ACIT 8(1), MUMBAI V. AFFABLE FISHERIES P. LTD, MUMBAI

ITA 4440/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2080 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJN EESH K ARVIND
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation; Document seized; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 4440/MUM/2010 (ASSESSMENT YEAR : 2006-07) ITA NO. 4426/MUM/2010 (ASSESSMENT YEAR : 2007-08) ASSTT. COMMISSIONER OF INCOME TAX-8(1), ROOM NO.260A, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ... APPELLANT VS. M/S. AFFABLE FISHERIES PVT. LTD., COSMOS BUILDING, KHIRA NAGAR, SANTACRUZ(WEST), MUMBAI 400 020 PAN:AAACA 9733H .... RESPONDENT APPELLANT BY : SHRI RAJNEESH K. ARVIND RESPONDENT BY : SHRI M.SUBRAMANIAN DATE OF HEARING : 03/08/2015 DATE OF PRONOUNCEMENT : 30/11/2015 ORDER PER G.S. PANNU,AM: BOTH THE CAPTIONED APPEALS ARE FILED BY THE REV ENUE, WHICH ARE DIRECTED AGAINST A COMMON ORDER PASSED BY THE CIT( A) -16, MUMBAI DATED 24/03/2010 PERTAINING TO THE ASSESSMENT YEARS 2006-07 & 2007- 08, WHICH IN TURN HAVE ARISEN FROM AN ORDERS PASSED BY THE ASSESSING 2 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) OFFICER DATED 23/12/2008 & 20/11/2009 RESPECTIVELY UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN BOTH THE APPEALS, THE ISSUES RAISED ARE COMMO N, THEREFORE, THE TWO APPEALS HAVE BEEN CLUBBED AND HEARD TOGETHER AN D A CONSOLIDATED ORDER IS PASSED FOR THE SAKE OF CONVENIENCE AND BRE VITY. 3. FIRST WE SHALL TAKE UP THE APPEAL RELATING TO TH E ASSESSMENT YEAR 2006-07, WHEREIN REVENUE HAS RAISED THE FOLLOWING T HREE MAIN GROUNDS OF APPEAL. GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2006-07:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION OF RS.2,35,13,625/-, WITHOU T APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.39, 67,132/- MADE BY THE A.O ON ACCOUNT OF FOOD AND OTHER PROVISIONS FOR CREW ME MBERS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM WITH SUPPORTING DOCUMENTARY EVIDENCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.48, 25,082/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALARY PAID TO CREW MEMBERS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM WITH SUPPORTING DOCUMENTARY EVIDENCE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND TO BE SET ASIDE AND THAT OF ITO/ACIT/DCIT BE RESTORED . 3. BEFORE WE PROCEED TO ADJUDICATE THE SPECIFIC GRO UNDS OF APPEAL, BRIEF BACKGROUND IS THAT THE RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1961 AND IS, 3 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) INTER-ALIA, ENGAGED IN THE BUSINESS OF OPERATING D EEP SEA FISHING VESSELS IN INDIAN AS WELL AS INTERNATIONAL WATERS. FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE-COMPANY FILED RETURN OF INCOME DECLARING A LOSS OF RS.1,27,61,271/-, WHICH WAS SUBJECT TO A SCRUTINY. IN THE ASSESSMENT, THE TOTAL INCOME AS BEEN ASSESSED AT RS .4,64,72,570/- AS AGAINST THE LOSS DECLARED IN THE RETURN OF INCOME. THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME IS PRI MARILY ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND EXPENSES ON FUE L, SALARY TO CREW MEMBERS, ETC. THE ENTIRE DISCUSSION IN THE ASSESS MENT ORDER REVEALS THAT THE GENESIS OF THE DISALLOWANCES WAS THE FAILU RE ON THE PART OF THE ASSESSEE TO FURNISH CERTAIN INFORMATION CALLED FOR BY THE ASSESSING OFFICER, WHICH WAS CLAIMED NOT TO BE READILY AVAILA BLE WITH THE ASSESSEE AS THE SAME WAS IN THE CUSTODY OF THE DEPARTMENT OF REVENUE INTELLIGENCE(DRI). SINCE THE ASSESSING OFFICER COU LD NOT CARRY OUT APPROPRIATE VERIFICATION, HE MADE DISALLOWANCES O UT OF THE CLAIM OF DEPRECIATION, SALARY FOR VESSEL CREW, PROVISION FOR CREW AND FUEL EXPENSES. BEFORE CIT(A), ASSESSEE POINTED OUT THAT THE DRI HAD CONDUCTED THE SEARCH ON THE ASSESSEE ON 27/07/2006 AND CERTAIN DOCUMENTS WERE SEIZED BY THE OFFICERS OF THE DRI AN D, THEREFORE, THE REQUIRED DOCUMENTS COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT. BEFORE THE CIT( A) ASSESSEE ALSO SUBMITTED AN AFFIDAVIT ALONGWITH THE COPY OF PANC HNAMA PREPARED BY THE DRI OFFICIALS AT THE TIME OF SEARCH AND ENCLO SED A COMMUNICATION FROM THE DRI DEMONSTRATING THAT A SEARCH HAD TAKEN PLACE IN THE PREMISES OF THE ASSESSEE ON 27/7/2006 AND DOCUMENTS WERE SEIZED BY THE OFFICIALS OF THE DRI. THE ASSESSEE ALSO MOVED AN APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962, BEFORE TH E CIT(A) PLEADING FOR 4 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) ADMISSION OF ADDITIONAL EVIDENCE AS SUCH DOCUMENTS COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER, SINCE THEY W ERE SEIZED DURING THE SEARCH CARRIED OUT BY THE DRI OFFICIALS. THE CIT(A) CONSIDERED THE CIRCUMSTANCES IN WHICH SUCH EVIDENCES COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER AND HE DEEMED IT FIT TO ADMI T THE SAME. THE CIT(A) SENT BACK THE ADDITIONAL EVIDENCE TO THE ASS ESSING OFFICER WITH DIRECTIONS TO VERIFY THE SAME AND SUBMIT A REMAND R EPORT. ON EACH OF THE DISALLOWANCES IN QUESTION, THE ASSESSING OFFICE R SUBMITTED A REMAND REPORT, WHICH HAS BEEN TAKEN INTO CONSIDERAT ION BY THE CIT(A). ON THE BASIS OF THE MATERIAL ON RECORD AS WELL AS T HE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, THE CIT(A) FOUN D IT FIT TO DELETE ALL THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING O FFICER OUT OF THE CLAIM OF DEPRECIATION, FUEL EXPENSES AND SALARY PAI D TO CREW AND PROVISIONS. AGAINST SUCH ACTION OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REP RESENTATIVE APPEARING FOR THE REVENUE HAS PRIMARILY CANVASSED A N OMNIBUS ARGUMENT TO SUPPORT THE CASE OF THE REVENUE, WHICH IS TO THE EFFECT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE CL AIM ON ACCOUNT OF DEPRECIATION, FUEL EXPENSES AND SALARY TO CREW MEMB ERS AND OTHER PROVISIONS ON THE BASIS OF APPROPRIATE DOCUMENTARY EVIDENCE. 5. ON THE OTHER HAND, ASSERTIONS OF THE LD. REPRESE NTATIVE FOR THE ASSESSEE WERE THAT THE CIT(A) MADE NO MISTAKE IN DE LETING THE DISALLOWANCES/ADDITIONS MADE BY THE ASSESSING OFFIC ER SINCE THE RELEVANT MATERIAL WAS BROUGHT ON RECORD IN THE APPE LLATE PROCEEDING AND EVEN IN THE REMAND PROCEEDINGS THE ASSESSING O FFICER DID NOT FIND 5 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) ANYTHING OBJECTIONABLE IN SUCH MATERIAL. BEFORE US , THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ALSO FURNISHED A PAPER BOOK WHICH, INTER-ALIA, CONTAINS THE MATERIAL WHICH WAS AVAILAB LE BEFORE THE CIT(A) AND WHICH HAS BEEN RELIED UPON TO DELETE THE IMPUGN ED ADDITION/DISALLOWANCES. THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT IN SCRUTINY ASSESSMENT MADE FOR TH E SUBSEQUENT ASSESSMENT YEAR OF 2008-09, NO SUCH DISALLOWANCES H AVE BEEN MADE AND THE INCOME COMPUTED FOR SUCH ASSESSMENT YEAR HA S BEEN ACCEPTED AS SUCH EXCEPT VARIATION IN THE BROUGHT FORWARD LOS SES OF ASSESSMENT YEARS 2006-07 AND 2007-08. IN THIS MANNER, IT IS S OUGHT TO BE CONTENDED THAT THE IMPUGNED ADDITIONS/DISALLOWANCES MADE IN THE ASSESSMENT BY THE ASSESSING OFFICER WERE UNJUSTIFIE D. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. AT THE OUTSET, WE MAY SAY THAT THE CIT(A) HAS BASED HIS DE CISION TO DELETE THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER ON THE MATERIAL AVAILABLE BEFORE HIM, WHICH WAS ALSO A SUBJECT MATT ER OF VERIFICATION BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS. T HE CIT(A), IN OUR VIEW, IS QUITE JUSTIFIED IN ADMITTING FRESH EVIDE NCE PRODUCED BY THE ASSESSEE, WHICH WAS HITHERTO NOT AVAILABLE IN THE C OURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. THE REAS ONS ADVANCED BY THE CIT(A) FOR ADMITTING SUCH ADDITIONAL EVIDENCE, IN O UR VIEW, DOES NOT MERIT ANY INTERFERENCE IN AS MUCH AS THE INABILITY TO PRODUCE REQUISITE MATERIAL WAS ON ACCOUNT OF SEIZURE OF DOCUMENTS B Y THE DRI IN THE COURSE OF SEARCH ON 27/7/2006. BE THAT AS IT MAY, WE HEREINAFTER DISCUSS THE SPECIFIC GROUNDS OF APPEAL RAISED BY T HE REVENUE. 6 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) 7. IN THE FIRST GROUND, THE DISPUTE RELATES TO DENI AL OF ASSESSEES CLAIM FOR DEPRECIATION OF RS.2,35,13,625/- ON THE V ESSELS OWNED BY THE ASSESSEE-COMPANY. ON THIS ASPECT, IT IS NOTICEABLE THAT RELEVANT DOCUMENTS WERE FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE ASSESSEE COULD NOT P RODUCE COPIES OF THE IMPORT INVOICE AND THE EVIDENCE OF PAYMENT OF C USTOM DUTY AND ALSO COULD NOT PRODUCE THE ORIGINAL COPIES OF CERTA IN DOCUMENTS. FOR THE SAID REASONS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION. THE CIT(A) HAS APPRECIATED THE POSITION AND NOTICED THAT THE ORIGINAL DOCUMENTS WERE SEIZED AND LYING IN THE CUSTODY OF DRI AND, THEREFORE, THE RELIANCE BY THE ASSESSEE ON PHOTOCOPIES OF SUCH DOCUMENTS WAS QUITE IN ORDER. IN FACT, THE CIT(A) ALSO RECORDS A FINDING THAT THE PHOTOCOPY OF THE DOCUMENTS WERE SUBJECT TO VERIFICA TION BY THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS AND NOTHING OBJECTIONABLE HAS BEEN FOUND. WITH REGARD TO THE O THER OBJECTION CIT(A) NOTICED THAT THE ASSESSEE HAS PRODUCED THE E VIDENCE OF SALE PURCHASE OF THE VESSELS, CLEARANCE FROM THE REGISTR AR FISHING BOAT, BOMBAY, PERMISSION FROM MINISTRY OF AGRICULTURE, ET C. FOR EACH OF THE INDIVIDUAL VESSELS. THIS MATERIAL HAS FORMED TH E BASIS FOR CIT(A) TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION. BEFORE US, THERE IS NO MATERIAL LEAD BY THE REVENUE, WHICH WOULD NEGATE TH E AUTHENTICITY AND BONAFIDE OF THE MATERIAL RELIED UPON BY THE CIT(A) TO ALLOW THE CLAIM OF THE ASSESSEE. AS A CONSEQUENCE, WE HEREBY AFFIRM T HE ORDER OF LD. CIT(A) ON THIS ASPECT AND AS A RESULT, REVENUE FAI LS IN GROUND OF APPEAL NO.1. 8. THE NEXT GRIEVANCE OF THE REVENUE IS WITH REGARD TO THE ACTION OF CIT(A) IN DELETING THE DISALLOWANCE OF RS.39,67,132 /- MADE BY THE 7 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) ASSESSING OFFICER ON ACCOUNT OF FOOD AND OTHER PROV ISIONS FOR CREW MEMBERS. 8.1 IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE A SSESSING OFFICER DISALLOWED 50% OF THE TOTAL EXPENSES FOR THE FOOD A ND OTHER PROVISIONS FOR THE CREW MEMBERS. THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAD CLAIMED SALARY PAYMENT TO 196 CREW MEMBERS AND SI NCE COMPLETE DETAILS WERE NOT MADE AVAILABLE, HE DISALLOWED 50% OF THE SALARY PAID. SIMILARLY, PROVISION FOR FOOD AND OTHER EXPENSES OF THE CREW MEMBERS WERE ALSO SUBJECT TO DISALLOWANCE TO THE EXTENT OF 50% OF THE TOTAL EXPENSES. THE ASSESSING OFFICER NOTICED THAT THE N UMBER OF CREW EMPLOYED BY THE ASSESSEE WAS ONLY 52, WHILE THE PRO VISIONS WERE MADE FOR 196 MEMBERS. 