R.K. OVERSEAS, MUMBAI V. CIT -18, MUMBAI

ITA 324/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2591 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURINER MEHRA
• Keywords: Depreciation
• Section: 143(3); 142(1); 80IB; 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAJESH KUMAR , AM ./ ITA NO. 324/MUM/20 14 ( / ASSESSMENT YEAR: 2008 - 09 ) M/S. R.K. OVERSEAS / VS. A C I T - 18(2) GALA NO. 7, EVERGREEN INDL. ESTATE, SHAKTI MILLS COMP. OPP. HARRISON ROAD, MAHALAXMI MUMBAI 400011 PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI 400012 ./ PAN - AAEFR3489E /APPELLANT / RESPONDENT / APPELLANT BY: SHRI SURINER MEHRA / RESPONDENT BY : SHRI VIVEK ANAND OJHA / DATE OF HEARING : 08.10. 2015 / DATE OF PRONOUNCEMENT : 30 .10.2015 / O R D E R PER SHAILENDRA K UMAR YADAV, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT - 18, MUMBAI AND IT PERTAINS TO A.Y. 2008 - 09 ON FOLLOWING GROUNDS: - I.A) THAT THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX U/S. 263 SETTING ASIDE THE ASSESSMENT MADE IS ILLEGAL AND WITHOUT JURISDICTION AND THE SAME MAY BE CANCELLED. B) THAT THERE IS NO MATERIAL WHATSOEVER OIL TO SHOW THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND AS SUCH THE INVOKING OF THE PROVISIONS OF SECTION 26 3 OF THE ACT BY THE COMMISSIONER OF INCOME TAX IS ILLEGAL AND WITHOUT JURISDICTION. 2 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS C) THAT THE COMMISSIONER OF INCOME TAX HAS ERRED IN NOT GIVING DUE WEIGHT TO THE REPLY , DATED 2.6.2012 AND 5.6.2012 FILED BY THE APPELLANT FIRM ALONG WITH ENCLOSURES MENTIONE D THEREIN. D) THAT FROM THE PERUSAL OF - 'THE SAID LETTERS DATED 2.6.20 12 AND 5.6.20 12 FILED WITH THE COMMISSIONER OF INCOME TAX IN REPLY TO THE SHOW CAUSE NOTICE IT IS APPARENT THAT ALL THE OBJECTIONS RAISED BY HIM DO 1101 HOLD GOOD AND THAT THE ASSESSMENT W AS MADE AFTER THOROUGH SCRUTINY AND NONE OF THE GROUNDS STATED BY THE COMMISSIONER OF INCOME TAX FOR HOLDING THAT THE ORDER PASSED WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HOLD GOOD. E) THAT IT IS SETTLED LAW THAT UNLESS A VIEW TAKEN BY TH E ASSESSING OFFICER IS UNSUSTAINABLE IN LAW, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE VIDE MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC). 2. IN THIS CASE THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 28.12.2010 IN WHICH RETURNED INCOME OF ` 78.76 LAKHS WAS ACCEPTED. THE CASE WAS SELECTED FOR SCRUTINY INTER ALIA FOR EXAMINING THE CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT AND ALSO TO EXAMINE THE GENUINENESS OF COMMISSION EXPENSES CLAIMED BY ASSESSEE. ACCORDING TO THE CIT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE PROPERLY. ACCORDING TO HIM DUE TO LACK OF ENQUIRY/INVESTIGATION THE ASSESSMENT ORDER PASSED IN A HURRIED MANNER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ASSESSEE HAS CLAIMED DEDUCTION OF ` 21.90 LAKHS IN RESPECT OF COMMISSION PAID TO VARIOUS PARTIES. AS STATED EARLIER, NO EFFORTS HAVE BEEN MADE TO INQUIRE INTO THE GENUINENESS OF THE SAID EXPENSES. PRIOR TO THIS THE CIT OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10B IN RESPECT OF INCOME OF ` 1.10 LAKHS ALTHOUGH THIS INCOME CANNOT BE ATTRIBUTED TO EXPORT BUSINESS. FURTHER THE CIT OBSERVED THAT SEVERAL EXPENSES HAS BEEN DEBITED TO PROFIT & LOS S ACCOUNT WHICH HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER . FOR 3 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS EXAMPLE, ASSESSEE HAS DEBITED A SUM OF ` 20.03 LAKHS AS EXCHANGE RATE DIFFERENCE WHICH HAS NOT BEEN EXAMINED AT ALL BY THE ASSESSING OFFICER . THERE WAS ADDITION TO BUILDING AND MACHINERY A CCOUNT AMOUNTING TO ` 18.70 LAKHS AND ` 7.79 RESPECTIVELY AS PER THE DEPRECIATION CHART. HOWEVER, THE ENTIRE CLAIM OF DEPRECIATION ON THESE ASSETS HAVE BEEN ALLOWED WITHOUT CALLING FOR EVEN PRELIMINARY DETAILS SUCH AS NATURE OF ASSETS, DATE OF PURCHASE, DATE OF INSTALLATION, ETC. LIKEWISE, ASSESSEE DEBITED ` 26.96 LAKHS ON ACCOUNT OF TRAVELLING EXPENSES. HOWEVER, NO QUERY HAS BEEN RAISED TO EXAMINE THE GENUINENESS OF SUCH EXPENSES AND ALSO ITS BUSINESS EXPEDIENCY. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE UNDER SE CTION 263 ASSESSEE MADE WRITTEN SUBMISSION, INTER ALIA, CONTESTING THE PROPOSED ACTION UNDER SECTION 263. IT HAS BEEN CLAIMED THAT THE ASSESSMENT ORDER HAS BEEN FRAMED AFTER DETAILED ENQUIRY AND INVESTIGATION BY THE CONCERNED ASSESSING OFFICER . ASSESSEE HA S SUBMITTED RELEVANT DETAILS FROM TIME TO TIME WITH REGARD TO DEDUCTION CLAIMED UNDER SECTION 10B IN RESPECT OF INTEREST INCOME. IT HAS BEEN STATED THAT THE INTEREST WAS RECEIVED ON STATUTORY DEPOSITS GIVEN TO BANK FOR AVAILING VARIOUS FACILITIES. THIS INC OME WAS REQUIRED TO BE NETTED OUT AGAINST THE INTEREST PAID TO BANK AMOUNTING TO ` 14,64,871/ - . IN RESPECT OF COMMISSION EXPENSES IT WAS CLAIMED THAT RELEVANT DETAILS HAVE BEEN FURNISHED . MOREOVER, COMMISSION AMOUNTING TO ` 12,32,867/ - PERTAINS TO AMRITSAR UNIT WHICH WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B. AS SUCH, ANY DISALLOWANCE MADE IN THIS REGARD WOULD RESULT IN HIGHER DEDUCTION AND THE NET INCOME WOULD REMAIN THE SAME. AS REGARDS APPLICABILITY OF SECTION 40(A)(IA) IT WAS CLAIMED THAT THE PROVISI ONS ARE NOT APPLICABLE SINCE THE AMOUNT WAS PAYABLE TO PERSONS RESIDING OUTSIDE INDIA. WITH REGARD TO OTHER EXPENSES, IT HAS BEEN CLAIMED THAT AS MAJOR PART OF 4 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS SUCH EXPENSES RELATED TO AMRITSAR UNIT, ANY DISALLOWANCE WOULD NOT HAVE MADE ANY MATERIAL DIFFER ENCE TO THE INCOME. HOWEVER, THE CIT SET ASIDE THE ORDER OF THE ASSESSING OFFICER UNDER PROVISIONS OF SECTION 26 3 BY OBSERVING AS UNDER: - 7. I HAVE CAREFULLY CONSIDERED THE OBJECTION RAISED BY THE ASSESSEE AS NARRATED ABOVE. HOWEVER, I DO NOT FIND ANY MERIT THEREIN. AS STATED EARLIER, THE ASSESSING OFFICER HAS NOT PROPERLY EXAMINED THE ISSUES ON WHICH THE CASE WAS SELECTED FOR SCRUTINY. MERE BR INGING ON RECORD CERTAIN DETAIL DOES NOT LEAD TO THE CONCLUSION THAT NECESSARY INQUIRY HAS BEEN CONDUCTED. IT WAS INCUMBENT ON HIM TO EXAMINE THE GENUINENESS OF THE COMMISSION EXPENSE WHICH HAS APPARENTLY HAS NOT BEEN DONE. MOREOVER, WITH REGARD TO OTHER E XPENSES, HE HAS FAILED TO BRING ON RECORD EVEN PRIMARY DETAILS. THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE. IN RESPECT OF INTEREST INCOME ALSO, THE INTEREST INCOME CANNOT BE CONSIDERED AS INCOME FROM EXPORT BUSINESS. RATHER IT BEING TAXAB LE AS INCOME FROM OTHER SOURCES AND THERE BEING NO NEXUS WITH INTEREST PAID, ENTIRE AMOUNT REQUIRED TO BE EXCLUDED FOR THE PURPOSE OF SECTION 10B. 4. THE SAME HAS BEEN OPPOSED BEFORE US AND THE STAND OF THE ASSESSEE HAS BEEN THAT THE CIT HAS PASSED THE ORDER WITHOUT TAKING THE FACTS AND CIRCUMSTANCES UNDER CONSIDERATION. THE CIT EARED IN NOT GIVING DUE WEIGHT TO THE REPLY DATED 02.06.2012 AND 05.06.2012 FILED BY THE ASSESSEE FIRM ALONGWITH ENCLOSURES MENTIONED THEREIN. ACCORDING TO LEARNE D A.R. FOR THE ASSESSEE ALL OBJECTIONS RAISED BY THE CIT WERE MET OF BY ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX IN RESPONSE TO THE SHOW CAUSE NOTICE. IN THIS REGARD ASSESSEE DREW OUR ATTENTION TO ITS LETTER DATED 02.06.2012 FILED WITH THE COMMISSION IN RESPONSE TO THE NOTICE UNDER SECTION 263. ACCORDING TO THE ASSESSEE ALL DETAILS WERE CALLED FOR BY THE CONCERNED ASSESSING OFFICER VIDE ITS NOTICE UNDER SECTION 142(1) DATED 19.07.2010. COPY OF THE SAID NOTICE AND QUESTIONNAIRE WAS FILED WITH THE SAID LETTER FOR READY REFERENCE. ASSESSMENT PROCEEDINGS WERE IN PROGRESS FOR MORE THAN 5 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS FIVE MONTHS AND THEREAFTER THE ORDER WAS PASSED ON 28.12.2010. DURING THE SAID PERIOD ALL THE DOCUMENTS CALLED FOR BY THE ASSESSING OFFICER FROM TIME TO TIME WERE FURNISHED A ND WERE CHECKED BY THE ASSESSING OFFICER AND HE WAS FULLY SATISFIED ABOUT THE GENUINENESS OF THE ASSESSEE AS HE COULD NOT FIND ANY DISCREPANCIES AND THEREAFTER PASSED THE ORDER ACCEPTING ASSESSEES RETURNED INCOME. THE LEARNED A.R. FOR THE ASSESSEE ALSO S UBMITTED THAT ASSESSEES CASE HAS BEEN CONTINUOUSLY SCRUTINIZED FOR THE LAST MORE THAN FIVE YEARS AND EXCEPT FOR SOME ALLOCATIONS OF SALARY AND COMMISSION OF MUMBAI HO TO AMRITSAR BRANCH, THE RESULTS SHOWN BY THE ASSESSEE WERE FULLY ACCEPTED. AS SUCH IT WA S SUBMITTED THAT ASSESSMENT ORDER PASSED WAS PROPER AND THERE IS NO HASTE IN THE SAID ASSESSMENT ORDER. ASSESSEE, IN THE SAID LETTER ALSO JUSTIFIED ITS CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF AMRITSAR UNIT. ALL THESE DOCUMENTS WERE C LAIMED TO BE FILED BEFORE THE ASSESSING OFFICER AND HE WAS DULY SATISFIED. IN THIS BACKGROUND THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER DOES NOT ATTRACT PROVISIONS OF SECTION 263. ACCORDINGLY THE ORDER OF CI T BE SET ASIDE. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTED THE ORDER OF THE CIT. 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT THE COMMISSIONER OF INCOME TAX, IN THE ORDER UNDER SECTION 263, OBSERVED THAT IT WAS INCUMB ENT ON THE ASSESSEE TO EXAMINE THE GENUINENESS OF THE COMMISSION EXPENSES WHICH WAS APPARENTLY NOT BEING DONE. THE FINDING S OF THE CIT ARE CONTRARY TO THE DOCUMENT ON RECORD. IN ITS LETTER DATED 02.06.2012 FILED WITH THE CIT IN RESPONSE TO THE SHOW CAUSE N OTICE UNDER SECTION 263 ASSESSEE FILED COMPLETE DETAILS OF COMMISSION DEBITED TO PROFIT & LOSS ACCOUNT, WHICH WERE FILED BEFORE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND THE SAME WERE ON 6 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS RECORD. THE SAID LETTER WAS FILED WITH DATEWISE DETAILS OF EVERY PURCHASES AND SALE MADE IN THE AMRITSAR UNIT AND MUMBAI HO AS DEMANDED BY ASSESSING OFFICER AT RELEVANT POINT OF TIME WHICH SHOWS THAT THE CASE WAS SCRUTINIZED IN DETAIL AS PER FACTS. ASSESSING OFFICER ALSO CALLED FOR FURTHER BILLWISE DETAILS OF COMM ISSION PAID IN MUMBAI HO AND AMRITSAR UNIT AND SAME WERE HANDED OVER TO THE ASSESSING OFFICER ON 07.12.2010 AND COPIES OF THE SAME WERE PLACED ON PAGES 11.16 OF THE PAPER BOOK. THE SAID LETTER ALONG WITH DETAILS FILED GIVE COMPLETE PICTURE OF ASSESSEES BUSINESS . THE DETAILS FILED BY THE ASSESSEE WERE ALSO EXAMINED BY THE ASSESSING OFFICER AT RELEVANT POINT OF TIME AND NO DISCREPANCY, WHATSOEVER, WAS FOUND IN THIS REGARD . A FTER FURNISHING SUCH DETAILS ON 07.12.2010 THE ASSESSMENT ORDER WAS PASSED ON 28.10 .2010 I.E. AFTER SCRUTINIZING ALL THE DETAILS FILED . I T WAS NOT PASSED IN A HASTY MANNER AS CLAIMED BY THE CIT. THE AMOUNT OF ` 12,32,867/ - PERTAINS TO AMRITSAR UNIT OF THE ASSESSEE FIRM AND IT WOULD MAKE NO DIFFERENCE TO THE TOTAL INCOME EVEN IF ANY PORTIO N OF THE COMMISSION IS DISALLOWED AS THE ENTIRE INCOME OF THE SAID UNIT IS EXEMPT AND IF ANY DISALLOWANCE IS MADE, THE DEDUCTION ALLOWABLE UNDER SECTION 10B WOULD GO UP AND THE NET INCOME WOULD REMAIN THE SAME. THUS NO PREJUDICE IS CAUSED TO REVENUE IN THI S REGARD. IN THE MUMBAI HO THE COMMISSION PAID IS ONLY 1.61% OF THE TURNOVER AND THE COMMISSION PAID IN AMRITSAR UNIT IS ONLY 1.55% OF THE TURNOVER AND THESE FIGURES GO TO SHOW THAT THE COMMISSION PAID IS VERY REASONABLE AND PROPER. THE ACCOUNTS OF THE ASS ESSEE FIRM ARE DULY AUDITED EXCEPT FOR MINOR VARIATIONS IN FIGURES. NO DISALLOWANCE HAS BEEN MADE IN THE HANDS OF THE ASSESSEE AS DISCUSSED ABOVE. ASSESSEE FILED BEFORE THE ASSESSING OFFICER A LETTER RECEIVED FROM THE BANK REGARDING REMITTANCE MADE ABROAD OF COMMISSION PAID. 6. IN VIEW OF THIS THERE WAS NOTHING FOR THE ASSESSING OFFICER OR THE COMMISSIONER TO DOUBT THE GENUINENESS OF THE COMMISSION PAID. 7 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS COMMISSION WAS PAID TO AGENTS WHO HAVE BEEN AGENTS OF THE ASSESSEE FOR QUITE SOME TIME AND ALL THE YEARS T HE COMMISSION PAID TO THEM ARE ACCEPTED. ASSESSEE FIRM IS REGULARLY FOLLOWING MERCANTILE SYSTEM OF AC COUNTING AND IN RESPECT OF EXPORT S ALREADY MADE CERTAIN COMMISSION IS DULY ASCERTAINED AND PAYABLE. THE SAME WAS REGULARLY PROVIDED IN THE ACCOUNTS AND HA S BEEN ALWAYS ALLOWED AS DEDUCTION. BILLWISE DETAILS OF COMMISSION PAYABLE ARE GIVEN IN PAGES 11 TO 14 OF THE PAPER BOOK FILED BEFORE US AND DETAILS OF COMMISSION ACTUALLY PAID ARE GIVEN IN PAGES 15 AND 16 OF THE PAPER BOOK. FROM THE PERUSAL OF THE SAME, I T IS APPARENT THAT THE COMMISSION PAYABLE IN RESPECT OF EXPORTS MADE AND IT IS AN ASCERTAINED LIABILITY AND NOT CONTINGENT LIABILITY. IT IS NOT CASE OF NO ENQUIRY WITH REGARD TO ALL ISSUES RAISED BY CIT IN REVISION PROCEEDING . IT MAY BE CASE OF IMPROPER OR LESS INQUIRIES BY ASSESSING OFFICER. REVISION POWER OF CIT UNDER PROVISION OF SECTION 263 OF THE ACT SHALL NOT BE INVOKED IN SUCH SITUATION BECAUSE IMPROPER INQUIRY OR LESS INQUIRY IS SUBJECT IVE OUTLOOK OF ASSESSING OFFICER. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIONS , THE CIT WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 263 TO SET ASIDE THE ORDER OF THE ASSESSING OFFICER . THE SAME IS SET ASIDE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. 30.10.2015 SD/ - SD/ - (RAJESH KUMAR) ( SHAILENDRA KUMAR YADAV ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI , DATED 30 TH OCTOBER, 2015 8 ITA NO. 324/MUM/20 14 M/S. R.K. OVERSEAS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . / THE CIT - 18 , MUMBAI 4 . , , / DR, D BENCH ITAT, MUMBAI 5 . / GUARD FILE . / B Y O RDER //TRUE COPY// /ASSTT. REGISTRAR) , /ITAT, MUMBAI