DCIT 2(1), MUMBAI V. DINSHAW & SONS LTD, MUMBAI

ITA 1108/MUM/2012

• Counselvise Citation: 110819914 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: F V IRANI; FALE E H BILIMORIA
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1108/MUM/2012 ASSESSMENT YEAR: 2008-09 DCIT 2(1) AAYAKAR BHAVAN R. NO. 561 5 TH FLOOR, M.K. ROAD, MUMBAI VS. M/S. DINSHAW & SONS LTD. 2 ND FLOOR, AFFINWALLA BLDG 77, MINT ROAD, FORT, MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACD 1365 L ASSESSEE BY : SHRI F.V. IRANI & FALEE H. BILIMORIA REVENUE BY : SMT. C. TRIPURA SUNDARI DATE OF HEARING : 05.08.2014 DATE OF PRONOUNCEMENT : 10.09.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A)-4, MUMBAI DATED 11.11.2011 FOR THE ASSESS MENT YEAR 2008-09. 2. IN THIS APPEAL, THE REVENUE HAS AGITATED THE DEC ISION OF THE LD.CIT(A) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF HIRE CHARGES CLAIMED BY THE ASSESSEE DURING THE ASSESSMENT YEAR. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE, A COMP ANY IS IN THE BUSINESS OF GIVING EQUIPMENTS ON HIRE AND PROVIDE SUCH SERVICES TO VARIOUS A SHIPPING COMPANIES AT THE MUMBAI PORT. SUCH EQUIPMENTS INCLUDE FORK LI FT, TEMPO, TRUCKS, MOBILE CRANES, BARGES ETC. THE ASSESSEE HAD CLAIMED TO HAVE PAID F OR HIRING OF SUCH SERVICES FROM OTHER PARTIES ALSO. ACCORDINGLY, THE ASSESSEE HAD C LAIMED AN EXPENDITURE OF RS.4,87,57,039/- ON ACCOUNT OF THE HIRE CHARGES OF VARIOUS EQUIPMENTS. IN THE ASSESSMENT FRAMED, THE AO MADE AN ADHOC DISALLOWANC E OF RS.97,51,047/- BEING ITA NO. 1108/MUM/2012 M/S. DINSHAW & SONS LTD ASSESSMENT YEAR: 2008-09 2 20% OF THE EXPENSES INCURRED DURING THE YEAR ON THE TOTAL HIGHER CHARGES OF RS.4,87,57,039/- CLAIMED BY THE ASSESSEE. ON APPEAL , THE LD.CIT(A) DELETED THE IMPUGNED DISALLOWANCE MADE BY THE AO ON THE REASON THAT THE AD HOC DISALLOWANCE OF 20% MADE BY THE AO IS WITHOUT ANY BASIS. AGGRIEV ED BY THE IMPUGNED DECISION, THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING, THE AO ISSUED NOTICE U/S 133(6) TO THREE PARTIES AND NOTIC E US/ 131(1) TO OTHER THREE PARTIES TO WHOM THE ASSESSEE HAS PAID THE HIRE CHARGES. THE AO HAS STATED THAT THE NOTICE ISSUED U/S 133(6) TO ONE PARTY, NAMELY, M/S. NOBLE CARRIERS AND NOTICE ISSUED U/S 131(1) TO M/S. HINDUSTAN BULK CARRIERS HAVING BEEN RETURNED, WHEREAS THE OTHER PARTIES HAVE FILED THE DETAILS REQUIRED BY THE AO W ITHOUT ANY PERSONAL APPEARANCE. HOWEVER, WHEN THE AO INFORMED THE ASSESSEE ABOUT TH E NON RECEIPT OF THE NOTICES BY THE PARTIES, THE ASSESSEE CLAIMED TO HAVE WRITTE N TO THE OTHER PARTIES AND THE SAID PARTIES HAVE ALSO SUBMITTED THEIR DETAILS. IT IS FU RTHER NOTED THAT THE ASSESSEE ALSO HAS SUBMITTED RECONCILIATION IN RESPECT OF ALL SUCH PARITIES DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, ACCORDING TO THE AO, IN SOME CASES CHEQUES PAID TO SUCH PARTIES HAVE BEEN IMMEDIATELY WITHDRAWN THOUGH HE C ITED THE NAMES OF I.E. NOBLE CARRIERS AND HEENA CARGO ONLY. ACCORDINGLY, THE AO FINALLY HELD THAT THE PAYMENTS TO THE SIX PARTIES ARE DOUBTFUL AND THEREFORE, HE DISA LLOWED 20% OF THE TOTAL PAYMENTS MADE TO THESE PARTIES. IN THE PROCESS, THE AO WORKE D OUT THE IMPUGNED DISALLOWANCE AT RS.97,51,407/-. IT IS OBSERVED THAT THE AO HAS ASKED FOR PARTY WISE DETAIL OF HIGHER CHARGES PAYMENTS ABOVE RS.10 LAKHS INDIVIDUALLY AND ACCORDINGLY THE ASSESSEE HAS GIVEN THE DETAILS IN THE CASES OF THE SAID SIX PARTIES TO WHOM NOTICES HAVE BEEN ISSUED BY THE AO. IT IS FURTHER OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS NOT DISPUTED THE EXPENDITUR E IN TOTO BECAUSE BY DISALLOWING 20% OF THE EXPENDITURE, HE HAS AUTOMATICALLY ALLOWE D 80% OF THE EXPENDITURE. THEREFORE, IT CANNOT BE SAID THAT THE PARTIES TO WH OM THE HIRE CHARGES HAVE BEEN PAID DO NOT EXIST OR THEY RENDERED NO SERVICES OR T HE PAYMENTS ARE NOT MADE. IN OTHER WORDS, IT CANNOT BE SAID THAT ONLY 20% OF PAR TY DOES NOT EXIST BECAUSE EITHER A PARTY EXIST OR IT DOES NOT EXIST IN TOTO. THUS, HAR PING OF THE AO IN THE ASSESSMENT ITA NO. 1108/MUM/2012 M/S. DINSHAW & SONS LTD ASSESSMENT YEAR: 2008-09 3 ORDER AS WELL AS IN THE REMAND REPORT SUBMITTED DUR ING THE FIRST APPELLATE PROCEEDINGS BEFORE THE LD.CIT(A) THAT SUMMONS HAVE BEEN ISSUED AND FEW PARTIES HAVE NOT APPEARED ANY PERSONAL OR TWO SUMMONS HAVE BEEN RETURNED DO NOT PROVE THE POINT THAT PARTIES DO NOT EXIST BECAUSE AO HIMS ELF HAS ALLOWED 80% OF THE EXPENSES PERTAINING TO THESE PARTIES. ALSO, IT IS F OUND THAT THE AO HAS NOT TAKEN ANY FURTHER ACTION AGAINST ANY SUCH PARTY WHICH HAS NOT RESPONDED TO HIS NOTICES/SUMMONS AS OBSERVED BY THE LD.CIT(A). EVEN FOR MAKING A DISALLOWANCE OF 20%, THE AO HAS NOT BEEN ABLE TO FIND OUT AS TO WHI CH BILL OF THE PARTY IS DOUBTFUL. ALTERNATIVELY, IT CAN BE SEEN AS IF 80% OF EACH BIL L IS GENUINE AND 20% IS NOT GENUINE, WHICH CANNOT BE THE CASE BECAUSE THE ASSES SEE HAS CORRELATED EACH BILL AND PARTY WITH THE BILL RAISED BY THE ASSESSEE ON I TS CUSTOMERS. IN THE REMAND REPORT SUBMITTED BY THE AO BEFORE THE LD.CIT(A) ALSO, THE AO HAS NOT BEEN ABLE TO FIND ANY DEFECT IN ANY OF THE BILLS OR RECONCILIATION FILED BY THE ASSESSEE WHEREAS IN THE REMAND REPORT VIDE POINT NO. 3, THE AO HIMSELF HAS SHOWN A CURIOSITY AS TO WHY PAYMENTS MADE ON HIRE CHARGES HAS BEEN DISALLOWED A T 20% WHEN CORRESPONDING RECEIPTS HAVE NOT BEEN DISPUTED. THEREFORE, THE AO IN HIS REMAND REPORT RECOMMENDED THE LD.CIT(A) TO DECIDE THE ISSUE ON ME RIT. MOREOVER, THE ASSESSEE HAS MADE PAYMENTS TO SUB-CONTRACTORS AND WITHDRAWAL BY CASH OF SUB-CONTRACTORS FROM THEIR BACK ACCOUNTS DO NOT JUSTIFY ANY ADDITIO N IN THE HANDS OF THE ASSESSEE UNLESS IT IS PROVED THAT THE MONEY REACHED BACK TO THE ASSESSEE. WHEREAS, ASSESSEE HAS CLAIMED THAT NEITHER THE EXACT AMOUNTS OF PAYME NTS HAVE BEEN WITHDRAWN AND THE AO HAS CITED ONLY TWO SUCH CASES FROM DETAILS F ILED BY THE SUCH PARTIES. EVEN IN THE REMAND REPORT ALSO, NO FURTHER FINDING HAVE BEE N GIVEN ON CASH WITHDRAWALS. THIS DEMONSTRATES THAT SUB-CONTRACTORS HAVE TO MAKE FURTHER PAYMENTS TO THEIR SUPPLIERS ETC. AND THEY MAY BE DRAWING CASH IN SOME CASES BUT THAT HAS NO RELATION WITH THE ASSESSEE. THEREFORE, THE AO HAS NO CASE FO R DISALLOWANCE OF ANY EXPENDITURE ON ACCOUNT OF HIRE CHARGES AS OBSERVED BY THE LD.CIT(A). EVEN OTHERWISE, ADHOC DISALLOWANCE CANNOT BE MADE IN SUC H CASES BECAUSE THERE IS NO JUSTIFICATION FOR SELECTING DISALLOWANCE AT 20% WIT HOUT ANY BASIS OF FACTS. IN VIEW OF THE FACT THE LD.CIT(A) HAS CORRECTLY APPRECIATED AF OREMENTIONED FACTS FOR DELETING THE IMPUGNED DISALLOWANCE MADE BY THE AO, THE IMPUG NED ORDER OF THE LD.CIT(A) ITA NO. 1108/MUM/2012 M/S. DINSHAW & SONS LTD ASSESSMENT YEAR: 2008-09 4 DESERVES TO BE UPHELD. RESULTANTLY, WE FIND NO MERI TS IN THE APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (RAJENDRA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.09.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.