ACIT 17(3), MUMBAI V. YATRA ART FUND -II, MUMBAI

ITA 3732/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7441 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 3732 /MUM./2016 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 17(3), MUMBAI . APPELLANT V/S YATRA ART FUND II SAKSHI GALLERY, TANNIA HOUSE 11 A, NATHALAL PAREKH MARG COLABA, MUMBAI 400 001 PAN AAATY1545J . RESPONDENT REVENUE BY : SHRI V. VIDHYADHAR ASSESSEE BY : NONE DATE OF HEARING 09.04.2018 DATE OF ORDER 25.04.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE REVENUE AGAINST ORDER DATED 11 TH MARCH 2016 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 28 , MUMBAI, DELETING THE PENALTY OF ` 18,09,832, IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 11 12 . 2 YATRA ART FUND II 2 . WHEN THE APPEAL WAS CALLED FOR HEARING NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE. ON A PERUSAL OF RECORD, IT IS SEEN THAT ON SEVERAL OCCASIONS WHEN THE APPEAL WAS FIXED FOR HEARING EARLIER , THE ASSESSEE NEVER APPEARED RESULTING IN REPEATED ADJOURNMENT OF THE APPEAL. IN VIEW OF THE AFORESAID, WE PROCEED TO DISPOSE OFF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3 . BRIEF FACTS ARE, THE ASSESSEE AN ASSOCIATION OF PERSON FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 17 TH SEPTEMBER 2011, DECLARING LOSS OF ` 1,53,13,156. DURING THE ASSESSMENT PROCEEDINGS, ON VERIFYING THE P ROFIT & LOSS ACCOUNT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE DEBITED THE SUM OF ` 58,57,060, TOWARDS ADVISORY FEES. FROM THE TAX AUDIT REPORT AND DOCUMENTS AVAILABLE ON RECORD, HE FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE PAID SUCH FEE TO SYNERGY F OUNDATION LTD. WHERE THE TRUSTEES ARE DIRECTORS / SHAREHOLDERS. THEREFORE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF ADVISORY FEES AND ALSO THE NATURE OF SERVICE PROVIDED BY THE COMPANY. AS OBSERVED BY THE ASSESSING OFFICER , IN T HE ABSENCE OF ANY EXPLANATION OR DETAILS FURNISHED BY THE ASSESSEE , THE ASSESSING OFFICER TREATED THE PAYMENT OF ADVISORY FEES AMOUNTING TO ` 58,57,060, TO BE NOT FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY DISALLOWED THE SAME. ON THE BASIS OF SUCH ADDITIO N, THE 3 YATRA ART FUND II ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 OF THE ACT, THE ASSESSEE FILED ITS EXPLA NATION OBJECTING TO IMPOSITION OF PENALTY. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE ADVISORY FEES PAID WAS IN TERMS OF THE TRUST DEED. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND THE SUBMISSIONS OF THE ASSESSEE CONVINCING AND PROCEEDED TO IMPOSE PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT FOR AN AMOUNT OF ` 18,09,832. BEING AGGRIEVED OF THE PENALTY ORDER PASSED, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND VERIFYING THE MATERIAL ON RECORD, THOUGH, FOUND THAT THE ASSESSEE HAS ACCEPTED THE ADDITION MADE BY THE ASSESSING OFFICER AND SIMILAR DISALLOWANCE WAS ALSO MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2008 09 AND WAS CONFIRMED BY THE F IRST APPELLATE AUT HORITY, H OWEVER, HE OBSERVED THAT THE BASIC FACT ON WHICH THE ASSESSING OFFICER CONCLUDED THAT THE CLAIM OF EXPENDITURE WAS NOT SUBSTANTIATED WAS , IN THE ABSENCE OF ANY AGREEMENT PROVIDING SUCH PAYMENT. THE LEARNED COMMISSIONER (APPEALS) OBSERVED, THE EXAMINATION OF THE TRUST DEED REVEALED THAT THE TRUSTEES HAVE BEEN AUTHORIZED TO APPOINT SYNERGY ART FOUNDATION 4 YATRA ART FUND II LTD. AS A COMMERCIAL ADVISOR. FURTHER, CALLING FOR AND VERIFYING THE CONFIDENTIAL INFORMATION MEMORANDUM OF THE ASSESSEE HE FOUND THAT IT ALSO PROVIDED THAT SYNERGY ART FOUNDATION LTD. WOULD ACT AS AN ADVISOR TO THE TRUSTEES. THEREFORE, HE OBSERVED THAT THOUGH THE PAYMENT OF ADVISORY FEES WAS AS PER THE TERMS OF TRUST DEED, HOWEVE R , THE ASSESSEE WAS UNABLE TO PROVE THE SERVICES RENDE RED BY SYNERGY FOR WHICH IT WAS DISALLOWED. THE LEARNED COMMISSIONER (APPEALS) BEING OF THE VIEW THAT IT WAS AN EXPENDITURE CLAIMED BY THE ASSESSEE WHICH WAS DISALLOWED FOR LACK OF EVIDENCE, IT WILL NOT LEAD TO IMPOSITION OF PENALTY IN VIEW OF THE RATIO LA ID BY THE HON'BLE SUPREME COURT IN CIT V/S RELIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC) . ACCORDINGLY, HE DELETED THE PENALTY IMPOSED. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE REL Y I NG UPON THE GROUNDS RAISED AND OBSERVATIONS OF THE ASSESSING O FFICER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO SUBSTANTIATE TO PROVE THE NECESSITY OF PAYING THE ADVISORY FEE AND, THEREFORE, ACCEPTED THE ADDITION. HE SUBMITTED, THE FACTS ON RECORD CLEARLY ESTABLISH ED THE CONDUCT OF THE A SSESSEE IN FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, THE LEARNED COMMISSIONER (APPEALS) SHOULD HAVE NOT DELETED THE PENALTY. 5 YATRA ART FUND II 2 . WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN, THE ADDI TION ON THE BASIS OF WHICH THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1)(C) IS THE ADVISORY FEES PAID TO THE SYNERGY ART. IT IS FURTHER EVIDENT THE REASON FOR DISALLOWANCE OF THE AFORESAID EXPENDITURE CLAIMED WAS DUE TO THE FACT THAT THE ASSES SEE WAS UNABLE TO ESTABLISH THE SERVICES RENDERED BY THE PAYEE. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) AFTER EXAMINING MATERIALS ON RECORD HAS FOUND THAT PAYMENT OF ADVISORY FEES WAS PROVIDED UNDER THE TRUST DEED AS WELL AS CONFIDENTIAL INFORMATION ME MORANDUM (CIM) OF THE ASSESSEE TRUST. THUS, AS COULD BE SEEN, THE ASSESSEE MADE THE PAYMENT AS PER THE TRUST DEED. IT IS ANOTHER MATTER THE ASSESSEE COULD NOT SATISF Y THE DEVELOPMENT AL AUTHORITIES ABOUT THE NECESSITY / REQUIREMENT OF THE PAYMENT , WHICH COULD BE FOR VARIOUS FACTORS. FURTHER, THE ACCEPTANCE OF THE ADDITION BY THE ASSESSEE AT A LATER STAGE CANNOT BE A REASON TO CONCLUDE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS EVIDENT , THE ASSESSEE HAS FURNISHED FULL PA RTICULARS OF THE ADVISORY FEES . F OR SOME REASON THE ASSESSING OFFICER DID NOT FIND IT ALLOWABLE. THE DISALLOWANCE OF A DEDUCTION CLAIMED BY THE ASSESSEE BY ITSELF WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR WHICH THE ASSESSING OF FICER HAS IMPOSED THE PENALTY. IN VIEW OF THE AFORESAID, WE DO NOT 6 YATRA ART FUND II FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUND RAISED IS DISMISSED. 3 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.04.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 25.04.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR/SR.P.S) ITAT, MUMBAI