ACIT CIR 4(2), MUMBAI V. KALPESH SYNTHETICS P. LTD, MUMBAI

ITA 76/MUM/2014

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 101333 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H M WANARE
• Assessee Lawyers: K SHIVARAM
• Keywords: Business expenditure; Salary income
• Section: 68; 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6774/MUM/2013 ASSESSMENT YEAR: 2010-11 M/S. KALPESH SYNTHETICS P. LTD. GALA NO. 8, 1 ST FLOOR, KUNTAL MODI ESTATE, L.B.S. MARG GHATKOPAR (W), MUMBAI 400086 / VS. ACIT, CIRCLE 4(2) 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. AAACK6496P ITA NO.76/MUM/2014 ASSESSMENT YEAR: 2010-11 ACIT, CIRCLE 4(2) 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 / VS. M/S. KALPESH SYNTHETICS P. LTD. GALA NO. 8, 1 ST FLOOR, KUNTAL MODI ESTATE, L.B.S. MARG GHATKOPAR (W), MUMBAI 400086 ( $ / REVENUE) ( !' # /ASSESSEE) PAN. NO. AAACK6496P ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 2 !' # / ASSESSEE BY SHRI K. SHIVARAM $ / REVENUE BY SHRI H.M. WANARE $% & # ' / DATE OF HEARING : 19/07/2016 & # ' / DATE OF ORDER: 20/07/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THESE ARE CROSS APPEALS FILED BY THE REVENUE AS WEL L AS THE ASSESSEE AGAINST THE ORDER DATED 08.10.2013 OF LD. COMMISSIONER OF INCOME TAX. IN THE APPEAL OF THE AS SESSEE THE DISALLOWANCE HAS BEEN CONFIRMED AMOUNTING TO RS.87,493/- OUT OF VARIOUS EXPENSES ON ADHOC BASIS WHICH HAS BEEN CHALLENGED THROUGH GROUND NO. 1 & 2. IN GR OUND NO. 3 & 4 THE DISALLOWANCE OF RS.3,95,850/- HAS BEE N CONFIRMED WHICH IS OUT OF COOLIE AND CARTAGE CHARGE S, LABOUR CHARGES AND PACKING EXPENSES. IN GROUND NO. 5 & 6 THE DISALLOWANCE OF RS.52,096/- OUT OF REPAIR AND MAINTENANCE CHARGES HAS BEEN CHALLENGED. 2.2 DURING HEARING DR. K. SHIVARAM, LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT SINCE THE ASSESSEE IS A COMPANY NO ADHOC DISALLOWANCE IS TO BE MADE. ON THE OTHER HAND, THE LEARNED D.R. SHRI H.M. WANARE CONTE NDED THAT SOME OF THE EXPENSES WERE CLAIMED ON SELF MADE VOUCHERS, THEREFORE, THEIR GENUINENESS WAS NOT ESTA BLISHED BY THE ASSESSEE. CONSEQUENTLY THE ADDITION MADE BY THE ASSESSING OFFICER WAS DEFENDED. IN REPLY THE LEARNE D ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 3 COUNSEL FOR THE ASSESSEE CONTENDED THAT FIRSTLY THE DISALLOWANCE IS NOT PERMITTED, THE ASSESSEE BEING A COMPANY, AND SECONDLY THE DISALLOWANCE IS BASED ON SURMISES AND CONJECTURE AND ALSO HIGHLY EXCESSIVE. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ED THAT THE MAJOR REASON FOR MAKING THE DISALLOWANCE BY THE LEARNED ASSESSING OFFICER IS THAT THE GENUINENESS O F THE EXPENSES IS NOT ESTABLISHED BY THE ASSESSEE AND ALS O SOME OF THE EXPENSES ARE CLAIMED ON SELF MADE VOUCHERS. IT IS ALSO NOTED THAT THE LEARNED CIT(A) GRANTED PART REL IEF TO THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND THE MATERIAL AVAILABLE ON RECORD TO PUT AN END TO THE LITIGATION THE DISALLOWANCE UNDER THE RESPECTIVE HEAD IS REDUCED T O 50% OF THE DISALLOWANCE CONFIRMED BY THE LEARNED CIT(A) . THUS THESE THREE GROUNDS, RAISED BY THE ASSESSEE, ARE PA RTLY ALLOWED. IT IS MADE CLEAR THAT SINCE WE HAVE GRANTE D PART RELIEF TO THE ASSESSEE TO THE PECULIAR FACTS OF THE PRESENT APPEAL, THEREFORE, OUR DECISION MAY NOT BE QUOTED F OR FUTURE REFERENCE AS A PRECEDENT. RESULTANTLY THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3. IN THE APPEAL OF THE REVENUE, THE FIRST GROUND PERTAINS TO DELETING THE DISALLOWANCE MADE UNDER SE CTION 36(1)(II) AMOUNTING TO RS.4 LAKHS, BEING BONUS PAID TO DIRECTORS BY THE ASSESSEE COMPANY APART FROM PAYMEN T MADE AS REMUNERATION. THE LEARNED D.R. DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER WHEREAS THE ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 4 ASSESSEE HAS DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ED THAT SHRI JITENDER C. SHAH AND SHRI BHAVESH KUMAR V. SHA H ARE WORKING AS EMPLOYEES OF THE ASSESSEE. BOTH THES E PERSONS RECEIVED REMUNERATION FROM THE ASSESSEE COM PANY AS SALARY INCOME. AN AMOUNT OF RS.4 LAKHS WAS PAID AS BONUS TO THESE PERSONS. THE ASSESSEE COMPANY, DURIN G THE RELEVANT TIME, WAS HAVING PROFIT AROUND RS.78,48,49 2/-. BOTH THE AFOREMENTIONED PERSONS ARE DIRECTORS OF TH E ASSESSEE COMPANY. THE LEARNED ASSESSING OFFICER DISALLOWED THE COMMISSION INVOKING SECTION 36(1)(II ). ON APPEAL BEFORE THE LEARNED CIT(A) THE ADDITION MADE ON THIS COUNT WAS DELETED. NOW THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THE TRIBUNAL. 3.2 WE FIND THAT, UNDER THE FACTS DISCUSSED HEREIN ABOVE AND ALSO AVAILABLE ON RECORD, THE LEARNED CIT(A) WH ILE GRANTING RELIEF TO THE ASSESSEE CONSIDERED VARIOUS DECISION INCLUDING FROM HON'BLE JURISDICTIONAL HIGH COURT IN LOYAL MOTOR SERVICE COMPANY P. LTD. VS. CIT 14 ITR 647, M /S. DALAL AND BROCHA STOCK BROKING P. LTD. THE PERCENTA GE OF SHAREHOLDINGS WAS CONSIDERED ALONGWITH DECISIONS LI KE CIT VS. CARRIER LAUNCHER INDIA LTD. (2012) 71 DTR (DEL) ; 131 ITD 414. IT IS ALSO NOTED THAT FOR ASSESSMENT YEAR 2009-10 IDENTICAL DISALLOWANCE WAS MADE BY THE ASSESSING OF FICER UNDER SECTION 36(1)(II) WHICH WAS DELETED BY THE CI T(A). NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 5 REVENUE. EVEN OTHERWISE ON THE PRINCIPLE OF CONSIST ENCY ALSO THE ASSESSEE IS HAVING A CASE IN ITS FAVOUR. CONSIDERING THE TOTALLY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE WE AFFIRM THE STAND OF THE CIT(A). 4. THE NEXT GROUND PERTAINS TO PART RELIEF GRANTED TO THE ASSESSEE WITH RESPECT TO FOREIGN TRAVEL EXPENSES. T HE LEARNED D.R. DEFENDED THE ADDITION WHEREAS THE LEAR NED COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION AR RIVED AT IN THE IMPUGNED ORDER. 4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ED THAT THE WHOLE ISSUE HAS BEEN TABULATED AT PAGE 7 ONWARD S BY THE LEARNED CIT(A) AS WAS EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 20.12.2012 WITH RESPECT TO DETAILS OF FOREIGN TRAVEL EXPENSES. THE LEARNED CIT(A) DULY CONSIDERED THE FACTUAL MATRIX ALONG WITH THE DECISIONS IN COOPER ENGINEERING LTD. VS. CIT 135 ITR 597 (BOM), SHESHAS AYEE BROTHERS VS. CIT 42 ITR 568 (MAD) AND SABAL GAR INDUSTRIES LTD. VS. CIT 46 ITR 978 (ALL). IT IS ALS O NOTED THAT THE LEARNED ASSESSING OFFICER DISALLOWED THE E NTIRE AMOUNT OF FOREIGN TRAVEL EXPENSES AMOUNTING TO RS.5,78,484/- CLAIMED UNDER SECTION 37 OF THE ACT. THE COMPARATIVE FIGURES OF ASSESSMENT YEAR 2008-09 TO 2 010- 11 WERE ALSO CONSIDERED AND FOUND THAT PROPER EXPLANATION WITH RESPECT TO BUSINESS EXPENDITURE IN RESPECT OF FOREIGN TRAVEL EXPENSES WAS ADDUCED BY T HE ASSESSEE. THE PURPOSE OF TRAVEL WAS ALSO EXPLAINED. EVEN ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 6 OTHERWISE THE ADDITION TO THE EXTENT OF RS.60,707/- WAS UPHELD WHICH WAS FOUND TO BE NOT GENUINE. THUS THE STAND OF THE CIT(A) IS AFFIRMED. 5. THE NEXT GROUND PERTAINS TO RESTRICTING THE DISALLOWANCE TO 5% AS AGAINST 10% MADE ON ACCOUNT O F COOLIE AND CARTAGE CHARGES, LABOUR CHARGES AND PACK AGING CHARGES. WE FIND THAT THE ADDITION/DISALLOWANCE WAS MADE BY THE LEARNED ASSESSING OFFICER THAT SUCH CLAIM WA S NOT FULLY SUPPORTED WITH PROPER BILLS AND VOUCHERS AND CERTAIN EXPENSES WERE CLAIMED ON SELF MADE VOUCHERS. CONSID ERING THE TOTALITY OF FACTS WE FIND NO JUSTIFICATION TO I NTERFERE WITH THE REASONING/CONCLUSION CONTAINED IN THE IMPUGNED ORDER. THUS THIS GROUND OF THE REVENUE HAVING NO ME RITS, THEREFORE, DISMISSED. 6. THE LAST GROUND, RAISED BY THE REVENUE, PERTAINS TO DELETING THE DISALLOWANCE MADE ON ACCOUNT OF UNSECU RED LOANS UNDER SECTION 68 OF THE ACT AMOUNTING TO RS.33,50,000/-. THE CRUX OF ARGUMENT ON BEHALF OF T HE REVENUE IS THAT THE ASSESSEE DID NOT PROVE THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER . 6.1 WE HAVE GONE THROUGH THE FACTUAL MATRIX AND FOU ND THAT THE ASSESSEE RECEIVED LOANS FROM GAJARABEN C. SHAH (RS.20,00,000/-), POOJA K. VORA (RS.5,00,000/-), ME HENDER C. SHAH (RS.4,50,000/-) AND APARNA D. SHAH (RS.4,00,000/-) TOTALING RS.33,50,000/-. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO PR OVE ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 7 THE IDENTITY, CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTION. WE FIND THAT THE SUBMISSION OF THE ASSESSEE WERE DULY CONSIDERED BY THE CIT(A) AS IS EVIDENT FROM PARA 7.1 OF THE IMPUGNED ORDER AND THE SUBMISSION OF THE ASSESSEE WERE FORWARDED T O THE ASSESSING OFFICER FOR HIS COMMENTS. THE COMMENTS VI DE LETTER DATED 30.08.2013 WERE ALSO CONSIDERED BY THE CIT(A). THE COUNTER COMMENTS OF THE ASSESSEE WERE A LSO CONSIDERED AND EACH OF THE PARTY HAS BEEN SEPARATEL Y DEALT WITH. UNCONTROVERTED FINDINGS HAVE BEEN RECORDED BY THE LEARNED CIT(A) THAT THE ASSESSING OFFICER DULY VERI FIED THE LOANS TO THE EXTENT OF RS.31,00,000/- AND THUS THE ADDITION WAS DELETED. SO FAR AS THE AMOUNT OF RS.2,50,000/- IS CONCERNED THIS AMOUNT WAS FOUND AS OPENING BALANCE AND THE LOAN TRANSACTIONS WERE CONTINUING FROM THESE PARTIES FROM EARLIER YEARS. T HE SOURCE OF THE AMOUNT WAS ALSO EXPLAINED ALONG WITH CREDITWORTHINESS AS WELL GENUINENESS. IT IS ALSO NO TED THAT THE CONCLUSION OF THE LEARNED CIT(A) IS BASED UPON THE SUBMISSION OF THE ASSESSEE, REPORT FROM THE ASSESSI NG OFFICER AND COUNTER REPLY FROM THE ASSESSEE. IT IS NOTED THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES ALONG WITH THE GENU INENESS OF THE TRANSACTION, THUS THE CONDITIONS MENTIONED I N SECTION 68 ARE DULY ESTABLISHED, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED CI T(A) MORE SPECIFICALLY WHEN THE PRIMARY ONUS CAST UPON T HE ASSESSEE HAS BEEN DULY DISCHARGED. THUS WE ARE CONV INCED ITA NOS. 76 &6774/MUM/2013 M/S. KALPESH SYNTHETICS P. LTD. 8 THAT THE ADDITION MADE UNDER SECTION 68 BY THE LEAR NED ASSESSING OFFICER IS NOT JUSTIFIED. THUS THE STAND OF THE LEARNED CIT(A) IS AFFIRMED. RESULTANTLY THE APPEAL OF THE REVENUE IS DISMISSED. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 19/07/2016. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) # / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ) DATED : 20/07/2016 AA P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 2# ( +, ) / THE CIT-4, MUMBAI. 4. 1 1 2# / CIT(A)-8, MUMBAI 5. 4$5 /# , 1 +,' + 6 , % / DR, ITAT, MUMBAI 6. 7! 8% / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI