UTTAMKUMAR G.MAJI, MUMBAI V. ITO 14(1)(1), MUMBAI

ITA 6724/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1700 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 06-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P MEENASR
• Assessee Lawyers: AJEET MANWANI
• Keywords: Depreciation; Opportunity of being heard; Additional evidence
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.6724/M/2010 ASSESSMENT YEAR: 2007-2008 SHRI UTTAM KUMAR G. MAJI, ROOM NO.9, MADAN MANSION, 57-59, S.M. STREET, MUMBAI 400 002. PAN: AHFPM 3363 A VS. INCOME TAX OFFICER-14(1)(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJEET MANWANI RESPONDENT BY : SHRI O.P. MEENA. SR. AR DATE OF HEARING: 19.2.2013 DA TE OF ORDER: 8.3.2013 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 21.9.2010 IS A GAINST THE ORDER OF CIT (A)- 25, MUMBAI DATED 10.08.2010 FOR THE ASSESSMENT YEAR 2007-2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. LD CIT (A) HAS ERRED TO UPHOLD ARBITRARY ANNUAL LETTING VALUE OF THE PROPERTY BY THE ITO. 2. LD CIT (A) HAS NOT APPRECIATED THAT APPELLANT HA D USED TWO PREMISES FOR BUSINESS WHILE OTHER TWO WERE LYING VACANT DURI NG THE PREVIOUS YEAR. 3. LD CIT (A) HAS FAILED TO CONSIDER THE FACTS RELA TING TO DISALLOWANCE OF EXPENSES AND ARBITRARILY UPHELD THE ADDITION TO THE EXTENT OF 1/8 TH OF EXPENSES INCURRED. 3. AT THE OUTSET, SHRI SHRI AJEET MANWANI, LD COUNS EL FOR THE ASSESSEE MENTIONED THAT THERE ARE A COUPLE OF ISSUES FOR ADJ UDICATION IN THIS APPEAL AND THE FIRST ONE RAISED VIDE GROUND NO.1 AND 2 RELATES TO ANNUAL LETTING VALUE (ALV) OF THE PROPERTIES. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 4.2 OF THE ASSESSMENT ORDER AND MENTIONED THAT ASSESSEE OWNS F OUR PROPERTIES NAMELY (I) NEW SHOP (II) SEA WOOD DEVELOPERS (III) SHOP VISION DEV ELOPERS AND (IV) SANT NARAYAN SOCIETY. 2 4. REFERRING TO NEW SHOP AND SANT NARAYAN SOCIETY, LD COUNSEL MENTIONED THAT THE SAID PREMISES WERE UTILIZED FOR BUSINESS PURPOS ES OF THE ASSESSEE. IN THIS REGARD, ASSESSEE FILED AFFIDAVITS FROM THE EMPLOYEE S, WHO USED THE SAME, IN SUPPORT OF THE CLAIM. 5. REGARDING OTHER PROPERTIES AT SEA WOOD DEVELOPER S AND SHOP VISION DEVELOPERS, LD COUNSEL MENTIONED THAT THE SAID PROP ERTIES COULD NOT BE LET OUT DURING WHOLE OF THE YEAR DESPITE THE EFFORTS MADE B Y THE ASSESSEE. LD COUNSEL ALSO MENTIONED THAT THE ASSESSEE FILED AFFIDAVITS IN SUPPORT OF THE CLAIM BEFORE THE FIRST APPELLATE AUTHORITY, WHO DID NOT ADMIT THE SAID EVI DENCES AND REJECTED THE SAME ARBITRARILY. IN THIS REGARD, WITHOUT GOING INTO THE MERITS OF THE CLAIM, LD COUNSEL PRAYED THAT ONE MORE CHANCE MAY KINDLY BE GRANTED TO THE ASSESSEE AFTER ADMITTING THE ADDITIONAL EVIDENCES, WHICH ARE REJEC TED BY THE CIT (A) IN THE INTEREST OF JUSTICE. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO AND MENTIONED THAT THE ASSESSEE HAS NOT AVAILED THE OPPORTUNITIES GRAN TED BY THE AO, DURING THE ASSESSMENT PROCEEDINGS AND BEFORE THE CIT (A), DURI NG THE FIRST APPELLATE PROCEEDINGS. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS LIMITED I SSUE OF REMANDING THE MATTER TO THE FILES OF AO, AFTER ADMITTING THE ADDITIONAL EVIDENCES AND FIND THAT THE ORDER OF THE AUTHORITIES BELOW DID NOT PROVIDE ADEQUATE REAS ONS FOR NON-ADMISSION OF THE AFFIDAVIT FILED BY THE ASSESSEES EMPLOYEES, EXCEPT MERELY STATING THAT THESE CONSTITUTE SELF-SERVING DOCUMENTS. IN OUR OPINION, IN THE INTEREST OF THE JUSTICE, THE ASSESSING OFFICER NEEDS TO MAKE A REQUISITE ENQUIRY INTO THE CLAIM OF THE ASSESSEE IF THE SAID PREMISES WERE UTILIZED BY THE ASSESSEE/HIS EMPLOYEES FOR THE BUSINESS PURPOSES. GENERALLY, LITTLE ENQUIRY WITH THE NEIGH BORS OF THE PROPERTY MUST REVEAL REAL TRUTH. SIMILARLY, AO IS DIRECTED TO CONDUCT RE QUISITE ENQUIRIES WITH REGARD TO EFFORTS MADE BY THE ASSESSEE FOR LETTING OF THE RES T OF THE PROPERTIES TOO THROUGHOUT THE YEAR. CONSIDERING THE POWERS VESTED ON THE AO, WE ARE OF THE OPINION THAT THE FACTS SHOULD BE LOGICALLY DUG OUT AND IT IS CERTAIN LY POSSIBLE IF SOME LITTLE EFFORTS ARE 3 MADE BY THE AO AO IS ALSO DIRECTED TO APPLY THE E XISTING JUDGMENTAL LAW IN FORCE AND ALSO THE PROVISIONS OF SECTION 23 APPROPRIATELY IN THE SET ASIDE PROCEEDINGS. FURTHER, AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE PASSING THE SPEAKING ORDER ON THE ISSUES RAIS ED BEFORE US. ACCORDINGLY, GROUND NO.1 AND 2 ARE SET ASIDE . 8. REGARDING GROUND NO.3, WHICH RELATES TO ADDITION TO THE EXTENT OF 1/8 TH OF THE EXPENSES, THE FACTS ARE GIVEN IN PARA 5, 5.1, 5.2 A ND 5.3 OF THE ASSESSMENT ORDER, THE SAME ARE EXTRACTED AS UNDER: DISALLOWANCES OUT OF VARIOUS EXPENSES CLAIMED IN THE P & L ACCOUNT:- 5.1. TELEPHONE EXPENSES: IT IS OBSERVED FROM THE P & L A/C OF PROPRIETARY C ONCERN THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS, 76,978/- UNDE R THE HEAD TELEPHONE EXPENSES. THE PERSONAL ELEMENT EMBEDDED IN THE US AGE OF TELEPHONE BY PROPRIETOR AND HIS FAMILY MEMBERS CANNOT BE OVERLOO KED. THE ASSESSEE HAS ALSO NOT DENIED THE PERSONAL ELEMENT OF EXPENSES EM BEDDED IN TELEPHONE CHARGES IN AS MUCH AS THE PERSONAL USE OF TELEPHONE . THEREFORE, 1/5 TH DISALLOWANCE OUT OF THE ABOVE EXPENDITURE OF RS. 76 ,978/- IS MADE IN TERMS OF EXCLUSIVE PARENTHESIS OF SECTION 37(1) OF THE IT AC T, 1961 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE, WHICH WORKS OUT TO RS . 15,396/- TO COMPENSATE THE POSSIBLE PERSONAL USE OF TELEPHONE BY THE ASSES SEE. 5.2. THE ASSESSEE HAS DEBITED TO P&L ACCOUNT FOLLOW ING EXPENSES ON ACCOUNT OF MOTOR CAR EXPENSES:- (I) PETROL EXPENSES RS. 85,790/- (II) CAR DEPRECIATION RS. 8,922/- (III) CAR INSURANCE RS. 2,868/- TOTAL RS. 97,580/- THE PERSONAL USE OF MOTOR CAR BY THE PROPRIETOR AND HIS FAMILY MEMBERS CANNOT BE TOTALLY RULED OUT. FURTHER, NO LOGBOOK H AS BEEN MAINTAINED, AS REGARDS THE USE OF MOTOR CAR FOR THE PURPOSE OF BUS INESS. CONSIDERING THE PERSONAL ELEMENT AND NON-MAINTENANCE OF LOG-BOOK, 1 /5 TH FROM THESE EXPENSES IS RS. 10,516/- IS DISALLOWED. 5.3. THE ASSESSEE HAS DEBITED VARIOUS EXPENSES TO T HE P&L ACCOUNT OF PROPRIETARY CONCERN. FROM THE DETAILS PRODUCED IN R ESPECT OF VARIOUS EXPENSES DEBITED TO P&L ACCOUNT, IT IS SEEN THAT THE DETAILS IN RESPECT OF THE FOLLOWING EXPENSES ARE NOT COMPLETE AND MOST OF THEM ARE SUPP ORTED BY SELF-MADE VOUCHERS. THEREFORE, 1/5 TH DISALLOWANCE ARE MADE OUT OF THESE EXPENSES AS UNDER: HEAD OF EXPENSE DEBITED TO P&L A/C AMOUNT DEBITED A MOUNT OF DISALLOWANCE MADE (RS.) STAFF WELFARE EXPENSES 58,133/ - 11,627/ - CONVEYANCE EXPENSES 92,120/ - 18,424/ - TOTAL 30,051/ - 4 9. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL WAN TED FOR FURTHER RELIEF IN THE MATTER. WHEREAS LD DR RELIED ON THE ORDER OF THE CI T (A). 10. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF EXPENSES INCURRED ON ACCOUNT OF TELEPHONE EXPENSES, CAR INSURANCE AND DEPRECIATI ON EXPENSES, STAFF WELFARE EXPENSES AND CONVEYANCE EXPENSES ARE THE SUBJECT MA TTER OF DISALLOWANCE. AO RESTRICTED THE DISALLOWANCE 1/5 TH OF THE ABOVE CLAIM TOWARDS PERSONAL USE. CIT (A) REDUCED THE DISALLOWANCE TO 1/8 TH OF THE CLAIM BY HOLDING AS UNDER: DISALLOWANCE ON ACCOUNT OF CERTAIN EXPENSES AMOUNTI NG TO RS. 64,963/-:- THE AO VIDE PARA 5 HAD MADE DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES, CAR INSURANCE, DEPRECIATION/PETROL EXPENS ES, STAFF WELFARE EXPENSES, CONVEYANCE EXPENSES. THE AO HAD MADE 1/5 TH DISALLOWANCE OUT OF THESE EXPENSES FOR PERSONAL USE EMBEDDED IN SUCH TYPE OF EXPENSES. SINCE, THE AO HAD NOT SPECIFIED PRECISE FLAWS IN THESE EXPENSES, DISALLOWANCE MADE BY THE AO IS REDUCED TO 1/8 TH HAVING REGARD TO THE SPECIFIC NATURE OF THE ASSESS EES BUSINESS AND LOCATION OF THE BUSINESS PREMISES AS P OINTED OUT BY THE LD AR. ACCORDINGLY, ASSESSEES THIS GROUND OF APPEAL IS AL LOWED IN PART AND THE ASSESSEE GET RELIEF TO THAT EXTENT. THE AO IS DIRE CTED TO WORK OUT DISALLOWANCE OF THESE EXPENSES @ 1/8 TH . 11. FROM THE ABOVE, THE CIT (A) WAS RIGHTLY REDUCED THE CLAIM OF THE ASSESSEE TO 1/8 TH KEEPING IN VIEW THE SPECIFIC NATURE OF THE BUSINES S AND THE LOCATION OF THE BUSINESS PREMISES. NO ADDITIONAL REASONS OR PAPERS ARE FILED BEFORE US TO SUBSTANTIATE FURTHER RELIEF IN THE MATTER. THEREFOR E, THE ORDER OF THE CIT(A) IS PROPER AND IT DOES NOT CALL FOR ANY INTERFERENCE AND WE CO NFIRM THE SAME. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED . 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH, 2013. SD/- SD/- (VIVEK VARMA) (D. KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 8. 03.2013 AT :MUMBAI 5 OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR F, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI