WHITE CUBE RETAILS P.LTD, MUMBAI V. ITO WD 8(3)(4), MUMBAI

ITA 2659/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8496 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2659/MUM/2015 ASSESSMENT YEAR: 2010-11 M/S. WHITE CUBE RETAILS P. LTD. VS. ITO WD 8(3)(4) 95/96 GOVT INDL. ESTATE, MUMBAI HINDUSTAN NAKA, CHARKOP DANDIVALI (W) MUMBAI 400067 PAN NO. AACW7970N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL TALATI, AR REVENUE BY: SHRI R.P. MEENA, CIT(DR) DATE OF HEARING : 02/0 1/2017 DATE OF PRONOUNCEMENT: 31/01/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR 2010-11. THE APPEAL IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER (APPEALS) 18, MUMBAI AND ARISES OUT OF THE ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (T HE ACT). 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CON FIRMING THE ADDITION OF RS. 1,29,43,157/- MADE BY THE AO UNDER SECTION 41(1) OF THE ACT. THE 2 ND GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,98,57,926/- MADE BY THE AO U/S 28(IV) IN RESPECT OF UNDISCHARGED LIABILITIES ON ACCOUNT OF DEPOSITS FROM THE DEBTORS . ITA NO. 2659/MUM/2015 2 THE 3 RD GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 10,47,95,882/- MADE BY AO AS UNPROV ED PURCHASES. THE 4 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 20,87,278/- MADE BY THE AO U/S 40(A )(IA) OF THE ACT. THE 5 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION MADE ON AD-HOC BASIS AMOUNTING TO RS. 14,4 1,850/- ON ACCOUNT OF BRAND IMAGING EXPENSES FOR WANT OF VOUCH ERS. THE 6 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 3,68,35,330/- MADE BY THE AO U/S 40 (A)(IA) OF THE ACT ON OUTLET OPERATING AND MAINTENANCE EXPENSES. THE 7 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 36,02,517/- (RS. 35,92,517/-) BEING UNPROVED COMMISSION EXPENSES. THE 8 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 1,24,88,000/- MADE BY THE AO BEING SHARE APPLICATION MONEY U/S 68 OF THE ACT. THE 9 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 24,03,705/- MADE BY THE AO BEING UN PROVED AND UNSUBSTANTIATED PURCHASES AND THE TRANSACTIONS MADE WITH AKANSHA SYNTHETIC PVT. LTD. DUE TO DIFFERENCE IN LEDGER A/C AS ON 31 ST MARCH, 2010. THE 10 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) HAS ACTED ON THE REMAND REPORT OF TH E AO DATED 08.01.2015 WHEREAS THE COMPLETE DETAILS AS ASKED BY THE LEARNED CIT(A) FOR REMAND REPORT WERE FILED ON 22.01.2015. THEREFORE, IT IS STATED THAT THE LEARNED CIT(A) BE DIRECTED TO CALL FOR THE REMAND ITA NO. 2659/MUM/2015 3 REPORT BASED ON DETAILS FILED ON 22.01.2015 AND THE CASE BE DECIDED BASED THEREON. 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-11 ON 08.10.2010 DECLARING TOTAL INCOME OF RS. 13,07,643/ - THE ASSESING OFFICER (AO) MADE ADDITION OF (I) RS. 1,29,43,157/- [CESSATION OF LIABILITIES U/S 41(1)] (II) RS. 1,98,57,926/- [DEEM ED INCOME U/S 28(IV), (III) RS. 10,47,95,882/-[ UNPROVED / UNSUBS TANTIATED PURCHASES; (IV) RS. 20,87,278/- [DISALLOWANCE U/S 4 0(A)(IA)]; RS. 3,68,35,330/- [DISALLOWANCE TOWARDS OUTLET OPERATIN G AND MAINTENANCE EXPENSES]; (V) RS. 50,82,055/- [UNPROVE D COMMISSION EXPENSES]; (VI) RS. 1,24,88,000/- [SHARE APPLICATIO N MONEY U/S 68] AND RS. 24,03,705/- [DIFFERENCE IN THE AMOUNT OF PU RCHASES] 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEAR NED CIT(A). DURING THE APPELLATE PROCEEDINGS, THE LEARNED AR OF THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) ADDITIONAL EVID ENCES AND STATED THAT DUE TO MAJOR FIRE AT THE BUSINESS PREMISES OF THE ASSESSEE, MANY DOCUMENTS COULD NOT BE PRODUCED BEFORE THE AO. THE LEARNED CIT(A) WAS CONVINCED THAT THE CASE WAS COVERED UNDER RULE 46A OF THE INCOME TAX RULES, 1962 AND THEREFORE HE SENT THE AD DITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE TO THE AO FOR E XAMINATION AND THUS CALLED FOR A REMAND REPORT. THE AO SUBMITTED A REMAND REPORT TO THE LEARNED CIT(A) ON 08.01.2015. THE LEARNED CIT(A ) WAS NOT CONVINCED WITH THE EXPLANATIONS GIVEN BY THE ASSESS EE AGAINST THE ADDITIONS MADE BY THE AO, AND THEREFORE HE DISMISSE D THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE S UBMITS WITH REGARD TO GROUND NO 1 OF THE APPEAL THAT SINCE THE ASSESSEE HAS NOT WRITTEN OFF THE BALANCES IN THE BOOKS OF ACCOUNTS, THE QUESTION OF INVOKING THE PROVISIONS OF SECTION 41(1) DOES NOT A RISE AND MORE SO WHEN THE SUNDRY CREDITORS HAVE BEEN PAID IN THE SUB SEQUENT YEARS AND NECESSARY EVIDENCES WERE FURNISHED. IT IS STATE D THAT DURING THE COURSE OF HEARING, THE LEARNED AR HAD SUBMITTED SAM PLE INVOICES OF CREDITORS AND THEIR REPAYMENT SCHEDULE BEFORE THE L EARNED CIT(A). 5.1 REGARDING GROUND NO 2 OF THE APPEAL, THE LEARNE D COUNSEL OF THE ASSESSEE SUBMITS THAT WHENEVER THE ASSESSEE GIVES A NY FRANCHISEE LICENSE TO SALE ITS GOODS, IT OBTAINS DEPOSITS FROM FRANCHISEES. IN THE ITA NO. 2659/MUM/2015 4 CASE OF THE ASSESSEE IT IS WITH REGARD TO THESE DEP OSITS. THESE DEPOSITS ARE PAYABLE ON CANCELLATION OF FRANCHISEE AGREEMENT . IT IS SUBMITTED THAT DURING THE COURSE OF HEARING BEFORE THE LEARNE D CIT(A), SAMPLE AGREEMENT WERE FILED. 5.2 AS REGARDS THE 3 RD GROUND OF APPEAL, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITS THAT DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE THE LEARNED CIT(A), THE ASSESSEE HAD SUBMITT ED SAMPLE INVOICES WITH DELIVERY CHALLAN AND PAYMENT BOOKS. 5.3 AS REGARDS THE 4 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED THAT THE CONCERNED EXPENSES WERE REIMBURS EMENT TO FRANCHISEE ON WHICH TDS PROVISIONS WERE NOT APPLICA BLE. ALSO IT IS STATED THAT THE LEARNED AR OF THE ASSESSEE HAD ATTA CHED SAMPLE BILLS IN THIS REGARD. 5.4 AS REGARDS THE 5 TH & 6 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEAR NED CIT(A), IT WAS SUBMITTED THAT THE CONCERNED EXPENSES WERE REIMBURS EMENT TO THE FRANCHISEE FOR THE EXPENSES INCURRED BY THEM AND TH E ASSESSEE HAD FILED COPIES OF THE AGREEMENTS WHICH PROVIDE FOR RE IMBURSEMENT OF THE SAID EXPENSES ALONG WITH PROOF IN THE BANK STAT EMENTS WHICH REFLECT PAYMENT OF THE EXPENSES. IT IS SUBMITTED AS THESE EXPENSES WERE REIMBURSEMENT, THE SAME SHOULD NOT BE ADDED TO INCOME FOR NON-DEDUCTION OF TDS NOR FOR INABILITY TO PROVE THE EXPENSES AS REQUESTED BY AO. 5.5 AS REGARDS THE 7 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE HAD MADE TDS ON THE CON CERNED AMOUNT AND DULY DEPOSITED THE SAME, THE SAID CHALLANS WERE DULY SUBMITTED BEFORE THE AO FOR VERIFICATION DURING THE COURSE OF ASSESSMENT. 5.6 AS REGARDS THE 8 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), IT WAS STATED THAT THE ASSESSEE HAD SUBMITTED BEFORE THE A O THE FOLLOWING DOCUMENTS: ITA NO. 2659/MUM/2015 5 I. FORM NO 2 (SUBMITTED TO ROC FOR ALLOTMENT OF SH ARES FOR ISSUE OF SHARES) II. INCOME TAX RETURN OF THE SHARE APPLICANTS TO PR OVE CREDIT WORTHINESS III. BANK STATEMENT OF THE SHARE APPLICANTS REFLECT ING PAYMENT OF SHARE APPLICATION MONEY IV. BANK STATEMENT OF THE COMPANY REFLECTING RECEIP T OF SHARE APPLICATION MONEY V. IN CASE OF PRIVATE LIMITED COMPANY APPLICANT, SH ARE HOLDING PATTERN OF THE COMPANY 5.7 AS REGARDS, THE 9 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), IT WAS STATED THAT THE ASSESSEE HAD SUBMITTED BEFORE THE A O THE PURCHASE AMOUNT VIDE DATED 11.02.2013. THE DIFFERENCE IS ON ACCOUNT OF RECEIPT OF RS. 24,03,702/- ON 10.06.2009 WHICH WAS RECEIVAB LE ON 01.04.2009 AND THE TOTAL PURCHASES AMOUNTED TO RS. 3,79,40,413 /-. TILL 01.04.2009, WHITE CUBES WAS SELLING GOODS TO AKANSH A SYNTHETICS PVT. LTD. HOWEVER, SINCE 01.04.2009, WHITE CUBE STARTED MAKING PURCHASES FROM AKANSHA SYNTHETICS PVT. LTD. THE AO HAS INCLUDED AMOUNT PAID BY AKANSHA SYNTHETICS PVT. LTD. OF RS. 24,03,707/- RECEIVED ON 10.06.2009 BY WHITE CUBES, WHICH IS NOT HING BUT THE AMOUNT OF SALES MADE BY AKANSHA SYNTHETICS PVT. LTD . TO WHITE CUBE AND THE SAID AMOUNT CANNOT BE ADDED AS PURCHASES TO THE INCOME OF THE ASSESSEE. 5.8 AS REGARDS, THE 10 TH GROUND OF APPEAL IT IS STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), THE RELEVANT BANKS STATEMENT WERE FILED. 6. THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE ADDITION OF (I) RS. 1,29,43,1 57/- [CESSATION OF LIABILITIES U/S 41(1)]; (II) RS. 1,98,57,926/- [DEE MED INCOME U/S 28(IV); (III) RS. 10,47,95,882/-] UNPROVED / UNSUBS TANTIATED PURCHASES; (IV) RS. 20,87,278/- [DISALLOWANCE U/S 4 0(A)(IA)]; RS. 3,68,35,330/- [DISALLOWANCE TOWARDS OUTLET OPERATIN G AND MAINTENANCE EXPENSES]; (V) RS. 50,82,055/- [UNPROVE D COMMISSION ITA NO. 2659/MUM/2015 6 EXPENSES]; (VI) RS. 1,24,88,000/- [SHARE APPLICATIO N MONEY U/S 68] AND RS. 24,03,705/- [DIFFERENCE IN THE AMOUNT OF PU RCHASES]. IT IS FURTHER STATED BY HIM THAT SUFFICIENT OPPORTUNITY H AS BEEN GIVEN BY THE A.O. AS WELL AS THE LEARNED CIT(A) TO THE ASSES SEE TO EXPLAIN ITS CASE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAD F ILED BEFORE THE LEARNED CIT(A) (I) A LIST OF CREDITORS AND SAMPLE I NVOICES AND THEIR REPAYMENT SCHEDULE IN RESPECT OF GROUND NO 1 OF THE APPEAL, (II) SAMPLE AGREEMENT IN RESPECT OF GROUND NO 2 OF THE A PPEAL (III) SAMPLE INVOICES ALONG WITH DELIVERY CHALLAN AND PAYMENT PR OOFS IN RESPECT OF GROUND NO 3 OF THE APPEAL, (IV) SAMPLE BILLS INDICA TING REIMBURSEMENT OF EXPENSES TO FRANCHISEE IN RESPECT OF GROUND NO 4 OF THE APPEAL, (V) COPY OF THE AGREEMENTS WHICH PROVIDE FOR REIMBURSEM ENT OF EXPENSES ALONG WITH PROOF IN THE BANK STATEMENT WHI CH REFLECTS PAYMENT OF THE SAID EXPENSES IN RESPECT OF GROUND N O 5 & 6 OF THE APPEAL, (VI) BANK STATEMENT REFLECTING PAYMENTS IN RESPECT OF GROUND NO 7 OF THE APPEAL, (VII) RELATED DOCUMENTS IN RESP ECT OF GROUND NO 8 OF THE APPEAL, (VIII) THE DETAILS CLARIFYING THE DI SCREPANCY AND BANK STATEMENTS IN RESPECT OF GROUND NO 9 OF THE APPEAL. 7.1 WE FIND THAT THE LEARNED CIT(A) HAS NOT EXAMINE D THE ABOVE DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE HIM. THESE DETAILS ARE HAVING A DIRECT BEARING ON THE ADDITIONS / DISALLOWANCES MADE BY THE AO. IN VI EW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RE STORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AS PE R THE PROVISIONS OF THE ACT, AFTER GIVING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FURNISH BEFORE THE AO THE RELEVANT DETAILS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31/01/2017 SD/- SD- ( MAHAVIR SINGH) (N.K. PR ADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R ITA NO. 2659/MUM/2015 7 MUMBAI; DATED: 31/01/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI