MULLA ASSOCIATES, MUMBAI V. ACIT RG 19(3), MUMBAI

ITA 6026/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83882 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 30-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAVA
• Assessee Lawyers: N R AGRAWAL
• Keywords: Non-deduction of tax
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 6026/MUM/2011 ( / ASSESSMENT YEAR: 2005-06) MULLA ASSOCIATES 102, SAQUIB, TURNER ROAD, BANDRA (W), MUMBAI-400 050 / VS. ASST. CIT-19(3), 3 RD FLOOR, PIRAMAL CHAMBERS, MUMBAI ./ ./PAN/GIR NO. AABFM 7784 J ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI N. R. AGRAWAL !' # $ / RESPONDENT BY : SHRI ANURAG SRIVASTAVA % &'( # )* / DATE OF HEARING : 05.08.2014 +,- # )* / DATE OF PRONOUNCEMENT : 25.09.2014 . / 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)-30, MUMBAI (CIT(A) FOR SH ORT) DATED 25.07.2011, CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TA X ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2005-06 VIDE ORDER DATED 29.03.2010. 2. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND F ACTS OF THE CASE. THE ASSESSEE IS A FIRM OF ADVOCATES WORKING AS LABOUR LAW CONSULTANTS . IT WAS OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO HAVE RECEIVED R S.45,44,952/- (I.E., AT NET OF TDS OF RS.2,99,548/-) FROM BRITANNIA INDUSTRIES LIMITED DU RING THE RELEVANT PREVIOUS YEAR, I.E., FINANCIAL YEAR 2004-05. FURTHER, THE ASSESSEE, FOLL OWING THE CASH METHOD OF ACCOUNTING, 2 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT HAD PAID RS.37 LACS TO THREE PARTIES, AS UNDER, CLAIMING THE SAME FROM ITS TOTAL PROFITS FOR THE YEAR: I) GRAND FOUNDRY LTD. RS.22 LACS II) SULEMAN BHARUCHA RS.7.50 LACS III) YASMIN BHARUCHA RS.7.50 LACS IT WAS EXPLAINED THAT THE RECEIPT WAS FOR THE PROJE CT OF THE CLOSURE OF THE PAYEE COMPANYS MANUFACTURING UNIT AT SEWRI (ALSO CALLED AS REAY RO AD UNIT), MUMBAI, WHICH HAD 800 WORKMEN ON ITS ROLLS. THE SAME INVOLVED CONVINCING THE WORKERS; HANDLING COURT CASES; NEGOTIATING WITH TRADE UNIONS; FINALIZING THE SETTL EMENT OF VRS, ETC. THE PROJECT WAS UNDERTAKEN JOINTLY WITH THE THREE PAYEES AFORE-REFE RRED, AND WHICH EXPLAINS THE PAYMENT TO THEM. FURTHER, THE PAYMENTS WERE NOT ON PROFIT SHARING BA SIS, BUT TOWARD SPECIFIC SERVICES RENDERED BY THEM, EACH CONTRIBUTING TO THE PROJECT, SO THAT THERE WAS NO QUESTION OF A JOINT VENTURE (JV) OR OF AN ASSOCIATION OF PER SONS (AOP) . THE PAYMENT FOR RS.37 LACS (WHICH WAS THUS IN THE NATURE OF PROFESSIONAL FEES AND/OR COMMISSION) WAS DISALLOWED IN VIEW OF THE SAME BEING NOT PROVED IN TERMS OF THE S ERVICES RENDERED BY THE THREE PAYEES AFORE-REFERRED, BEING UNEVIDENCED AND, IN ANY CASE, NON-DEDUCTION OF TAX AT SOURCE, SO THAT SECTION 40(A)(IA) STOOD ATTRACTED. ON THE SAME FOOTING WAS THE PAYMENT OF RS.5 LACS TO ONE, MRS. DARSHANNA BHATT, CLAIMED IN RESPECT OF A RECEIPT, FROM DEEPAK FERTILIZERS & PETROCHEMICALS LTD., AT A GROSS AMOUNT OF RS.8,46,0 59/-. THE DISALLOWANCE, BEING THUS AT A TOTAL OF RS.42 LACS, STOOD CONFIRMED BY THE TRIBU NAL (IN ITA NO. 6383/MUM(B)/2008 DATED 07.05.2010). IT FOUND THAT THE NATURE OF THE RECEIPT HAD NOT BEEN ESTABLISHED. IT IS ONLY, WHERE SO, THAT THE NATURE OF THE PAYMENT/S, S TATED TO BE TOWARD UNDERTAKING WORK IN RELATION TO THE PROJECT/S, FOR WHICH THE REMUNERATI ON HAD BEEN RECEIVED, COULD BE CONFIRMED. THE PENALTY PROCEEDINGS U/S.271(1)(C), I NITIATED AT THE COMPLETION OF THE ASSESSMENT ON 28.12.2007, WERE ACCORDINGLY PROCEEDE D WITH. 3. BEFORE US, THE ASSESSEES CASE WAS IN TERMS OF H AVING INCLUDED THE ENTIRE RECEIPT AS ITS INCOME IN ITS ACCOUNTS (UNDER THE ACCOUNT HEAD PROFESSIONAL FEE/PB PGS.11-34). THE PAYMENTS TO GRAND FOUNDRY LTD. AND BHARUCHAS, AS AL SO TO MRS. DARSHANNA BHATT, STOOD CONFIRMED BY THEM. NON-DEDUCTION OF TAX AT SOURCE, LEADING TO A DISALLOWANCE 3 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT U/S.40(A)(IA), COULD NOT BE A GROUND FOR LEVY OF PE NALTY, AS EXPLAINED BY THE TRIBUNAL IN DY. CIT VS. ROOP SINGH BAGGA (IN ITA NO.44/IND/2013 DATED 31.05.2013). FURTHERMO RE, THE ASSESSEE HAD DEPOSITED TAX AT SOURCE SUBSEQUENT LY, I.E., DURING THE PERIOD RELEVANT TO A.Y. 2010-11, AND HAD, ACCORDINGLY, CLAIMED DEDUCTI ON IN TERMS OF SECTION 40(A)(IA). THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OT HER HAND, RELIED ON THE ORDERS BY THE AUTHORITIES BELOW AS WELL AS THAT BY THE TRI BUNAL IN THE QUANTUM PROCEEDINGS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, GIVING OUR CAREFUL CONSIDERATION TO THE MATTER. THE ISSUE, AS WE DISCERN, IS AS TO IF THE ASSESSEE HAS A PLAUSIBLE EXPLANATION WITH REGARD TO ITS CLAIM OF RS.42 LACS ON ACCOUNT OF PAY MENT TO FOUR PERSONS. WHERE SO, CLEARLY, NO PENALTY ON ACCOUNT OF CONCEALMENT AND/O R FURNISHING INACCURATE PARTICULARS OF INCOME U/S.271(1)(C) COULD BE LEVIED, WHILE, WHERE NOT SO, THE PROVISION OF EXPLANATION (1B) WOULD STAND ATTRACTED. THE ONUS TO REBUT THE S TATUTORY PRESUMPTION OF EXPLANATION (1A) AND EXPLANATION (1B), WHICH PUTS THE BURDEN OF SUBSTANTIATING ITS C ASE ON THE ASSESSEE, FAILING WHICH IT WOULD BE DEEMED TO HAVE CONCEALED AND/OR FURNISHED INACCURATE, PARTICULARS OF INCOME. CASE LAW IN THE MATTER IS LEGION, AND FOR WHICH WE MAY RELY ON A HOST OF DECISIONS BY THE APEX COURT, VIZ. CIT V. ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC); UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC); GULJAG INDUSTRIES V. CTO [2007] 293 ITR 584 (SC); K.P. MADHUSUDHANAN VS. CIT [2001] 251 ITR 99 (SC); B.A. BALASUBRAMANIAM AND BROS V. CIT [1999] 236 ITR 977 (SC); ADDL. CIT VS. JEEVAN LAL SHAH [1994] 205 ITR 244 (SC); CIT VS. K. R. SADAYAPPAN [1990] 185 ITR 49 (SC); AND CIT VS. MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 (SC), BESIDES BY THE HONBLE HIGH COURTS, VIZ., CIT VS. MOHD. MOHTRAM FAROOQUI [2003] 259 ITR 132 (RAJ); CIT VS. SREE KRISHNA TRADING CO. [2002] 253 ITR 645 (KER); SHIV KUMAR TAK VS. CIT [2001] 251 ITR 373 (RAJ); CIT VS. VIDYAGAURI NATVERLAL [1999] 238 ITR 91 (GUJ), TO NAME SOME. THE LAW, IN OUR HUMBLE VIEW, W OULD HOLD EVEN WHERE THE DISALLOWANCE LEADING TO THE VARIATION BETWEEN THE A SSESSED AND RETURNED INCOMES IS U/S. 40(A)(IA), BEING INDEPENDENT OF THE PROVISION WHERE -UNDER THE SAME (DISALLOWANCE) IS EFFECTED. THAT IS, THE QUESTION OF LEVY OR OTHERWIS E OF PENALTY WOULD HAVE TO BE 4 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT NECESSARILY EXAMINED W.R.T. THE ASSESSEES CASE FOR THE CLAIM OF EXPENDITURE IN VIEW OF NON-OBSTANTE CLAUSE OF S.40(A)(IA), AS INDEED WOULD BE THE CASE FOR ANY OTHER PROVISION. THERE IS, TO BEGIN WITH, NO QUESTION OF THE ASSESSE E HAVING NOT CLAIMED THE IMPUGNED SUM FOR THE RELEVANT YEAR. THE ASSESSEE HA S DEBITED THE SAID PAYMENTS IN ITS ACCOUNTS (UNDER A NOMINAL ACCOUNT PROFESSIONAL FEE S/PB PGS.11-33), WHICH GETS THUS REFLECTED IN ITS PROFIT AND LOSS ACCOUNT FOR THE YE AR, MAINTAINED ON CASH BASIS, AT A NET OF RS.90.64 LACS (PB PGS.6-8), I.E., AS AGAINST THE GR OSS RECEIPT OF RS.133.46 LACS. THE SAID ACCOUNTING TREATMENT, WHICH IS IN ANY CASE NOT DETE RMINATIVE OF THE MATTER, ENABLES THE ASSESSEE TO PLEAD ITS CASE OF THE IMPUGNED SUM (RS. 42 LACS) EITHER AS AN EXPENSE OR FOR ITS EXCLUSION BY WAY OF OVERRIDING TITLE , AND WHICH, AS WE SHALL PRESENTLY SEE, IT INDEED D OES, OR AT LEAST ATTEMPTS TO. WE SHALL, ACCORDINGLY, EXA MINE THE ASSESSEES CASE FROM BOTH THE STAND POINTS, THE TWO CLAIMS BEING COMPLEMENTARY OR PARI MATERIA , AT LEAST IN-SO-FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED IN-AS-MUCH AS THE Y BOTH LEAD TO A REDUCTION IN ITS INCOME CHARGEABLE TO TAX FOR THE RELEVANT YEAR BY T HE IMPUGNED SUM. QUA THE CLAIM FOR EXPENSES, THERE IS NO IOTA OF EVIDENCE ON RECORD TO EXHIBIT THE SERVICES HAVING BEEN RENDERED BY THE DIFFERENT PAYE ES, AND TOWARD WHICH THE PAYMENTS HAVE OSTENSIBLY BEEN MADE. RATHER, THERE IS IN FACT NO DELINEATION AT ANY STAGE OF THE PROCEEDINGS, EITHER AS TO QUANTUM OR PENALTY, OF TH E WORK UNDERTAKEN OR TO BE UNDERTAKEN BY THE DIFFERENT PAYEES IN THE EXECUTION OF THE PRO JECT. ON THE CONTRARY, BY ALL AVAILABLE ACCOUNTS, THE RECEIPT BY THE ASSESSEE FIRM IS FOR A PROJECT TO BE UNDERTAKEN AS A JV, I.E., BY THE ASSESSEE AS THE DRIVING FORCE, ALONG WITH THE O THER PAYEES. THE ASSESSEES CASE IS THUS CONTRADICTORY AND INCONSISTENT WITH ITS OWN STAND, BASED ON THE MATERIAL ON RECORD (REFER PARA 2 ABOVE). IT IS ON ACCOUNT OF THIS THAT THE AS SESSING OFFICER (A.O.) STATES OF THE ASSESSEE HAVING NOT CLAIMED THIS SUM AS EXPENDITURE . THE STATEMENT BY HIM THAT, EVEN SO CONSIDERING, THE AMOUNT WOULD STAND TO BE DISALLOWE D ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE IN VIEW OF SECTION 40(A)(IA), IS MADE IN THE ALTERNATIVE. THE SAME CANNOT BE CONSIDERED AS AN ARGUMENT IN FAVOUR OF THE ASSESSEE HAVING MADE A CLAIM FOR EXPENDITURE, WHICH ON FACTS STANDS PROVED AND/OR ESTABLISHED, WH ICH WOULD AMOUNT TO TURNING THE A.O.S OBSERVATION/ARGUMENT ON ITS HEAD, MUCH LESS OF THE ASSESSEE HAVING THUS PROVED 5 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT THE EXPENDITURE IN TERMS OF SECTION 37(1), SO THAT THE ONLY DETRIMENT TO ITS ALLOWABILITY IS THE NON-DEDUCTION OF TAX AT SOURCE. THE ASSESSEES CLAIM, MADE BEFORE US, THAT THE ONLY REASON FOR THE DISALLOWANCE, OR ITS SUSTENANCE, IS INVOCATION OR APPLICABILITY OF SECTION 40(A)(IA) IS WITHOUT BASIS IN FACTS. QUA THE CLAIM FOR DIVERSION BY OVERRIDING TITLE. THIS C LAIM STANDS MADE BY THE ASSESSEE, AS FAR AS APPEARS TO US, VIDE ITS LETTER DATED 08.10.2010 TO THE LD. CIT(A) (PB PGS. 27-28); THE ASSESSEES WRITTEN SUBMISSIONS VID E LETTER DATED 23.03.2010, MENTION OF WHICH WE FIND IN THE PENALTY ORDER, BEING NOT ON RE CORD. THOUGH AN EXPLANATION, IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C), CAN ONLY BE THAT FURNISHED BEFORE THE A.O., WHO DECIDES ON THAT BASIS (AND AFTER SUBJECTING IT TO S UCH VERIFICATION AS HE IN HIS WISDOM MAY DEEM FIT) THE QUESTION OF LEVY OF PENALTY IN THE FA CTS AND CIRCUMSTANCES OF THE CASE. WE, STILL, GIVING THE ASSESSEE THE BENEFIT OF DOUBT, CO NSIDER THE SAME AS AN EXPLANATION BY THE ASSESSEE TOWARD AND IN SUBSTANTIATION OF ITS CASE. THE BASIS OF THE ASSESSEES CLAIM, AS WE GATHER, IS THE FACT THAT THE PARTIES HAD AGREED TO SHARE THE LEGAL FEES ARISING TO IT, AS THEIR SHARE IN THE PROFIT OF THE JV. THE A.O. REJECTED TH E ASSESSEES CASE ON MERITS FOR TWO REASONS. FIRSTLY, IN THAT CASE THE INCOME WAS OF TH E AOP CONSISTING OF THE ASSESSEE AND