ACIT, Navsari Circle, Navsari V. Theis Precision Steel India Pvt. Ltd., Navsari

ITA 391/SRT/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0682 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 18-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUJESH SURATWALA
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ ITA NO.391/SRT/2018 ( [ [ / ASSESSMENT YEAR: (2014-15) (VIRTUAL COURT HEARING) THE ASSISTANT COMMISSIONER OF INCOME TAX, NAVASARI CIRCLE, NAVSARI. V S. THEIS PRECISION STEEL INDIA PVT. LTD., OPP.GIDC, NATIONAL HIGHWAY NO.8, KABILPORE, NAVASARI. ./ ./PAN/GIR NO.: AACCT 6322 K (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI SUJESH SURATWALA - CA RESPONDENT BY : SHRI RITESH MISHRA CIT(DR) / DATE OF HEARING : 24/06/2021 / DATE OF PRONOUNCEMENT : 15/07/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE REVENUE PERTAINING TO ASSESSMENT YEAR (A.Y.) 2014-15, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS), VALSAD, DATED 01.03.2018, WHICH IN TURN ARISE OUT OF AN ASSESSMENT ORDER PASSED BY THE LD.ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 30.12. 2016. 2. GRIEVANCES RAISED BY THE REVENUE ARE AS FOLLOWS: (I) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE ORDER OF THE LD. CIT (A) IS PERVERSE AS THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,34,44,597/- MADE ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY FEES PAID TO MR. A. SELVADURAI HALLMAN AND MR. FRIDER GUSTV WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPLETELY FAILED TO DISCHARGE ITS ONUS OF PROVING THE WHOLENESS AND EXCLUSIVENESS OF PAYMENT OF SUCH FEES FOR THE PURPOSE OF BUSINESS. (II) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE ORDER OF THE LD. CIT(A) IS PERVERSE AS THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,34,44,597/- MADE ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY FEES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT ANY PAGE | 2 ITA NO.391/SRT/2018 FOR A.Y. 2014-15 THEIS PRECISION STEEL INDIA PVT. LTD., NAVSARI IMPEACHABLE EVIDENCE AS REGARD TO THE SERVICES RENDERED BY MR. A. SELVADURAI HALLMAN IN FORM OF MANAGEMENT CONSULTANCY. (III) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE ORDER OF THE LD.CIT(A) IS PERVERSE AS THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,65,47,462/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF DIRECT EXPENSES, OF RS.1,57,23,893/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF INDIRECT EXPENSES AND OF RS.30,17,770/- MADE ON ACCOUNT OF DISALLOWANCE OF 'BALANCES WRITTEN OFF' WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE INTENTIONALLY AVOIDED PRODUCTION OF BOOKS OF ACCOUNT FOR VERIFICATION DESPITE VARIOUS REMINDERS ISSUED BY THIS OFFICE RAISING SERIOUS DOUBT ON VERACITY OF CLAIM OF EXPENSES. (IV) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A), BE SET-ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. (V) THE APPELLANT CRAVES TO ADD, MODIFY OR ALTER ANY GROUNDS DURING THE COURSE OF APPEAL PROCEEDINGS. 3. GROUND NO. 1 & 2 RAISED BY THE REVENUE RELATE TO COMMON ISSUE OF CONSULTANCY FEES, THEREFORE, WE SHALL ADJUDICATE THEM TOGETHER. 4. SO FAR AS THESE GROUND NOS. 1 AND 2 OF APPEAL ARE CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE HAS CLAIMED CONSULTANCY FEES OF RS.1,21,62,906/- TO MR. SELVADURAI AND RS.12,81,691/- TO FRIDER GUTSV THEIS ON THE BASIS OF AN AGREEMENT. DURING THE ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE DID NOT EXPLAIN THE NECESSITY OF THE SAID EXPENDITURE AND DID NOT FURNISH PROOF OF RENDERING OF SUCH SERVICE. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS MERELY FURNISHED COPY OF AGREEMENT OF ALLEGED CONSULTANCY FEES AND BREAK UP OF CONSULTANCY FEES. THE ASSESSING OFFICER, THEREFORE HELD THAT IN ABSENCE OF EVIDENCE OF SERVICES RENDERED AND FOR WANT OF CREDULOUS MATERIAL, THE CLAIM OF THE ASSESSEE FAILS TO WITHSTAND THE TEST OF GENUINENESS AND ADMISSIBILITY. THEREFORE, ASSESSING OFFICER MADE ADDITION OF SAID EXPENDITURE OF CONSULTANCY SERVICES OF RS. 1,21,62,906/- CLAIMED IN THE NAME OF MR SELVADURAI AND RS. 12,81,691/- CLAIMED IN THE NAME OF FRIDER GUDTSV THEIS KALTWALWERKR. ACCORDINGLY, TOTAL CLAIM OF RS.1,34,44,597/- (12162906 + 1281691) WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PAGE | 3 ITA NO.391/SRT/2018 FOR A.Y. 2014-15 THEIS PRECISION STEEL INDIA PVT. LTD., NAVSARI 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7.ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD CIT(A). 8. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTION. WE HAVE PERUSED CASE FILE AS WELL AS PAPER BOOKS FURNISHED BY ASSESSEE. WE HAVE GONE THROUGH THE ORDER OF LD CIT(A) AND WE NOTE THAT LD. CIT(A), VIDE ORDER DATED 01.03.2018, HAS ALLOWED THE APPEAL BY ACCEPTING THE CONTENTION OF THE ASSESSEE THAT CONSULTANCY FEES PAID TO MR. A SELVADURAI AND MR. FRIDER GUSTV WAS DULY APPROVED BY THE BOARD RESOLUTIONS AND WAS AS PER THE CONTRACT OF CONSULTANCY AGREEMENT. THE PAYMENT OF CONSULTANCY FEES IS AS PER THE TERMS OF CONTRACT AND SUBSEQUENT RESOLUTIONS/RATIFICATIONS APPROVING THE CONSULTANCY FEES WAS AS PER THE PROVISIONS OF COMPANY`S ACT. THE LD. CIT(A) ALSO HELD THAT PERSONAL NON- ATTENDANCE OF DIRECTOR BASED OUT OF INDIA DOES NOT LEAD TO THE CONCLUSION THAT CONSULTANCY FEES PAID WAS UNWARRANTED AND NOT IN ACCORDANCE WITH COMPANIES LAW. BASED ON THESE FACTS, LD CITA) DELETED THE DISALLOWANCE OF RS.1,34,44,597/- MADE ON ACCOUNT OF CONSULTANCY FEES. WE NOTE THAT THERE IS NO INFIRMITY IN THE ORDER OF LD CIT(A). THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. CIT(A) IN DELETING THE AFORESAID ADDITIONS. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 9. GROUND NO.3 RAISED BY THE REVENUE RELATES TO DELETING THE ADDITION OF RS.1,65,47,462/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF DIRECT EXPENSES, OF PAGE | 4 ITA NO.391/SRT/2018 FOR A.Y. 2014-15 THEIS PRECISION STEEL INDIA PVT. LTD., NAVSARI RS.1,57,23,893/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF INDIRECT EXPENSES AND OF RS.30,17,770/- MADE ON ACCOUNT OF DISALLOWANCE OF 'BALANCES WRITTEN OFF'. THIS GROUND COVERS DISALLOWANCE OF VARIOUS DIRECT AND INDIRECT EXPENSES AND SUNDRY BALANCES WRITTEN OFF. 10. BRIEF FACTS QUA GROUND NO. 3 ARE THAT IN ORDER TO VERIFY THE GENUINENESS OF CLAIM OF EXPENSES MADE BY THE ASSESSEE, IT WAS REQUESTED BY AO TO PRODUCE ITS BOOKS OF ACCOUNT FOR VERIFICATION. HOWEVER, THE ASSESSEE DID NOT PRODUCE THE BOOKS REQUIRED FOR CARRYING OUT NECESSARY VERIFICATION. THE ASSESSEE TOOK NO COGNIZANCE OF THE NOTICES ISSUED BY ASSESSING OFFICER AND ASSESSEE HAS FAILED TO PRODUCE ITS BOOKS OF ACCOUNTS FOR VERIFICATION. BY DOING SO, THE ASSESSEE FAILED TO ESTABLISH THAT THE EXPENSES SO INCURRED BY IT, WERE EXCLUSIVELY AND WHOLLY FOR THE BUSINESS PURPOSE ONLY AS REQUIRED U/S 37(1) OF THE I.T. ACT. THEREFORE, ASSESSING OFFICER NOTED THAT UNLESS AND UNTIL THE SUPPORTING DOCUMENTS WERE PRODUCED BEFORE THE A.O. AND THE DETAILS WERE VERIFIED, IT CANNOT BE SAID THAT CLAIM OF EXPENSES BY THE ASSESSEE WAS GENUINE AND ALL THE EXPENSES WERE MADE FOR THE BUSINESS PURPOSE ONLY. IN THE CASE OF THE ASSESSEE, NEITHER BOOKS OF ACCOUNT NOR BILLS, VOUCHERS ETC. WERE PRODUCED NOR COMPLETE ADDRESS OF PAYEE OR DETAILS OF PAYMENT WAS PROVIDED. UNDER THESE CIRCUMSTANCES 2 % OF THE TOTAL DIRECT EXPENSES REFLECTING IN TRADING ACCOUNT I.E. RS.1,65,47,462/- (2% OF RS.82,73,73,099) WAS DISALLOWED BY ASSESSING OFFICER. MOREOVER, 10% OF INDIRECT EXPENSES REFLECTING IN THE PROFIT &LOSS ACCOUNT I.E. RS.1,57,23,893/- (10% OF RS.157238935)- WAS ALSO DISALLOWED. SINCE THE ASSESSEE FAILED TO PRODUCE BOOKS FOR VERIFICATION AS ALSO FAILED TO SUBSTANTIATE ITS CLAIM OF EXPENSES WITH SUITABLE DOCUMENTARY EVIDENCES, THE CLAIM OF ASSESSEE OF 'BALANCES WRITTEN OFF' OF RS.30,17,770/- IN THE PROFIT & LOSS ACCOUNT WAS ALSO DISALLOWED. 11. ON APPEAL, LD CIT(A) DELETED THE ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. PAGE | 5 ITA NO.391/SRT/2018 FOR A.Y. 2014-15 THEIS PRECISION STEEL INDIA PVT. LTD., NAVSARI 12. LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 13.ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT LD. CIT(A), VIDE ORDER DATED 01.03.2018, HAS ALLOWED THE APPEAL BY ACCEPTING THE CONTENTION OF THE ASSESSEE THAT AO HAS RESORTED TO ARBITRARY DISALLOWANCES WITHOUT BRINGING OUT ANY DISCREPANCIES IN THE BOOKS AS WELL AS OTHER SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT(A) IS OF THE VIEW THAT THE ASSESSEE HAD PRODUCED ALL THE DETAILS CALLED FOR AS APPEARING FROM THE CHRONOLOGICAL SUBMISSIONS FILED IN THE APPEAL. THE LD. CIT(A) DID NOT FOUND ANY ANOMALY IN THE CHART OF SALES TURNOVER VIS-A-VIS MAJOR EXPENSES FOR THE A.Y. 2011-12 TO A.Y.2014-15 SUBMITTED BY THE ASSESSEE. THE LD. CIT(A) HELD THAT THE DISALLOWANCE OF VARIOUS EXPENSES WAS WITHOUT ANY MERITS IGNORING THE PATTERNS OF SALES TURNOVER AND EXPENSES OF LAST THREE ASSESSMENT YEARS AND THE SAME DOES NOT STAND TO THE TEST OF JUDICIAL SCRUTINY AND HAS DELETED THE AD-HOC DISALLOWANCES OF RS.1,65,47,462/- AND RS.1,57,23,893/- MADE OUT OF VARIOUS EXPENSES IN THE ASSESSMENT ORDER. THE LD. CIT(A) ALSO DELETED THE ADDITION OF RS.30,17,770/- MADE ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF IN THE BOOKS OF ACCOUNT KEEPING IN VIEW THE DETAILS PERTAINING TO SUNDRY BALANCES FILED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS INCLUDING SUPPORTING LEDGER ACCOUNTS. THE LD. CIT(A) FOUND NO ANOMALY IN THE CLAIM OF DEDUCTION OF RS.30,17,770/- SINCE THE SAME WAS MADE AFTER CREDITING WRITE BACK OF EARLIER YEARS SUNDRY BALANCES. CONSIDERING THESE FACTS, WE NOTE THAT THERE IS NO INFIRMITY IN THE ORDER OF LD CIT(A). HENCE WE ARE NOT INCLINED TO ACCEPT PAGE | 6 ITA NO.391/SRT/2018 FOR A.Y. 2014-15 THEIS PRECISION STEEL INDIA PVT. LTD., NAVSARI THE CONTENTION OF THE ASSESSING OFFICER IN ANY MANNER AND HENCE WE UPHOLD THE ORDER OF LD CIT(A). 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED ON 15/07/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 15/07/2021 / SGR TRUE COPY COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT