SHABBIR MOTIWALA, MUMBAI v. ITO 11(1)(4), MUMBAI

ITA 3724/MUM/2011 | 2006-2007
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 372419914 RSA 2011
Assessee PAN AAAPZ3860F
Bench Mumbai
Appeal Number ITA 3724/MUM/2011
Duration Of Justice 10 month(s) 21 day(s)
Appellant SHABBIR MOTIWALA, MUMBAI
Respondent ITO 11(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 30-03-2012
Assessment Year 2006-2007
Appeal Filed On 09-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER & SHRI AMIT SHUKLA JUDICIAL MEMBER. I.T.A. NO. 3724/MUM/2011. ASSESS MENT YEAR : 2006-07. SHRI SHABBIR MOTIWALA THE INCOME-TAX OFFICER 404 4 TH FLOOR 9 SANSKRUTI VS. 11(1)(4) 90 FT ROAD KANDIVILI (E) MUMBAI. MUMBAI 400101. PAN AAAPZ3860F APPELLANT. RESPONDENT. APPELLANT BY : SH RI M. SUBRAMANISN. RESPONDENT BY : SHRI A.K.NAYAK. DATE OF HEARING : 14-03-2012. DATE OF PRONOUNCEM ENT : 30- 03-2012. O R D E R PER P.M. JAGTAP A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-3 MUMBAI DATED 07-02-2011 AND THE GRO UNDS RAISED BY THE ASSESSEE THEREIN READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE I.T. ACT IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN PARTLY CONFIRMING THE ACTIO N OF THE A.O. AND THAT TOO WITHOUT APPRECIATING FULLY AD PROPERLY THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN SUSTAINING AND RETAINING TH E DISALLOWANCE OF 2 ITA NO.3724/MUM/2011. 20% IN RESPECT OF PETROL EXPENSE TELEPHONE EXPENSE FOOD EXPENSE AND BUSINESS PROMOTION EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN SUSTAINING DISALLOWANCE TO THE EXTENT OF 5% IN RESPECT OF EXPENSES CLAIMED IN THE PROFIT & LOSS AC COUNT OTHER THAN PETROL EXPENSE TELEPHONE EXPENSE FOOD EXPENSE AND BUSINESS PROMOTION EXPENSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN MAKING THE DISALLOWANCE OF RS.3 81 147/- BEING THE DIFFERE NCE BETWEEN INCOME SHOWN IN P&L A/C AND THE GROSS INCOME AS PER THE TDS CERTIFICATE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN SUSTAINING THE ADHOC ADDITI ON MADE OF RS.79 546/-. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE TIME OF HEARING BEFORE U S THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 AND 6 RAISED BY THE ASSESSEE IN THIS APPEAL. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 3. GROUND NO. 2 RAISED BY THE ASSESSEE IN THIS APPE AL IS GENERAL SEEKING NO SPECIFIC DECISION FROM US. 4. AS REGARDS THE ISSUE RAISED IN GROUND NO. 3 RELA TING TO DISALLOWANCE OF 20% MADE OUT OF PETROL EXPENSES TELEPHONE EXPENSES FO OD EXPENSES AND BUSINESS PROMOTION EXPENSES IT IS OBSERVED THAT THE ASSESSE E WHO IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF PRODUCING ADVERTISEMENT FILMS AND COMMERCIALS HAD CLAIMED EXPENSES UNDER DIFFERENT HEADS AGGREGATING TO RS.7 03 807/-. ACCORDING TO THE AO THE SAID EXPENSES WERE FULLY VERIFIABLE AND THERE WAS ALSO A POSSIBILITY OF INVOLVEMENT OF PERSONAL ELEMENT THEREIN. HE THEREF ORE MADE A DISALLOWANCE OF RS.1 40 761/- BEING 20% OF THE SAID EXPENSES ON ACC OUNT OF SUCH UNVERIFIABLE AND 3 ITA NO.3724/MUM/2011. PERSONAL ELEMENT INVOLVED IN THE CONCERNED EXPENSES . ON APPEAL THE LEARNED CIT(APPEALS) FOUND THAT NO INSTANCE WAS POINTED OUT BY THE AO TO SHOW ANY ELEMENT OF UNVERIFIABLE EXPENSES CLAIMED BY THE ASS ESSEE UNDER THE DIFFERENT HEADS. AS REGARDS THE INVOLVEMENT OF PERSONAL ELEMENT SHE HELD THAT THE SAME COULD NOT BE RULED OUT IN SO FAR AS THE EXPENSES CLAIMED BY T HE ASSESSEE UNDER THE HEAD PETROL TELEPHONE FOOD AND BUSINESS PROMOTION ARE CONCERNE D. ACCORDINGLY SHE CONFIRMED THE DISALLOWANCE OF 20% MADE BY THE AO OU T OF THE EXPENSES CLAIMED UNDER THE SAID FOUR HEADS. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY OBSERVED BY THE LEAR NED CIT(APPEALS) THE INVOLVEMENT OF PERSONAL ELEMENT IN THE EXPENSES CLA IMED BY THE ASSESSEE UNDER THE HEAD PETROL TELEPHONE FOOD AND BUSINESS PROMOTION CANNOT BE RULED OUT AND IN THE ABSENCE OF ANY RECORD MAINTAINED BY THE ASSESSEE TO SHOW THAT THE EXPENSES CLAIMED UNDER THE SAID HEADS WERE WHOLLY AND EXCLUS IVELY INCURRED FOR THE PURPOSE OF HIS BUSINESS SOME DISALLOWANCE OUT OF THE SAID EXPENSES FOR PERSONAL ELEMENT IS VERY MUCH CALLED FOR. HOWEVER HAVING REGARD TO THE NATURE OF ASSESSEES BUSINESS WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 20% MAD E BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) IS SLIGHTLY ON THE HIGHER SIDE AND IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE SAME TO 15%. WE ORDER A CCORDINGLY AND ALLOW GROUND NO. 3 OF THE ASSESSEES APPEAL PARTLY. 6. AS REGARDS THE ISSUE RAISED IN GROUND NO. 4 RELA TING TO DISALLOWANCE SUSTAINED BY THE LEARNED CIT(APPEALS) TO THE EXTENT OF 5% OUT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD OTHER THAN PETROL T ELEPHONE FOOD AND BUSINESS PROMOTION IT IS OBSERVED THAT IT WAS FOUND BY THE LEARNED CIT(APPEALS) HERSELF THAT NOT A SINGLE EXPENSE CLAIMED BY THE ASSESSEE WAS ID ENTIFIED BY THE AO AS UNVERIFIABLE AND FINDING TO THIS EFFECT WAS SPECIFI CALLY RECORDED BY HER IN PARA NO. 4 ITA NO.3724/MUM/2011. 2.1.3 OF THE IMPUGNED ORDER. STILL SHE SUSTAINED TH E DISALLOWANCE OF 20% MADE BY THE AO UNDER THE RELEVANT HEADS OF EXPENSES TO THE EXTENT OF 5% WHICH IN OUR OPINION IS TOTALLY UNJUSTIFIED. IN THE ABSENCE OF ANY INSTANCE POINTED OUT BY THE AO TO SHOW ANY UNVOUCHED OR UNVERIFIABLE EXPENSES CLAI MED BY THE ASSESSEE WE ARE OF THE VIEW THAT NO DISALLOWANCE ON THIS GROUND COU LD JUSTIFIABLY BE MADE AND THE LEARNED CIT(APPEALS) WAS NOT RIGHT TO SUSTAIN THE D ISALLOWANCE MADE BY THE AO ON THIS COUNT EVEN TO THE EXTENT OF 5%. WE THEREFORE DELETE THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(APPEALS) TO THE EXTENT OF 5% OUT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD OTH ER THAN PETROL TELEPHONE FOOD AND BUSINESS PROMOTION AND ALLOW GROUND NO. 4 OF TH E ASSESSEES APPEAL. 7. AS REGARDS THE ISSUE RAISED IN GROUND NO. 5 RELA TING TO THE ADDITION OF RS.3 81 147/- MADE BY THE AO AND CONFIRMED BY THE L EARNED CIT(APPEALS) ON ACCOUNT OF DIFFERENCE BETWEEN INCOME SHOWN BY THE A SSESSEE IN THE PROFIT & LOSS ACCOUNT AND THE INCOME REFLECTED IN THE TDS CERTIFI CATES THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE INCOM E SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT WAS NET OF SERVICE TAX WHEREA S THE AMOUNTS REFLECTED IN TDS CERTIFICATES WERE INCLUSIVE OF SERVICE TAX. HE HAS SUBMITTED THAT THE IMPUGNED DIFFERENCE AMOUNT THUS WAS BECAUSE OF THE DIFFEREN T ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE WHEREBY INCOME NET OF SERVICE TAX WAS CREDITED TO THE PROFIT & LOSS ACCOUNT INSTEAD OF CREDITING THE GROSS AMOUNT AND D EBITING THE SERVICE TAX AMOUNT SEPARATELY TO THE PROFIT & LOSS ACCOUNT. AS SUBMITT ED BY HIM IT APPEARS THAT THIS EXPLANATION OF THE ASSESSEE OFFERED BEFORE THE AUTH ORITIES BELOW IN RESPECT OF IMPUGNED DIFFERENCE AMOUNT HAS NOT BEEN PROPERLY AP PRECIATED BY THEM AND SINCE THE ASSESSEE IS IN A POSITION TO RECONCILE THE SAID DIFFERENCE WE ARE OF THE VIEW THAT ONE MORE OPPORTUNITY CAN APPROPRIATELY BE GIVEN TO THE ASSESSEE TO DO SO. WE THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LEAR NED CIT(APPEALS) ON THIS ISSUE 5 ITA NO.3724/MUM/2011. AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DE CIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE ONE MORE OPPORTUNITY TO EXPLAIN THE DIFFERENCE. GROUND NO. 5 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL P URPOSES. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH 2012. SD/- SD/- (AMIT SHUKLA) ( P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI DATED: 30 TH MARCH 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR E-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI. WAKODE