ITO 16(3)(4), MUMBAI V. R. TRIBHOVANDAS JEWLLERS, MUMBAI

ITA 874/MUM/2014

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5538 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 07-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIYA
• Keywords: Principle of natural justice; Accommodation entries; Revenue expenditure; Set aside
• Section: 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 874/MUM/2014 ( / ASSESSMENT YEAR: 2004 - 05 ) ITO 16(30(4) MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 / VS. M/S R. TRIBHOVANDAS JEWELLERS, 263/C, KHATAU WADI, GOREGAONKAR LANE, NEAR CENTRAL PLAZA, GIRGAUM, MUMBAI - 400 004. ./ ./ PAN NO. A AE FR9718G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI CHAITANYA ANJARIYA, DR / RESPONDENTBY : NONE / DATE OF HEARING : 09.08 .2018 / DATE OF PRONOUNCEMENT : 05.11.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 28 , MUMBAI DATED 01.11.13 F OR AY 20 04 - 05 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN IGNORING THE FACT THAT, THERE WERE NO HUGE PURCHASE TRANSACTIONS EXCEPT THREE PARTIES AND PURCHASES FROM THE SAID PARTIES WERE ONLY ACCOMMODATION ENTRIES TO SUPPRESS THE GROSS PROFIT?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT HUGE EXPENSES WERE INCURRED ON ADVERTISEMENT AND ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE AGAINST THESE CLAIMS EVEN AT THE TI ME OF REMAND REPORT BY AO?' 3. ' WHETHER ON FACTS AND CIRCUMSTANCES AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN IGNORING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE COPY OF AGREEMENT IN SUPPORT OF ITS CLAIM AS RENT EXPENSES WHICH WAS PAID TO ONE OF THE PA RTNERS OF THE FIRM?' 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF SEVERAL CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE FIRM A BUYER, SELLER, MANUFACTURERS, DEALER, AND IMPORTER/ EXPORTERS OF GOLD, SILVER, DIAMONDS AND DIAMOND STUDDED JEWELLERY. THE ASSESSEE FIRM FILED ITS RETURN OF INCOME ON 01.11.2004 DECLARING TOTAL LOSS OF RS. 29,41,6907 - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S. 143(3) WAS PASSED ON 08.12.2006 ASSESSING TOTAL INCOME AT RS.75,95,243/ - . 4. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . 4 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, AGAINST THE ORDER OF LD. CIT(A), REVENUE PREFERRED APPEAL BEFORE ITAT AND THE SAME WAS NUMBERED AS ITA NO. 874/MUM/14. SINCE NONE HAD APPEARED ON BEHALF OF ASSESSEE, THEREFORE THE APPEAL WAS HEARD EX - PARTE AND WAS DISMISSED ON 10.02.17. 5. LATER ON, THE REVENUE MOVED M.A. NO. 699/MUM/17 AND HAS RAISED THE GROUND THAT WHILE DISMISSING THE APPEAL, THE ITAT HAD NOT ADJUDICATED GROUND NO. 2 & 3 IN THE MAIN APPEAL. THEREFORE VIDE ORDER DATED 06.04.18, THE ITAT RECALLED ORDER DATED 1 0.02.17 FOR THE LIMITED PURPOSE OF DISPOSING OF GROUND NO. 2 & 3 RAISED BY THE REVENUE. 6. NOW BEFORE US AGAIN , NONE HAD APPEARED ON BEHALF OF THE ASSESSEE EVEN SPITE OF SEVERAL CALLS, SO WE HAVE DECIDED TO PROCEED WITH HEARING OF THE CASE EX - PARTE WITH THE ASSISTANCE OF LD. DR. GROUND NO. 2 7 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN IGNORING THE FACT THAT HUGE EXPENSES 5 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, WERE INCURRED ON ADVERTISEMENT AND ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE AGAINST THESE CLAIMS EVEN AT THE TI ME OF REMAND REPORT BY AO. 8 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE AO DISALLOWED THE ADVERTISEMENT EXPENSES BY CONSID ERING THE SAME AS NON - GENUINE AND ACCORDINGLY MADE ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE. THE DETAILS ARE CONTAINED IN PARA NO. 5 OF THE ORDER OF AO. HOWEVER, LD. CIT(A) DELETED THE ADDITIONS BY HOLDING THAT SINCE LD. CIT(A) - 15 IN ASSESSEES OWN CA SE FOR AY 2003 - 04 HAD ALLOWED THE RELIEF TO THE ASSESSEE BY HOLDING THAT THERE WAS NO CONCEPT OF DIFFERENT REVENUE EXPENDITURE UNDER THE INCOME TAX ACT EXCEPT SECTION 35D AND SINCE IT WAS FOR THE INITIAL PERIOD OF ASSESSEES BUSINESS, SUBSTANTIAL EXPENSES ON ADVERTISEMENT WERE NOT USUAL. BEFORE US, NOTHING HAS BEEN PLACED TO SHOW AS TO WHETHER ANY APPEAL WAS FILED BY THE REVENUE BEFORE ITAT FOR AY 2003 - 04 OR WHAT WAS THE FATE OF THE SAID APPEAL , IF ANY , SO FILED BY THE REVENUE. IN THE ABSENCE OF ANY SUCH MA TERIAL, WE HAVE NO 6 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, OTHER OPTION EXCEPT TO UPHELD THE ORDER OF LD. CIT(A) ON THIS GROUND. THEREFORE , THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 3 9 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN IGNORING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE COPY OF AGREEMENT IN SUPPORT OF ITS CLAIM AS RENT EXPENSES WHICH WAS PAID TO ONE OF THE PARTNERS OF THE FIRM . 10 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUND RAISED BY THE ASSESSEE IN PARA NO. 7 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD . CIT(A) CO NTAINED IN PARA NO. 7 , WHICH IS REPRODUCED BELOW: - 7 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, 7. GROUND OF APPEAL NO. 5 . DISALLOWANCE O F EXPENSES: (1) RENT RS. 90,000/ - (2) SOFTWARE EXPENSES RS. 1,05,700/ - ; (3) SALES PROMOTION RS. 78,985/ - (4) ADVERTISEMENT RS. 1,79,669/ - AND RS. 28,723/ - = TOTAL RS. 4,83,077/ - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN DISALLOWING EXPENSES AGGREGATING RS. 4,83,077 / - INCURRED UNDER VARIOUS HEAD AS MENTIONED ABOVE BY CONSIDERING THE SAME EITHER AS 'NON GENUINE' OR INFLATED AND ACCORDINGLY MADE AN ADDITION TO THE TOTAL INCOME WHILE COMPUTING A TOTAL INCOME FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004 - 05. THE APPELLANT SUBMITS THAT: - A) ALL THE EXPENSES INCURRED GENUINELY INCURRE D FOR THE PURPOSE OF BUSINESS AND PROPERLY ACCOUNTED HI THE BOOKS OF ACCOUNT AND PAYMENTS TO THEM WERE MADE ;1 EITHER BY ACCOUNT PAYEE CHEQUES OR CASH WHICH ARE PROPERLY. IN VIEW OF THE ABOVE GROUNDS OF APPEAL, THE APPELLANT SUBMITS THAT ADDITIONS MADE IN THE ASSESSMENT ORDER IS AGAINST ALL THE PRINCIPLES OF NATURAL JUSTICE, EQUITY AND 8 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, FAIR PLAY AND THEREFORE THE ASSESSING OFFICER BE DIRECTED TO CONSIDER THE SAME AS GENUINE EXPENDITURE. 7.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AUTHORISED REPRESENTATIVE DID NOT PRESS THE VARIOUS DISALLOWANCES MADE OIL OF EXPENSES AS ABOVE , EXCEPT THE RENT OF RS. 90,000/ - . HENCE THIS GROUND OF APPEAL IS DISMISSED EXCEPT FOR DISALLOW ANCE OF RENT EXPENSES, WHICH IS DECIDED AS UNDER. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED RENT EXPENSES OF RS. 1,80,000 / - , COMPARE TO RS. 90,000/ - SHOWN LAST YEAR. THIS RENT WAS PAID TO ONE OF THE PARTNER OF TH E FIRM. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT JUMP OF RENT EXPENSES TO TWICE THAT OF LAST YEAR WAS INFLATION OF EXPENSES AND HENCE DISALLOWED RS. 90,000/ - OUT OF THE SAME. DURING APPELLATE PROCEEDINGS IT WAS EXPLAINED THAT: - IN THE A. Y. 2003 - 04, THOUGH THE DEED OF PARTNERSHIP SAYS THAT THE FIRM CAME INTO EXISTENCE W.E.F. 1 ST APRI, 2002 BUT THE SHOWROOM (FOR WHICH THE RENT HAS BEEN PAID) IN WHICH THE APPELLANT HAS COMMENCED ITS BUSINESS FROM THE MONTH OF OCTOBER, 2002 AND THEREFORE THE RENT OF THE HALF YEAR WAS PAID AND THIS FACT HAS BEEN OVERLOOKED BY THE AO; 9 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, FOR THIS YEAR, THE SHOWROOM HAS USED THE PLACE FOR ENTIRE YEAR AND THEREFORE PAID THE RENT FOR ENTIRE YEAR. A RENT OF RS. 15,000/ - FOR A SHOWROOM COVERING 1200+ SQUARE FEET CANNOT BE TERMED HI GHER AND/ OR INFLATED. THE PAYEE, WHO IS A PARTNER OF THE FIRM HAS CONFIRMED THE RECEIPT, DECLARED THE SAME IN HIS RETURN OF INCOME AT AMOUNT OF RS. 1,80,000/ - AND CLAIMED THE CREDIT OF IDS RS. 27,676 / - . IN VIEW OF THE ABOVE THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF RENT EXPENSES. THE INFLATION FROM LAST YEAR HAS BEEN DULY EXPLAINED BY THE AUTHORISED REPRESENTATIVE AND IS JUSTIFIED. THE A.O. IS THEREFORE DIRECTED TO DELETE THE ADDITION/DISALLOWANCE OF RS . 90,0007 - MADE OUT OF RENT EXPENSES. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS ORDER PASSED BY THE REVENUE AUTHORITIES AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE LD. CIT(A ), WE ARE ALSO OF THE VIEW THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE REVENUE TO DISALLOW THE RENT EXPENSES. LD. CIT(A) HAD DULY CONSIDERED THAT THE INFLATION FROM LAST YEAR HAD BEEN DULY 10 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, EXPLAINED BY THE AUTHORIZED REPRESENTATIVE. THEREFORE, IN VI EW OF THE SAID FACT, LD. CIT(A) HAD RIGHTLY ORDERED FOR DELETION OF ADDITION /DISALLOWANCE MADE OUT OF RENT EXPENSES. N O NEW FACTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAI SED BY THE REVENUE STANDS DISMISSED . GROUND NO. 4 11 . THIS GROUND RAISED BY THE REVENUE IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 12 . IN THE NET RESULT , THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH NOV , 2018 SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 05 . 11 .201 8 SR.PS . DHANANJAY 11 I.T.A. NO. 874 /MUM/201 4 M/S R. TRIBHOVANDAS JEWELLERS, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI