ITO, New Delhi V. M/s Infinite Telesolution (P) Ltd., New Delhi

ITA 1473/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52989 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Business expenditure; Opportunity of being heard; Corroborative evidences; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.1473/DEL/2011 ASSESSMENT YEAR : 2007-08 INCOME-TAX OFFICER, M/S. INFINITE TELESOLUTION (P ) LTD., WARD-11(4), NEW DELHI. VS. G-4, COMMUNITY CENTRE, C-BLOCK, NARAINA VIHAR, NEW DELHI. PAN: AAACI6591F (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL MISHRA, SR. DR. RESPONDENT BY: NONE . O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 07 -01-2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING AN AMOUNT OF RS.22,70,107/- WHICH WAS ADDED BY THE AO TREATING T HE SAME AS NON BUSINESS EXPENDITURE. 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN RELYING ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF SP BUILDERS LTD. VS. CIT ( 288 ITR 1) AS THE REVENUE IS NOT CHALLENGING THE PREROGATIVE O F THE ASSESSEE TO DECIDE HOW TO RUN THE BUSINESS BUT IS V ERIFYING THE GENUINENESS AND RELATIVITY OF THE EXPENDITURE WITH THE BUSINESS OF THE ASSESSEE. 3. IN THE ASSESSMENT, THE ASSESSING OFFICER DISALLO WED DEDUCTION OF RETAINER-SHIP CHARGES AMOUNTING TO RS.22,70,107/-. FROM THE DETAILS OF RETAINER-SHIP CHARGES, IT WAS FOUND BY THE AO THAT SUM OF RS.13,48,333/- AND RS.9,21,774/- AGGREGATING TO RS.22,70,107/- WERE SH OWN TO HAVE BEEN PAID TO BRIG. ARUN KUMAR SHARMA AND MAJOR GEN. D.N. VERM A RESPECTIVELY. VIDE ORDER SHEET ENTRY DATED 7.12.2009, THE ASSESSE E WAS ASKED TO FILE JUSTIFICATION ALONG WITH SUPPORTING EVIDENCE OF THE SE PAYMENTS MADE TO THE AFORESAID PERSONS. IN HIS REPLY DATED 11.12.2009, THE AR OF THE ASSESSEE STATED THAT BOTH THESE CONSULTANTS WERE VERY SENIOR PERSONS AND THEIR APPOINTMENT IS COMMENSURATE WITH THE NATURE AND VOL UME OF THE ASSESSEES BUSINESS, AND AS OF NOW NONE OF THEM WAS ASSOCIATED WITH THE ASSESSEE COMPANY. AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE ASSESSEE, THE AO DISALLOWED THE AFORESAID RETAINER-SHIP CHARGES OBSE RVING THAT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY MATERIAL OR EVIDEN CE TO SHOW AND ESTABLISH THAT THIS EXPENDITURE WAS LAID OUT WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF 3 BUSINESS. IT WAS FURTHER OBSERVED BY THE AO THAT M ERE BECAUSE THE AFORESAID TWO PERSONS HAVE SHOWN THE AMOUNT IN THE RETURN OF INCOME, THAT BY ITSELF IS NOT SUFFICIENT TO PROVE AND ESTABLISH THAT THE EXPE NDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE S BUSINESS. THE AO, THEREFORE, DISALLOWED THE AFORESAID DEDUCTION. 4. ON AN APPEAL, THE LEARNED CIT(A) DELETED THE ADD ITION BY OBSERVING THAT BOTH THE PERSONS WERE HOLDING RESPONSIBLE POSI TION IN THE SIGNAL BRANCH OF INDIAN ARMY, WHICH WAS RESPONSIBLE FOR TELECOMMU NICATION INFRASTRUCTURE OF INDIAN ARMY, WHICH IS IN LINE OF THE BUSINESS OF THE ASSESSEE. THE LEARNED CIT(A) FURTHER OBSERVED THAT BOTH THE PERSONS WERE UNRELATED AND INDEPENDENT PARTIES AND THEY HAVE SHOWN THE INCOME IN THEIR RETURN OF INCOME. THE LEARNED CIT(A) FURTHER OBSERVED THAT I T IS A BUSINESSMANS PREROGATIVE TO DECIDE HOW HE WANTS TO RUN HIS BUSIN ESS AND TAX AUTHORITIES CANNOT DECIDE THE SAME. THE LEARNED CIT(A) FURTHER OBSERVED THAT THERE WAS NO BASIS OR MATERIAL OR EVIDENCE BROUGHT ON RECORD BY THE AO TO SUPPORT HIS CONTENTION THAT THE SAID EXPENDITURE WAS NOT LAID O UT FOR THE PURPOSE OF BUSINESS NOR THE AO HAS BROUGHT ANY EVIDENCE ON REC ORD TO PROVE THAT THE EXPENDITURE WAS NOT GENUINE. THE LEARNED CIT(A) TH EREFORE, DELETED THE ADDITION. 5. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 4 6. WE HAVE HEARD THE LEARNED DR. NONE FOR THE ASSE SSEE WAS PRESENT DESPITE NOTICE OF HEARING FIXING THE DATE ON 13.10. 2011 HAS BEEN SERVED UPON THE ASSESSEE AS IS EVIDENT FROM THE ACKNOWLEDGEMENT RECEIPT PLACED ON RECORD. 7. IN THIS CASE, THE ASSESSEE HAS CLAIMED THE EXPEN SES OF RS.22,70,107/- PAID TO THE AFORESAID TWO PERSONS FOR ALLEGED SERVI CES RENDERED BY THEM. IT WAS FOR THE ASSESSEE TO PROVE AND ESTABLISH THAT TH ESE AMOUNTS WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE SHOULD HAVE PRODUCED DETAILS ABOUT THE NATURE OF SERVICES RENDERED BY THESE TWO PERSONS TO THE ASSESSEE IN THE COURSE OF CARRYING O N ASSESSEES BUSINESS. THIS BURDEN HAS NOT BEEN DISCHARGED BY THE ASSESSEE BY ADDUCING ANY EVIDENCE REGARDING NATURE OF SERVICES RENDERED BY T HESE TWO PERSONS TO THE ASSESSEE. THE LEARNED CIT(A) HAS WRONGLY PLACED TH E BURDEN ON THE REVENUE BY OBSERVING THAT THE ASSESSING OFFICER HAS NOT BRO UGHT ANY MATERIAL ON RECORD TO PROVE AND ESTABLISH THAT THE AFORESAID EX PENDITURE HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THIS CONNECTION, RELIANCE WAS PLACED BY THE LEARNED DR U PON THE DECISION OF JURISDICTIONAL DELHI HIGH COURT DATED 16.05.2011IN ITA NO.1203/2006 IN THE CASE OF MODI STONE LTD., WHERE, IT HAS BEEN HEL D THAT PRIMARY BURDEN TO PROVE THE PAYMENTS HAVING INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE 5 OF BUSINESS, IS UPON THE ASSESSEE. THE PRIMARY BUR DEN TO PROVE THE LIABILITY OF EXPENSES WAS UNDOUBTEDLY ON THE ASSESSEE. WE FA IL TO UNDERSTAND THAT MERE BECAUSE THESE PERSONS WERE EMPLOYED IN ARMY PR IOR TO THEIR RETIREMENT, HOW THAT BY ITSELF CAN BE A BASIS TO AL LOW THE PAYMENT MADE TO THEM WITHOUT ESTABLISHING AND PROVING THAT THEY WER E ACTUALLY RENDERING SERVICES TO THE ASSESSEE IN THE COURSE OF ASSESSEE S BUSINESS. IT WAS OBLIGATORY FOR THE ASSESSEE TO PRODUCE RELEVANT EVI DENCE BEFORE THE AO TO PROVE THE ALLOWABILITY OF THESE PAYMENTS AS DEDUCTI ON WHILE COMPUTING THE ASSESSEES PROFIT AND GAINS FROM BUSINESS. THE ASS ESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THAT THESE PAYMENTS WERE MADE TO THESE TWO PERSONS TOWARDS SERVICES RENDERED BY THEM. WE, THEREFORE, FIND IT NECESSARY THAT THE MATTER NEEDS VERIFICATION TO FIND OUT THE NATURE OF SERVICES RENDERED BY THESE TWO PERSONS TO THE ASSESSEE, WHICH COULD JUSTIFY TH E PAYMENT OF RETAINER-SHIP FEE TO THEM. WE, THEREFORE, RESTORE THE MATTER BAC K TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER GIVING ASSESSEE A REA SONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEE SHALL PRODUCE NECESSARY EVIDENCE OR MATERIAL OR DETAILS BEFORE THE AO TO PROVE THAT THESE PAYMENTS WERE ACTUALLY MADE FOR SERVICES RENDERED BY THESE PERSONS AND THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE A O MAY MAKE SUCH 6 ENQUIRY AS HE THINKS FIT AND PROPER FOR DECIDING TH E ISSUE AS PER LAW. WE ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED TO BE ALLOWED FOR A STATISTICAL PURPOSE. 9. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT I MMEDIATELY AFTER THE HEARING WAS OVER ON 13 H OCTOBER, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH OCTOBER, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT