BEAUTIFUL DIAMONDS LTD ( NOW KNOWN AS SPLENDOUR GEMS LTD), MUMBAI v. DCIT CIR 3(1), MUMBAI

I.T.A NO.2303/ MUM/2009 BEAU TIFUL DIAMONDS LTD. (NOW KNOWN AS SPLENDOUR GEMS LTD.) 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI. [ CORAM: D.MANMOHAN V.P. AND PRAMOD KUMAR AM ] I.T.A NO.2303/ MUM/2009 ASSESSMENT YEAR: 2003-04 BEAUTIFUL DIAMONDS LTD. .. APPELLANT (NOW KNOWN AS SPLENDOUR GEMS LTD.) 611/612 PAREKH MARKET 6 TH FLOOR 39 J.S.S.ROAD OPERA HOUSE MUMBAI. PA NO.AAACB5355 L VS DCIT CIRCLE 3(1) . RESPONDENT AAYAKAR BHAVAN M.K. ROAD MUMBAI. APPEARANCES: JITENDRA JAIN FOR THE APPELLANT NARESH KUMAR BALODIA FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 18 TH FEBRUARY 2009 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2004 -05. THE ONLY GRIEVANCE RAISED IN THIS APPEAL IS THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF ADMINISTRATIVE AND OTHER EXPENSES OF RS. 38 35 562 BEING 25% OF TOTAL EXPEN SES ON ADHOC BASIS. 2. FACTS ARE THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 1 53 42 247 ON ACCOUNT OF ADMINISTRATIVE AND OTHER EXPENSES. NO DETAILS OF THESE EXPENSES W ERE FURNISHED BEFORE THE ASSESSING OFFICER. IT WAS IN BACKDROP AND CONSIDERING THE TU RNOVER & THE NATURE OF BUSINESS OF THE ASSESSEE THE ASSESSING OFFICER DISALLOWED 25% OF T HE TOTAL EXPENSES AMOUNTING TO RS. 38 35 562 AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). THE CIT (A) CALLED F OR THE REMAND REPORT FROM THE ASSESSING OFFICER WHO SUBMITTED THE SAME ON 5.2.2009. LEARN ED CIT (APPEALS) AFTER CONSIDERING THE I.T.A NO.2303/ MUM/2009 BEAU TIFUL DIAMONDS LTD. (NOW KNOWN AS SPLENDOUR GEMS LTD.) 2 MATERIAL PLACED BEFORE HIM AND ANALYSING THE SAME O N THE BASIS OF ARGUMENTS ADVANCED BY BOTH THE PARTIES AND TAKING INTO CONSIDERATION THE VIEWS OF THE ASSESSING OFFICER EXPRESSED IN HIS REMAND REPORT CONFIRMED THE ADDITION MADE B Y THE AO. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO T HE APPLICABLE LEGAL POSITION. 5. WE HAVE NOTED THAT IT IS AN UNDISPUTED POSITION THAT THE ASSESSEE HAS NOT FURNISHED COMPLETE DETAILS OF EXPENSES EITHER AT THE TIME OF ORIGINAL ASSESSMENT OR EVEN DURING REMAND PROCEEDINGS BUT WE HAVE ALSO NOTED THAT THE ASSESSEES SUBMISSION TO THE FACT THAT THERE IS SUBSTANTIAL REDUCTION IN EXPENSES AS COMPA RED TO IMMEDIATE PRECEDING FINANCIAL YEAR IS ALSO NOT IN DISPUTE. IN THE COURSE OF REM AND PROCEEDINGS THE ASSESSEE DID POINT OUT TO THE SAID REDUCTION IN EXPENSES COMPARED TO IMMED IATE PRECEDING FINANCIAL YEAR I.E. FROM ` .4.65 CRORES TO ` .1.71 CRORES AND THE ASSESSING OFFICER DID NOT DISP UTE THE SAME AND MERELY OBSERVED IN A SUBMISSION TO THE CIT (A) THAT YOUR HONOUR MAY DECIDE THE ISSUE ON MERITS. THE CIT (A) HAS ALSO TAKEN NOTE OF THE ABOVE POSITI ON AND OBSERVED THAT THE AO HAS NOT GIVEN ANY FINDING ON ALLOWABILITY OF THE EXPENSES . BEARING IN MIND ALL THESE FACTS AND ALSO ENTIRETY OF THE CASE WHILE WE UPHOLD THE DISALLOWA NCE IN PRINCIPLE WE ALSO DEEM IT PROPER TO REDUCE THE QUANTUM OF DISALLOWANCE TO 20% OF THE EXPENSES. THE AO IS DIRECTED ACCORDINGLY. 6. IN THE RESULT THE APPEAL IS TREATED AS PARTLY A LLOWED. PRONOUNCED IN THE OPEN COURT ON 9 TH FEBRUARY 2011 SD/- (D.MANMOHAN ) (VICE PRESIDENT) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 9 TH FEBRUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) III MUMBA I 4. COMMISSIONER OF INCOME TAX 3 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.2303/ MUM/2009 BEAU TIFUL DIAMONDS LTD. (NOW KNOWN AS SPLENDOUR GEMS LTD.) 3 I.T.A NO.2303/ MUM/2009 BEAU TIFUL DIAMONDS LTD. (NOW KNOWN AS SPLENDOUR GEMS LTD.) 4