Pharmalab Financial Services Pvt. ... vs Assessee

BEFORE HON'BLE S/SHRI H.L. KARWA, PRESIDENT AND B.R.BASKARAN (AM) सव ी एच.एल. कावा, अ य एवं बी.आर.बा करन, लेखा सद य आयकर अपील सं./I.T.A. No.2569/Mum/2012 ( नधारण वष / Assessment Year :2009-10)

Pharmalab Financial Services बनाम/ Asstt.Commissioner of Income Pvt.Ltd., Vs. Tax-10(3), (formerly Pharmalab Aayakar Bhavan, Packaging Systems Pvt Ltd) M K Road, Kasturi Sanghavi Estate, Mumbai-400020 Govandi Station Road, Govandi (E), Mumbai-400088. (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIRNo. :AAACS5510L

अपीलाथ ओर से / Appellant by : Shri K Gopal यथ क ओर से/Respondent by Shri Parmanand J

सन ु वाई क तार ख / Date of Hearing : 1.1.2015 घोषणा क तार ख /Date of Pronouncement : 16.01.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The appeal filed by the assessee is directed against the order dated 28-02-2012 passed by Ld CIT(A)-22, Mumbai and it relates to the assessment year 2009-10.

2. The assessee is in the business of manufacturing of machineries used by pharmaceutical and allied industries; investments etc. The assessment was completed by making various additions and the assessee could not get much relief in the appeal filed before Ld CIT(A). Hence the assessee has filed this appeal before us.

2 I T A N o 6 2 6 6 / Mu m / 2 0 1 2

3. We heard the parties and perused the record. The first issue relates to the disallowance of 50% of the expenses claimed by the assessee. For the year under consideration, the assessee had claimed aggregate amount of Rs.57,24,914/- as expenses under various heads. In the immediately preceding year, the assessee had claimed aggregate amount of Rs.1.35 crores. However, it was noticed that the assessee had carried out business only for four months during the year under consideration. Before the AO, the assessee could not submit any evidence to support the expenditure claimed by it. Hence, the AO disallowed 50% of the claim on the reasoning that the assessee has inflated the expenses.

4. At the time of hearing, the Ld A.R submitted that the assessing officer has reached the conclusion about inflation of expenses without bringing any material on record. On the contrary, the Ld D.R submitted that the assessee has also failed to substantiate the expenditure claim by producing the relevant evidences. We notice that the assessing officer has given a finding that the assessee has incurred 50% of expenses by way of cash, which are not susceptible for verification. At the same time, we find merit in the contentions of both the parties, meaning thereby, the stand of both the parties remain unsubstantiated. Under these set of facts, in order put this issue at rest, we direct the assessing officer to restrict the disallowance of expenses to 20% of the expenditure claimed by the assessee and in our view it would meet the ends of justice. The order of Ld CIT(A) stands modified accordingly.

5. The next issue relates to the disallowance made u/s 14A of the Act. The assessee had earned dividend income Rs.8,67,507/-, but the assessee did not make any disallowance u/s 14A of the Act. Hence, the AO computed the disallowance by applying the provisions of Rule 8D at Rs.3,58,798/- (interest Rs.13,740/- and other expenses Rs.3,45,058/-) and added the same to the total income of the assessee. In the appellate 3 I T A N o 6 2 6 6 / Mu m / 2 0 1 2

proceedings, the Ld CIT(A) noticed that the expenses claimed by the assessee included Portfolio Management fee of Rs.1,37,417/- and share dealing expenses of Rs.34,088/-. Both the expenses, being direct expenses, the AO enhanced the disallowance by the aggregate of both the above said amounts, i.e., by Rs.1,71,505/-.

6. At the time of hearing, the Ld A.R submitted that the Ld CIT(A) has enhanced the disallowance by Rs.1,71,505/- without giving notice of enhancement. However, a perusal of the order of Ld CIT(A), we notice that the Ld CIT(A) has brought the proposal of the disallowance to the notice of the assessee and further the assessee has accepted for the enhancement, meaning thereby, the Ld CIT(A) has enhanced the disallowance by giving proper opportunity. Hence, we do not find any infirmity in the order of Ld CIT(A) on this issue.

7. The next issue relates to the addition of loss on investment of Rs.50.68 lakhs. We notice that the assessee had already moved a petition u/s 154 of the Act before the AO for rectification of mistake relating to the above said amount. The Ld CIT(A) has also directed the AO to dispose of the rectification petition filed by the assessee. Hence, we do not find any reason to interfere with the order of Ld CIT(A) on this issue.

8. In the result, the appeal filed by the assessee is partly allowed.

The above order was pronounced in the open court on 16th Jan,2015.

घोषणा खुले यायालय म दनांकः 16 th Jan 2015 को क गई ।

sd sd

(एच.एल. कावा/ H.L. KARWA) (बी.आर. बा करन,/ B.R. BASKARAN) अ य / PRESIDENT लेखा सद य/Accountant Member मब ुं ई Mumbai: 16th Jan, 2015. 4 I T A N o 6 2 6 6 / Mu m / 2 0 1 2

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मब ुं ई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई /ITAT, Mumbai