S.V. BUSINESS P. LTD, MUMBAI V. DCIT CEN CIR 19,

ITA 7020/MUM/2010

• Counselvise Citation: 702019914 RSA 2010
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAYAK
• Keywords: Depreciation; Search and seizure; Document seized; Valuation report; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND VIVEK VARMA, (JM) . . , , ./I.T.A.NO.7019,7020 AND 7054/MUM/2010 ( / ASSESSMENT YEARS- 2006-07, 2007-08 & 2008-09) S.V.BUSINESS PVT. LTD., C/O SHANKARLAL JAIN AND ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI-400002 / VS. DY. COMMISSIONER OF INCOM E TAX, CENTRAL CIRCLE-39, MUMBAI ./ ./PAN/GIR NO. : AAECS1117M ( # / APPELLANT) .. ( $%# / RESPONDENT) # / APPELLANT BY : SHRI S.L.JAIN $%# ' /RESPONDENT BY : SHRI K C P PATNAYA K ' ) / DATE OF HEARING : 7.5.2014 ' ) /DATE OF PRONOUNCEMENT : 16.5.2014 / O R D E R PER P.M.JAGTAP,AM: THESE THREE APPEALS FILED BY ASSESSEE AGAINST T HE THREE SEPARATE ORDERS OF LD. CIT(A)-41, MUMBAI FOR ASSESSMENT YEARS 200 6-07, 2007-08 AND 2008-09 HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED O FF BY A SINGLE CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE. 2. OUT OF THESE THREE APPEALS, TWO APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 AND 2007-08 BEING I.T.A.NO .7019,7020 AND 7054/MUM/2010, WHICH ARE DIRECTED AGAINST THE ORDE RS OF LD. CIT(A)-41, MUMBAI BOTH DATED 30.8.2010, INVOLVE A SOLITARY IS SUE RELATING TO THE DISALLOWANCE MADE BY AO AND CONFIRMED BY LD. CIT( A) ON ACCOUNT OF BROKERAGE CLAIMED TO BE PAID BY THE ASSESSEE TO SHRI ISHWA RCHAND GOEL . 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PROCESSING AND SALE OF FABRICS. IT BEL ONGS TO JIMTEX GROUP. A I.T.A.NO.7019,7020 AND 7054/MUM/2010 2 SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (THE ACT) WAS CONDUCTED IN THE PREMISES BELONGING TO JIMTEX GROUP INCLUDING THE CASE OF THE ASSESSEE. PURSUANT TO THE SEARCH, N OTICE UNDER SECTION 153A OF THE ACT WAS ISSUED BY THE AO, IN RESPONSE TO WHICH THE ASSESSEE FILED ITS RETURN OF INCOME FOR BOTH YEARS UNDER CONSIDERATION I.E. AYS 2006-07 AND 2007-08 ON 12.01.2009 DECLARING TOTAL INCOME OF RS.6,28,580/- AND RS.1,04,59,364/- RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS CLAIMED TO HAVE PAID BROKERAGE CHARGES OF RS.1,30,625/- AND RS. 57,757/- TO ONE SHRI ISHWA RCHAND GOEL IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2006-07 AND 2007- 08 RESPECTIVELY. SINCE THE SIMILAR CLAIM MADE BY ASSESSEE ON ACCOUNT OF BROKER AGE CHARGES PAID TO SHRI ISHWARCHAND GOEL WAS DISALLOWED IN AY-2005-06 IN TH E ASSESSMENT COMPLETED U/S 143(3) OF THE ACT AND THE SAID DISALLOWANCE WA S ACCEPTED BY THE ASSESSEE, THE AO DISALLOWED THE BROKERAGE CLAIM TO BE PAID BY THE ASSESSEE TO SHRI ISHWARCHAND GOEL IN BOTH THE YEARS UNDER CONSIDERA TION. 4. THE DISALLOWANCE MADE BY AO ON ACCOUNT OF BROKE RAGE CHARGES PAID TO SHRI ISHWARCHAND GOEL WAS DISPUTED BY ASSESSEE IN THE AP PEALS FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE B Y THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) CONFI RMED THE DISALLOWANCE MADE BY AO ON ACCOUNT OF BROKERAGE CHARGES PAID TO SHRI IS HWARCHAND GOEL FOR BOTH THE YEARS UNDER CONSIDERATION I.E. ASSESSMENT YEARS 200 6-07 AND 2007-08 FOR THE FOLLOWING IDENTICAL REASONS GIVEN IN PARA 1.3 OF HI S IMPUGNED ORDERS: 1.