ASST CIT 13(2), MUMBAI V. RAM B. SALVE, MUMBAI

ITA 87/MUM/2011

• Counselvise Citation: 8719914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALMAN KHAN
• Keywords: Proportionate interest

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . . .. . , ,, , !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. I.P. BANSAL,JUDICIAL MEMBER & RAJENDRA ,ACCOUNTANT MEMBER /. ITA NO.87/MUM/2011 , $ $ $ $ % % % % / ASSESSMENT YEAR-2007-08 ACIT 13(2) R.NO. 421, 4 TH FLOOR,AAYAKAR BHAVAN MUMBAI-400020 VS. RAM B.SALVE 17/18, VYAPAR BHAVAN, 49, P.D. MELLO ROAD, CURNAC BUNDER MUMBAI- 400009 PAN:AACPS5498L ( &' / APPELLANT) ( ()&' / RESPONDENT) /. ITA NO.88/MUM/2011 , $ $ $ $ % % % % / ASSESSMENT YEAR-2006-07 ACIT 13(2) R.NO. 421, 4 TH FLOOR, AAYAKAR BHAVAN MUMBAI-400020 VS. RAM B.SALVE 17/18, VYAPAR BHAVAN, 49, P.D. MELLO ROAD, CURNAC BUNDER MUMBAI- 400009 PAN:AACPS5498L ( &' / APPELLANT) ( ()&' / RESPONDENT) &' &' &' &' * * * * ' '' ' / APPELLANT BY : SHRI SALMAN KHAN ()&' + * ' / RESPONDENT BY : NONE $ $ $ $ + ++ + , , , , / DATE OF HEARING : 17-09-2013 -.% + , / DATE OF PRONOUNCEMENT : 25-09-2013 $ $ $ $ , 1961 + ++ + 254(1) ' '' ' ,/, ,/, ,/, ,/, '0 '0 '0 '0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: ASSESSING OFFICER(AO)HAS FILED THE APPEALS AGAINST THE ORDERS DATED 29-10-2010 OF THE CIT(A)-24, MUMBAI RAISING FOLLOWING GROUNDS OF APPEAL: ITA NO. 88/MUM/2011 AY- 2006-07: (1).ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DIS ALLOWANCE OF RS. 8,52,083/- MADE @ 20% OUT OF CONVEYANCE & SUNDR Y EXPENSES TO 5%. (II)WHILE DOING SO, THE LD. CIT(A) HAS NOT GIVEN AN Y BASIS OR CONCRETE REASONS FOR GIVING THE RELIEF O N AD HOC BASIS, PARTICULARLY WHEN THE ASSESSEE HAS FAILED TO FURNISH COMPLETE AND PROPER DETAILS IN SUPPORT OF THE CLAIM. (2)(I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. C1T(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS.4,84,445/-MADE @ 20% OUT OF BHATTA PAID TO DR IVERS AND CLEANERS OF THE TRUCK TO RS.1,00,000/-. (II)WHILE DOING SO, THE LD. CIT(A) HAS NOT GIVEN AN Y BASIS OR CONCRETE REASONS FOR GIVING THE RELIEF O N ADHOC BASIS, PARTICULARLY WHEN THE ASSESSEE HAS FAILED TO FURNIS H COMPLETE AND PROPER DETAILS IN SUPPORT OF THE CLA IM. 2 ITA NO.87/MUM/2011 RAM B.SALVE . (3)(I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS.2,74,012/-MADE @ 20% OUT OF GATE PASS, TOLL T AX, LOADING & UNLOADING EXPENSES TO 5%. (II)WHILE DOING SO,THE LD. CIT(A) HAS NOT. GIVEN AN Y BASIS OR CONCRETE REASONS FOR GIVING THE RELIEF O N ADHOC BASIS, PARTICULARLY WHEN THE ASSESSEE HAS FAILED TO FURNIS H COMPLETE AND PROPER DETAILS IN SUPPORT OF THE CLA IM. (4)(I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW; THE LD. CIT(A) ERRED IN DELETING THE DIS ALLOWANCE OF INTEREST OF RS.46,15,956/- MADE ON ACCOUNT OF INTER EST FREE ADVANCES TO SISTER CONCERN WHEREAS THE ASS ESSEE IS PAYING INTEREST ON BORROWED FUNDS. (II)WHILE DOING SO, THE LD. C1T(A) FAILED TO APPREC IATE THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDEN CE TO SUBSTANTIATE THAT THE INTEREST BEARING FUNDS WERE U TILISED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE S. (II)THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THA T THE ASSESSEE HAS NOT DEMONSTRATED ANY COMMERCIAL EXIGENCY IN RESPECT OF THE INTEREST FREE ADVANCES TO THE SISTER CONCERN. (5)THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE A SSESSMENT OFFICER BE RESTORED. (6)THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD ANY NEW GROUND, IF NECESSARY. ITA NO. 87/MUM/2011 AY- 2007-08 (1) (I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DI SALLOWANCE OF INTEREST OF RS. 36,01,956/- MADE ON ACCOUNT OF INTE REST FREE ADVANCES TO SISTER CONCERN WHEREAS THE AS SESSEE IS PAYING INTEREST ON BORROWED FUNDS. (II)WHILE DOING SO, THE LD. CIT(A)FAILED TO APPRECI ATE THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENC E TO SUBSTANTIATE THAT THE INTEREST BEARING FUNDS WERE U TILIZED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE S. (III)THE LD. CIT(A) FURTHER FAILED TO APPRECIATE TH AT THE ASSESSEE HAS NOT DEMONSTRATED ANY COMMERCIAL EXIGENCY IN RESPECT OF THE INTEREST FREE ADVANCES TO THE SISTER CONCERN. (2)THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE A SSESSMENT OFFICER BE RESTORED. (3).THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND OR ADD ANY NEW GROUND, IF NECESSARY. 2. ASSESSEE,AN INDIVIDUAL,CARRYING ON BUSINESS OF CON TAINER MOVEMENTS WITH THE HELP OF TRUCKS, TRAILERS AND OTHER VEHICLES. HE ALSO HIRES VEHICLES FROM OTH ERS FROM OUTSIDE PARTIES.DETAILS OF DATES OF FILING OF RETURNS,INCOMES RETURNED,DATES OF ASSESSMENT AND AS SESSED INCOMES CAN BE SUMMARISED AS UNDER : DT.OF FILING OF RETURN RETURNED INCOME (RS.) DATE OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) AY2007-08 31.10.2007 NIL 28.10.2009 42,000/- 29.10 .2010 AY2006-07 02.11.2006 (-) 3,10,39,773 29.12.2008 5, 69,546/- 29.10.2010 ITA NO. 88/MUM/2011 AY- 2006-07 : 3. FIRST THREE GROUNDS OF APPEAL ARE ABOUT DISALLOWANC ES MADE BY THE AO AND RESTRICTED BY THE FAA.OUT OF THE THREE FIRST IS ABOUT RESTRICTING THE DISALLO WANCE OUT OF CONVEYANCE AND SUNDRY EXPENSES TO 5%. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 10.08 LACS AND RS.32.51 LACS ON ACCOUNT OF CONVEYANCE EXP ENSES SUNDRY EXPENSES RESPECTIVELY.HE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF PAYMENT.AUTHORIS ED REPRESENTATIVE(AR) OF THE ASSESSEE SUBMITTED THAT CONVEYANCE EXPENSES WERE INCURRED FOR TRAVELIN G OF STAFF INCLUDING DRIVERS AND CLEANERS,THAT SUNDRY EXPENSES WERE INCURRED FOR DAY-TODAY FUNCTIO NING OF OFFICE,THAT THE AMOUNT INVOLVED WAS VERY PETTY IN NATURE.AO ADDED RS. 8.52 LACS,BEING 20% OF THE CONVEYANCE AND SUNDRY EXPENSES EXPENSES TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO.87/MUM/2011 RAM B.SALVE . 3.A. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RS. 4.84 LACS OUT OF BHATTA PAID BY THE ASSESSEE TO DRIVERS AND CLEANERS OF THE TRUCKS.AO FOUND THAT AS SESSEE HAD CLAIMED TRIP EXPENSES IN THE P&L ACCOUNT,THAT HE HAD PAID RS.22.12 LACS TO THE DRIV ERS AND CLEANERS OF THE TRUCKS AS BHATTA CHARGES . HE HELD THAT IT WAS NOT VERIFIABLE WHETHER THE ENTIRE EXPENSES WERE INCURRED IN RELATION TO BUSINESS OR NOT, THAT THE EXPENSES WERE INCURRED IN CASH.HE DISALLOW ED 20% OF THE EXPENDITURE (RS. 4.84 LACS) OUT OF TH E ABOVE EXPENSES. 3.B. THIRD GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE W ITH REGARD TO GATE PASS,TOLL TAX, LOADING AND UNLOADING EXPENSES.DURING THE ASSESSMENT PROCEEDING S, AO FOUND THAT ASSESSEE HAD DEBITED RS. 13.70 LACS ON ACCOUNT DOCK EXPENSES.HE DIRECTED THE ASSES SEE TO FURNISH VOUCHERS WITH FULLY SUPPORTED BILLS AND CASH-MEMO.IT WAS ADMITTED BEFORE THE AO BY THE ASSESSEE THAT EXPENSES HAD BEEN INCURRED IN DOCK FOR GATE PASS, TOLL TAX, LOADING AND UNLOADING, THA T THE NATURE OF EXPENSES WAS SUCH THAT SUPPORTING B ILLS WERE NOT OBTAINABLE.AS PER THE AO CONSIDERING THE S AID DEFICIENCY,IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE ENTIRE EXPENSES HAD BEEN INCURRED FOR T HE PURPOSE OF BUSINESS. IN VIEW OF THE SAID LACUNAE , HE MADE AN AD-HOC DISALLOWANCE @ 20% (RS.2.74 LACS) TO THE TOTAL INCOME OF THE ASSESSEE. 4. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF INTE REST AMOUNTING TO RS. 46.15 LACS. AO FOUND THAT ASSESSEE HAD TAKEN LOAN OF RS. 10.90 CRORES FROM BA NK AND OTHER PARTIES,THAT HE HAD PAID INTEREST OF R S. 1.21 CRORES DURING THE YEAR UNDER CONSIDERATION,THA T THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS OF RS.3.84 CRORES TO HIS VARIOUS SISTER CONCERNS.HE HE LD THAT INTEREST BEARING FUNDS WERE GIVEN AS LOAN A ND ADVANCES WITHOUT CHARGING INTEREST.THEREFORE,HE DIS ALLOWED PROPORTIONATE INTEREST OF ADVANCES OF RS. 3 . 84 CRORES @12%.AS A RESULT,AN ADDITION OF RS.46.15 LACS WAS MADE TO THE INCOME OF THE ASSESSEE. 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).IT WAS SUBMITTED BEFORE HIM THAT CONVEYANCE EXPENSES INCLUDED EXPENSES INCURRED ON TRAVELLING OF STAFF MEMBERS FROM THE PLACE OF THE RESIDENCE TO THE PLACE OF EMPLOYMENT,THAT THE A SSESSEE MAINTAINED HIS OWN TRUCKS BESIDES HIRING A 75-80 TRUCKS,THAT TRUCKS OPERATED IN DIFFERENT PART S OF DOCKS,THAT THE SAID EXPENDITURE WAS INCURRED O N DAILY BASIS AND WAS SUPPORTED BY VOUCHERS, THAT THE SUNDRY EXPENSES WERE INCURRED FOR CARRYING ON DAY TO DAY FUNCTIONING OF THE BUSINESS OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE RESTRICTED THE DISALLOWANCE TO 5%.UNDER THE HEAD CO NVEYANCE AND SUNDRY EXPENSES.WITH REGARD TO THE BHATTA PAID TO DRIVERS AND CLEANERS,HE WAS OF T HE OPINION THAT CONTENTION MADE BY THE ASSESSEE WERE CORRECT.HE FOUND THAT FOR THE AY 2005-06 SIMIL AR DISALLOWANCE WAS MADE BY THE AO AMOUNTING TO RS. 3 LACS AND IT WAS RESTRICTED TO RS. 1 LAC BY HIS PREDECESSOR.FOLLOWING THE ORDER OF HIS PREDECE SSOR FOR THE YEAR 2005-06, HE RESTRICTED THE DISALLOWANC E OF RS. 1 LAC UNDER THE HEAD BHATTA CHARGES.SIMILA R LY,CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE, HE REDUCED THE DISALLOWANCE TO 5% UNDER THE HEAD GATE-PASS,TOLL-TAX, LOADING AND UNLOADING EXPENSES. 5.A. ON BEHALF OF THE ASSESSEE,IT WAS SUBMITTED BEFORE T HE FAA,THAT HE WAS RUNNING INTO LOSSES FOR LAST 5-6 YEARS, THAT HE HAD TAKEN SPECIFIC LOANS FROM FI NANCIAL INSTITUTION FOR PURCHASE OF VEHICLES, THAT THE ASSESSEE HAD ADVANCED LOAN TO SISTER CONCERNS BUT T HERE WAS NO DIRECT NEXUS BETWEEN THE LOAN ADVANCED AND LOAN TAKEN, THAT THE AO DISALLOWED A SUM OF RS. 46.15 LACS WITHOUT ESTABLISHING NEXUS BETWEEN THE LOAN ADVANCED AND LOANS TAKEN, THAT THE ASSESSEE HA D TAKEN LOAN WITHOUT PAYING ANY INTEREST, THAT THE ASSESSEE HAD INTEREST FREE LOANS AMOUNTING TO RS. 8 .57 CRORES AT HIS DISPOSAL,THAT THE LOAN GIVEN TO VARIOUS PERSONS AMOUNTED TO RS. 3.84 CRORES, HAT AS SESSEE HAD TAKEN LOAN FROM BANK OF RS. 2.33 CRORES ONLY.AFTER CONSIDERING THE SUBMISSION OF THE ASSESS EE AND THE ASSESSMENT ORDER,FAA HELD THAT THERE WAS NO NEXUS BETWEEN THE LOANS AND ADVANCES GIVEN A ND LOANS/ADVANCES TAKEN, THAT THE AMOUNT OF INTEREST FREE LOANS MATCHED WITH THE INTEREST FREE LOANS RECEIVED. 6. BEFORE US,DEPARTMENTAL REPRESENTATIVE SUBMITTED THA T AO HAD MADE DISALLOWANCES UNDER VARIOUS HEADS AS THE ASSESSEE WAS UNABLE TO PROVE THE INCUR RING OF EXPENDITURE FOR BUSINESS PURPOSES,THAT 4 ITA NO.87/MUM/2011 RAM B.SALVE . BHATTA CHARGES AND OTHER EXPENSES WERE UNVERIFIABLE ,THAT DISALLOWANCE OF 20% WAS JUSTIFIABLE CONSIDERING THE FACTS OF THE CASE.NONE APPEARED ON BEHALF OF THE ASSESSEE.THEREFORE,WE ARE DECIDING THE APPEAL ON THE BASIS OF AVAILABLE RECORDS. FIRST THREE GROUNDS OF APPEAL,AS STATED EARLIER,ARE ABOUT DISALLOWANCES MADE UNDER VARIOUS HEADS.WHILE DISALLOWING THE EXPENSES,AO HAD HELD THAT EXPENDITU RE INCURRED WAS NOT VERIFIABLE. WE FIND THAT HE HAS NOWHERE MENTIONED AS HOW THE DETAILS WERE NOT VERIF IABLE OR WHICH DETAILS WERE CHECKED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS,IN OUR OPINION FOR DISALLOWING ANY ITEM OF EXPENDITURE,AO HAS TO GIVE A COGENT REASON.WE FIND THAT WHILE FINALISING THE ASSESSMENT,HE HAS MADE AD-HOC DISALLOWANCE OF @20% UNDER ALL THE THREE HEADS.THOUGH HE ALLEGED TH AT IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE ENTIRE EXPENSES HAD BEEN INCURRED FOR THE PURPOSE O F BUSINESS OR NOT,YET HE DID NOT MENTION ANYTHING ABOUT NON-BUSINESS PURPOSE FOR INCURRING THE SAID E XPENDITURE UNDER THE HEADS CONVEYANCE EXPENSES, SUNDRY-EXPENSES, BHATTA AND DOCK-EXPENSES. IN T HESE CIRCUMSTANCES, IF FAA HAS REDUCED THE AD-HOC DISALLOWANCE TO 5% ,AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE,THEN IN OUR OPINION HIS ORDER HA S TO BE CONFIRMED.FAA,WHILE DECIDING THE APPEAL HAS L OOKED INTO THE TOTALITY OF THE FACTS AND CIRCUMSTAN -CES OF THE CASE, INCLUDING THE ORDER OF HIS PREDEC ESSOR PASSED FOR EARLIER ASSESSEMNT.AO HAD MADE DISALLOWANCES IN A ROUTINE MANNER.HE HAS NOT GIVEN ANY REASON AS TO WHY ONLY 20% OF THE EXPENDITURE HAD TO BE DISALLOWED.CONSIDERING THE NATURE OF BUSI NESS AND PAST HISTORY,FAA REDUCED THE DISALLOWAN- CE TO 5%.THEREFORE, WE ARE OF THE OPINION THAT HIS ORDER DOES NOT SUFFER FROM ANY INFIRMITY.UPHOLDING THE ORDER OF THE FAA,GROUNDS NO. 1-3 ARE DECIDED AG AINST THE AO. 6.A.LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RS.46.15 LACS UNDER THE HEAD INTEREST PAID.DURING THE APPELLATE PROCEEDINGS,FAA FOUND THAT ASSESSEE H AD SUFFICIENT INTEREST FREE LOANS AND ADVANCES WITH HIM, THAT AMOUNT OF LOAN FREE ADVANCES WAS RS. 8.57 CRORES WHEREAS THE LOANS GIVEN WERE OF RS.3.84 CRORES.HE FURTHER FOUND THAT,DURING THE YEAR UNDER CONSIDERATION,THE ASSESSEE HAD TAKEN LOAN FROM BANK AMOUNTING TO RS. 2.33 CRORES ONLY.AFTER GOING THROU GH THE DETAILS HE HAS GIVEN A CATEGORICAL FINDING O F FACT THAT THERE WAS NO NEXUS BETWEEN THE LOANS AND ADVANCES GIVEN VIS--VIS LOANS AND ADVANCES TAKEN, THAT THE AMOUNT OF INTEREST FREE LOANS GIVEN MATCHE D WITH THE INTEREST FREE LOANS RECEIVED. IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT HIS ORDER IS BASED ON SOUND FOOTING AND REASONING.THEREFORE, CONFIRMING HIS ORDER,WE DECIDE GROUND NO.4 AGAINST THE AO. ITA NO. 87/MUM/2011 AY- 2007-08 THE EFFECTIVE GROUND OF APPEAL FOR THE YEAR UNDER C ONSIDERATION IS ABOUT DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 36.01 LACS MADE BY THE AO ON ACCOUNT OF INTEREST FREE ADVANCES TO SISTER CONCERN.DECIDING THE APPEAL FOR THE LAST AY,WE HAD CONFIRMED THE ORDERS OF THE FAA.WE FIND THAT FACTS FOR THE YEAR UNDER CONSIDERATION AND THAT OF LAST YEAR ARE SIMILAR.THREFORE,CONFIRMING THE ORDER OF THE FAA,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINS T THE AO. AS A RESULT,APPEALS FILED BY THE AO, FOR BOTH THE A YS.,STAND DISMISSED. 1 2 $1, 3 .$4 $.%5 ' 6 + /7 8 1! + !, 9:. ORDER PRONOUNCED IN THE OP EN COURT ON 25 TH SEPTEMBER, 2013. '0 + -.% ' 8 , , , , 25 , ,, , 2013 . + /. SD/- SD/- ( . .. . . .. . , ,, , / I.P.BANSAL ) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER 5 ITA NO.87/MUM/2011 RAM B.SALVE . / MUMBAI, ;$ /DATE: 25.09 .2013 SK ' ' ' '0 00 0 + ++ + (,< (,< (,< (,< ='<%, ='<%, ='<%, ='<%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR D BENCH, ITAT, MUMBAI / <@/ (,$ . , . . . 6. GUARD FILE/ / A )<, (, //TRUE COPY// '0$ / BY ORDER, B / 9 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI