Asst.C.I.T., Mangalore V. M/s Hassan Hajee & Co, Mangalore

ITA 1359/BANG/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5475 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K A CHANDRASHEKAR
• Assessee Lawyers: P DINESH
• Keywords: Search and seizure
• Section: 153A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH : MANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NOS. 67 & 68/BANG/2010 ASSESSMENT YEAR: 2002-03 TO 2003-2004 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MANGALORE. APPELLANT VS. M/S. HASSAN HAJEE & CO., NO. 20-8-678, NEAR OLD MUNICIPAL OFFICE, BUNDER, MANGALORE. PAN: AAAFH 8204R .....RESPONDENT IT A NO. 947/BANG/2008 ASSESSMENT YEAR: 2004-05 M/S. HASSAN HAJEE & CO., NO. 20-8-678, NEAR OLD MUNICIPAL OFFICE, BUNDER, MANGALORE. PAN: AAAFH 8204R ........APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), MANGALORE. RESPONDENT ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 2 OF 14 ITA NOS. 1358 TO 1363/BANG/2015 ASSESSMENT YEAR: 2006-07 TO 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, MANGALORE. APPELLANT VS. M/S. HASSAN HAJEE & CO., NO. 20-8-678, NEAR OLD MUNICIPAL OFFICE, BUNDER, MANGALORE. PAN: AAAFH 8204R .....RESPONDENT ASSESSEE BY : SHRI P. DINESH, ADVOCATE REVENUE BY : SHRI K.A. CHANDRASHEKAR, JCIT DATE OF HEARING : 03 .0 2 .2017 DATE OF PRONOUNCEMENT : 02 .0 5 .2017 O R D E R PER SHRI INTURI RAMA RAO, AM: SINCE THE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS WE PROCEED TO DISPOSE THE SAME VIDE THIS CONSOLIDATED ORDER. WE SHALL NOW TAKE UP THE ITA NOS. 67 & 68/BANG/2010 FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 RESPECTIVELY AND ITA NO. 947/BANG/2008 FOR THE ASSE SSMENT YEAR 2004-05. ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 3 OF 14 2. THESE ARE APPEALS RESTORED BY THE HONBLE HIGH COUR T VIDE ORDERS IN ITA NO. 432/2010 DATED 26.02.2016 FOR THE ASSESSMENT YE ARS 2002-03 & 2003-04, ITA NO. 433/2010 DATED 28.09.2016 FOR THE ASSESSMENT YEAR 2003-04 AND I.T.A. NO. 450/2009 DATED 01.06.2015 FO R THE ASSESSMENT YEAR 2004-05. THE HONBLE HIGH COURT IN ITA NO. 45 0/2009 HAS OBSERVED AS FOLLOWS. ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 4 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 5 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 6 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 7 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 8 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 9 OF 14 ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 10 OF 14 3. THE HONBLE HIGH COURT HAS SET ASIDE THE ORDER OF T HE TRIBUNAL FOR FRESH DISPOSAL IN ACCORDANCE WITH LAW. THUS ALL THE THRE E APPEALS ARE RESTORED TO THE FILE OF THE TRIBUNAL FOR FRESH ADJUDICATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2004-05 THE ADDITIONAL GROUND RELAT ING TO ENHANCEMENT OF INCOME TO THE EXTENT OF RS. 2,70,70,745/- BY CIT (APPEALS) WAS INVOLVED. IN THE ASSESSMENT YEARS 2002-03 TO 2004- 05 THE COMMON ISSUE IS REGARDING DISALLOWANCE OF THE SPEED MONEY. 