M/S.VENTURA COMMODITIES LIMITED, MUMBAI V. ACIT CIRCLE 2(3)(1), MUMBAI

ITA 364/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5345 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 15-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Gift; Corroborative evidences
• Section: 143(3); 37(1)

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI C.N PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.364/ MUM/2018 ( / ASSESSMENT YEAR: 2014 - 15) VENTURA COMMODITIES LTD., GROUND FLOOR, DHANNUR E , 15, SIR P.M. ROAD, F ORT, MUMBAI 400001 / V. ACIT, CIRCLE 2(3)(1), AAYAKAR BHAVAN, MUMBAI 400020 ./ PAN : AADCA4490N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: NONE REVENUE BY: SHRI. D.G PANSARI (DR) / DATE OF HEARING : 19.03.2019 / DATE OF PRONOUNCEMENT : 29 .05.2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY ASSESSEE , BEING ITA NO. 364/MUM/2018 , IS DIRECTED AGAINST APPELLATE ORDER DATED 15.11 .2017, PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2014 - 15 IN APPEAL NUMBER CIT(A) - 6/IT - 82/2016 - 17 , THE APPELLATE PROCEEDINGS HAD ARISE N BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDE R DATED 29.12.2016 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2014 - 15 . I.T.A. NO.364/MUM/2018 PAGE | 2 2. T HE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI ['LD. CIT (A)'] ERRED IN UPHOLDING THE ADDITION OF RS.21,77,660/ - FOR THE EXPENSES INCURRED OF RELATED PAR TIES. 1.2 IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE, COMPANY HAS MADE EXPENSES ACTUALLY INCURRED BY THE HOLDING COMPANY ON BEHALF OF THE ASSESSEE, COMPANY. THE DETAIL OF THE SAME WAS SUBMITTED WITH THE BASIS OF CHARGING THE EXPENSES. BESIDES, THERE W AS NO TAX BENEFIT TO EITHER PARTY DUE TO THESE EXPENSES. IT WAS PURELY AN APPROPRIATION OF THE EXPENSES FOR ARRIVING AT ACTUAL PROFIT OF THE ASSESSEE, COMPANY. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI ['LD. CIT (A)'] ERRED IN UPHOLDING THE ADDITION FOR SALES PROMOTION EXPENSES OF RS.4,16,633/ - . 2.1 IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE HAS PROVIDED DETAIL OF PERSONS WHO HAS GIVEN CONSIDERABLE BUSINESS DURING THE YEAR AND IT IS CUSTOMARY TO GIVE BUSINESS GIFT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN PROVIDING BUSINESS OF BROKING IN COMMODITIES. THE ASSESSEE HAS CLAIMED REIMBURSEMENT OF EXPENSES OF RS. 21,77,660/ - PAID TO ITS RELATED PARTY TOWARDS SALE LEADS CLAIMED TO BE GENERATED BY RELATED PARTY IN FAVOUR OF THE ASSESSEE . THE ASSESSEE WAS ASKED TO EXPLAIN DETAILS OF SALE LEADS GENERATED THROUGH RELATED P ARTY. THE ASSESSEE SUBMITTED THAT IT HAS PAID REIMBURSEMENT AMOUNT S ON THE SALE LEADS RECEIVED IN THE RATIO 90:10 OUT OF THE TOTAL EXPENDITURE INCURRED BY RELATED PARTY. THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH DETAIL S OF CUSTOMER S WHO HAVE BROUGHT THE SALE LEADS NOR THE ASSESSEE HAS PRODUCED THE TRANSACTIONS WITH THE CUSTOMER LIST GENERATED BY THE I.T.A. NO.364/MUM/2018 PAGE | 3 ASSESSEE. AS PER AO, I T WAS ALSO NOT BROUGHT O N RECORD AS TO HOW SALE S WERE IMPROVED WITH THE SALE LEADS GENERATED BY RELATED PARTY . IT IS ALSO NO T BROUGHT ON RECORD AS PER AO WHETHER THESE TRANSACTIONS WITH RELATED PARTIES WERE AT ARM S LENGTH AND WHY INCOME - TAX WAS NOT DEDUCTED ON THESE PAYMENTS . THE ADDITIONS TO THE TUNE OF RS. 21,77,660/ - WERE MADE BY THE AO U/S. 40A(2)(B) AND ADDED TO THE INC OME OF THE ASSESSEE , VIDE AS SESSMENT ORDER DATED 29.12.2016 PASSED U/S. 143(3) OF THE 1961 ACT . 3.2 AGGRIEVED BY AN ASSESSMENT FRAMED BY THE AO U/S 143(3) VIDE ASSESSMENT ORDER DATED 29.12.2016, T HE ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A) AND SU BMITTED THAT IT IS GETTING SOURCING LEAD OF PROSPECTIVE CLIENTS FROM DIFFERENT VENDORS INCLUDING RELATED PARTY . THE WRITTEN SUBMISSIONS WERE FILED BY THE ASSESSEE BEFORE LD. CIT(A) , AS UNDER: - 'APPELLANT, COMPANY IS GETTING SOURCING LEADS OF PROSPECTIVE CLIENTS FROM DIFFERENT VENDORS. THERE ARE VARIOUS SITES LIKE CHITTOGARH INFOTECH, E - EIGHTEEN.COM, GOOGLE, RADIFF.COM, ETC. THE VENDORS HAVE THEIR OWN SET UP FROM WHEREIN WHEN AN INDIVIDUAL BROWSE ON INTERNET AND HE COMES ACROSS ADVERTISEMENT PO STED BY VENDORS ON VARIOUS WEBSITES; INTERESTED PROSPECT PROVIDE DETAILS ON VARIOUS WEBSITES. APPELLANT, COMPANY IS SUBSIDIARY COMPANY OF VENTURA SECURITIES LTD. AND HAVE GREATER SET UP. THEY HAVE PERCENTAGE SHARING EXPENSES OF 10% OF THE COST INCURRED BY THE VENTURA SECURITIES. BESIDES, VENTURA SECURITIES IS COMPANY WITH HIGHEST TAX SLAB ARID INCOME MORE THAN NINE CRORES AND THERE WAS NO WAY THEY WOULD HAVE SAVE TAXES BY TRANSFERRING THE PROFIT FROM THIS COMPANY TO VENTURA SECURITIES. ON THE CONTRARY, VENT URA SECURITIES WOULD HAVE PAID HIGHER SURCHARGE ON THIS INCOME AND HENCE, THERE WAS NO TAX PLANNING ON PART OF THE APPELLANT. IT IS ACTUALLY PROPER COST ARRANGING BETWEEN TWO COMPANIES BY SHARING ACTUAL COST INCURRED BY BOTH THE COMPANIES ON GENERATING BUS INESS AND ADMINISTRATIVE WORK AND HENCE, ADDITION MADE IS NOT JUSTIFIED. ENCLOSED HEREWITH COPY NOTE ON BUSINESS LEAD COSTS ALONG WITH SHARING ARRANGEMENT AND SPECIMEN INVOICE FOR LEADS ON BEHALF OF THE APPELLANT, COMPANY. I.T.A. NO.364/MUM/2018 PAGE | 4 3.3 THE LD. CIT(A) REJECTED THE CONTENTION S OF THE ASSESSEE BY HOLDING AS UNDER , VIDE APPELLATE ORDER DATED 15.11.2017 : - 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED ASSESSEE TO SUBMIT DETAILS OF LEADS GENERATED BY THE RELATED PARTY AND THE DETAILS OF SERVICE CHARGES PAID. THE ASSESSEE MADE SUBMISSION THAT THE ASSESSEE HAS PAID REIM BURSEMENT ON THE SALE LEADS RECEIVED IN THE RATIO OF 90:10 OUT OF THE TOTAL EXPENDITURE INCURRED BY THE RELATED PARTY. HOWEVER AS HAS BEEN MENTIONED IN THE ASSESSMENT ORDER, NO DETAILS OF CUSTOMERS ETC. WERE SUBMITTED AS REGARDS THESE SALE LEADS. FURTHER T HE ASSESSEE COULD NOT PRODUCE THE TRANSACTIONS WITH THE CUSTOMER LIST. AS SUCH THE ASSESSEE FAILED TO SUBMIT SUPPORTING EVIDENCES IN RESPECT OF THE EXPENSES CLAIMED TO HAVE BEEN PAID TO THE RELATED PARTY. EVEN DURING THE APPELLATE PROCEEDINGS THE SUBMISSIO NS OF THE APPELLANT IS ON GENERALITIES AND NOT FACTS SPECIFIC OR DETAILS SPECIFIC AS WAS WARRANTED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISCUSSION HERE IN ABOVE, THE CONCLUSION REACHED BY THE AO IS FOUND TO BE JUSTIFIED AND IS ACCORDINGLY UPHELD. THIS GROUND IS ACCORDINGLY DISMISSED. 3.4 . AGGRIEVED BY AN APPELLATE ORDER DATED 15.11.2017 PASSED BY LEARNED CIT(A), T HE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL . N ONE APPEARED ON BEHALF OF THE ASSESSEE. THE ASSESSEE DID NOT APPEARED BEFORE BENCH ON 28.01.2019 AND THE APPEAL WAS ADJOURNED BY BENCH TO 19.03.2019. W HEN THE APPEAL WAS CALLED FOR HEARING ON 19.03.2019 BEFORE THE BENCH, THE ASSESSEE DID NOT APPEAR EVEN ON 19.03.2019 BEFORE THE BEN CH . THE APPEAL WAS THEN HEARD BY BENCH ON 19.03.2019 AFTER HEARING LEARNED DR. THE LD. DR SUPPORTED APPELLATE ORDER OF LD. CIT(A) AND PRAYED THAT THE APPELLATE ORDER PASSED BY LEARNED CIT(A) IS WELL REASONED ORDER WHICH SHOULD BE UPHELD . 3.5 WE HAVE CO NSIDERED CONTENTIONS OF LEARNED DR AND HAVE PERUSED THE MATERIAL ON RECORD INCLUDING ORDERS OF THE AUTHORITIES BELOW . W E HAVE OBSERVED THAT THE ASSESSEE HAS REIMBURSE S EXPENSES TO THE TUNE OF RS. 21,77,660 / - WHICH WERE PAID TO RELATED PARTY I.T.A. NO.364/MUM/2018 PAGE | 5 PURPORTEDLY TO WARDS SALE LEADS GENERATED BY RELATED PARTY IN FAVOUR OF THE ASSESSEE. THE ASSESSEE COULD NOT FURNISH DETAILS OF SUCH SALES LEADS GENERATED BY ITS RELATED PARTY IN FAVOUR THE ASSESSEE. THE ASSESSEE ALSO COULD NOT SUBMIT DETAILS OF BUSINESS ACTUALLY GENERAT ED IN ITS FAVOUR THROUGH SUCH SALES LEADS GENERATED BY ITS RELATED PARTY. THUS, IN NUT SHELL THE ASSESSEE COULD NOT PROVE THAT THESE PAYMEN TS MADE TO ITS RELATED PARTY WERE ACTUALLY INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESS EE. THE ASSESSEE HAS ALSO NOT FILED ANY PAPER BOOK EVEN BEFORE TRIBUNAL CONTAINING EVIDENCES TO PROVE THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. THE ONUS IS ON THE ASSESSEE TO PROVE THAT THESE REI MBURSEMENT OF EXPENSES TO RELATED PARTY WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE , WHICH THE ASSESSEE IN THE INSTANT CASE FAILED TO DISCHARGE. U NDER THESE CIRCUMSTANCES AS THERE IS NO MATERIAL ON RECORD TO PROVE THAT THESE EXPENSES WERE INCURRED FOR BUSINESS OF THE ASSESSEE AND KEEPING IN VIEW FACTUAL MATRIX OF THE CASE , WE ARE INCLINED TO CONFIRM ADDITION S AS WERE UPHELD BY LD. CIT(A) AND HENCE WE ARE NO T INCLINED TO INTERFERE WITH WELL REASONED APPELLATE ORDER PASSED BY LD. CIT(A). THE ASSESSEE FAILS ON THIS GROUND NUMBER 1.1 AND 1.2 FILED BY IT IN ITS MEMO OF APPEAL FILED WITH THE TRIBUNAL. WE ORDER ACCORDINGLY. 4 . THE SECOND ISSUE CONCERN S ITSELF WITH PURCHASE OF GOLD COINS BY ASSESSEE FROM M/S. VINAY JEWELL ERS TO THE TUNE OF RS. 4,16,633/ - . THE ASSESSEE WAS ASKED BY AO TO EXPLAIN AS TO WHOM THESE GIFTS OF GOLD COIN WERE GIVEN AND HOW THESE EXPENSES WERE INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPOSE S OF BUSINESS OF THE ASSESSEE . T HE ASSESSEE , HOWEVER, FAILE D TO EXPLAIN THE SAME BEFORE AO , WHICH LED AO TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE BY DISALLOWING THE AFORESAID EXPENSES TO THE TUNE OF RS. 4,16,633/ - BY INVOKING PROVISIONS OF SECTION 37(1) OF THE 1961 ACT, VIDE ASSESSMENT ORDER DATED 29.12.2 016 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT . I.T.A. NO.364/MUM/2018 PAGE | 6 4.2 AGGRIEVED BY AN ASSESSMENT FRAMED BY THE AO U/S 143(3) VIDE ASSESSMENT ORDER DATED 29.12.2016, THE ASSESSEE FILED FIRST APPEAL BEFORE LEARNED CIT(A) WHICH WAS DISMISSED BY L D. CIT(A) WHO REJECTED CON TENTION S OF THE ASSESSEE VIDE APPELLATE ORDER DATED 15.11.2017, BY HOLDING AS UNDER: - 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD. IN RESPECT OF THIS ISSUE THE LD. AR WAS ASKED BY THE AO TO EXPLAIN TO WHOM THE GIFTS WERE GIVEN AND HOW THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, IT IS THE OBSERVATION OF THE AO THAT THE LD. AR, HOWEVER, WAS UNABLE TO EXPLAIN THE SAME. EVEN DURING THE INSTANT PROCEEDINGS, THE LD AR OF THE APPELLANT BUT FOR MAKING THE SUBMISSION AS ABOVE HAS NOT GIVEN ANY FACTUAL DETAILS OF GIVING GIFTS TO BUSINESS CUSTOMERS/ASSOCIATES FROM WHOM THE BUSINES S WAS DONE/BENEFITED. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISCUSSION HERE IN ABOVE, THE CONCLUSION REACHED BY THE ASSESSING OFFICER IS FOUND TO BE JUSTIFIED AND IS ACCORDINGLY UPHELD. THIS GROUND IS ACCORDINGLY DISMISSED. THUS, LD. CIT(A) RE JECTED THE CONTENTION S OF THE ASSESSEE AS THE ASSESSEE HAS FAILED TO EXPLAIN NEXUS OF THE GIFTS OF THE GOLD COIN WITH THE BUSINESS OF THE ASSESSEE. 4.3 THE ASSESSEE BEING AGGRIEVED BY AFORESAID APPELLATE ORDER PASSED BY LEARNED CIT(A) HAS FILED SECOND APP EAL BEFORE THE TRIBUNAL . N ONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE BENCH WHEN THE APPEAL WAS CALLED FOR HEARING , WHILE LD. DR ON THE OTHER HAND RELIED UPON THE APPELLATE ORDER PASSED BY LD. CIT(A). THE LEARNED DR PRAYED THAT WELL REASONED APPEL LATE ORDER PASSED BY LEARNED CIT(A) BE UPHELD. 4.4 . WE HAVE CONSIDERED CONTENTIONS OF LEARNED DR AND PERUSED THE MATERIAL ON RECORD INCLUDING ORDERS OF THE AUTHORITIES BELOW . W E HAVE OBSERVED THAT THE ASSESSEE HAS PURCHASED GOLD COINS TO THE TUNE OF RS. 4, 16,333/ - WHICH IT CLAIMED TO HAVE GIVEN AS GIFT FOR BUSINESS PURPOSES . T HE ASSESSEE ALTHOUGH HAD GIVEN THE L IST OF THE PERSONS TO WHOM GOLD COINS WERE GIFTED BUT THE NEXUS OF GIFT OF GOLD COIN TO BUSINESS OF THE ASSESSEE COULD NOT BE PROVED . THE ASSESSE E COULD NOT I.T.A. NO.364/MUM/2018 PAGE | 7 PROVE THAT THESE EXPENSES WERE INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE AND THAT THE ASSESSEE DID INFACT GENERATED BUSINESS FROM THE PERSONS TO WHOM GIFT OF GOLD COINS WERE GIVEN. THE ONUS IS ON THE ASSESSEE TO PROVE THAT IT SATISFIED MANDATE OF SECTION 37(1) THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSES OF THE BUSINESS OF THE ASSESSEE AND THESE EXPENSES WERE NEITHER PERSONAL EXPENSES NOR CAPITAL EXPENSES, WHICH THE ASSESSEE HAD FAILED TO DISCHARGE IN THE INSTANT CASE . U NDER THESE CIRCUMSTANCES BASED ON MATERIAL ON RECORD AND FACTUAL MATRIX OF THE C ASE , WE ARE INCLINED TO DISMISS THE APPEAL OF THE ASSESSEE. THE ASSESSEE FAILS ON THE GROUND NUMBER 2 AND 2.1 FILED BY THE ASSESSEE. WE ORDER ACCORDINGLY. 5. THE GROUND NUMBER 3 BEING GENERAL IN NATURE DOES NOT REQUIRE SEPARATE ADJUDICATION. 6.IN THE RESU LT, T HE APPEAL OF THE ASSESSEE IN ITA NO. 364/MUM/2018 FOR AY 2014 - 15 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 9 .05.2019. 2 9 .05.2019 S D / - S D / - ( C.N PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 9 .05.2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI I.T.A. NO.364/MUM/2018 PAGE | 8 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI