DCIT 1(2)(2), MUMBAI V. MAFATLAL FABRICS P.LTD, MUMBAI

ITA 418/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5839 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.418/M/2017 ASSESSMENT YEAR: 2012-13 DCIT 1(2)(1), ROOM NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. MAFATLAL FABRICS PVT. LTD., 4 TH FLOOR, MAFATLAL HOUSE, HT PAREKH MARG, BACKBAY RECLAMATION, MUMBAI 400 020 PAN: AAACP4133C (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AARTI VISSANJI, A.R. REVENUE BY : SHRI SAURABHKUMAR RAI, D.R. DATE OF HEARING : 04.07.2018 DATE OF PRONOUNCEMENT : 17.07.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 26.10.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED AS UNDER: '1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF SA LES PROMOTION EXPENSES OF RS.51,90,094/- ON THE GROUNDS THAT THE REQUISITE DETAILS IN RESPECT OF THE EXPENSES WERE SUBMITTED BEFORE THE A O WITHOUT VERIFYING WHETHER SUCH DETAILS WERE PRODUCED BEFORE THE AO OR MERELY FILED IN TAPAL SINCE THE DATE OF SUBMISSION OF SUCH DETAILS IS MEN TIONED AS 28.1.2015 I.E., THE DATE ON WHICH ASSESSMENT ORDER HAS BEEN PASSED? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE BY THE AO, UNDER THE HEAD ITA NO.418/M/2017 M/S. MAFATLAL FABRICS PVT. LTD., 2 'COMMISSION ON SALES', AMOUNTING TO RS.2,1 7,09,822 /-, WHICH FORMED PART OF 'SALES EXPENSES' OF RS.2,99,92,664/-, WITHOUT APPRECIATING THE FACT THAT PARTICULARLY RELEVANT DETAILS WERE NOT FILED BY THE ASSESSEE, AN D WITHOUT CONSIDERING THE FACT THAT AN AMOUNT OF RS. 39,86,359/-, BEING 'COMM ISSION PROVISION' ALSO FORMED PART OF SUCH 'COMMISSION ON SALES'.' 3. THE REVENUE HAS CHALLENGED IN THE FIRST GROUND O F APPEAL THE DELETION OF DISALLOWANCE OF SALES PROMOTION EXP ENSES TO THE TUNE OF RS.51,90,094/- BY LD. CIT(A) AS MADE BY THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT FILE ANY EVIDENCES OR PROOFS TO VERIFY THE SAID EXPENSES AS THE ASSESS EE FILED THE DETAILS VIDE LETTER DATED 28.01.2015 ON WHICH THE OR DER WAS PASSED BY THE AO AND THUS AO HAS NO OCCASION TO EXA MINE THEM. 4. THE ISSUE RAISED IN GROUND NO.2 OF APPEAL IS AGA INST THE DELETION OF ADDITION AS MADE BY THE AO UNDER THE HE AD COMMISSION ON SALES AMOUNTING TO RS.2,17,09,822/-, WH ICH WERE PART OF THE SALES EXPENSES OF RS.2,99,92,664/-, WITHOUT APPRECIATING THE FACT THAT ASSESSEE DID NOT FILE AN Y DETAILS DURING THE ASSESSMENT PROCEEDINGS AND ALSO WITHOUT CONSIDERING THE FACT THAT RS.39,86,359/- BEING COMMIS SION PROVISION ALSO FORMS PART OF SUCH COMMISSION ON SAL ES. 5. AT THE OUTSET, THE LD. D.R. TOOK THROUGH THE PARA N O.6 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS RECORDED HI S FINDING THAT ASSESSEE HAS COMPLETELY FAILED TO EXPLAIN THE SERVICES RENDERED AND IDENTITY OF THE RECIPIENTS TO WHOM THE PAYMENTS WERE MADE AND THUS THE COMMERCIAL EXPEDIENCY OF THE SAID EXPENSES AND BUSINESS RELEVANCY WERE NOT PROVED. THE LD. D.R. ALSO BROUGHT TO OUR NOTICE THAT THE ASSESSEE H AS STATED IN HIS REPLY BEFORE THE LD. CIT(A) THAT REQUISITE DETAI LS ITA NO.418/M/2017 M/S. MAFATLAL FABRICS PVT. LTD., 3 QUA THE SAID BUSINESS PROMOTION EXPENSES OF RS.51,90 ,094/- WERE SUBMITTED VIDE SUBMISSION DATED 28.01.2015 WHERE AS THE ASSESSMENT ORDER WAS ALSO PASSED ON THE SAME DA TE AND THUS THE AO DID NOT GET AN OPPORTUNITY TO VERIFY TH E SAID EXPENSES. THUS THE FILING OF THE EVIDENCES BEFORE T HE LD. CIT(A) WHICH WERE NOT PRODUCED BEFORE THE AO AMOUNT ED TO ADDITIONAL EVIDENCES AND THEREFORE THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE AO. SIMILARLY, AS REGARDS THE SALE PROMOTION EXPENSES OF RS.2,99,92,663/- THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY EVIDE NCES BEFORE THE AO WHEREAS THE EVIDENCES WERE PRODUCED BEFORE T HE LD. CIT(A). THE LD. CIT(A) INSTEAD OF CALLING REMAND RE PORT FROM THE AO PROCEEDED TO DECIDE THE ISSUE IN FAVOUR OF T HE ASSESSEE THEREBY DEPRIVING THE AO OF EXAMINING THESE EVIDENC ES. THUS THE LD. D.R. ALSO REQUESTED THAT THIS ISSUE MAY ALS O BE RESTORED TO THE FILE OF THE AO TO DECIDE THE SAME I N THE LIGHT OF THE EVIDENCES WHICH THE ASSESSEE FILED BEFORE THE A O IN THE SET ASIDE PROCEEDINGS. 6. THE LD. A.R., ON THE OTHER HAND, SUBMITTED THAT NO SUCH DISALLOWANCE WAS MADE IN RESPECT OF BUSINESS PROMOT ION EXPENSES IN THE PRECEDING YEAR BY REFERRING TO THE ASSESSMENT ORDERS FOR ASSESSMENT YEAR 2011-12 AND 2013-14. THE LD. A.R. ALSO BROUGHT TO THE NOTICE OF THE BENCH THE UPWA RD INCREASE IN THE GP DURING THE FINANCIAL YEAR AS COM PARED TO THE PRECEDING ASSESSMENT YEAR WHICH IS FILED ON PAG E NO.5 OF THE PAPER BOOK. SIMILARLY, AS REGARDS THE COMMISSION PAID TO VARIOUS PERSONS, THE LD. A.R. SUBMITTED THAT THE COM MISSIONS WERE PAID TO VARIOUS PARTIES AFTER DEDUCTION OF TDS AT SOURCE ITA NO.418/M/2017 M/S. MAFATLAL FABRICS PVT. LTD., 4 THE DETAILS WHEREOF ARE FILED AT PAGE NO.50 & 51 OF THE PAPER BOOK. THE LD. A.R. FURTHER SUBMITTED THAT THE SAID DETAILS COMPRISED OF THE PROVISION FOR EXPENSES TO THE TUNE OF RS.39,86,359/-. FINALLY, THE LD. A.R. LEFT THE ISSUE TO THE DISCRETION OF THE BENCH WHETHER TO RESTORE OR DECID E THE ISSUE ON THE BASIS OF RECORDS BEFORE THE BENCH. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT I N THIS CASE THE BILLS AND VOUCHERS OF EXPENSES INCURRED BY THE ASSESSEE ON BUSINESS PROMOTION AND SALE EXPENSES WERE NOT PRODU CED BEFORE THE AO BUT ASSESSEE DULY FILED ALL THE EVIDE NCES BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION ON THE BASI S OF SAID EVIDENCES WITHOUT CALLING FOR THE REMAND REPORT, TH US DEPRIVING THE AO TO EXAMINE THE ISSUE IN THE LIGHT OF THE EVIDENCES. UNDER THESE CIRCUMSTANCES, WE DEEM IT PRO PER TO GIVE AN OPPORTUNITY TO THE AO TO EXAMINE THE EVIDEN CES AND DECIDE THE ISSUE OF ALLOWABILITY OF EXPENSES IN TH E LIGHT OF SAID EVIDENCES. ACCORDINGLY, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME DENOVO AFT ER APPRECIATION OF EVIDENCES WHICH THE ASSESSEE MAY FI LE DURING THE SET ASIDE PROCEEDINGS. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.07.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.07.2018. * KISHORE, SR. P.S. ITA NO.418/M/2017 M/S. MAFATLAL FABRICS PVT. LTD., 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.