CEAT LTD, MUMBAI V. ACIT 6(2), MUMBAI

ITA 7056/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4033 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Assessee Lawyers: S SRIRAMAMAR GAHLOT
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) M/S. CEAT LTD., 463, DR. ANNIE BESANT ROAD, MUMBAI 400 030 PAN:AAACC 1645G ... APPELLANT VS. THE ACIT, RANGE 6(2), ROOM NO.562, AAYKAR BHAVAN, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : S/SHRI S .SRIRAM/AMAR GAHLOT RESPONDENT BY : SHRI M.DAYASAGAR DATE OF HEARING : 27/01/2016 DATE OF PRONOUNCEMENT : 03/02/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-12, MUMBAI DATED 6/9/2013 FOR ASSESSME NT 2009-10. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE, A DOMESTIC COMPANY ENGAGED IN THE MANUFACTURE OF AUTOMOTIVE TYRES, FILED ITS RETURN OF INCOME FO R ASSESSMENT YEAR 2009-10 ON 29/9/2009 DECLARING LOSS OF (-) RS.33,84 ,49,425/- AS PER NORMAL PROVISIONS AND LOSS OF (-) RS.37,17,22,590/ - UNDER SECTION 115JB OF THE INCOME TAX ACT,1961( IN SHORT THE ACT). T HE RETURN WAS 2 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE C ASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 29 /12/2011, WHEREIN THE BUSINESS LOSS WAS ASSESSED AT (-)RS.27,27,35,49 5/- IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES:- (I) DISALLOWANCE UNDER SECTION 14A RS. 1,60,37,000/- (II) DIFFERENCE IN VALUATION OF CLOSING STOCK RS. 5,88,08,382/- (III) PAYMENT TO CLUBS RS. 4,91,427/- (IV) DISALLOWANCE OF EXPENDITURE ON GUEST HOUSE RESIDENTIAL FLATS RS.4,03,77,121/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2009- 10 DATED 29/12/2011, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE CIT(APPEALS)-12, MUMBAI. THE LD. CIT(A) DISPOSED O F THE APPEAL VIDE ORDER DATED 6/9/2013 ALLOWING THE ASSESSEE PARTIA L RELIEF. 3.0 BEING AGGRIEVED BY THE ORDER OF THE CIT(APPEALS )-12, MUMBAI , THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE T RIBUNAL. ORIGINALLY, THE ASSESSEE FILED CERTAIN GROUNDS ALONGWITH THE AP PEAL MEMO AND ALSO ADDITIONAL GROUNDS OF APPEAL VIDE SUBMISSION DATED 23/04/2014. SUBSEQUENTLY, THE ASSESSEE FILED REVISED GROUNDS OF APPEAL ON 16/11/2015, WHICH ARE BEING TAKEN UP FOR ADJUDICAT ION AND ARE EXTRACTED HEREUNDER:- 1.THE ORDER OF THE CIT(A) IS UNSUSTAINABLE AND NON -SPEAKING IN LAW SINCE IT IS (A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE ; (B) AGAINST THE PRINCIPLE 3 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) OF EQUITY AND NATURAL JUSTICE AND (C) WITHOUT ADJUD ICATING THE ARGUMENTS RAISED BY THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ['CIT(A)'] ERRED IN CONFIRMING THE ADDITION O FRS 1,60,37,000/- MADE UN DER SECTION 14A OF THE ACT BY THE ASSESSING OFFICER A. THE LEARNED CIT(A) ERRED IN CONFIRMING DIS-ALLOW ANCE OF INTEREST EXPENSES INCURRED BY THE ASSESSEE UNDER SECTION 14A OF THE A CT, WITHOUT APPRECIATING THAT BORROWED FUNDS WERE NOT USED BY THE ASSESSEE F OR MAKING ANY INVESTMENT. B. THE LEARNED CIT(A) ERRED IN CONFIRMING DIS-ALLO WING OF GENERAL EXPENSES OF RS 12.27 LACS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT, WITHOUT APPRECIATING THAT (I) THE ASSESSEE HAD ITSE LF DIS-ALLOWED THE EXPENSES INCURRED BY IT FOR EARNING EXEMPT INCOME, (II) THE ASSESSEE HAD NOT INCURRED ANY ADDITIONAL EXPENSE TO EARN EXEMPT INCOME, (III) THE ASSESSING OFFICER HAS NOT FOUND ANY DISCREPANCY IN THE CLAIM OF THE ASSES SEE NOR HAS RECORDED HIS SATISFACTION FOR MAKING SUCH DISALLOWANCE (GROUND 2 (B) WAS EXPRESSLY RAISED AS AN ADDITIONAL GROUND VIDE PETITION DATED 24.04.2 015) 3. THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADJ USTMENT MADE BY THE ASSESSING OFFICER TO THE VALUE OF CLOSING STOCK. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF GUEST HOUSE EXPENSES WITHOUT APPRECIATING THE EVIDENCES AND SU BMISSIONS MADE BEFORE HIM 4.0 GROUND NO.1 BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 5.0 GROUND NO.2 (A & B) DISALLOWANCE UNDER SECTION14A OF THE ACT. 5.1 IN THIS GROUND THE ASSESSEE ASSAILS THE IMPUGNE D ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.1,60, 37,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT IN R ESPECT OF (A) INTEREST EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE HAD NOT UTILIZED BORROWED FUNDS FOR MAKING ANY INVESTMENTS AND (B) DISALLOWING OF GENERAL EXPENSES OF RS.12.27 LAKHS WITHOUT APPRE CIATING THAT THE ASSESSEE ITSELF HAD DISALLOWED EXPENSES OF RS.1.20 LAKHS INCURRED BY IT TO EARN THE EXEMPT INCOME AND THE ASSESSING OFFICER HA D NOT FOUND ANY 4 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) DISCREPANCY IN THE CLAIM OF THE ASSESSEE NOR RECOR DED SATISFACTION FOR MAKING SUCH DISALLOWANCE. 5.2 IN RESPECT OF GROUND NO.2(A) REGARDING THE INTEREST DISALLOWANCE, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE OUGHT TO HAVE BEEN MADE IN THIS REGARD SINCE THE A SSESSEE HAD NOT UTILIZED ANY BORROWED FUNDS FOR MAKING THE SAID INV ESTMENTS IN INSTRUMENTS THAT EARNED EXEMPT INCOME. THE LD. REP RESENTATIVE FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO TH E PAPER BOOK (PAGES 1 TO 65) FILED BY THE ASSESSEE AND SPECIFICALLY TO PAGES 24,26 AND 34 TO SHOW THAT THE ASSESSEE HAD SUBSTANTIAL OWN INTERES T FREE FUNDS OF RS.488.938 CRORES, WHICH WERE FAR IN EXCESS OF THE INVESTMENT IN MUTUAL FUNDS AMOUNTING TO RS42.66 CRORES WHICH EARNED EXEM PT INCOME OF RS.77.87 LAKHS. IT WAS ALSO SUBMITTED THAT THE ASS ESSEE HAS SUFFICIENT CASH FLOW FROM BUSINESS OF RS.131.21 CRORES. IN TH ESE CIRCUMSTANCES IT WAS CONTENDED THAT SINCE ONLY INTEREST FREE OWN FUN DS OF THE ASSESSEE WERE AVAILABLE AND USED FOR INVESTMENT IN MUTUAL FUNDS THAT GENERATE TAX FREE INCOME, NO DISALLOWANCE IN THIS REGARD COU LD BE MADE UNDER SECTION 14A OF THE ACT. IN SUPPORT OF THIS PROPOSI TION, THE LD. REPRESENTATIVE FOR THE ASSESSEE FOR THE ASSESSEE PL ACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, WHEREIN IN ITS OR DER IN ITA NO.824/MUM/2012 DATED 26/2/2015, THE SAME ISSUE ON SIMILAR FACTS WAS HELD IN FAVOUR OF THE ASSESSEE. THE ASSESSEE A LSO PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF HDFC BANK LTD.(2014) 366 ITR 505 (BOM) IN SUPPORT OF THE PROPOSITION THAT 5 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) SINCE THE ASSESSEES OWN FUNDS ARE MORE THAN THE IN VESTMENTS MADE BY THE ASSESSEE, IT WOULD BE PRESUMED THAT THE INVEST MENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST FREE FUNDS A VAILABLE WITH THE ASSESSEE. 5.3 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT A CO-ORDINATE BENCH OF THIS TRIBUNAL, ON SIMILAR FACTS, IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITS ORDER IN ITA NO.824/MUM/2012 DA TED 26/02/2015 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HO LDING AS UNDER AT PARA 4 THEREOF:- 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONT ENTIONS HAVE CAREFULLY BEEN CONSIDERED. THE FACTUAL POSITION REGARDING OWN FUNDS OF THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. SIMILARLY, TH E FACTUAL POSITION REGARDING INVESTMENT MADE BY THE ASSESSEE IN TAX FR EE SECURITIES IS ALSO NOT DISPUTED. IF IT IS SO, THEN THE INVESTMENT OF THE A SSESSEE IN THE TAX FEE SECURITIES WOULD BE A MEAGER SUM OF RS.9.60 CRORES, AGAINST OWN FUNDS AVAILABLE WITH THE ASSESSEE OF RS.513.25 CRORES. RE SPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. HDFC BANK LTD. (SUPRA), WE HOLD THAT ACCORDING TO THE FACTS OF THE PRESENT CASE NO DISALLOWANCE ON ACCOUNT OF INTEREST FACTOR IS CALLE D FOR. 5.4.2 THE FACTUAL POSITION REGARDING THE AVAILABIL ITY OF OWN FUNDS OF THE ASSESSEE AT RS.488.38 CRORES OR THE FACTUAL POSIT ION IN RESPECT OF THE INVESTMENT OF RS.43.68 CRORES MADE BY THE ASSESSEE IN TAX FREE INVESTMENTS HAS NOT BEEN DISPUTED BY REVENUE. IN T HESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE 6 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD.(SUP RA) AND THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 (SUPRA), WE HOLD T HAT IN KEEPING WITH THE FACTS OF THE CASE, AS DISCUSSED ABOVE, NO DISAL LOWANCE ON ACCOUNT OF INTEREST PORTION IS CALLED FOR. CONSEQUENTLY, GROU ND 2(A) OF THE ASSESSEES APPEAL IS ALLOWED. 6. GROUND NO.2(B) DISALLOWANCE OF ADMINISTRATIVE EXPE NSES OF RS.12.27 LAKHS UNDER SECTION 14A OF THE ACT 6.1 ON DUE CONSIDERATION, WE ADMIT THIS ADDITIONAL GROUND FOR ADJUDICATION IN THE INTEREST OF JUSTICE AND EQUITY. IN THIS GROUND, THE ASSESSEE CONTENDS THAT THE DISALLOWANCE OF GENERAL EXPENSES OF RS.12.27 LAKHS HAS BEEN MADE BY THE ASSESSING OFFIC ER UNDER SECTION 14A OF THE ACT WITHOUT TAKING INTO ACCOUNT THE FACT THAT THE ASSESSEE HAD ITSELF DISALLOWED RS.1.20 LAKHS AS EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME. IT IS ALSO CONTENDED THAT SINCE THE ASSESSING OFFICER HAD NEITHER FOUND ANY DISCREPANCY IN THE CLAIM OF T HE ASSESSEE NOR RECORDED ANY SATISFACTION FOR MAKING SUCH DISALLOWA NCE, NO DISALLOWANCE ON THIS COUNT COULD BE MADE BY THE ASS ESSING OFFICER. IN SUPPORT OF THIS PROPOSITION, THE LD. REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS :- (I) GRAVISS HOSPITALITY LTD. (ITA NOS.3542&4801/MUM /2013 DATED 21/11/2014. (II) SIL INVESTMENT LTD. (ITA NO. 2431/DEL/2010 AND CO NO.349/DEL/2010 DATED 4/5/2012 FOR THE DISALLOW ANCE U/R. 8D(2) (III) TO BE RESTRICTED TO 5%. 7 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) IT WAS SUBMITTED THAT IN ANY CASE THE DISALLOWAN CE UNDER SECTION 14A R.W.S. RULE 8D MADE AT RS.1.60 CRORES SHOULD NOT HAVE EXCEEDED THE EXEMPT INCOME OF RS.77.87 LACS. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- (I) JOINT INVESTMENTS P. LTD. (ITA NO.117/2015 DE LHI HIGH COURT; (II) TAIKISHA ENGINEERING INDIA LTD., (ITA NO.115/2 014 DELHI HIGH COURT) 6.2 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE FOLLOWING IN THE ORDERS OF THE AUTH ORITIES BELOW ON THIS ISSUE. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE ASSESSEE IS MAINLY ENGAG ED IN THE BUSINESS OF MANUFACTURE OF AUTOMOTIVE TYRES. IT HAD MADE IN VESTMENTS IN MUTUAL FUNDS ON WHICH IT HAD EARNED EXEMPT INCOME OF APPROX RS.77.87 LAKHS. IT WAS SEEN THAT THE ASSESSEE HAD OWN INTEREST FREE FUNDS AMOUNTING TO RS.488.38 CRORES APPROX AND A CA SH FLOW OF APPROXIMATELY RS.131.21 CRORES, WHICH WAS MORE SUF FICIENT TO MAKE INVESTMENTS IN MUTUAL FUNDS TO THE EXTENT OF RS. 4 2.66 CRORES, WHICH EARNED THE ASSESSEE TAX EXEMPT INCOME OF RS.77.87 LAKHS. IN THIS REGARD, THE ASSESSEE HAD SUO-MOTO DISALLOWED AN AMO UNT OF RS.1.20 LAKHS AS EXPENDITURE INCURRED BY IT FOR EARNING TH E EXEMPT INCOME. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.1.60 C RORES UNDER SECTION14A R.W. RULE 8D; INCLUDING THE AMOUNT OF RS .12.27 LAKHS 8 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) U/R.8D(2)(III) OF THE RULES, WHICH IS THE SUBJECT M ATTER OF DISPUTE BEFORE US. 6.3.2 ONCE THE ENTIRE FINANCIAL STATEMENTS OF THE A SSESSEE WERE ADMITTEDLY BEFORE THE ASSESSING OFFICER , THE ASSES SING OFFICER WAS REQUIRED TO RECORD HIS SATISFACTION OR HAVE SATI SFIED HIMSELF THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE DEBITED IS NOT CORRECT A ND THAT THERE COULD HAVE BEEN CERTAIN OTHER EXPENDITURES WHICH CAN BE S AID TO HAVE BEEN INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOM E. THE DISALLOWANCE UNDER SECTION 14A(1) OF THE ACT CAN BE TRIGGERED ON LY WHEN THE CONDITIONS SPECIFIED IN SEC.14A(2) OF THE ACT ARE SATISFIED. TO MAKE OUT A DISALLOWANCE U/R.8D OF THE IT RULES, 1962, TH E ASSESSING OFFICER HAS TO FIRST EXAMINE THE ACCOUNTS OF THE ASSESSEE AND THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE AND THEN, IF HE I S NOT SATISFIED WITH THE CLAIM MADE OR THE CLAIM THAT NO EXPENDITURE AT ALL HAS BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME, ONLY THEN CAN BE RESORT TO RULE 8D. IN THE FACTUAL MATRIX OF THE CA SE ON HAND, WE FIND THAT THE ASSESSING OFFICER HAS PROCEEDED TO APPLY R ULE 8D FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION14A OF THE ACT , WITHOUT COMPLYING WITH THE MANDATORY REQUIREMENTS OF SECTIO N 14A(2) OF THE ACT OR RULE 8D. IN OUR VIEW, ONCE THE ASSESSING OF FICER HAS FAILED TO COMPLY WITH THE STATUTORY REQUIREMENT, HE THEN CANN OT PROCEED TO MAKE THE DISALLOWANCE UNDER SECTION 14A(1) OF THE A CT. IN COMING TO THIS VIEW, WE DREW SUPPORT FROM AND RELY ON THE FIN DING RENDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GRAVISS HOSPITALITY 9 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) LTD. IN ITA NO.352& 4801/MUM/2013 DATED 21/11/2014. IN THIS VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE UNDER SECTIO N 14A R.W. RULE 8D(2)(III) OF THE RULES AMOUNTING TO RS. 12.27 LAKH S TO THE EXTENT IT IS EXCESS OF THE SUO-MOTO DISALLOWANCE OF RS.1.20 LAKH S MADE BY THE ASSESSEE. IT IS ACCORDINGLY ORDERED. CONSEQUENTL Y, GROUND NO.2(B) IS ALLOWED AS INDICATED ABOVE. 