MTZ TRADING P. LTD, MUMBAI v. ITO WD 1(2)-3, MUMBAI

ITA 7897/MUM/2010 | 2005-2006
Pronouncement Date: 25-02-2011 | Result: Partly Allowed

Appeal Details

RSA Number 789719914 RSA 2010
Bench Mumbai
Appeal Number ITA 7897/MUM/2010
Duration Of Justice 3 month(s) 10 day(s)
Appellant MTZ TRADING P. LTD, MUMBAI
Respondent ITO WD 1(2)-3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 25-02-2011
Assessment Year 2005-2006
Appeal Filed On 15-11-2010
Judgment Text
1 ITA NO.7897/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI SMC SMC SMC SMC BENCH BENCH BENCH BENCH MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI BEFORE SHRI R K PANDA ACCOUNTANT MEMBER BEFORE SHRI R K PANDA ACCOUNTANT MEMBER BEFORE SHRI R K PANDA ACCOUNTANT MEMBER BEFORE SHRI R K PANDA ACCOUNTANT MEMBER ITA NO.7897/MUM/2010 ITA NO.7897/MUM/2010 ITA NO.7897/MUM/2010 ITA NO.7897/MUM/2010 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) MTZ TRADING P LTD NEW INDIA CENTRE 5 TH FLOOR 17 COOPERAGE ROAD MUMBAI 400 039 VS THE INCOME TAX OFFICER WARD 1(2)(3) MUMBAI (APPELANT) (APPELANT) (APPELANT) (APPELANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO.AACCM2468B PAN NO.AACCM2468B PAN NO.AACCM2468B PAN NO.AACCM2468B ASSESSEE BY SHRI SHEKHAR GUPTA REVENUE BY SHRI SATHIR SINGH/DR PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED19.8.2010 OF THE CIT(A)-2 MUMBAI RELATING TO ASSESSMENT YEAR 2005-06. 2 THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER: THE LD CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AO IN MAKING ADDITION OF RS. 2 07 000/- AS 25% OF THE PAYMENT MADE TO THE LABOURERS FOR STITCHING EMBROI DERY AND OTHER LABOUR CHARGES WITHOUT APPRECIATING THE FACT THAT THE SAID PAYMENT HAS BEEN MADE BY THE ASSESSEE COMPANY TO THE LABOURERS AND N O OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE BY ISSUING SUMMONS TO TH E RESPECTIVE PARTIES FOR THE CONFIRMATIONS . 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS A MANUFACTURE OF DECORATIVE HAND BAGS AND DOG COLLARS. DURING THE YE AR THE ASSESSEE HAS SHOWN SALES OF RS. 25.23 LAKHS INCLUDING EXPORTS OF RS. 1 5 LAKHS. DURING THE COURSE OF 2 ITA NO.7897/MUM/2010 ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 3 70 327/- TOWARDS EMBROIDE RY CHARGES RS. 97 335/ TOWARDS LABOUR CHARGES AND RS. 3 60 608 TOWARDS ST ITCHING CHARGES. THE ASSESSING OFFICER NOTED THAT THESE EXPENSES BEING PERPETUAL IN NATURE WERE ALSO VERIFIED DURING THE COURSE OF ASSESSMENT PROCE EDINGS FOR ASSESSMENT YEAR 2003-04 WHERE CERTAIN ADDITIONS WERE MADE BY DISALL OWING THE ENTIRE EXPENSES ON THE GROUND THAT NOTICES ISSUED TO THE RESPECTIVE PARTIES TO WHOM THE PAYMENT CLAIMED TO HAVE BEEN MADE WERE RETURNED UN-SERVED. THE ASSESSEE ALSO FAILED TO PRODUCE THOSE PARTIES. HE NOTED FROM THE DETAIL S FURNISHED THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PAYMENTS TO VARIOUS PARTIE S WHOSE NAMES WERE ALSO APPEARED IN THE LIST OF PAYMENTS FOR SIMILAR EXPENS ES IN THE ASSESSMENT YEAR 2003-04. HE NOTED FROM THE SAMPLE BILLS FURNISHED BY THE ASSESSEE THAT THE SAME ARE STANDARD INVOICES OR DELIVERY CHALLANS ON WHICH THE NAMES OF THE PARTIES ARE NOT PRINTED. THEY ALSO DO NOT BEAR ANY ST/CST REGISTRATION NUMBER. COMPLETE POSTAL ADDRESSES ARE NOT GIVEN IN MOST OF THE BILLS. DUE TO THE ABOVE LACUNAE THE ASSESSING OFFICER WAS OF THE OPINION THAT IT IS NOT POSSIBLE TO VERIFY THE GENUINENESS OF THE CLAIM OF THESE EXPENSES. SI NCE THE ASSESSEE ACCORDING TO THE ASSESSING OFFICER HAS NOT BEEN ABLE TO SATI SFACTORILY PROVE THE GENUINENESS OF THE CLAIM OF THE EXPENSES ON ACCOUNT OF EMBROIDERY CHARGES LABOUR CHARGES AND STITCHING CHARGES ETC. THE ASSE SSING OFFICER FOLLOWING THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2003-0 4 DISALLOWED 25% OF THE ABOVE EXPENSES . THUS HE MADE AN ADDITION OF RS.2 07 000/- TO THE TOTAL INCOME OF THE ASSESSEE. 3 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASS ESSING OFFICER SHOULD HAVE ISSUED SUMMONS TO THE PARTIES TO VERIFY THE GE NUINENESS OF THE EXPENSES. 3 ITA NO.7897/MUM/2010 IT WAS ALSO ARGUED THAT THE ASSESSING OFFICER HAS N OT GIVEN ANY PROPER OPPORTUNITY DURING THE COURSE OF ASSESSMENT PROCEED INGS. 4 HOWEVER THE CIT(A) WAS NOT CONVINCED WITH THE EX PLANATION GIVEN BY THE ASSESSEE. ACCORDINGLY HE CONFIRMED THE ACTION OF T HE ASSESSING OFFICER. AS FAR AS THE CONTENTION OF ISSUANCE OF SUMMONS IS CONCERN ED HE NOTED THAT IT WAS THE DUTY OF THE ASSESSEE TO ESTABLISH THE GENUINENESS O F THE CLAIM MADE IN THE RETURN OF INCOME. THE ASSESSEE SHOULD HAVE PRODUCE D THOSE PARTIES IF IT DESIRED IN ORDER TO VERIFY THE GENUINENESS OF THE EXPENSES. IT WAS NOT A SITUATION WHERE ASSESSEE IS CLAIMING THAT THE PARTIES UNDER CONSIDE RATION ARE NOT COOPERATING WITH THE ASSESSEE. FURTHER MOST OF THE PARTIES UN DER CONSIDERATION BEFORE THE ASSESSING OFFICER ARE THE SAME PARTIES WHO HAD ALR EADY BEEN ISSUED LETTER IN THE EARLIER YEARS AND THEREFORE THE ISSUANCE OF SUMMON S NOW WOULD HAVE BEEN A FUTILE EXERCISE. THEREFORE THE REQUEST OF THE ASS ESSEE IS UNJUSTIFIED. HE FURTHER NOTED THAT DURING THE COURSE OF APPELLATE PROCEEDIN GS THE LD COUNSEL FOR THE ASSESSEE WAS REQUESTED TO PRODUCE THE ENTIRE QUANTI TATIVE RECORD OF ALL THE WORK WHICH THE ASSESSEE COMPANY HAS GOT DONE FOR EMBROID ERY LABOUR CHARGES AND STITCHING CHARGES AND TO PRODUCE THE CORRELATION OF PAYMENTS MADE WITH THESE QUANTITATIVE DETAILS. IT WAS ALSO REQUESTED THAT O NE OF THE DIRECTORS KNOWING THESE DETAILS SHOULD PERSONALLY APPEAR. HOWEVER IT WAS CONTENDED BY THE ASSESSEE THAT THE DIRECTOR WAS PREOCCUPIED AND THE APPEAL MAY BE DECIDED ON THE BASIS OF THE SUBMISSIONS MADE FROM TIME TO TIME . ACCORDINGLY THE CIT(A) HELD THAT DISALLOWANCE OF 25% OF THE EXPENSES UNDE R THE FACTS AND CIRCUMSTANCES OF THE CASE IS PERFECTLY JUSTIFIED. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 4 ITA NO.7897/MUM/2010 6 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E ASSESSING OFFICER HAS SIMPLY FOLLOWED THE ORDER FOR ASSESSMENT YEAR 2003- 04 AND THERE IS NO INDEPENDENT FINDING GIVEN BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE BILLS ISSUED BY THE LABOURERS WERE TOWARDS LABOUR CHARGES EMBROIDERY AND STITCHING CHARGES; THEREFORE THERE IS NO REQUIREMENT OF ST/C ST REGISTRATION NOS. ETC. FURTHER ALL THE PAYMENTS HAVE BEEN MADE BY BEARER CHEQUES AND IN THE BANK STATEMENT THE NAMES OF THE PARTIES WERE MENTIONED. REFERRING TO PAGES 13 TO 16 OF THE PAPER BOOK HE SUBMITTED THAT FULL DETAIL S AND ADDRESSES HAVE BEEN GIVEN IN THE CASE OF MOST OF THE PARTIES AND THE AS SESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY. 5.1 REFERRING TO PAGE 10 OF THE PAPER BOOK HE SUBM ITTED THAT FULL QUANTITATIVE DETAILS ARE GIVEN IN THE AUDIT REPORT ITSELF. HE S UBMITTED THAT SINCE THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE AUDITORS HAVE N OT POINTED OUT ANY MISTAKE OR IRREGULARITIES; THEREFORE NO ADHOC DISALLOWANCE SHOULD HAVE BEEN MADE. FURTHER THERE IS NO EVIDENCE ON RECORD THAT THE AM OUNT PAID TO THE LABOURERS HAS COME BACK TO THE ASSESSEE IN SOME FORM OR OTHER. H E ACCORDINGLY SUBMITTED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE NO D ISALLOWANCE IS CALLED FOR. 5.2 THE LD DR ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE QUESTION IS REGARDING THE GENU INENESS OF THE PAYMENT. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT A CTUALLY ENGAGED THE LABOURERS. THEREFORE THE PAYMENT BY BEARER CHEQUES WILL NOT ABSOLVE THE ASSESSEE FROM THE ONUS CAST ON IT. HE SUBMITTED TH AT NOWHERE IN THE ASSESSMENT ORDER IT IS MENTIONED THAT THE ASSESSEE REQUESTED T HE ASSESSING OFFICER TO ISSUE SUMMONS TO THE PARTIES. DESPITE BEING ASKED BY THE CIT(A) THE ASSESSEE NEITHER PRODUCED ANY OF THE DIRECTORS WHO IS WELL VERSED WI TH THE FACTS OF THE CASE NOR 5 ITA NO.7897/MUM/2010 PRODUCED THE QUANTITATIVE DETAILS. THEREFORE DISA LLOWANCE OF 25% OF THE EXPENSES ON ACCOUNT OF LABOUR CHARGES EMBROIDERY A ND STITCHING CHARGES IS FULLY JUSTIFIED. 6 I HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 3 70 327/- TOWARDS EMBROIDERY CHARG ES RS. 97 335/ TOWARDS LABOUR CHARGES AND RS. 3 60 608 TOWARDS STITCHING CHARGES. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FURNISH THE COMPL ETE DETAILS IN RESPECT OF THESE EXPENSES ALONG WITH SAMPLE BILLS. THERE IS A LSO NO DISPUTE TO THE FACT THAT THE ASSESSEE FURNISHED DETAILS TOWARDS LABOUR PAYME NT GIVING THE NAME AND ADDRESSES OF THE PARTIES TO WHOM SUCH AMOUNT HAS BE EN PAID. I FIND THE ASSESSING OFFICER RELYING ON THE ORDER OF THE CIT(A ) FOR ASSESSMENT YEAR 2003-04 DISALLOWED AN AMOUNT OF RS. 2 07 000/- BEING 25% OF THE ABOVE EXPENSES ON THE GROUND THAT THE ASSESSEE WAS UNABLE TO SATISFY HIM REGARDING THE GENUINENESS OF THE CLAIM OF THOSE EXPENSES. IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE AO HAS NOT ISSUED SUMMONS TO THE PARTIES AND HAS SIMPLY RELIED ON HIS ORDER FOR AY 2003-04. IT IS ALSO THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE PAYMENTS HAVE BEEN MADE THROU GH BEARER CHEQUES AND THE NAMES OF THE PARTIES APPEAR IN THE BANK STATEME NT. HOWEVER ON A PERUSAL OF THE LABOUR PAYMENTS FOR THE AY 2004-05 COPY OF WHICH IS PLACED AT PAGES 13 TO 16 OF THE PAPER BOOK I FIND THE ASSESSEE HAD GI VEN ONLY THE NAMES WITHOUT ANY ADDRESS IN THE CASE OF (I) SHRI IQBAL KHAN RS. 9000/- (II) MOHD SWAKAT RS. 12 940/- (III) RASHU NAIK RS. 10 000./- (IV) VINO D PAINTER RS. 430/- (V) DILIP PATWA RS. 4700/- (VI) NOORALI BASHIR RS. 5225/- (VII) HAB IB BABLU RS. 4000/- (VIII) GARIB 6 ITA NO.7897/MUM/2010 NAWAJ RS. 5495/- (IX) RAFIQ KHAN RS. 5000/- (X) AFT AB SHEAKH RS. 2500/- (XI) MUSTAFA KHAN RS. 10 000/- ETC. THEREFORE IN ABSEN CE OF FULL DETAILS IT IS NOT POSSIBLE ON THE PART OF THE ASSESSING OFFICER TO IS SUE SUMMONS. THEREFORE THE SUBMISSIONS OF THE LD COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER SHOULD HAVE ISSUED SUMMONS IN MY OPINION IS WITHOUT ANY FORCE ESPECIALLY IN ABSENCE OF FULL ADDRESS OF THE CONCERNED PARTIES. UNDER THE SE CIRCUMSTANCES THE FULL EXPENSES ON ACCOUNT OF EMBROIDERY CHARGES LABOUR C HARGES AND TOWARDS STITCHING CHARGES IN MY OPINION CANNOT BE ALLOWED. 7 HOWEVER I FIND THE TURNOVER OF THE ASSESSEE DURI NG THE YEAR IS RS. 25.23 LAKHS. FROM THE AUDITED BALANCE SHEET FILED BY THE ASSESSEE I FIND THE ASSESSEE HAS SHOWN OTHER INCOME OF RS. 59 496/-. CONSIDERIN G THE TOTALITY OF THE FACTS OF THE CASE AND APPLYING THE PROVISIONS OF SEC. 44AF O N THE TOTAL TURNOVER OF RS. 25.23 LAKHS AND AFTER ADDING RS. 59 496/- TOWARDS O THER INCOME THE TOTAL INCOME COMES TO RS. 1 85 660/-. HOWEVER THE ASSESSEE HAS FILED RETURN OF INCOME AT RS. 1 46 960/-. THEREFORE IN MY CONSIDERED OPINION ADDITION OF RS. 38 700/- UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE WIL L MEET THE ENDS OF JUSTICE. I HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY T HE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 8 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED ON THE 25 TH DAY OF FEB 2011. SD/- ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 25 TH FEB 2011 RAJ* 7 ITA NO.7897/MUM/2010 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI