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Kamlesh S Mehta Versus ITO-21 (1) (2) , Mumbai

2016 (4) TMI 301 - ITAT MUMBAI

Disallowance at the rate of 20% of the business expenses - Held that:- If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that keeping in view, the totality of facts and magnitude of the business of the assessee, the expenses of ₹ 63,101/- as staff welfare expenses is not towards highe .....

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expenses were not incurred. As mentioned earlier, the ld. Assessing Officer himself has mentioned that possibly the expenses have been incurred, thus, since, the incurring of expenses is not in doubt, the ad-hoc disallowance made by the ld. Assessing Officer cannot be said to be justified, more specifically, when no defect was pointed out in the books of accounts of the assessee, therefore, this ground of the assessee is allowed.

Addition on account of purchases - Held that:- The asse .....

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ness of the claim was not discharged, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). So far as, cases relied upon by the assessee is concerned, they are on different facts, therefore, may not help the assessee. So far as, burden upon the Department is concerned, we are of the view that the initial burden is upon the assessee which has not been discharged, therefore, there is no question of shifting the burden upon the Revenue. So far as, .....

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cessary evidence before the ld. Assessing Officer so that it can be examined. Opportunity be provided to the assessee to substantiate his claim, thus, this ground of the assessee is allowed for statistical purposes - ITA NO.1475/Mum/2014 - Dated:- 1-3-2016 - Shri G.S. Pannu, Accountant Member and Shri Joginder Singh, Judicial Member For The Assessee : Shri Kamlesh S Mehta (Assessee in person) For The Revenue : Shri Aarsi Prasad ORDER Per Joginder Singh (Judicial Member) The assessee is aggriev .....

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ssary evidence and explanation for the same was duly adduced before the ld. Assessing Officer and the accounts of the assessee are audited one, therefore, the addition is purely on the basis guess work. Our attention was invited to exhibit A (pages 1 & 2) and exhibit D containing ledger of transportation, octroi and staff welfare expenses. 2.1. On the other hand, the ld. DR, Shri Aarsi Prasad, defended the disallowance by contending that necessary details of the claimed expenses were not fur .....

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644/-). During assessment proceedings, the assessee was asked to furnish supporting evidences. As per the ld. Assessing Officer, the assessee did not produce any bill or voucher. It has been observed in para 4.1 of the assessment order that no doubt, the assessee might have incurred these expenses but the quantum appears to be little higher, therefore, he made adhoc disallowance of ₹ 69,325/- at the rate of 20% and added to the income of the assessee. On appeal, the ld. Commissioner of Inc .....

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xpenses is not towards higher side. Identically, octroi charges is allowable deduction and transportation charges are also seems to be genuine. The accounts of the assessee are audited one and the total turnover of the assessee is approximately ₹ 29 crores. The assessee before the ld. Assessing Officer produced the ledger of expenses and the payment of expenses are to the reputed transportation. The ad-hoc disallowance has been made purely on guess work and it has not been mentioned in the .....

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ssee pertains to addition on account of purchases amounting to ₹ 4,76,446/-. The crux of argument, on behalf of the assessee is that purchases of the material was made from three suppliers, whose name appearing in the list of suspicious dealer of the website of Sales Tax Department of the Government of Maharashtra, who are indulging in issuing invoices without supplying the material. It was contended that the burden is upon the Department to prove that the transactions were bogus. Reliance .....

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n Box Company vs CIT (2001) 249 ITR 216 (SC). 3.1. On the other hand, the ld. DR defended the addition by inviting out attention to the finding contained in the assessment order as well as the impugned order. 3.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee claimed to have certain purchases from various parties. The assessee was asked to furnish the list from whom purchases were made. The ld. Assessing Officer .....

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sponded too. The ld. Assessing Officer vide notice u/s 142(1) of the Act dated 18/03/2013 asked the assessee as to why the purchases made from these parties should be treated as bogus purchases and further why should not be added to the income of the assessee. The assessee was asked to file the details up to 22/03/2013. As per the ld. Assessing Officer, the assessee neither provided any explanation nor filed any details. The Sales Tax Department also published a list of parties, who are providin .....

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ing Officer also placed reliance upon the decision from Hon ble Andhra Pradesh High Court in Transport Corporation of India Ltd. 269 ITR 701 (AP) and a decision from a jurisdictional High Court in Ramanand Sagar vs DCIT 256 ITR 134 (Bom.) and also Laxmit Narayan Madanlal 86 ITR 439 (SC) and further in the absence of any material/evidence made addition of ₹ 4,76,446/-. On appeal, before the ld. Commissioner of Income Tax (Appeals), the addition was confirmed. The assessee is in further appe .....

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are providing bogus bills without supply of goods/material. The notices issued u/s 133 (6) by the ld. Assessing Officer were either returned un-served by the postal authorities with the remark not known or such party did not respond to the notices. So far as, onus of proving the same to be genuine is concerned, we are of the view that primarily such onus is upon the assessee and if plausible explanation is adduced, by the assessee, or the onus is satisfactorily discharged, only then it shifts t .....

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was laid down in Dalmia Jain & company Ltd. 33 ITR 294 (Pat.), Liberty Cinema 52 ITR 153 (Cal.) and Udaipur Mineral Development Syndicate Pvt. Ltd. 269 ITR 263 (Raj.). 3.4. Section 28 of the Act deals with profit & gains of business or profession, whereas, section 37 of the Act deals with allowabiltiy of any expenditure (not being expenditure of the nature describe in section 30 to 36) and not being in the nature of capital expenditure or personal expenses of the assessee laid out or ex .....

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to or received by,- (a) any person, by whatever name called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto; (b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and condit .....

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y or business ; (iii) income derived by a trade, professional or similar association from specific services performed for its members ; (iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) ; (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ; (iiic) any duty of customs or excise re-paid or re-payable as .....

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rt policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) ; (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession ; (v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm : Provided that where any interest, salary, bonus, commission or remuneration, by whateve .....

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re or information or technique likely to assist in the manufacture or processing of goods or provision for services: Provided that sub-clause (a) shall not apply to- (i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable under the head "Capital gains"; (ii) any sum received as compensation, from the multilateral fund of the Montreal P .....

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e by legal proceedings; (ii) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding a .....

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the whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD. Explanation 1.-[Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.] Explanation 2.-Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business. We are also reproducing hereunder section 3 .....

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y declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. [Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred .....

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of the Act, which includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The analysis of business expenditure has been dealt with in B.K. Khanna & Company Pvt. Ltd. vs CIT (2001) 247 ITR 705, 709 (Del.). In other words to be an allowable expenditure, the money paid out or away must be (a) paid out wholly and exclusively for the purposes of business (b) must not be (i) capital expenditure, (ii) personal expenditure or (iii) an .....

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produced at any stage. The totality of facts, clearly indicates that the onus cast upon the assessee to explain the genuineness of the claim was not discharged, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). So far as, cases relied upon by the assessee is concerned, they are on different facts, therefore, may not help the assessee. So far as, burden upon the Department is concerned, we are of the view that the initial burden is upon the a .....

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