K UTTAMLAL (EXPORTS) P LTD, MUMBAI v. DCIT CIR 6(2), MUMBAI

ITA 1791/MUM/2015 | 2010-2011
Pronouncement Date: 30-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 179119914 RSA 2015
Assessee PAN AAACK9486B
Bench Mumbai
Appeal Number ITA 1791/MUM/2015
Duration Of Justice 1 year(s) 6 month(s) 4 day(s)
Appellant K UTTAMLAL (EXPORTS) P LTD, MUMBAI
Respondent DCIT CIR 6(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 30-09-2016
Assessment Year 2010-2011
Appeal Filed On 26-03-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH JUDICIAL MEMBER ITA NO S . 1791 & 1792 /MUM/20 15 : (A.Y S : 2010 - 11 & 2011 - 12 ) M/S. K. UTTAMLAL (EXPORTS ) PVT. LTD. C/O. KARNAVAT & CO. 2A KITAB MAHAL 1 ST FLOOR 192 DR. D.N. ROAD MUMBAI - 1 PAN : AAACK9486B ( APPELLANT ) VS. DCIT CIRCLE - 6(2) MUMBAI (RESPONDENT) ASSESSEE BY : SHRI SUNIL HIRAVAT REVENUE BY : SHRI DEEPAK RIPOTE DATE OF HEARING : 21/07 /2016 DATE OF PRONOUNCEMENT : 30 / 09 /2016 O R D E R PER G.S. PANNU AM : THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE FOR ASSESSMENT YEARS 2010 - 11 & 2011 - 12 AND SINCE THEY INVOLVE CERTAIN COMMON ISSUES THEY HAVE BEEN CLUBBED AND HEARD TOGETH ER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. APPEAL FOR ASSESSMENT YEAR 2010 - 11 IS TAKEN AS THE LEAD CASE TO APPRECIATE THE CONTROVERSY. ITA NO. 1791/MUM/2015 (ASSESSMENT YEAR 2010 - 11) 2. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 12 MUMBAI DATED 29 .01.2015 PERTAINING TO THE ASSESSMENT 2 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 YEAR 201 0 - 1 1 WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 18.02.2013 PASSED BY THE ASSESSING OFFICER MUMBAI UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 3. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON FACTS AND IN LAW THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5 35 143/ - OUT OF INTEREST U/S 14A. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO DELETE THE SAID SUM OF RS.5 35 143/ - . 2. ON FACTS AND IN LAW THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5 83 063/ - OUT OF EXPENSES INSTEAD OF RS.12 000 / - AS CLAIMED BY THE APPELLANT. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS.12 000/ - OUT OF EXPENSES. 3. ON FACTS AND IN LAW THE LEARNED CIT(A) HAD ERRED IN CONFIRMI NG THE ADDITION OF RS.29 353/ - BEING THE PURCHASES FROM M/S. MAHALAXMI CORPORATION BY TREATING THE SAME AS BOGUS PURCHASES AS CLAIMED BY THE ASSESSING OFFICER. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT NOT TO HAVE CONFIRMED THE SAID ADDITI ON OF RS.29 353/ - . 4. THE APPELLANT BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND IS INTER - ALIA ENGAGED IN THE BUSINESS OF EXPORT OF GOODS AND MERCHANDISE AS WELL AS TRADING AND INVESTMENT IN SHARES AND SECURITIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.2 18 959/ - WHICH WAS CLAIMED AS EXEMPT. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SEC. 14A OF THE ACT AND 3 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 DISALLOWED AN EXPEND ITURE OF RS.11 19 650/ - IN RELATION TO THE EXEMPT INCOME BY APPLYING THE FORMULA CONTAINED IN RULE 8D(2) OF THE INCOME TAX RULES 1962 (IN SHORT THE RULES) . THE ASSESSING OFFICER DISALLOWED RS.5 35 143/ - OUT OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) OF THE RULES AND RS.5 83 063/ - OUT OF OVERHEADS IN TERMS OF RULE 8D(2)(III) OF THE RULES. THE SAID DISALLOWANCES HAVE SINCE BEEN AFFIRMED BY THE CIT(A) AND ACCORDINGLY ASSESSEE IS IN APPEAL BEFORE US ON THE SAID ISSUES BY WAY OF GROUNDS OF APPEAL NO. 1 & 2 STATED ABOVE. 5. INSOFAR AS THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.5 35 143/ - IS CONCERNED THE PLEA OF ASSESSEE IS THAT EXEMPT INCOME HAS BEEN EARNED BY WAY OF DIVIDEND AND THAT THE AMOUNT INVESTED IN THE INVESTMENTS IS OUT OF INTEREST - FREE FU NDS. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SO FAR AS INVESTMENTS ARE CONCERNED IT IS EVIDENT FROM SCHEDULE - V OF THE BALANCE - SHEET THAT THERE IS NO CHANGE FROM THAT IN THE LAST YEAR AND FURTHER THAT T HE AMOUNT OF SHARE CAPITAL AND R ESERVES & S URPLUS ARE MORE THAN ADEQUATE TO COVER THE VALUE OF SUCH INVESTMENTS AND THEREFORE FOLLOWING THE RATIO OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340 THE PRESUMPTION IS THAT SUCH INVESTMENTS ARE OUT OF INTEREST - FREE FUNDS. RELIANCE HAS ALSO BEEN PLACED ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. 366 ITR 505 FOR THE PROPOSITION THAT IN THE AFORESAID SITUATION DISALL OWANCE U/S 14A OF THE ACT IS NOT MERITED. AT THE TIME OF HEARING THE LEARNED REPRESENTATIVE ALSO POINTED OUT THAT UNDER A SIMILAR SITUATION INTEREST DISALLOWED U/S 14A OF THE ACT IN ASSESSMENT YEAR 2009 - 10 BY THE ASSESSING OFFICER WAS DELETED BY THE 4 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 CIT (A) AND REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST SUCH AN ORDER. THEREFORE ON THE BASIS OF CONSISTENCY ALSO PLEA OF THE ASSESSEE IS THAT INTEREST DISALLOWANCE DESERVES TO BE DELETED. 6. THE LD. DR HAS NOT CONTROVERTED THE FACTUAL MATRIX BROUGHT OUT BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE BUT HAS MERELY RELIED UPON THE ACTION OF ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE PAPER BOOK FILED BEFORE US ASSESSEE HAS PLACED A COPY OF COMPUTATION OF TOTAL INCOM E AS ALSO THE A NNUAL STATEMENT OF ACCOUNTS FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IN THE STATEMENT OF TOTAL INCOME IT IS REVEALED THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME OF RS.2 18 959/ - AS WELL AS SHARE OF PROF IT FROM PARTNERSHIP FIRMS OF RS.20 41 220/ - WHICH IS EXEMPT U/S 10(2A) OF THE ACT . IN THE CONTEXT OF RELIANCE PLACED BY ASSESSEE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) WE HAVE PERUSED THE A NNUAL FINANCIAL STATE MENT S . IN PARTICULAR THE FIGURES OF SHARE CAPITAL PLUS R ESERVES & S URPLUS HA VE BEEN EXAMINED BY US IN THE CONTEXT OF THE INVESTMENTS MADE WHICH HAS YIELDED SUCH EXEMPT INCOMES. IT IS QUITE CLEAR THAT THE AMOUNT OF SHARE CAPITAL PLUS R ESERVES & S URPLUS IS MORE THAN ADEQUATE TO COVER SUCH INVESTMENTS. THEREFORE IN OUR VIEW THE CASE OF ASSESSEE IS FULLY COVERED BY THE RATIO OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) AND DISALLOWANCE OF INTEREST U/S 14A OF THE ACT IS U NTENABLE WHICH IS HEREBY DIRECTED TO BE DELETED. THUS ON THIS ASPECT ASSESSEE SUCCEEDS. 5 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 8. INSOFAR AS DISALLOWANCE OF RS. 5 83 063/ - OUT OF OVERHEAD EXPENSES IS CONCERNED SAME HAS BEEN WORKED OUT BY THE ASSESSING OFFICER BY APPLYING RULE 8D(2)(III) OF THE RULES. ON THIS ASPECT THE LEARNED REPRESENTATIVE POINTED OUT THAT ASSESSEE HAD MADE SUO MOTU DISALLOWANCE OF RS.12 000/ - BASED ON THE WORKING PLACED AT PG. 24 OF THE PAPER BOOK. IN TERMS OF THE SAID STATEMENT ASSESSEE HAS TAKEN INTO CONSIDERATION THE PROPORTION OF ANNUAL COST TO THE ASSESSEE FOR ITS STAFF FOR THE WORK INVOLVED RELATING TO THE EX EMPT INCOMES. A PART OF THE ADMINISTRATIVE EXPENSES HAS ALSO BEEN ATTRIBUTED TO IT. BE THAT AS IT MAY WE FIND THAT THE BASIS OF WORKING ADOPTED BY THE ASSESSEE HAS NOT BEEN ADVERSELY COMMENTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BEFORE PROC EEDING TO COMPUTE DISALLOWANCE BY INVOKING RULE 8D(2)(III) OF THE RULES. THIS APPROACH OF THE ASSESSING OFFICER IS CONTRARY TO THE PROVISIONS OF SEC. 14A(2) OF THE ACT WHICH REQUIRES THE ASSESSING OFFICER TO RECORD HIS SATISFACTION ON THE IN CORRECTNESS O F THE CLAIM MADE BY THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE AND ONLY THEREAFTER HE CAN RESORT TO COMPUTE DISALLOWANCE BY INVOKING RULE 8D OF THE RULES. SUCH AN APPROACH IS CONSPICUOUS BY ITS ABSENCE IN THE PRESENT CASE AND THEREFORE ON THIS COUNT ITSELF WE FIND NO REASON TO UPHOLD THE DISALLOWANCE OF RS.5 83 063/ - COMPUTED BY THE ASSESSING OFFICER. AS A CONSEQUENCE WE DIRECT THE ASSESSING OFFICER TO RETAIN THE DISALLOWANCE OF RS.12 000/ - COMPUTED BY THE ASSESSEE AND DELETE THE BALAN CE. THUS ON THIS ASPECT ALSO ASSESSEE SUCCEEDS. 9. THE LAST GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF RS.29 353/ - MADE BY THE ASSESSING OFFICER OUT OF 6 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 PURCHASES. THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT ASSESS EE WAS FOUND TO HAVE EFFECTED PURCHASES OF RS.29 353/ - FROM M/S. MAHALAXMI CORPORATION REPRESENTING LABELS FOR THE PRODUCTS EXPORTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS REFERRED TO A STATEMENT OF THE SAID SUPPLIER MADE TO THE SALES TAX DEPARTMENT W HEREIN IT IS ADMITTED THAT NO SUCH TRANSACTIONS WERE ENTERED BY THE SAID CONCERN WITH THE ASSESSEE. AS A CONSEQUENCE THE ASSESSING OFFICER HELD THE SAID PURCHASES TO BE BOGUS AND ADDED A SUM OF RS.29 353/ - TO THE RETURNED INCOME. CIT(A) HAS ALSO AFFIRME D THE STAND OF ASSESSING OFFICER AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. BEFORE US THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT ASSESSEE IS AN EXPORTER OF VARIOUS GOODS AND MERCHANDISE WHICH INTER - ALIA INCLUDES EXPOR T OF PAPADS. IN THIS CONTEXT IT WAS EXPLAINED THAT ASSESSEE HAD PURCHASED PAPADS FROM M/S. SHREE MAHILA GRUHUDYOG AND EXPORTED THE SAME AND THE IMPUGNED PURCHASES CONSISTED OF LABELS AFFIXED ON SUCH PACKETS OF PAPADS. THE LEARNED REPRESENTATIVE POINTED OUT THAT ASSESSEE WAS HAVING A HUGE TURNOVER OF APPROXIMATELY RS. 67 CRORES AND THAT THE IMPUGNED PURCHASES OF RS.29 353/ - WAS TOO MEAGRE AN AMOUNT FOR IT TO UNDERTAKE ANY FRAUDULENT PURCHASES SO AS TO DEFLATE THE PROFITS. IN ANY CASE IT WAS POINTED OUT THAT THESE ARE MINOR PURCHASES WHICH HAVE BEEN CARRIED OUT IN THE COURSE OF BUSINESS AND DO NOT CALL FOR ANY DISALLOWANCE. 7 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 11. ON THE OTHER HAND THE LD. DR REFERRED TO THE REASONING OF ASSESSING OFFICER WHICH WE HAVE ALREADY ADVERTED TO IN THE EARLIER PARAS AND IS NOT REPEATED FOR THE SAKE OF BREVITY. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN OUR CONSIDERED OPINION THE ASSESSING OFFICER HAS MECHANICALLY MADE THE ADDITION WITHOUT ESTABLISHING ON A CONCRETE BASIS THAT ASSESSEE HAD EFFECTED BOGUS PURCHASES. IN FACT THE ALLEGED STATEMENT OF THE SUPPLIER MADE TO THE SALES TAX DEPARTMENT WHICH IS REFERRED TO B Y THE ASSESSING OFFICER HAS NOT BEEN CONFRONTED TO THE ASSESSEE AT ANY STAGE. FURTHERMORE WE FIND THAT THERE IS NO DOUBT THAT ASSESSEE HAD EFFECTED THE PURCHASE OF LIJJAT PAPADS FOR EXPORT AND THE IMPUGNED PURCHASES WERE MERELY LABELS AFFIXED ON THE PACK ETS OF PAPAD SO EXPORTED. UNDER THE ENTIRETY OF CIRCUMSTANCES IN OUR VIEW THE IMPUGNED ACTION OF ASSESSING OFFICER IS UNSUSTAINABLE AND ADDITION OF RS.29 353/ - IS DIRECTED TO BE DELETED. 13. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 14. THE ONLY ISSUE INVOLVED IN THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 RELATES TO BOGUS PURCHASES OF RS.75 000/ - . SINCE THE ISSUE AS WELL AS THE FACTS AND CIRCUMSTANCES ARE PARI MATERIA TO THOSE CONSIDERED BY US IN THE ASSESSEES APPEAL FOR ASS ESSMENT YEAR 2010 - 11 IN THE EARLIER PARAGRAPHS OUR DECISION IN THE APPEAL FOR ASSESSMENT YEAR 2010 - 11 SHALL MUTATIS MUTANDIS APPLY FOR ASSESSMENT YEAR 2011 - 12 ALSO. 8 M/S. K. UTTAMLAL (EXPORTS) PVT. LTD. ITA NOS. 1791 & 1972/MUM/2015 15. RESULTANTLY APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2010 - 11 IS PARTLY ALLOWED AND FOR ASSESSMENT YEAR 2011 - 12 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 T H SEPTEMBER 2016. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI DATE : 3 0 T H SEPTEMBER 2016 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R I BENCH MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T MUMBAI