G. SHOE EXPORTS, MUMBAI V. ACIT 25(1), MUMBAI

CO 191/MUM/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9604 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 22-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: N R AGARWAL
• Keywords: Principle of natural justice; Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENC H MUMBAI . . , ..'#. , BEFORE SHRI B.R.BASKARAN, AM & DR.S.T.M.PAVALAN, JM ./ ITA NO.4985/MUM/2012 ( % % % % / ASSESSMENT YEAR :2009-10) JCIT 25(1), MUMBAI-400 051 VS. G.SHOE EXPORT, SHED NO.1, HITEX INDL. ESTATE, S.V.ROAD, DAHISAR (E), MUMBAI-400 068 & ./ ' ./ PAN/GIR NO. : AACFG 5376 P ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) AND )*+ . /CROSS OBJECTION NO.191 /MUM/2013 (ARISING OUT OF ITA NO.4985/MUM/2012) ( % % % % / ASSESSMENT YEAR :2009-10) G.SHOE EXPORT, SHED NO.1, HITEX INDL. ESTATE, S.V.ROAD, DAHISAR (E), MUMBAI-400 068 VS. JCIT 25(1), MUMBAI-400 051 & ./ ' ./ PAN/GIR NO. : AACFG 5376 P ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) , ,, , - - - - /REVENUE BY : MR. R.K.SAHU ./ , ,, , - - - - /ASSESSEE BY : MR. N.R.AGARWAL , /# / DATE OF HEARING : 22 ND MAY, 2014 01% , /# / DATE OF PRONOUNCEMENT : 28 TH MAY, 2014 2 2 2 2 / O R D E R PER B.R.BASKARAN (A.M.) : THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 2 9.05.2012 PASSED BY LD CIT(A)-35, MUMBAI AND THEY RELATE TO THE ASSESSM ENT YEAR 2009-10. ITA NO.4985/12 & CO NO.191/13 2 2 . THE REVENUE IS ASSAILING THE DECISION OF THE LEARNED CIT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING ADDITIO NS MADE BY THE ASSESSING OFFICER :- A) COMMISSION EXPENSES; B) CLAIM FOR DAMAGED GOODS; AND C) FOREIGN TRAVELLING EXPENSES. 3 . IN RESPECT OF FOREIGN TRAVELLING EXPENSES, THE LE ARNED CIT(A) HAS PARTIALLY CONFIRMED THE ADDITION AND HENCE, THE ASS ESSEE HAS FILED CROSS OBJECTION CHALLENGING THE ADDITION CONFIRMED BY THE LEARNED CIT(A). 4 . THE FACTS RELATING TO THE CASE ARE STATED IN BRIE F. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING A ND EXPORT OF SHOES AND ALSO CARRYING OTHER ALLIED ACTIVITIES. THE ADDI TIONS MADE BY THE AO IN RESPECT OF COMMISSION EXPENSES, CLAIM FOR DAMAGED G OODS WERE FULLY DELETED BY LEARNED CIT(A). THE ADDITIONS MADE BY TH E AO IN RESPECT OF FOREIGN TRAVELLING EXPENSES WAS PARTLY ALLOWED BY T HE LEARNED CIT(A). HENCE, THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN CROSS OBJECTION BEFORE US CHALLENGING THE DECISION OF LEARNED CIT(A ) IN RESPECT OF THE MATTERS DECIDED AGAINST EACH OF THEM. 5 . THE FIRST ISSUE RELATES TO DISALLOWANCE OF COMMIS SION EXPENSES CLAIMED BY THE ASSESSEE, WHICH WAS DISALLOWED BY TH E AO ON THE FOLLOWING TWO GROUNDS:- (A) THE ASSESSEE DID NOT FURNISH ANY PROOF OF SERV ICES RENDERED BY THE COMMISSION AGENTS; AND (B) THE ASSESSEE DID NOT DEDUCT TDS FROM THE COMMI SSION AMOUNTS SO PAID. ITA NO.4985/12 & CO NO.191/13 3 THE ASSESSEE SUBMITTED THAT THE COMMISSION WERE PAI D TO NON-RESIDENT AGENTS AND HENCE THERE IS NO REQUIREMENT TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS, SINCE THE RECIPIENTS ARE NOT TAX ABLE IN INDIA IN RESPECT OF THE SAME., THE ASSESSING OFFICER, HOWEVER, NOTIC ED THAT IN RESPECT OF COMMISSION CLAIMED TO HAVE BEEN PAID TO M/S TRADING POST, THE RELEVANT AGREEMENT FILED BY THE ASSESSEE SHOWED THAT THE SER VICES WERE RENDERED BY ANOTHER CONCERN, NAMELY, M/S MTPL, WHICH WAS DOI NG BUSINESS IN INDIA. ACCORDINGLY, THE ASSESSING OFFICER TOOK THE VIEW THAT THE COMMISSION PAYMENT MADE TO M/S TRADING POST CANNOT BE TREATED AS COMMISSION PAID TO A NON-RESIDENT. 6. IN APPELLATE PROCEEDINGS, THE LEARNED CIT(A) ALLOW ED THE CLAIM OF THE ASSESSEE BY TAKING INTO CONSIDERATION CERTAIN A DDITIONAL EVIDENCES, WHICH WERE IN THE NATURE OF CORRESPONDENCES AND EVI DENCES, WITHOUT CONFRONTING THEM WITH THE ASSESSING OFFICER. WITH R EGARD TO THE OBSERVATION OF THE AO THAT THE ASSESSEE DID NOT DED UCT TDS FROM THE COMMISSION AMOUNTS, THE LEARNED CIT(A) PLACED RELIA NCE ON THE CIRCULARS ISSUED BY THE CBDT, VIZ., CIRCULAR NO.23 OF 1969 AN D CIRCULAR NO.786 OF 2000, WHICH WERE IN FORCE DURING THE ASSESSMENT YEA R UNDER CONSIDERATION AND HELD THAT THE ASSESSEE IS NOT REQ UIRED TO DEDUCT TAX AT SOURCE FROM THE COMMISSION AMOUNT PAID TO FOREIGN A GENTS. EVEN THOUGH THE ABOVE SAID TWO CIRCULARS WERE WITHDRAWN BY ANOT HER CIRCULAR NO.7 OF 2009, DATED 22.10.2009, THE LEARNED CIT(A) TOOK THE VIEW THAT THE CIRCULAR NO.7 OF 2009 SHALL HAVE PROSPECTIVE EFFECT ONLY AND THE OLD CIRCULARS SHALL APPLY FOR THE YEAR UNDER CONSIDERATION. ITA NO.4985/12 & CO NO.191/13 4 7. THE LEARNED D.R CONTENDED THAT THE LEARNED CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A OF THE I.T. RULES IN ADM ITTING THE ADDITIONAL EVIDENCES WITHOUT CONFRONTING THE SAME WITH THE ASS ESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THA T THE RECIPIENTS OF COMMISSION DID RENDER ANY SERVICE TO THE ASSESSEE. IN RESPECT OF REQUIREMENT OF DEDUCTION OF TAX AT SOURCE, THE LD D .R PLACED RELIANCE ON THE ASSESSMENT ORDER. 8 . WITH REGARD TO THE OBSERVATION OF THE AO THA T THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO SHOW THAT THE AGENTS HAVE R ENDERED THEIR SERVICES TO THE ASSESSEE HEREIN, THE LEARNED AR SUBMITTED TH AT THE ASSESSEE HAS FURNISHED SOME ADDITIONAL EVIDENCES BEFORE THE BENC H, IN ADDITION TO THOSE EVIDENCES THAT WERE FILED BEFORE THE LEARNED CIT(A). WITH REGARD TO THE REQUIREMENT OF DEDUCTING TAX AT SOURCE, THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE ALLAHABAD HIGH COU RT IN THE CASE OF CIT VS. MODEL EXIMS KANPUR, (2013) 358 ITR 72 (ALL) AND SUBMITTED THAT THE CIRCULAR NO.23 OF 1969 AND CIRCULAR NO.786 OF 2000 ARE APPLICABLE TO THE YEAR UNDER CONSIDERATION. 