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IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI
BEFORE S/SHRI P.M.JAGTAP (AM) AND VIVEK VARMA, (JM)
.. , ,
./I.T.A.No.7019,7020 and 7054/Mum/2010
( / Assessment Years- 2006-07, 2007-08 & 2008-09)
S.V.Business Pvt. Ltd., / Dy. Commissioner of Income
C/o Shankarlal Jain and Vs. Tax, Central Circle-39,
Associates, Mumbai
12, Engineer Building,
265, Princess street,
Mumbai-400002
. / . /PAN/GIR No. : AAECS1117M
( /Appellant) .. ( / Respondent)
/ Appellant by : Shri S.L.Jain
/Respondent by : Shri K C P Patnayak
/ Date of Hearing
: 7.5.2014
/Date of Pronouncement : . 5.2014
/ O R D E R
PER P.M.JAGTAP,AM:
These three appeals filed by assessee against the three separate orders
of ld. CIT(A)-41, Mumbai for assessment years 2006-07, 2007-08 and 2008-09
have been heard together and are being disposed off by a single consolidated
order, for the sake of convenience.
2. Out of these three appeals, two appeals filed by the assessee for
assessment year 2006-07 and 2007-08 being I.T.A.No.7019,7020 and
7054/Mum/2010, which are directed against the orders of ld. CIT(A)-41,
Mumbai both dated 30.8.2010, involve a solitary issue relating to the
disallowance made by AO and confirmed by ld. CIT(A) on account of brokerage
claimed to be paid by the assessee to Shri Ishwarchand Goel .
3. The assessee in the present case is a company which is engaged in the
business of processing and sale of fabrics. It belongs to JIMTEX GROUP. A
2 I.T.A.No.7019,7020 and 7054/Mum/2010
search and seizure action under section 132 of the Income Tax Act, 1961 (the
Act) was conducted in the premises belonging to JIMTEX Group including the
case of the assessee. Pursuant to the search, notice under section 153A of the
Act was issued by the AO, in response to which the assessee filed its return of
income for both years under consideration i.e. AYs 2006-07 and 2007-08 on
12.01.2009 declaring total income of Rs.6,28,580/- and Rs.1,04,59,364/-
respectively. During the course of assessment proceedings, it was noticed by
the AO that the assessee has claimed to have paid brokerage charges of
Rs.1,30,625/- and Rs. 57,757/- to one Shri Ishwarchand Goel in the previous
year relevant to assessment year 2006-07 and 2007-08 respectively. Since the
similar claim made by assessee on account of brokerage charges paid to Shri
Ishwarchand Goel was disallowed in AY-2005-06 in the assessment completed
u/s 143(3) of the Act and the said disallowance was accepted by the assessee,
the AO disallowed the brokerage claim to be paid by the assessee to Shri
Ishwarchand Goel in both the years under consideration.
4. The disallowance made by AO on account of brokerage charges paid to Shri
Ishwarchand Goel was disputed by assessee in the appeals filed before the ld.
CIT(A) and after considering the submissions made by the assessee as well as
material available on record, the ld. CIT(A) confirmed the disallowance made by
AO on account of brokerage charges paid to Shri Ishwarchand Goel for both the
years under consideration i.e. assessment years 2006-07 and 2007-08 for the
following identical reasons given in para 1.3 of his impugned orders:
"1.3 I have considered the submissions of the appellant , order of the
AO and facts of the case that the appellant has made payment brokerage
to Shri Ishwarchand Goel for the AY 2006-07 and 2007-08. It is pertinent
to note that in the AY 2005-06 the appellant has shown the brokerage
payment to Shri Ishwarchand Goel the same person which was
disallowed because he has failed to prove the genuineness of this
expenditure that it was incurred for the purposes. During the year under
consideration the appellant has failed to furnish any evidence before the
AO to prove that this expenditure was wholly and exclusively incurred for
the business purpose and any services rendered by Shri Ishwarchand
Goel. Therefore, the AO has made disallowance in these years also
Before me the appellant has submitted that the payment was made by
3 I.T.A.No.7019,7020 and 7054/Mum/2010
cheque and TDS was deducted was deducted but no evidence was
submitted to prove any services rendered by the broker. Consequently the
appellant has failed to submit any evidence to prove that this expenditure
was wholly and exclusively incurred for the business purpose and what