7. GROUND NO.3 ADJUSTMENT TO VALUATION OF CLOSING STO CK RS.5,58,08,382/- 7.1 IN THIS GROUND, THE ASSESSEE CONTENDS THAT THE LD. CIT(A) ERRED IN NOT DELETING THE ADJUSTMENTS MADE BY THE ASSESSING OFFICER TO THE VALUE OF CLOSING STOCK. THE LD. REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1933/ MUM/2011 DATED 25/6/2014 FOR ASSESSMENT YEAR 2007-08. 7.2 PER CONTRA, THE LD. REPRESENTATIVE FOR THE ASSE SSEE PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A). 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENT CITED. WE FIND THAT THE SIMILAR ISSU E OF ADJUSTMENT IN VALUATION OF CLOSING STOCK WAS CONSIDERED BY A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2007-08 AND IN ITS ORDER IN ITA NO.1938/MUM/2011 DATED 25/6 /2014 AT PARA 8, THEREOF, IT HAS BEEN HELD AS UNDER:- 10 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) 8. THIRD ISSUE RAISED BY THE ASSESSEE RELATES TO T HE VALUATION OF CLOSING STOCK. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONE D THAT THIS ISSUE SHOULD ALSO BE REMANDED TO THE FILE OF THE AO. TO JUSTIFY THE SAME, LD COUNSEL MENTIONED THAT THE ASSESSEE IS FOLLOWING INCLUSIVE METHOD OF ACCOUNTING AND THE ONLY ACTUALS ARE ENTERED IN THE BOOKS OF AC COUNTS. THERE IS NO NEED FOR ADJUSTMENT OF INVENTORIES AS THEY WERE ALREADY ADJUSTED BASING ON THE ACTUALS IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 145A OF THE ACT. LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED BY STATI NG THAT THE JUDGMENTS RELIED ON BY THE REVENUE AUTHORITIES HAVE NO RELEVA NCE TO THE FACTS OF THE PRESENT CASE. FURTHER, REFERRING TO THE ANNEXURE-A TO THE ASSESSMENT ORDER, LD COUNSEL MENTIONED THAT THERE ARE PATENT ERRORS I N MATTERS OF CLOSING STOCK. HE MENTIONED THAT SOME UNKNOWN ERRORS ARE FO UND PLACED IN THE ORDER OF THE AO. BRINGING OUR ATTENTION TO ITEM NO. V O F THE SAID ANNEXURE-A, LD COUNSEL MENTIONED THAT THE FIGURES SUGGEST RS.96,11 ,053/-; RS. 10,15,39,384/- & RS. 11,74,59,949/- ARE UNCONNECTED TO THE ASSESSEE. IN ALL PROBABILITY, THESE FIGURES WERE IMPORTED FROM SOME OTHER ASSESSEES IN HIS JURISDICTION. 9. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS O F THE REVENUE AUTHORITIES. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THIS ISSUE NEEDS TO REVISIT THE FILE O F THE AC AND THE CLOSING STOCK VALUATIONS HAVE TO BE REDONE IN THE LIGHT OF THE PR OVISIONS OF SECTION 145A OF THE ACT. ACCORDINGLY, WE REMAND THE ISSUE TO THE FI LE OF THE AO FOR ADJUDICATING THE ISSUE AFRESH AFTER GRANTING A REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO .3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7.3.2 THE ABOVE ORDER OF THE TRIBUNAL WAS FOLLOWED BY ANOTHER CO- ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR ASSE SSMENT YEAR 2008-09 IN ITA NO.824/MUM/2011 DATED 26/2/2015. FOLLOWING THE AFOREMENTIONED ORDERS OF THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 AND 2009-10, WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFI CER FOR ADJUDICATING THIS ISSUE AFRESH, AFTER AFFORDING ADEQUATE OPPORT UNITY OF BEING HEARD AND TO FILE DETAILS/SUBMISSIONS REQUIRED. ACCORDI NGLY, GROUND NO.3 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) 8. GROUND NO.4 GUEST HOUSE EXPENSES RS.4,03,77,121 /- 8.1 IN THIS GROUND, THE ASSESSEE CONTENDS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF GUEST HOUSE EXPENSES WITHOUT APPRECIATING THE EVIDENCES AND SUBMISSIONS BEFORE H IM. THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE ASSESSEES OWN CASE IN ITA NO.1933/MUM/2011 DATED 25/06/2014 F OR ASSESSMENT YEAR 2007-08. 8.2 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A). 8.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CA REFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENT CITED. WE FIND THAT THE SIMILAR ISSU E OF DISALLOWANCE OF EXPENDITURE ON GUEST HOUSE AND RESIDENTIAL FLATS , ETC. WAS CONSIDERED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 AND IN ITS ORDER IN ITA NO. 1933/MUM/2011 DATED 25/06/2014 AT PARA 7 THEREFORE, IT HAS BEEN H ELD AS UNDER:- 7. SECOND ISSUE RELATES TO THE EXPENDITURE ON GUE ST HOUSE AND RESIDENTIAL FLATS. AT THE VERY OUTSET, LD COUNSEL FOR THE ASSES SEE BROUGHT OUR ATTENTION TO PAGE 182 OF THE PAPER BOOK-I, WHICH IS AN AFFIDAVIT FILED BY SHRI GOVIND SHARMA, VICE PRESIDENT (TAXATION & CROP. AFFAIRS), AND MENTIONED THAT THE CONFIRMATION GIVEN BY SHRI SHARMA IS SUPPORTED BY T HE GUEST HOUSE REGISTER, WHICH IS PLACED IN THE PAPER BOOK-I VIDE PAGE 174 O NWARDS. HE ALSO MENTIONED THAT THIS ISSUE CAN ALSO BE REMANDED TO T HE FILE OF THE AD TO EXAMINE THE EXPENDITURE INCURRED ON GUEST HOUSES AN D RESIDENTIAL FLATS OWNED BY THE EMPLOYEES. IT IS ALSO SUBMITTED THAT T HE EXPENDITURE INCURRED ON EMPLOYEES MAY BE FULLY ALLOWED AS IT IS INCURRED FOR THE BUSINESS PURPOSES. AS SUCH, IT IS NOT DEAR FROM THE RECORD THAT WHY TH E ASSESSEE HAS TO INCUR ON 12 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) THE RESIDENTIAL FLATS ALLOTTED TO THE EMPLOYEES OF THE COMPANY. CONSIDERING THE NO OBJECTION FROM THE LD DR, WE REMAND THE MATT ER TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AFTER E XAMINING THE DETAILS AND CONTENTS MADE IN THE SAID AFFIDAVIT AND PASS A SPEA KING ORDER AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR S TATISTICAL PURPOSES. 8.3.2 THE ABOVE REFERRED ORDER OF THE TRIBUNAL (SUP RA) WAS FOLLOWED BY ANOTHER CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITA NO.824/MUM/2012 DATED 26/2/2015. RESPECTFULLY FOLLOWING THE ORDERS OF TH E CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2007-08 AND 2008-09, WE REMAND THE ISSUE OF DISAL LOWANCE OF EXPENSES ON GUEST HOUSE AND RESIDENTIAL FLATS TO TH E FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE AND DECIDE TH E ISSUE AFRESH AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. CONSEQUENTLY, GROUND NO.4 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESS MENT YEAR 2009-10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/02/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 03/02/2016 VM , SR. PS 13 ITA NO. 7056/MUM/2013 (ASSESSMENT YEAR : 2009-10) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI