ADDL CIT RG 13(2), MUMBAI V. R.S. CARRIERS, MUMBAI

ITA 2785/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70925 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K GARG
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Transfer pricing; Fair market value

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . , !' !' !' !' # # # # $%&' $%&' $%&' $%&' , % % % % () () () () BEFORE S/SH.D.MANMOHAN,VICE-PRESIDENT & RAJENDR A,ACCOUNTANT MEMBER ./ ././ ./ ITA NO.2785/MUM/2012 , + + + +/ // / ASSESSMENT YEAR-2008-09 ASST. COMMISSIONER OF INCOME TAX- 13(2), MUMBAI. VS. R.S. CARRIERS 312, VARDHAM CHAMBERS, 3 RD FLOOR, KALYAN STREET, DANA BUNDER, MUMBAI- 400009 PAN: AACFR3058D ( ,- / // / APPELLANT ) ( ./,- / RESPONDENT ) ,- ,- ,- ,- 0 0 0 0 % %% % / APPELLANT BY : SHRI J.K. GARG. ./,- 1 0 % / RESPONDENT BY : SHRI VIJAY C. KOTHARI. 1 11 1 2 2 2 2 / DATE OF HEARING :29/08/2013 3+ 1 2 / DATE OF PRONOUNCEMENT :04/09/2013 , 1961 1 11 1 254(1) % %% % &242 &242 &242 &242 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M: CHALLENGING THE ORDER DT.20-02-2012 OF THE CIT(A)-2 4,MUMBAI ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: (1) (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE FISALOWANCE MADE OF RS. 9,81,500/- U/ S. 40A(2)(A) OF THE I.T.ACT, 1961. (II) WHILE DOING SO, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS THAT SUBSTANTIAL PAYMENTS HAD GONE TO THE GROUP COMPANIES/ASSOCIATED ENTERPRISES WI TH COMMON PARTNERS. (2) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. (3) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY NEW GROUND, IF NECESSARY. 2. ASSESSEE - FIRM, ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACT , ILED ITS RETURN OF INCOME ON 07.10.2008 DECLARING INCOME OF RS. 12.98 LACS.ASSES SMENT WAS FINALISED BY THE AO U/S.143(3)OF THE ACT,ON 23.12.2010, DETERMINING THE INCOME OF TH E ASSESSEE AT RS. 22.79 LACS. 2.1. ONLY EFFECTIVE GROUND OF APPEAL IS ABOUT ADHOC DISA LLOWANCE OF RS. 9,81,500/- MADE BY THE AO U/S. 40A(2)(B) OF THE ACT @ 3% OF CASH EXPENSES. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT IT HAD CLAIMED DIESEL EXPENSES ON RS. 36 3.23 LACS.AS PER THE DIRECTION OF THE AO ASSESSEE PRODUCED PAYMENT-VOUCHERS THAT WERE TEST C HECKED BY THE AO WITH THE BANK STATEMENTS /CASH BOOK. AFTER MAKING INQUIRY IN THIS REGARD, AO HELD THAT SUBSTANTIAL PAYMENT IN RESPECT OF DIESEL EXPENSES HAD GONE TO THE GROUP COMPANIES/ASS OCIATED ENTERPRISES WITH COMMON PARTNERS. AO FOUND THAT ASSESSEE HAD SHOWN CASH EXPENSES OF R S. 3.27 CRORES HE MADE A DISALLOWANCE OF RS.9.81 LACS U/S.40A(2)(B) OF THE ACT (@ 3% OF CASH PAYMENTS). 2.2 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY(FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HE HELD THAT WHILE MAKING THE ADHOC DISALLOWANCE OF 3% AO HAD NOT SHOWN AS TO HOW THE SAME WAS LIABLE FOR DISALLO WANCE, THAT FOR MAKING ANY DISALLOWANCE UNDER THE SAID SECTION FIRST REQUIREMENT WAS THAT T HE PAYMENT SHOULD HAVE BEEN MADE TO ANY PERSON REFERRED TO CLAUSE (B) OF THE SECTION 40A(2) OF THE ACT, THAT THE SECOND REQUIREMENT WAS THE OPINION OF THE AO THAT INCURRED EXPENDITURE WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS FOR WHICH THE PA YMENT WAS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS, THAT THE PERUSAL OF ASSESSMENT ORDER SHOWED THAT AO HAD NOT SHOWN THAT THE 2 ITA NO. 2785/MUM/2012(AY-2008-09) R.S. CARRIERS PAYMENTS HAD BEEN MADE TO ANY PERSON REFERRED TO CL AUSE (B), THAT HE HAD NOT POINTED OUT EVEN A SINGLE SUCH INSTANCE, THAT AO HAD MADE ONLY GENERAL OBSERVATIONS THAT SUBSTANTIAL PAYMENT HAD GONE TO THE GROUP COMPANIES, THAT THE AO HAD NOT ME NTIONED NAMES OF THE CONCERNS/PERSONS OR THE AMOUNT OF PAYMENT WHO WERE COVERED UNDER THE PR OVISIONS OF SECTION 40A(2)(B) OF THE ACT, THAT THE AUDIT REPORT FILED BY THE ASSESSEE CLEARLY PROVED THAT NO PAYMENT WAS MADE TO THE PERSONS SPECIFIED U/S.40A(2)(B) OF THE ACT, THAT TH E AO HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT AUDITORS COMMENTS WERE INCORRECT. AS A RESULT, HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 2.3 .BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTE D THE ORDER OF THE AO.AUTHORISED REPR -ESENTATIVE(AR)SUBMITTED THAT PAYMENTS WERE NOT MAD E TO THE PERSONS COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, THAT AO HAD NOT AL LEGED THAT PAYMENTS WERE UNREASONABLE AND EXCESSIVE. 2.4 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AO HAS MADE THE DISALLOWANCE WITHOUT ANY BASIS.HE HAS MADE A GENERAL OBSERVATION ABOUT PROVISIO -NS OF SECTION 40A(2)(B) OF THE ACT, BUT HE HAS FAI LED TO GIVE EVEN A SINGLE INSTANCE OF MAKING PAYMENT TO THE PARTIES COVERED BY THE SAID SECTION. SECONDLY, HE HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO PROVE THAT PAYMENT MADE BY THE ASSESSE E WAS EXCESSIVE/UNREASONABLE AS LAID DOWN IN THE SAID SECTION OF THE ACT.IN SHORT, AS POINTED OUT BY THE FAA TWIN CONDITIONS FOR INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT ARE MISS ING IN THE CASE UNDER CONSIDERATION.SO,WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE W ITH THE ORDER OF THE FAA. CONFIRMING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST TH E AO. AS A RESULT APPEAL FILED BY THE AO STAND DISMISSED. 6 )7 62 8 ( 9 6$ 1 $ 2 :. ORDER PRONOUNCED IN THE O PEN COURT ON 4 TH SEPTEMBER, 2013 (%5 1 3+ % & ; <( 4 , 2 2013 1 4 = SD/- SD/- ( . / D. MANMOHAN ) ( $%&' $%&' $%&' $%&' / RAJENDRA) !' !' !' !' / VICE-PRESIDENT % % % % () () () () /ACCOUNTANT MEMBER / MUMBAI, <( /DATE: 04.09 . 2013 SK (%5 (%5 (%5 (%5 1 11 1 .2> .2> .2> .2> ?%>+2 ?%>+2 ?%>+2 ?%>+2 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ,- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR D BENCH, ITAT, MUMBAI / >B 4 .2 . , . . & . 6. GUARD FILE/ 4 C / >2 .2 //TRUE COPY// (%5 / BY ORDER, / $ DY./ASST. REGISTRAR , /ITAT, MUMBAI