ITO 1(1)(1), MUMBAI V. ASR LOGISTICS (I) P.LTD, MUMBAI

ITA 1197/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8234 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MISHRA
• Keywords: Business income; Business expenditure; Corroborative evidences; Retraction
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ ././ ./ ITA NO. 1197/MUM/2013 / ASSESSMENT YEAR: 2009-10 ITO-1 (1)(1) ROOM NO.534/579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400 020. VS. M/S. ASR LOGISTICS (INDIA) PVT.LTD. ROOM NO.26, KHANDKE BUILDING, SHAHID BHAGAT SINGH MARG, FORT MUMBAI-400 001. PAN: AAECA 9987 B ( / // / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI S.K. MISHRA ASSESSEE BY: SHRI VIPUL JOSHI / // / DATE OF HEARING: 07.02.2017 !'#$ / DATE OF PRONOUNCEMENT: 22.02.2017 , ,, , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDER,DATED 19/11/2012,OF THE CIT(A )-1,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAG ED IN THE BUSINESS OF CUSTOM HOUSE AGENT, FREIGHT FORWARDERS AND CLEARING AND FORWARDI NG AGENTS,FILED ITS RETURN OF INCOME ON 29/ 09/2009,DECLARING LOSS OF RS.44.50 LAKHS. THE AO CO MPLETED THE ASSESSMENT,U/S.143 (3) R.W.S.147 OF THE ACT,ON 26/12/2011, DETERMINING ITS INCOME AT RS. 87.10 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE AD DITION IN RESPECT OF CUSTOM FORMALITY AND CUSTOM EXPENSES.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT AN ACTION UNDER SECTION 133A WAS CONDUCTED AT THE OFFICE PREMISES O F THE ASSESSEE ON 07/03/2011, THAT IT HAD DEBITED A SUM OF RS.10.14 LAKHS UNDER THE HEAD CUST OM FORMALITY OF,THAT AS CUSTOM EXPENSES IT HAD CLAIMED EXPENDITURE OF RS. 32.45 LAKHS,THAT THE EXPENSES WERE NOT SUPPORTED BY DOCUMENTARY EVIDENCES, THAT THE DIRECTOR OF THE COM PANY,IN HIS STATEMENT, HAD ADMITTED THAT THERE WERE NO SUPPORTING BILLS AND VOUCHERS EXCEPT THE SELF MADE VOUCHER OF HIS EMPLOYEES TO SUPPORT THE EXPENSES,THAT ALL THE EXPENSES WERE INC URRED IN CASH AND WERE NOT SUPPORTED BY THIRD-PARTY BILLS AND VOUCHERS. HE HELD THAT ASSESS EE HAD NOT SUBSTANTIATED THE EXPENSIVE THE SUPPORTING EVIDENCES IS REQUIRED UNDER THE ACT, THA T THE DISPUTED EXPENSES WERE NOT ELIGIBLE FOR DEDUCTION AND WERE TO BE DISALLOWED IN COMPUTIN G BUSINESS INCOME FOR THE YEAR UNDER APPEAL. BUT,IN A SUBSEQUENT AFFIDAVIT, DATED 31/03/ 200,THE DIRECTOR STATED THAT ONLY 25% OF THE EXPENSES WERE OFFERED FOR TAXATION AND THE BALANCE WAS CLAIMED A GENUINE BUSINESS EXPENSES. AS THE DIRECTOR HAD AGREED TO OFFER THE WHOLE EXPEN SES FOR TAXATION AND HIS STATEMENT DATED 1197/M/13-ASR LOGISTICS (I)PL.(09-10) 2 07/03/2011,SO,THE AO DISALLOWED THE ENTIRE EXPENDIT URE I.E. RS. 46.59 LAKHS (RS. 10.14 LAKHS+ RS. 32.45 LAKHS). 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,IT MADE ELABOR ATE SUBMISSIONS AND RELIED UPON THE DECISION OF TRIBUNAL IN THE CASE OF A.P.L.(INDIA) P RIVATE LTD. (97 TTJ187). AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE ASSESSEE WA S CARRYING ON THE BUSINESS OF CLEARING AND FORWARDING AGENTS,THAT CASH PAYMENTS WERE INCURRED AT THE PORT TO EXPEDITE THE PROCESS OF CARGO CLEARANCE, THAT THE CONTENTION RAISED BY THE AO THAT THE ASSESSEE HAD CHANGED THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS DI D NOT HOLD SIGNIFICANT RELEVANCE, THAT IN THE STATEMENT RECORDED DURING SURVEY OPERATIONS THE ASSESSEE HAD NOT ACCEPTED THAT THESE PAYMENTS WERE NOT INCURRED FOR BUSINESS PURPOSES OR THAT SAME WERE BOGUS OR NON-GENUINE TRANSACTIONS, THAT THE DIRECTOR HAD CONFIRMED THAT THE PAYMENTS WERE REQUIRED TO BE INCURRED AS BUSINESS EXPEDIENCY FOR WHICH NO BILLS COULD BE OBTAINED,THAT THE ISSUE WAS TO BE DECIDED NOT MERELY ON THE STRENGTH OF THE STATEMENT RECORDE D DURING THE COURSE OF SURVEY ONLY, THAT CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE NECESSITY FOR SUCH EXPENSES COULD NOT BE DENIED, THAT IT HAD SUBMITTED DOCUMENTS THAT PRO VE THAT TO SOME EXTENT THOSE EXPENSES WERE ALSO RECOVERED FROM THE CUSTOMERS,THAT THE REC OVERIES WERE DULY REFLECTED IN THE INCOME IS OFFERED FOR TAXATION, THAT WHEN THE INCOME RETUR NS BY THE ASSESSEE FORM THE BUSINESS OF CLEARING AND FORWARDING HAD BEEN ACCEPTED THEN THE EXPENSES INCURRED AS PER PREVAILING BUSINESS PRACTICE HAD TO BE ACCEPTED, THAT THE ASSE SSEE HAD AFFIRMED THAT EXPENSES WERE REQUIRED TO BE MADE IN ORDER TO CARRY ON ITS NORMAL BUSINESS OF LOADING AND UNLOADING, THAT DISALLOWANCE OF ENTIRE EXPENDITURE WAS NOT JUSTIFIE D, THAT THE EXPENSES WERE WITHOUT ANY THIRD-PARTY AFFIRMATIONS, THAT ENTIRE EXPENSES COUL D NOT BE ACCEPTED A GENUINE.REFERRING TO THE ORDER OF THE A.P.L. INDIA PRIVATE LTD.(SUPRA),HE HE LD THAT PAYMENTS MADE TO DOCKWORKERS EXPEDITE THE LOADING AND UNLOADING WAS ALLOWABLE AS DEDUCTION U/S.37 OF THE ACT, THAT THE DEDUCTION WAS ALLOWABLE BECAUSE THE PAYMENTS WERE N OT ILLEGAL OR PROPOSED TO PUBLIC POLICY, THAT THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE, ON ESTIMATE BASIS, 25% OF THE EXPENDITURE INCURRED. FINALLY, HE HELD THAT DISALLOWANCE OF 25% OFFERED BY THE ASSESSEE IN THE AFFIDAVIT OF THE DIRECTOR, DATED 31/03/2011 WAS REASONABLE. 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) STATED THAT THE DIRECTOR OF THE COMPANY IN HIS STATEMENT RECORDED D URING THE SURVEY PROCEEDINGS HAD ADMITTED TO OFFER ENTIRE EXPENSES FOR TAXATION, TH AT RETRACTION FILED BY HIM WAS AN AFTERTHOUGHT, 1197/M/13-ASR LOGISTICS (I)PL.(09-10) 3 THAT THE AO HAD RIGHTLY DISALLOWED THE ENTIRE EXPEN DITURE.THE AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT DURING THE SURVEY PROCEEDINGS,THE DIRECTOR OF THE COMPANY HAD ADMITTED THAT COMPANY WOULD SURRENDER THE ENTIRE EXPENDITURE CLAIMED UNDER THE HEAD CUSTOM EXPENSES AND CUSTOM FORMALITIES, THAT ON 31/03/2007 HE FILED AN AFFIDAV IT AND PARTIALLY RETRACTED HIS STATEMENT, THAT THE FAA RESTRICTED THE DISALLOWANCE AT THE RATE OF 25% OF THE EXPENDITURE AS AGAINST THE 100% DISALLOWANCE MADE BY THE AO. WE FIND THAT THE FAA H AD GIVEN A CATEGORICAL FINDING OF FACT THAT IN SOME CASES THE ASSESSEE HAD RAISED THE BILL S AGAINST SUCH EXPENDITURE IN THE NAMES OF THE CUSTOMERS AND HAD OFFERED SUCH RECEIPTS IN ITS RETURN OF INCOME. IF ANY INCOME HAS BEEN OFFERED FOR TAXATION CORRESPONDING EXPENDITURE HAS TO BE ALLOWED, IS THE CARDINAL PRINCIPLE OF TAX-JURISPRUDENCE. THE FAA HAS RESTRICTED THE DISAL LOWANCE TO 25% AS AGAINST THE 100% DISALLOWANCE MADE BY THE AO. WE FIND THAT SIMILAR I SSUE WAS DECIDED BY THE TRIBUNAL IN THE CASE OF APL INDIA PRIVATE LTD.(SUPRA)AND HELD THAT IN THE CASE OF CLEARING AND FORWARDING AGENTS THE DISALLOWANCE SHOULD NOT EXCEED 25%. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE TR IBUNAL,WE HOLD THAT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE FAA. CONFIRMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2017. 22 2017 SD/- SD /- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; % /DATED : 22 .02.2017 . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.