ACIT CEN CIR 11, MUMBAI V. JAYAVANT PRODUCTS LTD, MUMBAI

ITA 1651/MUM/2010

• Counselvise Citation: 165119914 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 16-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO.1651/MUM/2010 A.Y 2004-05 ASST. COMMISSIONER OF I.T., CENTRAL CIR.11, MUMBAI. VS. M/S. JAYAVANT PRODUCTS LTD., 1401, RAHEJA CENTRE, NARIMAN POINT, MUMBAI 400 021. PAN: AAACJ 4489 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.C.TEJPAL. RESPONDENT BY : SHRI VIJAY MEHTA. DATE OF HEARING: 16-04-2012. DATE OF PRONOUNCEMENT: 20-04-2012. O R D E R VIVEK VARMA, JM: THE APPEAL ARISES OUT OF THE ORDER OF THE CIT(A)-37 , MUMBAI DATED 16-12-2009, WHEREIN THE AO HAS CHALLENGED THE DELETION OF COMMISSION INCOME RECEIVED FROM M/S. S.J.IMPEX AND M/S. JYOTI BRIGHT BAR LTD., BY THE CIT(A). 2. THE REASON FOR THE AO NOT ALLOWING THE COMMISSIO N AS INCOME FROM BUSINESS AND TREATING THE SAME AS INCOME FROM OTHER SOURCES WAS BECAUSE IN THE CASES OF THE PAYEES, I.E. M/S. S .J.IMPEX AND M/S. JYOTI BRIGHT BAR LTD. THE EXPENSES WERE NOT TREATED AS BUSINESS EXPENSES AND CORRESPONDINGLY, AO TREATED THE RECEIP TS AS INCOME FROM THE OTHER SOURCES. THE ISSUE IN BOTH THESE CASES I. E. M/S. S.J.IMPEX ITA NO.1651 OF 2010 2 AND M/S. JYOTI BRIGHT BAR LTD. REACHED THE ITAT MU MBAI, WHEREIN THE CO-ORDINATE BENCH IN I.T.A. NOS. 7533 & 7534/MUM/20 07, DATED 07-05-2008, TREATED THE IMPUGNED OUTFLOW AS BUSINES S EXPENSES. IN I.T.A.NOS.7533 & 7534/MUM/07 HAS TREATED THE PAYMEN TS MADE BY THESE COMPANIES TO THE ASSESSEE COMPANY AS BUSINESS EXPENSES. THE RELEVANT PORTION OF THE ORDER IS AS UNDER: 6.1 THUS, IT IS CLEAR THAT FOR ALL PROCEEDINGS UND ER THE INCOME TAX ACT SAVE AND EXCEPT THOSE U/S.131 WHERE THE ASSESSEE OR THE WITNESS HAS BEEN REQUIRED TO ATTEND FOR PERSONAL EXAMINATION ON OATH OR AFFIRMATION, THE AUTHORISED REPRESENTATIVE IS ENTIT LED TO APPEAR. IN THE CASE ON HAND, THE CHARTERED ACCOUNTANT OF M/S ADAM & CO. MR. POLISHWALA HAD APPEARED AND STATED THAT HE IS INVOL VED IN THE DAY-TO- DAY BUSINESS OF MADAM & CO. AS HE IS REGULARLY SPEN DING TIME IN THE OFFICE OF M/S ADAM & CO. AND IS, THEREFORE, FULLY C ONVERSANT WITH THE BUSINESS AFFAIRS OF M/S ADAM & CO. AND, THEREFORE, HIS STATEMENT WAS RECORDED U/S. 131. UNDER SEC. 131, AO PERSON AND EX AMINE HIM ON OATH. BUT AS PROVIDED U/S.288 AUTHORISED REPRESENTA TIVE IS NOT EMPOWERED TO GIVE ANY STATEMENT ON OATH. THEREFORE, THE STATEMENT CANNOT FORM THE BASIS FOR THE ADDITION. THE OTHER F ACTS CONSIDERED BY AO FOR MAKING THE DISALLOWANCE ARE THAT JPL HAS NO INFRASTRUCTURE OR EXPERIENCE FOR PROVIDING ANY ASSISTANCE FOR THE PRO MOTION OF EXPORT. BUT WE FIND THAT AO HAS NO EVIDENCE OR MATERIAL BEF ORE HIM FOR COMING TO THIS CONCLUSION EXCEPT THAT JPL HAD DECLA RED LOSS AND THAT NO TAX LIABILITY HAD ARISEN TO IT FROM THE COMMISSION RECEIVED FROM THE ASSESSEE. THE FACT THAT JPL HAS FILED THE CONFIRMAT ION OF RECEIPT OF COMMISSION AND HAS OFFERED THE SAME FOR TAXATION TH OUGH AFTER SETTING IT OFF AGAINST ITS BUSINESS LOSS, THERE WAS NO TAX LIABILITY GIVES RISE TO A PRESUMPTION THAT THE ASSESSEE HAS RECEIVED SERVICES OF JPL. THE FACT THAT JPL HAD OFFERED THE COMMISSION AND BROKERAGE I NCOME IN THE NEXT ASSESSMENT YEAR WHICH HAS BEEN ACCEPTED BY THE AO U /S. 143[3J ASSESSMENT ALSO GO TO PROVE THAT JPL IS ENGAGED IN SUCH ACTIVITIES. FURTHER, AO HAS NOT EXAMINED JPL BEFORE COMING TO T HE CONCLUSION THAT IT HAD NO INFRASTRUCTURE OR EXPERIENCE FOR PRO VIDING THE SERVICES. IN THE COMMISSION/BROKERAGE BUSINESS, NOT MUCH OF INFR ASTRUCTURE IS NECESSARY AND THE AO HAS NOT BEEN ABLE TO POINT OUT ANY DEFICIENCY IN THE INFRASTRUCTURE OF JPL. THEREFORE, IN OUR OPINIO N, THE DISALLOWANCE HAS BEEN MADE ON TOTALLY IRRELEVANT CONSIDERATIONS MORE PARTICULARLY WHEN JPL AND THE ASSESSEE ARE UNRELATED PARTIES. TH E FACT THAT THE ASSESSEE HAS TAKEN OVER CONTROL OF JPL SUBSEQUENTLY ALSO HAS NO BEARING ON THE TRANSACTIONS BECAUSE THE ASSESSEE HA D TAKEN OVER THE CONTROL IN THE A.YRS. 05-06 AND 06-07 WHEREAS THE R ELEVANT ASSESSMENT YEAR BEFORE US IS 04-05. THE ASSESSEE HAS ALSO FILE D CONFIRMATIONS FROM ITA NO.1651 OF 2010 3 THE RESPECTIVE PARTIES TO THE EFFECT THAT JPL HAS R ENDERED SERVICES TO THE ASSESSEE JUSTIFYING THE PAYMENT OF COMMISSION. IN V IEW OF ALL THE ABOVE, WE FIND THAT THE DISALLOWANCES MADE BY THE A C AND CONFIRMED BY THE C[T(A)ARE NOT SUSTAINABLE AND THE ASSESSEE S APPEAL IS TO BE ALLOWED. THE CIT(A) ALSO WHILE DECIDING THE APPEAL BEFORE HI M, ALSO REFERRED TO THE RELEVANT POTION OF THE TRIBUNALS ORDER IN ALLO WING THE APPEAL. 3. BEFORE US, A.R. SUBMITTED THAT THE CIT(A) HAD RE MANDED THE ISSUE TO THE FILE OF THE AO AND HAD RECEIVED THE RE MAND REPORT. THE A.R. SUBMITTED THAT AS THE DECISION TAKEN BY THE CI T(A) WAS CONSCIOUS AND REASONABLE, BASED ON FACTS. HE ALSO SUBMITTED T HAT IN THE SUBSEQUENT YEAR THE AO HAS ACCEPTED THE INCOME AS C OMMISSION U/S.143(3). 4. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE AO. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS OF THE P ARTIES, WE DO NOT FIND ANY REASON TO DISTURB THE FINAL FINDING OF THE CIT(A) AND AS DONE BY THE CO-ORDINATE BENCH IN THE CASES OF TWO P AYEE PARTIES. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 0/4/2012. SD/- SD/- (RAJENDRA SINGH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 20/4/2012. P/-*