THE THREE PAYEES AS ITS MEMBERS, WHICH IS CLEARLY NOT T HE CASE; THE ENTIRE PAYMENT HAVING BEEN MADE TO THE ASSESSEE-FIRM AND THERE BEING NO S EPARATE MAINTENANCE OF ACCOUNTS OF THE AOP. FURTHER, THE SHARES IN THE RECEIPT HAVING BEEN FIXED , THERE WAS NO SCOPE FOR SHARED CONTROL AND LOSSES, REFERRING TO THE DECISIO N BY THE HONBLE APEX COURT IN FAGUNI CHAND GULATI VS. UPPAL DATED 07.08.2008. TWO, THE ASSESSEE HAD, THOUGH THU S CONSIDERED ONLY A PART OF THE LEGAL FEE, I.E., RS.11,44,500/- AND RS.3,46,059/- AS ITS INCOME (PB PGS.35, 36), IT HAD CLAIMED TDS ON THE ENTIRE SUM R ECEIVED BY IT, I.E., AT RS.3,42,419/-, ON PAYMENTS TO IT BY BRITANNIA INDUSTRIES LIMITED AND DEEPAK FERTILISERS & PETROCHEMICALS LTD. (AT A GROSS OF RS.56.905 LACS). THE PAYMENTS W ERE MADE TO IT AS A FIRM, AND THE SUBSEQUENT PAYMENTS BY IT TO THE PAYEES WERE ONLY A LLOCATIONS MADE BY WAY OF SELF-MADE MUTUAL ARRANGEMENTS (REFER PARA 6 OF THE TRIBUNALS ORDER SUPRA). WE GO A STEP FURTHER. EVEN ASSUMING THAT THE PAYMENTS WERE NOT MADE WITH A VIEW TO REDUCE THE TAX INCIDENCE, AS THE TRIBUNAL SEEMS TO IMPLY, THE QUESTION IS: AR E THEY IN THE NATURE OF THE ALLOCATION OR 6 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT DISTRIBUTION OF PROFIT OR BY WAY OF DIVERSION BY OV ERRIDING TITLE? IN OUR VIEW, THE SAME CANNOT, BY ANY STRETCH OF IMAGINATION, BE CONSIDERE D AS DIVERSION BY OVERRIDING TITLE. IT IS AT BEST A MUTUAL ARRANGEMENT BY WHICH THE PARTIES A GREED TO SHARE THE RECEIPT, FOR WHATEVER CONSIDERATION/S, ARISING TO THE ASSESSEE O N ACCOUNT OF PROJECT WORK, IN AN AGREED MANNER. EVERY SINGLE DOCUMENT WE HAVE CAME ACROSS I N RELATION TO THE SAID PAYMENTS VIZ., THE ASSESSEES BOOKS OF ACCOUNT, BEING PRINCI PALLY THE LEDGER ACCOUNT OF PROFESSIONAL FEES; THE SUMMARY OF PAYMENTS (PB PG S. 35-36); THE COMMUNICATIONS DATED 15.03.2004 AND 22.03.2004 BY GRAND FOUNDRY LTD. TO THE ASSESSEE (PB PGS. 37-39, 40); AND THE CONFIRMATION BY EACH OF THE FOUR PAYEES (PB PGS. 41, 44, 51, 56), REFER TO THE SAID AMOUNTS AS SHARE OF PROFIT ON THE JV PROJECT, I.E., THE PROJECT/S UNDERTAKEN JOINTLY. THE PAYMENT IS ACCORDINGLY ONLY AN APPLICATION OF INCOM E, AND THERE IS NO CASE OF ANY DIVERSION BY OVERRIDING TITLE. THE ASSESSEES CLAI M IN THIS REGARD IS THUS NOT ONLY WHOLLY UNSUBSTANTIATED, BUT DE HORS AND CONTRARY TO THE MATERIAL ON RECORD. CAN THE ASSESSEE CLAIM TO HAVE FURNISHED A SUBSTANTIATION WHICH IN F ACT CONTRADICTS THE MATERIAL ADDUCED BY HIM ? CONTINUING FURTHER, IT CANNOT BE LOST SIGHT OF TH AT THE ASSESSEE HAS FAILED TO EXHIBIT THE TRUE NATURE OF THE TRANSACTION/S WHICH, GOING B Y ITS VERSION, IS INEXTRICABLY LINKED WITH ITS CONTRACTS WITH THE PAYEE COMPANIES, I.E., BRITA NNIA INDUSTRIES LIMITED AND DEEPAK FERTILIZERS & PETROCHEMICALS LTD., AND WHICH ARE CO NSPICUOUS BY THEIR ABSENCE, A FACT SOUGHT TO BE EMPHASIZED BY THE TRIBUNAL. FURTHER, T HE PAYMENT, OR NEARLY THE WHOLE OF IT, STANDS RECEIVED BY THE ASSESSEE IN THE MONTHS OF AP RIL AND MAY, 2004 (FROM BRITANNIA INDUSTRIES LIMITED AT RS.42.50 LACS AND RS.5.585 LA CS RESPECTIVELY) AND IN MAY AND JULY, 2004 (FROM DEEPAK FERTILIZERS & PETROCHEMICALS LTD. AT RS. 2 LACS AND RS.5.70 LACS RESPECTIVELY). THE PAYMENTS TO ITS PARTNERS, HOWEVE R, ARE MADE ONLY TOWARD THE END OF THE YEAR, I.E., IN FEBRUARY AND MARCH, 2005 (PB PGS. 35 -36), AND WHICH IS NOT UNDERSTANDABLE IF THE SHARE (OF PROFIT) WAS, AS STATED, ALREADY FI XED AND, FURTHER, WITH REFERENCE TO THE GROSS FEES RECEIVED BY THE ASSESSEE. IF THEIR SHARE WAS RELEASED AFTER THE COMPLETION OF THEIR WORK, IT IS A CASE OF SUB CONTRACT OF A PART OF THE WORK, IN WHICH CASE THEY WOULD ONLY RAISE A BILL ON THE ASSESSEE FOR THE SAME NO THING MORE AND NOTHING LESS. OR AT LEAST CONFIRM SO, WHILE EVEN THEIR CONFIRMATIONS, WHICH A RE BY WAY OF CONFIRMING THE PAYMENT 7 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT STATEMENT ON THE ASSESSEES LETTER HEAD, STATE OF T HE PAYMENTS BEING MADE AND RECEIVED AS SHARE OF PROFIT IN THE JOINT VENTURE PROJECT. THERE IS NO MATERIAL ON RECORD, EXCEPT FOR SELF ASSERTIONS, THAT WOULD LINK THE IMPUGNED PAYMENTS T O THE RECEIPT FROM THE TWO PAYEE COMPANIES. IT IS THIS COMPLETE LACK OF CLARITY IN T HE MATTER THAT WAS SOUGHT TO BE EMPHASIZED BY THE TRIBUNAL VIDE ITS ORDER IN THE QU ANTUM PROCEEDINGS. EVEN SO, WE COULD BE PREPARED TO EXTEND THE BENEFIT OF DOUBT TO THE ASSESSEE, SO THAT THOUGH LIABLE TO BE TAXED IN ITS HANDS, THE AS SESSEE HAD REASONABLE REASON/S TO CONSIDER IT AS NOT SO; THE GENUINENESS OF THE PAYME NTS HAVING PRESUMABLY BEEN NOT DOUBTED. HOWEVER, EVEN QUA THIS PARAMETER WE ARE UNABLE TO CONSIDER THE ASSESS EES CASE AS FALLING WITHIN THE REALM OF A REASONABLE EXPLANA TION. THE ASSESSEE ADMITTEDLY IS THE MAIN DRIVER OF THE PROJECT. IT HAS NOT SPECIFIED TH E EXPENDITURE INCURRED AND CLAIMED BY IT ON THE RELEVANT PROJECT, SO THAT FOR ALL WE KNOW IT MAY WELL HAVE RETURNED A LOSS THEREON, I.E., PARTICULARLY CONSIDERING THAT IT DISCLOSES ON LY A PART OF THE REMUNERATION RECEIVED AS ITS INCOME, I.E., AT RS.14.905 LACS (FOR BOTH THE P AYEE COMPANIES). THIS IS IN FACT QUIZZICAL IN-AS-MUCH AS THOUGH STATED TO BE THE MAIN DRIVER O F THE PROJECT, AND FOR WHICH REASON IT WOULD ALSO THEREFORE UNDERTAKE THE BULK, IF NOT THE WHOLE OF THE EXPENDITURE ON THE PROJECT, THE ASSESSEE RETAINS ONLY A FRACTION (A LI TTLE OVER 25%) OF THE TOTAL RECEIPT OF RS.56.905 LACS. TWO, WE OBSERVE THAT THE PAYEES HAV E CLAIMED EXPENDITURE AGAINST THE PAYMENTS TO THEM, RETURNING ONLY A PART THEREOF TO TAX, CONTRADICTING THE CLAIM OF THE PAYMENTS TO THEM AS BEING THEIR SHARE OF PROFIT (PB PGS. 45-49, 52-54). ALSO RELEVANT IN THIS REGARD IS THE HUGE BUILD-UP OF CASH WITH THE A SSESSEE DURING THE YEAR; THE ASSESSEE HAVING WITHDRAWN THE LEGAL FEES RECEIVED BY IT, FOR NO OSTENSIBLE REASON, BANKING THE SAME IN FEBRUARY AND MARCH, 2005 FOR PAYMENT TO THE JV P ARTNERS (REFER PARA 3 OF THE ASSESSMENT ORDER). THE SAID BUILD-UP (TO THE TUNE OF RS.50 LACS) WHICH REMAINS UNEXPLAINED, AS WELL AS THE OTHER INCIDENCES REFERR ED TO ABOVE, DIRECTLY IMPINGE ON THE GENUINENESS OF THE IMPUGNED PAYMENTS . FINALLY, THE ASSESSEE HAS CLAIMED THE IMPUGNED SUM AS EXPENDITURE U/S. 37(1) R/W S. 40(A)(IA) BY D EPOSITING TDS THEREON OSTENSIBLY AS COMMISSION, FOR A.Y. 2010-11, THEREBY DEBUNKING ITS CLAIMS, BOTH QUA SHARE OF PROFIT AND DIVERSION BY OVERRIDING TITLE. WE HAVE ALREADY FOUND IT TO HAVE NO CASE QUA CLAIM FOR 8 ITA NO. 6026/MUM/2011 (A.Y. 2005-06) MULLA ASSOCIATES VS. ASST. CIT EXPENDITURE, WHILE IT, BY DOING SO, EVEN RETRIEVES BACK THE TAX PAID BY IT FOR THE CURRENT YEAR . AS SUCH, WHICHEVER WAY ONE MAY LOOK AT IT, THE AS SESSEE HAS NO CASE. THE ACCEPTANCE OF ITS CLAIM FOR A.Y. 2010-11 BY THE REVENUE, AS CONTENDED BEFORE US, WOULD BE OF NO CONSEQUENCE. THE REASON IS SIMPLE. A RETURN PROCESSED U/S.143(1) CANNOT BE REGARDED AS AN ACCEPTANCE OF THE ASSESSEES RETU RN (OR THE CLAIMS PREFERRED THEREBY); THE SAID PROVISION, W.E.F. 01.06.1999, DOES NOT EVE N ENTITLE THE REVENUE TO MAKE ANY PRIMA FACIE ADJUSTMENT TO AN ASSESSEES RETURN. REFERENCE IN TH IS REGARD MAY BE MADE TO THE DECISION BY THE APEX COURT IN ASST. CIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD . [2007] 291 ITR 500 (SC). 5. IN VIEW OF THE FOREGOING, WE FIND THE LEVY OF PE NALTY IN THE INSTANT CASE U/S. 271(1)(C) OF THE ACT AS SUSTAINABLE IN LAW. WE DECI DE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. /-)0 &12/) # / # ) 34 ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 25, 2014 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 5& DATED : 25.09.2014 '.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 6) ( ) / THE CIT(A) 4. % 6) / CIT - CONCERNED 5. 9':; !)&<1 , * <1- , % ( / DR, ITAT, MUMBAI 6. ;=2 >( / GUARD FILE ! ( / BY ORDER, ) / (* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI