KRISHNA R. BHAT, MUMBAI V. ACIT 23(1), MUMBAI

ITA 1805/MUM/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2123 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: J S KINI
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1805/MUM/2015 ASSESSMENT YEAR : 2010-11 KRISHNA R. BHAT, A-203, ANAND RAJ INDUSTRIAL ESTATE, SONAPUR LANE, L.B.S. MARG, BHANDUP (WEST), MUMBAI [PAN : ACCPB7606H] VS. ACIT-23(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S. KINI, AR RESPONDENT BY : SHRI RAJEEV GUBGOTRA, DR DATE OF HEARING : 14-06-2019 DATE OF PRONOUNCEMENT : 19-06-2019 O R D E R PER G.S. PANNU, VICE PRESIDENT: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)- 40, MUMBAI, DATED 21-01-2015, PERTAINING TO THE ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ORDE R DATED 11-03-2011 PASSED BY THE ASSESSING OFFICER (AO), MUM BAI U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN .DISMISSING THE APPEAL. ITA NO. 1805/MUM/2015 : 2 : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL A ND THAT TOO WITHOUT GIVING FULL AND PROPER OPPORTUNITY OF BEING HEARD I N THE MATTER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL A ND THAT TOO WITHOUT APPRECIATING FULLY AND PROPERLY THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING COMMISSION EXPENSES OF RS. 43,07,691/-. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING CONVEYANCE AND TRAVELLING EXPENSE AMOUN TING TO RS.50,000/-. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING BUSINESS PROMOTION EXPENSES AMOUNTING T O RS.10,000/-. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OR ALL OF THE GROUNDS OF APPEAL AT ANY TIME. 3. IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MU LTIPLE GROUNDS OF APPEAL, BUT ESSENTIALLY, THREE DISPUTES HAV ES BEEN RAISED. FIRSTLY WITH REGARD TO DISALLOWANCE OF COMMIS SION EXPENSES OF RS.43,07,691/-, DISALLOWANCE OF RS.50,0 00/- OUT OF CONVEYANCE AND TRAVELLING EXPENSES AND RS.10,000/ - OUT OF BUSINESS PROMOTION EXPENSES. 4. THE APPELLANT BEFORE US IS AN INDIVIDUAL, WHO IS STATED TO BE IN THE BUSINESS OF EXPORT OF PHARMACEUTICAL RAW MAT ERIALS AND BULK DRUGS. IN THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD INCURRED COMMISSION EXPENDITURE BY WAY OF PAYMENTS OF RS.43,07,691/- TO TWENTY PARTIES AS PER DETAILS IN PA RA 6.1 OF ITA NO. 1805/MUM/2015 : 3 : THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS DISA LLOWED THE ENTIRE EXPENDITURE ON THE GROUND THAT THE SAME WAS BOGUS/INFLATED. THOUGH THE ASSESSING OFFICER HAS PAS SED A DETAILED ASSESSMENT ORDER, BUT IN SUM AND SUBSTANCE, HE HAS RELIED ON THE VERIFICATION EXERCISE CARRIED OUT BY HIM IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE EARLIER ASSE SSMENT YEAR 2009-10. PERTINENTLY, THERE IS NO VERIFICATION O R ENQUIRY CONDUCTED WITH REGARD TO THE EXPENDITURE CLAIMED IN THE INSTANT ASSESSMENT YEAR. 5. BEFORE US, IT HAS BEEN EXPLAINED BY THE LD.REPRESENTATIVE THAT AT NO STAGE, ASSESSEE HAS BEEN GI VEN AN APPROPRIATE OPPORTUNITY IN AS MUCH AS DURING THE ASSES SMENT PROCEEDINGS, ASSESSEE WAS ASKED TO PRODUCE FOURTEEN P ARTIES OUT OF TWENTY PARTIES WITHIN A SHORT TIME. IT WAS EXPLAI NED THAT THE ASSESSMENT PROCEEDINGS COMMENCED AS EARLY AS SEPTEMBER, 2011, BUT IT WAS ONLY IN FEBRUARY, 2013, A SSESSEE WAS ASKED TO PRODUCE THE PARTIES WITHIN A SPAN OF FOUR TO SIX WORKING DAYS. IT WAS ALSO POINTED OUT THAT THE ENTIRE PAY MENT OF COMMISSION WAS MADE THROUGH BANKING CHANNEL AND A LL THE REQUISITE PARTICULARS OF THE RECIPIENTS VIZ., ADDRESS A ND PAN DETAILS ETC., WERE FURNISHED TO THE ASSESSING OFFICER. IT WAS POINTED OUT THAT FOR THE ASSESSMENT YEAR 2009-10, THE DISALLOWANCE WAS ONLY TO THE EXTENT OF RS.2,50,000/- AND NOT THE ENTIRE EXPENDITURE. EXPLAINING THE BACKGROUND, THE LD.REPRESENTATIVE POINTED OUT THAT PRIOR TO ASSESSMENT YEAR 2009-10, THE ENTIRE EXPENDITURE ON ACCOUNT OF COMMISSIO N WAS ALLOWED. IT WAS ONLY IN ASSESSMENT YEAR 2009-10 THAT A PORTION OF THE COMMISSION EXPENDITURE WAS DISALLOWED, ITA NO. 1805/MUM/2015 : 4 : WHEREAS IN THE INSTANT YEAR, THE ENTIRE EXPENDITURE HAS B EEN DISALLOWED. IT IS REITERATED BY THE ASSESSEE THAT THE ASSESSEE WOULD BE IN A POSITION TO DISCHARGE HIS ONUS IF AN A PPROPRIATE OPPORTUNITY IS PROVIDED. 6. ON THE OTHER HAND, LD.DR APPEARING FOR THE REVENUE , REITERATED THE STAND OF THE LOWER AUTHORITIES, BUT HAS N OT SERIOUSLY OPPOSED THE PLEA OF THE ASSESSEE FOR AN OPP ORTUNITY AFRESH, BEFORE THE ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. A PERTINENT ASPECT WHICH EMERGES FROM PERUSAL OF THE ORDE R OF THE CIT(A) AS WELL AS THE ASSESSING OFFICER IS THAT THE DISALLOWANCE HAS BEEN MADE PRIMARILY BASED ON THE EN QUIRIES CONDUCTED FOR THE PRECEDING ASSESSMENT YEAR OF 2009-10 . IN FACT, THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER, INC LUDING THE REFERENCE MADE TO ISSUANCE OF NOTICES U/S.133(6) A ND SUMMONS U/S.131 OF THE ACT IS IN THE CONTEXT OF ASSESSME NT PROCEEDINGS FOR THE ASSESSMENT YEAR 2009-10 AND NOT I N RELATION TO INSTANT ASSESSMENT YEAR. IT HAS ALSO BEEN B ROUGHT OUT BY THE LD.REPRESENTATIVE THAT WHILE IN ASSESSMENT YEAR 2009-10, A PORTION OF THE EXPENDITURE WAS DISALLOWED TO THE EXTENT OF RS.2,50,000/-, WHEREAS IN THE INSTANT YEAR, THE ENTIRE EXPENDITURE HAS BEEN DISALLOWED. CONSIDERING TH E ENTIRETY OF CIRCUMSTANCES, IT CLEARLY EMERGES THAT THERE IS A CERTAIN AMOUNT OF INADEQUACY IN THE ORDERS OF THE AUTHO RITIES BELOW AND ALSO ON THE PART OF ASSESSEE IN NOT DISCHARG ING THE ONUS CAST ON HIM TO EXPLAIN THE IMPUGNED EXPENDITURE ON COMMISSION. IT HAS BEEN EXPLAINED BY THE LD.REPRESENTA TIVE THAT THE TIME PERMITTED TO PRODUCE THE PARTIES WAS VERY SHOR T ITA NO. 1805/MUM/2015 : 5 : AND THAT THE ISSUE WAS RAISED BY THE ASSESSING OFFICER TOWARDS THE FAG END OF THE ASSESSMENT PROCEEDINGS. BE THAT AS I T MAY, IN OUR CONSIDERED OPINION, IT WOULD MEET THE ENDS OF J USTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFF ICER, WHO SHALL DENOVO EXAMINE THE ISSUE AND PASS AN ORDER AFRESH IN ACCORDANCE WITH LAW. WE MAY CLARIFY HERE THAT THE ASSE SSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTU NITY OF BEING HEARD IN THE MATTER AND ONLY THEREAFTER, SHALL PASS AN ORDER AFRESH ON THIS ASPECT AS PER LAW. 7.1. INSOFAR AS THE OTHER TWO DISALLOWANCES OUT OF CON VEYANCE & TRAVELLING EXPENDITURE AND BUSINESS PROMOTION EXPEN DITURE ARE CONCERNED, RELEVANT DISCUSSION IN THE ASSESSMENT O RDER REVEALS THAT THEY HAVE BEEN MADE PURELY ON ADHOC BASIS . THE ASSESSING OFFICER HAS SOUGHT TO JUSTIFY THE DISALLOWANC ES ON MERE GENERALIZED OBSERVATIONS, WITHOUT POINTING OUT ANY SPECIFIC INFIRMITIES. ACCORDINGLY, SUCH DISALLOWANC ES ARE DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2019 SD/- SD/- (PAWAN SINGH) (G.S. PANNU) JUDICIAL MEMBER VICE PRESIDENT /MUMBAI; /DATED : 19-06-2019 TNMM ITA NO. 1805/MUM/2015 : 6 : / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A), MUMBAI 4. / CIT, MUMBAI 5. !' #$ , % #$& , / DR, ITAT, MUMBAI 6. ''( / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) % #$& , / ITAT, MUMBAI