SHAH TECHNICAL CONSULTANTS PVT. LTD., MUMBAI V. ADDLL. CIT 2(3)(2), MUMBAI

ITA 338/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3333 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 24-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T. KHALSA
• Keywords: Revised return; Set aside
• Section: 115JB; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 338 /MUM/2019 ASSESSMENT Y EAR: 2015 - 16 M/S SHAH TECHNICAL CONSULTANTS PVT. LTD., 407, RAHEJA CENTRE, PLOT NO. 214, NARIMAN POINT, MUMBAI - 400021 PAN: AADCS4968D VS. ADDL. CIT - 2(3)(2), ROOM NO. 552, AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. K. SHIVARAM (SR. ADVOCA TE ) REVENUE BY : SHRI T. KHALSA (DR ) DATE OF HEARING : 2 7 /09 /202 1 DATE OF PRONOUNCEMENT: 30 / 09 /202 1 O R D E R PER SAKTIJIT DEY , JM THIS IS AN APPEAL BY THE REVENUE AGAINST ORDER DATED 26.11.2018 OF LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - 6 , MUM BAI FOR THE ASSESSMENT YEAR 20 15 - 16 . 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO DISALLOWANCE OF PRINTING AND STATIONERY E XPENSE S O F RS. 2,70,72,569/ - 3. BRIEFLY STATED , THE ASSESSEE IS A RESIDENT COMP ANY ENG AGED IN THE BUSINESS OF CONSULTANCY SERVICES IN DESIGN, CIVIL C ONSTRUCT ION AND E NVIRONMENTAL ENGINEERING PROJECT. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2015 DECLARING TOTA L INCOME OF RS. 2 ITA NO. 338 / MUM/2019 ASS ESSMENT YEAR: 2015 - 1 6 10,32,08,988/ - UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. WHEREAS, THE ASSESSEE ALSO DECLARED BOOK PROFIT OF RS. 9,98,87,661/ - UNDER SECTION 115JB OF THE ACT. SUBSEQUENTLY, ASSESSEE ALSO FILED A REVISED RETURN OF INCOME ON 30. 11.20 16. BE THAT AS IT MAY, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ( AO ) WHILE VERIFYING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS DEBITED RS. 2,99,75,249/ - TOWARDS P RINTING AND STATIONERY EXPENSES. FURTHE R, HE NOTICE D THAT IN ASSESSMENT YEAR 2013 - 14, THE ASSESSEE HAS INCURRED P RINTING AND STATIONERY EXPENSES OF RS. 46,69,896/ - . W HEREAS , IN ASSESSMENT YEAR 2014 - 15 EXPENDITURE WAS TO THE TUNE OF RS. 2,24,22,076/ - . HE ALSO FOUND THAT IN ASSESSMENT 2014 - 15, TH E AO HAS MADE CERTAIN ADVERSE COMMENTS ON THE ALLEGED PURCHASES MADE FROM THREE PARTIES VIZ. RIDDHI ENTERPRISES, NITYANAND ENTERPRISES AN D SANKET ENTERPRISES. BASED ON THE ABOVE MATERIAL, THE AO CALLED UPON THE ASSE SSEE TO FURNISH THE DETAILS OF PRINTING A ND STATION E RY E XPENSES AND JUSTIFY ITS ALLOWABILITY. IN RESPONSE TO THE QUERY RAISED BY THE AO, THE ASSESSEE FURNISHED THE DETAILS AND ALSO EXPLAINED THE CORRECTNESS OF EXPENSES CLAIMED. THE AO , HOWEVER, WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESS EE. ULTIMATELY, THE AO DISALLOWED THE P RINTING AND STATIONERY EXPENSES. THOUGH, ASSESSEE CONTESTED THE AFORESAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , IN ASSESSMEN T YEAR 2014 - 15 ALSO THE ASSESSEE H AD PURCHASED ITEMS FROM THESE ENTITIES. HE SUBMITTED, THOUGH, THE AO AND LEARNED COMMISSIONER (APPEALS) DISALLOWED THE EXPEND ITURE , HOWEVER, THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL HAS 3 ITA NO. 338 / MUM/2019 ASS ESSMENT YEAR: 2015 - 1 6 RESTRICTED THE DISALLOWANCE TO 1 5% OF THE TOTAL EXPENDITURE. THUS, HE SUBMITTED , FACTS BEING IDENTICAL , DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2014 - 15 IS SQUARELY APPLICABLE . 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE AO AND LEARNED COMM ISSIONER (APPEALS) AND SUBMITTED THAT AT NO STAGE, THE ASSESSEE HAS FURNISHED EVIDENCE TO PROVE THE PURCHASES FROM THE CONCERNED ENTITIES. THEREFORE, THE FACTS ARE NOT IDENTICAL TO ASSESSMENT YEAR 2014 - 15. HENCE, THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2014 - 15 WOULD NOT BE APPLICABLE. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF, OUT OF FIVE PARTIES SUPPLYING GOODS TO THE ASSESSEE , RIDDHI ENTERPRISES, NITYANAND ENTERPRIS ES AN D SANKET ENTERPRISES HAD SUPPLIED GOODS TO THE ASSESSEE IN ASSESSMENT YEAR 2014 - 15 AS WELL. WHILE DECIDING ASSESSEES APPEAL CONTESTING THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY LEARNED COMMISSIONER (APPE ALS) IN ASSESSMENT YEAR 2014 - 15, T HE TRI BUNAL IN ITA NO. 249/MUM/2018 DATED 21.05.2019 HAS HELD AS UNDER: - 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER, WE OBSERVE THAT UNDISPUTEDLY THE ASSESSEE HAS MADE SUBSTANTIAL PURCHASES OF PRINTING AND STATIONERY FROM THREE PARTIES NAMELY M/S. RIDDHI ENTERPRISES RS.93,51,632/ - , M/S. SANKET ENTERPRISES RS.32,81,534/ - AND M/S. NITYANAND ENTERPRISES RS.21,22,436/ - AGGREGATING TO RS. RS.1,47,55,602/ - . ALL THESE PARTIES WERE PAID THROUGH RTGS. THIS IS ALSO T RUE THAT ASSESSEE HAS ENTERED INTO A NEW VENTURE IN ARCHITECTURAL FIELD AND HAVE OBTAINED 4 PROJECTS IN THE STATE OF PUNJAB, HIMACHAL PRADESH, UTTARAKHAND AND TAMIL NADU. THE ASSESSEE HAS ALSO COMPLETED FOUR MAJOR PROJECTS NAMELY KERALA 4 ITA NO. 338 / MUM/2019 ASS ESSMENT YEAR: 2015 - 1 6 WATER SUPPLY PROJEC T, THE INDORE WATER SUPPLY PROJECT, JAMMU & KASHMIR WATER & SEWERAGE PROJECT AND THE HOGENEKKAL WATER SUPPLY PROJECT DURING THE YEAR. THE LD. A.R. SUBMITTED BEFORE US THAT IT IS ONLY DUE TO THIS NEW LINE OF BUSINESS THE ASSESSEE HAS TO INCUR THE HUGE EXPEN DITURE ON PRINTING AND STATIONERY WHICH IS COMPARATIVELY VERY COSTLY AS THE ASSESSEE HAS TO PREPARE MAPS AND DRAWING IN THE COLOUR FORMAT WITH MULTIPLE COPIES WHEREAS IN THE EXISTING LINE OF BUSINESS WHICH IS ENGINEERING WHICH ENTAILS RELATIVELY CHEAPER PR INTING COST . IT IS ALSO FACT THAT IN THIS CASE THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE AO. MOREOVER, THE CONSUMPTION OF PRINTING MATERIAL IS ALSO NOT IN DOUBT AS THE ASSESSEE HAS EXECUTED VARIOUS PROJECTS DURING THE YEAR. UNDER THESE FACTS, TH E POSSIBLE PRESUMPTION IS THAT THE ASSESSEE MIGHT HAVE PROCURED THE MATERIAL FROM DIFFERENT SOURCES MAY BE GREY MARKET. THUS TO DISALLOW THE ENTIRE PURCHASES ON THE GROUND OF BEING NON GENUINE AND NON PROVED IS NOT CORRECT. THE ASSESSEE HAS MAINTAINED STOC K RECORDS AND ENTERED ALL THE RECEIPT AND CONSUMPTION OF MATERIALS THEREIN. THEREFORE, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT 100% ADDITION ACCOUNT OF THE ALLEGED PURCHASES SHOULD BE MADE. IN OUR OPINION IT WOULD BE REASON ABLE IF SOME PERCENTAGE OF THESE PURCHASES IS ADDED TO THE INCOME OF THE ASSESSEE IN ORDER TO BRING TO TAX THE VARIOUS SAVINGS WHICH THE ASSESSEE MAY HAVE MADE BY MAKING PURCHASES FROM THE GREY MARKET. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, W E ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE IF 15% OF THE TOTAL PURCHASES ARE DISALLOWED AND BROUGHT TO TAX. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO MAKE ADDITION AT 15% OF THE TOTAL ALLEGED PURCHASES. 7. THOUGH, LEARNED DEPARTMENTAL REPRESENTATIVE HAS TRIED TO IMPRESS UPON US THAT FACTS IN ASS ESSMENT YEAR 2014 - 15 ARE DIFFERENT, HOWEVER, WE ARE NOT CONVINCED. IN FACT, LEARNED COMMISSIONER (APPEALS) HAS SUSTAINED THE ADDITION BY SIMPLY RELY ING UPON HIS ORDER PASSED IN ASSE SSEES CASE IN ASSESSMENT YEAR 2014 - 15. THIS IS VERY MUCH EVIDENT FROM HIS OBSERVATIONS IN PARAGRAPH 6.3 OF THE IMPUGNED ORDER. THE REFORE, IN OUR OPINION, THE ISSUE IN DISPUTE ARISING IN THE PRESENT APPEAL IS SQU ARELY COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES 5 ITA NO. 338 / MUM/2019 ASS ESSMENT YEAR: 2015 - 1 6 OW N CASE IN ASSESSMENT YEAR 2014 - 1 5. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH AS REFERRED TO ABOVE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 15% OF THE TOTAL PURCHASES OF RS. 2,70,72,569/ - . GROUNDS ARE PAR TLY ALLOWED. 8 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER , 2021 . SD/ - SD/ - ( M. BALAGANESH ) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI ; DATED: 30 / 09 /202 1 ALINDRA, PS / 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