The DCIT, Central Circle-2(1), Ahmedabad V. Top Impex Pvt. Ltd., Ahmedabad

ITA 1845/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0353 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 04-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: MAYUR H SHAH
• Keywords: Opportunity of being heard; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 11/09/09 DRAFTED ON: 24/09/09 ITA NO.1845/AHD/2007 ASSESSMENT YEAR : 2003-04 THE DY.CIT CENTRAL CIRCLE-2(1) AHMEDABAD VS. TOP IMPEX PVT.LTD. 2, CHANDRAVILLA APARTMENTS SHREYAS COLONY NAVRANGPRUA,AHMEDABAD PAN/GIR NO. : AAACT 7014 L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI GOVIND SINGHAL, SR.DR RESPONDENT BY: SHRI MAYUR H. SHAH O R D E R PER D.C.AGRAWAL, ACCOUNTANT MEMBER:- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-III, AHMEDABAD DATED 19/02/200 6 PASSED FOR ASSESSMENT YEAR 2003-04, WHEREIN THE LEARNED CIT(AP PEALS) ALLOWED THE CLAIM OF THE ASSESSEE FOR AN EXPENDITURE OF RS.5,85 ,000/- PAID BY IT TO ANOTHER GROUP CONCERN NAMED M/S.TOP TRADE & IMPORTS PVT.LTD. FOR ALLEGED CONSULTANCY WORK. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE-COMPANY IS ENGAGED IN THE EXPORTS OF TEXTILES AND OTHER CONSUMABLE ITE MS. ITA NO.1845/AHD/2007 DY.CIT VS. TOP IMPEX PVT.LTD. ASST.YEAR 2003-04 - 2 - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTED THAT ASSESSEE-COMPANY CLAIMED MANAGEMENT CONSULTANC Y EXPENDITURE OF RS.5,85,000/- CLAIMED TO WHICH HAVE BEEN PAID TO M/ S.TOP TRADE & IMPORTS PVT.LTD. (TTIPL). THE ASSESSING OFFICER NO TICED THAT THE CLAIM HAS BEEN MADE MERELY THROUGH GENERAL ENTRIES PASSED ON 31/03/2006 AND NO PAYMENT HAS ACTUALLY BEEN MADE TO THE SAID CONCE RN. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH A NOTE ON ACTIVITIES OF M/S. TOP TRADE & IMPORTS PVT.LTD. AND TO FURNISH THE DETAI LS OF THE STAFF OF THAT CONCERN WHO HAVE HANDLED THE WORK FOR THE ASSESSEE; TO PROVIDE THE INCOME EARNED AGAINST SUCH PAYMENT OF CONSULTANCY C HARGES AND ALSO TO PROVIDE THE DETAILS OF VARIOUS ACTIVITIES PERFORMED BY EACH STAFF MEMBER OF THAT CONCERN FOR THE ASSESSEE. THE ASSESSEE FURNIS HED THE REPLY GIVING CERTAIN DETAILS OF THE WORK DONE BY M/S.TOP TRADE & IMPORTS PVT.LTD. FOR THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THERE IS NO COMMON DIRECTOR AND PROVISIONS OF SECTION 40A(2)(B) ARE NOT APPLICABLE. THE ASSESSING OFFICER, HOWEVER, TOOK THE VIEW THAT THE ASSESSEE-COMPANY HA S NOT PROVED AS TO WHAT WORK THAT CONCERN HAS DONE FOR THE ASSESSEE. HE ACCORDINGLY DISALLOWED THE CLAIM. 3. THE LEARNED CIT(APPEALS) ALLOWED THE CLAIM OF TH E ASSESSEE ON THE GROUND THAT THERE IS AN AGREEMENT BETWEEN THE ASSES SEE AND M/S. TOP TRADE & IMPORTS PVT.LTD. FOR PROVIDING MANAGEMENT C ONSULTANCY SERVICES ITA NO.1845/AHD/2007 DY.CIT VS. TOP IMPEX PVT.LTD. ASST.YEAR 2003-04 - 3 - TO THE ASSESSEE IN RESPECT OF THE WORK MENTIONED BY THE ASSESSING OFFICER IN PARAGRAPH NO.4.3 OF HIS ORDER. BY TAKING SERVIC ES FROM THAT CONCERN, THE ASSESSEE-COMPANY HAS SAVED IN TERMS OF SALARIES OF THE EMPLOYEES. GENUINENESS OF THE PAYMENT IS NOT DOUBTED BY THE AS SESSING OFFICER AND INCIDENCE OF TAXATION HAS NOT BEEN REDUCED. 4. BEFORE US, LD.DR SUBMITTED THAT MERE EXISTENCE O F AGREEMENT DOES NOT PROVE THAT M/S.TOP TRADE & IMPORTS PVT.LTD. HAS RENDERED SERVICES. THE DETAILS OF THE EMPLOYEES AND THE NUMBER OF HOUR S OF THE WORK THEY HAVE DONE FOR THE ASSESSEE-COMPANY IS NOT PROVIDED. FURTHER, WHETHER THAT COMPANY IS PROVIDING SUCH SERVICES TO OTHERS IS ALS O NOT DETAILED SO AS TO SHOW THAT COMPANY HAS BEEN PROVIDING MANAGEMENT CON SULTANCY SERVICES TO OTHERS. IF THAT COMPANY IS BUSY IN ITS OWN WORK , HOW IT WOULD BE ABLE TO SPARE ITS OWN EMPLOYEES FOR THE WORK OF THE ASSESSE E. THE CLAIM COULD NOT BE ALLOWED IN ABSENCE OF EVIDENCE FOR RENDERING SUC H SERVICES. 5. AGAINST THIS, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT FULL ADDRESSES OF THE EMPLOYEES WHO DID WORK FOR THE ASSESSEE-COMPANY WAS PROVIDED TO THE ASSESSING OFF ICER, BUT ASSESSING OFFICER DID NOT CARRY INVESTIGATION FURTHER. THE D ETAILS OF THE WORK DONE BY M/S.TOP TRADE & IMPORTS PVT.LTD. FOR ASSESSEE ARE F OUND IN PARAGRAPH ITA NO.1845/AHD/2007 DY.CIT VS. TOP IMPEX PVT.LTD. ASST.YEAR 2003-04 - 4 - NO.4.3 OF THE ORDER OF THE ASSESSING OFFICER. BY R ENDERING SERVICES, ASSESSEE-COMPANY HAS SAVED RECURRING AND PERMANENT SALARY OF THE STAFF. THUS, THERE WAS A COMMERCIAL EXPEDIENCY IN MAKING S UCH PAYMENT. THE PAYMENT HAS BEEN EFFECTED BY THE ASSESSEE-COMPANY T HROUGH CHEQUE FROM TIME TO TIME. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN OUR CONSIDERED VIEW, EXCEPT MAKING STATEMENT, THE ASSESSEE-COMPAN Y HAS NOT PRODUCED ANY EVIDENCE AS TO WHAT WORK M/S.TOP TRADE & IMPORT S PVT.LTD. HAS DONE FOR THE ASSESSEE. IT IS REQUIRED TO SUBSTANTIATE THROUGH EVIDENCE AND NOT BY MERE STATEMENTS. IF THE EMPLOYEES OF M/S.TOP TRADE & IMPORTS PVT.LTD. ARE ENGAGED FOR THE WORK OF ASSESSEE-COMPANY, THEN HOW THE WORK OF M/S.TOP TRADE & IMPORTS PVT.LTD. IS NOT AFFECTED IS NOT SPELT OUT. WHETHER M/S.TOP TRADE & IMPORTS PVT.LTD. IS RENDERI NG SUCH SERVICES TO OTHERS IS ALSO NOT MADE CLEAR SO AS TO SHOW THAT IT IS RENDERING SUCH SERVICES IN THE MARKET AND, THEREFORE, RENDERING OF SERVICES AND CHARGES RECEIVED ARE AT AN ARMS LENGTH CONSIDERATION. FURTHER, WHAT WA S THE PRACTICE IN THE PAST AND HOW THE ASSESSEE-COMPANY HAS CARRIED OUT THE WO RK WITHOUT SUCH CONSULTANCY IS NOT MADE CLEAR. BY PROCURING SUCH C ONSULTANCY SERVICES FROM M/S.TOP TRADE & IMPORTS PVT.LTD., HOW THE PERF ORMANCE OF THE ITA NO.1845/AHD/2007 DY.CIT VS. TOP IMPEX PVT.LTD. ASST.YEAR 2003-04 - 5 - ASSESSEE-COMPANY HAS IMPROVED IS ALSO NOT EXPLAINED . THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER TO THE F ILE OF ASSESSING OFFICER FOR GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSE E FOR FURNISHING EVIDENCE OF ACTUAL WORK DONE BY M/S. TOP TRADE & IM PORTS PVT.LTD. AND ALSO TO PROVE ITS CREDENCE OF RENDERING SUCH MANAGE MENT CONSULTANCY SERVICES AND THAT THE PAYMENT IS NOT MERELY GRATITU OUS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS T REATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/10/ 2009. SD/- SD/- ( T.K. SHARMA ) ( D.C. AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD; DATED 09 / 10 /2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT 3. THE CIT CONCERNED.4. THE LD. CIT(APPEALS)-III, A HMEDABAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD