ITO 12(3)(3), MUMBAI V. VINOD SOORU KOTIA, MUMBAI

ITA 4222/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5684 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 27-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Keywords: Unexplained expenditure; Additional evidence
• Section: 69C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 4222/MUM/2011 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER - 12(3)(3) SHRI VINOD SOORU KOTI AN ROOM NO. 138, AAYAKAR BHAVAN 24, 2ND FLOOR, PRINTIN G HOUSE M.K. ROAD, MUMBAI 400020 VS. POLICE COURT LANE, FORT MUMBAI 400001 PAN - AABPK5810H APPELLANT RESPONDENT APPELLANT BY: SHRI R.K. SAHU RESPONDENT BY: SHRI BHUPENDRA SHAH DATE OF HEARING: 27.02.2014 DATE OF PRONOUNCEMENT: 27.02.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 09.03.2011 PASSED BY THE CIT(A)-23, MUMBAI AND IT P ERTAINS TO A.Y. 2007-08. 2. FOLLOWING GROUNDS WERE URGED BY THE REVENUE BEFORE US: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .23,56,576/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED AS EXPE NSES ON VISA PROCESSING AND OTHER CONSULATE FEES ADDED U/S. 69C OF THE I.T. ACT EVEN THOUGH THE SAME WAS NOT ADEQUATELY SUPPORTED B Y EVIDENCE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HA ERRED IN ACCEPTING THE ADDITIONAL EVI DENCE WHICH WERE NOT PRODUCED BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND VIOLATED THE PROVISIONS OF RULE 46A. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEE IS PROPRIETOR OF M/S. ROYAL SERVICES AND I S ENGAGED IN THE BUSINESS OF TRAVEL AGENCY. FOR THE YEAR UNDER CONSIDERATION ASSESSEE DECLARED TOTAL INCOME OF ` 8,29,981/-, WHICH WAS ORIGINALLY PROCESSED UNDER SE CTION 143(1) OF THE ACT BUT LATER ON SOUGHT TO BE REOPENED BY IS SUING NOTICE UNDER SECTION ITA NO. 4222/MUM/2011 SHRI VINOD SOORU KOTIAN 2 143(2) OF THE ACT IN VIEW OF THE INFORMATION RECEIV ED FROM THE ADDL. DIRECTOR OF INCOME TAX (INVESTIGATION) NOTICING THAT HUGE AM OUNT OF CASH WAS WITHDRAWN FROM BANK OF INDIA, MUMBAI. THE ASSESSEE ACCORDINGLY RESPONDED TO THE NOTICES AND APPEARED FROM TIME TO TIME ALONGWITH HIS AUTHORISED REPRESENTATIVE. IT IS THE CASE OF THE AS SESSEE THAT IT WAS OBTAINING VISA AND PASSPORTS FOR ITS CLIENTS AND IT IS ALSO PROVIDING CAR RENTAL SERVICES, ETC. DURING THE YEAR UNDER CONSIDERATION IT HAS RENDERED SERVICES TO THREE OF ITS CLIENTS AND RECEIVED FEES AS UNDER: - AMERICAN EXPRESS BANK ` 36,46,196/- RAM KRISHNA ` 2,92,714/- PROMINENT TOWER ` 5,27,000/- TOTAL ` 46,01,494/- AGAINST THE SAID RECEIPTS IT CLAIMED DEDUCTION OF ` 36,72,373/- TOWARDS EXPENSES RESULTING IN A NET PROFIT OF ` 9,29,121/-. IN THE P & L ACCOUNT THE ASSESSEE HAD ALSO SHOWN INCOME IN THE FORM OF REIMB URSEMENT, TO THE TUNE OF ` 1,55,75,015/-, WHICH WAS STATED TO HAVE BEEN INCURR ED BY HIM ORIGINALLY AND REIMBURSED BY THE CLIENTS. 4. THE AO NOTICED FROM THE CASH BOOK THAT THE ASSESSEE HAD INCURRED EXPENDITURE TOWARDS STAFF WELFARE, SALARY, TELEPHON E, ETC. APART FROM EXPENDITURE INCURRED FOR OBTAINING VISA, ETC. AMOUN TING TO ` 68,21,500/-, WHICH WAS REIMBURSED. THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE GENUINENESS OF THE ENTRY VIDE ORDER SHEET NOTING DA TED 21.12.2009. THE CASE OF THE ASSESSEE, ON THE OTHER HAND, WAS THAT HE HAS WITHDRAWN CASH FROM THE BANK AND THE SAME WAS SPENT AS AND WHEN NEEDED AND IN RESPECT OF CERTAIN EXPENDITURE THE AMOUNT WAS IMMEDIATELY REIM BURSED BY THE PARTIES BECAUSE IT OUGHT TO HAVE BEEN INCURRED BY THE PARTI ES SUCH AS VISA FEES, ETC. 5. THE AO NOTICED THE NUMBER AND DETAILS OF CASH WITHD RAWN FROM THE BANK, WHICH WORKS OUT TO ` 45,80,000/- WHEREAS THE ASSESSEE INCURRED AN AMOUNT OF ` 68,21,500/- ON 31.03.2007 TOWRDS REIMBURSEMENT FOR WHICH NO EXPLANATION WAS FURNISHED BUT THE ASSESSEE SHOWN TO HAVE SPENT A SUM OF ` 44,64,933/- IN THE FORM OF CONSULATE FEES. THUS, TH E DIFFERENTIAL AMOUNT OF ITA NO. 4222/MUM/2011 SHRI VINOD SOORU KOTIAN 3 ` 23,56,567/- ( ` 68,21,500 44,64,933) WAS TREATED AS UNEXPLAINED EXPENDITURE, WHICH WAS ADDED UNDER SECTION 69C OF T HE ACT. 6. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T THE AO ERRED IN MAKING THE ADDITION UNDER SECTION 69C OF THE ACT IG NORING THE FACT THAT THE PAYMENTS WERE MADE TOWARDS VISA PROCESSING FEES, ET C. OF DIFFERENT CONSULATES WHICH WERE REIMBURSED BY THE CLIENTS. DU RING THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF SPECIMEN OF CONTACT WITH CLIENTS, LIST OF CONSULATE AND EMBASSY OFFICES IN MUMBAI, DETAILS OF VISA FEES PAYABLE TO CONSULATE BY CASH/P AY ORDER, SPECIMEN CIRCULARS SHOWING MODE OF PAYMENT, PARTICULARLY IN CASH, ETC. THE SPECIMEN CONTRACT WITH THE AMERICAN EXPRESS TRAVEL RELATED S ERVICES SHOWS THAT ROYAL SERVICES (THE APPELLANT HEREIN) WILL PROVIDE PASSPO RT AND VISA SERVICES TO THEM FOR WHICH THE ASSESSEE WILL BE PAID @ ` 250/- PER TRANSACTION AS CONSOLIDATED COST OF SERVICES FOR THE FIRST 500 TRA NSACTIONS AND FOR ANY INCREMENTAL TRANSACTIONS @ ` 150/- PER TRANSACTION. MONTHWISE BRAKE UP OF THE PAYMENT BY CASH, PAYMENT BY CHEQUE/PAY ORDER, E TC. WAS ALSO FURNISHED. BASED ON THE SAID DETAILS THE LEARNED CI T(A) CALLED FOR A REMAND REPORT OF THE AO, WHO HAS OBJECTED TO THE CORRECTNE SS OF THE CLAIM ON THE GROUND THAT VISA FEES PAYABLE BY THE APPELLANT WAS FOR THE CURRENT FINANCIAL YEAR 2009-10/2008-09 AND NOT FOR 2007-08. AS REGARD S THE MONTHLY BREAK UP OF VISA PAYMENTS IN CASH/PAY ORDER HE MERELY SUB MITTED THAT THESE DETAILS WERE NEITHER FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR WERE FILED BEFORE THE INVESTIGATION TEAM. AS RE GARDS THE SPECIFIC SELF- MADE VOUCHERS FURNISHED BY THE ASSESSEE, THE AO STA TED THAT THERE WAS NO JUSTIFICATION FOR PAYMENT IN CASH AND THE PAYMENTS MADE EXCEED THE VISA FEES. 7. IN REBUTTAL, THE ASSESSEE SUBMITTED THAT THE DETAIL S OF VISA FEES PAYABLE WERE PRODUCED TO PROVE THAT CERTAIN CONSULA TES ACCEPT PAYMENTS ONLY IN CASH. IT IS ALSO SUBMITTED THAT EARLIER YEA RS DETAILS COULD NOT BE FURNISHED BECAUSE SOME CONSULATES WERE NOT DISCLOSI NG THE VISA FEES ON THE WEBSITE IN RESPECT OF A.Y. 2006-07, HENCE THE LATES T UPDATES WERE PROVIDED. WITH REGARD TO THE MONTHLY BREAK UP OF FEES PAYMENT IT WAS STATED THAT THE ITA NO. 4222/MUM/2011 SHRI VINOD SOORU KOTIAN 4 OLD CHARTERED ACCOUNTANT WAS SUFFERING FROM CARDIAC PROBLEMS AND HENCE IT COULD NOT BE IMMEDIATELY FURNISHED. IT WAS ALSO CON TENDED THAT THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT DID NOT CALL FOR ANY DETAILS AND MERELY TRANSFERRED THE CASE TO THE AO AND EVEN THE AO HAS NOT CALLED FOR ANY FURTHER DETAILS. IN MOST OF THE CASES THE C ORPORATE CLIENTS HARDLY GIVE 24 HOURS TIME FOR THEIR VISA WORK AND HENCE THE ASS ESSEE WITHDRAWS CASH FROM THE BANK AND APPLIES FOR VISA FOR WHICH THE AS SESSEE WOULD BE PAID ` 250/- PER TRANSACTION. IT WAS THUS CONTENDED THAT A S PER THE DETAILS FILED THE VISA FEES PAID IN CASH TOTALLED ` 68,21,500/- AND THAT PAID BY CHEQUE/PAY ORDER TOTALLED ` 87,53.515/- THE DATEWISE DETAILS OF VISA FEES PAYMENT IN CASH AND BY CHEQUE/PAY ORDER WERE ALSO F URNISHED. 8. HAVING REGARD TO THE MATERIAL PLACED BEFORE HIM, IN CLUDING THE REMAND REPORT, THE LEARNED CIT(A) CONCLUDED THAT NO CASE W AS MADE OUT BY THE AO TO MAKE THE IMPUGNED ADDITION. IN THIS REGARD HE OBSER VED, VIDE PARA 4.5 OF HIS ORDER, AS UNDER: - 4.5 THE APPELLANT HAD FILED A SUMMARY STATEMENT OF VISA FEES PAID DURING THE YEAR GIVING BREAK UP OF PAYMENTS BY CASH AND CHEQUE, IN WHICH MONTHWISE DETAILS WERE GIVEN. A STATEMENT SHO WING PAYMENT OF VISA FEES ON DAILY BASIS WAS ALSO FURNISHED FOR THE ENTIRE YEAR. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT WAS ASKED TO PRODUCE ORIGINAL VOUCHERS. THE SAME WERE PRODUCED AND VERIFICATION O F THE VISA FEES WAS MADE ON TEST CHECK BASIS WITH RESPECT TO THE AM OUNTS MENTIONED IN THE DAILY STATEMENT OF PAYMENT OF VISA FEES. IN RESPECT OF AMERICAN EXPRESS BANK LTD., WHICH IS THEIR CORPORATE CLIENT, THE ADVICE OF CHEQUE TRANSMITTAL WAS FOUND SUPPORTED BY LIST OF PERSONS ON WHOSE ACCOUNT VISAS WERE HANDLED, PAYMENT AMOUNTS AND INVOICE RAI SED BY THE APPELLANT WERE FOUND AND TALLIED WITH THE DAILY STA TEMENT. IN NON- CORPORATE CLIENTS, TEST CHECK SHOWED THE INVOICE SU PPORTED BY COPY OF PASSPORT OF THE CLIENT. THE DIFFERENCE IN THE VISA FEES MENTIONED AS IN 2009-10 AND IN THE AY 2006-07 CANNOT BE MADE THE BA SIS OF ADDITION, SINCE THE VISA FEES CHARGEABLE VARY OVER TIME. IN V IEW OF THE VERIFICATION CARRIED OUT AS ABOVE WHICH DID NOT THROW UP ANY DIS CREPANCY, THE AND MADE IS NOT FOUND JUSTIFIED AND IS DELETED. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. THE CASE OF THE LEARNED D.R. IS THAT THE ASSESSEE HAS NOT FURNISHED ANY DET AILS BEFORE THE AO WHEREAS THE CIT(A) HAS ADMITTED THE ADDITIONAL EVID ENCE WITHOUT FOLLOWING THE PROCEDURES PRESCRIBED UNDER RULE 46A OF THE I.T . RULES. IN THIS REGARD HE RELIED UPON THE FOLLOWING DECISIONS: - ITA NO. 4222/MUM/2011 SHRI VINOD SOORU KOTIAN 5 I. ITO VS. RAJAN MANHAZI AYROORKAROT 49 SOT 76 (MUM) II. CIT VS. RANJIT KUMAR CHOUDHURY 288 ITR 179 (GUJ) 10. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE AFOREMENTIONED CASES HAVE NO APPLICATION TO THE FACTS OF THE INSTANT CASE BECAUSE THE FIRST APPELLATE AUTHORITY HAS CALLED FO R A REMAND REPORT AND HAD TAKEN INTO CONSIDERATION THE REMAND REPORT AND ALSO THE ADDITIONAL EVIDENCE. HE FURTHER CONTENDED THAT THE ASSESSEE PROVED TO TH E HILT THAT THESE ARE MERE REIMBURSEMENTS. IN FACT, IT IS NOT THE CASE OF THE AO THAT ON A PARTICULAR DATE THERE WAS NO CASH AVAILABILITY WITH THE ASSESSEE AS AGAINST THE PAYMENTS MADE. REIMBURSEMENTS WERE RECORDED ON THE LAST DAY OF THE YEAR BUT THE FACT REMAINS THAT THE EXPENDITURE WAS INCURRED ON DIFFERENT DATE S. HE ALSO SUBMITTED THAT AS PER THE STANDARD PRACTICE FOLLOWED BY THE TRAVEL AG ENTS EXPENDITURE IS INCURRED ON THE DATE WHEN VISA FEES IS PAID AND IN MOST OF T HE CASES THE PAYMENT IS RECEIVED FROM THE CLIENTS ON THAT DATE. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ON A PARTICULAR DATE THE ASSESSEE INCURRED MOR E EXPENDITURE THAN WHAT WAS AVAILABLE IN CASH AND IN THE BANK ACCOUNT. THE FIRST APPELLATE AUTHORITY HAD TAKEN INTO CONSIDERATION THE NORMAL PRACTICE FO LLOWED IN THE LINE OF BUSINESS AND THE EVIDENCE IN SUPPORT THEREOF WHILE COMING TO THE CONCLUSION THAT THERE IS NO CASE FOR MAKING ADDITION UNDER SEC TION 69C OF THE ACT. HE, THUS, JUSTIFIED THE ACTION OF THE LEARNED CIT(A). 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE ALL THROUGH WAS TH AT NEITHER THE INVESTIGATING WING NOR THE AO CALLED FOR CERTAIN DE TAILS AS TO THE MODE OF OPERATION CARRIED ON BY TRAVEL AGENTS BUT AS A MATT ER OF ABUNDANT PRECAUTION IT HAS FILED ALL THE DETAILS BEFORE THE CIT(A) AND BASED ON THE CIRCUMSTANCE THE LEARNED CIT(A) THOUGHT IT FIT TO A DMIT THE SAME AFTER OBTAINING A REMAND REPORT. HAVING REGARD TO THE CIR CUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT ADMISSION OF ADDITIONAL EVI DENCE CANNOT BE STATED TO BE IN VIOLATION OF RULE 46A OF THE I.T. RULES. SINC E THE ASSESSEE HAS EXPLAINED THE CONSISTENT METHOD FOLLOWED BY HIM, IN THE ABSENCE OF POINTING OUT ANY SPECIFIC INSTANCE OF CASH PAYMENT WITHOUT A VAILABILITY OF CASH ON THE STIPULATE DATE, WE ARE OF THE VIEW THAT THE ADDITIO N MADE BY THE AO UNDER ITA NO. 4222/MUM/2011 SHRI VINOD SOORU KOTIAN 6 SECTION 69C HAS NO LEGS TO STAND. UNDER THESE CIRCU MSTANCES WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CI T(A) FOR THE REASONS GIVEN BY HIM IN PARA 4.5 OF HIS ORDER. WE, THEREFORE, AFF IRM THE ORDER PASSED BY THE CIT(A). 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2014. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 27 TH FEBRUARY, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 23, MUMBAI 4. THE CIT 23, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.