ASST CIT CIR 21(3), MUMBAI V. ANITA LAHU GHADGE, MUMBAI

ITA 919/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84473 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 05-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2013
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBE
• Assessee Lawyers: BHUMIKA VORA
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTA N T MEMBER I.T.A.NO. 919/M/2013 (AY 2008 - 2009) I.T.A. NO.937/M/20 13 (AY 2007 - 2008) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 21(3), R.NO.501, BLDG 5 TH FLOOR, C - 121, PRATYAKSHAKAR BHAVAN, BAKC, BANDRA (E), MUMBAI 400 051. VS. ANITA LAHU G H ADGE, 33/D, KAMGAR NAGAR, SWAPNAPURTI, KURLA (E), MUMBAI 400 024. PAN: AFQPG3328A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SACHIDANAND DUBE RESPONDENT BY : MS. BHUMIKA VORA DATE OF HEARING: 5.11.2014 DATE OF ORDER: 11 .12 .2014 O R D E R PER D. KARUNAKARA RAO, AM : THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE REVENUE INVOLVING THE ASSESSMENT YEARS 2007 - 2008 AND 2008 - 2009 AGAINST THE SEPARATE ORDERS OF THE CIT(A) - 32, MUMBAI COMMONLY DATED 1.11.2012. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL AND THE ONLY DIFFERENCE IS I N FIGURES, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.919/M/2013 FOR THE ASSESSMENT YEAR 2008 - 09. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF COMMISSION EXPENDITURE TO 40% OF GROSS COMMISSION RECEIPT OF RS. 2,89,74,296/ - BEING RS. 1,15,74,296/ - AS AGAINST RS. 1,20,27,100/ - DISALLOWED BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN RESTR ICTING THE DISALLOWANCE OUT OF OTHER EXPENSES (INCLUDING HALL 2 RENT & SEMINAR EXPENSES) TO RS. 12,02,693/ - AS AGAINST RS. 40,41,092/ - MADE BY THE ASSESSING OFFICER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS FAILED T O APPRECIATE THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND SUPPORTING BILLS AND VOUCHERS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS FAILED TO APPRECIATE THAT THE EXPENDITURE WAS MADE IN CASH AND THERE WERE NOT ENOUGH CASH WITHDRAWALS FROM THE BANK TO SUPPORT THE CLAIM. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF COMMISSION AGENCY . ASSESSSEE FILED THE RETURN OF INCOME DECLARING T HE TOTAL INCOME OF RS.22,31,503/ - . ASSESSM ENT WAS COMPLETED U/S 143(3) READ WITH SECTION 147 OF THE ACT DETERMINING THE ASSESSED INCOME AT RS. 1,85,92,450/ - . DURING THE ASSESSMENT, AO NOTICED THAT THE ASSESSEE RECORDED THE COMMISSION RECEIPTS OF RS. 2,89 ,35,142/ - AND MADE PAYMENT OF COMMISSION IN CASH OF RS.1,71,81,570/ - TO 8384 PARTIES . IN THIS REGARD, ASSESSEE WAS ASKED TO EXPLAIN THE CLAIM AND FURNISH THE DETAILS. ASSESSEE FURNISHED CERTAIN DETAILS ON 27.12.2011. ASSESSING OFFICER ANALYZED THE BANK ACCOUNT IN ICICI BANK LTD AND FOUND THE TOTAL CASH WITHDRAWN IS MUCH LESS THAN THE CASH PAYMENTS TO THE SAID 8384 PARTIES. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, AO DISALLOWED RS.1,20,27,100/ - BEING 70% OF THE SAID COMMISSION PAYMENTS. FURTH ER, ASSESSING OFFICER NOTED THAT ASSESSEE CLAIMED DEDUCTION OF OTHER EXPENDITURE OF RS. 94,61,383/ - ON ACCOUNTS OF RENT, SALES PROMOTION, POSTAL AND TELEGRAPH EXPENSES. ASSESSING OFFICER NOTED CERTAIN DISCREPANCIES ON THESE ACCOUNTS TOO. THEREFORE, AO DI SALLOWED A SUM OF RS.94,61,333/ - ON ACCOUNT OF OTHER EXPENSES BY STATING THAT THE SAID AMOUNT IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF THE COMMISSION INCOME OF RS.2,89,35,742/ - . CONTENTS OF PARA 4 OF THE ASSESSMENT ORDER ARE RE LEVANT. AGGRIEVED WITH THE SAID DISALLOWANCES MADE BY THE AO, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONFIRMED THE DISALLOWANCE ON ACCOUNT OF COMMISSION EXPENSES TO THE EXTENT OF RS.56,07,274/ - WHICH COMES TO 40% OF THE GROSS COMMISSION RECEIVED BY T HE ASSESSEEE (RS.2,89,35,742/ - ) AGAINST THE DISALLOWANCE OF RS.1,20,27,100/ - MADE BY THE AO. IN CONNECTION WITH THE DISALLOWANCE OF RS. 94,61,333/ - ON ACCOUNT OF OTHER EXPENSES , CIT (A) CONFIRMED 3 30% OF THE EXPENDITURE WHICH COMES TO RS.28,38,399/ - AGAINST THE DISALLOWANCE OF RS. 40,41,092/ - MADE BY THE AO. ASSESSEE ACCEPTED THE DECISION OF THE CIT (A). H OWEVER, A GGRIEVED WITH SAID DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD DR HEAVILY RELIED ON THE ORDER OF THE AO. 6. ON THE OTHER HAND, LD C OUNSEL FOR THE ASSESSEE SATISFIED THE CONCLUSIONS OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND RELIED ON THE OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL A S THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT(A) IN GENERAL AND PARA 3.3 IN PARTICULAR, WE FIND THE SAME IS SATISFACTORY AND CONCLUSIONS ARE FAIR AND REASONABLE . THEREFORE, CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 3.3 OF THE CIT(A)S ORDER AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME IS EXTRACTED WHICH READS AS UNDER: 3.3.THE ASSESSING OFFICER WHILE MAKING BEST JUDGMENT ASSESSMENT IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES HAS DISALLOWED 70% OF THE COM MISSION AND ALLOWED THE COMMISSION EXPENSES OF RS. 51,54,470/ - ONLY AGAINST THE GROSS COMMISSION RECEIPTS OF RS. 2,89,35,742/ - WHICH IS ONLY 17.81% OF THE GROSS COMMISSION RECEIPTS OF RS. 2,89,35,742/ - AS AGAINST THE 40 TO 47% CLAIMED BY ASSESSEE BEFORE TH E ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR ALLOWING ONLY @ 17.81% OF GROSS COMMISSION RECEIVED OR @ 30% OF COMMISSION EXPENSES CLAIMED. THE GROUNDS FOR DISALLOWANCE BY ASSESSING OFFICER ARE THAT EXPENDITURE WAS MADE IN CASH AN D THERE WAS NOT ENOUGH CASH WITHDRAWALS FROM BANK. THUS, THE DISALLOWANCE OF EXPENSES MADE BY THE ASSESSING OFFICER IS EFFECTIVELY 82% OF THE GROSS COMMISSION RECEIVED BY THE ASSESSEE WHICH ALSO HAS CLAIMED COMMISSION EXPENSES OF RS. 1,71,81,570/ - ON GROS S COMMISSION OF RS. 2,89 ,35,742/ - WHICH IS APPROX 60% I.E., MUCH MORE THAN THE ASSESSEES OWN CLAIM OF PAYMENT OF COMMISSION @ 40 TO 47%. HENCE, IN VIEW OF THE FACT THAT ASSESSEE DID ADMIT BEFORE THE ASSESSING OFFICER THE PAYMENT OF COMMISSION FROM 40 TO 47% AND THE ASSESSING OFFICER HAS NOT REBUTTED SUCH PERCENTAGE IN HIS ORDER, HENCE FOLLOWING THE PRINCIPLES OF BEST JUDGMENT OF COMMISSION EXPENDITURE SHALL BE ALLOWABLE TO THE EXTENT OF 40% OF THE GROSS COMMISSION EXPENSES RECEIVED BY ASSESSEE. SINCE, TH E GROSS COMMISSION RECEIVED IS RS. 2,89,35,742/ - , THE COMMISSION ALLOWABLE @ 40% WILL BE RS. 1,15,74,296/ - ONLY AS AGAINST RS. 1,71,81,570/ - CLAIMED BY THE ASSESSEE. THUS, THE DISALLOWANCE OUT OF THE COMMISSION EXPENSES IS CONFIRMED TO THE EXTENT OF RS. 5 6,07,274/ - ONLY (RS. 1,71,81,570 RS.1,15,74,296/ - ). IN RESPECT OF THE OTHER EXPENSES OF RS. 94,61,333/ - ONCE AGAIN THE EXPENDITURE ARE NOT FULLY SUPPO RTED BY THE BILLS AND VOUCHERS AND AT THE SAME TIME THEY HAVE BEEN INCURRED IN CASH WHEREAS THE CASH WI THDRAWALS FROM BANK ACCOUNT WAS HOT SUFFICIENT ENOUGH TO MEET SUCH CASH EXPENDITURE. FURTHER, NO EXPLANATION WITH EVIDENCE FOR THE HALL RENT AND SEMINAR EXPENSES CLAIMED IN P & L A/C AND THAT AS PER DETAILS FILED BEFORE 4 THE ASSESSING OFFICER HAS BEEN GIVE N AT APPELLATE STAGE ALSO. CONSIDERING THESE SHORTCOMINGS, DISALLOWANCE @ 30% OF THE OTHER EXPENDITURE OF RS. 94,61,333/ - WHICH COMES TO RS. 28,38,399/ - IS CONFIRMED AS AGAINST TOTAL DISALLOWANCE OF RS. 40,41,092/ - MADE BY THE ASSESSING OFFICER. IN SHORT, AGAINST THE TOTAL ADDITION OF RS. 1,60,68,192/ - MADE BY THE ASSESSING OFFICER, THE ADDITION IS CONFIRMED TO RS. 84,45,673/ - ONLY. 8. FROM THE ABOVE, WE FIND THAT THE CIT (A) DISCUSSED THE ISSUES AT LENGTH BEFORE RESTRICTING THE DISALLOWANCE TO RS.1 ,15,74,296/ - (I.E., 40% OF THE ASSESSEES CLAIM OF RS.1,71,81,570/ - ) ON ACCOUNT OF COMMISSION EXPENSES AND RS. 28,38,399/ - (I.E., 30% OF THE ASSESSEES CLAIM OF RS.94,61,333/ - ) ON ACCOUNT OF OTHER EXPENSES. IT IS EVIDENT FROM THE ABOVE EXTRACT THAT B OTH ASSESSING OFFICER AND CIT (A) RESORTED TO ADHOCISM IN MAKING / RESTRICTING THE DISALLOWANCES. AS SUCH, THERE IS NO INCRIMINATING AND DIRECT EVIDENCE IN POSSESSION OF THE ASSESSING OFFICER AGAINST THE ASSESSEE. ASSESSEE ACCEPTED THE DECISION OF THE CI T (A), WHO GRANTED PART RELIEF TO THE ASSESSEE. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NOS.1 AND 2 RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. I.T.A. NO.937/M/2913 (AY 2007 - 2008) 10. T HIS APPEAL FILED BY THE REVENUE ON 4.2.2013 IS AGAINST THE ORDER OF THE CIT (A) - 32, MUMBAI DATED 1.11.2012 FOR THE ASSESSMENT YEAR 2007 - 2008. 11 . IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF COMMISSION EXPENDITURE @ 40% OF RS. 1,95,98,205/ - BEING RS. 78,39,282/ - A AGAINST RS. 81,76,600/ - DISALLOWED BY THE ASSESSING OFFICER IGNORING THAT THE EXPENDITURE WAS MADE IN CASH AND THERE WERE NOT ENOUGH CASH WITHDRAWALS FROM THE BANK TO SUPPORT THE CLAIM. 12. THE ISSUE INVOLVED IN THE ABOVE GROUND, WHICH RELATES TO THE DISALLOWANCE OF COMMISSION EXPENDITURE, IS IDENTICAL TO THAT OF THE GROUND RAISED BY THE REVENUE IN ITS APPEAL FOR THE AY 2008 - 2009 AND THE SAME IS ADJUDICATED BY US IN THE ABOVE 5 PARAGRAPHS OF THIS ORDER WHILE DECIDIN G THE ITA NO. 919/M/2013. SINCE, THE GROUND RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SIMILAR TO THAT OF THE GROUND NO.1 RAISED BY THE REVENUE FOR THE AY 2007 - 08, THEREFORE, OUR ADJUDICATION GIVEN THEREIN SQUARELY APPLIES TO THE PRESENT APPEAL TOO. CONSIDERING THE SAME, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 11 TH DECEMBER, 2014. SD/ - SD/ - (H.L. KARWA) (D. KARUNAKARA RAO) PRESIDENT ACCOUNTANT MEMBER DATE: 11 .12 .2014. AT :MUMBAI OKK COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR A, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI