The ITO, Ward-4(2), Ahmedabad V. J.H. Kharawala Pvt. Ltd., Ahmedabad

ITA 780/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9791 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NIMISH VAYAWALA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 08/07/2010 DRAFTED ON: 1 3/09/2010 ITA NO.780/AHD/2008 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER WARD-4(2) AHMEDABAD VS. J.H. KHARAWALA PVT.LTD. JAY HOUSE PANCHVATI CIRCLE AMBAWADI, AHMEDABAD PAN/GIR NO. : AAACJ 5528 P ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI K.MADHUSUDAN, SR. D.R. RESPONDENT BY: SHRI NIMISH VAYAWALA O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)VIII-AHME DABAD DATED 20/12/2007 PASSED FOR ASSESSMENT YEAR 2005-06 AND THE GROUNDS RAISED ARE AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO DELETE THE DISALLOWANCE OF RS .11,01,535/- U/S.40A(2)(B) OF THE ACT, ON ACCOUNT OF EXCESSIVE S ERVICE CHARGES PAID TO A GROUP CONCERN, NAMELY M/S. JAY IN FRA TRADE PVT.LTD. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS O F THE CASE IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISAL LOWANCE OF RS.3,59,690/-, BEING 1/7 TH OF MISCELLANEOUS EXPENSES, WHEN THE ITA NO.780/AHD/ 2008 ITO VS. J.H.KHARAWALA PVT.LTD. ASST.YEAR 2005-06 - 2 - ASSESSEE HAD EXPRESSED INABILITY TO PRODUCE THE BIL LS AND VOUCHERS FOR VERIFICATION DURING THE ASSESSMENT PRO CEEDINGS. 2. BOTH THESE GROUNDS HAVE ALREADY BEEN DECIDED BY THE ITAT AHMEDABAD BENCH B VIDE AN ORDER PASSED IN ITA NO S.1607 AND 4063/AHD/2007 FOR ASSESSMENT YEARS 2003-04 & 2004-0 5 ORDER DATED 17/09/2010RESPECTIVELY AND, THEREFORE, THE DIRECTI ONS EMBEDDED THEREIN SHALL ALSO APPLY MUTATIS MUTANDIS FOR THE YEAR UNDE R CONSIDERATION AS WELL. 3. AS FAR AS GROUND NO.1 IS CONCERNED, WE HAVE TAKE N A VIEW IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH NO.8.2, THERE FORE, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED; FOR READY REFERENC E REPRODUCED BELOW :- 8.2. BECAUSE OF THESE CITATIONS; PERTAINING TO THE SERVICE PROVIDER AS WELL AS THE SERVICE RECEIVER, BOTH, OF THE RESPE CTED CO-ORDINATE BENCH NOW DULY PLACED BEFORE US, AND THEREUPON WE HAVE MADE CERTAIN OBSERVATIONS ABOUT THE MAINTENANCE OF THE C ONSISTENCY IN THE FOREGOING PARAGRAPHS, AT THIS POINT PRONTO WE C AN SAFELY ARRIVE AT A CONCLUSION THAT AT THE MOMENT THERE IS NOTHING LEFT FOR OUR AFRESH ADJUDICATION OF THE ISSUE. FURTHERMORE, ONC E FOR THE SAME ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2003-04 IN ON E OF THE SISTER- CONCERNS CASE, WHICH IS ALSO A SERVICE RECEIVER AS THE ASSESSEE IS , IT HAD ALREADY BEEN HELD BY THE AHMEDABAD TRIBUNAL THAT THE PAYMENT WAS NOT EXCESSIVE AND THE TRANSACTION WAS G ENUINE, THEREFORE, THE VIEW TAKEN ON THE SAME LINES BY THE FIRST APPELLATE AUTHORITY FOR THE YEAR UNDER CONSIDERATION IN ASSE SSEES CASE AS WELL OUGHT TO BE AFFIRMED. WE HOLD ACCORDINGLY. THUS, THE FIRST GROUND IN BOTH THE ASSESSMENT YEARS OF THE REVENUE IS HEREBY DISMISSED. ITA NO.780/AHD/ 2008 ITO VS. J.H.KHARAWALA PVT.LTD. ASST.YEAR 2005-06 - 3 - 4. APROPOS GROUND NO.2, WE HAVE TAKEN A DECISION VI DE PARAGRAPH NO.10.1 TO RESTORE THE ISSUE BACK TO THE STAGE OF L EARNED CIT(APPEALS) WITH CERTAIN DIRECTIONS AND THOSE DIRECTIONS HAS TO BE FOLLOWED FOR THE YEAR UNDER CONSIDERATION AS WELL. THEREFORE, THIS GROUND OF THE REVENUE IS HEREBY TREATED AS ALLOWED FOR STATISTICAL PURPOS ES; FOR READY REFERENCE REPRODUCED BELOW:- 10.1. ON ONE HAND, THE REVENUE HAS VEHEMENTLY ARGU ED THAT THE FIRST APPELLATE AUTHORITY HAD GRANTED THE RELIEF WI THOUT ACKNOWLEDGING THE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAID CLAIM BEFORE THE ASSESSING OFFICER THOUGH AN OPPORTUNITY WAS GRANTED BY THE ASSESSING OFFICER, HOWEVER ON TH E OTHER HAND, THE ASSESSEE HAS INFORMED THAT THOSE VOUCHERS OR B ILLS WERE NOT TRACEABLE AT THAT TIME, THEREFORE, DUE TO THE SAID REASON COULD NOT BE PRODUCED. THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HAD AD OPTED A VERY REASONABLE RATIO OF DISALLOWANCE WHICH COULD HAVE B EEN AFFIRMED BY THE FIRST APPELLATE AUTHORITY. FROM THE SIDE OF THE ASSESSEE, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE S HRI NIMISH VAYAWALA HAS TRIED TO EXPLAIN THAT THERE WAS NO SUB STANTIAL VARIATION IN THE PERCENTAGE CLAIM OF EXPENSES IF CO MPARED WITH THE PAST YEARS HENCE IT WAS TOTALLY ALLOWABLE. THE LE ARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS FILED A CHART SHOWING THE COMPARATIVE FIGURES OF ABOVE FEW YEARS. IT COULD HAVE BEEN POSSIBLE THAT THERE WAS NO SUBSTANTIAL VA RIATION IN THE PERCENTAGE OF EXPENSES, BUT IT IS ALSO AN ADMITTED POSITION THAT THE RATIO OF EXPENSES UNDER QUESTION WAS NOT UNIFORM IF COMPARED WITH THE PAST HISTORY OF THE CASE. THE DETAILS AND THE CHARTS PRODUCED BEFORE US HAVE DEPICTED THE SAME INFORMATION. IN SUCH A SITUATION, IT WAS EXPECTED FROM THE FIRST APPELLATE AUTHORITY TO EITHER CALLED- FOR A REMAND REPORT OR IN THE ALTERNATE WOULD HAVE GRANTED AN OPPORTUNITY OF HEARING TO THE ASSESSING OFFICER SO THAT THE REQUISITE INFORMATION COULD HAVE BEEN VERIFIED. IT IS NOT A SIMPLE DISALLOWANCE ON ABHOC BASIS, BUT THE IMPUGNED 1/7 TH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER DUE TO THE GROSS FAILURE ON THE ITA NO.780/AHD/ 2008 ITO VS. J.H.KHARAWALA PVT.LTD. ASST.YEAR 2005-06 - 4 - PART OF THE ASSESSEE. THE SITUATION WAS NOT THAT T HE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT AND GOT VERIFIED THE REAS ONABLENESS AS WELL AS THE GENUINENESS OF THE EXPENSES, BUT EVEN T HEN A PARTIAL ADHOC DISALLOWANCE WAS MADE. RATHER THE ADMITTED POSITION IS THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE GENUINE NESS OR THE REASONABLENESS OF THE CLAIM OF EXPENSES, THOUGH THE OPPORTUNITY WAS GRANTED TO THE ASSESSEE. IN VIEW OF THIS, WE HEREBY HOLD THAT THE RELIEF GRANTED BY THE LEARNED CIT(APPEALS) WAS NOT ON FIRM- FOOTING WHICH CAN BE UPHELD EITHER ON FACTS OR ON L AW. WE, THEREFORE, RESTORE THIS ISSUE BACK TO THE STAGE OF FIRST APPELLATE AUTHORITY TO BE DECIDED DE NOVO, NEEDLESS TO SAY, A FTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDE S. WE HOLD ACCORDINGLY. RESULTANTLY, THIS GROUND OF THE REVE NUE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 5. IN THE RESULT, FOLLOWING THE AFOREMENTIONED VIEW A PPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24/ 09 /2010. SD/- SD/- ( N.S. SAINI) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 24 / 09 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VIII, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO.780/AHD/ 2008 ITO VS. J.H.KHARAWALA PVT.LTD. ASST.YEAR 2005-06 - 5 - 1. DATE OF DICTATION..08/09/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/09/2010 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 22/09/2010 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 23/09/2010 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 22/09/2010 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24/09/2010 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER