SUBHASH MENON, MUMBAI v. ITO WD 8(3), MUMBAI

ITA 3636/MUM/2009 | 2005-2006
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 363619914 RSA 2009
Bench Mumbai
Appeal Number ITA 3636/MUM/2009
Duration Of Justice 11 month(s) 17 day(s)
Appellant SUBHASH MENON, MUMBAI
Respondent ITO WD 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 21-05-2010
Date Of Final Hearing 14-05-2010
Next Hearing Date 14-05-2010
Assessment Year 2005-2006
Appeal Filed On 04-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKOT AIAH (AM) ITA NO.3636/MUM/2009 ASSESSMENT YEAR : 2005-06 SHRI SUBHASH MENON MANAVASHI 4 NAZIR WADI BEHIND FOOD LAND JUHU TARA ROAD SANTACRUZ (W) MUMBAI-400 049. ..( APPELLANT ) P.A. NO. (AAHPM 1997 M) VS. INCOME TAX OFFICER WARD-8(3)-3 AAYAKAR BHAVAN M.K. ROAD NEW MARINE LINES MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI R. PRASAD RAO RESPONDENT BY : SHRI RA JNEESH ARVIND O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 25.3.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE A N INDIVIDUAL IS A DIRECTOR IN M/S. REMINISCENT INDIA TELEV ISION LTD. BESIDES DURING THE YEAR THE ASSESSEE HAS ENGAGED IN THE B USINESS OF ITA NO.3636/M/09 A.Y:05-06 2 TRADING IN FABRICS AND ALSO RECEIVED INTEREST. HE FILED RETURN DECLARING TOTAL INCOME OF RS.1 98 708/-. DURING THE COURSE OF ASSES SMENT IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT SHOWN ANY RECEIPT OF SALARY M/S. REMINISCENT INDIA TELEV ISION LIMITED. WHERE THE ASSESSEE IS A DIRECTOR. HE FURTHER OBSERVED THAT A SUM OF RS.7 23 246/- IS CLAIMED TO HAVE BEEN RECEIVED FROM THE SAID COMPANY TOWARDS REIMBURSEMENT OF AMOUNTS STATED TO HAVE BEEN EX PENDED BY THE ASSESSEE FOR THE COMPANYS AFFAIRS. HOWEVER THE ASSESSIN G OFFICER WAS OF THE VIEW THAT (A) DURING THE COURSE OF A SSESSMENT PROCEEDINGS THE ASSESSEE HAS STATED THAT THE SAID COMPANY VIZ. M/S. REMINISCENT INDIA TELEVISION LTD. HAS FILED RETURN OF I NCOME ONLY UPTO ASSESSMENT YEAR 2003-04. RETURNS FOR THE SUBSEQUENT YEARS ARE UNDER PREPARATION. (B) IT IS NOT VERIFIABLE AS TO WH AT IS THE NATURE OF EXPENSES THAT THE ASSESSEE CLAIMS TO HAVE INCURRED FOR THE COMPANY AND DECIDED ITS ALLOWABILITY. (C) FROM THE RETURN OF I NCOME FILED BY THE ASSESSEE FOR EARLIER YEARS IT IS SEEN THAT THE ASSESSEE HAS RE CEIVED FROM THE SAID COMPANY A NET SALARY OF RS.1 49 000/- FO R ASSESSMENT YEARS 2002-03 AND 2003-04 AND RS.1 75 000/- FOR THE A SSESSMENT YEAR 2004-05. (D) FROM THE COPY OF LEDGER ACCOUNT IN R ESPECT OF THE RELEVANT PAYMENT RECEIVED IT IS SEEN THAT THE AMOUNTS ARE RECEIVED AT REGULAR INTERVALS OF 5 TO 15 DAYS AND EVEN THE AMOUN TS ARE ALMOST ROUND SUM AND IDENTICAL I.E. RS.15 000/- 16 000/- 17 000/- 18 000/- ITA NO.3636/M/09 A.Y:05-06 3 AND 19 000/- AND HENCE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEES CONTENTION THAT THE AMOUNT OF RS.7 23 246/- RE PRESENTS REIMBURSEMENT OF EXPENSES IS NOT ONLY UNTENABLE BUT I S FAR FETCHED AND IS SURELY AN AFTER THOUGHT AND HENCE THE ASSESSING OF FICER TREATED THE SAID AMOUNT AS REMUNERATION FROM THE SAID COMPANY WHERE THE ASSESSEE IS A DIRECTOR AND BROUGHT TO TAX UNDER THE HEAD INCOME FROM SALARIES. THE ASSESSING OFFICER AFTER MAKING SOME OTHER AD DITIONS COMPLETED THE ASSESSMENT AT AN INCOME OF RS.11 41 120/- VI DE ORDER DATED 12.12.2007 PASSED U/S.143(3) OF THE INCOME TAX A CT 1961 (THE ACT). ON APPEAL THE LD. CIT(A) AFTER HEARING THE A SSESSEE ASKED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER . THE ASSES SING OFFICER SUBMITTED HIS REMAND REPORT VIDE LETTER DATED 10.2.2 009. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT AND THE SUB MISSION OF THE ASSESSEE WHILE HOLDING THAT THE ASSESSING OFFICER WAS JUSTIFI ED IN TREATING THE AMOUNT OF RS.7 23 246/- AS SALARY FROM TH E COMPANY SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER . 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS AGAINST THE VALIDITY OF THE ASSESSMENT ORDER AS THE ASSESSING OFFICER HAS FAILED TO APPLY THE PROVISIONS OF SECTION 44AF OF THE ACT. ITA NO.3636/M/09 A.Y:05-06 4 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE ABOVE GROUND WHICH W AS NOT OBJECTED TO BY THE LD. DR. 6. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORTING M ATERIAL THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED BEIN G NOT PRESSED. 7. GROUND NO.2 IS AGAINST THE SUSTENANCE OF ADDITION OF RS.7 23 246/- TREATED AS INCOME FROM SALARY. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THE A MOUNT OF RS.7 23 246/- REPRESENTS REIMBURSEMENT OF EXPENSES FROM M/S. REMINISCENT INDIA TELEVISION LTD.(R.I.T.V.) AND NOT SAL ARY AS TREATED BY THE ASSESSING OFFICER. HE FURTHER SUBMITS THAT SINCE THE COMP ANY WAS RUNNING INTO LOSSES THE ASSESSEE INCURRED VARIOUS EXPENSES ON BEHALF OF THE COMPANY THROUGH CREDIT CARDS WHICH WERE REIMBURSED BY THE SAID COMPANY TO THE ASSESSEE. IN SUPPORT THE REFERENCE WAS ALSO MADE TO THE CAPITAL A/C. AND R.I.T.V. EXPENSES A/C. IN THE BOOKS OF THE ASSESSEE APPEARING AT PAGE 28 AND 31 TO 45 ASSESSEE'S ACCOUNT IN THE BOOKS OF THE COMPANY APPEARING AT PAGE-93 TO 9 5 CREDIT CARD ITA NO.3636/M/09 A.Y:05-06 5 DETAILS AND CREDIT CARD STATEMENTS APPEARING AT PAGE-11 8 TO 251 BALANCE SHEET P&L ACCOUNT AND THE OTHER RELEVANT ACCOUN TS IN THE BOOKS OF THE COMPANY TO SHOW THAT THE REIMBURSEMENT OF EXPENSES HAVE BEEN ACCOUNTED FOR BY THE COMPANY UNDER THE RESPECT IVE HEADS IN THEIR BOOKS APPEARING AT PAGE 84 TO 87 AND 112 TO 117 OF ASSESSEE'S PAPER BOOK. HE ALSO REFERS TO THE EXTRACT FROM THE P&L A/C. OF THE COMPANY TO SHOW THAT DURING THE YEAR 31.3.2005 AND 31 .3.2006 NO DIRECTORS REMUNERATION WAS GIVEN BY THE COMPANY AS PER ST ATEMENT APPEARING AT PAGE-23 OF ASSESSEE'S PAPER BOOK. HE FURTHE R SUBMITS THAT SINCE THE COMPANY IN ITS BOOKS