8.2 THE CLAIM OF THE ASSESSEE WAS THAT THE ENTIRE P ROVISION FOR FOOD, ETC. AND SALARIES WAS BASED ON INVOICES RAISED BY M /S.GREAT WALL INTERNATIONAL DEVELOPMENT COMPANY LTD., TAIWAN AND THERE WAS NO JUSTIFICATION FOR MAKING ANY ADHOC DISALLOWANCE. I N THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), ASSESSEE S UBMITTED COMPLETE DETAILS OF THE CREW MEMBERS NUMBERING 196, WHICH IN CLUDED 52 INDIAN CREW MEMBERS AND THE BALANCE FOREIGN MEMBERS. THE CIT(A) CONSIDERED THE DETAILS FURNISHED BY THE ASSESSEE AS ALSO THE CONFIRMATION OF M/S.GREAT WALL INTERNATIONAL DEVELO PMENT COMPANY LTD., TO WHOM THE PAYMENTS HAD BEEN REIMBURSED BY T HE ASSESSEE COMPANY. ACCORDING TO CIT(A), THE ASSESSING OFFICE R ERRED IN INFERRING THAT THE ASSESSEE COMPANY WAS EMPLOYING ONLY 52 CRE W MEMBERS, WHEREAS THE ACTUAL NUMBER WAS 196. THE CIT(A) ALS O REFERRED TO THE THIRD PARTY EVIDENCE IN THE SHAPE OF AN APPROVAL FR OM THE MINISTRIES OF 8 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) GOVERNMENT OF INDIA, WHICH ESTABLISHED THE ACTUAL NUMBER OF CREW MEMBERS AT 196. 8.3 IN THE ABOVE BACKGROUND, WE HAVE CAREFULLY CONS IDERED THE DISCUSSION IN THE ASSESSMENT ORDER AS ALSO THE STAN D OF THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS AND FINDINGS OF THE CIT(A). IN OUR CONSIDERED OPINION, THE CIT(A) IS QUITE JUSTIFI ED IN CONCLUDING IN PARA 5.5 OF HIS ORDER THAT THERE WAS NO EVIDENCE WITH TH E ASSESSING OFFICER WHICH WOULD DEMOLISH THE PLEA THAT ASSESSEE HAD EM PLOYED 196 CREW MEMBERS AND THE TOTAL PROVISION OF RS.79,46,264/- M ADE FOR FOOD AND OTHER PROVISIONS FOR THE CREW MEMBERS WAS DULY CONF IRMED BY THE THIRD PARTY I.E. M/S.GREAT WALL INTERNATIONAL DEVELOPMENT COMPANY LTD., TO WHOM SUCH PAYMENTS HAD BEEN REIMBURSED. THE AFORES AID FACTUAL FINDINGS OF THE CIT(A) HAVE NOT BEEN NEGATED BY THE REVENUE ON THE BASIS OF ANY CREDIBLE MATERIAL. THEREFORE, THE SAM E ARE HEREBY AFFIRMED. AS A CONSEQUENCE, IN SO FAR AS THE GROUN D OF APPEAL NO.2 IS CONCERNED, THE SAME IS HEREBY DISMISSED. 9. THE LAST GROUND IS WITH RESPECT TO THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.48,25,082/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALARIES PAID TO CREW MEMBERS . THE AFORESAID ISSUE IS SUBSUMED IN THE DISALLOWANCE MADE BY THE A SSESSING OFFICER OF RS.39,67,132/- ON ACCOUNT OF FOOD AND OTHER PROVISI ONS FOR CREW MEMBERS, WHICH HAS BEEN DEALT WITH BY US IN THE EAR LIER STATED GROUND OF APPEAL NO.2. IN FACT, THE DISALLOWANCE OUT OF S ALARIES WAS ALSO MADE TO THE EXTENT OF 50% OF THE TOTAL SALARIES CLAIMED THAT WAS BASED ON THE PAYMENTS MADE TO M/S. GREAT WALL INTERNATIONAL DEVE LOPMENT COMPANY LTD., TAIWAN. BASED ON OUR DISCUSSION IN T HE EARLIER PARAS 9 ITA NO. 4440&4426/MUM/2010 (ASSESSMENT YEAR : 2006-07& 2007-08) RELATING TO THE GROUND OF APPEAL NO.2, ON THIS ASP ECT ALSO, WE FIND NO ERROR ON THE PART OF CIT(A) IN DELETING THE ADDITIO N, WHICH WE HEREBY AFFIRM. 10. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2006-07 IS DISMISSED. 11. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES OF THE DISPUTE IN ASSESSMENT YEAR 200 7-08 IS PARI- MATERIA TO THAT OF ASSESSMENT YEAR 2006-07, WHICH W E HAVE DEALT WITH IN THE EARLIER PARAS. OUR DECISION IN THE APPEAL O F THE REVENUE FOR ASSESSMENT YEAR 2006-07 SHALL APPLY MUTATIS-MUTANDI S IN THE APPEAL FOR ASSESSMENT YEAR 2007-08 ALSO. 12. RESULTANTLY, THE CAPTIONED APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2015. SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 30/11/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS