DCIT 24(3), MUMBAI V. KUNAL V BHANDULA, MUMBAI

ITA 9209/MUM/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0988 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Onus to prove
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./ I.T .A. NO. 9209 / MUM/ 201 0 ( / ASSESSMENT YEAR : 20 06 - 07 ) DY.COMMISSIONER OF INCOME TAX 24(3) ROOM NO.70 1 , C - 11, 7 TH FLOOR, BANDRA KURLA COMPLEX , BANDRA (E), MUMBAI - 400051 / VS. SHRI KUNAL V BHANDULA, B/108, ATLANTIC APARTMENTS, 1 ST CROSSLAN E , LOKHANDWALA MARKET, ANDHERI (W), MUMBAI - 400053 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : ACHPB5127E / APPELLANT BY SHRI ASGHAR ZAIN / RSPONDENT BY S HRI SATISH MODI / DATE OF HEARING : 2. 7 . 201 5 / DATE OF PRONOUNCEMENT : 2. 7. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 20 - 10 - 2010 PASSED BY LD CIT(A) - 34, MUMBAI FOR ASSESSMENT YEAR 2006 - 07, WHEREIN HE HAS DELETED THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS.17,69,391/ - MADE BY THE AO ON THE REASONING THAT THEY WERE UNVERIFIABLE. 2. THE ASSESSEE IS A CIVIL CONTRACTO R AND IS ENGAGED IN THE BUSINESS OF EVENT MANAGEMENT SERVICES. THE AO, IN ORDER TO VERIFY THE PURCHASES/EXPENSES, ISSUED NOTICES U/S 133(6) OF THE ACT TO CERTAIN ITA NO. 9209 / MUM/20 1 0 2 PERSONS. HOWEVER, HE DID NOT RECEIVE ANY REPLY FROM SIX PERSONS TO WHOM THE ASSESSEE HAD PAID AMOUNTS AGGREGATING TO RS.35,38,781/ - AND CLAIMED THE SAME AS DEDUCTION. HENCE THE ASSESSEE WAS ASKED TO PRODUCE THOSE PARTIES. HOWEVER, THE ASSESSEE EXPLAINED HIS INABILITY TO PRODUCE THEM. HENCE, THE AO OPINED THAT THE ASSESSEE HAS FAILED TO PROVE TH E GENUINENESS OF THE EXPENSES. THOUGH THE AO GAVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBMIT CONFIRMATIONS FROM THE SIX PERSONS, YET THE ASSESSEE COULD SUBMIT ONLY RELEVANT LEDGER ACCOUNTS, BANK STATEMENTS AND BILLS RAISED BY THOSE SIX PARTIES. HENCE THE AO DISALLOWED 50% OF THE CLAIM ON ESTIMATED BASIS, WHICH WORKED OUT TO RS.17,69,391/ - , TOWARDS UNVERIFIED PORTION OF EXPENSES. 3. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) TOOK THE VIEW THAT THE DISALLOWANCE MADE BY THE AO IS UNSUSTAINABLE IN LAW, S INCE THE AO HAS NOT PROVED THAT THE PARTIES TO WHOM PAYMENTS WERE MADE WERE NOT EXISTING OR THE EXPENSES WERE BOGUS. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER DID NOT POSSESS ANY ADVERSE MATERIAL AGAINST THE ASSESSEE. ACCORDINGLY THE LD CIT(A) DELET ED THE ADDITION AND HENCE THE REVENUE HAS FILED THIS APPEAL. 4. THE LD D.R SUBMITTED THAT THE ONUS TO PROVE THE EXPENSES IS PLACED UPON THE ASSESSEE AND THE SAME HAS NOT BEEN DISCHARGED. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN DE LETING THE DISALLOWANCE MADE BY THE AO. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF EXPENSES, WHICH IS PROVED BY THE FACT THAT THE AO HIMSELF HAS ALLOWED 50% OF THE CLAIM. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS PROVED THE EXPENSES BY FURNISHING THE RELEVANT BILLS AND THE PAYMENT DETAILS. ITA NO. 9209 / MUM/20 1 0 3 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THAT ASSESSEE HAS INITIALLY FURNISHED COPIES OF RELEVANT BILLS AND ALSO THE PAYMENT DETAILS. TH ERE SHOULD NOT BE ANY DOUBT THAT THE SUBMISSION OF BILLS AND PAYMENT DETAILS WOULD NOT AUTOMATICALLY PROVE THE VERACITY OF THE EXPENSES, EVEN THOUGH THEY ARE PRIMARY DOCUMENTS. FURTHER MERE SUBMISSION OF THOSE DETAILS WOULD NOT DISABLE THE AO TO MAKE FURT HER ENQUIRIES. IN THE INSTANT CASE, THE AO DID MAKE FURTHER ENQUIRIES BY ISSUING NOTICES U/S 133(6) OF THE ACT. HOWEVER, THE SIX PARTIES DID NOT RESPOND TO THE NOTICES OR THEY WERE RETURNED UNSERVED. HENCE THE AO PROVIDED OPPORTUNITY TO THE ASSESSEE TWO TIMES IN ORDER TO PRODUCE THE PARTIES OR TO FILE CONFIRMATIONS FROM THEM. HOWEVER, THE ASSESSEE HAS EXPRESSED HIS INABILITY TO PRODUCE THE PARTIES AND FURTHER HE COULD NOT ADDUCE ANY OTHER EVIDENCE. THUS, IT IS SEEN THAT THE ASSESSEE HAS FAILED TO DISCHAR GE THE ONUS PLACED UPON HIM TO PROVE THE EXPENDITURE. HENCE, THE AO WAS CONSTRAINED TO OBSERVE THAT THESE CLAIM REMAINED UNVERIFIED. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE MIGHT HAVE INCURRED EXPENSES, HE CHOSE TO DISALLOW 50% OF THE CLAIM. 6. THUS, WE NOTICE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS PLACED UPON HIM. WE NOTICE THAT LD CIT(A), ON THE CONTRARY, DELETED THE ADDITION BY PUTTING THE BLAME UPON THE ASSESSING OFFICER. THE SAID ACTION OF THE LD CIT(A), IN OUR VIEW, IS NOT LEGALLY C ORRECT, IT IS THE ASSESSEE, WHO HAS FAILED TO DISCHARGE THE ONUS PLACED UPON HIM. WE HAVE ALREADY NOTICED THAT THE AO HAS OBSERVED THAT THE ASSESSEE MIGHT HAVE INCURRED EXPENSES, WHICH MEANS THAT THE AO ONLY DOUBTS ABOUT THE QUANTUM OF EXPENSES. AS OBSE RVED EARLIER, MERE SUBMISSION OF BILLS AND PAYMENT DETAILS WOULD NOT, PER SE, PROVE THE QUANTUM OF EXPENSES. IN OUR VIEW, IT IS ALSO NECESSARY TO SHOW THAT THE PAYMENT MADE WAS NOT ONLY AT THE MARKET RATES, BUT ALSO IT WAS COMMENSURATE WITH THE SERVICES R ECEIVED. ITA NO. 9209 / MUM/20 1 0 4 SINCE THE ASSESSEE HAS FAILED TO PROVE THESE ASPECTS, WE ARE OF THE VIEW THAT THE AO WAS JUSTIFIED IN DISALLOWING A PORTION OF THE CLAIM. HOWEVER, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 50% OF THE EXPENDITURE CLAIM IS ON THE HIGHER SIDE. A T THE TIME OF HEARING, THE LD A.R SUBMITTED THAT THE DISALLOWANCE MAY BE RESTRICTED TO A REASONABLE LEVEL OF 10%. 7. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT A DISALLOWANCE OF 20% OF THE EXPENDITURE WOULD BE REASONABLE IN ORDER TO CO VER UP THE DEFICIENCIES AND IN OUR VIEW, THE SAME WOULD ALSO MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 20% OF THE EXPENDITURE CLAIM, REFERRED ABOVE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 2 ND JULY , 2015. 2 ND JULY , 2015 SD SD ( . . / I.P. BANSAL ) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 2 ND JULY, 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. ITA NO. 9209 / MUM/20 1 0 5 / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI