RADHAKRISHNA RAMNARAIN, MUMBAI v. ITO 7(2)(1), MUMBAI

ITA 3155/MUM/2009 | 2005-2006
Pronouncement Date: 23-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 315519914 RSA 2009
Assessee PAN AAACR3297H
Bench Mumbai
Appeal Number ITA 3155/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 9 day(s)
Appellant RADHAKRISHNA RAMNARAIN, MUMBAI
Respondent ITO 7(2)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 23-03-2011
Date Of Final Hearing 28-10-2010
Next Hearing Date 28-10-2010
Assessment Year 2005-2006
Appeal Filed On 14-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.3155/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. PHOENIX MILLS COMPOUND 462 SENAPATI BAPAT MARG LOWER PAREL MUMBAI -400 013 ASSESSEE VS THE INCOME-TAX OFFICER -7(2)(1) MUMBAI .. REVENUE PAN: AAACR 3297 H ASSESSEE BY: SHRI HARESH BUCH & SHRI PANKAJ SHAH REVENUE BY: SHRI SUMEET KUMAR O R D E R PER R.S. PADVEKAR JM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER OF THE LD. CIT (A) 7 MUMBAI DATED 27.02.2009 FOR THE A.Y. 2005-06. GROUND 1 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI I MUMBAI [THE CIT(A)] ERRED IN CONFIRMING THE ACTIO N OF THE INCOME TAX OFFICER WARD 7(2)(1) MUMBAI (THE A.O. ) AT LEAST TO THE EXTENT OF DISALLOWING A SUM OF ` 3 36 669 B EING SALARY PAID TO THE STAFF STATIONED AT THE RESIDENCE OF THE DIRECTORS. ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 2 2. WE HAVE HEARD THE PARTIES. THE ASSESSEE-COMPANY IS ENGAGED IN TRADING OF GARMENT AND ALSO GET INCOME FROM WAREHOU SING. THE A.O. HAS NOTED THAT THERE WERE 92 EMPLOYEES I.E. DRIVERS-7 OPERATORS-2 DOMESTIC SERVANT & COOKS-83 WHO WERE PAID ` 19 87 814/- WHOSE SERVICES ARE UTILIZED AT DIRECTORS RESIDENCE/GUEST HOUSE. THE A.O. WAS OF THE OPINION THAT THE SALARIES TO THOSE 94 EMPLOYEES WHO SE SERVICES ARE UTILIZED AT THE DIRECTORS RESIDENCE / GUEST HOUSES WERE NOT CONNECTED WITH THE BUSINESS ACTIVITY CARRIED OUT BY THE COMPA NY. THE A.O. RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF TRAVANCORE TITANIUM PRODUCT LTD. VS. CIT 60 ITR 277 AND HELD THAT THE E XPENDITURE MUST BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION AND AS IN THE PRESENT CASE ALL THE SERVICES OF DRIVERS WH ICH ARE UTILIZED AT THE RESIDENCES OF THE DIRECTORS AS WELL AS GUEST HOUSES CANNOT BE SAID TO BE USED FOR THE PURPOSE OF ASSESSEES BUSINESS. THE A .O. THEREFORE MADE THE DISALLOWANCE OF ` 19 87 814/-. THE ASSESSEE CARRIED THE ISSUE BEFOR E THE LD. CIT (A). BEFORE THE LD. CIT (A) THE ASSESS EE CONTENDED THAT IN ASSESSEES OWN CASE FOR THE A.Y. 1964-65 THE TRIBUN AL HAS ALLOWED THE CLAIM OF THE ASSESSEE AND THE SAID ORDER IS FOLLOWE D IN THE A.YS. 2001-02 AND 2002-03. THE ASSESSEE ALSO CONTENDED THAT IN T HE HANDS OF THE DIRECTORS THE PERQUISITE OF ` 95 000/- HAS BEEN OFFERED TO TAX. IT WAS FURTHER CONTENDED THAT THE DIRECTORS ALSO ATTEND TO COMPANIES WORK FROM THEIR RESIDENCE AND THEY DO NOT DRAW ANY ADDITIONAL REMUNERATION FROM THE COMPANY AND THEREFORE ENTIRE EXPENDITURE IS O NLY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE-COMPANY. THE LD. CIT (A) WAS NOT IMPRESSED WITH THE PLEA AND CONTENTIONS OF THE ASSE SSEE. HE WAS OF THE OPINION THAT FOR THE A.Y. 1964-65 EVEN IF THE CLAIM WAS ALLOWED BY THE TRIBUNAL BUT THE AMOUNT INVOLVED WAS MEAGER I.E. ` 4 700/-. HE HAS ALSO NOTED THAT IN THE PRESENT YEAR THE FACTS ARE DISTI NGUISHABLE. IT IS FURTHER OBSERVED THAT THE NUMBER OF THE STAFF / SERVANTS AR E 92 IN THE FINANCIAL YEAR RELEVANT TO A.Y. 2005-06 AND THAT SAID NUMBER IS QUITE HIGH. THE ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 3 LD. CIT (A) ALSO DECLINED TO FOLLOW THE ORDERS OF H IS PREDECESSORS FOR THE A.Y. 2001-02 AND 2002-03. FINALLY HE SUSTAINED TH E DISALLOWANCE OF ` 3 36 669/- AFTER CONSIDERING THE FACT THAT MAJOR AM OUNT TO THE EXTENT OF ` 14.23 LAKHS WAS RECOVERED BACK FROM THE OTHER CONCE RNS AND ` 95 000/- HAS BEEN OFFERED AS PERQUISITE BY THE DIRECTORS IN THEIR RETURNS. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES. THE LD. COUNSEL PLACED HIS HEAVY RELIANCE ON THE DECISION O F THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 1964-65. HE ALSO R ELIED ON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003-04 (ITA NOS.3765 AND 4358/M/2006) ORDER DATED 28.7.2008 AND SUBMITS THAT ON PRINCIPLE THE TRIBUNAL HAS DELETED THE IDENTICAL DISALLOWANCE MADE BY THE A.O. AND THE TRIBUNAL HAS ALSO CONSIDERED THE O RDER OF ITAT FOR THE A.Y. 1964-65 WHICH WAS FOLLOWED BY THE LD. CIT (A) AND DELETED THE ADDITION. HE FURTHER SUBMITTED THAT ON PRINCIPLE T HE EXPENDITURE IS ALLOWED AND THERE IS NO JUSTIFICATION TO TAKE THE D IFFERENT VIEW IN THIS YEAR. PER CONTRA THE LD. D.R. SUPPORTED THE ORDER OF THE A.O. 4. THE FACTS ARE ALREADY RECORDED HEREINABOVE. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE WH ICH IS PLACED IN THE COMPILATION PAGE NO.1 TO 5 FOR THE A.Y. 2003-04. I T IS NOTICED THAT THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT (A) IN WHICH THE ORDER OF THE ITAT FOR THE A.Y. 1964-65 WAS FOLLOWED. IN OUR OPINION ON PRINCIPLE IT IS ACCEPTED THAT THE SERVICES RENDERED BY THE ST AFF AT THE RESIDENCE OF THE DIRECTORS IS FOR THE PURPOSE OF THE BUSINESS. WE DO NOT FIND ANY REASON TO TAKE DIFFERENT VIEW FROM THE VIEW ALREADY TAKEN BY THE TRIBUNAL IN THE A.Y. 2003-04. WE ACCORDINGLY DELETE THE A DDITION SUSTAINED BY THE LD. CIT (A) AND GROUND NO.1 IS ALLOWED. ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 4 5. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A .O. IN DISALLOWING A SUM OF ` 1 26 806 BEING OF THE AGGREGATE ELECTRICITY EXPENSES INCURRED AT THE RESIDENCE OF T HE DIRECTORS. 6. THE ASSESSEE HAS CLAIMED THE ELECTRICITY CHARGES OF ` 1 69 075/-. THE A.O. HAS ALSO NOTED THAT ELECTRICITY BILLS FOR GUEST HOUSES OF THE DIRECTORS WERE CLAIMED AS A BUSINESS EXPENDITURE. T HE A.O. ALSO TOOK THE NOTE OF THE FACT THAT THE IDENTICAL DISALLOWANCE WA S MADE BY THE A.O. FOR THE A.Y. 2001-02 WAS CONFIRMED BY THE A.O. FOR THE A.Y. 2001-02 WAS CONFIRMED BY THE TRIBUNAL. THE A.O. ALSO NOTED THA T THE MAJOR PART OF THE ELECTRICITY EXPENSES BOOKED CLAIMED IN THIS COM PANY PERTAINS TO DIRECTORS RESIDENCE AND GUESTS HOUSES. HE THEREFO RE MADE THE DISALLOWANCE OF THE 90% OF ` 1 69 075/- WHICH WAS WORKED OUT AT ` 1 50 168/-. THE ASSESSEE CHALLENGED THE SAID DISAL LOWANCE BEFORE THE LD. CIT (A). THE LD. CIT (A) RESTRICTED THE DISALL OWANCE TO THE EXTENT OF 75% OF THE TOTAL CLAIM. IT IS SEEN THAT IN THE ASS ESSEES OWN CASE FOR THE A.Y. 2001-02 THE TRIBUNAL HAS CONFIRMED THE IDENTIC AL DISALLOWANCE WHICH IS IN RESPECT OF THE ELECTRICITY EXPENSES OF THE JUHU PROPERTY. THOUGH THE LD. COUNSEL SUBMITTED THOUGH OTHER ELECT RICITY EXPENDITURE IS THERE OTHER THAN THE JUHU PROPERTY BUT NO CONVI NCING EVIDENCES IS FILED BEFORE US. IN OUR OPINION NO INTERFERENCE I S CALLED FOR IN THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. WE ACCORDINGLY CO NFIRM THE SAME AND GROUND IS DISMISSED. 7. GROUND NO.3 READS AS UNDER:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A .O. OF MAKING ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 5 AN ADDITION OF THE AGGREGATE SUM OF ` 13 38 729 AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCO ME-TAX ACT 1961 (THE ACT) ON THE ALLEGED GROUND THAT TH E INVESTMENT WERE BROUGHT INTO BOOKS MUCH LATER WHILE THE TRANS ACTION WAS COMPLETED IN A.Y. 2001-02. 7. THE ISSUE IS IN RESPECT OF ADDITION OF ` 13 38 729/- MADE U/S.69 OF THE ACT. AS PER THE FACTS ON RECORD IT WAS NOTICE D BY THE A.O. THAT INVESTMENT IN EQUITY SHARES OF PHOENIX MILL LTD. WA S INCREASED BY 1161 SHARES IN THE FINANCIAL YEAR 2004-05 AND THE SAID S HARES IS VALUED IN THE BOOKS FOR ` 13 13 729/-. THE A.O. SOUGHT THE EXPLANATION OF T HE ASSESSEE. THE ASSESSEE FILED THE REPLY BY STATING THAT THE ASSESSEE HAS TO RECEIVE ` 13 13 729/- FROM THE PARTNERSHIP FIRM M/S. RUIA KR ISHI KENDRA IN WHICH ALL THE DIRECTORS OF THE COMPANY WERE PART NERS. THE SAID FIRM WAS HOLDING 1161 EQUITY SHARES OF THE PHOENIX MILLS LTD. THE SAID FIRM HAS BECOME DEFUNCT AND SUBSEQUENTLY IT WAS DISSOLVE D. THE OUTSTANDING DEMAND WAS DUE FROM FIRM WAS ADJUSTED AGAINST THE R ECEIPTS OF 1161 SHARES AND THE PHOENIX MILLS LTD AND HENCE THE INVE STMENT IN THE SHARES WAS INCREASED IN THE BALANCE-SHEET OF THE ASSESSEE- COMPANY TO THAT EXTENT. THE ASSESSEE FILED THE FURTHER EXPLANATION STATING THAT THE SAID TRANSACTION WAS COMPLETED BY ADJUSTMENT ENTRY INVOL VING TRANSACTION BETWEEN HYDERABAD AGRICULTURAL DEVELOPMENT PVT LTD. AND M/S. RUIA KRISHI KENDRA WHICH WAS OWING AMOUNT TO SAID FIRM A ND SAID FIRM WAS OWING AMOUNT TO THE ASSESSEE. HENCE THE SHARES HE LD BY HYDERABAD AGRICULTURAL DEVELOPMENT PVT LTD. WAS TRANSFERRED T O THE RUIA KRISHI KENDRA AND THEN TO THE ASSESSEE. HE ALSO NOTED THA T NO THIRD PARTY AGREEMENT WHATSOEVER WAS PRODUCED TO SUBSTANTIATE T HE CLAIM. HE REJECTED THE EXPLANATION OF THE ASSESSEE THAT TRANS ACTION WAS COMPLETED PRIOR TO MARCH 2001. THE A.O. MADE ADDITION OF ` 13 38 729/- U/S.69 OF THE ACT. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) BUT WITHOUT ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 6 SUCCESS BUT THE ADDITION WAS CONFIRMED. THE LD. CO UNSEL SUBMITTED THAT AS PER THE CERTIFICATE GIVEN BY PHOENIX MILLS LTD. PAGE NO.108 OF THE COMPILATION DATED 20.12.2007 TRANSFER OF THE SHARES WAS AFFECTED ON 15.12.2001. HE FURTHER SUBMITS THAT THE SAID CERTI FICATE WAS FILED BEFORE THE LD. CIT (A). ON THE PERUSAL OF THE ORDER OF TH E LD. CIT (A) AS WELL AS THE A.O. WE FIND THAT THIS CERTIFICATE HAS NOT BEEN CONSIDERED OR NOR THERE IS ANY DISCUSSION ON THIS EVIDENCE. IT IS ALSO SEE N THAT THE ASSESSEE HAS ONLY FILED THE XEROX COPIES OF THE CERTIFICATE AND ORIGINAL CERTIFICATE IS NOT ON RECORD. IT IS ALSO SEEN FROM THE XEROX COPY OF THE CONFIRMATION LETTER GIVEN BY THE PHOENIX MILLS LTD. THERE IS A DIFFERE NCE IN THE TOTAL SHARES HOLDING SHOWN BY THE ASSESSEE IN THE BALANCE-SHEET AND CERTIFICATE ISSUED BY THE PHOENIX MILLS LTD. IF THE TRANSACTIO N IS COMPLETED ON 5.12.2001 BY TRANSFER OF THE SHARES BY THE PHOENIX MILLS LTD. THEN NO ADDITION CAN BE MADE IN THIS YEAR. MOREOVER SEC. 69 IS A RULE OF EVIDENCE AND IN OUR OPINION THE A.O. HAS TO TAKE INTO CONSIDERATION THE CONFIRMATION LETTER GIVEN BY THE PHOENIX MILLS LTD. IN RESPECT OF THE TRANSFER OF THE SHARES ON 15.12.2001. WE THEREFOR E CONSIDERED IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A D IRECTION THAT HE SHOULD VERIFY FROM THE PHOENIX MILLS LTD. OR THROUGH ANY O THER RECORD WHETHER THE SHARES WERE TRANSFERRED ON THE NAME OF THE ASSE SSEE ON 15.12.2001 AND IF THE SAME ARE TRANSFERRED AS CLAIMED BY THE A SSESSEE ON 15.12.2001 OR PRIOR TO THE ASSESSMENT YEAR 2005-06 THEN NO ADDITION SHOULD BE MADE. THE LD. COUNSEL AGREED THAT THERE IS A DIFFERENCE IN THE TOTAL NUMBER OF SHARES AND HENCE THE ASSESSEE SHOU LD FILE THE RECONCILIATION OF THE DIFFERENCE IN THE FIGURE. WI TH THIS DIRECTION WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. AND GROU ND NO.3 IS ALLOWED FOR THE STATISTICAL PURPOSES. 8. GROUND NO.4 READS AS UNDER:- ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 7 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A .O. IN DISALLOWING A SUM OF ` 4 74 045 BEING THE CLAIM FOR ADVANCES AND DEPOSITS WRITTEN OFF. 9. THE ASSESSEE WRITTEN OFF VARIOUS AMOUNTS TO THE EXTENT OF ` 4 72 045/- AND CLAIMED THE SAME AS BAD DEBT. THE A SSESSEE COULD NOT PROVE WHETHER THE AMOUNTS WRITTEN OFF COMPLY WITH C ONDITION OF SECTION 36(2) OF THE ACT. THE A.O. THEREFORE MADE THE DI SALLOWANCE OF THE ENTIRE AMOUNT AND MADE THE ADDITION OF ` 4 72 045/-. THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT (A). 10. BEFORE US THE LD. COUNSEL FAIRLY CONCEDED THAT WHEN THE AMOUNTS WERE STANDING FOR A LONG PERIOD IT IS VERY DIFFICUL T TO PRODUCE THE EVIDENCES SHOWING THE NATURE OF THE SAID OUTSTANDIN G AMOUNTS. IN OUR OPINION THE ASSESSEE HAS TO COMPLY THE MANDATE OF SECTION 36(2) OF THE ACT. ONLY IN RESPECT OF THE AMOUNTS WRITTEN OFF IN THE CASE OF PHOENIX MILLS LTD. ` 1 74 017/- THE LD. COUNSEL SUBMITTED THAT IT WAS R EGULAR TRADING TRANSACTION AND AT LEAST TO THAT EXTENT THE CLAIM MAY BE ALLOWED. THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO SHOW THA T THE AMOUNTS WRITTEN OFF WERE ACTUALLY CONSIDERED IN PAST WHILE COMPUTING THE INCOME OF THE ASSESSEE. IN OUR OPINION THERE IS MERIT IN THE CLAIM OF THE ASSESSEE. HENCE GROUND NO.4 IS DISMISSED. 11. GROUND NO.5 IS CONSEQUENTIAL. 12. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED FOR THE STATISTICAL PURPOSES. ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 8 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 3RD MARCH 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 23RD MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) VII MUMBAI. 4) THE CIT 7 MUMBAI. 5) THE D.R. D BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 3115/M/2009 M/S. RADHAKRISHNA RAMNARAIN PVT. LTD. 9 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 14.03.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER