THE DY CIT 18(1), MUMBAI v. M/S. EYETECH INDUSTRIES,

ITA 1089/MUM/2008 | 2004-2005
Pronouncement Date: 10-12-2010 | Result: Dismissed

Appeal Details

RSA Number 108919914 RSA 2008
Assessee PAN AAAFE6550D
Bench Mumbai
Appeal Number ITA 1089/MUM/2008
Duration Of Justice 2 year(s) 9 month(s) 26 day(s)
Appellant THE DY CIT 18(1), MUMBAI
Respondent M/S. EYETECH INDUSTRIES,
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 10-12-2010
Date Of Final Hearing 15-11-2010
Next Hearing Date 15-11-2010
Assessment Year 2004-2005
Appeal Filed On 14-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SHRI D.K. AGARWA L (JM) ITA NO.1089/MUM/2008 ASSESSMENT YEAR : 2004-05 DY. COMMISSIONER OF INCOME TAX CIRCLE 18(1) 1 ST FLOOR PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012. ..( APPELLANT ) VS. M/S. EYETECH INDUSTRIES 55 KALYANDAS UDYOG BHAVAN NEAR CENTURY BAZAR PRABHADEVI MUMBAI. ..( RESPONDENT ) P.A. NO. (AAAFE 6550 D) APPELLANT BY : SHRI SUMEET KUMAR RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 23.11.2007 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2004-05. 2. AT THE TIME OF HEARING NONE ATTENDS FOR AND ON BE HALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNMENT OF TH E CASE. IT WAS THEREFORE DECIDED TO DISPOSE OF THE APPEAL EXTARTE Q UA THE ASSESSEE ON MERITS AFTER HEARING THE LD. DR. ITA NO.1089/M/08 A.Y:04-05 2 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS OF TRADING IN OPHTHALMIC AND SUR GICAL INSTRUMENTS FILED RETURN DECLARING TOTAL INCOME OF RS.5 1 20 150/- AFTER CLAIMING DEDUCTION U/S.80 HHC RS.3 845/-. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER FROM COLUMN NO.18 OF TAX AUDIT REPORT THAT THE ASSESSEE HAS MADE PAYMENTS U/S.40A(2)(B) OF THE INCOME TAX ACT 196 1(THE ACT) AS UNDER :- 1. MR. RAVI MEHRA SALARY & ALLOWANCES RS . 4 49 329/- 2. MRS. SHOBHA MEHRA RENT RS . 1 08 000/- 3. MR. RAVI MEHRA RENT RS . 1 13 000/- 4. MR. RAVI MEHRA HUF INTEREST ON CAPITAL RS . 1 51 864/- 5. MRS. SHOBHA MEHRA INTEREST ON CAPITAL RS. 1 45 965/- 6. MR. KUNAL MEHRA INTEREST ON CAPITAL RS . 1 98 357/- 7. MS. NEHA MEHRA INTEREST ON CAPITAL RS. 1 65 306/- 8. MR. KUNAL MEHRA REMUNERATION RS. 2 40 000/- RS.15 71 821/- THE ASSESSEE WAS ASKED TO PROVE THE REASONABLENESS OF SUCH PAYMENTS VIS-A-VIS MARKET PRICE. IN THE ABSENCE OF ANY EXPLANATION IN RESPECT OF REASONABLENESS OF THE PAYMENT THE ASSESSING OFF ICER FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COU RT IN 261 ITR 258(BOM.) WAS OF THE VIEW THAT THE ASSESSEE HAS NOT DISCHA RGED ITS ONUS AND THEREFORE HE DISALLOWED RS.3.00 LACS U/S.40A( 2)(B) OF THE ACT. APART FROM THIS THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED TRAVELLING AND CONVEYANCE EXPENSES RS.33 12 111/- WHICH INCLUDES LOCAL CONVEYANCE RS.6 33 92 5/- AND LOCAL TRAVELLING EXPENSES RS.26 78 186/-. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS WITH SUPPORTING BILLS AND VOUCHE RS. THE ASSESSEE FILED DETAILS OF THESE EXPENSES INCURRED ON PERSON- WISE PLACES VISITED ETC. HOWEVER THE ASSESSEE COULD NOT PRODUCE A LL THE BILLS VOUCHERS FOR VERIFICATION AND MOREOVER SOME PAYME NTS WERE ITA NO.1089/M/08 A.Y:04-05 3 MADE IN CASH SUPPORTED BY SELF-MADE VOUCHERS. HENCE THE ASSE SSING OFFICER DISALLOWED RS.6 62 422/- BEING 20% OF THE EXPE NSES FOR WANT OF PROPER VERIFICATION AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER AFTER MAKING SOME OTHER DISALLOWANCES COMP LETED THE ASSESSMENT AT AN INCOME OF RS.75 45 910/- VIDE ORDER DATED 26.12.2006 PASSED U/S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) WITH REGARD TO THE DISALLOWANCE OF RS.3.00 LACS MADE UND ER SECTION 40A(2)(B) WHILE OBSERVING THAT THE SAME IS WITHOUT ANY BASIS DELETED THE DISALLOWANCE OF RS .3.00 LACS MADE BY THE ASSESSING OFFICER. WITH REGARD TO THE DISALLOWANCE OF TRAVELING AND CONVEYANCE EXPENSES RS.6 62 422/- THE LD. CIT(A) FOLLOWING THE APPELLATE ORDER OF EARLIER YEARS DELETED THE SAME. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US. 5. GROUND NO.1(I) AND (II) ARE AGAINST THE DELETION OF ADDITION OF RS.3.00 LACS MADE U/S.40A(2))(B) OF THE ACT. 6. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT SIN CE THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION WITH RESPECT TO THE RE ASONABLENESS OF THE PAYMENTS THEREFORE THE LD. CIT(A) WAS NOT JUST IFIED IN DELETING THE ADDITION OF RS.3.00 LACS MADE BY THE ASSESSING OFFICER . HE THEREFORE SUBMITS THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER BE RESTORED. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD . DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND TH AT THERE IS NO DISPUTE THAT IN THIS CASE PROVISION OF SECTION 40A(2)(B) OF THE ACT ARE ITA NO.1089/M/08 A.Y:04-05 4 APPLICABLE. UNDER SECTION 40A(2)(A) OF THE ACT THE EXPE NDITURE INCURRED BY THE ASSESSEE MAY BE DISALLOWED BY THE ASSESSING OFFICER IF HE CONSIDERS THE SAME TO BE EXCESSIVE OR UNREASONABLE HAVIN G REGARD TO :- (A) THE FAIR MARKET VALUE OF THE GOODS/SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE; OR (B) THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE S BUSINESS OR PROFESSION; OR (C) THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESSEE FROM THE PAYMENT. IN THE CASE BEFORE US THE LD. CIT(A) AFTER EXAMINING THE RELEVANT MATERIAL IN DETAIL HAS OBSERVED AND HELD AS UNDER (PAG E-12):- 4.1 EVEN UPON MERITS THE A.R. HAS ARGUED THAT IN RESPECT OF SALARY/ALLOWANCES AND REMUNERATION MANY EMPLOYEES ARE BEING PAID MORE THAN THE COMPENSATION PAID TO MR. RAVI MEHRA AND MR. KUNAL MEHRA DESPITE THE FACT THAT THE BENEFICIARIES OF SUCH PAYMENT POINTED OUT AS ABOVE ARE HAVING QUALIFICATION SUCH AS MBA. IN RES PECT OF THE PAYMENT OF RENT IT IS POINTED OUT THAT THERE I S NO SUCH DISALLOWANCE FOR THE PAST 8 YEARS AND THE A.R. HAS SHOWN THAT THE PAYMENT OF RENT IS MUCH BELOW THE PREVAILED MARKET RATE IN THE AREA. AS FAR AS THE PAYMENTS OF INTEREST ARE CONCERNED THE RATE OF PAY MENT AT 12% WHICH IS NO WAY ABNORMAL OR EXCESSIVE. IN V IEW OF THESE OBSERVATIONS I FIND THAT THE ADDITION OF RS .3 LAKHS IS NOT REASONABLE AND IS WITHOUT ANY PROPER B ASIS. MOREOVER NO SPECIFIC OPPORTUNITY ON ANY SUCH ISSUE HAS BEEN PROVIDED TO THE APPELLANT. THIS ADDITION IS THEREFORE DELETED. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) AND K EEPING IN VIEW THAT THE LD. CIT(A) AFTER EXAMINING THE RECORDS HAS DELETED THE DISALLOWANCE ON THE GROUND THAT THE SAME IS NOT REASONA BLE AND WITHOUT ANY PROPER BASIS WE ARE INCLINED TO UPHOLD TH E FINDING OF THE ITA NO.1089/M/08 A.Y:04-05 5 LD. CIT(A) IN DELETING THE ADDITION MADE BY THE LD. CIT(A) . THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED . 8. GROUND NO.1(III) AND (IV) ARE AGAINST THE DELETIO N OF DISALLOWANCE OF TRAVELLING AND CONVEYANCE EXPENSES RS.6 62 422/-. 9. AT THE TIME OF HEARING THE LD. DR WHILE RELYING ON THE ORDER OF THE ASSESSING OFFICER SUBMITS THAT THE LD. CIT(A) HAS ERR ED IN DELETING THE DISALLOWANCE OF RS.6 62 422/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT PRODUCE COMPLETE DETAILS OF THE SAME. HE THEREFORE SUBMITS THAT THE DISALLOWANCE MADE BY THE A SSESSING OFFICER BE RESTORED. 10. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE LD. DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THE ASSESSEE HAS FILED COMPLETE DETAILS OF TRAVELLING AND CONVEYANCE EXP ENSES WITH NAME OF THE EMPLOYEE DESTINATION PURPOSE PERIOD AN D AMOUNT COPIES OF WHICH ARE APPEARING AT PAGE 21 TO 48 OF ASSES SEES PAPER BOOK. WE FURTHER FIND THAT THE SIMILAR DISALLOWANCE WA S DELETED BY THE LD. CIT(A) FOR ASSESSMENT YEARS 1999-00 AND 2001-02 COPY OF THE APPELLATE ORDER ARE APPEARING AT PAGE 49 TO 64 OF A SSESSEE'S PAPER BOOK. EVEN AT THIS STAGE THE REVENUE HAS NOT BROUGHT ON RECORD ANY ITEM OF DISALLOWABLE NATURE TO SHOW THAT THE SAME HAS N OT BEEN INCURRED FOR BUSINESS PURPOSES. THIS BEING SO AND KEEPI NG IN VIEW THE RULE OF CONSISTENCY WE ARE INCLINED TO UPHOLD THE FINDI NG OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.6 62 422/- M ADE BY THE ASSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. ITA NO.1089/M/08 A.Y:04-05 6 11. THE LAST GROUND IS GENERAL IN NATURE AND IN THE ABSENCE OF ANY SPECIFIC PLEA THE SAME IS THEREFORE REJECTED. 12. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.12.2010. SD/- SD/- (R.S. SYAL) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 10.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.