KASHIKEY DIAMOND INDIA P.LTD, MUMBAI V. DCIT 5(2)(1), MUMBAI

ITA 1991/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7331 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 02-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: JALPESH VORA
• Keywords: Reasonable cause
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 1991 / MUM . /2018 ( ASSESSMENT YEAR : 20 11 12 ) KASHIKEY DIAMOND INDIA PVT. LTD. FE 3011, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AACCK3666P . APPELLANT V/S DY . COMMISSIONER OF INCOME TAX CIRCLE 2 (2) (1) , MUMBAI . RESPONDENT ASSESSEE BY : SHRI JALPESH VORA REVENUE BY : SHRI CHAITANYA ANJARIA DATE OF HEARING 18 .0 4 .201 9 DATE OF ORDER 26.04.2019 O R D E R THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 17 TH FEBRUARY 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 10, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2011 12. 2 . THERE IS A DELAY OF ALMOST NINE MONTHS IN FILING THE PRESENT APPEAL. THE ASSESSEE HAS FILED AN APPLICATION ACCOMPANIED BY AN AFFIDAVIT SEEKING CONDONATION OF DELAY. IT IS SUBMITTED THAT SINCE THE ASSESSEE HAD CLOSED DOWN OPERATION S IN INDIA, IT COULD NOT FILE THE 2 MADHURI SURESH RUNGTA APPEAL IN T IME. SUBSEQUENTLY, ON LEGAL ADVISE , THE APPEAL WAS FILED. THUS, THE LEARNED AUTHORISED REPRESENTATIVE REQUESTED FOR CONDONING THE DELAY. 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE OPPOSED CONDONATION OF DELAY. 4 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AFTER GOING THROUGH THE AVERMENTS MADE IN THE AFFIDAVIT, I AM SATISFIED THAT THE DELAY IN FILI N G THE PRESENT APPEAL IS DUE TO REASONABLE CAUSE, HENCE, CONDONING THE DELAY, I ADMIT THE APPEAL FOR HEARING ON MERIT. 5 . IN GROUND NO.1, THE A SSESSEE HAS CHALLENGED DISALLOWANCE OF EXPENDITURE AMOUNTING TO ` 32,83,062. 6 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE UNDER VARIOUS HEADS AMOUNTING TO ` 32,83,062. HE NOTIC ED THAT IN THE COURSE OF SURVEY OPERAT ION CONDUCTED IN CASE OF M/S. LO NDON STAR DIAMOND CO. PVT. LTD., FROM WHOM THE ASSESSEE PURCHASES DIAMOND, I T WAS FOUND THAT THE ASSESSEE FOR CONDUCTING ITS BUSINESS ACTIVITIES USES THE PREMISES OF M /S. LANDON STAR DIA MOND CO. PVT. LTD. AND FURTHER , THE SAID COMPANY PROVIDES SOME OTHER SERVICES TO THE ASSESSEE SUCH AS ASSORTMENT, ADVISE, INSPECTION OF DIAMOND, ETC. THUS, ON THE BASIS OF 3 MADHURI SURESH RUNGTA SUCH INFORMATION FOUND AT THE TIME OF SURVEY OPERATION, THE ASSESSING OFFICER CONCLU DED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). ACCORDINGLY, HE ADDED BACK THE AMOUNT OF ` 32,83,062, TO THE INCOME OF THE ASSESSEE. 7 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION IN APPEAL, HOWEVER, LEARNED COMMISSIONER (APPEALS) ALSO CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 8 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE IS AN INDIAN SUBSIDIARY OF A JAPANESE COMPANY AND IT HAD TO INCUR CERTAIN EXPENDITURE TOWARDS THE ACCOMMODATION OF DIRECTORS WHO WERE NON RESIDENT S . HE SUBMITTED , THE ASSESSEE HAS ALSO INCURRED VARIOUS OTHER EXPENSES FOR WHICH SEPARATE EVIDENCES WERE PRODUCED BEFORE THE ASSESSING OFFICER. IN THIS CONTEXT, HE DREW O UR ATTENTION TO THE COPY OF EVIDENCES FURNISHED BEFORE THE ASSESSING OFFICER. FURTHER, HE SUBMITTED , THOUGH , IN THE PRECEDING AS WELL AS SUBSEQUENT ASSESSMENT YEAR S THE ASSESSEE HAS CLAIMED SIMILAR EXPENDITURE, HOWEVER, THE ASSESSING OFFICER HAS MOSTLY ALL OWED THE EXPENDITURE CLAIMED BY THE ASSESSEE IN SCRUTINY ASSESSMENTS. IN THIS CONTEXT, HE FURNISHED THE ORDERS PASSED UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR S 2007 08 TO 2015 16. THUS, HE SUBMITTED , NO DISALLOWANCE OUT OF THE EXPENDITURE CL AIMED SHOULD BE MADE. 4 MADHURI SURESH RUNGTA 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 10 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT , THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE RELYING UPON CERTAIN INFORMATION FOUND DURING THE SURVEY OPERATION CONDUCTED IN CASE OF M/S. LO NDON STAR DIAMOND CO. PVT. LTD. IT IS NOTICED THAT THE ASSESSING OFFICER HAS HIMSELF STATED THAT AS PER THE INFORMATION FOUND DURING THE SURVEY, THE ASSESSEE INCURS EXPENDITURE FOR VISIT OF THEIR DIRECTORS, SALARY TO MAID, TRAVEL EXPENSES AND HOUS E RENT, MOTORCAR EXPENSES, ETC. T HE INFORMATION OBTAINED DURING THE SURVEY ONLY STATE S THAT THE ASSESSEE USES THE PREMISES OF M/S. LO NDON STAR DIAMOND CO. PVT. LTD. AND AVAILS SOME SERVICES LIKE A SSORTMENT, ADVISE, INSPECTION OF DIAMOND, ETC. THEREFORE, THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE DOES NOT INCUR ANY EXPENSES I S NOT BORNE OUT FROM THE MATERIAL ON RECORD. ON A QUERY FROM THE BENCH, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE RENT PAID WAS TOWARDS THE ACCOMMODATION OF DIRECTORS DURING THEIR VISIT AND STAY IN INDIA. IT IS ALSO A FACT ON RECORD THAT SIM ILAR EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PRECEDING AND SUBSEQUENT ASSESSMENT YEAR S HAS MOSTLY BEEN ALLOWED BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT EXCEPT A PART DISALLOWANCE OF EXPENDITURE UNDER COUPLE OF HEADS IN ASSESSMENT 5 MADHURI SURESH RUNGTA YEAR 2007 08 AND 2010 11. THUS, FROM THE AFORESAID FACTS, IT BECOMES CLEAR THAT THE ASSESSEE , IN FACT , INCURS EXPENDITURE FOR THE PURPOSE OF ITS BUSINESS AND THE DEPARTMENT IN PRECEDING AS WELL AS SUBSEQUENT ASSESSMENT YEARS HAS ALSO ACCEPTED SUCH EXPENDITURE TO BE GE NUINE. THAT BEING THE CASE, PURELY RELYING UPON SO ME INFORMATION RECEIVED DURING THE SURVEY OPERATION CONDUCTED IN CASE OF M/S. LO NDON STAR DIAMOND CO. PVT. LTD., THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE CANNOT BE DISALLOWED. MORE SO, WHEN THE INFORM ATION RECEIVED DOES NOT IN ANY WAY DEMONSTRATE THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE AT ALL. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BEING PURELY ON CONJECTURE AND SURMISES IS UNSUSTAINABLE. ACCORDINGLY , I DELETE THE SAME. GR OUND NO.1 IS ALLOWED. 11 . GROUND NO.2, IS NOT PRESSED, HENCE, DISMISSED. 12 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 26.04.2019 6 MADHURI SURESH RUNGTA COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI