TEX MACHINE INDUSTRIES, MUMBAI v. ITO 19(2)(2), MUMBAI

ITA 6204/MUM/2009 | 2006-2007
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 620419914 RSA 2009
Assessee PAN AAAFT1017G
Bench Mumbai
Appeal Number ITA 6204/MUM/2009
Duration Of Justice 5 month(s) 21 day(s)
Appellant TEX MACHINE INDUSTRIES, MUMBAI
Respondent ITO 19(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 21-05-2010
Assessment Year 2006-2007
Appeal Filed On 30-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI VIJAY PAL RAO JM ITA NO.6204/MUM/2009 : ASST.YEAR 2006-2007 M/S.TEX MACHINE INDUSTRIES 5 TH FLOOR MEENA SANTACRUZ (EAST) MUMBAI 400 055. PA NO.AAAFT1017G. VS. THE INCOME TAX OFFICER WARD 19(2)(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH SHAH RESPONDENT BY : SHRI SHRAVAN KUMAR O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 26.10.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. FIRST TWO GROUNDS ARE AGAINST THE UPHOLDING OF A DDITION OF RS.3 49 250 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS. B RIEFLY STATED THE FACTS OF THESE GROUNDS ARE THAT THE ASSESSEE WROTE OFF A SUM OF RS .3 49 250 DUE FROM M/S.MAFATLAL ENGINEERING INDUSTRIES LIMITED AS BAD DEBT. AGAINST SUCH SUM THE ASSESSEE ADJUSTED A SUM OF RS.1 18 186 WHICH WAS NO LONGER PAYABLE TO M/S.POOJA PLASTICS AND THE NET AMOUNT OF RS.2 31 064 WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AS BAD DEBT. ON BEING CALLED UPON TO SUBSTANTIATE THE CLAIM OF G ENUINENESS OF BAD DEBT THE ASSESSEE STATED THAT THE AMOUNT OF RS.3.49 LAKHS WA S DUE FROM M/S.MAFATLAL ENGINEERING INDUSTRIES LIMITED SINCE LAST MORE THAN 15 YEARS. IT WAS TRYING TO RECOVER THE SAID AMOUNT BUT WITHOUT ANY SUCCESS. SI NCE THE PARTY CLOSED ITS BUSINESS THE ASSESSEE STATED THAT THERE WAS NO OP TION EXCEPT FOR WRITING OFF THE SAID AMOUNT. THE ASSESSING OFFICER DID NOT ALLOW DE DUCTION FOR THE SAID AMOUNT WHICH OPINION WAS UPHELD BY THE LEARNED CIT(A). ITA NO.6204/MUM/2009 M/S.TEX MACHINE INDUSTRIES. 2 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TFR LIMITED VS. CIT DATED 9.2.2010 IN WHICH IT HAS BEEN HELD THAT IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT AND THERE IS NO NEED FOR PROVING FURTHER THAT THE DEBT HAS BECOME BAD. IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT DIRECTLY ON THE ISSUE WE ALLOW THESE TWO GROUNDS O F APPEAL. 4. THIRD GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS.22 935 BEING 20% MOTOR CAR EXPENSES INCURRED BY THE FIRM. THE AS SESSING OFFICER MADE DISALLOWANCE AT 20% OR MOTOR CAR EXPENSES FOR THE R EASON THAT THESE EXPENSES WERE NOT FULLY VERIFIABLE AND FURTHER THE PERSONAL USE O F MOTOR CAR COULD NOT BE RULED OUT. GROUND NO.4 DEALS WITH CONFIRMATION OF DISALLOWANCE AT RS.15 110 BEING 20% OF MOTOR CAR DEPRECIATION. GROUND NO.5 IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.1 845 BEING 20% OF INTEREST ON CAR LOAN. THESE D ISALLOWANCES WERE MADE BY THE ASSESSING OFFICER FOR THE SAME REASON AS GIVEN FOR MAKING DISALLOWANCE OF MOTOR CAR EXPENSES. NO RELIEF WAS ALLOWED BY THE FIRST AP PELLATE AUTHORITY. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS FOUND THAT THE EXPENSES / DISALLOWANCE S CLAIMED BY THE ASSESSEE WERE NOT FULLY SUBSTANTIATED. FURTHER THE ELEMENT OF PER SONAL USER CANNOT BE RULED OUT. SINCE IT IS A QUESTION OF MAKING ESTIMATE OF DISALL OWANCE WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT CIRCUMSTANCES OF THE CA SE IT WILL BE JUST AND FAIR IF THE PERCENTAGE OF DISALLOWANCE IS REDUCED FROM 20% TO 1 5% IN RESPECT OF MOTOR CAR EXPENSES MOTOR CAR DEPRECIATION AND INTEREST ON CA R LOAN. THESE THREE GROUNDS ARE THEREFORE PARTLY ALLOWED. ITA NO.6204/MUM/2009 M/S.TEX MACHINE INDUSTRIES. 3 6. GROUND NO.6 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE AT 1/4 TH OF SALES PROMOTION EXPENSES. THE A.O. MADE DISALLOWANCE FOR THE REASON THAT THE EXPENSES WERE NOT FULLY SUPPORTED BY EVIDENCE. THE LEARNED C IT(A) SUSTAINED THE DISALLOWANCE AT THE SAME LEVEL OF RS.8 090. AFTER C ONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD WE FIN D THAT THE EXPENSES DISALLOWED BY THE A.O. WERE NOT FULLY SUPPORTED BY EVIDENCE AN D HENCE THE DISALLOWANCE IS CALLED FOR. OUR VIEW IS FORTIFIED BY THE JUDGMENT IN THE CASE OF GOOD YEAR INDIA LTD. VS. CIT (2000) 246 ITR 116 (DEL) IN WHIC H IT HAS BEEN HELD THAT EVEN IF ACCOUNTS ARE AUDITED THE AO CAN MAKE DISALLOWANCE OF EXPENSES ON AD HOC BASIS IN ABSENCE OF PROPER DETAILS. CONSIDERING THE FACTS I N ENTIRETY IN THIS CASE WE HOLD THAT IT WILL BE JUST AND FAIR IF THE DISALLOWANCE I S REDUCED TO 15%. WE ORDER ACCORDINGLY. 7. GROUND NO.7 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF RS.8 195 BEING 20% OF CONVEYANCE EXPENSES. THE DISALLOWANCE HAS BE EN MADE AND SUSTAINED FOR THE SAME REASON AS GIVEN IN RESPECT OF GROUND NOS.3 4 AND 5 ABOVE. FOLLOWING THE VIEW TAKEN HEREINABOVE WE RESTRICT THE DISALLOWANCE TO 15%. 8. GROUND NO.8 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF RS.9 650 BEING 20% OF TRAVELLING EXPENSES. THE A.O. MADE DISALLOWA NCE AT THE RATE OF 20% OF THE EXPENSES ON THE GROUND THAT MOST OF THESE EXPENSES WERE INCURRED IN CASH AND THE ELEMENT OF PERSONAL NATURE WAS THERE. THE LEARNED C IT(A) SUSTAINED THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THESE EXPENSES HAVE BEEN IN CURRED FOR THE PURPOSE OF BUSINESS WHICH FACT HAS NOT BEEN DENIED BY THE ASSE SSING OFFICER. WHEN TRAVELLING EXPENSES WERE INCURRED IN CONNECTION WITH BUSINESS AND THERE IS NO WHISPER IN THE ASSESSMENT ORDER THAT THE PROPRIETOR OR HIS FAMILY UNDERTOOK PERSONAL TOUR AND ITA NO.6204/MUM/2009 M/S.TEX MACHINE INDUSTRIES. 4 BOOKED ITS EXPENSES IN THE BOOKS OF ACCOUNT THERE CANNOT BE ANY QUESTION OF THESE EXPENSES BEING CONSIDERED AS PERSONAL IN NATURE. IT NEEDS TO BE CONSIDERED THAT THE TRAVELLING EXPENSES ARE NOT LIKE MOTOR CAR EXPENSES OR TELEPHONE EXPENSES ETC. IN RESPECT OF WHICH THERE IS PROBABILITY OF PERSONAL U SE. WE THEREFORE ORDER FOR THE DELETION OF THIS ADDITION. 10. GROUND NO.9 IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS.16 910 OF PACKING AND FORWARDING EXPENSES. THE ASSESSEE CLAIM ED DEDUCTION UNDER THIS HEAD FOR A SUM OF RS.87 732. ON BEING CALLED UPON TO FUR NISH THE BILL-WISE DETAILS OF SUCH EXPENSES WITH SUPPORTING EVIDENCE THE ASSESSE E STATED THAT A SUM OF RS.67 635 WAS CLAIMED AS DEDUCTION ON ACCOUNT OF EX PENSES PAID TO SMALL TRANSPORTERS IN RESPECT OF WHICH NO EVIDENCE WAS AV AILABLE EXCEPT FOR SELF-MADE VOUCHERS. CONSIDERING THESE FACTS THE A.O. MADE DIS ALLOWANCE AT THE RATE OF 25% OF SUCH EXPENSES OF RS.67 635. NO RELIEF WAS ALLOWED I N THE FIRST APPEAL. 11. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD IT IS FOUND AS AN UNDISPUTED FACT THAT OUT O F TOTAL PACKING AND FORWARDING EXPENSES A SUM OF RS.67 635 REPRESENTED EXPENSES C LAIMED AS DEDUCTION ON THE BASIS OF SELF-MADE VOUCHERS. IN OUR CONSIDERED OPIN ION IT WILL BE JUST AND FAIR IF THE DISALLOWANCE IS REDUCED TO RS.10 145 AT THE RATE OF 15% INSTEAD OF 25% SUSTAINED IN THE FIRST APPEAL. IT WILL RESULT INTO RELIEF OF RS.6 765 ON THIS COUNT. 12. GROUND NO.10 IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF RS.10 490 BEING 20% OF MISCELLANEOUS EXPENSES. SIMILARLY GROUND NO. 11 IS AGAINST CONFIRMATION OF DISALLOWANCE AT RS.4 690 BEING 20% STAFF WELFARE EX PENSES. THESE DISALLOWANCES WERE MADE BY THE A.O. FOR LACK OF PROPER EVIDENCE WHICH CAME TO BE SUSTAINED IN THE FIRST APPEAL. CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THIS CASE ITA NO.6204/MUM/2009 M/S.TEX MACHINE INDUSTRIES. 5 IN OUR CONSIDERED OPINION IT WILL BE JUST AND FAIR IF THE DISALLOWANCES IN RESPECT OF THESE TWO GROUNDS ARE REDUCED TO 15% INSTEAD OF 20% . WE ORDER ACCORDINGLY. 13. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 21 ST DAY OF MAY 2010. SD/- SD/- ( VIJAY PAL RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 21 ST MAY 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XXX MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.