ITO, WARD, 1(3), Nagpur V. SHRI PURUSHOTTAM VIJAYKUMAR KARWA, Nagpur

ITA 188/NAG/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9195 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U U KASAR
• Assessee Lawyers: S C THAKAR
• Keywords: Principle of natural justice; Additional evidence; Revised return; Capital expenditure; Futures and options

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 188 /NAG /201 3 / ASSESSMENT YEAR : 20 0 7 - 08 THE INCOME TAX OFFICER, WARD 1(3), NAGPUR ....... / APPELLANT / V/S. SHRI PURUSHOTTAM VIJAYKUMAR KARWA, B - 6, MOUNTVERT, TRANQUILLE, WAKAD, PUNE 411057 PAN : ABIPK3881E / RESPONDENT ASSESSEE BY : SHRI S.C. THAKAR REVENUE BY : SHRI U.U. KASAR / DATE OF HEARING : 2 6 - 03 - 2019 / DATE OF PRONOUNCEMENT : 28 - 03 - 201 9 2 ITA NO . 188/NAG/2013, A.Y. 2007 - 08 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI, CAMP: NAGPUR DATED 11 - 02 - 2013 FOR THE ASSESSMENT YEAR 2007 - 08. 2 . THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS ENGA GED IN MANUFACTURING AND TRADING OF MEDICINES AND DRUGS AND TRADING IN SHARES, FUTURES AND OPTIONS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED EXPENDITURE OF RS.66,37,980/ - CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES AND HELD THE SAME TO BE ON CAPITAL ACCOUNT. THE ASSESSEE ASSAILED THE ADDITION IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE DOCUMENTS ON RECORD AND SUBMISSIONS OF ASSESSEE ALLOWED ASSESSEES CLAIM AND DELET ED THE ADDITION. NOW, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAIS ING FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N MADE BY THE A.O. AMOUNTING TO RS.66,37,980/ - ON ACCOUNT OF JOINT VENTURE COMMITMENT CHARGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, CIT(A) WAS NOT JUSTIFIED IN IGNORING THE FACT THAT THERE WAS JOINT VENTURE MOU BETWEEN THE ASSESSEE AND M/S. ABRIES HEALTHCARE AND THE PROFIT SHOULD HAVE BEEN TAXED IN THE HANDS OF ASSESSEE FIRS T AND THEN SHOULD HAVE BEEN DISTRIBUTED. 3 ITA NO . 188/NAG/2013, A.Y. 2007 - 08 3 . SHRI U.U. KASAR REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF R S .66,37,980/ - TOWARDS JOINT VENTURE COMMITMENT CHARG ES. HOWEVER, THE ASSESSEE COULD NOT SHOW GENUINENESS AND NATURE OF TRANSACTIONS. ON ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER IT TRANSPIRED THAT THE EXPENDITURE WAS INCURRED FOR RESTORING THE TENDER EARLIER ALLOTTED TO THE ASSESSEE FOR SUPPLY OF MEDICINE KITS. S INCE THE SAID EXPENDITURE RESULTED IN ENDURING BENEFIT TO THE ASSESSEE , T HE SAME WAS HELD TO BE ON CAPITAL ACCOUNT. 4. ON THE OTHER HAND SHRI S.C. THAKAR APPEARING ON BEHALF OF THE ASSESSE E VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF REVENUE. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.66,37,980/ - UNDER THE HEAD ADMINISTRATIVE CHARGES IN RESPECT OF JOINT VENTURE COMMITMENT. THE ASSESSEE WAS ALLOTTED TENDER FOR SUPPLY OF MEDICINES KITS BY THE GOVERNMENT OF MAHARASHTRA . THE SAID TENDER WAS CANCELLED . THE ASSESSEE PAID RS.66,37,980/ - TO M/S. ABRIES HEALTHCARE F OR RESTORATION OF CANCELLED TENDER. THE TENDER WAS RESTORED. TH E ASSESSING OFFICER HELD THAT SINCE THE PAYMENT OF AFORESAID AMOUNT HAS RESULTED IN ENDURING BENEFIT TO THE ASSESSEE , T HE SAID EXPENDITURE IS CAPITAL 4 ITA NO . 188/NAG/2013, A.Y. 2007 - 08 IN NATURE. TH E ASSESSEE DURING FIRST APPELLATE PROCEEDINGS FURNISHED DETAILED SUBMISSIONS. THE SAME WAS SENT TO THE ASSESSING OFFICER FOR COMMENTS AND HIS REPORT. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE REMAND REPORT ON THE SUBMISSIONS OF ASSES SEE , CONCLUDED AS UNDER : 2.5 THE AO'S ORDER AND REPORT, THE CONTENTIONS OF THE APPELLANT AS WELL AS MATERIALS ON RECORD HAVE BEEN CONSIDERED. THE AO HAS BASICALLY MACE DISALLOWANCE ON TWO COUNTS, ONE THAT THE EXPENDITURE IS CAPITAL EXPENDITURES SINCE IT PROVIDES BENEFIT OF ENDURING NATURE, AND SECOND, THAT THE EXPENDITURE IS OF ILLEGAL NATURE AND GENUINENESS OF THE TRANSACTION IS NOT PROVED. IN R EMAND HOWEVER, THE A O HAS HELD THAT SINCE THE AGREEMENT WITH M/ S ABARIS HEALTHCARE WAS OF PROFIT SHARING, THE APPELLANT SHOULD HAVE FIRST SHOWN THE ENT IRE PROFIT AS HIS INCOME AND THEREAFTER SHARED IT. THE DISALLOWANCE MADE BY THE 0 ON THE GROUND OF IT BEING OF CAPITAL EXPENDITURE IS NOT BORNE OUT, SINCE THE BENEFIT WAS A ONE - TIME BENEFIT I.E., FOR THE SPECIFIC TENDER ONLY, AS SUCH THE AO HAS OT SHOWN T HAT THERE WAS SOME LONG TERM ENDURING BENEFIT DERIVED FROM THE JOINT VENTURE AG REEMENT WITH M/ S ABARIS HEALTHCARE. SIMILARLY, THE A O 'S REFERENCE TO THE TRANSACTION BEING OF ILLEGAL NATURE/PENAL NATURE HAS NOT BEEN SUPPORTED BY ADEQUATE EVIDENCE AND REMAINS UNSUPPORTED. THE VIEW OF THE PRESENT AO IN REMAND PROCEEDINGS IS ALSO TENABLE AS IT IS NOT THE PROFIT FROM A NEW VENTURE, BUT PAYMENT MADE FOR GETTING THE TENDER TO FRUCTIFY / OR O THERWISE DISPOSING OF F THE KITS, AND M/ S ABARIS HEALTHCARE, AS PER AGREEMEN T WOULD ALSO BE RENDERING SERVICES IN ASSEMBLING AND DESPATCHING THE KITS TO VARIOUS PARTS OF THE STATE. M/ S ABARIS HEALTHCARE HAD ALSO FILED CONFIRMATION BEFORE THE A O OF HAVING DISCLOSED ITS SHARE OF INCOME FROM THIS TRANSACTION WITH THE APPELLANT IN THE IR IT RETURN FOR AY 2008 - 09. IN VIEW OF THIS POSITION, THE ADDITION MADE BY THE AO IS DELETED. AS REGARDS THE ADDITIONAL GROUND OF APPEAL, THE SAME IS ADMITTED IN VIEW OF THE FACT THAT IT REQUIRES NO ADDITIONAL EVIDENCE TO BE LED, THE A O HAS NOT FILED AN Y OBJECTION TO IT BEING ADMITTED, AND ALSO IN THE INTEREST OF NATURAL JUSTICE. SINCE THE AO HAS ALSO CONFIRMED THE FACT THAT REVISED RETURN WAS FILED IN TIME, THE AO IS DIRECTED TO VERIFY WHETHER THE EXPENSES RELATING TO ORISSA DRUGS AND CHEMICALS PERTAIN TO AY 2007 - 08, AND IF SO TO ALLOW ADJUSTMENT FOR THE SAME IN AY 2008 - 09. 6. THE LD. DR HAS FAILED TO CONTROVERT THE WELL REASONED FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING ASSESSEES CLAIM. W E 5 ITA NO . 188/NAG/2013, A.Y. 2007 - 08 CONCUR WITH THE FINDINGS OF COMMISSIONE R OF INCOME TAX (APPEALS) AND FIND NO REASON TO INTERFERE WITH THE SAME. RESULTANTLY, THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 28 TH DAY OF MARCH, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / NAGPUR ; / DATED : 28 TH MARCH, 2019. RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / THE CIT 5. , , , / DR, ITAT, NAGPUR BENCH, NAGPUR . 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, NAGPUR