services rendered by Shri Ishwarchand Goel to whom the brokerage
payment was made . The onus is always on the assessee to submit
evidence before the AO before claiming any deduction as held by the
Hon'ble Supreme Court in the case of CIT V/s Calcutta Agencies 19 ITR
119. In the present case the appellant has failed to submit any
documentary evidence to prove the services rendered by Shri
Ishwarchand Goel to whom the brokerage payment was made and
consequently to prove that this expenditure was incurred wholly and
exclusively for the business purpose of the appellant company'"
5. We have heard the arguments of both the sides and also perused the
relevant material available on record. Although the ld. counsel for the assessee
has invited our attention to the relevant documentary evidence placed in his
paper book to show that the payment of brokerage was made to Shri
Ishwarchand Goel by cheques after deduction of TDS and that the said person
was not related to the assessee company, he has not been able to explain on
evidence the exact nature of services rendered by Shri Ishwarchand Goel for
the purposes of assessee's business. As rightly held by ld. CIT(A), the onus in
this regard is on the assessee to establish that the expenditure on payment of
brokerage charges was wholly and exclusively incurred for the purposes of its
business and since the assessee has failed to discharge the said onus, we find
no justifiable reasons to interfere with the impugned orders of ld. CIT(A)
confirming the disallowance made by AO on account of brokerage paid by
assessee to Shri Ishwarchand Goel for both the years under consideration. The
same are therefore upheld and the appeals for the assessment years 2006-07
and 2007-08 are dismissed.
4 I.T.A.No.7019,7020 and 7054/Mum/2010
6. In the appeal for assessment year 2008-09 being ITA
No.7054/Mum/2010, which is directed against the order of ld. CIT(A)-41,
Mumbai dated 30.8.2010, the solitary issue raised by the assessee relates to
disallowance of Rs.3,10,800/- made by AO and confirmed by ld. CIT(A) on
account of depreciation on building.
7. During the course of search, certain loose papers inventorised as pages
7 to 16 were found and seized from the possession of the assessee showing
receipts in cash aggregating Rs.40,06,000/-. In the statement recorded during
the course of search u/s 132(4) of the Act, the assessee explained that the
transactions reflected in the said lose papers as that of sale of scrap
comprising of drums, screens, nickel, plastic bags, damaged motors, damaged
fabrics etc. He also agreed that the said transactions were not recorded in the
regular books of account and offered an amount of Rs.40,06,000/- as the
additional income for assessment year 2007-08. In the statement, it was stated
on behalf of the assessee that out of the amount of Rs.40,06,000/-, the sum of
Rs.31,08,000/- was utilized for additional construction of the existing factory
building at MIDC, Dombivili. In his books of account, entries were recorded by
the assessee showing an amount of Rs.31,08,000/- spent on additional
construction of factory building and depreciation thereon was claimed by the
assessee in the return of income filed for the year under consideration i.e.
assessment year 2008-09. AO however, disallowed the claim of the assessee
for the said depreciation on the ground that no documentary evidence was
produced by the assessee in support of its claim for the said expenses incurred
on construction of factory building.
5 I.T.A.No.7019,7020 and 7054/Mum/2010
8. The disallowance made by the AO on account of its claim for depreciation
on additional factory building was disputed by assessee in the appeal filed
before the ld. CIT(A) and after considering the submissions made by the
assessee and material available on record, the ld. CIT(A) confirmed the
disallowance made by AO on account of depreciation for the following reasons :
"1.4 I have considered the submissions of the appellant, order of the AO
and facts of the case carefully. It is noticed that the appellant has claimed
an amount of Rs.31,08,000/- incurred for addition to the factory building.
The AO has cleared for the details and bills etc to prove the genuineness
of the expenses incurred for the addition to the factory building.
However, the appellant has failed to submit any evidence to substantiate
its claim except the argument that the amount in addition of the building
was incurred out of the additional income declared on account of sale of
scrap and waste in AY 2007-08. As per the provision of the Income Tax
Act to the onus us on the assessee to prove the documentary evidence
before the AO before claiming any deduction. The Hon'ble Supreme
Court in the case of CIT V/s Calcutta a Agency 19 ITR 119 has held that
the onus is on the assessee to prove the genuineness of the expenditure
before claiming any deduction"
9. We have heard the arguments of both the sides on the issue involved in
the appeal filed for the assessment year 2008-09 and also perused the relevant
material on record. The ld. Counsel for the assessee has invited our attention
to the relevant seized documents placed at pages 24 to 31 of his paper book to
point out that the fact of having spent/utilized the sales proceeds of scrap for
building work was clearly mentioned in the said documents. He has also invited
our attention to the copy of the statement of the assessee recorded during the
course of search placed at pages 11 to 20 of his paper book and pointed out
that in reply to question No.5, it was clearly stated by the assessee that
unaccounted sales proceeds of scrap to the extent of Rs.31,08,000/- were
utilized for the construction of factory building in MIDC, Dombivili. Relying on
the decision of a Co-ordinate Bench of Tribunal in the case of Biren V.Savla
6 I.T.A.No.7019,7020 and 7054/Mum/2010
V/s ACIT (2006) 100TTJ (Mumbai) 1006 and the decision of the Hon'ble Kerala
High Court in the case of CIT V/s P D Abraham Alias Appachan and Anr (2012)
252 CTR (Ker) 407, he has contended that the statement of the assessee as
well as contents of the relevant documents cannot be accepted in part and
rejected in part.
10. The ld. DR, on the other hand, strongly relied on the orders of authorities
below in support of the Revenue's case.
11. After considering the rival submissions and on perusal of relevant
material on record, we find no infirmity in the impugned order of ld. CIT(A)
confirming the disallowance made by AO on account of assessee's claim for
depreciation on additional construction of factory building in MIDC, Dombivili.
Although it was indicated in the relevant seized documents that the
unaccounted sales proceeds of scrap were partly used for building purposes and
the assessee also reiterated this position in his statement recorded under
section 132(4), we are of the view that the same by itself was not sufficient to
establish that the amount of Rs.31,08,000/- was incurred by the assessee on
the construction of additional factory building in MIDC, Dombivili. The onus in
this regard was on the assessee to substantiate its claim for the expenditure
incurred on the construction of additional building by producing the relevant
documentary evidence such as bills, vouchers etc. Even if such bills /vouchers
were not maintained by the assessee in support of expenditure incurred outside
the books of account, the assessee could have and should have substantiated
its case by producing valuation report or building plans showing that the
additional construction was indeed made at its factory building situated in
7 I.T.A.No.7019,7020 and 7054/Mum/2010
MIDC, Dombivali. The statement of the assessee and indication in the relevant
seized documents was not sufficient to establish that the amount of
Rs.31,08,000/- was incurred by assessee on account of construction of
additional factory building and that too to its existing building in MIDC,
Dombivali. In our opinion, it is thus not a case where the statement or relevant
seized documents are partly accepted and partly rejected by the authorities
below as sought to be contended by the ld counsel for the assessee. It is the
case where the said statement and the relevant seized documents were not
sufficient to establish the case of the assessee of having spent an amount of
Rs.31,08,000/- for the construction of additional factory building and the claim
of the assessee for depreciation on such additional building was disallowed by
the authorities below on the ground that the assessee failed to substantiate the
said claim by bringing any documentary evidence. We therefore, find no
infirmity in the orders of authorities below in disallowing the assessee's claim of
depreciation and confirming the said disallowance, we dismiss the appeal of the
assessee for the assessment year 2008-09.
12. In the result, all the three appeals of the assessee are dismissed.
Order pronounced in the open court on th May, 2014
th May, 2014
( /VIVEK VARMA) (.. / P.M.JAGTAP)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai:
on this th day of May, 2014
8 I.T.A.No.7019,7020 and 7054/Mum/2010
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant /Applicant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , /
DR, ITAT, Mumbai
6. / Guard file.
/ BY ORDER,
(Asstt. Registrar)
, /ITAT, Mumbai
Date Initials
1. Draft dictated on 7.5.2014 SPS
2. Draft placed before author 9.5.2014 SPS
3. Draft proposed & placed before the Second JM
Member
4. Draft discussed/approved by Second Member AM
5. Approved Draft comes to the Sr. PS SPS
6. Kept for pronouncement on SPS
7. File sent to the Bench Clerk SPS
8. Date on which file goes to the Head Clerk
9. Date on which file goes to A.R.
10. Date of dispatch of order
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