JCIT RG 21(2), MUMBAI v. WINSTON M. FERNANDES, MUMBAI

ITA 5049/MUM/2010 | 2007-2008
Pronouncement Date: 16-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 504919914 RSA 2010
Assessee PAN AADPF2541A
Bench Mumbai
Appeal Number ITA 5049/MUM/2010
Duration Of Justice 1 year(s) 5 month(s) 29 day(s)
Appellant JCIT RG 21(2), MUMBAI
Respondent WINSTON M. FERNANDES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 16-12-2011
Date Of Final Hearing 22-11-2011
Next Hearing Date 22-11-2011
Assessment Year 2007-2008
Appeal Filed On 17-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI V. DURGA RAO JUDICIAL MEMBER I.T.A. NO. 5049/MUM/2010 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX SHRI WINSTON M. FERNADES CIRCLE-21(2) MUMBAI. VS. 22 SILVER SAND JUHU TARA ROAD JUHU MUMBAI 400 051. AADPF 2541A. APPELLANT. RESPONDENT I.T.A. NO.4659/MUM/2010 ASSESSMENT YEAR : 2007-08 SHRI WINSTON M. FERNADES JT. COMMISSIONER OF INCOME-TAX MUMBAI. VS. RANGE-21(2) MUMBAI. APPELLANT. RESPONDENT. DEPARTMENT BY : SHRI A.K. NAYAK. ASSESSEE BY : SHRI S.C. AGARWAL. DATE OF HEARING : 22-11-2011. DATE OF PRONOUNCEMENT : 16-12-2011. O R D E R. PER P.M. JAGTAP A.M. : THESE TWO APPEALS ONE FILED BY THE ASSESSEE BEING ITA NO. 4659/MUM/2010 AND OTHER FILED BY THE REVENUE BEING ITA NO.5049/MU M/2010 ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT (APPEALS)-32 MUMBAI DATED 29-03-2010. 2 ITA NO5049/MUM/2010 & ITA NO. 4659/MUM/2010 2. THE MAIN ISSUE INVOLVED IN THESE APPEALS AS RAIS ED IN THE APPEAL OF THE ASSESSEE AS WELL AS IN GROUND NO. 1 AND 2 OF THE RE VENUES APPEAL RELATES TO THE ADDITION OF RS.52 40 609/- MADE BY THE AO ON ACCOUN T OF DISALLOWANCE OF VARIOUS EXPENSES WHICH HAS BEEN SUSTAINED BY THE LEARNED CI T(APPEALS) TO THE EXTENT OF RS.10 48 119/-. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF PROVIDING CONSTRUCTION MACHINERY ON HIR E AND SUPPLYING CONCRETE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY HIM ON 29-10-2007 DECLARING TOTAL INCOME OF RS.92 97 498/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED THE BOOKS OF ACC OUNT AND VOUCHERS ONLY AT THE FAG END DESPITE THE FACT THAT SUFFICIENT OPPORTUNIT Y WAS AFFORDED BY THE AO TO DO SO. AS NOTED BY THE AO EVEN THE VOUCHERS PRODUCED BY THE ASSESSEE WERE NOT COMPLETE AND IN THE ABSENCE OF ANY SUPPORTING DOCUM ENTARY EVIDENCE THEY WERE NOT FULLY VERIFIABLE. HE VERIFIED WHATEVER VOUCHERS THAT WERE PRODUCED BY THE ASSESSEE AT RANDOM AND POINTED OUT VARIOUS INSTANCE S TO SHOW THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT FULLY VERIFIABLE. THE AO ALSO FOUND THAT PAYMENTS AGAINST VARIOUS EXPENSES WERE MADE BY THE ASSESSEE BY CREDIT CARDS AND IT WAS NOT VERIFIABLE AS TO WHETHER THE EXPENSES SO PAID WERE INCURRED FOR THE PURPOSE OF HIS BUSINESS OR THEY WERE OF PERSONAL NA TURE. KEEPING IN VIEW THESE DEFECTS POINTED OUT IN THE BOOKS OF ACCOUNT AND OTH ER RECORD MAINTAINED BY THE ASSESSEE THE AO HELD THAT THE SAME WERE NOT FULLY RELIABLE TO COMPUTE THE TRUE AND CORRECT INCOME OF THE ASSESSEE AND REJECTING THE SA ME HE PROCEEDED TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE U/S 144 TO THE BES T OF HIS JUDGMENT. IN THIS REGARD HE FOUND THAT EXPENSES CLAIMED BY THE ASSESSEE UNDE R THE HEADS OTHER OPERATIONAL EXPENSES FUEL & LUBRICANTS REPAIRS & MAINTEN ANCE AND TRANSPORTATION 3 ITA NO5049/MUM/2010 & ITA NO. 4659/MUM/2010 CHARGES WERE NOT FULLY VERIFIABLE AND A DISALLOWA NCE TO THE EXTENT OF 15% OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE SAID HEA DS WAS MADE BY HIM WHICH RESULTED IN AN ADDITION OF RS.52 40 609/- TO THE TO TAL INCOME OF THE ASSESSEE. 4. THE DISALLOWANCE MADE BY THE AO OUT OF VARIOUS E XPENSES TO THE EXTENT OF 15% WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FIL ED BEFORE THE LEARNED CIT(APPEALS). AFTER CONSIDERING THE SUBMISSIONS MAD E ON BEHALF OF THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LEARN ED CIT(APPEALS) ACCEPTED THE STAND OF THE ASSESSEE THAT THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT WAS NOT BASED ON CONVINCING AND SUFFICIENT REASONS. HE HOWEVER HELD THAT KEEPING IN VIEW THE CASE MADE OUT BY THE AO SHOWING UNVERIFIABLE ELEMENT INVOLVED IN THE VARIOUS EXPENSES CLAIMED BY THE ASS ESSEE DISALLOWANCE OF THE SAID EXPENSES TO SOME EXTENT WAS CALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE. HE HELD THAT THE DISALLOWANCE OF 1 5% MADE BY THE AO FOR INVOLVEMENT OF UNVERIFIABLE ELEMENT IN THE EXPENSES HOWEVER WAS EXCESSIVE AND UNREASONABLE AND THE SAME WAS RESTRICTED BY HIM TO THE EXTENT OF 3% THEREBY SUSTAINING THE DISALLOWANCE OF RS.52 40 609/- MADE BY THE AO TO THE EXTENT OF RS.10 48 119/-. AGGRIEVED BY THE ORDER OF THE LEARN ED CIT(APPEALS) THE ASSESSEE AND REVENUE BOTH HAVE RAISED THIS ISSUE IN THESE AP PEALS FILED BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE REJECTION OF ASS ESSEES BOOKS OF ACCOUNT WE FIND MERIT IN THE CONTENTION RAISED BY THE LEARNED DR TH AT KEEPING IN VIEW THE MATERIAL AND SPECIFIC DEFECTS POINTED OUT BY THE AO IN THE V OUCHERS MAINTAINED BY THE ASSESSEE AS WELL AS OTHER RECORD IT WAS A FIT CASE TO REJECT THE BOOKS OF ACCOUNT. THE LEARNED CIT(APPEALS) IN OUR OPINION THEREFORE WA S NOT JUSTIFIED IN HOLDING THAT 4 ITA NO5049/MUM/2010 & ITA NO. 4659/MUM/2010 THE DECISION OF THE AO TO REJECT THE BOOKS OF ACCOU NT WAS NOT BASED ON CONVINCING AND SUFFICIENT REASONS. WE MAY HOWEVER HASTEN TO ADD THAT NOTHING REALLY TURNS ON THIS ASPECT OF THE MATTER IN SO FAR AS THE ISSUE OF DISALLOWANCE OUT OF EXPENSES IS CONCERNED. AS ACCEPTED EVEN BY THE LEARNED CIT(APPE ALS) WHILE SUSTAINING THE DISALLOWANCE OF 15% MADE BY THE AO OUT OF VARIOUS E XPENSES TO THE EXTENT OF 3% THE DEFECTS AND DEFICIENCIES IN THE VOUCHERS MAINTA INED BY THE ASSESSEE WERE SUFFICIENT TO SHOW THAT THE HUGE AMOUNT OF EXPENSES AGGREGATING TO RS.3.49 CRORES CLAIMED BY THE ASSESSEE WERE NOT FULLY VERIFIABLE A ND SOME REASONABLE DISALLOWANCE OUT OF THE SAID EXPENSES FOR INVOLVEME NT OF SUCH UNVERIFIABLE ELEMENT WAS CALLED FOR. HOWEVER KEEPING IN VIEW THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WHICH WAS FOUND TO BE WELL COMPARABLE BY THE LEARNED CIT(APPEALS) TO THAT OF THE EARLIER YEARS THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF 15% OF THE TOTAL EXPENSES W AS HIGHLY EXCESSIVE AND UNREASONABLE AND THE LEARNED CIT(APPEALS) IN OUR O PINION WAS FULLY JUSTIFIED IN RESTRICTING THE SAME TO THE EXTENT OF 3% BEING FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE THEREFORE UPHOLD TH E IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE. GROUND NO. 1 OF THE REV ENUES APPEAL IS ACCORDINGLY ALLOWED WHEREAS GROUND NO.2 OF THE REVENUES APPEAL AND THE SOLITARY GROUND RAISED IN ASSESSEES APPEAL ARE DISMISSED. 6. THE REMAINING ISSUE RAISED IN GROUND NO. 3 OF TH E REVENUES APPEAL RELATES TO THE DISALLOWANCE OF RS.8 52 499/- MADE BY THE AO U/S 40(A)(IA) WHICH HAS BEEN DELETED BY THE LEARNED CIT(APPEALS). 7. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E HAD MADE PAYMENT OF RS.8 52 499/- TO ONE M/S AMNI ENTERPRISES TOWARDS H IRING OF TRANSIT MIXER. WHILE MAKING THE SAID PAYMENT TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 194C. ACCORDING TO THE AO TH E ASSESSEE OUGHT TO HAVE 5 ITA NO5049/MUM/2010 & ITA NO. 4659/MUM/2010 DEDUCTED TAX AT SOURCE FROM THE SAID PAYMENT AT A H IGHER RATE AS PER THE PROVISIONS OF SECTION 194I AND HAVING FAILED TO DO SO HE DISA LLOWED THE EXPENSES OF RS.8 52 499/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF HIRE CHARGES PAID TO M/S AMNI ENTERPRISES. BEFORE THE LEARNED CIT(APPEALS) THE A SSESSEE PRODUCED A CERTIFICATE ISSUED BY THE AO OF M/S AMNI ENTERPRISES PERMITTING DEDUCTION OF TAX AT SOURCE AT LOWER RATE. IT WAS CONTENDED ON BEHALF OF THE ASSES SEE THAT SINCE THE DEDUCTION OF TAX AT SOURCE WAS DONE AS PER THE SAID CERTIFICATE THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE ON ACCOUNT OF PAYMENT MADE TO M/S AMNI ENTERPRISES. THIS CONTENTION OF THE ASSESSEE WAS ACCEPTED BY THE LEAR NED CIT(APPEALS) AND ACCORDINGLY HE DIRECTED THE AO TO DELETE THE DISALL OWANCE MADE ON THIS ISSUE AFTER VERIFYING THE CERTIFICATE ISSUED BY THE AO OF M/S A MNI ENTERPRISES ALLOWING DEDUCTION OF TAX AT SOURCE AT LOWER RATE. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. WHEN T HE TAX AT LOWER RATE WAS DEDUCTED BY THE ASSESSEE FROM THE PAYMENT MADE TO M/S AMNI E NTERPRISES AS PER THE CERTIFICATE ISSUED BY THE AO OF THE SAID PARTY HE CANNOT BE HELD GUILTY OF DEDUCTING TAX AT SOURCE AT LOWER RATE AND THE EXPENSES CLAIME D BY HIM ON ACCOUNT OF PAYMENT OF HIRE CHARGES OF TRANSIT MIXER TO AMNI ENTERPRISE S CANNOT BE DISALLOWED ON THIS COUNT. WE THEREFORE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) DIRECTING THE AO TO DELETE THE DISALLOWANCE MADE ON THIS ISSUE AFTER VERIFYING THE CERTIFICATE ISSUED BY THE AO OF M/S AMNI ENTERPRISE S ALLOWING DEDUCTION OF TAX AT SOURCE AT LOWER RATE WHICH WAS PRODUCED BY THE ASSE SSEE FOR THE FIRST TIME BEFORE THE LEARNED CIT(APPEALS). GROUND NO. 3 OF HE REVENU ES APPEAL IS ACCORDINGLY DISMISSED. 6 ITA NO5049/MUM/2010 & ITA NO. 4659/MUM/2010 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED WHEREAS THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF DEC. 2011. SD/- SD/- (V. DURGA RAO) (P.M. J AGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED : 16 TH DEC. 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR G-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI. WAKODE