OF ACCOUNT HAS ALSO CONF IRMED THAT THE ABOVE EXPENSES ARE ONLY REIMBURSEMENT OF EXPENSES A LREADY INCURRED BY THE ASSESSEE AND KEEPING IN VIEW THE DETAILS OF THE RESPECTIVE ACCOUNTS THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE REIMBURSEMENT OF EXPENSES AS SALARY FROM THE COMPANY. HE THEREFORE SUBMITS THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 9. ON THE OTHER HAND THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER AND IN THE ORDER OF THE LD. CIT(A) THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CITA) BE UPHELD. ITA NO.3636/M/09 A.Y:05-06 6 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE ASSESSMENT ORDER IT HAS BEEN INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE COMPANY M/S. REMINISCENT INDIA TELEVIS ION LTD. HAS FILED RETURN OF INCOME ONLY UPTO ASSESSMENT YEAR 2003-04 AND THE RETURNS FOR THE SUBSEQUENT YEARS ARE UNDER PREPARATION. WE FURTHER FIND THAT IN THE REMAND REPORT DATED 10.2.2009 THE ASSESSING OFFICER IN THIS REGARD HAS SUBMITTED AS UNDER : DURING THE COURSE OF ASSESSMENT PROCEEDING IN THIS CASE THE BALANCE SHEET/RETURN OF INCOME OF M/ S. REMINISCENT INDIA TELEVISION LTD. WAS NOT AVAILABLE ON RECORD AS THE RETURN WAS FILED ON 29.2.2008 WITH A CIT CIR11(1) MUMBAI AFTER THE ASSESSMENT WAS COMPLETE D IN THE ASSESSEE'S CASE. I HAVE NOW EXAMINED THE COPIE S OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE COMP ANY ACCOMPANYING THE PAPER BOOK FORWARDED BY YOUR GOODSELF AND ALSO FURNISHED BY THE ASSESSEE I HAV E ALSO EXAMINED THE COPIES OF CREDIT CARD STATEMENTS AND T HE ANALYSIS AND EXPLANATION SUBMITTED BY THE ASSESSEE THEREON. IT IS SEEN THAT THE ASSESSEE HAS INCURRED VARIOUS EXPENSES THROUGH A NUMBER OF CREDIT CARDS HOWEVER IT IS NOT CONVINCINGLY ESTABLISHED THAT A PARTICULAR ITEM OF EXPENDITURE ON A CREDIT CARD IS INCURRED FOR THE CO MPANY AND NOT AS A PERSONAL EXPENDITURE. THE ASSESSEE HA S NOT BEEN ABLE TO PROVE THAT HE HAD INCURRED EXPENDITURE ON BEHALF OF THE COMPANY ON HIS CREDIT CARDS. MOREOVER FROM THE LEDGER ACCOUNT IN RESPECT OF PAYMENTS RECEIVED BY THE ASSESSEE FROM THE COMPANY IT IS SEEN THAT THE AMOUNTS ARE RECEIVED IN REGULAR IN TERVALS OF 5 TO 15 DAYS AND THEY ARE ALL IN ROUND FIGURES S UCH AS RS.15 000/- RS.16 000/- RS.17 000/- ETC. THUS THE SE AMOUNTS DO NOT APPEAR TO BE OF THE NATURE OF REIMBURSEMENT. ITA NO.3636/M/09 A.Y:05-06 7 11. FROM THE READING OF THE ABOVE WE FIND THAT THER E IS NO DISPUTE THAT IN THE REMAND PROCEEDING THE ASSESSING OFFICER HAS E XAMINED THE P&L A/C. BALANCE SHEET OF THE COMPANY AND OTHER ACCOMP ANYING PAPERS. IT IS NOT THE CASE OF THE REVENUE THAT THE REI MBURSEMENT OF EXPENSES CLAIMED BY THE ASSESSEE WAS NOT FOUND RECORDED UND ER THE RESPECTIVE ACCOUNTS APPEARING IN THE BALANCE SHEET AND P& L A/C. OF THE COMPANY. IT IS ALSO NOT THE CASE OF THE REVENUE THAT D URING THE YEAR UNDER CONSIDERATION ANY DIRECTORS REMUNERATION WAS PAID BY THE ASSESSEE COMPANY INASMUCH AS IT IS EVIDENT FROM THE P&L A/C. OF THE COMPANY APPEARING AT PAGE - 87 OF THE ASSESSEE'S PAPER B OOK THAT NO DIRECTORS REMUNERATION WAS PAID DURING THE YEAR BY THE COMPANY AS AGAINST RS.1 75 000/- IN THE IMMEDIATELY PRECEDING YE AR I.E. ASSESSMENT YEAR 2004-05. MERELY BECAUSE THE REIMBURSEMENT OF EXPENSES WAS MADE BY THE COMPANY IN ROUND FIGURE OF RS.1 5 000/- TO RS.19 000/- AT REGULAR INTERVALS OF 5 DAYS TO 15 DAYS D OES NOT MEAN THAT SUCH PAYMENT WAS MADE ON ACCOUNT OF SALARY TO THE A SSESSEE WHEREAS IT HAS BEEN CLEARLY MENTIONED BY THE COMPANY I N THE ACCOUNT OF THE ASSESSEE THAT SUCH PAYMENTS ARE TOWARDS EXPENSES REIMBURSEMENT. THIS BEING SO AND IN THE ABSENCE OF ANY OTHER CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE WE A RE OF THE VIEW THAT THE ASSESSEE HAS ESTABLISHED THAT RECEIPT OF RS.7 23 246/- IS ON ACCOUNT OF REIMBURSEMENT OF THE EXPENSES INCURRED BY THE ASSESSEE ITA NO.3636/M/09 A.Y:05-06 8 ON BEHALF OF THE COMPANY HENCE THE ADDITION OF RS.7 23 246/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY THE SAME IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 12. GROUND NO.3 IS AGAINST THE DISALLOWANCE OF REBATE U /S.88 IN RESPECT OF LIC PREMIUM AND GROUND NO.4 IS AGAINST THE L EVY OF INTEREST U/S.234B AND 234C. 13. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ABOVE GROUNDS ARE CONSEQUENTIAL IN NATURE TH EREFORE NECESSARY DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER T O ALLOW CONSEQUENTIAL RELIEF IN THIS REGARD WHICH WAS NOT OBJECTE D TO BY THE LD. DR. 14. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THOUGH THE ASSESSEE HAS TAKEN GROUND IN RESPECT OF NOT GRANTING OF REBATE U/S.88 ON THE PAY MENT OF LIC PREMIUM BEFORE THE LD. CIT(A) AS GROUND NO.3 BUT TH E LD. CIT(A) HAS NOT ADJUDICATED THE SAME AND NO GROUND AGAINST THE LEV Y OF INTEREST U/S.234B AND 234C WAS TAKEN BY THE ASSESSEE BEFORE THE LD . CIT(A). HOWEVER IN THE INTEREST OF JUSTICE AND KEEPING IN VIEW THAT THE SAME ARE CONSEQUENTIAL IN NATURE WE CONSIDER IT FAIR AND R EASONABLE THAT THE ITA NO.3636/M/09 A.Y:05-06 9 MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER WHO AFTER CONSIDERING THE SAME SHALL ALLOW DUE RELIEF TO THE ASSESSE E IN THIS REGARD. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED. 15. IN THE RESULT THE ASSESSEE'S APPEAL STANDS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.5.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 21.5.2010. 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. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 14.5.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 17.5.10 SR.PS/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 21.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 24.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER