ACIT, Noida V. M/s. M.D. Overseas Ltd., New Delhi

ITA 2337/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7045 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPIKA MITTAL
• Assessee Lawyers: NIKUNJ KH ANNA
• Keywords: Search and seizure; Principle of natural justice
• Section: 142(1); 153A; 37; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 2337 /DEL/ 2014 ASSESSMENT YEAR: 2009 - 10 ACIT, CENTRAL CIRCLE, NOIDA VS. M/S. M.D. OVERSEAS LTD., 43, BABAR ROAD, BENGALI MARKET, NEW DELHI PAN : AACCM9507F (APPELLANT) (RESPONDENT) APPELLANT BY MS. DEEPIKA MITTAL, CIT (DR) RESPONDENT BY SH. VED JAIN, ADV. & SH NIKUNJ KH ANNA , CA DATE OF HEARING 20.07.2016 DATE OF PRONOUNCEMENT 21.0 9 .2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST THE ORDER DATED 17/01/2014 OF THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) , NOIDA FOR ASSESSMENT YEAR 2009 - 10 RAISING FOLLOWING GROUNDS: I. THAT THE LD. C1T(A) HAS ERRED IN LAW AND FACTS IN DELETING THE CWC - NSEZ EXPENSES AMOUNTING TO RS. 18,26,474/ - IGNORING THE FACTS OF THE CASE AS WELL AS DETAILED DISCUSSION MADE IN THE ASSESSMENT ORDER AND MATERIALS BROUGHT ON RECORD BY THE A.O. II. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING TH E FREIGHT & FORWARDING EXPENSES AMOUNTING TO RS. 18,25,262/ - IGNORING THE FACTS OF THE CASE AS WELL AS 2 ITA NO. 2337/DEL/2014 AY: 2009 - 10 DETAILED DISCUSSION MADE IN THE ASSESSMENT ORDER AND MATERIALS BROUGHT ON RECORD BY THE A.O. III. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING TH E ADDITION WITHOUT GIVING A FINDING THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS SO AS TO BE A ALLOWABLE DEDUCTION U/S 37 OF THE I.T. ACT. IV. THAT THE LD. CIT(A) HAS ERRED IN NOT GIVING ANY FINDING DESPITE THE FACT THAT HE WAS EXERCISING CO - TERMINUS JURISDICTION WITH A.O. IN TERM OF EXPLANATION OF SECTION 251(1) OF THE I.T. ACT. V. THAT THE ORDER OF THE LD. CIT(A) BEING ERRONEOUS IN LAW AND ON FACT S WHICH NEEDS TO BE VACATED AND THE ORDER OF THE A.O. BE RESTORED. VI. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUND OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 2. THE F ACTS IN BRIEF OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 15/09/2009. A N OTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 27/12/2010 FOR FILING RETURN OF INCOME. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON 29/08/2011, DECLARING INCOME OF RS.25,62,33, 380/ - . NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED AND THE ASSESSMENT WAS COMPLETED ON 30/12/2011. IN THE ASSESSMENT, THE ASSESSING OFFICER MADE FOLLOWING TWO DISALLOWANCES: 1. DIS ALLOWANCE O U T OF CWC - NSEZ EXPENSES OF RS. 18, 26, 474/ - 2. DISALLOWANCE O U T OF FREI GHT AND FORWARDING EXPENSES OF RS.18,25, 262/ - 3 ITA NO. 2337/DEL/2014 AY: 2009 - 10 2.1 O N APPEAL, T H E LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) DE LETED BOTH THE DISALLOWANCES. AGGRIEVED , THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 2.2 EFFECTIVELY , R EVENUE IS AGGRIEVED WITH THE DELETION OF BOTH THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. HENCE, THE PRES ENT APPEAL BY THE REVENUE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (DEPARTMENTAL R EPRESENTATIVE) RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS DELETED THE DISALLOWANCE WITHOUT EXAM INING WHETHER THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 4. ON THE OTHER , THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, RELIED ON THE FINDING S OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARD S THE ABOVE DISALLOWANCES ARE CONCERNED , W E FIND THAT THE ASSESSING OFFICER HAS DISALLOWED EXPENSES WITH FOLLOWING REMARKS: ASSESSEE HAS SHOWN RS. 7443522/ - AS CWC - NSEZ EXPENSES F OR THE CURRENT YEAR AGAINST RS. 2695650/ - FOR PRECEDING YEAR. AS EXPLAINED THIS EXPENSE AMOUNT IS INCURRED FOR TRANSPORTATION OF GOODS AT SEZ. DURING THE YEAR THE SALE AMOUNT HAS INCREASED BY 6.74%, ACCORDINGLY THIS EXPENSE SHALL ALSO INCREASE BY APPROXIM ATELY SUCH PERCENTAGE. KEEPING IN ACCOUNT THE INFLATION AND OTHER FACTORS RS. 1826474/ - IS DISALLOWED DURING THE YEAR. ON SAME GROUNDS FREIGHT AND FORWARDING EXPENSES INCURRED FOR CARRIAGE OF GOODS AMOUNTING TO RS. 1825262/ - IS DISALLOWED . 4 ITA NO. 2337/DEL/2014 AY: 2009 - 10 6 . T HE LEA RNE D COMMISSIONER OF INCOME - TAX ( APPEALS), HAS DELETED THE DISALLOWANCE WITH FOLLOWING OBSERVATIONS: REGARDING FIRST ADDITION THE APPELLANT HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION VAULTING/WARE HOUSING CHARGES OF RS.58,49,384/ - WERE CLUBBED WITH CWC - NSEZ EXPENSES OF RS.15,94,138/ - AND THE TOTAL OF THESE TWO BEING RS.74,43,522/ - WERE REFLECTED IN SCHEDULE 16 OF THE BALANCE SHEET. WHEREAS IN RESPECT OF ASSESSMENT YEAR 2008 - 09 VAULTING/WARE HOUSING CHARGES OF RS.1,27,25,590/ - WERE SHOWN SEPARAT ELY IN SCHEULE - 16 OF THE BALANCE SHEET. WITH ABOVE FACTS IT HAS BEEN CLAIMED BY THE APPELLANT THAT BECAUSE OF RE - GROUPING OF VAULTING I WARE HOUSING CHARGES IN ASSESSMENT YEAR UNDER CONSIDERATION CREATED CONFUSION IN THE MIND OF THE AO WHILE VERIFYING AND COMPARING THE FIGURES UNDER ABOVE HEADS. TAKING INTO ACCOUNT THE ABOVE CLARIFICATION FILED BY THE APPELLANT I FIND NO INCREASE IN THE EXPENSES UNDER THE HEAD CWC - NSEZ EXPENSES AS ALLEGED BY AO. REGARDING SECOND ADDITION OF RS.18,25,262/ - MADE UNDER THE HE AD FREIGHT AND FORWARDING EXPENSES THE APPELLANT HAS VEHEMENTLY CLAIMED THAT AO HAS MADE ADDITION ON ESTIMATE BASIS WITHOUT SPECIFYING THE BASIS WHERE AS THEY HAD PROVIDED EVERY INFORMATION/DETAIL CALLED FOR DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT HAS ALSO CLAIMED THAT NO OPPORTUNITY WAS ACCORDED TO THE ASSESSEE TO FURNISH DETAILS/EXPLANATION IN RESPECT OF ABOVE ADDITION. WITH ABOVE SUBMISSION THE APPELLANT HAS CLARIFIED THAT THE INCREASE IN ABOVE EXPENSES BY RS. 57,54,321/ - WERE MAINLY ON ACCOUNT OF OCTROI PAID TO MUMBAI MUNICIPAL CORPORATION. WITH ABOVE SUBMISSION THE APPELLANT HAS PLEADED THAT THE ABOVE TWO ADDITIONS MADE BY THE AO BE DELETED. ON CAREFUL CONSIDERATION OF SUBMISSION MADE BY THE APPELLANT, FACTS BROUGHT OUT BY THE AO IN ASSESSMENT ORDER AND RELEVANT MATERIAL AVAILABLE ON RECORDS I FIND THAT AO HAS MADE ABOVE ADDITIONS WITHOUT GOING INTO THE DETAILS OF ABOVE EXPENDITURES APPEARING IN THE AUDITED BALANCE SHEET 5 ITA NO. 2337/DEL/2014 AY: 2009 - 10 FILED BY THE ASSESSEE. THE AO HAS SIMPLY MADE ESTIMATED ADDITION ON AD - HOC BASIS WITHOUT ANY EXPLANATION OR JUSTIFICATION IN THIS REGARD. THE AO HAS ALSO NOT DELIBERATED THE BASIS OF ARRIVING AT THE FIGURES OF DISALLOWANCE UNDER ABOVE HEADS. I ALSO FIND THAT AO HAS FAILED TO GIVE SHOW CAUSE NOTICE TO THE APPELLANT BEFORE MAKING ABOVE TWO ADDITIONS WHICH IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. FURTHER, I FIND THAT THE BALANCE SHEET OF THE APPELLANT IS DULY AUDITED AND WHICH WERE PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SAME WERE CHECKED BY TH E AO. FURTHER, THE AO DID NOT RAISE ANY DOUBT ABOUT THE GENUINENESS OF BALANCE SHEET/BOOKS OF ACCOUNTS AND HAS ALSO NOT POINTED OUT ANY IRREGULARITY IN REPORTING THE EXPENDITURE UNDER ABOVE TWO HEADS UNDER DISCUSSION. THE APPELLANT HAS ALSO CLAIMED THAT TH E EXPENSES UNDER ABOVE HEADS WERE INCURRED THROUGH ACCOUNT PAYEE CHEQUES. IN THIS REGARD THE APPELLANT HAS CITED AND RELIED UPON THE FOLLOWING TWO JUDGMENTS WHICH SUPPORT THE ASSESSEE'S CASE: A. ITO VS. LAKE PALACE HOTELS AND MOTELS (P) LTD. 13 TTJ (JP) 216 B. TRIPT KAUR VS. ACIT, CIR 22(1), NEW DELHI IN ITAT, DELHI BENCH 'H', NEW DELHI TAKING ALL THE ABOVE INTO CONSIDERATION I FIND NO JUSTIFICATION IN AO'S ACTION OF MAKING ESTIMATED ADDITION ON AD - HOC BASIS UNDER ABOVE TWO HEADS OF EXPENSES AND THEREFORE THE SAME ARE DELETED. 7 . W E FIND THAT THE ASSESSING OFFICER WHILE MAKING DISALLOWANCE HAS NOT NOTED ANY DEFICIENCY IN THE BILLS OR VOUCHERS IN R E S P E C T O F THE EXPENSES INCURRED AND MADE DISALLOWANCE MERELY ON THE BASIS THAT IN THE YEAR UNDER CONSIDERATION , EXPENSES UNDER THE RELEVANT HEAD S H A V E I N C R E A S E D I N PERCENTAGE T E R M S O N SALES A S C O M P A R E D T O PRECEDING Y E A R . THE ASSESSING OFFICER HAS NOT EVEN EXAMINED THE DETAIL OF THE EXPENSES. THE LEARNED COMMISSIONER OF 6 ITA NO. 2337/DEL/2014 AY: 2009 - 10 INCOME - TAX(APPEALS) , ON THE OTHER HAND , EXAMINED THE DETAIL S OF T HE EXPENSES AND I N R E S P E C T O F F I R S T D I S A L L O W A N C E FOUND THAT IN THE PRECEDING ASSESSMEN T YEAR VAULTING/ WAREHOUSING EXPENSES WERE SHOWN SEPARATELY, WHEREAS IN THE YEAR UNDER CONSIDERATION , THE SAID EXPENSES ARE CLUBBED WITH EXPENSES UNDER THE HEAD CWC - NSEZ AND , THEREFORE , THE I N C R E A S E I N E XPENSES W A S FOUND TO BE JUSTIFIED BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS). SIMILARLY , UNDER THE HEAD FREIGHT AND FORWARDING EXPENSES , THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS EXAMINED EXPENSES IN DETAIL AND FOUND THAT THE IN CREASE WAS MAINLY ON A CCOUNT OF THE OF O C T R O I PAID TO M UNICIPAL CORP ORATION OF MUMBAI . WE FIND THAT THE ASSESSEE HAS DULY EXPLAINED THE I N C R E A S E I N THE EXPENSES UNDER BOTH THE HEAD S AS COMPARED TO THE PRECEDING ASSESSMENT YEAR BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) . F U R T H E R , W E DO NOT FIND ANY STRENGTH IN THE GR OUND OF THE R EVENUE THAT LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS NOT EXERCISED THE CO - TERMINUS POWER OF THE ASSESSING OFFICER AND DID NOT EXAMINE WHETHER THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF BUSINESS . IN OUR VIEW , THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS EXAMINED THE DETAIL S OF TH E EXPENSES AND THE INCREA SE IN EXPENSES HAS BEEN FOUND BY HIM TO BE JUSTIFIED . IN OUR CONSIDERED OPINION, NO DISALLOWANCE CAN BE MADE MERELY ON THE ESTIMATE OR AD - HOC BASIS , WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS OR VOUCHERS. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE FIND THAT THE ORDER OF THE LEARNED 7 ITA NO. 2337/DEL/2014 AY: 2009 - 10 COMMISSIONER OF INCOME - TAX ( APPEALS) ON THE ISSUE IN DISPUTE IS WELL REASONED AND NO INTERFERENCE ON OUR PART IS REQUIRED. A CCORDINGLY , WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPE ALS). THE GROUNDS RAISED BY THE R EVENUE ARE DISMISSED. 7. IN THE RESULT , THE APPEAL OF THE R EVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 1 S T SEPT., 2016 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 S T SEPTEMBER , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI