ACIT CIR 25(3), MUMBAI V. MILAN N SHAH, MUMBAI

ITA 1718/MUM/2012

• Counselvise Citation: 171819914 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMAT SR
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , , BEFORE S/SH. JOGINDER SINGH,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1718 /MUM/201 2 , / ASSESSMENT YEAR - 200 8 - 09 ACIT - CENTRAL CIRCLE - 2 5(3) 308, C - 11, BANDRA KURLA COMPLEX BANDRA (E) MUMBAI - 400 051. VS SHRI MILAN N. SHAH Q - 1202, PANCHSHEEL GARDEN MAHAVIR NAGAR, KANDIVALI(W) MUMBAI - 400 067. PAN: ANIPS 3933 R ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI NISHIT GANDHI / REVENUE BY :SHRI YOGESH KAMAT - SR.AR / DATE OF HEARING : 15 - 06 - 2015 / DATE OF PRONOUNCEMENT : 15 - 06 - 2015 , 19 61 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 16.12.2011 OF CIT(A) 35 , THE ASSESSING OFFICER(AO) , HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DELETING THE ADDITION OF RS.29,45,455/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUB - CONSULTANCY CHARGES PAID. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF CONSULTANCY AND ADVISORY SE RVICES IN SHARES AND SECURITIES, FILED HIS RETURN OF INCOME ON 30. 0 9. 20 09 ADMITTING TOTAL INCOME O F RS.38.92 LACS. THE AO COMPLETED THE ASSESSMENT ON 24.12.10 , U/S. 143(3) OF THE ACT DETER MINING THE INCOME OF THE ASSESSEE AT RS.68.37 LACS. 2 . EFFECTIVE GR OUND O F APPEAL IS ABOUT DISALLOWANCE OF DEDUCTION OF RS.29,45,455/ - CLAIMED BY THE ASSESSEE TOWARDS CONSULTANC Y CHARGES. DUR ING THE ASSESSME NT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE H AD DEBITED CONSULTANC Y CHARGE S IN THE NAMES OF NAVIN S. SHAH (FATHER OF THE ASSESSEE ) AND HEMANT K. S HAH, CA(FRIEND OF THE ASSESSEE ). HE EXAMINED THE ASSESSEE ON OATH DURING THE ASSESSMENT PROCEEDING AND DIRECTED THE ASSESSEE TO FILE EXPLANATION ABOUT JUS TIFICATION OF PAYMENT OF CONSULTANCY CHARGES. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE GENUINE NEED OF THE BUSINESS VIZ . A VIZ . THE EXPENSES FOR CONSULTANCY FEES, THAT SUB CONSULTANCY CHA RGES HAD BEEN PAID TO RELATED PARTIES, THAT ONE OF THE PARTY WAS HIS FATHER, THAT CONSULTANCY FEE WAS OUTSTANDING FOR THE Y EA R AND THE EARLIER Y EA RS. THE AO MADE AN ADD ITIO N OF RS. 29.45 LACS. 1718 - MILAN SHAH 2 3 . AGGRIEVED BY THE ORDER OF TH E AO, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE FIST APPELLATE AUTHORITY ( FAA ). BEFORE HIM, IT WAS CONTENDED THAT THE ASSESSEE HAD FILED EXPLANATION WITH REGARD TO GENUINENESS OF PAYMENT OF SUB - CONSULTANCY FEE, THAT THE AO HAD WRONGLY HELD THAT JOB BING ACTIVITIES DID NOT WARRANT ANY EXPERT OPINION, THAT THE JOBBING BUSINESS WAS HIGHLY VOLATILE, THAT IT REQUIRED DAILY ANALYSIS OF SHARE MARKET Q UOTATION S AND TRENDS, THAT ALL THESE ACTIVITIES C OU LD NOT BE P E RFORMED BY ONE PERSON SINGLE HANDEDLY, THAT HE TOOK ADVISE FROM PERSONS WHO WERE EXPERI ENCED AND EXPERT IN THE LINE OF ACTIVITY, THAT THE BUSINESSMAN WAS THE BEST JUDGE OF THE ACTIVITY TO BE EMPLOYED TO CARRY ON THE BUSINESS ACTIVITY , THAT HEMANT K. SHA H WAS A PROFESSIONAL, THAT HE WAS IN THE FIELD OF SHARE MARKET FOR LAST SO MANY YEARS, THAT HE HAD SUBMITTED THE COPY OF HIS INCOME TAX RETURN, THAT H EMANT K S HAH HAD OFFERED THE INCOME REC EIVE D FROM THE ASSESSEE FOR THE Y EA R UNDER CONSIDERATION FOR TAXATION , THAT NAVIN S. S HAH HAD EXPERT KNOWLEDGE OF SHARE TRADING , THAT HE WAS WORKING WITH TREA SURY BENCH OF CENTRAL BANK OF INDIA, THAT HE HAD ALSO PAID THE TAX ON THE RECEIPT BASIS WITH REGARD TO SUB CONSULTANCY FEES.THE FAA CALLED FOR A REMAND REPORT FROM THE AO AND INVITED COMMENTS OF THE ASSESSEE ABOUT THE REMAND REPORT. AFTER CONSIDERING THE AVAILABLE MATERIAL, THE FAA HELD THAT THE ASSESSEE WAS REGULARLY CARRYING ON THE BUSINESS OF CONSULTANCY AND ADVISORY SERVICES IN THE FORM OF JOBBING, THAT HE HAD SHOWN THE INCOME ARISING FR O M BOTH ACTIVITIES WHICH WAS ACCEPTED AS SUCH BY THE DEPARTMENT, T HAT THERE HAD BEEN PHENOMENAL INCREASE IN THE GROSS REC EIPT FROM RS. 42 .00 LA C S TO RS. 96 .00 LACS FOR AY. 20 07 - 08 TO 20 08 - 09, THAT THE ACCOUNTS OF THE ASSESSEE WERE AUDITED AS PER PROV ISION S OF SECTION 4 4 AB OF THE ACT, THAT HE HAD FILED EXHAUSTIVE DETAILS DUR ING THE ASSESSMENT PROCEEDINGS, THAT IT INCLUDED EXPLANATION REGARDING CONSULTANCY CHARGES DEBITED TO THE P&L A/C., THAT THE AO HAD NOT INVOKED THE PROVISIONS OF S.145 OR 144 OF THE ACT, THAT ALL THE PAYMENTS WERE MADE BY A/C. PAYEE CHEQUES AND APPROPRIAT E TAXES WERE DEDUCTED AT SOURC E, THAT BOTH THE RECIPIENTS OF SUB - CONSULTANCY WERE INCOME TAX ASSESS E ES AND HAD OFFERED THE CORRESPONDING INCOME S IN THEIR RETURNS, THAT BOTH OF THEM HAD FILED CONFIRMATION OF PAYMENT, COPIES OF INCOME TAX STATEMENT AND BANK STATEMENT BEFORE THE AO, THAT B OTH OF THEM HAD APPEARED BEFORE AO IN RESPONSE TO THE SUMMONS ISSUE D U/ S. 131, THAT IN THEIR STATEMENT,ON OATH, THEY H AD CONF I RMED THE SERVICES RENDERED AS WELL AS REC EI PT OF SUB CONSULTANCY CHARGES, THAT THE ASSESSEE WAS ALSO EXAMINED BY AO,THAT HE HAD CONFIRM E D PAY M ENT OF SUB CONSULTANCY CHAR G ES, THAT BOTH OF THEM HAD EXPE R IENC E OF SHARE MARKE T AND WERE CAPABLE OF RENDERING THE SERV ICES, THAT THE AO HAD NOT CONTRO VERTED OR DISPUTED THE BASIC FACTS , THAT THE ASSESSEE WAS FOLL OWING MERCANTIL E SYS TEM OF ACCOUNTING , THAT NAVIN S . S HAH WAS FOLL OWIN G CASH SYS TEM OF ACCOUNTING , THAT AO HAD NOT SPELT OUT AS TO WHAT FURTHER EVIDENCES WERE EXPECTED FROM THE ASSESSEE , THAT IN THE STOCK MARKET CONSULTANCY AND ADVISORY IS GIVEN ON REAL TI ME BASIS AND CONTINUOUSLY, THAT IN SUCH A TRADE CUSTOMARY PRACTICE A S WELL AS CIRCUMSTANTIAL EVIDENCES HAD TO BE L OOKED IN, THAT BOTH THE PAYEES HAD GIVEN DESCRIPTION OF THE SERVICES RENDERED BY THEM, THAT THE AO HAD NOT GIV EN ANY CLEAR OR SPECIFIC FINDING AB OU T JUSTIFICATION FOR INVOKING THE PROV ISION OF SEC. 40A(2)(B) OF THE ACT, THAT THE AO C OU LD NOT SIT IN THE ARMCHAIR OF THE BUSINESS MAN TO DECIDE COMMERCIAL EXPEDIENCY, BUSINESS NEED REASONABLENESS OF PAYMENT TO BE MADE , THAT THE ASSESSEE HAD DISCHARGED HIS ONUS TO CLAIM DED UCTION OF RS. 29.45 LACS AS CONSULTANCY , THAT THE A O HAD FAILED TO BRING ON RECORD ANY COGENT MAT ERIA L TO REBUT ASSESSEE S EXPLANATION AND EVIDENCES. ACCORDINGLY, THE DISALLOWANCE OF RS. 29 , 45 , 445/ - MADE BY THE AO WAS DELETED. 4. BEFORE US , THE DEPARTMENTAL REPRESENTATIVE ( DR ) RELIED UPON THE OR DER OF THE AO AND STATED THAT JUST I F I CATION FOR DELETING THE ADDITION WAS MISSING IN THE ORDER OF THE FAA, THAT SERVICES WERE 1718 - MILAN SHAH 3 NOT RENDERED TO THE ASSESSEE . THE AUTHORISED REPRESENTATIVE ( AR ) ARGUED THA T HEMANT K. SHAH , NAVIN S. SHAH WERE EXPERT IN THE FIELD OF SHARE M ARKETING ,T HAT AM OUN T WAS PAID FOR BUSINESS NEED OF THE ASSESSEE , THAT BOTH OF THEM H AD OFFERED INCOME FOR TAXATION, THAT IN EARLIER Y EARS ALSO ASSESSEE WAS PAYING CONSULTANCY CHARGES TO THO SE PERSONS. HE REFERRED TO PG - NO.153 TO 158 OF THE P APER BOOK . 5. WE HAVE HEARD THE RIVAL SUBM ISSION S AND PERUSED THE MAT ERIAL BEFORE US. WE FIND THAT THE DISALLOWANCE WAS MADE BY THE AO, AS HE WAS OF THE OPINION THAT THERE WAS NO BUSINESS NEED TO MAKE SUB CO NSULTANCY CHARGES AND THEN SERVICES WERE NOT RENDERED BY THE CONSULTANTS , THAT FAA HAD CALLED FOR REMAND REPORT FOR AO , THAT BOTH THE PARTIES I.E.SERVICE PROVIDERS HAD FILED THE PROOF OF FILING OF THEIR RETURNS OF INCOME, DURING THE ASSESSMENT PROCEEDINGS, WH EREIN THE SUB CONSULTANCY CHARGES WERE OFFERED FOR TAXATION. IN OUR OPINION IT IS THE ASSESSEE AND NOT THE AO WHO HAS TO DECIDE THE NEEDS OF THE BUSINESS AND PAYMENT TO BE MADE.IF THE PAYMENT ARE TO BE MADE FOR CARRYIN G ON OF BUSINESS SAME CANNOT BE DISALL OWED EVEN IF T HE AO IS OF THE OPINION THAT THE PAYMENT IS EXCES SIVE.THE ONLY EXCEPTION IS PROVISIONS OF SECTION 40(A)(2)(B)OF THE ACT. BUT THE AO HAS NOT DISCHARGED THE ONUS THAT THE ASSESSEE HAD VIOLATED THAT SECTION. FROM THE AFFIDAVITS FILED BY BOTH THE RECIPIENTS OF THE SUB - CONSULTANCY, IT IS CLEAR THAT THEY HAD RENDERED SERVICES TO THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ORDER O F FAA DOES NOT S UFFER FROM ANY LEGAL INFIRMITY.THEREFORE,CONFIRMING HIS ORDER, WE DECIDE THE EFFECTIVE GR OUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH , JUNE ,2015. 15 , 2015 SD/ - SD/ - ( / JOGINDER S INGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 15 .0 6 .2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.