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT , ORDER OF THE AO AND FACTS OF THE CASE THAT THE APPELLANT HAS MAD E PAYMENT BROKERAGE TO SHRI ISHWARCHAND GOEL FOR THE AY 2006-07 AND 20 07-08. IT IS PERTINENT TO NOTE THAT IN THE AY 2005-06 THE APPELLANT HAS SH OWN THE BROKERAGE PAYMENT TO SHRI ISHWARCHAND GOEL THE SAME PERSON W HICH WAS DISALLOWED BECAUSE HE HAS FAILED TO PROVE THE GENUI NENESS OF THIS EXPENDITURE THAT IT WAS INCURRED FOR THE PURPOSES. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAS FAILED TO FURNISH A NY EVIDENCE BEFORE THE AO TO PROVE THAT THIS EXPENDITURE WAS WHOLLY AND EX CLUSIVELY INCURRED FOR THE BUSINESS PURPOSE AND ANY SERVICES RENDERED BY S HRI ISHWARCHAND GOEL. THEREFORE, THE AO HAS MADE DISALLOWANCE IN T HESE YEARS ALSO BEFORE ME THE APPELLANT HAS SUBMITTED THAT THE PAYM ENT WAS MADE BY I.T.A.NO.7019,7020 AND 7054/MUM/2010 3 CHEQUE AND TDS WAS DEDUCTED WAS DEDUCTED BUT NO EVI DENCE WAS SUBMITTED TO PROVE ANY SERVICES RENDERED BY THE BRO KER. CONSEQUENTLY THE APPELLANT HAS FAILED TO SUBMIT ANY EVIDENCE TO PROV E THAT THIS EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINE SS PURPOSE AND WHAT SERVICES RENDERED BY SHRI ISHWARCHAND GOEL TO WHOM THE BROKERAGE PAYMENT WAS MADE . THE ONUS IS ALWAYS ON THE ASSE SSEE TO SUBMIT EVIDENCE BEFORE THE AO BEFORE CLAIMING ANY DEDUCTI ON AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S CALCU TTA AGENCIES 19 ITR 119. IN THE PRESENT CASE THE APPELLANT HAS FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO PROVE THE SERVICES RENDERED BY SHRI ISHWARCHAND GOEL TO WHOM THE BROKERAGE PAYMENT WAS MADE AND CONSEQUENTLY TO PROVE THAT THIS EXPENDITURE WAS INC URRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE OF THE APPEL LANT COMPANY 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH TH E LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE RELEVANT DOCUMENTA RY EVIDENCE PLACED IN HIS PAPER BOOK TO SHOW THAT THE PAYMENT OF BROKERAGE W AS MADE TO SHRI ISHWARCHAND GOEL BY CHEQUES AFTER DEDUCTION OF TDS AND THAT THE SAID PERSON WAS NOT RELATED TO THE ASSESSEE COMPANY, HE HAS NO T BEEN ABLE TO EXPLAIN ON EVIDENCE THE EXACT NATURE OF SERVICES RENDERED BY SHRI ISHWARCHAND GOEL FOR THE PURPOSES OF ASSESSEES BUSINESS. AS RIGHTLY H ELD BY LD. CIT(A), THE ONUS IN THIS REGARD IS ON THE ASSESSEE TO ESTABLISH THAT TH E EXPENDITURE ON PAYMENT OF BROKERAGE CHARGES WAS WHOLLY AND EXCLUSIVELY INCURR ED FOR THE PURPOSES OF ITS BUSINESS AND SINCE THE ASSESSEE HAS FAILED TO DISCH ARGE THE SAID ONUS, WE FIND NO JUSTIFIABLE REASONS TO INTERFERE WITH THE IMPUGN ED ORDERS OF LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY AO ON ACCOUNT OF BROKERAGE PAID BY ASSESSEE TO SHRI ISHWARCHAND GOEL FOR BOTH THE YE ARS UNDER CONSIDERATION. THE SAME ARE THEREFORE UPHELD AND THE APPEALS FOR THE A SSESSMENT YEARS 2006-07 AND 2007-08 ARE DISMISSED. I.T.A.NO.7019,7020 AND 7054/MUM/2010 4 6. IN THE APPEAL FOR ASSESSMENT YEAR 2008-09 BEING ITA NO.7054/MUM/2010, WHICH IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-41, MUMBAI DATED 30.8.2010, THE SOLITARY ISSUE RAISED BY THE ASSESSEE RELATES TO DISALLOWANCE OF RS.3,10,800/- MADE BY AO AND CONF IRMED BY LD. CIT(A) ON ACCOUNT OF DEPRECIATION ON BUILDING. 7. DURING THE COURSE OF SEARCH, CERTAIN LOOSE PAPER S INVENTORISED AS PAGES 7 TO 16 WERE FOUND AND SEIZED FROM THE POSSESSION OF THE ASSESSEE SHOWING RECEIPTS IN CASH AGGREGATING RS.40,06,000/-. IN THE STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT, THE AS SESSEE EXPLAINED THAT THE TRANSACTIONS REFLECTED IN THE SAID LOSE PAPERS AS THAT OF SALE OF SCRAP COMPRISING OF DRUMS, SCREENS, NICKEL, PLASTIC BAGS, DAMAGED MOTORS, DAMAGED FABRICS ETC. HE ALSO AGREED THAT THE SAID TRANS ACTIONS WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND OFFERED AN AMOUNT OF RS.40,06,000/- AS THE ADDITIONAL INCOME FOR ASSESSMENT YEAR 2007-08. IN THE STATEMENT, IT WAS STATED ON BEHALF OF THE ASSESSEE THAT OUT OF THE AMOUNT O F RS.40,06,000/-, THE SUM OF RS.31,08,000/- WAS UTILIZED FOR ADDITIONAL CONSTRUC TION OF THE EXISTING FACTORY BUILDING AT MIDC, DOMBIVILI. IN HIS BOOKS OF ACCOU NT, ENTRIES WERE RECORDED BY THE ASSESSEE SHOWING AN AMOUNT OF RS.31,08,000/- SPENT ON ADDITIONAL CONSTRUCTION OF FACTORY BUILDING AND DEPRECIATION T HEREON WAS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2008-09. AO HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE SAID DEPRECIATION ON THE GROUND THAT NO DOC UMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FO R THE SAID EXPENSES INCURRED ON CONSTRUCTION OF FACTORY BUILDING. I.T.A.NO.7019,7020 AND 7054/MUM/2010 5 8. THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF IT S CLAIM FOR DEPRECIATION ON ADDITIONAL FACTORY BUILDING WAS DISPUTED BY ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SU BMISSIONS MADE BY THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY AO ON ACCOUNT OF DEPRECIATION FOR THE FOLLOWING REASONS : 1.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT, ORDER OF THE AO AND FACTS OF THE CASE CAREFULLY. IT IS NOTICED THAT THE APPELLANT HAS CLAIMED AN AMOUNT OF RS.31,08,000/- INCURRED FOR ADDITION T O THE FACTORY BUILDING. THE AO HAS CLEARED FOR THE DETAILS AND BILLS ETC TO PROVE THE GENUINENESS OF THE EXPENSES INCURRED FOR THE ADDITION TO THE FA CTORY BUILDING. HOWEVER, THE APPELLANT HAS FAILED TO SUBMIT ANY EV IDENCE TO SUBSTANTIATE ITS CLAIM EXCEPT THE ARGUMENT THAT THE AMOUNT IN AD DITION OF THE BUILDING WAS INCURRED OUT OF THE ADDITIONAL INCOME DECLARED ON ACCOUNT OF SALE OF SCRAP AND WASTE IN AY 2007-08. AS PER THE PROVISIO N OF THE INCOME TAX ACT TO THE ONUS US ON THE ASSESSEE TO PROVE THE DOC UMENTARY EVIDENCE BEFORE THE AO BEFORE CLAIMING ANY DEDUCTION. THE H ONBLE SUPREME COURT IN THE CASE OF CIT V/S CALCUTTA A AGENCY 19 ITR 119 HAS HELD THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENE SS OF THE EXPENDITURE BEFORE CLAIMING ANY DEDUCTION 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THE ISSUE INVOLVED IN THE APPEAL FILED FOR THE ASSESSMENT YEAR 2008-09 AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSES SEE HAS INVITED OUR ATTENTION TO THE RELEVANT SEIZED DOCUMENTS PLACED AT PAGES 24 TO 31 OF HIS PAPER BOOK TO POINT OUT THAT THE FACT OF HAVING SPENT/UTILIZED THE SALES PROCEEDS OF SCRAP FOR BUILDING WORK WAS CLEARLY MENTIONED IN THE SAID DO CUMENTS. HE HAS ALSO INVITED OUR ATTENTION TO THE COPY OF THE STATEMENT OF THE A SSESSEE RECORDED DURING THE COURSE OF SEARCH PLACED AT PAGES 11 TO 20 OF HIS PAPER BOOK AND POINTED OUT THAT IN REPLY TO QUESTION NO.5, IT WAS CLEARLY STA TED BY THE ASSESSEE THAT UNACCOUNTED SALES PROCEEDS OF SCRAP TO THE EXTENT OF RS.31,08,000/- WERE UTILIZED FOR THE CONSTRUCTION OF FACTORY BUILDING I N MIDC, DOMBIVILI. RELYING ON THE DECISION OF A CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF BIREN V.SAVLA I.T.A.NO.7019,7020 AND 7054/MUM/2010 6 V/S ACIT (2006) 100TTJ (MUMBAI) 1006 AND THE DECISI ON OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V/S P D ABRAHAM ALIAS APPACHAN AND ANR (2012) 252 CTR (KER) 407, HE HAS CONTENDED THAT THE STAT EMENT OF THE ASSESSEE AS WELL AS CONTENTS OF THE RELEVANT DOCUMENTS CANNOT BE ACCEPTED IN PART AND REJECTED IN PART. 10. THE LD. DR, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF RELEVANT MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY AO ON ACCOUNT OF ASSESSEES CLAIM FOR DEPRECIATION ON ADDITIONAL CONSTRUCTION OF FACTORY BUILDING IN MIDC, DOMBIVILI. ALTHOUGH IT WAS INDICATED IN THE RELEVANT SEIZED DOCUMENTS THAT THE UNACCOUNTED SALES PROCEEDS OF SCRAP WERE PARTLY US ED FOR BUILDING PURPOSES AND THE ASSESSEE ALSO REITERATED THIS POSITION IN HIS STATEMENT RECORDED UNDER SECTION 132(4), WE ARE OF THE VIEW THAT THE SAME BY ITSELF WAS NOT SUFFICIENT TO ESTABLISH THAT THE AMOUNT OF RS.31,08,000/- WAS INCURRED BY THE ASSESSEE ON THE CONSTRUCTION OF ADDITIONAL FACTORY BUILDING IN MIDC, DOMBIVILI. THE ONUS IN THIS REGARD WAS ON THE ASSESSEE TO SUBSTANTIATE IT S CLAIM FOR THE EXPENDITURE INCURRED ON THE CONSTRUCTION OF ADDITIONAL BUILDING BY PRODUCING THE RELEVANT DOCUMENTARY EVIDENCE SUCH AS BILLS, VOUCHERS ETC. EVEN IF SUCH BILLS /VOUCHERS WERE NOT MAINTAINED BY THE ASSESSEE IN SUPPORT OF EXPENDITURE INCURRED OUTSIDE THE BOOKS OF ACCOUNT, THE ASSESSEE COULD HAVE AND SHOULD HAVE SUBSTANTIATED ITS CASE BY PRODUCING VALUATION REPORT OR BUILDING PLANS SHOWING THAT THE ADDITIONAL CONSTRUCTION WAS INDEED MADE AT ITS FA CTORY BUILDING SITUATED IN I.T.A.NO.7019,7020 AND 7054/MUM/2010 7 MIDC, DOMBIVALI. THE STATEMENT OF THE ASSESSEE AND INDICATION IN THE RELEVANT SEIZED DOCUMENTS WAS NOT SUFFICIENT TO ESTABLISH T HAT THE AMOUNT OF RS.31,08,000/- WAS INCURRED BY ASSESSEE ON ACCOUNT OF CONSTRUCTION OF ADDITIONAL FACTORY BUILDING AND THAT TOO TO ITS EX ISTING BUILDING IN MIDC, DOMBIVALI. IN OUR OPINION, IT IS THUS NOT A CASE W HERE THE STATEMENT OR RELEVANT SEIZED DOCUMENTS ARE PARTLY ACCEPTED AND PARTLY REJECTED BY THE AUTHORITIES BELOW AS SOUGHT TO BE CONTENDED BY THE LD COUNSEL F OR THE ASSESSEE. IT IS THE CASE WHERE THE SAID STATEMENT AND THE RELEVANT SEI ZED DOCUMENTS WERE NOT SUFFICIENT TO ESTABLISH THE CASE OF THE ASSESSEE OF HAVING SPENT AN AMOUNT OF RS.31,08,000/- FOR THE CONSTRUCTION OF ADDITIONAL F ACTORY BUILDING AND THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON SUCH ADDITIONAL BUILDING WAS DISALLOWED BY THE AUTHORITIES BELOW ON THE GROUND THAT THE ASSESS EE FAILED TO SUBSTANTIATE THE SAID CLAIM BY BRINGING ANY DOCUMENTARY EVIDENCE. W E THEREFORE, FIND NO INFIRMITY IN THE ORDERS OF AUTHORITIES BELOW IN DI SALLOWING THE ASSESSEES CLAIM OF DEPRECIATION AND CONFIRMING THE SAID DISALLOWANCE, WE DISMISS THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09. 12. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH MAY , 2014 ' - . 16 TH MAY, 2014 ' SD SD ( / VIVEK VARMA ) ( . . / P.M.JAGTAP) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 16 TH DAY OF MAY, 2014 I.T.A.NO.7019,7020 AND 7054/MUM/2010 8 . . ./ SRL , SR. PS ' #$&' (' / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT /APPLICANT 2. $%# / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. $5 , ) 5 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) ) 5 , /ITAT, MUMBAI