Serverl India Pvt. Ltd., New Delhi V. CIJCIT, New Delhi

ITA 3905/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53060 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 24-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: AJAY JAIN
• Keywords: Opportunity of being heard
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER ITA NO: 3905/DEL/2011 A.Y. : 2007-2008 SERVEL INDIA P.LTD. VS. JCIT-XI, RANGE 8, S-15, OKHLA INDL.AREA NEW D ELHI PHASE II NEW DELHI 20 PAN: AAACS 0617 A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AJAY JAIN, C.A. RESPONDENT BY : SH. S. MOHANTY, D.R. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 4.2.11 OF CIT(A)-XI, NEW DELHI PERTAINING TO A .Y. 2007-08 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN : 1. CONFIRMING THE DISALLOWANCE OF RS.2 LACS CLAIMED U/ S 80GGB BY TREATING IT AS AN EXPENSES U/S 37, WHICH IS CONT RARY TO LAW AND THE FACTS OF THE CASE. 2. ON THE FACTS BROUGHT ON RECORD, THE LD.CIT(A) OUGHT TO HAVE HELD THAT THE EXPENDITURE OF RS. 1,05,252/- INCURRE D BY THE APPELLANT UNDER THE HEAD VEHICLE RUNNING & MAINTEN ANCE WERE SUPPORTED WITH COMPLETE DETAILS, BILLS AND VOU CHERS AND THAT TWO CONTRADICTORY STANDS PERTAINING TO THE SAM E AMOUNT IN TWO ASSESSMENT ORDERS PASSED BY THE AO ON THE SA ME DAY, ONE U/S 115WE (3) ACCEPTING THE EXPENSE, AND THE OT HER U/S 143(3) DISALLOWING THE EXPENSE, CAN NOT BE LEGALLY TENABLE. ITA 390 5/DEL/2011 PAGE 2 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU ND OF APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALIN G IN TELECOMMUNICATION WIRES AND CABLES AND THEIR ACCESS ORIES. RETURNED INCOME WAS FOR RS. 89,40,124/-. THE CASE WAS SELEC TED FOR SCRUTINY. IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN THAT A DON ATION OF RS. 2,76,000/- HAS BEEN MADE TO THE POLITICAL PARTY VI Z., JAI JAWAN JAI KISAN MAZDOOR CONGRESS UNDER THE HEAD ADMINISTRATI VE EXPENSES VIDE SCHEDULE XIII TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO FILE DETAILS IN REGARD TO THE SAID PAYMENT. THE AS SESSEE SUBMITTED THAT THE DONATION HAD BEEN MADE TO A POLITICAL PARTY VIZ ., JAI JAWAN JAI KISAN MAZDOOR CONGRESS. RECEIPT DT. 31.3.2007 ISSUED BY THE PARTY PRESIDENT WAS FILED. IT WAS NOTICED THAT THE SAID RECEIPT ME NTIONS THE DETAILS OF DONATIONS PAID BY A SPECIFIC CHEQUE NO. 966959 DT. 30.3.2007 FOR A SUM OF RS. 2 LAKHS. THE AO REQUIRED THE ASSESSEE TO JU STIFY THE BUSINESS EXPEDIENCY. TAKING INTO CONSIDERATION THE EXPLANAT ION OF THE ASSESSEE THE A.O. WAS OF THE VIEW THAT THE SAID CLAIM WAS NO T TO BE ALLOWED. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE SAI D ACTION WAS CONFIRMED AS THE CIT(A) WAS ALSO OF THE VIEW THAT THE CONTRIB UTION MADE TO POLITICAL PARTY SHOULD PASS THROUGH THE TEST OF S.37(1) OF TH E ACT AND SINCE ASSESSEE FAILED TO EXPLAIN BUSINESS EXIGENCY THE C LAIM WAS NOT TO BE ALLOWED. ITA 390 5/DEL/2011 PAGE 3 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI 3. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. THE LD.A.R. CONTENDED THAT THE CLAIM OF ASSESSEE WAS AL LOWABLE U/S 80 GGB OF THE ACT AND THE VIEW TAKEN BY THE TAX AUTHORITIE S THAT IT SHOULD BE COVERED U/S 37(1) OF THE ACT AND EXPLAIN THE EXIGEN CY WAS NOT CORRECT. IT WAS STATED THAT THE SAID PARTY WAS RUNNING A HOSPIT AL WHERE THE ASSESSEES EMPLOYEES AT TIMES WERE TREATED. HOWEVE R, IT WAS CONCEDED ON QUERY THAT THESE FACTS ARE NOT BORNE OUT FROM THE RECORD. IT WAS HIS ARGUMENT THAT BUSINESS NECESSITY WAS NOT THE REQUI REMENT OF LAW. ATTENTION WAS INVITED TO PAPER BOOK PAGE NO.5 SO AS TO CONTEND THAT DEDUCTION UNDER THE SAID SECTION HAD BEEN SHOWN IN THE COMPUTATION OF TAXABLE INCOME AS THE DONATION MADE AMOUNTED TO RS . 2 LAKHS. ATTENTION WAS ALSO INVITED TO PAPER BOOK PAGE NO.24 FOR THE SAID ASSERTION. 4. THE LD.D.R. ON THE OTHER HAND RELIED UPON THE OR DER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS MADE A DONATION OF RS.2 LAKHS BY WAY OF A CHEQUE TO JAI JAWAN JAI KI SAN MAZDOOR CONGRESS AND CLAIMED IT AS A DEDUCTION U/S 80 GGB. THE AO HAS BEEN OF THE OPINION THAT BUSINESS EXIGENCY HAS TO BE PRO VED BY THE ASSESSEE AND RELIANCE HAS BEEN PLACED UPON CIT VS. INDUSTRIA L DEVELOPMENT CORPORATION OF ORISSA 249 ITR 401 (ORISSA) DISCUSSE D AT PAGES 2, 3 AND 4 OF THE ASSESSMENT ORDER. IT IS SEEN THAT THE SAID JUDGEMENT WAS RENDERED ITA 390 5/DEL/2011 PAGE 4 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI IN THE CONTEXT OF LAW AS WAS PREVAILING IN A.Y. 19 98-99. THE A.Y. WITH WHICH WE ARE CONCERNED IS 2007-08. THE MARGINAL NO TE TO S.80 GGB SHOWS THAT DEDUCTION IN RESPECT OF CONTRIBUTIONS GI VEN BY THE COMPANIES TO POLITICAL PARTIES WAS INSERTED BY ELECTION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2003 W.E.F. 11.9.2003 . IT IS SEEN THAT THE CHANGED LEGAL POSITION HAS NOT BEEN TAKEN NOTE OF BY THE A. O. OR BY THE CIT(A). A PERUSAL OF THE SAID PROVISION SHOWS THAT IT IS NOT NECESSARY TO PROVE BUSINESS EXIGENCY, WHAT IS NECESSARY IS THAT THE PO LITICAL PARTY MUST BE REGISTERED UNDER SECTION 29A OF THE REPRESENTATION OF THE PEOPLES ACT, 1951, (43 OF 1951) AND MUST HAVE ISSUED A CERTIFICA TE AS DONATION RECEIVED U/S 80GGB. THE RECEIPT ISSUED BY THE SAID POLITICAL PARTY NEEDS TO BE SEEN. IT IS SEEN THAT NO ARGUMENTS ON THIS ASPECT HAVE BEEN ADDRESSED BY PARTIES BEFORE THE BENCH. AS SUCH I N THE AFOREMENTIONED PECULIAR FACTS AND CIRCUMSTANCES, WE RESTORE THE IS SUE BACK TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDER. NEEDLESS TO SAY THAT THE AO SHALL GIVE THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. IN THE RESULT THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 6. THE FACTS PERTAINING TO THE NEXT ISSUE ARE THAT THE A.O. OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 30,92,8 52/- ON VEHICLE REPAIR AND MAINTENANCE UNDER THE HEAD ADMINISTRAT IVE EXPENSES VIDE SCH.13 TO THE P&L ACCOUNT. THE AO ASKED THE ASSESS EE TO EXPLAIN AND ITA 390 5/DEL/2011 PAGE 5 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI SUBMIT THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE S AID CLAIM. ON VERIFICATION OF BILLS/VOUCHERS, THE AO WAS OF THE V IEW THAT THE ASSESSEE COULD NOT FILE DETAILS OF EXPENDITURE TO THE TUNE O F RS. 1,05,252/-. SINCE THE ASSESSEE COULD NOT FILE ANY PLAUSIBLE EXPLANATI ON THE AMOUNT WAS DISALLOWED AND THE AO ADDED BACK THE SAME TO THE I NCOME OF ASSESSEE. 7. AGGRIEVED BY THIS THE ASSESSEE WENT IN APPEAL BE FORE THE CIT(A) BEFORE WHOM IT WAS CONTENDED THAT THE VERY SAME A.O . WHILE PASSING THE FRINGE BENEFIT TAX ORDER U/S 115 WE(3) HAS NOT MADE ANY DISALLOWANCE ON ACCOUNT OF PERSONAL USER AS SUCH HOW THE AMOUNT OF RS. 10,52,052/- REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE CL EARLY SHOWS THAT A MISTAKE HAS ACCRUED ON THE PART OF THE A.O. AS ALL THE VOUCHERS WERE SHOWN AND EXAMINED BY THE A.O. BEFORE PASSING OF BO TH THE ORDERS I.E. THE REGULAR ASSESSMENT OF THE ASSESSEE U/S 143(3) A ND THE ASSESSMENT MADE U/S 115 WE(3) UNDER FRINGE BENEFIT TAX. IT WA S CONTENDED THAT THERE IS A CONTRADICTION IN THE TWO ORDERS. HOWEVE R NOT CONVINCED WITH THE EXPLANATION OFFERED THE ADDITION MADE BY THE AO WAS SUSTAINED BY THE CIT(A). 8. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. THE SUBMISSIONS ADVANCED BEFORE THE CIT(A) WERE REITERA TED BY THE LD.A.R. IT WAS CONTENDED THAT WHILE CONSIDERING THE FRINGE BEN EFIT TAX THE VERY SAME AO ACCEPTED THESE FACTS AND PASSED AN ORDER U/ S 115 WE(3) THESE VOUCHERS IT WAS CONTENDED WERE SHOWN TO THE A .O. AND THE CIT(A), ITA 390 5/DEL/2011 PAGE 6 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI AND DESPITE THE OBVIOUS MISTAKE THAT THERE ARE CO NTRADICTIONS IN THE TWO ORDERS PASSED BY THE SAME A.O., THE CIT(A) HAS NOT CONSIDERED THE FACTS AND ARGUMENTS AND HAS MERELY CONFIRMED THE ORDER. IT WAS ARGUED THAT ALL THE FACTS WERE BROUGHT TO THE NOTICE OF THE CI T(A) AND RELEVANT VOUCHERS WERE AGAIN SHOWN AS SUCH THERE IS NO REASO N ON THE BASIS OF WHICH THE CIT(A) COULD HAVE HELD THAT THE ASSESSEE HAS FAILED TO PRODUCE CERTAIN DOCUMENTS IT WAS ARGUED THAT BY GIVING GENE RAL OBSERVATIONS ADDITION HAS BEEN CONFIRMED WITHOUT SPELLING AT AS TO WHICH WERE THOSE DOCUMENTS WHICH WERE UNEXPLAINED. ON THE CONTRARY IT WAS ARGUED ALL THE DOCUMENTS WERE SUBMITTED AGAIN BEFORE THE CIT (A) AND NONE OF THE AUTHORITIES IT WAS SUBMITTED HAVE POINTED OUT ANY DEFECT IN THE VOUCHERS. IN THE PECULIAR FACTS AND CIRCUMSTANCES IT WAS HIS SUBMISSION THAT THE ADDITION WAS NOT WARRANTED ON F ACTS. 9. LD.D.R. ON THE OTHER HAND RELIES UPON THE IMPUGN ED ORDER. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME WE ARE OF THE VIEW THAT THE FACTS NEED VERIFICATION. THE A.O. SH ALL VERIFY WHETHER ANY DISALLOWANCE HAS BEEN MADE BY THE A.O. IN THE ORDER U/S 115 WE(3) CONSIDERING THE FRINGE BENEFIT TAX AND DECIDE THE I SSUE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY GROUND NO.2 RAISED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. ITA 390 5/DEL/2011 PAGE 7 OF 7 A. Y. 2007-08 SERVEL INDIA P.LTD., N.DELHI 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST OCTO BER,2011. SD/- SD/- (B.C.MEENA ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST OCTOBER, 2011 *MANGA COPY OF THE ABOVE ORDER IN ITA 2379/DEL/2010 FORWA RDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CI T(A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //