Riaz Alimohamad Padamsee, Pune V. Income-tax Officer, Pune

ITA 941/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1683 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-05-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.941/PUN/2017 / ASSESSMENT YEAR : 2012-13 RIAZ ALIMOHAMAD PADAMSEE, A-19, PADMAVILAS ENCLAVE, NEAR SHINDE CHATRI, WANOWARI, PUNE 411 040 PAN : AJEPP6882G VS. ITO, WARD-11(2), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-1, PUNE ON 25-10-2016 IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THERE IS A DELAY OF 157 DAYS IN PRESENTING THIS APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AN AFFIDAVIT IN SUPPORT OF THE REASONS WHICH LED TO THE FILING OF THE INSTANT APPEAL BELATEDLY. I AM SATISFIED WITH THE REASONS. AS SUCH, THE APPELLANT BY SHRI M.K. KULKARNI RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 14-05-2019 DATE OF PRONOUNCEMENT 15-05-2019 ITA NO.941/PUN/2017 RIAZ ALIMOHAMAD PADAMSEE 2 DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR DISPOSAL O N MERITS. 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.8.00 LAKH BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER ALSO CALLED THE ACT). 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN ENGINEER ENGAGED IN RENDERING ADMINISTRATION, MANAGEMEN T AND MARKETING SERVICES. THERE ARE TWO OTHER PERSONS SP ECIFIED U/S.40A(2) OF THE ACT, RELEVANT FOR THE PURPOSE, NAMELY, MR. SCHERIZE PADAMSEE AND MR. S.M. PADAMSEE. EACH OF THE ASSESSEE AND THESE TWO PERSONS RECEIVED A SUM OF RS.21 .55 LAKH FROM M/S EAGLE HOME APPLIANCES PVT. LTD. THE ASSESSEE CLAIMED DEDUCTION OF RS.8.00 LAKH, BEING, A SUM OF RS.4 .00 LAKH PAID TO EACH OF THEM. THE ASSESSING OFFICER (AO) HE LD THAT THE PROVISIONS OF SECTION 40A(2) WERE ATTRACTED AS THERE WAS NO RATIONALE IN MAKING PAYMENTS TO THESE TWO PERSONS WHO WERE ALREADY EARNING SIMILAR INCOME FROM THE SAME COMPANY. T HE LD. CIT(A) SUSTAINED THE DISALLOWANCE. ITA NO.941/PUN/2017 RIAZ ALIMOHAMAD PADAMSEE 3 5. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESS EE ALONG WITH THE OTHER TWO RELATED PERSONS RECEIVED A SUM OF RS.21.55 LAKH EACH FROM M/S EAGLE HOME APPLIANCES PVT. LTD. THUS, IT BECOMES OVERT THAT THE TWO PERSONS REFERRED TO IN SECTION 40A(2)(B) WERE ALSO RENDERING SIMILAR SERVICES. THE CASE OF THE ASSESSEE IS THAT THESE PERSONS ASSISTED HIM IN RENDERING THE SERVICES FOR WHICH HE PAID A SUM OF RS.4. 00 LAKH TO EACH OF THEM. IT IS RELEVANT TO NOTE THAT THESE PERSONS WE RE ALSO SUBJECTED TO TAX AT THE HIGHEST TAX RATE AND THE AMOUNTS SHOWN TO HAVE BEEN RECEIVED BY THEM FROM THE ASSESSEE W ERE INCLUDED IN THEIR TOTAL INCOME. AS THE ASSESSEES CONTENTION OF HAVING RECEIVED SERVICES FROM THESE PERSONS FOR RENDERIN G OF FURTHER SERVICES TO HIS CUSTOMERS HAS NOT BEEN REFUTED BY THE AO, IN MY CONSIDERED OPINION, THERE CANNOT BE ANY DISALLOWANCE U/S.40A(2) IN THE PECULIAR CIRCUMSTANCES AS ARE INSTANTLY PREVAILING. I, THEREFORE, ORDER TO DELETE THE ADDITION OF RS.8.00 LAKH. ITA NO.941/PUN/2017 RIAZ ALIMOHAMAD PADAMSEE 4 6. THE ONLY OTHER GROUND WHICH SURVIVES IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF ADMINISTRATIVE EXPENSES CLAIMED AT RS.5,79,022/-. 7. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLAIMED ADMINISTRATIVE EXPENSES. THE AO HAS SPELT OUT DETAILS OF SUCH EXPENSES IN THE ASSESSMENT ORDER. ON PERUSAL O F THE DETAILS, IT WAS OBSERVED THAT THE ASSESSEE CLAIMED SOME EXPENSES IN RESPECT OF THE ALLEGED OFFICE MAINTAINED IN LONA VALA AND SUCH EXPENSES WERE IN THE NATURE OF MONTHLY PAYMENTS TO DRIVER AND SERVANTS. SINCE THE ASSESSEE DID NOT HAVE ANY OFFICE IN LONAVALA, RATHER IT WAS HIS RESIDENCE, THE AO DID NOT ALLOW DEDUCTION FOR SUCH EXPENSES EXCEPT BANK CHARGES AND TE LEPHONE CHARGES. THE LD. CIT(A) SUSTAINED THE ADDITION. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS FOUND AS AN ADMITTED POSITION THAT THE ASSESSEE DID NOT HAVE ANY OFFICE IN LONAVALA AT THE MATERIAL TIME. ALL THE EXPENSES CLAIMED WERE SHOWN IN RESPEC T OF MONTHLY SALARY TO DRIVER AND SERVANTS ETC. FOR DEPLOYME NT IN LONAVALA OFFICE. RATHER THE ASSESSEE WAS LIVING THERE WITH H IS FAMILY. UNDER SUCH CIRCUMSTANCES, THERE CANNOT BE ANY Q UESTION ITA NO.941/PUN/2017 RIAZ ALIMOHAMAD PADAMSEE 5 OF ALLOWING PERSONAL EXPENSES AGAINST THE BUSINESS INCOME. I, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS SCORE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 15 TH MAY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-1, PUNE 4. THE PR. CIT-1, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.941/PUN/2017 RIAZ ALIMOHAMAD PADAMSEE 6 DATE 1. DRAFT DICTATED ON 14-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *