MAYURA MILIND NAIK, MUMBAI V. ITO 18(2)(1), MUMBAI

ITA 7908/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7908 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: VENUGOPAL C NAIR
• Keywords: Business income; Depreciation
• Section: 37

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , ,, , , ,, , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./7908/MUM/2011, / ASSESSMENT YEAR:2006-07 MRS. MAYURA M. NAIK 15, SHANTI NIKETAN, DADAR GURUDEO CHS LTD., VEER SAVARKAR MARG DADAR (W),MUMBAI-400 028. PAN:ACLPN 8057 D VS. INCOME TAX OFFICER-18(2)(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SUMAN KUMAR- DR /ASSESSEE BY: SHRI VENUGOPAL C. NAIR / DATE OF HEARING: 15/12/2016 / DATE OF PRONOUNCEMENT:22.03. 2017 PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 23.06.2011 OF THE CIT( A)-29,MUMBAI,THE ASSESSEE HAS FILED PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,DERIVING INCO ME FROM HOUSE PROPERTY, BUSINESS/ PROFESSION AND OTHER SOURCES,FILED HER RETURN OF IN COME ON 19.01.2007 DECLARING TOTAL INCOME AT RS.4,14,800/-.THE ASSESSING OFFICER (AO)COMPLETE D THE ASSESSMENT U/S.143(3) OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 10.40 LAKHS. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORISED REPRESENTATIVE (AR)STATED THAT THE ASSESSEE WAS NOT INTERESTED IN PRESSING FIRST TWO GROUNDS. HENCE BOTH THE GROUNDS STAND DISMISSED, AS NOT PRESSED. 2. EFFECTIVE GROUND OF APPEAL (GOA 3-8) IS ABOUT CONFI RMING THE ADDITIONS- EITHER PARTLY OR FULLY- MADE BY THE AO UNDER THE VARIOUS HEADS.DURIN G THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD MADE TOTAL SALES OF RS. 4.89 LAKHS AFTER CLAIMING VARIOUS EXPENSES TO THE TUNE OF RS. 9.80 LAKHS,THAT SHE HAD CLAIMED LOSS OF RS. 4.62 LAKHS FROM THE BUSINESS IN THE COMPUTATION OF INCOME,THAT SHE HAD DISALLOWED R S.1.25 LAKHS ON ACCOUNT OF DEPRECIATION AND TELEPHONE EXPENSES ON HER OWN,THAT DURING THE A Y.2007-08 SHE HAD CLAIMED LOSS OF RS.3.60 LAKHS ON A SALES TURNOVER OF RS. 5.15 LAKHS , THAT THE LOSS HAD BEEN SET OFF TOWARDS THE RENTAL INCOME OF RS. 12 LAKHS,THAT IN THAT YEAR SHE HAD DISALLOWED RS. 1.19 LAKHS ON ACCOUNT OF DEPRECIATION ON PREMISES AND FIRTH NATURE AND TE LEPHONE EXPENSES.REFERRING TO THE PROVISIONS OF SECTION 37 OF THE ACT AND RELYING UPO N THE CASE OF RAMANAND SAGAR (256 ITR 134)HELD THAT THE ASSESSEE HAD DEBITED 39% OF THE TURN OVER TOWARDS SALARY,THAT CONVEYANCE WAS 16.2% OF THE TURNOVER,THAT SHE WAS PURCHASING AND SELLING AYURVEDIC MEDICINES,THAT NO PRUDENT BUSINESSMAN WOULD SPEND 55% OF THE TURNOVER ON SALARY AND CONVEYANCE,THAT REASON 7908/M/11(06-07) MAYURA MILIND NAIK 2 -ABLENESS OF THE EXPENDITURE INCLUDING THE BONAFIDE NATURE OF BOTH THE ITEMS OF EXPENDITURE AND ITS QUANTUM REMAINED UNPROVED.FINALLY,HE DISALL OWED 75% OF BOTH THE EXPENSES AND MADE AN ADDITION OF RS. 2.02 LAKHS TO THE TOTAL INC OME OF THE ASSESSEE. THE AO FURTHER FOUND THAT THE ASSESSEE HAD DEBITED RS.73,115/- TOWARDS TRAVELLING EXPENSES THAT WAS 15% OF THE TURNOVER.HE HELD THAT IN ABSENC E OF NEXUS OF TRAVELLING EXPENSES WITH THE BUSINESS WHOLE OF THE TRAVELLING EXPENSES HAS TO BE DISALLOWED AND WAS TO BE ADDED TO THE INCOME OF THE ASSESSEE. SIMILARLY OUT OF ELECTRIC C HARGES OF RS.19,111/- HE DISALLOWED 75% OF THE EXPENDITURE I.E. RS.14,333/-.OUT OF THE EXHIBIT ION EXPENSES OF RS.75,241/- HE DISALLOWED 50%(RS.37,621/-) ON ESTIMATE BASIS AND ADDED THE SA ME TO THE INCOME OF THE ASSESSEE.OUT OF THE EXPENDITURE UNDER THE HEAD REPAIRS AND MAINTENA NCE (RS.40,692/-), RENT-(RS.36,000) AND DEPRECIATION(RS.1.74 LAKHS),THE AO DISALLOWED 100% AND 90% OF THE EXPENSES RESPECTIVELY. 2.2. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT THE DETAILS OF SALARY EXPENSES WERE NO T ENOUGH TO JUSTIFY SUCH A MEAGER TURNOVER, THAT THE LOSS IN BUSINESS INCOME HAD BEEN CREATED T O SET OFF HOUSE PROPERTY INCOME DISCLOSED BY THE ASSESSEE, THAT 50% DISALLOWANCE OF THE EXPEN SES UNDER THE HEAD SALARY AND CONVEYANCE WOULD BE REASONABLE ENOUGH TO MEET THE ENDS OF JUST ICE.OUT OF TRAVELLING EXPENSES HE UPHELD THE DISALLOWANCE UPTO 50%,WHEREAS HE CONFIRMED THE ADDITION MADE BY AO UNDER THE HEAD ELECTRICITY EXPENSES.WITH REGARD TO DISALLOWANCE OF EXHIBITION EXPENSE THE FAA HELD THAT SAME SHOULD BE RESTRICTED TO 50%. HE UPHELD THE DIS ALLOWANCE MADE TOWARDS REPAIR AND MAINTENANCE AS WELL AS RENT.WITH REGARD TO DEPRECIA TION, THE FAA HELD THAT ALL THE ASSETS OWNED BY ASSESSEE WERE PERSONAL IN NATURE, THAT THE RE WAS NO EVIDENCE OF BEING USED FOR BUSINESS, THAT DEPRECIATION SCHEDULE HAD NOT BEEN F ILED BEFORE THE AO OR DURING APPELLATE PROCEEDINGS.THE ASSESSEE HERSELF HAD DISALLOWED RS .1.20 LAKHS.HE DIRECTED THE AO TO ADJUST THE SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE WH ILE GIVING EFFECT TO HIS ORDER.THUS, HE PARTLY ALLOWED THE GROUND OF APPEAL PERTAINING TO D EPRECIATION. 2.3. DURING THE COURSE OF HEARING BEFORE US,THE AR ARGUE D THAT ADDITIONS MADE BY AO AND CONFIRMED BY THE FAA WERE ON HIGHER SIDE,THAT THE D ISALLOWANCE MADE BY AO WOULD INCREASE THE PROFIT ABNORMALLY HIGH,THAT THE ASSESSEE WAS A SMALL TIME ENTREPRENEUR. THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD MADE CLAIMS UNDER VARIOUS HEADS OF EXP ENSES DURING THE YEAR UNDER APPEAL, THAT THE AO HAD PARTLY/FULLY DISALLOWED EXPENSES CLAIMED TO HAVE BEEN INCURRED UNDER THE HEAD 7908/M/11(06-07) MAYURA MILIND NAIK 3 SALARY AND CONVEYANCE, TRAVELLING,ELECTRICITY EXPEN SES,EXHIBITION ,REPAIRS AND MAINTENANCE, RENT AND DEPRECIATION. IT IS TRUE THAT ASSESSEE IS RUNNING HER BUSINESS FROM RESIDENCE ONLY AND MOST OF THE ASSETS ARE OF PERSONAL NATURE.THE ASSES SEE HERSELF HAD MADE A SUO-MOTU DISALLOWANCE OF RS.1.20 LAKHS UNDER THE HEAD DEPREC IATION, THAT THE FAA HAD GIVEN PARTIAL RELIEF WITH REGARD TO CERTAIN EXPENSES.CONSIDERING PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND QUANTUM OF BUSINESS,WE ARE OF THE OPINION THAT DISALLOWANCE UNDER THE VARIOUS HEADS AND CONTESTED BY THE ASSESSEE,SHOULD BE RESTRICTED TO 15% OF THE DISALLOWANCES.GOA 3-8 STAND PARTLY ALLOWED. 3. LAST GROUND OF APPEAL IS ABOUT CONFIRMING ADDITION OF INTEREST ON TAX FREE RBI BONDS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.2 LAKHS AND RS.8 LAKHS IN 8% RBI TAXABLE BONDS, THAT SHE HAD NOT OFFERED CORRESPONDING INTEREST ON THE SAID INVESTMENTS IN THE RETURN OF I NCOME. HE WORKED OUT THE INTEREST AT RS. 63,615/- AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE. 3.1. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE STAT ED THAT SHE HERSELF HAD TAKEN IN ON TAX FREE BONDS INTO HER CAPITAL ACCOUNT, THAT THE AO HA D NOT RAISED ANY QUERY IN THAT REGARD. THE FAA HELD THAT THE ASSESSEE HAD NOT PRODUCED ANY EVI DENCE OF INVESTMENT SHOWING THAT THE BONDS WERE TAX FREE, THAT THE AO WAS JUSTIFIED IN M AKING THE ADDITION. 3.2. BEFORE US,THE AR ARGUED THAT THE AO HAD NOT CALLED FOR DETAILS OF TAXABLE RBI BONDS. HE REFERRED TO THE CASE OF VIDYASAGAR B. WAHI-HUF (ITA 3551/MUM/2010/AY06-07 DT.22.7. 2011).THE DR SUPPORTED THE ORDER OF THE FAA. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US . WE FOUND THAT RBI BONDS ARE NOT TAX FREE.THE AO/FAA HAS NOT DISCU SSED THE TERMS AND CONDITIONS OF THE BONDS.THEREFORE,WE ARE OF THE OPINION THAT ISSUE NE EDS FURTHER VERIFICATION BY THE AO.IN THE INTEREST OF JUSTICE WE ARE RESTORING BACK THE ISSU E TO THE FILE OF AO FOR FRESH ADJUDICATION .HE IS DIRECTED TO CONSIDER THE CASE OF VIDYASAGAR B. W AHI-HUF(SUPRA) AND AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECI DING THE ISSUE. AS A RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND ,MARCH , 2017. 22 , 2017 SD/- SD/- ( !' / AMARJIT SINGH ) ( #$% / RAJENDRA ) $&& '& / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 22.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 7908/M/11(06-07) MAYURA MILIND NAIK 4 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.