MGI COUTIER EXOTECH INDUSTREIS P. LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 5426/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79471 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIVANLAL LAVIDIYA
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 5426/MUM/2010 ( / ASSESSMENT YEAR: 2007-08) MGI COUTIER EXOTECH INDUSTRIES PVT. LTD. 4, ALPANA, PEDDER ROAD, MUMBAI-400 026 # VS. DY. CIT, 5(2), AAYAKAR BHAVAN, MUMBAI $ #'%' ./PAN/GIR NO. AAACM 6837 A ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI VIJAY MEHTA '($&)* / RESPONDENT BY : SHRI JIVANLAL LAVIDIYA + ,)- / DATE OF HEARING : 14.07.2014 ./0 )- / DATE OF PRONOUNCEMENT : 18.07.2014 '1# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-9, MUMBAI (CIT(A) FOR SHO RT) DATED 23.04.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2007-08 VIDE ORDER DATED 29.09.2009. 2. THE ASSESSEES REVISED GROUNDS OF APPEAL CONTAIN THREE GROUNDS, OF WHICH THE FIRST TWO WERE NOT PRESSED BY THE LD. AUTHORIZED REPRESEN TATIVE (AR) AT THE TIME OF HEARING, MAKING AN ENDORSEMENT TO THAT EFFECT THEREON. THE O NLY SURVIVING GROUND (GD. 3) IS IN RESPECT OF MISCELLANEOUS EXPENDITURE, DISALLOWED @ 10%. THE DISALLOWANCE STOOD MADE 2 ITA NO. 5426/MUM/2010 (A.Y. 2007-08) MGI COUTIER EXOTECH INDUSTRIES PVT. LTD. VS. DY. CI T BY THE ASSESSING OFFICER (A.O.) ON THE GROUND OF WA NT OF PROOF AND PROPER VERIFICATION THE SAME HAVING BEEN MADE PER SELF-DRAWN VOUCHERS A S WELL AS THAT THE EXPENSES ARE IN THE NATURE WHICH WOULD BEAR A PERSONAL ELEMENT (REF ER PARA 6 OF THE ASSESSMENT ORDER). THE SAME STOOD CONFIRMED FOR THE SAME REASONS THE ASSESSEE HAVING BEEN UNABLE TO REBUT THE FINDINGS BY THE A.O. AGGRIEVED, THE ASSES SEE IS IN SECOND APPEAL. 3.1 THE ASSESSEES CASE BEFORE US, MADE WITH REFERE NCE TO THE DETAIL OF THE MISCELLANEOUS EXPENDITURE, INCURRED AND CLAIMED IN THE SUM OF RS.46.81 LACS, WAS THAT THE SAME CONTAINS EXPENSES QUA WHICH THERE IS NO SCOPE FOR HOLDING THEM TO BE EITH ER PER SELF-MADE VOUCHERS OR AS BEARING ANY PERSONAL COMPO NENT, VIZ. BANK CHARGES (RS.9.18 LACS); SECURITY CHARGES (RS.5.55 LACS); LC CHARGES (RS.3.12 LACS); EXCISE DUTY (RS.2.46 LACS); EXCESS TDS WRITTEN OFF (RS.1.25 LACS); INTER EST ON FBT (RS.0.44 LACS). IN FACT, FOR OTHERS TOO, AS: PRINTING AND STATIONERY (RS.7.58 LA CS); STAFF TRAINING AND RECRUITMENT (RS.3.44 LACS); PRODUCT DEVELOPMENT EXPENSES (RS.1. 41 LACS); BUSINESS PROMOTION EXPENSES (RS.1.21 LACS); AND ADVERTISEMENT (RS.0.84 LAC), IT WOULD BE WRONG TO SUGGEST, WITHOUT A DEFINITE, SPECIFIC FINDING IN THE MATTER THAT IS WHICH IS ABSENT, THAT THE SAME IS BASED ON SELF-MADE VOUCHERS, SO THAT THE RELEVANT E XPENDITURE IS NOT SUBJECT TO VERIFICATION. THAT IS, IT CANNOT BE A MATTER OF PRE SUMPTION, AND TO THE EXTENT SO, THE SAME OUGHT TO HAVE BEEN TO BE THE CREDITABLE CLEARLY SPECIFIED BY THE A.O. IN FACT, EVEN WHERE THAT MAY BE THE CASE, AS FOR EXAMPLE IN THE C ASE OF OFFICE AND GENERAL EXPENSES (RS.7.32 LACS), IT WOULD ONLY BE SO, I.E., IF AND T O THE EXTENT IT ACTUALLY IS, FOR THE REASON THAT THIRD PARTY VOUCHERS ARE NOT FORTHCOMING. RELI ANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF MECKECHNIE EXOTECH INDUSTRIES PVT. LTD. VS. ACIT (IN ITA NO.766/MUM(B)/2008 DATED 01.07.2009) WHERE A SIMILA R DISALLOWANCE STOOD DELETED BY THE TRIBUNAL ON THE GROUND THAT THE COMPANY, A CORP ORATE ENTITY, COULD NOT HAVE ANY PERSONAL EXPENSES. 3.2 THE REVENUES CASE RESTS ON THE ASSESSEES INAB ILITY TO PROVE ITS CLAIMS FOR EXPENSES PER SATISFACTORY EVIDENCES, SO THAT AN ASS ESSMENT TOWARD THAT INADMISSIBLE HAD NECESSARILY TO BE RESORTED TO, AND WHICH IT DID AT THE RATE OF 10%. 3 ITA NO. 5426/MUM/2010 (A.Y. 2007-08) MGI COUTIER EXOTECH INDUSTRIES PVT. LTD. VS. DY. CI T 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WE MAY FIRSTLY CONSIDER THE ASSESSEES RELIANCE ON THE DECISION IN THE CASE OF MECKECHNIE EXOTECH INDUSTRIES PVT. LTD. (SUPRA). WE ARE UNABLE TO, EVEN AS OBSERVED DURING HEARING, FIND ANY RATIO EMANATING THERE-FROM FOR BEING ADOPTED IN THE PRESENT CASE. THIS IS AS THE MATTER BEFORE US IS PURELY FACTUAL THE REVENUE DISALLOWING THE EXPENSES ON THE GROUND OF IT BEING NOT PROPERLY SUBSTANTIATE D, SO THAT NEITHER COULD IT BE VERIFIED NOR AN ELEMENT OF PERSONAL (I.E., NON-BUSINESS) PUR POSE, RULED OUT. THIS WOULD OBTAIN, IRRESPECTIVE OF THE STATUS OR THE PERSONALITY OF TH E ASSESSEE CLAIMING THE EXPENDITURE. TRUE, THERE IS NO DENYING THE FACT THAT A COMPANY IS A SE PARATE LEGAL ENTITY, AND WHICH CANNOT ORDINARILY BE DISREGARDED, AS EXPLAINED BY THE TRIB UNAL IN DY. CIT VS. HARYANA OXYGEN LTD. [2001] 76 ITD 32 (DEL), FURTHER RELIED UPON BY THE TRIBUNAL IN THE CASE OF MECKECHNIE EXOTECH INDUSTRIES PVT. LTD. (SUPRA). WE, HOWEVER, DO NOT OBSERVE ANY ATTEMPT BY THE REVENUE IN THE INSTANT CASE TO EITHER DISREGARD OR REMOVE THE CORPORATE VEIL OR REFERENCE TO ANY ILLEGALITY HAVING BEEN COMMITTED BY THE ASSE SSEE-COMPANY. THE SAID RELIANCE BY THE ASSESSEE, THUS, IS OF NO CONSEQUENCE AND, ACCOR DINGLY, FAILS. 4.2 COMING TO THE MERITS OF THE CASE, WE FIND, EQUA LLY, NO SUBSTANCE IN THE REVENUES CASE. TRUE, IF AND TO THE EXTENT THE EXPENDITURE CL AIMED IS NOT PROPERLY VOUCHED, THE MANNER AND EXTENT OF SUCH BOOKING OF EXPENDITURE CA N BE EXAMINED, EVEN PROBED, BY THE A.O., TO ARRIVE AT A FINDING AS TO THE EXTENT OF OV ER-BOOKING OR INFLATION THAT ATTENDS THE SAME, OR CAN BE REASONABLY ATTRIBUTABLE THERETO. HO WEVER, THERE IS NO WHISPER OF THE EXPENDITURE, WHICH IS STATED AS NOT PROPERLY VOUCHE D AND, THUS, NON-VERIFIABLE; THE MANNER IN WHICH IT IS VOUCHED, AND THE ASSESSEES E XPLANATION WITH REGARD THERETO, IN THE ASSESSMENT ORDER. BY ONE GENERALIZED COMMENT, THE A .O. HAS IN ONE STROKE SUMMARILY APPLIED A COMMON YARDSTICK ACROSS ALL INDIRECT, ADM INISTRATIVE EXPENDITURE CLASSIFIED UNDER A PARTICULAR GROUPING (FOR PRESENTATION PURPO SES), WITHOUT CONSIDERING THE NATURE OF THE EXPENDITURE AND THE CALIBRE OF THE ASSESSEES S UBSTANTIATION THEREOF; ITS ACCOUNTS BEING DULY AUDITED. THE ASSESSEE CLAIMING PROPER SUBSTANT IATION, THE ENTIRE CASE WE FIND AS BUILT ON SURMISE. THE NATURE OF THE EXPENDITURE FORMING P ART OF THE IMPUGNED EXPENDITURE IN 4 ITA NO. 5426/MUM/2010 (A.Y. 2007-08) MGI COUTIER EXOTECH INDUSTRIES PVT. LTD. VS. DY. CI T THE MAIN, ON THE CONTRARY, SUGGESTS OTHERWISE, MAKI NG IT ALL THE MORE INCUMBENT ON THE ASSESSING AUTHORITY TO STATE HIS CASE EXPLICITLY. A S WE SEE IT, IT IS A CLEAR CASE OF NON- APPLICATION OF MIND BY, IN FACT, BOTH THE AUTHORITI ES BELOW; THAT BY THE FIRST APPELLATE AUTHORITY BEING EQUALLY DE HORS AND WITHOUT REFERENCE TO ANY SPECIFICS. A SET ASIDE , AS CONTENDED BY THE LD. DR, WOULD NORMALLY FOLLOW WHER E WE FIND A NON-DISCHARGE OF THE BURDEN OF PROOF ON IT BY THE ASSESSEE, LEADING TO A STATE OF FACTUAL INDETERMINATION, WHILE, AS AFORE-STATED, WE FIND NO BASIS TO HOLD SO IN THE INSTANT CASE; THE REVENUES CASE BEING WITHOUT REFERENCE TO THE PRIMARY FACTS, AND IMBUED WITH A COMPLETE LACK OF OBJECTIVITY, SO THAT NO PRIMA FACIE CASE IS MADE OUT FOR US TO CONSIDER A SET ASIDE FOR FRESH DETERMINATION. THE DISALLOWANCE IS WHOLLY UNSUSTAINABLE IN LAW, AN D IS ACCORDINGLY VACATED. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 20 -34 52-) 6 -) -78! ORDER PRONOUNCED IN THE OPEN COURT ON JULY 18, 2014 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + 9, MUMBAI; : DATED : 18.07.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + ;- < = / THE CIT(A) 4. '' + ;- / CIT - CONCERNED 5. >? @'-A4 ' A40 + 9, / DR, ITAT, MUMBAI 6. @ 5B , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + 9, / ITAT, MUMBAI