9 . WE HEARD PARTIES ON THIS ISSUE. WITH REGARD TO TH E DECISION TAKEN BY THE LEARNED CIT(A) ON APPLICABILITY OF CIRCULARS NO .23 OF 1969 AND 786 OF 2000, LEARNED AR PLACED RELIANCE ON THE DECISION R ENDERED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MODEL EXIMS KANPUR, (SUPRA) , WHEREIN THE HONBLE HIGH COURT HAS OBSERVED THAT THE CIRCULAR NO.7 OF 2009, DATED 22.10.2009 WITHDRAWING EARLIER TWO CIRCULARS WOULD BE OPERATIVE ONLY FROM 22.10.2009 AND NOT PRI OR TO THAT DATE. SINCE ITA NO.4985/12 & CO NO.191/13 5 THE VIEW TAKEN BY LD CIT(A) ON THIS ISSUE IS IN ACC ORDANCE WITH THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT CITED ABOVE, WE UPHOLD HIS VIEW THAT CIRCULAR NO.23 OF 1969 AND CIRCULAR NO. 786 OF 2000 ARE APPLICABLE FOR THE YEAR UNDER CONSIDERATION. 10 . WITH REGARD TO THE PAYMENT OF COMMISSION MADE TO M/S TRADING POST, THE ASSESSEE FILED AN AGREEMENT DATED 1-9-200 9 ENTERED BETWEEN M/S TRADING POST AND ASSESSEE HEREIN AND SUBMITTED THAT THE PAYMENT WAS MADE TO M/S TRADING POST IN CONNECTION WITH THE SERVICES RENDERED BY IT AND IT WAS A NON-RESIDENT. THE LD A.R SUBMI TTED THAT THE RECIPIENTS OF COMMISSION AMOUNT HAVE PROCURED ORDERS FOR THE A SSESSEE AND TO PROVE THE SAME, CERTAIN ADDITIONAL EVIDENCES ARE IN CLUDED IN THE PAPER BOOK. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS PAID THE COMMISSION AMOUNT ONLY TO FOREIGN AGENTS FOR THE SE RVICES RENDERED OUTSIDE INDIA. 11. IN THE REJOINDER, THE LEARNED D.R SUBMITTED THAT A LL THESE ADDITIONAL EVIDENCES NEED TO BE EXAMINED AT THE END OF THE ASS ESSING OFFICER AND ACCORDINGLY PRAYED THAT MATTER MAY BE SET ASIDE TO THE ASSESSING OFFICER FOR EXAMINING THE SAME AFRESH. LEARNED AR AGREED TO THE SUBMISSION MADE BY THE LEARNED DR. 12. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER WITH A DIRECTION TO EXAMINE THE MATTER AFRESH BY DULY CONS IDERING THE ADDITIONAL EVIDENCES THAT WERE FILED BEFORE THE LEARNED CIT(A) AND ALSO BEFORE US. ITA NO.4985/12 & CO NO.191/13 6 THE AO MAY SEEK FURTHER EXPLANATIONS AND INFORMATIO N FROM THE ASSESSEE. CONSIDERING ALL THE RELEVANT FACTS AND M ATERIALS, THE AO MAY DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 13 . THE NEXT ISSUE RELATES TO CLAIM FOR DAMAGED GOODS . LEARNED DR SUBMITTED THAT LEARNED CIT(A) HAS DELETED THE SAID DISALLOWANCE BY CONSIDERING CERTAIN NEW EVIDENCES AND THEY WERE NOT CONFRONTED TO THE ASSESSING OFFICER RESULTING IN VIOLATION OF RULE 46 A OF IT RULES. ACCORDINGLY, HE PLEADED THAT THIS ISSUE MAY ALSO BE SET ASIDE TO THE FILE OF THE AO. LEARNED AR ALSO AGREED TO THE SUBMISSIONS MADE BY THE LEARNED DR. 14 . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNE D CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF TH E AO FOR EXAMINING THE SAME AFRESH BY DULY CONSIDERING THE ADDITIONAL EVID ENCES AND SUCH OTHER EVIDENCES THAT MAY BE FILED BY THE ASSESSEE BEFORE HIM. THE AO MAY SEEK FURTHER EXPLANATIONS AND INFORMATION FROM THE ASSESSEE. CONSIDERING ALL THE RELEVANT FACTS AND MATERIALS, T HE AO MAY DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 15 . THE NEXT ISSUE RELATES TO DISALLOWANCE RELATING T O FOREIGN TRAVEL EXPENSES. THE ASSESSEE CLAIMED FOREIGN TRAVEL EXPE NSES OF RS.33,91,814/- AS DEDUCTION. THE AO ASKED THE ASSE SSEE TO JUSTIFY THE SAID CLAIM BY FURNISHING NECESSARY DETAILS AND DOCU MENTS. THOUGH THE ASSESSEE SUBMITTED THAT THE PARTNERS OF THE ASSESSE E FIRM HAS UNDERTAKEN TRAVEL TO ITALY & GERMANY TO ATTEND AND PARTICIPAT E IN SHOE FAIRS, YET THE ASSESSEE FAILED TO FURNISH NECESSARY DETAILS TRIP W ISE, PERSON WISE, PLACES ITA NO.4985/12 & CO NO.191/13 7 VISITED, PURPOSE OF VISIT AND BUSINESS PROCURED, IF ANY ETC. HENCE, THE AO DISALLOWED THE ENTIRE AMOUNT OF RS.33,91,814/-. 16. THE LD CIT(A) EXAMINED THE DETAILS THAT WERE FURNI SHED BY THE ASSESSEE TO THE AO AND NOTICED THAT NOT ONLY THE PA RTNERS OF THE ASSESSEE FIRM, BUT ALSO THE FAMILY MEMBERS HAVE UNDERTAKEN T RAVEL. HE ALSO NOTICED THAT PARTNERS HAVE TRAVELLED FOR ATTENDING SHOE FAIRS HELD IN ITALY, EGYPT ETC. THE LD CIT(A) ALSO NOTICED THAT CERTAIN DOMESTIC TRAVEL EXPENSES HAVE ALSO BEEN INCLUDED IN FOREIGN TRAVEL EXPENSES. HE FURTHER NOTICED THAT A FAMILY MEMBER NAMED MS. PRIY A, WHO WAS NEITHER A PARTNER NOR AN EMPLOYEE OF THE ASSESSEE FIRM, HAS A LSO UNDERTAKEN FOREIGN TRAVEL. HENCE, CONSIDERING THE INVOLVEMENT OF PERSONAL ELEMENT, THE LD CIT(A) RESTRICTED DISALLOWANCE TO 10% OF THE CLAIM AND ACCORDINGLY DIRECTED THE AO TO DELETE 90% OF THE DISALLOWANCE. 17. THE ASSESSEE IS CHALLENGING THE ADDITION OF 10% SUS TAINED BY LD CIT(A) AND THE REVENUE IS CHALLENGING THE RELIEF GR ANTED. WE HEARD THE PARTIES ON THIS ISSUE. THE LD D.R SUBMITTED THAT T HE ASSESSEE DID NOT FURNISH ANY MATERIAL OR EVIDENCE TO SHOW THAT THERE WAS BUSINESS NECESSITY OR BUSINESS CONNECTION IN UNDERTAKING THE FOREIGN TRAVEL. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS CLAIMED EXP ENSES INCURRED FOR FAMILY MEMBERS ALSO. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 10 % OF THE CLAIM. 18. THE LD A.R SUBMITTED THAT THE FAMILY MEMBER MS . PRIYA WAS ACTUALLY ASSISTING THE PARTNERS IN THE FOREIGN TRIP S. HE SUBMITTED THAT SHE WAS TAKEN TO ASSIST THEM, SINCE THE PARTNERS HAVE T O NECESSARILY TAKE ITA NO.4985/12 & CO NO.191/13 8 SOMEBODY TO CARRY THE BAGS CONTAINING SAMPLES, DISP LAY THEM AND EXPLAIN THE FEATURES. HE SUBMITTED THAT SUCH KIND OF ASSIS TANCE WAS GIVEN BY MS. PRIYA. HE FURTHER SUBMITTED THAT THE EXPENSES INCU RRED ON THE TRAVEL OF MS. PRIYA WAS ONLY RS.1,74,311/-. HE FURTHER SUBM ITTED THAT THE ASSESSEE HAS BEEN INCURRING EXPENSES ON THE TRAVEL OF MS. PRIYA IN THE SUBSEQUENT YEARS ALSO. HE SUBMITTED THAT THE ASSES SING OFFICER HAS EXAMINED THE EXPENSES INCURRED ON THE TRAVEL OF MS. PRIYA IN ASSESSMENT YEAR 2011-12 AND WAS SATISFIED THAT IT WAS INCURRED FOR BUSINESS PURPOSES. ACCORDINGLY HE SUBMITTED THAT THE ENTIR E CLAIM OF TRAVELING EXPENSES SHOULD BE ALLOWED. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE RECORD. DURING THE COURSE OF HEARING, THE LD A.R W AS SPECIFICALLY ASKED AS TO WHETHER THE ASSESSEE COULD SUBSTANTIATE CLAIM RELATING TO SHOE FAIRS THAT WERE CLAIMED TO HAVE BEEN HELD IN FOREIGN COUN TRIES AND THE PARTICIPATION BY THE ASSESSEE BY BRINGING ON RECORD ANY TYPE OF CORRESPONDENCES, BROUCHERS, INVITATION ETC., THE LD A.R SUBMITTED THAT THE ASSESSEE COULD FURNISH THE RELEVANT DETAILS, IF AN OPPORTUNITY IS GIVEN. SINCE THE ASSESSEE IS VEHEMENTLY CONTENDING THAT TH E FOREIGN TRIPS WERE UNDERTAKEN BY THE PARTNERS IN CONNECTION WITH PARTI CIPATING IN SHOE FAIRS AND FURTHER SINCE IT IS SUBMITTED THAT THE SAID CLA IM COULD BE PROVED WITH EVIDENCES, WE ARE OF THE VIEW THAT, IN THE INTEREST OF NATURAL JUSTICE, THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY TO SUBST ANTIATE ITS CLAIM. WITH REGARD TO THE EXPENDITURE INCURRED ON THE FORE IGN TRIP OF MS. PRIYA, WE NOTICE THAT THE ASSESSING OFFICER HAS ACCEPTED THE SUBMISSIONS OF THE ITA NO.4985/12 & CO NO.191/13 9 ASSESSEE THAT SHE WAS ASSISTING THE PARTNERS IN THE FOREIGN COUNTRIES IN A.Y 2011-12. HENCE, IN OUR VIEW, THE ABOVE SAID CL AIM OF THE ASSESSEE ALSO REQUIRES PROPER EXAMINATION IN THIS YEAR. ACC ORDINGLY, IN OUR VIEW, THE ENTIRE CLAIM OF FOREIGN EXPENSES REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASID E THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER ALSO TO THE F ILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY CONSIDERING THE MATERIALS AND EVIDENCES THAT MAY BE FURNISHED BY TH E ASSESSEE. THE AO MAY SEEK FURTHER EXPLANATIONS AND INFORMATION FROM THE ASSESSEE. CONSIDERING ALL THE RELEVANT FACTS AND MATERIALS, T HE AO MAY DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 20. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE TREATED AS ALLO WED FOR STATISTICAL PURPOSES. . /3 , ./ , )*+ 4, 567 8/ , / 9: ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MAY, 2014. 2 , 01% ; <3 28 TH MAY,2014 1 , = SD/- SD/- ( . . '# . ) (DR.STM PAVALAN) ( . . ) (B.R.BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; < DATED 28/05/2014 ). . /PKM , . / PS ITA NO.4985/12 & CO NO.191/13 10 2 2 2 2 , ,, , )/> )/> )/> )/> ?>%/ ?>%/ ?>%/ ?>%/ / COPY OF THE ORDER FORWARDED TO : 2 2 2 2 / BY ORDER, 5 55 5 / 9 9 9 9 ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. @ ( ) / THE CIT(A), MUMBAI. 4. @ / CIT 5. >A= )/ , , / DR, ITAT, MUMBAI 6. = B / GUARD FILE. *>/ )/ //TRUE COPY//