DCIT, New Delhi V. M/s. A.K. Services Pvt. Ltd., New Delhi

ITA 1143/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6836 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Gift; Commercial expediency
• Section: 143(3); 142(1)

Judgement Text

ITA NOS. 1143&1194/DEL/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO S . 1143 & 1194 /DEL/20 1 4 A.Y RS . : 2010 - 11 & 2011 - 12 DCIT, CENTRAL CIRCLE - 2, NEW DELHI ROOM NO. 323, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS M/S A.K. CAPITAL SERVICES LTD., FLAT NO. N, SAGAR APARTMENT, 6, TILAK MARG, NEW DELHI (PAN:AABCA1591L) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. K.K. JAISWAL, DR ASSESSEE BY : SH. VED JAIN, ADV. DATE OF HEARING: 18.01.2016 DATE OF ORDER : 10.02.2016 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM THESE ARE THE APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE IMPUGNED ORDERS PASSED BY THE LD. COMMISSI ONER OF INCOME TAX (APPEALS)-III, NEW DELHI FOR THE ASSESSMENT YEARS 2 010-11 & 2011-12. SINCE THE ISSUE INVOLVED IN THESE APPEALS ARE IDENTICAL AND C OMMON, HENCE, THESE APPEALS ARE BEING CONSOLIDATED AND DISPOSED OF BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 1143(D EL/2014 (AY 2010-11). 2. THE GROUNDS RAISED IN THE REVENUES APPEAL NO. 1 143/DEL/2014 (AY 2010-11) READ AS UNDER:- ITA NOS. 1143&1194/DEL/2014 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 74,53,938 /- BEING BOGUS BUSINESS PROMOTION EXPENSES CLAIMED. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 3. THE GROUNDS RAISED IN THE REVENUES APPEAL NO. 1 194/DEL/2014 (AY 2011-12) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 49,48,065 /- BEING BOGUS BUSINESS PROMOTION EXPENSES CLAIMED. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE C OMPANY FILED E-RETURN DECLARING INCOME OF RS. 77,99,99,674/- ON 28.9.2010 . THE SAME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 ON 30.3 .2012. THE CASE WAS SELECTED FOR COMPULSORY SCRUTINY. NOTICE U/S. 143(2 ) OF THE I.T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 22.9.2011. THEREAFTE R NOTICE U/S. 143(2), 142(1) OF THE I.T. ACT, 1961 ALONGWITH QUESTIONNAIR E WAS ISSUED TO THE ASSESSEE ON 21.9.2012. THE CASE WAS TRANSFERRED TO OTHER CIRCLE. DUE TO ITA NOS. 1143&1194/DEL/2014 3 CHANGE OF INCUMBENCY A FRESH NOTICE U/S. 143(2) DAT ED 15.1.2013 WAS SERVED UPON THE ASESSEE. THE CASE WAS REPRESENTED B Y THE ASSESSEES REPRESENTATIVE WHO FURNISHED THE DETAILS. IN THIS CASE THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING ME RCHAND BANKING SERVICES AND INVESTMENT IN SECURITIES. AO NOTICED T HAT THE ASSESSEE HAS DEBITED A SUM OF RS. 2,27,84,386/-. COMPLETE DETAI LS ALONGWITH BILLS AND VOUCHERS WERE SUBMITTED BY THE ASSESSE TO THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO, HOWEVER, HAS DISAL LOWED THE EXPENDITURE OF RS. 74,53,938/- ALLEGING THAT THE E XPENDITURE INCURRED BY THE ASSESSEE ON PURCHASE OF GOLD ORNAMENTS IS FOR P ERSONAL USE OF THE DIRECTORS AND THEREFORE IS NOT ALLOWABLE VIDE ORDER DATE 06.3.2013 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 5. AGGRIEVED WITH THE AFORESAID ORDER OF THE AO, TH E ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDE R DATED 12.12.2013 DELETED THE ADDITION BY HOLDING THAT THE AO HAS NO T BROUGHT ON RECORD ANY MATERIAL TO THE EFFECT THAT THE EXPENDITURE IS RELATED TO THE PERSONAL EXPENDITURE OF THE DIRECTORS. LD. CIT(A) HAS ALSO HELD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON PRESUMPTIONS, CON JECTURES AND SURMISES. 6. AGAINST THE ORDER OF THE LEARNED CIT(A) THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. IT WAS SUBMITTED BY THE LEARNED DR THAT THE AO HAS RIGHTLY ASSESSED THE INC OME AT RS.78,74,53,610/-. HE FURTHER STATED THAT THE AO HAS ALLEGED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF GIFT S OR GOLD ORNAMENTS APPEARS UNETHICAL AND AGAINST PUBLIC POLICY. IT WA S FURTHER SUBMITTED THAT AO HAS GIVEN COGENT REASONS FOR DISALLOWING THE ADD ITION OF BUSINESS PROMOTION EXPENSES OF RS. 74,53,938/-. ITA NOS. 1143&1194/DEL/2014 4 8. ON THE CONTRARY, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE ACTION OF THE AO WAS NOT JUSTIFIED. HE STATED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS PROVIDING FINANCIAL SERVICE S RELATED TO IPO MANAGEMENT DEBT SYNDICATION, DEBT TRADING, PROJECT FINANCING, MUTUAL FUND DISTRIBUTION, LOAN SYNDICATION AND PRIVATE PLA CEMENT OF DEBT INSTRUMENTS, ETC. THE ASSESSEE HAS INCURRED THE SA ID EXPENSES IN ORDER TO ATTRACT MORE CLIENTS, WHICH IN TURN WILL INCREASE T HE INCOME OF THE ASSESSEE. THE EXPENDITURE INCURRED BY THE ASSESSEE IS FULLY VERIFIABLE FROM THE BOOKS OF ACCOUNTS MAINTAINED, AND THE PAYM ENTS HAVE ALSO BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. HE FURTHER ST ATED THAT IT IS A SETTLED LAW THAT REVENUE CANNOT PUT ITSELF IN THE A RMCHAIR OF THE BUSINESSMAN AND DECIDE ABOUT THE REASONABLENESS OF AN EXPENDITURE. HE FURTHER STATED THAT THE ALLEGATIONS OF THE AO THAT THE ASSESSEE MUST HAVE DISTRIBUTED THE GIFTS/ GOLD ORNAMENTS TO THE EMPLOY EES OF THE PSUS, THE SAME IS WITHOUT ANY BASIS AND IS MERELY BASED ON TH E SURMISES OF THE AO. THE SAID ALLEGATIONS OF THE AO IS NOT BACKED WITH A NY COGENT MATERIAL, AND THEREFORE, IS NOT MAINTAINABLE. IN SUPPORT OF HIS CONTENTION HE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS:- - CIT VS. DALMIA CEMENT (P) LTD. 254 ITR 377 (HONB LE JURISDICTIONAL HIGH COURT) - CALCUTTA HIGH COURT RAVI MARKETING (P) LTD. VS. CIT (2006) 280 ITR 519. - APEX COURT DECISION IN SA BUILDERS VS. CIT {2006} 206 CTR (SC) 631; (2007) 288 ITR 1 (SC). IN VIEW OF ABOVE, LD. COUNSEL OF THE ASSESSEE STAT ED THAT ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A ), HENCE, THE SAME MAY BE UPHELD. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE P APER BOOK, CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE IN HI S WRITTEN SYNOPSIS, ASSESSMENT ORDER AND THE ORDER OF THE LD. CIT(A). WE FIND THAT THE LD. ITA NOS. 1143&1194/DEL/2014 5 CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE AND GAV E HIS FINDING VIDE PARA NO. 7 TO 7.4 AT PAGE NO. 8 & 9 OF HIS IMPUGNED ORD ER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDING OF THE LD. CIT(A) IS REPRODUCED BELOW:- 7. I HAVE CONSIDERED THE FACTS AND EVIDENCES AVAIL ABLE ON RECORDS AND THE OBSERVATIONS OF THE AO AND THE JUDI CIAL PRONOUNCEMENTS ON THE ISSUE AS BROUGHT FORWARD BY T HE APPELLANT. I HAVE EXAMINED THE NATURE OF EXPENSES I NCURRED AND THE DESCRIPTION OF ITEMS PURCHASED SHOWS THAT T HESE ITEMS CANNOT BE SAID TO BE JEWELLERY PURCHASED FOR PERSONAL USE BY THE DIRECTORS OR THEIR FAMILY MEMBERS. THE A SSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON THE BASIS O F WHICH IT CAN BE SAID THAT THE ITEMS PURCHASED BY INCURRING T HE IMPUGNED EXPENDITURE ON BUSINESS PROMOTION WERE RET AINED BY THE DIRECTORS FOR THEIR PERSONAL USE AND WERE NO T DISTRIBUTED IN THE REGULAR COURSE OF BUSINESS. THE COMMERCIAL EXPEDIENCY ON INCURRING THESE TYPE OF EXPENDITURE H AS INFACT BEEN ACCEPTED BY THE ASSESSING OFFICER HIMSELF AS H E HAS ACCEPTED THAT THE OTHER GIFTS WHICH HAVE NOT BEEN Q UESTIONED. 7.1. FURTHER IT IS SEEN THAT THE APPELLANT HAS EARN ED A SUBSTANTIAL ARRANGER FEE OF RS.158.73 CORES DURING THE INSTANT YEAR AND THE TOTAL EXPENSES ON ACCOUNT OF GIFTS ETC . ARE TO THE TUNE OF RS.2.27 CRORE I.E. 1.43% ON TOTAL REVENUE. IT IS NOT THE CASE OF THE AO THAT IN THE YEAR UNDER CONSIDERATION THERE HAS BEEN HUGE INCREASE IN SUCH EXPENDITURE AND THE SAME IS NOT ITA NOS. 1143&1194/DEL/2014 6 INCURRED FOR THE PURPOSE OF ITS BUSINESS. IT IS ALS O A MATTER OF FACT THAT THE NATURE OF SERVICES RENDERED BY THE AP PELLANT IS FOR ACTING ONLY AS AN INTERMEDIARY OR A BROKER AND IN THIS NATURE OF BUSINESS, MAINTAINING CORDIAL RELATIONS, CONTACTS AND LIAISON WITH BUSINESS CONSTITUENTS IS A BUSINESS NE CESSITY. THE EXPENDITURE INCURRED BY THE APPELLANT IS FOUND TO B E FULLY VOUCHED, VERIFIABLE AND HAS BEEN INCURRED THROUGH A CCOUNT PAYEE CHEQUES. 7.2. ALSO THE AO HAS NOT BROUGHT FORWARD ANY EVIDEN CE TO PROVE THAT THESE GIFTS HAVE ACTUALLY BEEN GIVEN TO PUBLIC SECTOR EMPLOYEES. HE HAS JUST DRAWN A PRESUMPTION L OOKING TO THE NATURE OF THE BUSINESS OF THE APPELLANT. DISALL OWANCES/ ADDITIONS MERELY ON PRESUMPTIONS, CONJECTURES AND S URMISES CANNOT BE CEMENTED WITHOUT SUPPORT OF ANY CORROBORA TIVE EVIDENCE. 7.3. IT IS ALSO PERTINENT TO NOTE THAT A SIMILAR EX PENDITURE INCURRED BY THE APPELLANT IN EARLIER YEARS IS FOUND TO BE FULLY ALLOWED BY THE ASSESSING OFFICER AND NO DISALLOWANC E HAS BEEN MADE IN THE EARLIER YEARS. FURTHER SIMILAR DIS ALLOWANCES HAVE BEEN DELETED BY COMMISSIONER OF INCOME TAX (APPEALS)-I AND COMMISSIONER OF INCOME TAX (APPEALS )-XXXI IN THE CASES OF THE APPELLANT FOR EARLIER YEARS. 7.4. HENCE, FROM THE ABOVE DISCUSSION, SINCE THE FA CTS OF THE PRESENT CASE ARE SAME AS IN EARLIER YEARS, THEREFOR E ON THE. ITA NOS. 1143&1194/DEL/2014 7 BASIS OF EVIDENCES ON RECORD, THE ADDITION OF RS, 7 4,53,938 CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE ARE OF THE VIEW THAT LD. CIT(A) HAS PASSED A WELL R EASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. ACCORDINGLY, THE APPEAL OF THE REVENUE IS ALSO DISM ISSED. 11. AS REGARDS ITA NO. 1194/DEL/2014 (AY 2011-12) IS CONCERNED, FOLLOWING OUR CONSISTENT VIEW IN ITA NO. 1143/DEL/2 014 (AY 2010-11), AS AFORESAID, THE ITA NO. 1194/DEL/2014 (AY 2011-12) A LSO STAND DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/02/2016. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - [ [[ [L.P. SAHU L.P. SAHU L.P. SAHU L.P. SAHU] ] ] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR DATE: 10-02-2016 COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES