Globus Infocom Ltd., New Delhi V. CIT, New Delhi

ITA 1315/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97200 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: S KRISHNAN
• Keywords: Revision of order
• Section: 143(3); 263

Judgement Text

1 ITA NO. 1315/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBL E, JUDICIAL MEMBER I.T.A .NO.- 1315/DEL/2012 (ASSESSMENT YEA R-2007-08) GLOBUS INFOCOM LTD. C-1/2, SAFDURJUNG DEVELOPMENT AREA NEW DELHI AABCG3985C (APPELLANT) VS CIT DELHI-IV C.R. BUILDING, I.P. ESTATE NEW DELHI (RESPONDENT) APPELLANT BY SH.S. KRISHNAN, ADV RESPONDENT BY SH.A. K. SAROHA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST ORDER DATED 29.02.2012 PASSED BY THE CIT, DELHI IV U/S 263 OF THE INCOME TAX ACT 1961 (HEREIN AFTER REFERRED AS THE ACT). 2. THIS MATTER IS REMITTED BACK FROM THE HONBLE HI GH COURT, DELHI VIDE ORDER DATED 13.08.2014 (ITA NO. 447 OF 2013). 3. THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRA DING OF PROJECTORS, PLASMA, SCHOOL BOARD, SCHOOL PADS & OTHER AUDIO/VIS UAL PRODUCTS, AMC & RENTING OF AUDIO/VIDEO PRODUCTS. THE ASSESSEE HAD F ILED ITS RETURN UNDER NORMAL PROVISIONS. HOWEVER, THE RETURN WAS TAKEN U P FOR SCRUTINY AND THE DATE OF HEARING 28.08.2015 DATE OF PRONOUNCEMENT 07.09.2015 2 ITA NO. 1315/DEL/2012 ASSESSING OFFICER HAD MADE ADDITIONS TO THE INCOME OF ASSESSEE ON BOTH SUBSTANTIVE AND PROTECTIVE BASIS. THE ASSESSING OF FICER HAD CARRIED OUT DUE VERIFICATION AND SCRUTINY AND WAS SATISFIED THAT TH E BIFURCATION/APPORTIONMENT WAS JUSTIFIED AND CORRECT. 4. SUBSEQUENTLY, A NOTICE WAS ISSUED BY THE COMMISS IONER U/S 263 OF THE ACT. THE COMMISSIONER HAD ISSUED NOTICE BY OBSERVI NG THAT COMMISSION REQUIRED TO THE DISALLOWED U/S 36(1) (II) OF THE AC T, AS IT WAS PAID TO THE TWO MANAGING DIRECTORS. THE COMMISSIONER ALSO OBSERVED THAT ASSESSEE HAD BOOKED MAJORITY OF EXPENSES AGAINST THE UNIT CARRYI NG OUT TRADING OPERATIONS AND THEREBY HAD INFLATED PROFITS OF THE MANUFACTURI NG UNIT FOR CLAIMING EXEMPTION U/S 80IC OF THE ACT, WHEREAS EXPENSES BOO KED FOR ELIGIBLE UNIT U/S 80IC OF THE ACT WERE LESSER THAN THE AMOUNT AS AGAI NST EXPENSES ON ACCOUNT OF TRADING ACTIVITIES. 5. THE COMMISSIONER IN HIS ORDER OBSERVED THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER ACCEPTING SUCH COMMISSION PAY MENT WITHOUT VERIFYING AS TO WHETHER PROVISIONS OF SECTION 36 (1) (II) OF THE ACT ARE ATTRACTED, WAS SET ASIDE ON THIS ISSUE WITH A DIRECTION TO THE ASSESSING OFF ICER TO VERIFY AS TO WHETHER THE CONCERNED DIRECTORS WERE STAKE HOLDERS/SHAREHO LDERS IN THE COMPANY, ENTITLED TO PROFITS/DIVIDEND OF THE COMPANY AND IF THESE FACTS APPEAR TO BE CORRECT THEN THE PROVISIONS OF SECTION 36 (1) (II) OF THE ACT MAY BE INVOKED TO DISALLOW THE COMMISSION PAYMENT MADE TO THE SAID D IRECTORS AND THE FRESH ASSESSMENT ORDER U/S 143(3) OF THE ACT MAY BE PASSE D ACCORDINGLY. 6. ON THE SECOND ISSUE, THE COMMISSIONER, INSTEAD O F COMMENTING UPON OR GIVING A FINAL FINDING WHETHER AFORESAID APPORTIONM ENT WAS ACCEPTABLE OR NOT, OBSERVED THAT IT WAS POSSIBLE THAT THERE WAS AN ATT EMPT TO INFLATE EXPENSES ON TRADING ACTIVITY AND AN ATTEMPT MIGHT HAVE BEEN MAD E TO REDUCE ACTUAL 3 ITA NO. 1315/DEL/2012 EXPENSES OF THE EXEMPT UNIT. THE USE OF THE WORD POSSIBLE WOULD INDICATE THAT THERE WAS NO FINDING AND ADJUDICATION BY THE COMMIS SIONER AND HIS OBSERVATIONS WERE BASED ON MERE SUSPICION. 7. THE ASSESSEE WENT IN APPEAL AGAINST THE SAID ORD ER UNDER SECTION 263 OF THE ACT BEFORE THE TRIBUNAL. THE TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 26.042013. THE ASSESSEE WENT TO H ONBLE HIGH COURT AND THE HONBLE HIGH COURT REMITTED BACK THE MATTER BY DIRE CTING THE TRIBUNAL TO CONSIDER THE FACTUAL MATRIX AS RELATED TO VARIOUS D OCUMENTS ON RECORD AND TO EXAMINE THE SCOPE OF SECTION 36 (1) (II) OF THE ACT . 8. THE HONBLE HIGH COURT HAS GIVEN CLEAR CUT FINDI NG IN PARA 11 THAT: 11. IT IS CLEAR FROM THE ORDER PASSED BY THE COMMI SSIONER UNDER SECTION 263 THAT THE ISSUE RELATING TO APPORTIONMEN T OF COMMON EXPENDITURE WAS SPECIFICALLY GONE INTO AND EXAMINED BY THE ASSESSING OFFICER, WHO WAS FULLY SATISFIED WITH THE APPORTIONMENT MADE. THUS, IT WAS NOT A CASE OF NO ENQUIRY BUT SPECIFIC AND POINTED ENQUIRIES BY THE ASSESSING OFFICER. THE SA ID FINDING AND APPORTIONMENT COULD HAVE BEEN SET ASIDE AND NEGATED ONLY WITH THE FINDING BY THE COMMISSIONER, THAT THE ASSESSING OFF ICER WAS ERRONEOUS AND WRONG. THE COMMISSIONER SHOULD HAVE E XAMINED AND GONE INTO THE QUESTION OF APPORTIONMENT ON MERITS. MERE STATEMENT THAT IT WAS POSSIBLE THAT THE ASSESSING OFFICER WAS ERRONEOUS, IS NOT SUFFICIENT AND DOES NOT MEET THE REQUIREMENT STIPUL ATED BY LAW. 9. THEREFORE, ONLY ONE ISSUE REMAINS TO BE LOOKED I NTO RELATING TO COMMISSION PAID TO MANISH DHAM AND RAJIV BAKSHI AND APPLICABILITY OF 4 ITA NO. 1315/DEL/2012 SECTION 36 (1) (II) OF THE ACT. IN THIS REGARD THE ASSESSEE HAS SUBMITTED THREE LETTERS ALONG WITH LEDGER ACCOUNTS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS GIVEN THE DETAILS OF COMMISSION PA ID TO RELATED PARTIES ALONG WITH THE COPY OF AGREEMENT AND COMMON BUSINESS HEAD MANUAL AND THE SAME WAS ENCLOSED TO LETTER DATED 22.06.2009. THE ASSESS EE FURTHER SUBMITTED THE COPY OF LEDGER ACCOUNTS OF COMMISSION/BROKERAGE, SA LE PROMOTION, FREIGHT AND CARTAGE, REBATE AND DISCOUNT ALONGWITH DETAILS OF T OURS AND TRAVELS. THE ASSESSEE FURTHER SUBMITTED IN THE SAID LETTER THAT HE HAS SUBMITTED THE INFORMATION RELATED TO SHRI RAJIV BAKSHI WHO IS A R EGIONAL HEAD OF THE COMPANY (ALSO CALLED THE BUSINESS HEAD) WHO IS OLD ASSOCIATE OF THE COMPANY AND GOT THE COMMISSION ON THE SALE DONE BY HIM IN H IS RESPECTIVE REGION. THE COMPANY HAS PRESCRIBED A BUSINESS HEAD MANUAL WHICH PRESCRIBES THE DETAILS OF THE TERMS AND CONDITIONS OF THE COMMISSION SALE CONTRACT. THE ASSESSEE FURTHER SUBMITTED THE CHART OF EQUITY SHARE HOLDIN G AS ON 13/3/2012 RELATED TO VARIOUS YEARS STARTING FROM 31 ST MARCH 2007 TILL 13 TH MARCH 2012 IN THIS PARTICULAR, MR. MANISH DHAM WAS NOT ACQUIRING ANY P ERCENTAGE OF EQUITY IN THE YEAR 2007 WHEREAS MR. RAJEEV BAKSHI WAS HAVING 1.72 % OF EQUITY IN THE YEAR 31 ST MARCH 2007. THE SAME IS ANNEXED AT PAGE 42 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE BEFORE THIS TRIBUNAL. THE ASSESSEE SUBMITTED THE ENTIRE PAPER BOOK WITH THE RELEVANT DOCUMENTS TO ASSESSING OFFIC ER AND AFTER GOING THROUGH ALL THE DOCUMENTS THE ASSESSING OFFICER HAS PASSED REASONED ASSESSMENT ORDER. THE ASSESSEE HAD BOOKED MAJORITY OF THE EXPE NSES AGAINST THE UNIT CARRYING OUT TRADING OPERATIONS AND THEREBY HAVE IN FLATED PROFITS OF THE MANUFACTURING UNIT EXEMPT U/S 80IC OF THE ACT EXPEN SES BOOK FOR THE ELIGIBLE UNIT U/S 80IC OF THE ACT WERE ONLY RS.12,31,78,274/ - AS AGAINST EXPENSES OF RS.37,26,60,316/- BOOKED AGAINST TRADING ACTIVITIES . THE HONBLE HIGH COURT IN THIS RESPECT HAS QUOTED PARA 6 OF THE CITS ORDE R. 10. THE AR SUBMITTED THAT THE COMMISSION PAID WAS D ULY APPROVED BY THE SHAREHOLDERS OF THE COMPANY, AND THEREFORE, SECTION 36 (1) (II) WAS NOT 5 ITA NO. 1315/DEL/2012 APPLICABLE. THE AR FURTHER SUBMITTED THAT ASSESSEE HAS BEEN MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR MANUFACTURING UNIT RE CEIPTS AND EXPENDITURE WHICH WAS EXEMPT U/S 80IC OF THE ACT AND THE TRADIN G ACTIVITIES. HOWEVER, THERE WERE CERTAIN COMMON EXPENSES, WHICH WERE TO B E SEGREGATED, AS COMMON EXPENSES WERE NOT UNUSUAL, ABNORMAL OR UNIQUE IN SU CH CASES. IN ORDER TO CARRY OUT THE SAID SEGREGATION, THE ASSESSEE HAS MA DE APPORTIONMENT AND THE RATIO THEREOF WAS INDICATED AND INFORMED TO THE ASS ESSING OFFICER. 11. THE DR SUBMITTED THAT THE ITATS FIRST ORDER HAS TO BE TAKEN INTO CONSIDERATION AND FURTHER SUBMITTED THAT THE DEPART MENT WAS NOT GIVEN ENCLOSURES TO THE DOCUMENTS OF THE LETTER DATED 22. 06.2009 OF THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS. THEREFORE, THE COMMISSIONER OF INCOME TAX HAS RIGHTLY PASSED ORDER UNDER SECTION 263 OF T HE ACT. THE DR ALSO MENTIONED THAT HIGH COURT HAS DIRECTED THE TRIBUNAL TO DECIDE BOTH THE ISSUES IN RESPECT OF APPLICABILITY OF SECTION 36(1) (II) O F THE ACT AS WELL AS APPORTIONMENT. THE DR FURTHER SUBMITTED THAT THE A O THOUGH MADE OBSERVATIONS BY TAKING INTO ACCOUNT OF THE EVIDENCE PLACED BEFORE HIM STILL, THE AO HAS NOT APPLIED HIS MIND, THEREFORE SUBMITTED DI SMISSAL OF THE APPEAL. 12. WE HAVE PERUSED ALL THE RECORDS AND TAKEN INTO ACCOUNT ALL THE SUBMISSIONS MADE BY THE AR AS WELL AS DR. THE FIRS T CONTENTION OF THE DR IN RESPECT OF DIRECTIONS GIVEN BY THE HIGH COURT IS NO T AS PER THE ACTUAL DIRECTION GIVEN BY THE HONBLE HIGH COURT. THE HONBLE HIGH C OURT HAS GIVEN A DIRECTION IN RESPECT OF EXAMINING THE SCOPE OF SECTION 36 (I) (II) OF THE ACT AFTER TAKING INTO ACCOUNT VARIOUS DOCUMENTS. SECONDLY, THE ENCLOSURES SUPPLIED BY THE ASSESSEE TO THE ASSESSING OFFICER WERE ACTUALLY GIVEN TO THE ASSESSING OFFICER AND THERE WAS NO PROOF GIVEN BY THE DR THAT AT NO POINT OF TI ME, THAT THE DOCUMENTS WERE NOT AVAILABLE WITH THE DEPARTMENT. THE THIRD ASPEC T THAT AO HAS NOT APPLIED HIS MIND DOES NOT COME IN THE PURVIEW OF SECTION 26 3 OF THE ACT. THE SCOPE OF 6 ITA NO. 1315/DEL/2012 SECTION 263 OF THE ACT HAS TO BE TAKEN INTO ACCOUNT THAT IF THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAS ERRONEOUSLY DONE THE SAME AND WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE THEN ONLY THE REVISION OF ORDERS U/S 263 OF THE ACT BE PASSED BY THE COMMISSIONER OF INC OME TAX. THE PROVISION UNDER SECTION 263 OF THE ACT DOES NOT GIVE POWERS T O THE COMMISSIONER TO MAKE ENQUIRY AGAIN FOR THE ISSUE WHICH HAS BEEN DEC IDED AFTER VERIFYING ALL THE DOCUMENTS ON RECORD BY THE ASSESSING OFFICER. IN F ACT THE SCOPE OF SECTION 263 OF THE ACT IS IN RESPECT OF THE ORDER PASSED BY TH E ASSESSING OFFICER WHICH IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS VERIFIED AL L THE DOCUMENTS IN FACT HE HAS TAKEN INTO CONSIDERATION AND AFTER VERIFYING THE SA ME HAS RIGHTLY HELD THAT NO DISALLOWANCE IS TO BE MADE UNDER SECTION 36(1) (II) OF THE ACT. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT AND RESTORE THE ASSESSMENT ORDER PASSED BY THE A.O. 13. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 07 TH OF SEPTEMBER 2015. SD/- SD/- ( N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/09/2015 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 7 ITA NO. 1315/DEL/2012 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 28.08.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 31.08.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 01.09.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 07.09.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .08.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.