Aldan Investments P. Ltd, Mumbai vs Assessee

आयकर अपील य अ धकरण, 'ए' खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A -BENCH सव ी डी. म मोहन, उपा य एवं राजे , लेखा सद य Before S/Sh. D. Manmohan,Vice President & Rajendra,Accountant Member आयकर अपील सं/.ITA No.715/Mum/2013, नधारण वष/Assessment Year-2009-10 Aldan Investments Pvt. Ltd. Income tax Officer 701, heritage Plaza, Opp. I.O.C. Ward-4(1)(2) J.P. Road, Andheri-(W) Vs Aayakar Bhavan, MK Road Mumbai-400 053. Mumbai-400 020.

PAN:AAACA 8911 D (अपीलाथ /Assessee) ( यथ / Respondent) नधा रती ओर से/Assessee by :Shri Neelkanth Khandelwal राज व क ओर से/ Revenue by :Shri Asghar Zain सुनवाई क तार ख/ Date of Hearing :27- 04 -2015 घोषणा क तार ख / Date of Pronouncement :27-04-2015 आयकर अ ध नयम,1961 क धारा 254(1)के अ तगत आदे श Order u/s.254(1)of the Income-tax Act,1961(Act)

लेखा सद य राजे के अनुसार PER RAJENDRA, AM-

Challenging the order dt.23/11/2012 of the CIT(A)-8, Mumbai, assessee has raised following Grounds of Appeal:

"The Commissioner of Income-tax (Appeals) - 8, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assessing Officer in making an adhoc disallowance of a sum of Rs 10,11, 219, being 5% of Rs2,02,15,827 on the basis that the same are not verifiable. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the impugned disallowance made by the Assessing Officer inasmuch as all details have been furnished to the Assessing Officer and CIT(A). The impugned addition is without any basis and hence requires to be deleted.

The appellants crave leave to add to, alter or amend the afore-stated ground of appeal.."

Assessee-company engaged in the business of stock broking and depository services,filed its return of income on 30.09.2010,declaring income of Rs.3.27 lakhs.Assessing officer(AO) completed the assessment on 24.10.2011 u/s.143(3)of the Act,determining its income at Rs. 13.38 lakhs.

2.Effective ground of appeal is about ad hoc disallowance of Rs.10.11 lakhs.During the course of hearing the AO found that the assessee had claimed on an income of Rs.2.80 Crores the assessee had claimed an amount of Rs.3.14 Crores as expenses under various heads including depreciation.The AO called for an explanation of the assessee in that regard.He further observed that during the FY.2007-08 on a similar business income of Rs. 6.18 Crores the assessee had claimed expense of Rs.4.59 Crores under the heads employees' Cost,other expenses.The AO,keeping in view the ratio of expenses claimed in FY.2007-08, disallowed 5% of the expenses i.e.Rs.10,11,219(5% of Rs.2,02,15,827/-) u/s.40A of the Act.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,the assessee argued that during the assessment proceedings the assessee had filed all the details of expenses,that the genuineness of the expenses was not doubted,that disallowance was made on purely adhoc basis,that no reason

1 2 ITA No.715/M/13 Aldan Investment

was given for relying upon the order of the earlier year,that the expenses were incurred for business purposes,that income as well as expenses had come down during the year under appeal.The FAA called for Remand Report(RR)from the AO.After considering the available material the FAA held that the AO had disallowed 5% of the expenses on an ad hoc basis,that most expenses related to employee costs and other expenses,that the assessee did not produce details in support of its claim,that bills and vouchers were not produced,that the assessee was not able to adduce any evidence to prove the claim of expenses with supporting evidence.Finally,he upheld the order of the AO.

5.Before us,Authorised Representative(AR)stated that the assessee had filed all the details during the assessment proceedings,that the AO had invoked the provisions of section 40A of the Act for making the disallowance,that the FAA had not touched the issue of contravention of section 40A of the Act,that there was no justification for making ad hoc disallowance without rejecting the books of accounts,that expenditure was incurred wholly and exclusively for the business,that in the subsequent AY.The AO had not made any disallowance though similar claim was made.He referred to the page nos.8,13,29,30 of the Paper book. Departmental Representative(DR)supported the order of the AO.

6.We have heard the rival submissions and perused the material before us.We find that the AO had made the ad-hoc disallowance comparing it with the expenditure of the earlier year, that he had not pointed out any defect in the accounting system of the assessee,that he had not rejected the book results,that the assessee had submitted all the necessary details before the AO,that the AO had not held that expenditure was not incurred for business purposes,that the FAA had not commented upon the violation of the provisions of section 40A of the Act,that he upheld the disallowance as he was of the opinion that the assessee had not discharged the onus of proving that the expenditure was incurred for business purposes.Though the AO had invoked the provisions of section 40A of the Act,yet he has not uttered a single word as to how the assessee had contravened that section.The FAA has totally ignored the issue.Making an allegation is totally different from proving it.The AO has failed to enumerate the facts that led him to arrive at the conclusion that there was violation of section 40A of the Act.

Similarly,the FAA has not given any reason for not accepting the plea taken by the assessee about incurring of expenditure for business purposes.Not a single expenditure was pointed out which could be held to be non business expenditure.Paper book was filed before him, but the FAA had not indicated the reasons of disbelieving the same.Ad-hoc disallowance was made just because the expenses had not fallen in proportion to the fall in the income as compared to the previous year.Taxation jurisprudence lay down that each AY.is a separate unit and unless and until similar facts and circumstances do not exist for both the AY.s.no comparison should be made.The assessee had specifically mentioned that due to global recession there was fall in income as well as expenditure.It had filed details of all the expenses before the AO and the FAA.We have gone through the pages of the paper book relied upon by the AR.These documents clearly prove that the assessee had furnished all the details called for by the AO and there was no contravention of section 40A of the Act.Similarly,the documents prove that the expenditure was directly related to the business of the assessee.Considering the facts and circumstances of the case,we reverse the order of the FAA and decide the effective ground of appeal in favour of the assessee.

As a result,appeal filed by the assessee stands allowed.

फलतः नधा रती वारा दा खल क गई अपील मंजरू क जाती है .

Order pronounced in the open court on 27th,April, 2015.

आदे श क घोषणा खल ु े यायालय म दनांक 27 अ ैल, 2015 को क गई ।

3 ITA No.715/M/13 Aldan Investment Sd/- Sd/-

(डी. म मोहन /D. Manmohan) (राजे / RAJENDRA) उपा य / Vice President लेखा सद य / ACCOUNTANT MEMBER मब ुं ई/Mumbai, दनांक/Date: 27.04.2015 JV. आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ 2. Respondent / यथ

3.The concerned CIT(A)/संब ध अपील य आयकर आयु त, 4.The concerned CIT /संब ध आयकर आयु त

5.DR "A" Bench, ITAT, Mumbai / वभागीय त न ध, खंडपीठ,आ.अ. याया.मब ुं ई

6.Guard File/गाड फाईल स या पत त //True Copy// आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपील य अ धकरण, मब ुं ई /ITAT, Mumbai.