4. THE BRIEF FACTS OF THE CASE ARE THAT. 5. THE RESPONDENT ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENT AND TRANS PORT CONTRACTOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD NOTICED THAT ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 11 OF 14 THE ASSESSEE FIRM HAD CLAIMED A SUM OF RS. 1,17,59, 931/- AS THE SPEED MONEY. THE ASSESSEE FIRM CLAIM, THAT THIS SPEED MO NEY WAS PAID OUT OF BUSINESS EXPEDIENCY. IT IS CLAIMED THAT THE SPEED MONEY IS PAID TO THE NMPT TO COMPLETE THE WORK ON TIME AND AVOID THE PAY MENT OF CHARGES TO SHIP OWNERS AND THESE TYPE OF PAYMENT IS COMMON AND IS PREVALENT IN THIS LINE OF BUSINESS. IT IS FURTHER SUBMITTED THA T THE PAYMENT WAS NOT MADE FOR BREACH OF ANY PROVISIONS OF LAW NOR ILLEGA L PAYMENT. THE AO HAD SET OUT THE FOLLOWING FACTS AGAINST THE ALLOWAB ILITY OF THIS EXPENDITURE FOR THE ASSESSMENT YEAR 2002-03 AND FIN ALLY DISALLOWED THE 20% OF THE EXPENDITURE. 1) GIVEN THE NATURE OF BUSINESS, SUCH PAYMENTS ARE TO BE MADE. 2) THE ASSESSEE FIRM IS MAKING SUCH CLAIMS EVEN IN EARLIER YEARS. 3) TO GET EXTRA HOURS OF WORK, ADDITIONAL PAYMENTS ARE TO BE MADE TO COMPLETE THE WORK WITHOUT PAYING DAMAGES / DEMURRAGE TO THE SHIP OWNER. 4) UNLESS SUCH EXTRA PAYMENT IS MADE, THE SURVIVAL / EXISTENCE OF THE ASSESSEES BUSINESS WILL BE IN JEOPARDY AND IT IS NORMAL IN THE TYPE OF ACTIVITY CARRIED ON BY THE ASSESSEE. 6. ON APPEAL THE CIT(A) VIDE ORDER DATED 25.11.2009 HA D RESTRICTED THE DISALLOWANCE TO 1.6% OF THE TOTAL PAYMENT FOLLOWING THE ORDER OF THE HONBLE ITATS ORDER DATED 30.04.2009 IN ITA NO. 94 7/BANG/08 FOR THE ASSESSMENT YEAR 2004-05 AND THE SAME CAME TO BE CON FIRMED BY THE HONBLE TRIBUNAL VIDE ORDER DATED 16.07.2010 IN ITA NOS. 67 & 68/BANG/2010 FOR THE ASSESSMENT YEARS 2002-03 AND 2 003-04. THE REVENUE BEING AGGRIEVED BY THE TRIBUNAL ORDER CARRI ED THE MATTER TO THE ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 12 OF 14 HONBLE HIGH COURT. THE HONBLE HIGH COURT PASSED THE ABOVE ORDERS. THUS THE MATTERS CAME BEFORE US. 7. THE ONLY ISSUE IN ALL THESE APPEALS IS WHETHER THE CIT(A) WERE JUSTIFIED IN RESTRICTING THE DISALLOWANCE AT 1.6% OF THE TOTAL W AGES FOR THE ASSESSMENT YEAR 2002-03. IT IS NOT THE CASE OF THE AO THAT THE SPEED MONEY IS NOT ALLOWABLE IN PRINCIPLE. THE AO HAD NO T EVEN DOUBTED THE GENUINENESS OF THE EXPENDITURE. HAVING REGARD TO T HE NATURE OF THE EVIDENCE PRODUCED BEFORE HIM, THE AO HAS COME TO TH E CONCLUSION THAT A PART OF THE EXPENDITURE WAS NOT ALLOWABLE AS HE FEL T THAT THERE WAS NO EVIDENCE AVAILABLE EXCEPT THE SELF MADE VOUCHERS AN D THE EXPENDITURE INCURRED IN CASH. IT IS TRITE TO LAW THAT NO EXPEN DITURE CAN BE DISALLOWED WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND RELIANC E IN THIS REGARD CAN BE MADE ON THE DECISION OF HONBLE KARNATAKA HIGH C OURT IN CASE OF ANIL KUMAR & CO. VS CIT (386 ITR 702). 8. THE ASSESSEE FIRM IS NOT ON APPEAL AGAINST THE ORDE R OF THE CIT(A); KEEPING IN VIEW THE ABOVE PRINCIPLE, WE SUSTAIN THE ORDER OF THE CIT(A) AND APPEALS FILED BY THE REVENUE ARE DISMISSED. 9. IN RESPECT OF THE ASSESSMENT YEARS 2006-07 TO 2011- 12 IN ITA NOS. 1358 TO 1363/BANG/2015 THE BRIEF FACTS OF THE CASE ARE AS UNDER. 10.IT IS THE CASE OF THE AO THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CERTAIN INCRIMINATING MATERIAL SUGGESTIN G ILLEGAL PAYMENT TO THE OFFICIALS OF PORT WAS FOUND THEREFORE HE INFER RED THAT OUT OF THE TOTAL SPEED MONEY CLAIMED THE SPEED MONEY PAID IN EXCESS OF RS. 26/- PER ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 13 OF 14 TONE WAS TREATED AS INFLATED EXPENDITURE. ACCORDIN GLY, THE AO TREATED THAT 10% OF THE SPEED MONEY AS ILLEGAL MONEY AND IN VOKING THE EXPLANATION TO SECTION 1 TO 37(1) OF THE IT ACT. 13. BEING AGGRIEVED, THE APPEAL WAS FILED AGAINST ASSES SMENT ORDERS BEFORE CIT(A), WHO UPHELD THE DISALLOWANCE TO THE E XTENT 10% OF THE SPEED MONEY AND 10% OF THE TOTAL LABOUR CHARGES. B EING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT A PPEALS. IT IS AN UNDISPUTED FACT THAT THE IMPOUND ASSESSMENT ORDERS ARE MADE PURSUANT TO THE NOTICE ISSUED U/S. 153A OF THE ACT. NOW THE LAW IS SETTLED TO THE EXTENT THAT THE ADDITIONS IN THE ASS ESSMENTS U/S. 153A CAN BE MADE ONLY BASED ON THE MATERIAL FACTS AS A R ESULT OF THE INCRIMINATED MATERIALS FOUND. FROM THE PERUSAL OF THE ASSESSMENT ORDER IT IS CLEAR THAT DURING THE COURSE OF SURVEY AND SEIZURE OPERATIONS THE DEPARTMENT HAD SEIZED A LOOSE SHEET INDICATING PAYMENT TO THE CERTAIN OFFICIALS OF THE PORT TRUST. BASED ON THIS INFORMATION THE AO AS WELL AS THE CIT(A) HAS DISALL OWED THE PAYMENT TO THE EXTENT OF 10% OF THE SPEED MONEY AS ILLEGAL PAYMENT. MERE PERUSAL OF THE LOOSE SHEET IT IS CLEAR THAT ABOUT 1 0% OF THE CASH PAYMENTS WAS MADE TO THE OFFICIALS OF THE PORT TRUS T. THEREFORE IN OUR CONSIDERED OPINION THE DISALLOWANCE TO THE EXTE NT OF 10% IS JUST AND PROPER AND THEREFORE WE DO NOT WANT TO INTERFER E. 14. ACCORDINGLY WE DISMISS THE APPEALS FILED BY THE REV ENUE. ITA NOS. 67 & 68/BANG/2010, 947/BANG/2008 & 1358 TO 1363/BANG/2015 PAGE 14 OF 14 ASSESSEES APPEAL - 2004-05:- 15. THE APPEAL AS FILED BY THE ASSESSEE COMPANY IN ITA NO. 947/BANG/2008 IS CHALLENGING THE ENHANCEMENT NOTICE ISSUED BY THE HONBLE LD. COMMISSIONER OF INCOME-TAX TO DISALLOW THE SPEED MONEY PAID TO THE SAID CONTRACTORS WHICH WERE ALLOWED BY THE AO. IN THE REVENUES APPEAL SINCE, WE HELD THAT 10% OF THE SPE ED MONEY IS DISALLOWABLE THERE WAS NO QUESTION OF ENHANCEMENT O F ADDITION ON THIS ISSUE. THEREFORE THE QUESTION OF ENHANCEMENT DOES NOT ARISE. 16. THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF MAY, 2017 SD/- SD/- ( SUDHANSHU SRIVASTAVA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 02 ND MAY, 2017. / MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.