DIAM CIRCLE MANUFACTURING P.LTD, MUMBAI V. DCIT 5(1), MUMBAI

ITA 2580/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3136 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: DR K SHINDARAM
• Keywords: Opportunity of being heard; Additional evidence; Revenue expenditure
• Section: 37; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI RAJESH KUMAR , AM ITA NO . 2580 /MUM/201 4 (A.Y: 2009 - 10) DIAM CIRCLE MANUFACTURING PVT. LTD., FC 5041 TO 5043, BHARAT DIAMOND BOURSE, G. BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 51 PAN: AAGCS 6180 G VS. THE DY. COMMISSIONER OF INCOME TAX - 5(1), 5 TH FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI 400020 APPELLANT .. RESPONDENT APPELLANT BY .. DR. K. SHINDARAM, AR RESPONDENT BY .. SHRI VIJAY KUMAR BORA, AR DATE OF HEARING .. 08 - 09 - 2016 DATE OF PRONOUNCEMENT .. 08 - 09 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF THE CIT (APPEALS) - 9, MUMBAI IN APPEAL NO.CIT ( A) - 9/DCIT - 5(1)/301/2012 - 13 DATED 20 - 02 - 2014 . A SSESSMENT WAS FRAMED BY THE DCIT, CIRCLE - 5(1) , MUMBAI FOR THE ASSESSMENT YEAR 2009 - 10 U/S 143 (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) VIDE HIS ORDER DATED 31 - 12 - 2012. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER O F THE CIT (A) CONFIRMING THE DISALLOWANCE OF COMPENSATION PAID TO THE CONTRACTOR ON TERMINATION OF CONTRACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING TWO GROUNDS: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9 HAS ERRED IN UPHOLDING THE DIS ALLOWANCE OF COMPENSATION PAID OF RS.1,24,59,640 TO APPELLANTS CONTRACTORS ON TERMINATION OF THE CONTRACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9 HAS FAILED TO APPRECIATE THE FACT OF THE CASE AND ERRED IN NOT ALLOWING THE COMPENSATION EXP ENSES U/S 37 (1) OF THE INCOME TAX ACT, 1961. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTS OF CUT AND POLISHED DIAMONDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED FROM TH E PROFIT & LOSS ACCOUNT THAT THE ITA NO. 2580 /MUM/20 1 4 2 ASSESSEE HAD CLAIMED DEDUCTION OF COMPENSATION AS REVENUE EXPENDITURE FOR TERMINATION OF CONTRACT AMOUNTING TO RS.1,24,59,640/ - . THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE CLAIM AND THE ASSESSEE EXPLAINED THAT THERE WAS CL EAR RECESSION IN THE BUSINESS OF THE ASSESSEE AND ACCORDINGLY, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH THE CONTRACTOR FOR A PERIOD OF THREE YEARS BUT ONLY ONE AND A HALF YEARS HAVE BEEN ELAPSED SINCE COMMENCEMENT OF THE CONTRACT WITH THE ASSESSEE, THE ASSESSEE WAS UNABLE TO PROVIDE ANY WORK TO THE CONTRACTOR AND ACCORDINGLY THE CONTRACT WAS TERMINATED. THEREAFTER, IT WAS AGREED BETWEEN BOTH THE PARTIES THAT COMPENSATION WAS TO BE PAID TO THE CONTRACTOR SINCE THE CONTRACT WAS NOT COMPLETED. BUT, THE AO W AS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE AND DISALLOWED THE CLAIM OF EXPENDITURE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A), WHO ALSO CONFIRMED THE ACTION OF THE AO. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE FILED AN APPL ICATION FOR ADMISSION OF ADDITIONAL EVIDENCES TO DEMONSTRATE THAT THE COMPENSATION PAID BY THE ASSESSEE TO THE CONTRACTOR WAS GENUINE CLAIM. THE EVIDENCES FILED ARE ENUMERATED AS UNDER: - I) COMMUNICATION RECEIVED BY THE ASSESSEE FROM THE LABOUR COMMISSIONE R OFFICE. II) SETTLEMENT ARRIVED AT WITH THE WORKERS. III) NOTICES ISSUED BY THE LABOUR UNION TO THE ASSESSEE FOR COMPLETION OF CONTRACT. IV) DETAILS OF COMPENSATION IN RESPECT OF DUES PAYABLE TO THE CONTRACTOR AND SUB - CONTRACTORS INCLUDING THE WORKERS. T HE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THESE EVIDENCES WERE NOT AVAILABLE WITH THE ASSESSEE AT THE TIME OF ASSESSMENT AND THE APPELLATE PROCEEDINGS. ACCORDING TO HIM, THESE ADDITIONAL EVIDENCES ARE VITAL FOR DECIDING THE ISSUE BECAUSE WITHOUT THES E, THE ISSUE CANNOT BE REACHED AT A CONCLUSION. ON QUERY FROM THE BENCH, THE LEARNED SR. DR CONCEDED THE POSITION AND STATED THAT THESE EVIDENCES CAN BE ADMITTED. BUT, HE PUT A P OSER THAT IN CASE THESE EVIDENCES ARE ADMITTED, THE ISSUE HAS TO BE REMITTED B ACK TO THE F I LE OF THE AO FOR FRESH ADJUDICATION , BECAUSE NONE OF THE AUTHORITIES BELOW HAVE EXAMINED THESE EVIDENCES. ON THIS, THE LEARNED COUNSEL FAIRLY AGREED THAT THE ISSUE CAN BE REMITTED BACK TO THE FILE OF THE AO TO DECIDE IN TERMS OF THESE ADDITION AL EVIDENCES AND ALSO IN TERMS OF LAW. IN VIEW OF THE ABOVE CONSENT ITA NO. 2580 /MUM/20 1 4 3 GIVEN BY BOTH THE PARTIES, WE ADMIT THE ADDITIONAL EVIDENCES AND RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. NEEDLESS TO SAY THAT, THE AO WILL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ALSO ALLOW PRODUCING ANY ADDITIONAL EVIDENCES. ACCORDINGLY, THE MATTER IS RESTORED BACK TO THE FILE OF THE AO. 5. IN THE RESULT, THE AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. OR DER PRONOUNCED IN THE OPEN COURT ON 08 - 09 - 2016 . BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI SR.NO. PARTICULARS DATE INITIALS MEMBER CONCERNED 1 DICTATION GIVEN ON 08 /09/16 LK DEKA JM 2 DRAFT PLACED BEFORE AUTHOR 09 /09/16 3 DRAFT PROPOSED/PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER SD/ - ( RAJESH KUMAR ) ACCONTANT MEMBER MUMBAI, DATED: 08 - 09 - 2016 LAKSHMIKANTA DEKA/SR.PS SD/ - ( MAHAVIR SINGH ) JUDICIAL MEMBER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//