GLOBAL EXIM, MUMBAI V. CIT(A)XIII, MUMBAI

ITA 5158/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7316 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 31-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 13-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Bad and doubtful debts; Revised return; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.5158/MUM/2008 - A.Y 2005-06 M/S. GLOBAL EXIM, 301, FAIZ-E-QUTBI, 375, NARSHI NATHA STREET, MASJID WEST MUMBAI 400 009 PAN NO.ADDFG 7968 A VS. ASST. COMMISSIONER OF I.T. 13(3), MUMBAI (APPELLANT) (RESPONDENT) AND I.T.A.NO.5165/MUM/2008 - A.Y 2005-06 ASST. C.I.T., CIR. 13(3), MUMBAI M/S GLOBAL EXIM, MUMBAI ASSESSEE BY : SHRI SANJAY PARIKH. REVENUE BY : SHRI MOHD. USMAN. O R D E R PER P.MADHAVI DEVI, JM: THESE CROSS APPEALS ARE DIRECTED AGAINST CIT[A] S ORDER DATED 27-6-2008. 2. I.T.A.NO.5158/M/08 [ASSESSEES APPEAL ]: THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX [APPEALS] ERRED IN NOT A CCEPTING YOUR APPELLANT PLEA FOR DELETING THE ADDITION IN TO TO OF RS.4,13,155/- U/S.40(A)(IA) BEING REIMBURSEMENT OF EXPENSES PAID TO CLEARING & FORWARDING AGENT PAID TO SHRI VI PUL P.DOSHI. LOOKING TO THE FACTS & CIRCUMSTANCES OF THE CASE YO UR APPELLANT REQUEST YOUR HONOUR THAT THE ASSESSING OFFICER MAY BE DIRECTED TO DELETE THE SAID ADDITION OF EXPENSES AMOUNTING T O RS.4,13155/- IN TOTO. 2. THE LEARNED COMMISSIONER OF INCOME TAX [APPEALS] HAS ERRED IN LAW IN NOT ACCEPTING ADDITIONAL GROUNDS OF APPEA L FOR CLAIM OF RS.1,91,672/- BEING BUSINESS LOSS FOR ADVANCE GIVEN TO M/S FRIENDS SALT WORKS. YOUR APPELLANT REQUEST YOUR HON OR TO 2 ACCEPT THE SAME ADDITIONAL GROUND FOR CLAIM OF LOSS AMOUNTING TO RS.1,91,672/- IN TOTO. 3. THE LEARNED COMMISSIONER OF INCOME TAX [APPEALS] HAS ERRED IN LAW IN NOT ACCEPTING YOUR APPELLANT PLEA FOR DEL ETING THE ADDITION IN TOTO OF RS.1,91,672/- BEING BAD DEBT CL AIMED. YOUR APPELLANT REQUEST YOUR HONOR THAT THE OFFICER TO DE LETE THE SAID ADDITION OF EXPENSES AMOUNTING TO RS.1,91,672/-. 3. AS REGARDS GROUND NO.1 BRIEF FACTS ARE THAT THE ASSESSEE PAID CLEARING & FORWARDING EXPENSES OF RS.4,14,155/- TO SHRI VIPUL P. JOSHI AND DEDUCTED TDS OF RS.35,264/- ONLY. IT WAS SUBMIT TED TO THE AO THAT THE REMAINING AMOUNT CONSTITUTED REIMBURSEMENT OF E XPENSES AND, THEREFORE, ARE NOT LIABLE FOR TDS. THE AO DID NOT A CCEPT THIS CONTENTION OF THE ASSESSEE AND HELD THAT THE TDS HAS TO BE DED UCTED ON THE ENTIRE AMOUNT. HE, THEREFORE, DISALLOWED RS.3,77,89 1/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED , ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] WHO CONFIRMED THE ORDER O F THE AO AND THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND OF APPEAL NO.1 IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. GRANDPRIX FAB (P) LTD. REPORTED IN (2010) 34 DTR (DEL) (TRIB) 248. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. ON GOING THROUGH THE MATERIAL ON RECORD AND ALSO THE DECISION OF THE TRIBUNAL IN THE CASE OF GRANDPRIX FAB (P) LT D. [CITED SUPRA], WE FIND THAT THE ISSUE IS COVERED BY THE SAID DECISION OF THE TRIBUNAL WHEREIN AT PARA-16 OF ITS ORDER THE TRIBUNAL HAS HE LD AS UNDER- 16. IN RESPECT OF PAYMENT TOWARDS AGENCY CHARGES A MOUNTING TO RS.1,01,219, THE ASSESSEE HAS DEDUCTED TAX AMOUNTING TO RS.2,094 AT SOURCE, AND THE SAID PAYMENT HAS NOT BEEN DISALLOWE D BY THE AO. THE OTHER TWO PAYMENTS ARE TOWARDS PAYMENT OF CUSTOMS D UTY, AND OTHER EXPENSES PAID BY THE AGENT FOR/ON BEHALF OF THE ASSESSEE . THESE 3 REIMBURSEMENT EXPENSES WERE NOT MADE TOWARDS ANY SE RVICES RENDERED BY THE AGENT, BUT HAVE BEEN MADE TO SET OF F OF THE EXPENSES INCURRED BY THE AGENT WHILE CLEARING THE IMPORTED G OODS FROM THE CUSTOMS FOR/ON BEHALF OF THE ASSESSEE . SINCE NO ELEMENT OF INCOME IS EMBEDDED IN REIMBURSEMENT OF EXPENSES INCURRED BY A GENCY FOR/ON BEHALF OF THE ASSESSEE , THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE, AND, THEREFORE, THE CIT[A] HAS RIGHTLY DELETED THE ADDITION. AS FACTS AND CIRCUMSTANCES ARE SIMILAR, THIS GROUND OF APPEAL IS ALLOWED. 6. AS REGARDS GROUND NO.2 BRIEF FACTS ARE THAT THE ASSESSEE HAD CLAIMED RS.1,91,672/- AS BAD DEBTS. AO DISALLOWED T HE SAME HOLDING THAT ASSESSEE HAS NOT SATISFIED THE CONDITIONS LAID DOWN IN SEC.36[2] OF THE ACT. 7. BEFORE THE CIT[A], THE ASSESSEE CHALLENGED THE F INDINGS OF THE AO AS WELL AS RAISED AN ADDITIONAL GROUND THAT IF I T CANNOT BE ALLOWED AS BAD DEBTS, IT SHOULD BE ALLOWED AS A BUSINESS LO SS AS IT WAS THE AMOUNT ADVANCED TO M/S.FRIENDS SALT WORKS FOR THE P URPOSE OF PROCESSING IMPORT LICENSES AND IT COULD NOT BE RECO VERED. THE CIT[A] UPHELD THE FINDING OF THE AO THAT THE AMOUNT IS NOT ALLOWABLE AS BAD DEBT. AS REGARDS THE ADDITIONAL GROUND RELATING TO THE CLAIM OF BUSINESS LOSS, HE HELD THAT THE ASSESSEE SHOULD HAVE FILED A REVISED RETURN BEFORE THE AO AND AS IT WAS NOT DONE, THE CLAIM COU LD NOT BE ENTERTAINED. AGGRIEVED, ASSESSEE IS IN APPEAL BEFOR E US. 8. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE BEFORE THE CIT[A] IS PURELY A LEGAL ISSUE AND OUGHT TO HAVE BEEN ADMITTED AND DEC IDED ON MERITS. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT[A] A ND DIRECT HIM TO 4 RECONSIDER THE ISSUE ON MERITS IN ACCORDANCE WITH L AW. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. I.T.A.NO.5651/M/08 [REVENUES APPEAL] : THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT[A] HAS ERRED IN HOLDING THAT PREMIUM OF RS.39,55,825/ - PAID UNDER KEYMAN INSURANCE POLICY FOR THE PARTNERS IS ALLOWABLE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT[A] HAS ERRED IN ALLOWING THE LEGAL CHARGES OF LRS.10,20,000/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE NECESSARY EVIDENCE BEFORE THE AO TO ESTABLISH THAT THE EXPENSES WERE INCURRED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT[A] HAS ERRED IN ADMITTED ADDITIONAL EVIDENCES FOR THE FURTHER EXPENSES OF LEGAL CHARGES WITHOUT RECORDING THE REASONS THEREFORE AND HAS ERRED IN NOT GIVING OPPOR TUNITY TO THE AO TO EXAMINE THE SAME IN VIEW OF RULE 46A OF THE I .T.RULES. 11. AS REGARDS GROUND NO.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF G BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y 200 4-05 DATED 24-8-2009 WHEREIN FOLLOWING THE DECISION OF THE TRI BUNAL IN THE CASE OF MODI MOTORS (27 SOT 476) (MUM) AS WELL AS CBDT CIRC ULAR NO.762 DATED 18-2-1998 HAS ALLOWED THE SAME. AS FACTS AND CIRCUMSTANCES ARE SIMILAR, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH [CITED SUPRA], WE REJECT THIS GROUND OF APPEAL. 12. AS REGARDS GROUNDS NO.2 & 3, BRIEF FACTS ARE TH AT THE ASSESSEE HAS CLAIMED A SUM OF RS.10,20,000/- AS INTEREST CHA RGES PAID TO M/S. VERMAKANT & ASSOCIATES. ASSESSEES EXPLANATION WAS CALLED FOR AND VIDE LETTER DATED 3-12-2007 ASSESSEE SUBMITTED THAT M/S 5 VERMAKANT ASSOCIATES PROVIDES THE ASSESSEE WITH LEG AL ASSISTANCE AS AND WHEN THEY ARE IN PROCESS OF FINALIZING NEGOTIAT IONS WITH THE EXPORTERS FOR BUYING LARGE TRANSFERABLE LICENSES WH ICH INVOLVES IMPORTABILITY OF INPUTS IN RELATION TO CUSTOMS ACT/ FOREIGN TRADE POLICY/ITC ANGLES AND THE PAYMENT OF RS.10,20,000/- IS NOT MADE TO THEM ON CASE TO CASE BASIS BUT IS PAID TO THEM ON M ONTHLY BASIS, IRRESPECTIVE OF ANY LEGAL ISSUE ARISING OR NOT. AO HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE CLAIM WITH ANY SUBSTANTIAL EVIDENCE ON RECORD IN SUPPORTS OF ITS CONTENTIONS. HE HELD THAT MERE PAYM ENT THROUGH BANKING CHANNELS AND EVIDENCE OF TDS DO NOT ABSOLVE THE ASSESSEE FROM THE DUTY TO EXPLAIN THE NATURE OF SERVICES OFF ERED BY THE CLAIM FIRM TO CLAIM SUCH EXPENSES AS ELIGIBLE DEDUCTION. HE, THEREFORE, DISALLOWED THE ENTIRE AMOUNT OF RS.10,20,000/- AND ADDED IT BACK TO THE TOTAL INCOME OF THE ASSESSEE. 13. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] REITERATING THE SUBMISSIONS MADE BEFORE THE AO. AFT ER CONSIDERING THE SAME, THE CIT[A] OBSERVED THAT THE LEGAL FIRM IS R UN BY AN EX- CHAIRMAN OF CBEC AND A SUPREME COURT ADVOCATE AND T HAT IT IS RETAINER AND ALSO THAT THE FIRM IS NOT IN ANY WAY RELATED TO THE ASSESSEE. HE HELD THAT THE AO CANNOT SIT ON THE CHAIR OF BUSINES SMAN AND JUDGE THE REQUIREMENT OF BUSINESS. HE, THEREFORE, DELETED THE DISALLOWANCE. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT[A] , THE R EVENUE IS IN APPEAL BEFORE US. 14. THE LD. DR SUPPORTED THE ORDER OF THE AO AND SU BMITTED THAT THE CIT[A] HAS TAKEN INTO CONSIDERATION THE ADDITI ONAL EVIDENCE FOR 6 COMING TO THE CONCLUSION THAT THE LEGAL FIRM IS NOT IN ANY WAY RELATED TO THE ASSESSEE AND IS KEPT LIKE A RETAINER. HE SUBMIT TED THAT THERE IS NO EVIDENCE IN SUPPORT OF THIS CONTENTION. 15. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT[A] AND DREW OUR ATTENTION TO PAGE-42 OF THE PAPER BOOK WHICH IS A COPY OF LETTER DATED 29-11-07 ADDRESSED TO THE AO WHEREIN THESE SUBMISSIONS HAVE BEEN RECORDED. HE ALSO DREW OUR ATTENTION TO PAGE-48 OF THE PAPER BOOK ADDRESSED TO THE CIT[A] REITERATING THE SAME SUBMISSIONS MADE BEFORE THE AO . THUS, ACCORDING TO HIM, THERE WAS NO ADDITIONAL EVIDENCE WARRANTING THE FOLLOWING OF THE PROCEDURE U/R.46A OF THE I.T.RULES AND THE CIT[ A] HAS RIGHTLY APPRECIATED THE SUBMISSIONS OF THE ASSESSEE BEFORE DELETING THE DISALLOWANCE . 16. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAS NOT FILE D ANY ADDITIONAL EVIDENCE BEFORE THE CIT[A] AND, THEREFORE, THE GRO UND OF APPEAL NO.3 FAILS. AS REGARDS GROUND NO.2, WE FIND THAT THE ASS ESSEE HAS MADE THESE SUBMISSIONS BEFORE THE AO WHICH HAVE NOT BEEN CONSIDERED BY HIM IN THE PROPER PERSPECTIVE. IF THE AO WAS NOT CO NVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, HE COULD HAVE SUMMONED THE LEGAL FIRM TO VERIFY WHETHER IT WAS ENGAGED AS A RETAINER AND WHETHER THE PAYMENT HAS BEEN RECEIVED BY IT ON CASE TO BASIS OR AS A RETAINER. THE CIT[A] ALSO HAS NOT MADE SUCH VERIFICATION. UNDISP UTEDLY, THE BURDEN IS ON THE ASSESSEE TO PROVE THAT THE SERVICES HAVE BEEN RENDERED BY THE LEGAL FIRM BUT WHERE THE ASSESSEE HAS MADE CERT AIN SUBMISSIONS 7 AND IF THE AO WAS NOT SATISFIED WITH THE SUBMISSION S OF THE ASSESSEE, IT WAS OPEN TO HIM TO MAKE NECESSARY ENQUIRIES. WE, TH EREFORE, DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF T HE AO WITH A DIRECTION TO MAKE NECESSARY ENQUIRIES AND IF IT IS FOUND THAT THE LEGAL FIRM IS ENGAGED AS A RETAINER ALLOW THE CLAIM OF THE ASSESS EE. 17. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED ON THIS 9TH DAY OF MARCH, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 9 TH MARCH, 2010. P/-*