JCIT, (OSD), CIR-21, KOLKATA, Kolkata V. M/s Axiom Estate Advisory Service Pvt. Ltd., Kolkata

ITA 1119/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5901 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR CIT SRDR
• Assessee Lawyers: RAKESH JAIN
• Section: 144

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1119/KOL/2016 ASSESSMENT YEAR:2011-12 JCIT(OSD), CIRCLE- 2(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 7 TH FLOOR, KOLKATA-69 / V/S . M/S AXIOM ESTATE ADVISORY SERVICES PVT. LTD., PTI BUILDING, DP-9, SECTOR-V, SALT LAKE, KOLKATA-91 [ PAN NO.AAGCA 3608 P ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SAURABH KUMAR, ADDL. CIT-SR-DR /BY RESPONDENT SHRI RAKESHJAIN, FCA /DATE OF HEARING 05-07-2018 /DATE OF PRONOUNCEMENT 25-07-2018 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2011-12 CALLS INTO QUESTION CORRECTNESS OF COMMISSIONER OF INCOME TAX (APPEALS) -9, KOLKATAS ORDER DATED 24.02.2016 IN CASE NO.250/CIT(A)-9/CIRCLE-2/2015-16 /KOL, REVERSING ASSESSING OFFICERS ACTION INTER ALIA DISALLOWING ASSESSEES REMUNERATION PAID TO ITS DIRECTORS TOTALING TO 6,78,356/-, BUSINESS PROMOTION EXPENSES OF 83,52,600/- AND OFFICE MAINTENANCE EXPENDITURE OF 22,55,277/-; RESPECTIVELY IN ASSESSMENT ORDER DATED 26.03.2014, INVOLVING PROCEEDINGS U/S. 144 OF THE I NCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NO.1119/KOL/2016 A.Y. 2011- 12 JCIT(OSD), CRI-2(1) KOL. VS. M/S AXIOM ESTAT E ADVISORY SERVICES PVT. LTD. PAGE 2 2. WE COME TO THE FIRST ISSUE OF DISALLOWANCE OF RE MUNERATION PAID TO ASSESSEES TWO DIRECTORS NAMELY, SHRI AVIJEET DAS AND SHRI ARN AB DEY INVOLVING SUMS OF 8,89,996/- AND 4,66,716/-; RESPECTIVELY, DISALLOWED BY THE ASSESSI NG OFFICER TO THE EXTENT OF 50%. HE WAS FAIR ENOUGH IN NOT DISPUTING GENUINENESS OF THESE TWO PAYMENTS. THIS ONLY REASON FOR DISALLOWING THE SAME @ 50% IN HIS ORDER PARA 2.1 PAGED 2 OF ASSESSMENT ORDER WAS THAT ASSESSEES FIN ANCIAL PERFORMANCE INDICATED LOSS OF 223,04,098/- AND THEREFORE, THE REMUNERATION IN QUE STION WAS EXORBITANT U/S. 40A(2)(B) OF THE ACT. HE THEREFORE DISALLOWED 50% O F THE SAID CLAIM COMING TO 6,78,356/-. THE CIT(A) AS REVERSED ASSESSING OFFICE RS ACTION MAINLY ON THE GROUND THAT DIRECTORS REMUNERATION IN CASE OF CORPORATE ENTITY COULD NOT BE DISALLOWED MERELY BECAUSE IT HAS SHOWN LOSS DURING THE RELEVAN T PREVIOUS YEAR. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS DUR ING THE COURSE OF HEARING THAT CIT(A)S FINDINGS ARE TOTALLY NON SPEAKING. HE THER EFORE SEEKS TO GET THE INSTANT LIS RESTORED BACK TO THE ASSESSING OFFICER. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. THE FACT REMAINS THAT THE ASSESSING OFFIC ER HAS DISALLOWED ASSESSEES IMPUGNED CLAIM TO THE EXTENT OF 50% ONLY BY TREATIN G THE SAME TO BE EXORBITANT IN VIEW OF ITS LOSSES (SUPRA). SECTION 40A(2)(B) OF TH E ACT MAKES IT CLEAR THAT SUCH A FINDING HAS TO BE VIS--VIS MARKET RATE OF RELEVANT SERVICES ONLY AND NOT OTHERWISE. WE DO NOT FIND ANY SUCH COMPARISON DRAWN AT THE ASSESS ING OFFICERS END DURING THE COURSE OF ASSESSMENT. THERE IS FURTHER NO JUSTIFICA TION IN REVENUES STAND THAT MERE INCURRING OF LOSS INVITES DISALLOWANCE OF DIRECTORS REMUNERATION AS THESE TWO COUNTS OF EXPENDITURE AND FINANCIAL PERFORMANCE STAND ON T OTALLY DIFFERENT FOOTING. WE THEREFORE REJECT REVENUES ABOVE ARGUMENT AS WELL A S ITS FIRST SUBSTANTIVE GROUND. 3. THE REVENUES NEXT GRIEVANCE SEEKS TO REVIVE ASS ESSEES BUSINESS PROMOTION EXPENDITURE DISALLOWANCE OF 83,52,600/- MADE IN ASSESSMENT ORDER. LEARNED DEPARTMENTAL REPRESENTATIVE TAKES US TO PAGES 2 & 3 OF THE ASSESSMENT ORDER INDICATING THE ASSESSEE TO HAVE FILED ALL THE RELEV ANT DETAILS THROUGH POST UNDER THE HEAD EXPENDITURE TOWARDS BUSINESS PROMOTION FOR IN DIA PROPERTIES THE ASSESSING OFFICER INVOKED THE IMPUGNED DISALLOWANCE ON THE GR OUND THAT RELEVANT NECESSITY OR BUSINESS EXPEDIENCY OF THE SAID EXPENSE REMAINED UN EXPLAINED. ALL THIS RESULTED IN THE IMPUGNED DISALLOWANCE. ITA NO.1119/KOL/2016 A.Y. 2011- 12 JCIT(OSD), CRI-2(1) KOL. VS. M/S AXIOM ESTAT E ADVISORY SERVICES PVT. LTD. PAGE 3 4. THE CIT(A)S ORDER IN PARA 4.3 HOLDS THE ASSESSI NG OFFICER TO HAVE MADE THE IMPUGNED DISALLOWANCE WITHOUT ANY EXAMINATION OR VE RIFICATION. HE IS OF THE VIEW THAT THE ASSESSEES IDENTICAL EXPENSES STAND ACCEPTED IN PRECEDING AND SUCCEEDING ASSESSMENT YEARS. LEARNED DEPARTMENTAL REPRESENTATI VE VEHEMENTLY CONTENDS DURING THE COURSE OF HEARING THAT ASSESSING OFFICER HAD RI GHTLY DISALLOWED THE IMPUGNED BUSINESS PROMOTION EXPENSE ON ACCOUNT OF ASSESSEES FAILURE IN FILING ITS CORRESPONDENCE EXPLANATION. WE FIND NO SUBSTANCE IN REVENUES INSTANT ARGUMENT. LEARNED COUNSEL TAKE US TO ASSESSEES PAPER BOOK PA GES 42 TO 107 INDICATING IT TO HAVE INCURRED THE IMPUGNED EXPENDITURE IN CASE OF PAYEES M/S AXIOM ESTATES USA INCOME, AXIOM HOLDINGS LTD., DUBAI, UAE, GOOGLE IND IA PVT. LTD., AXIOM ESTATES ADVISORY SERVICES PVT. LTD. AND OTHERS. ALL THE SAI D PAYMENTS HAVE BEEN SUBJECTED TO TDS DEDUCTION AS WELL; WHEREVER NECESSARY. RELEVANT SERVICES IN QUESTION APPEAR TO BE MAINLY OF IN THE NATURE OF ADVERTISEMENT AND DIS PLAY OF HOARDINGS. THE ASSESSEE HAS COMPLIED WITH THE RELEVANT STATUTORY PROVISION U/S. 195 OF THE ACT AS WELL. THIS CRUCIAL DOCUMENTARY EVIDENCE HAS GONE UNREBUTTED FROM THE R EVENUE SIDE. ITS ONLY CASE AS ALREADY STATED HEREINABOVE IS THAT ASSESSEE COULD N OT EXPLAIN THE RELEVANT BUSINESS EXPEDIENCY. WE OBSERVE IN THIS BACKDROP THAT ASSESS EE HAD TO INCUR THE IMPUGNED EXPENDITURE FOR THE PURPOSE ADVERTING ITS PROPERTIE S IN INDIA AND ABROAD FOR GARNERING BETTER REVENUE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE FACT THAT THE ASSESSING OFFICER HAD NOT ISSUED ANY NOTICE TO EITH ER THE ASSESSEE OR ANY OF THE CORRESPONDING PAYEES TO VERIFY THE RELEVANT DETAILS . THIS APPEARS TO BE PRECISE REASON FOR THE CIT(A) FOR DELETING THE IMPUGNED DISALLOWAN CE. WE THEREFORE AFFIRM THE CIT(A)S ACTION UNDER CHALLENGE GRANTING RELIEF TO THE ASSESSEE QUA THE INSTANT ISSUE. REVENUE FAILS IN ITS SECOND SUBSTANTIVE GROUND AS W ELL. 5. THIS LEAVES US TO REVENUES THIRD AND LAST SUBST ANTIVE GROUND PLEADING THAT CIT(A) HAS ERRED IN LAW AS WELL S ON FACTS IN DELET ING OFFICE MAINTENANCE EXPENSES DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE T UNE OF 22,57,227/-. WE NOTICE HEREIN AS WELL THAT ASSESSING OFFICER INVOKED THE I MPUGNED DISALLOWANCE ALLEGING THAT ASSESSEE TO HAVE FILED ITS DETAILS THROUGH POST QUA PAYMENT MADE TO M/S DESERT DUNES INTERNATIONAL COMPANY ON ACCOUNT OF OFFICE MAINTENA NCE WITHOUT ANY EVIDENCE IN SUPPORT. THE CIT(A) REVERSES THE SAME ON THE GROUND THAT THE ASSESSING OFFICER HAS ITA NO.1119/KOL/2016 A.Y. 2011- 12 JCIT(OSD), CRI-2(1) KOL. VS. M/S AXIOM ESTAT E ADVISORY SERVICES PVT. LTD. PAGE 4 DISALLOWED THE ENTIRE CLAIM WITHOUT GOING FOR ANY V ERIFICATION AT ALL. THE VERY FACTUAL POSITION CONTINUES HEREIN AS WELL. THE ASSESSEES P APER BOOK REVEALS IT TO HAVE INCURRED THE IMPUGNED EXPENDITURE ON ACCOUNT OF OFF ICE USES AVAILING OF HIS FACULTY FOR TELEPHONE, UTILITIES, COMPUTERS STATIONERY AND OFFI CE ITSELF OF THE RELEVANT PAYEE. THE SAME FOLLOWS DETAILED BILLS OF THE CONCERNED PARTY( IES) INDICATING THE INSTANT TAXPAYER TO HAVE ACTUALLY AVAILED THE SERVICES. WE THEREFORE UPHOLD THE CIT(A)S FINDINGS UNDER CHALLENGE TREATING THE IMPUGNED EXPENDITURE TO BE O F ROUTINE NATURE TO DECLINE REVENUES INSTANT LAST GRIEVANCE AS WELL. 6. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 /07/2018 SD/- SD/- ( &) (( &) (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS ) - 25/07/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-JCIT(OSD), CIR.2(1), AAYAKAR BHAWAN, P-7 , CHOWRINGHEE SQUARE, 7 TH FLOOR, KOLKATA-69 2. /RESPONDENT-M/S AXIOM ESTATE ADVISORY SERVICES PVT. LTD., PTI BUILDING, DP-9, SECTOR-V, SALT LAKE, KOLKATA-91 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . ((, , , /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO ,,