ITO 6(1)(3), MUMBAI V. INTEGRATED TECHNOLOGY SOLUTIONS P.LTD, MUMBAI

ITA 5755/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5091 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Principle of natural justice; Onus to prove

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . , !'# $ % & , ' !'# !( BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER !. : 5755 / / 2012 A.Y. 2008-2009 ITA NO. : 5755/MUM/2012 (ASSESSMENT YEAR: 2008-2009) ITO - 6(1)(3), R. NO. 508, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 VS M/S INTEGRATED TECHNOLOGY SOLUTIONS PVT LTD., 4 TH FLOOR, KALPATARU SQUARE, KONDIVITA LANE, OPP. ANDHERI KURLA ROAD, MUMBAI -400 059 .: PAN: AAACI 8672 B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI O.P. SINGH RESPONDENT BY : S/SHRI HARESH G. BUCH HARSH KAPADIA/RAVI SAWANA /DATE OF HEARING : 12-11-2013 !' / DATE OF PRONOUNCEMENT : 20-11-2013 ' + O R D E R % & , !: PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE DEPARTMENT AGAINST THE ORDER O F CIT(A) 14, MUMBAI, DATED 27.06.2012, WHEREIN THE FOLLOWING GROUN DS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 25,97,051/- OF T RAVELING AND CONVEYANCE EXPENSES BY ACCEPTING THE ADDITIONAL EVIDENC E PRODUCED BY THE ASSESSEE WITHOUT AFFORDING SUFFICIENT OPPORTUNITY TO THE AO IN CONTRAVENTION OF RULE 46A. 2. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE FACTS ARE THAT THE ASSESSEE IS A SUB SELLING AGE NT FOR MARKETING AND DISTRIBUTION OF ONLINE LOTTERY FOR THE LOTTERIES CONDUCTED BY THE STATE OF NAGALAND. IN THE YEAR UNDER CONSIDERAT ION, THE AO M/S INTEGRATED TEC HNOLOGY SOLUTIONS PVT LTD. ITA NO. 5755/MUM/2012 2 NOTICED THAT THE ASSESSEE HAD DEBITED RS. 30,14,915/- UN DER THE HEAD TRAVELING AND CONVEYANCE, WHICH INCLUDED PAYMENTS MADE TO EXECUTIVE AIRWAYS FOR HIRING ON CHARTER, OF AIRCRAFT. THE AO CALLED FOR D ETAILS AND EXPLANATIONS FROM THE ASSESSEE WITH REGARD TO THE CORRE CTNESS OF THE EXPENSE. IT WAS EXPLAINED IN RESPONSE TO THE SAME , THE ASSESSEE HAS SUBMITTE D VIDE LETTER DATED 20.12.2010 AS PER THE NATURE OF BUSINESS OF THE ASSESSEE THEY NEE D TO KEEP ON TRAVELING MANY TIMES FOR EXECUTION & SMOOTH RUNNING OF THE VARIOUS BUSINESS ACTIV ITIES. DURING THE COURSE OF THE SAME THE REPRESENTATIVES OF THE ASSESSEE NEEDED TO A TTEND FOR SOME OF THE MAJOR MEETINGS AND DISCUSSIONS TO VARIOUS PART OF THE COUNTR Y WHEREIN THE TIME FRAME WAS VERY LIMITED AND TO ATTEND THE ON THE PARTICULAR TIME WAS MORE IMPORTANT TO CARRY ON THE FURTHER COURSE OF THE ACTIVITIES AND BUSINESS DECISIO NS. IN THE COURSE OF THE SAME SOME TIME THE ASSESSEE HAS INCURRED SOME MAJOR AIR TRAVEL E XPENSES DURING THE YEAR. THE ASSESSEE HAD AVAILED THE SERVICES OF EXECUTIVE AIRWAYS P VT. LTD. DURING THE YEAR 07-08. THE TRAVELLING EXPENSES SO INCURRED BY THE ASSESSEE WER E INDIRECT EXPENSES AND THE DIRECT LINK TO THE INCOME EARNED FOR THE SAME IS NOT FEA SIBLE TO ESTABLISHED. BASED ON THE NATURE OF THE BUSINESS ACTIVITIES CARRIED ON BY THE ASSE SSEE AND THE SIZE AND VOLUME OF THE BUSINESS, THE TRAVELLING EXPENSES SO INCURRED FOR TH E BUSINESS PURPOSE IS JUSTIFIED AND ARE INCURRED IN NATURAL AND NORMAL COURSE OF BUSINES S AND THE SAME SHOULD BE ALLOWED. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSION OF THE ASSESSEE AND THE SAME IS NOT ACCEPTABLE. THE ASSESSEE HAS MERELY PRODUCED COPIES OF THE BILLS FROM EXECUTIVE AIRWAYS P LTD BUT HAS NOT GIVEN ANY SATISFACTORY EXPLAN ATION AND ALSO NOT SUBSTANTIATED ITS CLAIM THAT THE SAID EXPENSES INCURR ED ARE CONNECTED VIS A VIS ITS BUSINESS ACTIVITY. THE JURISDICTIONAL HIGH COURT IN ITS JUD GMENT IN THE CASE OF RAMANAND SAGAR VS. DCIT & ORS. REPORTED IN 256 ITR 134 (BOM.) HAS LAID DOWN THAT THE BURDEN OF PROOF IS ON THE ASSESSEE TO ESTABLISH BEYOND DOUBT TH AT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. IN THIS CASE, AS FINER DETAILS ARE NOT MAINTAINED WITH REGARD TO THE ABOVE-MENTIONED EXPENDITURE, IT IS EV IDENT THAT THE ASSESSEE CANNOT FURNISH EVIDENCE TO RULE OUT THE PERSONAL ELEMENT RELATING TO SUCH EXPENDITURE. ACCORDINGLY, THE AMOUNT OF RS. 25,97,051/- IS DISALLOWED A ND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(L )(C) OF THE I.T. ACT, 1961 ARE HEREBY INITIATED. 3. THE AO, THEREFORE, DISALLOWED THE EXPENSE INCURRED FOR H IRING OF AIRCRAFT AND PAID TO EXECUTIVE AIRWAYS TO THE TUNE OF RS. 25,97,051/-. 4. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), WHO ON EXAMINATION OF THE DETAILS FILED BEFORE HIM, REVERSED THE DEC ISION OF THE AO AND ALLOWED THE PAYMENTS MADE TO EXECUTIVE AIRWAYS A S A BUSINESS EXPENSE, LEGITIMATELY MADE BY THE ASSESSEE. 5. AGAINST THIS ORDER, THE DEPARTMENT IS IN APPEAL AND AG ITATES THAT THERE WAS A VIOLATION OF THE PROCEDURES PRESCRIBED IN RULE 46A OF THE INCOME TAX RULE, 1962. M/S INTEGRATED TEC HNOLOGY SOLUTIONS PVT LTD. ITA NO. 5755/MUM/2012 3 6. BEFORE US THE DR ARGUED EXTENSIVELY AND VEHEMENTLY ON MERITS AND PLEADED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PR OVE THE CORRECTNESS OF THE EXPENSE INCURRED BY THE ASSESSEE. 7. THE AR ON THE OTHER HAND, POINTED OUT THAT THE GRO UNDS RAISED BY THE DEPARTMENT HAS NOT BEEN ARGUED. HE FURTHER POIN TED OUT THAT IN SO FAR AS THE CORRECTNESS OF THE EXPENSE IS CONCERNED, THE ISSUE HA S NOT BEEN AGITATED BY THE DEPARTMENT IN THE IMPUGNED APPEAL , MEANING THEREBY THAT THE EXPENSE, AS SUCH, HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES TO BE CORRECT IN ALL RESPECTS. HOWEVER, THE AR POINTED OUT THAT IT IS FACT THAT THE ASSESSEE PRODUCED CERTAIN DOCU MENTS FOR THE FIRST TIME BEFORE THE CIT(A). HE HOWEVER, FURTHER SUBMITTED T HAT THE PRODUCTION OF DOCUMENTS BEFORE THE CIT(A) WAS AS PER THE DESIRE OF THE CIT(A) AND THE ASSESSEE DID NOT PLACE ANY DOCUMENT AS IT S OWN, WHICH WOULD ATTRACT RULE 46A. 8. ON MERITS, AS ARGUED SO EXTENSIVELY BY THE DR, THE A R SUBMITTED THAT THE CIT(A) HAS TREADED ON THE IMPUGNED ISSUE AFTER CONSIDERING THE EVIDENCE CALLED FOR BY HIM AND SUPPLIED BY THE ASSESSE E. HE, THEREFORE, RELIED ON THE DECISION OF THE CIT(A). HE PLACED RELIANCE ON THE CERTAIN DECISIONS. 9. IN THE REJOINDER, THE DR, PLEADED THAT THE DEPARTMEN T BE ALLOWED THE PERMISSION TO REVISE THE GOA. 10. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTIES. AT THE OUTSET THE PRAYER MADE BY THE DR IN THE REJOINDER, FOR REVISING THE GOA IS REJECTED, AS APPARENTLY, THE DR REALIZED THE MISTA KE AFTER BEING POINTED OUT BY THE AR THAT THE GOA ARE DIFFERENT AND T HE ARGUMENTS ADVANCED ARE DIFFERENT. AS SUCH, FORM NO. 36 IS ALREADY ONCE REVISED. 11. COMING TO THE MERITS OF THE CASE, THE AR SUBMITTED BEFORE US THE COPY OF THE APB, WHICH CONTAINED PAPERS/MATERIALS/EVIDENCE , PLACED BEFORE THE CIT(A) FOR THE FIRST TIME. IT IS NO DOUBT CORRECT , THAT THE M/S INTEGRATED TEC HNOLOGY SOLUTIONS PVT LTD. ITA NO. 5755/MUM/2012 4 CIT(A) HAS PLENARY POWERS AND ALSO THE COTERMINOUS POWER , THAT OF THE AO, TO EXAMINE THE EVIDENCE, PLACED BEFORE THE CIT(A). THE R ELEVANT RULE HAS BEEN FRAMED TO OUST THE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. WE ARE ALSO IN AGREEMENT WITH THE ARGUMENTS OF T HE AR THAT RULE 46A(4), THE CIT(A) HAS BEEN GIVEN A DISCRETIONARY POWER TO REFER THE CASE TO THE AO BY THE USE OF THE WORD MAY IN SUB RULE (1). IN SUB RULE (4), THE CIT(A) HAS BEEN ALLOWED THE DISCRETION FOR MAKIN G ENQUIRIES ON HIS OWN AND IS NOT OBLIGED IN EVERY CASE TO MAKE REFERENCE OF THE EVIDENCE PRODUCED BEFORE HIM, TO THE AO. 12. BUT THE ISSUE IN HAND IS PECULIAR IN CIRCUMSTANCE, BECA USE, NOWHERE IN THE ORDER IMPUGNED BEFORE US, DOES IT SHOW TH AT THE PAPER BOOK FILED BY THE ASSESSEE BEFORE THE CIT(A) WAS AS PER H IS DIRECTION. IF THE PAPERS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) IS AS PER THE DIRECTION OF THE CIT(A), NEITHER THERE WOULD BE A VIOLATION OF NATURAL JUSTICE NOR CONTRAVENTION OF RULE 46A. IN THE IMPUGNED OR DER, NEITHER THE DR NOR THE AR HAS BEEN ABLE TO SHOW US THE LIGHT, A S TO HOW AND UNDER WHAT CIRCUMSTANCE THE PAPERS WERE SUBMITTED BEFO RE THE CIT(A), WHICH THE ASSESSEE EITHER FAILED TO, OR CHOSE NOT TO PROD UCE BEFORE THE AO. 13. IN THESE CIRCUMSTANCES, WHEN, THE REASONS AND PURPO SES FOR FILING OF THE PAPER BOOK CONTAINING AGREEMENT AND OTHER DO CUMENTS AS LISTED IN THE APB ARE NOT EMERGING FROM THE IMPUGNED ORDE R, IT IS OUR CONSCIOUS DUTY TO IRON OUT THE CREVASSE, TO BRING OUT T HE CORRECTNESS OF THE EXPENSE INCURRED BY THE ASSESSEE. WE, THEREFORE, RES TORE THE ISSUE PERTAINING TO THE DISALLOWANCE OF RS. 25,97,051/- PAID TO EXE CUTIVE AIRWAYS, WITH THE DIRECTION THAT THE CIT(A) SHALL ALLOW THE OPPORTUNITY TO THE AO AS WELL AS THE ASSESSEE TO EXAMINE THE CORRE CTNESS OF THE EXPENSE WITHOUT THE VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. M/S INTEGRATED TEC HNOLOGY SOLUTIONS PVT LTD. ITA NO. 5755/MUM/2012 5 14. WE MUST MENTION THAT THE AR PLACED RELIANCE ON A NU MBER OF DECISIONS, WHEREIN IT WAS FOUND THAT CALLING FOR A REPORT ON THE MATER IAL SUBMITTED BEFORE THE CIT(A), WAS NOT NECESSARY. 15. AS WE HAVE OBSERVED, THAT THE IMPUGNED ORDER IS NO T CLEAR TO MENTION AS TO WHETHER THE MATERIAL SUBMITTED IS ON THE D IRECTION OF THE CIT(A) OR THE ASSESSEE HAS SUBMITTED THE MATERIAL ON ITS OWN. SINCE THE FACT IS NOT CLEAR, WE, ON OUR OWN, CANNOT BE SILENT SP ECTATORS AND ALLOW TO PERPETUATE A DISCREPANCY, WHICH GOES TO THE ROO T OF THE GROUND AS A RAISED, PERTAINING TO VIOLATION OF NATURAL JUSTICE. 16. WITH THESE OBSERVATIONS, THE APPEAL OF THE DEPARTMEN T IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2013. SD/- SD/- ( . ) ( % & ) !'# !'# (D. KARUNAKARA RAO) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER &&' MUMBAI, () DATE: 20 TH NOVEMBER, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) * * + ( ) - 14 , MUMBAI / THE CIT (A)-14, MUMBAI. 4) THE CIT-VI, MUMBAI, 5) -./ 0 * , * 0 , &' / THE D.R. I BENCH, MUMBAI. 6) /2 3 COPY TO GUARD FILE. *)4 / BY ORDER [ 5 / 6 7 * 0 , &' DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *9:6 . .