SILVERBIRD TRADING PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX-1(3)(1), MUMBAI

ITA 4662/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3798 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 30-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Section: 143(3); 37

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G B ENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.4662/MUM/2017 (ASSESSMENT YEAR 2013-14) M/S SILVERBIRD TRADING PVT. LTD. 402, EXPRESS BUILDING, 14-E ROAD, CHURCHGATE, MUMBAI-400020. P AN: AAOCS8314E VS. ACIT-1(3)(1) ROOM NO. 540, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDENT APPELLANT BY : SHRI JITENDRA JAIN (AR) RESPONDENT BY : SHRI CHAUDHARY ARUN KUMAR SINGH (DR) DATE OF HEARING : 29.01.2019 DATE OF PRONOUNCEMEN T : 29.01.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX-3, MUMBAI (THE LD. CIT(A) DATED 04.05.2017, WHICH IN TURN ARI SES FROM THE ASSESSMENT ORDER DATED 28.03.2016 PASSED UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: 1. THE COMMISSIONER OF INCOME TAX(APPEALS) - 3, MUM BAI [CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.25,00,000/- U/S 3 7 OF THE INCOME TAX ACT, 1961 MADE BY THE AO HOLDING THAT THE PAYMENT MADE T OWARDS LABOUR CHARGES ARE NOT VERIFIABLE. THE APPELLANT SUBMITS THAT LABOUR CHARGES WAS PAID TO A TO Z QUALITY MANAGEMENT PRIVATE LIMITED FOR THE PURPOSE OF BUSIN ESS OF THE APPELLANT AND SAME SHALL BE ALLOWED AS DEDUCTIBLE REVENUE EXPENDI TURE U/S 37 OF THE IT. ACT. ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 2 2. THE CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLO WANCE OF RS.4,42,629/- (BEING 20% OF THE AGGREGATE EXPENSES OF RS.22,13,14 5/- CLAIMED UNDER THE HEAD OF CONSULTANCY CHARGES, PROFESSIONAL AND LEGAL EXPE NSES, TRAVELLING AND VEHICLE RUNNING EXPENSES) MADE BY THE AO, ON THE GROUND THA T, IN COMPARISON TO EARLIER YEAR EXPENSES RELATING TO COMMISSION INCOME HAS INC REASED AND IS UNJUSTIFIED. THE APPELLANT SUBMITS THAT THE ABOVE EXPENSES ARE I NCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS AND ON THE FACTS AND CIRCU MSTANCE OF THE CASE AND IN LAW NO ADHOC DISALLOWANCES OF EXPENSE ARE WARRANTED IN THE CASE OF THE APPELLANT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS CONSULTANT AND AGENT FOR FMCG COMPANIES, F ILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 30.09.2013 DE CLARING INCOME OF RS. 12,62,000/-. THE RETURN OF INCOME WAS REVISED ON 31 .03.2015 DECLARING NIL INCOME AFTER CLAIMING LOSS OF CURRENT YEAR OF RS. 5 3,46,814/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WA S COMPLETED UNDER SECTION 143(3) ON 28.03.2016. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE DISALLOWANCE OF LABOUR EXPENS ES OF RS. 25,00,000/-. THE ASSESSING OFFICER ALSO MADE ADHOC DISALLOWANCE @ 20% OF TOTAL EXPENSES OF RS. 22,13,145/-. ON APPEAL BEFORE THE L D. CIT(A), BOTH THE ADDITION/DISALLOWANCE WAS CONFIRMED. THEREFORE, FUR THER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRE SENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 4. GROUND NO.1 RELATES TO DISALLOWANCE OF RS. 25,00,00 0/- UNDER SECTION 37 OF THE ACT. THE LD. AR OF THE ASSESSEE SUBMITS THAT AF TER SELECTING THE RETURN OF ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 3 INCOME, THE JURISDICTION OF ASSESSING OFFICER WAS T RANSFERRED ON 08.02.2016 FROM ITO-1(3)-2, MUMBAI TO CIRCLE-1(3)-1, MUMBAI. T HE ASSESSING OFFICER FOR THE FIRST TIME, ON 15.03.2016 ASKED THE ASSESSE E TO PROVIDE THE DETAILS OF EXPENSES INCURRED ON LABOUR CHARGES. THE ASSESSEE F URNISHED THE DETAILED ON 17.03.2016 THAT LABOUR CHARGES WERE PAID TO M/S A T O Z QUALITY MANAGEMENT PRIVATE LTD. FOR YEARLY CONTRACT FOR PROVIDING MANP OWER FOR DAY TO DAY MARKETING FIELD WORK AND FURNISHED THE COPY OF LEDG ER. THE ASSESSING OFFICER DISALLOWED THE EXPENSES ON HIS OBSERVATION THAT LABOUR EXPENSES WERE DOUBTFUL AND THAT WARD INSPECTOR WAS DEPUTED TO VER IFY THE EXPENSES, IF PAID TO M/S A TO Z QUALITY MANAGEMENT PRIVATE LTD. THE I NSPECTOR REPORTED THAT NO SUCH ENTITY IS AVAILABLE ON SUCH ADDRESS PROVIDE D BY ASSESSEE. THE LD. AR FURTHER SUBMITS THAT THE ASSESSEE PROVIDED THE ADDR ESS OF M/S A TO Z QUALITY MANAGEMENT PRIVATE LTD. AND THE DETAILED OF LABOUR CHARGES, HOWEVER, THE ASSESSING OFFICER DISCLOSED THAT HE HAS ALREADY PAS SED THE ORDER. THE LD. AR FURTHER SUBMITS THAT THE ASSESSEE FURNISHED ALL THE DETAILS BEFORE THE LD. CIT(A). HOWEVER, THE LD. CIT(A) CONFIRMED THE DISAL LOWANCE WITHOUT VERIFYING THE DOCUMENTARY EVIDENCE AND GENUINENESS OF THE TRANSACTION HOLDING THAT THE ASSESSEE NOT PROVIDED NECESSARY EV IDENCE TO PROVE THAT PAYMENTS WERE MADE WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. THE DL. AR SUBMITS THAT THE ASSESSMENT ORDER WAS PA SSED BY ASSESSING OFFICER IN A HASTY MANNER AND WITHOUT GIVING THE OP PORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CONTENTIONS. THE ASSESSEE FURNI SHED THE FRESH ADDRESS OF A ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 4 TO Z QUALITY MANAGEMENT PVT. LTD. THE ASSESSEE ALSO PROVIDED THE COPY OF CONFIRMATION AND RETURN OF INCOME OF A TO Z QUALITY MANAGEMENT PVT. LTD. THE LOWER AUTHORITY HAS NOT GIVEN ANY FINDING ON SU CH EVIDENCES. THE ASSESSEE PAID THE LABOUR CHARGES ON ACCOUNT OF YEAR LY CONTRACT WITH A TO Z QUALITY MANAGEMENT PVT. LTD. FOR PROVIDING MANPOWER FOR DAY TO DAY MARKETING FIELD WORK FOR MARKETING PURPOSE. THE EXP ENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION OF FACT AS THE A SSESSMENT ORDER WAS PASSED BY ASSESSING OFFICER IN A HURRIEDLY WAY AND THAT TH E LD. CIT(A) ALSO CONFIRMED THE ADDITION/DISALLOWANCE WITHOUT VERIFYI NG THE EVIDENCES. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT ASSESS EE IS ENGAGED IN THE BUSINESS OF CONSULTANCY AND HAS SHOWN THE EXPENSES ON LABOUR CHARGES. THE ASSESSEE HAS NOT PROVED THE NEXUS OF THE EXPENSES W ITH THE BUSINESS OF THE ASSESSEE. IN SUPPORT OF HIS SUBMISSION, THE LD. DR FOR THE REVENUE RELIED UPON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN CASE OF INDIAN GALVANICS CYRIUM FOILS LTD. VS. DCIT [2018] 95 TAXMANN.COM 25 9 (BOM), IN CASE OF DHIMANT HIRALAL THAKAR VS. CIT [2015] 64 TAXMANN.CO M 177(BOM.), DYSTAR INDIA (P.) LTD. VS. DCIT [2013] 33 TAXMANN.COM 114 (MUMBAI TRIB.), AND IN HABIBUR RAHEMAN F. ANSARI VS. DCIT [2014] 50 TAXMAN N.COM 87 (MUMBAI TRIB.). ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LD. DR FOR THE REVENUE. WE HAVE NOTED THAT THE JURISDICTION OF ASSESSING OFFICER WAS TRANSFERRED F ROM ITO-1(3)-2 TO ACIT- CIRCLE 1(3)-1. THE ASSESSING OFFICER FOR THE FIRST TIME RAISED QUERY ON 15.03.2016 ABOUT THE VARIOUS EXPENSES CLAIMED BY AS SESSEE. THE ASSESSEE FURNISHED HIS SUBMISSION ON 17.03.2016 CONTENTING T HAT THE ASSESSEE PAID LABOUR CHARGES TO A TO Z QUALITY MANAGEMENT PVT. LT D. ON ACCOUNT OF YEARLY CONTRACT FOR PROVIDING PERSONS FOR DAY TO DAY MARKE TING FIELD WORK. THE ASSESSING OFFICER DEPUTED THE INSPECTOR TO VERIFY T HE ADDRESS OF BUSINESS PREMISES OF A TO Z QUALITY MANAGEMENT PVT. LTD. THE INSPECTOR ALLEGEDLY REPORTED THAT NO SUCH ENTITY IS AVAILABLE ON THE GI VEN ADDRESS. WE HAVE NOTED THAT THE REPORT OF INSPECTOR THAT ENTITY M/S A TO Z QUALITY MANAGEMENT PVT. LTD. IS NOT AVAILABLE AT THE GIVEN ADDRESS WAS NOT CONFRONTED TO THE ASSESSEE. THE ASSESSEE BEFORE US CONTENDED THAT THE ADDRESS O F M/S A TO Z QUALITY MANAGEMENT PVT. LTD. WAS CHANGED FROM C-305, ANTOP HILL HOUSING CO. LTD., VIT COLLEGE ROAD, WADALA(E), MUMBAI-37 TO 339 , ANTOP WAREHOUSING CO. LTD. , VIT COLLEGE ROAD, WADALA(E), MUMBAI-37. THE ASSESSEE ALSO FILED CONFIRMATION AND INCOME TAX RETURN OF M/S A T O Z QUALITY MANAGEMENT PVT. LTD. THE CONTENTION OF LD. AR OF THE ASSESSEE IS THAT THE ASSESSING OFFICER PASSED THE ORDER WITHOUT GIVING SUFFICIENT TIME AND CONFRONTING THE FACT ABOUT THE VERIFICATION OF ADDRESS TO THE ASSES SEE. IT IS FURTHER CONTENTION ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 6 OF LD. AR OF THE ASSESSEE IS THAT DESPITE FILING SU FFICIENT DOCUMENTARY EVIDENCE BEFORE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. WE HAVE NOTED THAT THE RELEVANT DOCUMENTARY EVIDENC E WAS NOT CONSIDERED BY THE LOWER AUTHORITY QUA THE ADDITION/DISALLOWANC E ON ACCOUNT OF LABOUR EXPENSES, THEREFORE, WE DEEM IT APPROPRIATE TO REST ORE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE DOCUMENTARY EVIDE NCE FURNISHED BY ASSESSEE AND TO PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO ORDER THAT BEFORE PASSING THE ORDER, THE ASSESSING OFFICER SHALL GRANT THE SUFFICIENT OPPORTUNITY TO THE ASSESSEE. SINCE, WE H AVE RESTORED THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE A FRESH, THEREFORE, IN VIEW OF THE VARIOUS DECISION RELIED BY LD. DR, THE ASSESSIN G OFFICER IS ALSO DIRECTED TO CONSIDER THE RATIO OF AFORESAID DECISION RELIED BY LD. DR, IF THE EXPENSES INCURRED BY ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSE. 7. GROUND NO.2 RELATES TO ADHOC DISALLOWANCE OF RS. 4, 42,629/- (BEING 20% OF THE AGGREGATE EXPENSES OF RS. 22,13,145/- CLAIMED U NDER THE HEAD OF CONSULTANCY CHARGES, PROFESSIONAL AND LEGAL EXPENSE S, TRAVELING AND VEHICLE RUNNING EXPENSES). THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE ASSESSEE CLAIMED EXPENSES ON ACCOUNT OF CONSULTANCY CHARGES, PROFESSIONAL AND LEGAL EXPENSES, TRAVELLING AND VEHICLE EXPENSES. THE ASSE SSING OFFICER DISALLOWED 20% OF THE EXPENSES HOLDING THAT COMPARATIVE TO EAR LIER YEARS THE EXPENSES RELATED TO COMMISSION HAS INCREASED WHICH IS UNJUST IFIED. THEREFORE, THE ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 7 ASSESSING OFFICER DISALLOWED 20% OF THE EXPENSES ON ADHOC BASIS. THE LD. AR SUBMITS THAT THE 20% OF DISALLOWANCE ON ADHOC BA SIS IS UNJUSTIFIED. THE LD. AR IN ALTERNATIVE SUBMITS THAT DISALLOWANCE MAY BE RESTRICTED TO 5% OF THE EXPENSES. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER AS WELL AS LD. CIT(A) HAS NOT DOUBTED THE G ENUINENESS OF EXPENSES. THE BASIS FOR DISALLOWANCES ADOPTED BY ASSESSING OF FICER AND CONFIRMED BY LD. CIT(A) THAT THE ASSESSEE HAS NOT JUSTIFIED THE INCREASED EXPENDITURE COMPARATIVE TO THE LAST YEAR. IN OUR VIEW WHEN GENU INENESS OF EXPENSES WERE NOT DOUBTED, THE DISALLOWANCE @ 20% OF EXPENSES IS ON HIGHER SIDE, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RESTR ICT THE SAID DISALLOWANCES TO THE EXTENT OF 10% ONLY. IN THE RESULT, THIS GROUND OF APPEAL IS ALSO PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/ 01/2019. SD/ SD/- MANOJ KUMAR AGGARWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL ME MBER MUMBAI, DATE: 29.01.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT ITA NO. 4662 MUM 2017-M/S SILVERBIRD TRADING PVT. LTD. 8 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI