CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, MUMBAI V. DCIT-5(1)(2), MUMBAI

ITA 2993/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7207 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: A K SHARMA
• Keywords: Gift; Opportunity of being heard
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO . 2993 /MUM/2016 (A.Y : 2012 - 13 ) M/S. CENTRAL INVESTIGAT ION & SECURITY SERVICES LIMITED, DUPLEX HEIGHT NO. 6 [FORMERLY KNOWN AS PERSURAMPURIA TOWER NO.6] , OFFICE NO. 002, NEAR MILAT NAGAR OSIWARA, ANDHERI (W) , MUMBAI 400 053 PAN NO : AAACC 6145 P V . DY . C.I.T 5(1) ( 2 ) ROOM NO. 525, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.K. SHARMA DEPARTMENT BY : SHRI RAM TIWARI DATE OF HEARING : 07.02 .2018 DATE OF PRONOUNCEMENT : 23 .04 .2018 O R D E R PER C.N. PRASAD 1. THIS APPEAL IS FILED BY THE ASSE SS EE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) - 10 MUMBAI DATED 15.02.2016 FOR THE ASSESSMENT YEAR 2012 13. 2 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, 2. THE FIRST GROUND OF APPEAL IN ASSESSEES APPEAL IS IN RESPECT OF UPHOLDING OF DISALLOWANCE OF . 1,13,699/ AND .1,04, 522/ - BEING THE AMOUNT S PAID ON LATE PAYMENT OF TDS AND SERVICE TAX PENALTY . 3. WHILE COMPLETING THE ASSESSMENT , THE ASSESSING OFFICER NOTICED THAT ASSESSE E DEBITED ITS PROFIT AND LOSS ACCOUNT WITH .1,13,699/ AND .1,04,522/ - TOWARDS IN TEREST ON TDS AND SERVICE TAX PENALTY RESPECTIVELY. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE ABOVE PAYMENTS SHOULD NOT TO BE DISALLOWED U/S. 37(1) OF THE ACT. IT SEEMS THAT ASSESSEE HAS NOT FILED ANY EXPLANATION BEFORE THE ASSESSING OFFICER. IN THE ABSENCE OF EXPLANATION BY T HE ASSESSEE THE ASSESSING OFFICER INVOKING THE E XPLANATION TO SECTION 37(1) OF THE ACT TREATED THE SAID EXPENDITURE AS INCURRED FOR THE PURPOSE OF OFFENCE WHICH IS PROHIBITED BY LAW AND NOT ALLOWABLE AS DEDUCTION . A CCORDINGL Y, THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE. ON APPEAL LD.CIT (A) SUSTAINED THE DISALLOWANCE. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT PAID FOR DELAY IN PAYMENT OF TDS AND SERVICE TAX IS NOT IN THE NATURE OF PENALTY AND IT IS NOT IN VIOLATION OF ANY LAW. THE PAYMENT MADE TOWARDS LATE REMITTANCE OF TDS AND SERVICE TAX IS ONLY COMPENSATORY IN NAT URE AND NOT PENAL IN NATURE. LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE MUMBAI BENCH IN THE CASE OF MANGAL KESHAV SECURITIES LTD V. ACIT [ 46 ITR (TRIB) 458] IN SU PPORT OF THE ABOVE CONTENTIONS. 3 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW . 6. ASSESSEE PAID INTEREST FOR DELAY IN REMITTING OF TDS AND PAID PENALTY FOR DELAY IN FILING THE SERVICE TAX RETURN. THE SAID AMOUNT PAID BY THE ASSESSEE WAS TREATED AS EXPENDITURE FALLING UNDER E XPLANATION T O SECTION 37(1) OF THE ACT AND THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER. ON A PLAIN READING OF THE EXPLANATION TO SECTION 37(1) OF THE ACT IT IS CLEAR THAT ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PR OHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND SUCH EXPENDITURE IS NOT ALLOWED AS DEDUCTION. THE DELAY IN PAYMENT OF INTEREST AND PENALTY IN LATE FILING OF RETURN OF SERVICE TAX CANNOT BE SAID TO BE AN OFFENCE OR INCURRED FOR THE PURPOSE WHICH IS PROHIBITED BY LAW. THIS VIEW IS ALSO SUPPORTED BY THE MUMBAI BENCH IN THE CASE OF MANGAL KESHAV SECURITIES LTD. V. ACIT (SUPRA). IN THE CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAID DISA LLO WANCE. THIS GROUND IS ALLOWED. 7. THE GROUND NO.2 TO 4 OF THE GROUNDS OF APPEAL OF THE ASSESSEE IS REGARDING UPHOLDING THE DISALLOWANCE OF .24,87,321/ - MADE U/S. 40 (A)(IA) OF THE ACT. 4 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, 8. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT AND ON PERUSAL OF THE TDS STATEMENTS AND TAX AUDIT REPORT NOTICED THAT ASSESSEE PAID INTEREST TO VARIOUS PARTIES AND NO TAX WAS DEDUCTED U/S. 194A OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PROVISIONS OF U/S. 40(A)(IA) S HOULD NOT BE APPLIED. IT IS OBSERVED BY THE ASSESSING OFFICER THAT IN RESPONSE TO THE SAME THE ASSESSEE ACCEPTED PROPOSED DISALLOWANCE AND ACCORDINGLY DISALLOWANCE OF .24,87,321/ - WAS MADE U/S. 40(A)(IA) FOR FAILURE TO DEDUCT TDS ON INTEREST EXPENSES. ON APPEAL LD.CIT(A) SUSTAINED THE DISALLOWANCE OBSERVING THAT SINCE THE ASSESSEE HAS AGREED FOR THE DISALLOWANCE BEFORE THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE C ANNOT NOT RAISE GROUND ON THE SAME ISSUE AGAIN. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, ASSESSEE NEVER AGREED BEFORE THE ASSESSING OFFICER FOR ANY ADDITION FOR ANY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. LD. COUNSEL FOR THE ASSESSEE FURTHER REFER E I NG TO THE PAGE NO. 18 OF THE PAPER BOOK WHICH IS THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A), IT IS SUBMITTED THAT ALL THE PERSONS/PARTIES TO WHOM PAYMENTS WERE MADE WITHOUT DEDUCTION OF TAX AT S OURCE HAD FILED THEIR RETURNS AND PAID TAX ES AND THER EFORE NO DISALLOWANCE COULD BE MADE IN ASSESSEES HAND U/S. 40(A)(IA) OF THE ACT. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT RELEVANT CERTIFICATES 5 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, REQUIRED TO BE SUBMITTED AS PER RULE 31ACB OF THE I.T. RULES HAVE BEEN SUBMITTED BEFORE THE LD. CIT (A) AND THESE CERTIFICATES WERE NOT FILED BEFORE THE ASSESSING OFFICER AS THESE WERE NOT RECEIVED BY THE ASSESSEE FROM THE PARTIES AND REQUESTED BEFORE THE LD.CIT(A) TO DIRECT THE LD. A.O TO VERIFY THE CERTIFICATES BEFORE DELETING THE AMOUNTS THEREFORE IT IS SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CERTIFICATE S BEFORE THE ASSESSING OFFICER. 10. LD. DR HAS NO SERIOUS OBJECTION IN REMITTING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION IN THE LIGHT OF THE SUBMISSIONS AND THE EVIDENCES FURNI SHED BY THE ASSESSEE. 11. ON HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THAT THIS MATTER HAS TO BE EXAMINED BY THE ASSESSING OFFICER AFRESH IN THE LIGHT OF THE SUBMISSIONS OF THE ASSES SEE AND DECIDE IN ACCORDANCE WITH LAW, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, WE RESTORE THIS ISSUE TO FILE OF THE ASSESSING OFFICER. THIS GROUND IS ALLOWED FOR STATISTI CAL PURPOSE. 12. THE LAST GROUND REMAINING FOR ADJUDICA TION IS IN RESPECT OF DISALLOWANCE OF ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER FROM OUT OF BUSINESS PROMOTION , GIFT S AND OFFICE EXPENSES . 6 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, 13. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE DEBITED VARIOUS EXPENSES LI KE BUSINESS PROMOTION, GIFTS AND OFFICE EXPENSES TO THE PROFIT AND LOSS ACCOUNT AND CALLED FOR BILLS, VOUCHERS PERTAINING TO THE SAID EXPENSES. ON VERIFICATION, HE FOUND THAT SOME BILLS, VOUCHE R S, WERE DEFECTIVE LIKE SOME WERE UNDATED, UNSIGNED, NOT SUPPORTED WITH RELEVANT BILLS. THEREFORE, ASSESSING OFFICER DISALLOWED A SUM OF . 3,00,000/ - AS UNVERIFIABLE BUSINESS PROMOTION, GIFTS AND OFFICE EXPENSES. ON APPEALS LD. CIT(A) S USTAINED THE SAID D ISALLOWANCE. 14. ON A CAREFUL READING OF THE ORDERS OF THE AUTHORITIES BELOW , WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE FINDIN GS OF THE AUTHORITIES BELOW IN SUSTAINING THE DISALLOWANCE AT . 3,00,000/ - FROM OUT OF BUSINESS PROMOTION, GIFTS AND OFFIC E EXPENSES. HENCE THE SAME IS SUSTAINED. THIS GROUND IS REJECTED. 15. IN THE RESULT, APPEAL OF THE ASSESS EE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 23 RD APRIL , 2018 . SD/ - SD/ - ( N. K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 23 / 04 / 201 8 GIRIDHAR , S R. PS 7 ITA NO.2993/MUM/2016 (A.Y: 2012 - 13) ) M/S. CENTRAL INVESTIGATION & SECURITY SERVICES LIMITED, 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// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM