Income Tax Appellate Tribunal - Mumbai
Mubarak Kasam Momin , Mumbai vs Department Of Income Tax on 8 May, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "H", MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.4222/M/2010
Assessment Year: 2007-08
ACIT -24(1), Mr. Mubarak Kasam Momin,
C-13, R.No.503, B - 704, Aliabad C.H.S. Ltd.,
Pratyaksh Kar Bhavan, Vs. Behrambaug Road,
Bandra (E), Jogeshwari (W),
Mumbai - 51 Mumbai - 102.
PAN: AAEPM 5679F
(Appellant) (Respondent)
Present for:
Assessee by : Shri Devendra A. Mehta, A.R.
Revenue by : Shri Jeetendra Kumar, D.R.
Date of Hearing : 10.02.2015
Date of Pronouncement : 08.05.2015
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 26.03.2010 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2007-08.
2. The Revenue has taken the following grounds of appeal:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,18,41,394/- made by the A.O. as unexplained cash credits, by treating the same as genuine gift.
2.a. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing relief to the assessee to the extent of Rs.24,03,663/- out of total addition of Rs.26,12,930/- made by the A.O. on account of non payment of TDS into Government Treasury by holding that the expenses to which the said TDS 2 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin defaults relates were in the nature of reimbursement.
2.b. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) e r r e d i n a d m i t t i n g a d d i t i o n a l e v i d e n c e s w i t h o u t p r o v i d i n g t h e A . O . a n opportunity to examine the additional evidences, which is in contravention of Rule 46A of the Income Tax Rules, 1962.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition on account of Foreign Travel to Rs.1,00,000/- on adhoc basis as against Rs.8,39,577/- made by the A.O. without giving any specific findings.
4. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
Ground No.1
3. The Revenue, vide ground No.1, has agitated the action of the Ld. CIT(A) in deleting the addition of Rs.3,18,41,394/- made by the Assessing Officer (hereinafter referred to as the AO) as unexplained cash credits on account of gift received by the assessee from his brother Mr. Zulfikar K. Momin.
4. During the assessment proceedings, the AO noticed that the assessee had shown to have received a gift of Rs.3,18,41,394/- from his brother Mr. Zulfikar K. Momin. He noticed that said Mr. Zulfikar K. Momin was the employee of the assessee and had received salary of Rs.1,32,000/- during the year consideration from the assessee. In the books of the assessee, one account in the name of Mr. Zulfikar K. Momin was maintained which was other than the salary account. Mr. Zulfikar K. Momin was having opening credit balance of Rs.59,66,285/-. Thereafter, several credits running into crores of Rupees had been made and at the end of the year the credit balance of Mr. Zulfikar K. Momin was Rs.3,88,51,576/-. Out of the said amount Rs.3,18,41,394/- was 3 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin shown as gift received by the assessee by way of passing of a journal entry. After seeking and considering the explanation given by the assessee in this respect, the AO held that the assessee had failed to establish the genuineness of the transaction and the creditworthiness of the donor for the following reasons:
"i) The alleged donor Mr. Zulfikar Momin is a salaried employee of the assessee and have received salary of Rs.1,32,000/- during the year.
ii) Mr. Zulfikar Momin is not having any other sources of income. Therefore the capacity of Mr. Zulfikar Momin to give gift of Rs.3,18,41,394/- is not proved. Mr. Momin did not have the capacity to give gift of Rs.3,18,41,394/- with earning of Rs.1,32,000/- per annum.
iii) The courses of gift as explained by the assessee also raised serious doubt about the genuineness of the transaction. As per the assessee the RBI Tax free Bonds standing in the name of Mr. Zulfikar Momin has been directly deposited in the account of Mr. Opal Stone Industries. If the bonds were in the name of Mr. Zulfikar Momin, which are running into crores of rupees the RBI will always issue Account Payee Cheque or Account Payee Pay Order in the name of Mr. Zulfikar Momin. This cheque or pay order cannot be deposited in any other account standing in the name of any other person.
Here, the assessee has argued that the cheque received from RBI has deposited directly in the bank account of Mr. Opal Stone Industries which is proprietorship concern of Mubarak Kasam Momin and Mr. Zulfikar is only a paid salaried employee of this proprietorship concern. The assessee has failed to substantiate his claim by any evidence. He failed to show how the money received on redemption of RBI Bonds standing in the name of Mr. Zulfikar Momin were deposited in his account. It cannot be accepted that RBI may have issued cheque in favour of any other person than the correct owner of the bond. Therefore the argument of the assessee is not acceptable and raises a serious doubt about the genuineness of the transaction as well as the sources of the amount deposited in Mr. Opal Stone Industries bank account.
iv) The amount received by the assessee is without any consideration as there is no such entry in the account which suggests of any consideration being paid.
v) The RBI Bonds are not to have been shown as alleged gift. The gift as shown by the assessee is executed through JV passed on 31st March, 2007."
5. In appeal, the Ld. CIT(A), after considering the submissions and the evidences on the file, observed that in this case the identity of the donor 4 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin Mr. Zulfikar K. Momin, brother of the assessee was well established. His PAN number was available on record and he was regularly assessed to tax. He further observed that the financial capacity and creditworthiness of the donor was also established from the copies of the income tax returns, balance sheet, capital account and other details relevant to assessment years 2001-02 to 2007-
08. Mr. Zulfikar K. Momin had substantial capital and regular income. There was a relationship between the donor and the donee and the gift was out of natural love and affection. He further observed that the genuineness of the transaction was also established as the entire transaction of gift had taken place through proper banking channels. The source of gift was maturity proceeds of tax free GOI relief bonds 1999 and 2001 respectively in which Mr. Zulfikar K. Momin had invested and against lien of which, M/s. Opal Stone Industries, the proprietorship concern of the assessee had taken revolving credit facilities of Rs.4,00,00,000/- from ICICI Bank and loan of Rs.80,00,000/- from Development Credit Bank. Consequent to lien, these bonds were transferred in the name of ICICI Bank and Development Credit Bank. On maturity the proceeds of these bonds were directly credited in the loan account of the assessee with ICICI Bank and Development Credit Bank and adjusted against the outstanding loans. Mr. Zulfikar K. Momin gifted the above/equivalent amount to the assessee. The Ld. CIT(A), relying upon the various case laws, observed that the Rs.3,18,41,394/- made u/s 68 of the Act by the AO was not sustainable. Before us, ld. D.R. could not successfully point out any infirmity in the well reasoned order of the Ld. CIT(A). We accordingly, uphold the same. This ground is accordingly dismissed.
Ground No.2
6. The Revenue, vide ground No.2, has agitated the action of the Ld. CIT(A) in giving relief to the assessee to the extent of Rs.24,03,663/- out of 5 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin total addition of Rs.26,12,930/- made by the AO on account of non payment of TDS into government treasury by holding that the expenses to which the said TDS defaults had occurred were in fact in the nature of reimbursement. At the outset, the Ld. A.R. of the assessee has stated that the TDS in this case was deposited before the due date of filing of return.
7. We have considered the rival contentions of the Ld. Representatives of the parties. In the case in hand the assessee has claimed that though it had not deposited the TDS before the due date as was prescribed u/s 40(a)(ia) of the Act, however, he had deposited the TDS before the due date of filing of return. He has relies upon a chart and copies of the challans to show that the TDS was duly deposited before the due date of filing of return of income for the assessment year under consideration.
8. Admittedly, the section 40(a)(ia) of the Act has been amended by the Finance Act, (2010) to the effect that the due date for deposit of tax will be the due date as prescribed in sub section (1) of section 139 of the Act i.e. due date for filing of return of income. The Ld. Authorised Representative (AR) of the assessee has invited our attention to the decision of the Hon'ble Delhi High Court in the case of "CIT vs. Naresh Kumar" (2013) 262 CTR (Del) 389 wherein the Hon'ble Delhi High Court has held that the amendment made to section 40(a)(ia) of the Act vide Finance Act, 2010 which states that the due date of deposit of TDS will be the date of filing of return u/s 139(1) is applicable retrospectively. While holding so, the Hon'ble Delhi High Court has relied upon another decision in the case of "CIT vs. Rajinder Kumar" (ITA No. 65/2013) and further on the case of "CIT vs. Jagannath Steel Corporation" observing that where the statute is curative or merely declaratory of previous law, retrospective operation is generally intended. Further the Hon'ble Calcutta High Court in the case of "CIT v. Virgin Creations" (in GA 6 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin 3200/2011 dated 23/11/2011) has held that the amendment to section 40(a)(ia) by the Finance Act, 2010 is to be considered as retrospective in-as-much as it is only toward mitigating a hardship and, thus, is to be considered as curative in nature. In view of the above decisions of the Hon'ble Delhi High Court and that of Calcutta High Court and in the absence of any decision to the contrary of our Hon'ble jurisdictional High Court of Bombay, it is to be held that the amendment to section 40(a)(ia) of the Act made vide Finance Act, 2010 is applicable retrospectively and if the payments have been deposited before the due date of filing of return, then it cannot be said to be a case of violation of provisions of section 194C of the Act inviting disallowance u/s section 40(a)(ia) of the Act. Since the challans representing the deposit of TDS were not produced before the lower authorities, hence, subject to the verification of the deposit of the TDS by the AO, we direct that the assessee's claim be allowed towards payment to the extent it exhibits payment of corresponding TDS by the due date of furnishing the return for the relevant year. So far the second part of the ground in relation to admission of additional evidence is concerned, since we have restored the matter to the file of the AO, this issue is disposed of accordingly with a direction that the assessee will be given proper opportunity by the AO to show/furnish evidence that the TDS was deposited before due date of filing and thereafter the AO to decide the issue in accordance with our above observations.
Ground No.3
9. Vide ground No.3, the Revenue has agitated the action of the Ld. CIT(A) in restricting the addition on account of foreign travel expenses to Rs.1 lakh on adhoc basis as against the disallowance of Rs.8395777/- made by the AO. The AO noticed that the assessee had debited an expenditure of Rs.1178881/- on foreign travel of his employee Mr. Zulfikar K. Momin. The 7 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin assessee contended that the said expenditure was incurred wholly and exclusively for the purpose of business of the assessee. The AO, however, disallowed Rs.7895777/- out of the above stated expenditure holding that the assessee had failed to produce travel schedule and business generated out of the said travels. The AO made a further disallowance of Rs.50,000/- on lumpsum basis on account of personal element considering expenses incurred through credit card towards purchase of cosmetics, perfumes etc.
10. In appeal, the Ld. CIT(A), after considering the submissions of the assessee, observed that the assessee had been engaged in the business of export of marble, granite and other stones. The very nature of the assessee's business and prevailing cut-throat competition required foreign travelling for meeting customers, exploring new avenues and buyers, regular personal meeting with customers to understand their needs, taste, requirements, etc., latest trends in the market, and market conditions, follow up for payments, the need for exploring new markets, new customers, regular communication and personal meetings with customers etc. He further observed that Mr. Zulfikar K. Momin, the sales manager of the assessee visited several countries in connection with assessee's business and incurred required expenses for the same. The details of the expenditure were duly furnished during the assessment proceedings as well as appellate proceedings before the Ld. CIT(A) such as the name of person visited, name of the country, period of visit, detailed break-up of expenses etc. The detail of the customers and the country-wise business generated was also filed. It was also explained that the gifts and entertainment expenses were incurred for maintaining harmonious and cordial business relationship and personal rapport. The Ld. CIT(A), considering the overall facts and circumstances of the case, observed that since the details of the some of the expenditure was not fully verifiable and some personal element could 8 ITA No.4222/M/2010 Mr. Mubarak Kasam Momin not be ruled out, he therefore made an adhoc disallowance of Rs.1 lakh out of foreign travelling expenses.
11. We do not find any infirmity in the well reasoned order of the Ld. CIT(A) on this issue and his findings on this issue are therefore upheld.
12. Ground No.4 is general in nature and does not require any adjudication.
13. Subject to our observations made in respect of ground No.2, the appeal of the Revenue is therefore dismissed.
Order pronounced in the open court on 08.05.2015.
Sd/- Sd/-
(R.C. Sharma) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 08.05.2015.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.