TOSHVIN ANALYTICAL PVT. LTD., MUMBAI V. DCIT -1(3), MUMBAI

ITA 4222/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 08-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G PANSARILD
• Assessee Lawyers: RUTURAJ GURJARLD
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3); 37(1); 6

Judgement Text

ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI JOGINDER SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.4253/MUM/2017 ( / ASSESSMENT YEAR: 2011-12 ) DY. COMMISSIONER OF INCOME TAX - 1 (3)(2) ROOM NO.540, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. TOSHVIN ANALYTIC AL PRIVATE LIMITED 103, S.J. HOUSE, 1 ST FLOOR SITARAM MILLS COMPOUND N.M. JOSHI MARG, LOWER PAREL MUMBAI-400 011 ./ ./PAN/GIR NO. AABCT-4482-D ( /APPELLANT ) : ( / RESPONDENT ) & ./I.T.A. NO.4222/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) TOSHVIN ANALYTICAL PRIVATE LIMITED 103, S.J. HOUSE, 1 ST FLOOR SITARAM MILLS COMPOUND N.M. JOSHI MARG, LOWER PAREL MUMBAI-400 011 / VS. DY. COMMISSIONER OF INCOME TAX - 1 (3)(2) ROOM NO.540, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AABCT-4482-D ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : RUTURAJ GURJAR-LD. AR REVENUE BY : SHRI D.G. PANSARI- LD. DR / DATE OF HEARING : 31/10/2018 / DATE OF PRONOUNCEMENT : 16/11/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 2 1. THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR [AY] 2011-12 WHICH CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, MUMBAI, [CIT(A)], APPEAL NO.CIT(A)-3/IT-98/DCIT-1(3)/14-15 DATED 29/3/2017. THE ASSESSEE IS AGGRIEVED BY CONFIRMATIO N OF ESTIMATED DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES & DISALLOWANCE OF CERTAIN FOREIGN EDUCATION EXPENSES WHEREAS THE REVENUE IS AGGRIEVED BY GRANT OF RELIEF ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-1(3), MUMBAI [AO] U/S 143(3) ON 20/03/2104 WHEREIN THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.12.59 CRORES AFTER CERTAIN ADDITIONS AS AGAINST RETURNED INCOME OF RS.11.81 CRORES E-FILED BY THE ASSESSEE ON 30/09/2011. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS ENGAGED AS COMMISSION AGENT & IN THE BUSINESS OF MARKETING, INSTALLATION & SERVICING OF ANALYTICAL HI-TECH EQUI PMENTS. THE FOLLOWING QUANTUM ADDITIONS ARE THE SUBJECT MATTER OF PRESENT APPEAL BEFORE US:- 2.1 DURING ASSESSMENT PROCEEDINGS, PURSUANT TO RECE IPT OF CERTAIN INFORMATION FROM DG INVESTIGATION, MUMBAI / SALES TAX DEPARTMENT, MAHARASHTRA REGARDING HAWALA DEALERS, IT TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF SUCH BOGUS PURCHASE BILLS AGGREGATING TO RS.53.26 LACS FROM 10 SUCH ENTITIES, THE DETAILS OF WHICH HA VE BEEN EXTRACTED AT PARA-4.7 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FOR VERIFICATION A ND CONFIRMATION OF THE TRANSACTIONS. THE ASSESSEE, WHILE EXPRESSING INABIL ITY TO DO THE SAME, NO. NATURE OF ADDITION AMOUNT (RS.) 1. ALLEGED BOGUS PURCHASES RS.53,26,539/- 2. FOREIGN TRAVEL EXPENSES RS.15,00,947/- ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 3 DEFENDED THE PURCHASES VIDE SUBMISSION DATED 10/02/ 2014, INTER-ALIA , BY SUBMITTING THAT THE PURCHASES WERE DULY SUPPORTED B Y THE PURCHASE INVOICES / PURCHASE ORDERS ETC. IT WAS SUBMITTED TH AT THE ASSESSEE WAS REQUIRED TO PARTICIPATE IN VARIOUS EXHIBITIONS, SEMINARS, CONFERENCES, IN HOUSE MEETINGS ETC. AND THERE WAS CONTINUOUS REQUIREMENT OF STATIONERY ITEMS, BROCHURES, DAIRIES, KEY-CHAINS ETC. ON REGUL AR BASIS WHICH WAS PURCHASED FROM THE ABOVE PARTIES AND THEREFORE, THE PURCHASES WERE GENUINE AND THE EXPENDITURE WAS MEANT FOR BUSINESS PURPOSES ONLY. HOWEVER, FOR WANT OF PRODUCTION OF THE SUPPLIERS AN D FOR WANT OF PROPER DOCUMENTARY EVIDENCES VIZ. DELIVERY CHALLANS, TRANSPORT RECEIPT, OCTROI RECEIPTS ETC. EVIDENCING DELIVERY OF MATERIAL, THE SAID PURC HASES WERE DISALLOWED BY LD. AO AND ADDED TO THE INCOME OF THE ASSESSEE. 2.2 THE SECOND ADDITION STEMS FROM THE FACT THAT TH E ASSESSEE CLAIMED FOREIGN EDUCATION EXPENSES OF CHAIRMAN AND MANAGING DIRECTOR, SHRI NAKUL TOSHNIWAL, OF THE ASSESSEE COMPANY AMOUNTING TO USD 28930.82 [EQUIVALENT INR 15,00,947/-]. THE SAME WERE INCURRE D DURING THE PERIOD FROM JAN, 2011 TO MARCH, 2011 AND THE DETAILS OF TH E SAME HAS BEEN EXTRACTED AT PARA 6.1 OF THE QUANTUM ASSESSMENT ORDER. IN SUPPORT OF THE EXPENDITURE, THE ASSESSEE PLACED ON RECORD BOARD RESOLUTION AUTHORIZING THE EXPENSES . THE STATED EXPENDITURE WAS CLAIMED TO BE INCURRED TOWARDS ATTENDING THE POLICY AND BUSINESS PROGRAMS OF JOHN HOPKINS UNIVERSITY, WASHINGTON DC AND OF STANFORD U NIVERSITY, CALIFORNIA . THE OTHER TERMS OF THE SAID ARRANGEMENT HAVE BEEN EXTRACTED AT PARA 6.2 OF THE QUANTUM ASSESSMENT ORDER. UPON PERUSAL OF TH E SAME, IT, INTER-ALIA, EMANATES THAT IMMEDIATELY AFTER COMPLETION OF THE SAID PROGRAM, THE AFORESAID EXECUTIVE WAS TO RETURN BACK TO INDIA AND SERVE ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 4 THE COMPANY FOR A MINIMUM PERIOD OF 5 YEARS AFTER T HAT AND NO REMUNERATION WAS PAYABLE TO HIM DURING THE TENURE O F THE PROGRAM. HOWEVER, FINDING NO NEXUS OF THE SAID PROGRAM WITH THE BUSINESS OF THE ASSESSEE AND FOR WANT OF NECESSARY DOCUMENTARY EVID ENCES, LD. AO DISALLOWED THE SAME. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH P ARTIAL SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 29/03/2017 WHEREIN THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES WAS RESTRICTED TO 12.5% WHEREAS THE ADDITION OF FOREIGN TRAVEL EXPENSES WAS CONFIRMED. AGGRIEVED AS AFORESAID, THE ASSESSEE AS WELL AS REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE SUBMISSIONS OF LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [AR], DRAWS STRENGTH FROM THE FACT THAT THE ASSESSE E PURCHASED STATIONERY ITEMS AND SALES PROMOTION MATERIAL FROM THE AFORESAID SUPPLIERS AS PER THE BUSINESS REQUIREMENTS AND THE PURCHASES WERE GENUINE. OUR ATTENTION IS ALSO DRAWN TO THE FACT TH AT THESE EXPENDITURE WERE REGULARLY BEING INCURRED BY THE ASSESSEE OVER PAST SEVERAL YEARS WHICH HAS BEEN ACCEPTED BY THE REVENUE. THE ADDITIO N ON ACCOUNT OF FOREIGN EDUCATION EXPENSES HAS BEEN ASSAILED ON THE GROUND THAT THE SAID EXPENDITURE FULFILLED THE CONDITIONS OF SECTIO N 37(1) AND FURTHER, THE SIMILAR DISALLOWANCE IN IMMEDIATELY SUCCEEDING AY H AS BEEN DELETED BY THE FIRST APPELLATE AUTHORITY ITSELF, FINDING STREN GTH IN ASSESSEES CLAIM. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI D.G.PANSARI SUBMITTED THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS CASTED UPON HIM TO PROVE THE PURCHASES AND THEREFORE, THE ADDITIONS WERE JUSTIFIED. ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 5 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER BOOK AND VARIOUS JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. SO FAR AS THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS CONCERNED, THE ASSESSEE HAS PLACED ON RECORD DOCUMENTARY EVIDENCES IN THE SHAPE OF PURCHASE SUMMARY, COPIES OF CHALLANS, PURCHASE ORDE RS THE PERUSAL OF WHICH REVEALS THAT THE ASSESSEE HAS PURCHASED VARIO US STATIONERY AND SALES PROMOTION ITEMS FROM THE AFORESAID SUPPLIERS. HOWEVER, AS RIGHTLY NOTED BY LD. AO, THE ASSESSEE HAS FAILED TO PROVIDE TRANSPORT DETAILS / ANY OTHER DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE DELIVERY THEREOF. IT IS ALSO UNDISPUTED FACT THAT THE ALL SUPPLIERS WERE LISTED AS HAWALA DEALERS BY SALES TAX DEPARTMENT, MAHARASHTRA AND THE ASSESSEE FAILED TO PRODUCE EVEN THE SINGLE SUPPLIER TO CONFIRM THE TRANSACTIONS. THE COMPLETE ONUS TO PROVE THE GENUINENESS OF THE PURCH ASES WAS UPON ASSESSEE AND THE SAME, IN OUR OPINION, HAS REMAINED UNFULFILLED. THEREFORE, THE STAND OF FIRST APPELLATE AUTHORITY, UNDER THE CIRCUMSTANCES, IN MAKING ESTIMATED ADDITIONS, WAS QUITE FAIR AND J USTIFIED. HOWEVER, KEEPING IN VIEW THE OVERALL FACTUAL MATRIX INCLUDIN G VAT RATES, WE FIND THAT ESTIMATION TO BE SLIGHTLY ON HIGHER SIDE AND T HEREFORE, WE REDUCE THE SAME TO 8%. SECONDLY, UPON PERUSAL OF DETAILS, IT I S NOTED THAT THE NET AMOUNT OF EXPENDITURE [EXCLUDING VAT] AS DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AGGREGATES TO RS.47,92,34 5/-. THEREFORE, BY MODIFYING THE IMPUGNED ORDER, WE RESTRICT THE IMPUG NED ADDITIONS TO 8% OF NET ALLEGED BOGUS PURCHASES OF RS.47,92,345/- WHICH COMES TO RS.3,83,388/-. THE REVENUES APPEAL STAND DISMISSED WHEREAS THIS GROUND OF ASSESSEES APPEAL STAND PARTLY ALLOWED. ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 6 6. SO FAR AS THE DISALLOWANCE OF FOREIGN EDUCATION EXPENSES IS CONCERNED, WE FIND THAT THE SAME HAS BEEN INCURRED IN RELATION TO KNOWLEDGE ENHANCEMENT OF THE KEY PERSONNEL OF ASSES SEE COMPANY NAMELY NAKUL TOSHNIVAL AGED AROUND 36 YEARS. THE UNDISPUTED FACTS AS ADVANCED BEFORE US IS THAT THE DIRECTOR WAS FIRST P ROMOTER DIRECTOR OF THE ASSESSEE COMPANY AND WAS QUALIFIED AS B.S. IN ECONOMICS FROM WHARTON SCHOOL OF THE UNIVERSITY OF PENNSYLVANIA AND WAS IN THE BUSINESS FOR OVER 10 YEARS DURING WHICH THE ASSESSE E COMPANY GREW CONSIDERABLY. THE EXPENSES WERE INCURRED IN RELATIO N TO ATTENDING OF POLICY AND BUSINESS PROGRAMS OF JOHN HOPKINS UNIVER SITY, WASHINGTON DC AND OF STANFORD UNIVERSITY, CALIFORNIA COVERING THE PERIOD FROM JANUARY, 2011 TO DECEMBER, 2011. THE PROGRAM WAS DE SIGNED AS AN EXECUTIVE PROGRAM FOR EXPERIENCED PROFESSIONALS HAV ING RELEVANT WORK EXPERIENCE WHO WISHED TO DEVELOP ANALYTICAL AND LEA DERSHIP SKILLS NECESSARY TO FORMULATE AND ADVOCATE POLICY ON KEY I NTERNATIONAL ISSUES. FURTHER, THE SAID ARRANGEMENT WAS DULY SUPPORTED BY AN AGREEMENT DATED 13/01/2011 HAVING ONEROUS STIPULATIONS FOR TH E DIRECTOR TO RETURN BACK TO INDIA AFTER COMPLETION OF THE PROGRAM AND S ERVE THE ASSESSEE FOR A MINIMUM PERIOD OF 5 YEARS. ALSO, THE DIRECTOR WAS LIABLE TO REFUND THE SAID EXPENDITURE IN CASE OF BREACH OF VARIOUS TERMS OF THE AGREEMENT. THE EXPENDITURE WAS DULY AUTHORIZED BY THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY. THE OFFER LETTERS OF THE CONCERNE D UNIVERSITIES OFFERING THE AFORESAID COURSE TO THE DIRECTOR HAS A LSO BEEN PLACED ON RECORD. THE ABOVE FACTUAL MATRIX LEAD US TO CONCLUD E THAT THE AFORESAID EXPENDITURE AS INCURRED BY THE ASSESSEE FULFILLED T HE CONDITIONS OF SECTION 37(1) AND WAS INCURRED IN FURTHERANCE OF AS SESSEES BUSINESS ITA NOS. 4222/MUM/2017 & 4253/MUM/2017 TOSHVIN ANALYTICAL PRIVATE LIMITED ASSESSMENT YEAR-2011-12 7 INTEREST AND HENCE, ALLOWABLE. THEREFORE, BY DELETI NG THE SAME, WE ALLOW THIS GROUND OF ASSESSEES APPEAL. CONCLUSION 7. THE REVENUES APPEAL STANDS DISMISSED WHEREAS TH E ASSESSEES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2018. SD/- SD/- (JOGINDER SINGH) (MAN OJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 16.11.2018 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ ( ) / THE CIT(A) 4. $ / CIT CONCERNED 5. #% &###' , #' , / DR, ITAT, MUMBAI 6. & ()* / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.