ITO WD 13(1)(1), MUMBAI V. UNIQUE INDUSTRIAL CORPORATION, MUMBAI

ITA 8988/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8934 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Keywords: Additional evidence; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F BENCH BEFORE SHRI I.P. BANSAL (JUDICIAL MEMBER) AND SHRI B.RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO.8988/MUM/2010 ASSESSMENT YEAR: 2007-08 ITO WD 13(1)(1), ROOM NO. 419, 4 TH FLOOR, AAYKAR BHAVAN, MUMBAI 400 020 VS. M/S. UNIQUE INDUSTRIAL CORPORATION, 50 NAGDEVI STREET, 1 ST FLOOR, MUMBAI 400 003 PAN NO. AAAFU 0335 N (APPELLANT) (RESPONDENT) APPELLANT BY : MR. AMARDEEP RESPONDENT BY : NONE DATE OF HEARING : 0 6 .09.2012 DATE OF P RONOUNCEMENT : 21.09.2012 ORDER PER B.RAMAKOTAIAH, AM : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF T HE CIT(A)- 24 MUMBAI DATED 06.10.2010. THE REVENUE HAS RAISED DETAILED GROUNDS ON THREE ISSUES AS UNDER: (1)(I) ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DISALL OWANCE TO 5% AS AGAINST 20% MADE BY THE AO OUT OF GENERAL, SCOOTER, CAR REPAIRS/ MAINTENANCE, PETROL, DEPRECIAT ION ON CAR/ SCOOTER AND TELEPHONE EXPENSES. ITA NO.8988/MUM/2010 M/S. UNIQUE INDUSTRIAL CORPORATION 2 (II) WHILE DOING SO, THE LD.CIT(A) FAILED TO APPRE CIATE THAT THE ASSESSEE HAD NOT FURNISHED ANY SUPPORTING EVIDENCE AND/OR MAINTAINED LOG BOOK TO SUBSTANTIATE TH AT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF BUSINESS. (2)(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO 5% AS AGAINST 20% MADE BY THE AO. (II) WHILE DOING SO, THE LD.CIT(A) HAS FAILED TO A PPRECIATE THAT THE ASSESSEE HAS NOT MAINTAINED PROPER DETAILS T O SUBSTANTIATE THAT THE CLAIM OF EXPENDITURE. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.8,80,750/- OUT OF SUNDRY CREDITORS BY ACCEPTING THE EXPLANATION AND RECONCILIATION SUBMITT ED BEFORE HIM IN VIOLATION OF RULE-46A OF THE I.T. RUL ES, 1962 AS THE AO HAS NOT BEEN ALLOWED REASONABLE OPPORTUNI TY. 2. GROUND NOS. 1 & 2 PERTAIN TO DISALLOWANCE OF VAR IOUS EXPENDITURES @ 20% BY AO AND REDUCTION BY THE CIT(A) TO 5%. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALL OWED 20% OF GENERAL EXPENSES (CONTESTED IN GROUND NO.1) AND 20% OF HEL & HAMALI AT RS.75,571/- (EVEN THOUGH STATED AS 10% IN AOS ORDER). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE RESTRICTED TO 5%. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THERE IS NO BASIS OF DISALLOWING 20% OF THE GE NERAL EXPENSES JUST BECAUSE THE ASSESSEE HAS NOT KEPT ANY LOG BOOK , EVEN THOUGH THE ASSESSING OFFICER RECORDED IN THE FIRST PAGE OF THE ORDER THAT NECESSARY DETAILS CALLED FOR IN THE COURSE OF ASSES SMENT PROCEEDINGS WERE PLACED ON RECORD. SINCE THE DISALLOWANCE MADE WAS ON ADHOC BASIS, THE CIT(A) AFTER ANALYZING THE FACTS RESTRIC TED TO 5%. WE DO ITA NO.8988/MUM/2010 M/S. UNIQUE INDUSTRIAL CORPORATION 3 NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF C IT(A). ACCORDINGLY, GROUND NOS. 1 & 2 ARE REJECTED. 4. GROUND NO.3 PERTAINS TO THE DISALLOWANCE OF AMOU NT OF RS.8,80,750/- OUT OF THE SUNDRY CREDITORS BY ACCEPT ING THE EXPLANATION AND RECONCILIATION SUBMITTED BEFORE HIM IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES, 1962. FOR THE SAKE OF RECORD, IT IS BETTER TO EXTRACT LD. CIT(A)S ORDER, WHICH IS A S UNDER : 4. THE NEXT GROUND OF APPEAL RELATES TO DISALLOWANC E OF RS.8,80,750/- OUT OF SUNDRY CREDITORS @ 20%. 4.1 THE LD. COUNSEL HAS SUBMITTED THAT THE ITO HAS DISALLOWED RS.8,80,750/- OUT OF SUNDRY CREDITORS. THE BREAKUP OF THE SAME ALONG WITH EXPLANATION IS HEREBELOW. A. GEORGE (EMPLOYEE) THE BONUS OF THE YEAR PROVIDED AND PAID IN APRIL 4,750/- B. NIZAM (EMPLOYEE) THE CONFIRMATION AND COPY OF LEDGER ACCOUNT IS ON RECORD. 6,750/- C. SANJAY SETH (EMPLOYEE) THE BONUS FOR THE YEAR PROVIDED AND PAID IN APRIL. 20,500/- D. SOMIL MODI (EMPLOYEE/ SON OF PARTNER) HIS CURRENT ACCOUNT IS ON RECORD. 2,42,500/- E. KAILAS SODI (EMPLOYEE) THE BONUS FOR THE YEAR PROVIDED AND PAID IN APRIL. 5,250/- F. MAYUR N GANDI (AUDITOR) RS.14000/- TOWARDS CURRENT YEARS AUDIT FEES. COPY OF BILLS IS ON RECORD. 14,000/- G. AJIT BANGANI (EMPLOYEE) THE BONUS FOR THE YEAR PROVIDED AND PAID IN APRIL. 9,500/- H. KRUTESH MODY (SON OF THE PARTNER/ EMPLOYEE) 1,75,000/- ITA NO.8988/MUM/2010 M/S. UNIQUE INDUSTRIAL CORPORATION 4 HIS CURRENT ACCOUNT IS ON RECORD. I. RUNIT MODY (SON OF THE PARTNER/ EMPLOYEE) HIS CURRENT ACCOUNT IS ON RECORD. 1,98,500/- J. KRINITA MODY (DAUGHTER OF THE PARTNER/ EMPLOYEE) HER CURRENT ACCOUNT IS ON RECORD. 2,04,000/- THE ADDITIONS MADE BY AO DESERVE TO BE DELETED BECAUSE THE AO HAS DISALLOWED RS.8,80750/- FROM SUNDRY CREDI TORS BY TREATING THEM AS EMPLOYEES OF THE APPELLANT WHICH I S TOTALLY WRONG. ONLY CERTAIN PERSONS ARE EMPLOYEES AND REST W ERE CREDITORS BUT IN HASTE AO HAS DISALLOWED WITHOUT EVE N INQUIRING ABOUT THEIR NATURE OF CREDIT. THE APPELLAT E FURTHER STATES THAT THE AMOUNT STANDING TO THE CREDIT OF EM PLOYEES IS THEIR SALARY ETC. FOR THE LAST MONTH TO BE PAID AFT ER CLOSE OF THE YEAR AND SUCH DISALLOWANCE IS TOTALLY WRONG AND NEEDS TO BE DELETED. THUS, APPELLANT PRAYS THAT THE DISALLOWANCE ON ACCOUNT OF SUNDRY CREDITORS IS TOTALLY WRONG AND BE DE LETED. 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUN SEL AND IT IS SEEN THAT THE ABOVE A/CS APPEARING IN THE BOO KS OF A/C OF THE APPELLANT ARE CORRECT AND TRULY REPRESENT THESE PAYMENTS/ TRANSACTIONS. HENCE THE DISALLOWANCE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5.1 WE COULD NOT SEE ANY ADDITIONAL EVIDENCE BEING ADMITTED BY THE CIT(A) AND NOTHING WAS BROUGHT ON RECORD BY REV ENUE THAT CIT(A) ADMITTED ANY ADDITIONAL EVIDENCE. IT IS VERY CLEAR THAT THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUE IN ITS CORRECT PROSPECTIVE. THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE IS AS UNDER : THE ASSESSEE WAS ASKED TO FURNISH THE LIST OF SUNDRY CREDITORS. ACCORDINGLY, THE ASSESSEE HAS FURNISHED T HE SAME. ON VERIFICATION OF THE SAID LIST OF SUNDRY CREDITORS, IT IS SEEN THAT FIRST 10 PERSONS ARE THE EMPLOYEES OF THE ASSE SSEE AND THEIR DUES ARE TOTALLYING TO RS.8,80,750/-. IT IS NO T POSSIBLE THAT THE EMPLOYEES WILL STAY WITHOUT THEIR MONTHLY SALAR Y. THE ITA NO.8988/MUM/2010 M/S. UNIQUE INDUSTRIAL CORPORATION 5 ASSESSEE WAS ASKED TO EXPLAIN WHY THE SALARIES ARE N OT PAID AND SHOWN AS SUNDRY CREDITORS. THE ASSESSEE HAS FURNI SHED ANY EXPLANATION. HENCE, AN AMOUNT OF RS.8,80,750/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5.2 THE ABOVE INDICATES THAT THE ASSESSEE HAS FURNI SHED THE LIST OF SUNDRY CREDITORS AND SAME WAS EXAMINED BY THE ASSES SING OFFICER. ON THE REASON THAT EMPLOYEES CANNOT STAY WITHOUT TH EIR MONTHLY SALARY, THE AMOUNT WAS DISALLOWED AND ADDED BACK. S INCE, THERE IS NO EVIDENCE OF FURNISHING OF ANY ADDITIONAL EVIDENC E BEFORE THE CIT(A) AND RECORD INDICATE THAT ASSESSEE FURNISHED ALL THE DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE AO., WE ARE OF THE OPINION THAT THE GROUND RAISED IS MISCONCEIVED. ACCORDINGLY, THE GROUND IS DISMISSED. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2012 SD/- (I.P. BANSAL) JUDICIAL MEMBER SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI, DATED 21 ST SEPTEMBER, 2012 RASIKA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME TAX 24, MUMBAI 4. THE COMMISSIONER OF INCOME TAX, MUMBAI 5. THE DEPARTMENTAL REPRESENTATIVE, BENCH F MUMB AI ITA NO.8988/MUM/2010 M/S. UNIQUE INDUSTRIAL CORPORATION 6 //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI