DCIT 24(3), MUMBAI V. ACE INSURANCE CONSULTANTS, MUMBAI

ITA 6124/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79538 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A B ENCH, MUMBAI . , !' , #$ %&'( , #) *+ # ' BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ I.T.A. NO.6124/MUM/2011 ( , , , , / ASSESSMENT YEAR :2008-09 THE DCIT-24(3), C-11, 7 TH FLOOR, B.K.C. BANDRA (E), MUMBAI-400 051 / VS. M/S. ACE INSURANCE CONSULTANTS, 75, NIRLON COMPLEX, OFF. W.E. HIGHWAY, GOREGAON (E), MUMBAI-400 063 +- #) ./ ./ ./ PAN/GIR NO. : AAKFA 4572D ( -0 / APPELLANT ) .. ( 12-0 / RESPONDENT ) -0 3 # / APPELLANT BY: SHRI SUNIL KUMAR AGARWAL 12-0 4 3 # / RESPONDENT BY: SHRI PRITESH MEHTA 4 5) / DATE OF HEARING :15.07.2014 6, 4 5) / DATE OF PRONOUNCEMENT :23.07.2014 *#7 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-34, MUMBAI DT.18.07.2011 PERTAINING TO A.Y. 2008-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN DELETING THE ADDITION OF 25% OF UNVERIFIABLE EXPENS ES AMOUNTING TO RS. 75,91,967/-. ITA NO. 6124/M/2011 2 3. THE ASSESSEE IS IN THE BUSINESS OF DISTRIBUTION OF INSURANCE POLICIES. THE RETURN WAS FILED ON 27.9.2008 DECLARI NG TOTAL INCOME AT RS. 1,52,99,500/-. THE RETURN WAS SELECTED FOR SCRUTIN Y ASSESSMENT AND STATUTORY NOTICES WERE ACCORDINGLY ISSUED AND SERVE D UPON THE ASSESSEE. 3.1. THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE IN ITS REPLY STATED THAT THE EXPENSES HAVE BEEN ALLOCATED FROM INDIA INFOLINE LTD. THE L IST OF EXPENSES AMOUNTED TO RS. 3.03 CRORES RELATING TO SEVERAL HEA DS OF EXPENSES LIKE ADVERTISEMENT, BUSINESS PROMOTION, TELEPHONE AND TR ANSPORTATION, TRAVELLING, OFFICE EXPENSES, RENT, EMPLOYMENT COST, WATER CHARGES ETC. THE ASSESSEE FURTHER STATED THAT THE ALLOCATION OF THESE EXPENSES FROM INDIA INFOLINE LTD. HAS BEEN CONFIRMED BY INDIA INF OLINE LTD. THE AO DID NOT ACCEPT THIS SUBMISSION OF THE ASSESSEE STATING THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT FULLY ACCEPTABLE AS MERELY FURNISHING A CERTIFICATE FROM M/S. INDIA INFOLINE LTD THAT THE E XPENSES MADE BY THEM INCLUDE AN AMOUNT OF RS. 3.03 CRORES HAVE BEEN ALLO CATED TO THE ASSESSEE. THE AO FURTHER OBSERVED THAT NO SUCH AGREEMENT HA S BEEN BROUGHT ON RECORD BY THE ASSESSEE. THE AO FURTHER OBSERVED THA T THE ASSESSEE MUST HAVE INCURRED CERTAIN EXPENDITURE FOR EARNING COMMI SSION INCOME. THE AO WENT ON TO DISALLOW 25% OF THE EXPENSES SO CLAIM ED AND MADE AN ADDITION OF RS. 75,91,967/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS CLAIM. THE ASSESSEE FURTHER FILED D ETAILS OF EXPENDITURE INCURRED BY INDIA INFOLINE LTD. AND ALLOCATED TO TH E ASSESSEE. THE LD. CIT(A) WAS CONVINCED WITH THE REPLY OF THE ASSESSEE . THE LD. CIT(A) OBSERVED THAT IN THE IMPUGNED ASSESSMENT ORDER, THE AO HAS NOT GIVEN ANY FINDING THAT SUCH ALLOCATION IS WITH A VIEW TO DEFRAUD THE REVENUE OR ITA NO. 6124/M/2011 3 SUCH ALLOCATION WOULD BE DETRIMENTAL TO THE INTERES T OF THE REVENUE. THE LD. CIT(A) DID NOT FIND ANY JUSTIFICATION OF MAKIN G ADHOC DISALLOWANCE OF 25% OF SUCH ALLOCATED EXPENSES AND DELETED THE A DDITION. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES AND IN PARTI CULAR BEFORE THE LD. CIT(A). 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS AN UNDISPUTED FACT THAT THE EXPENDITURE HAS BEEN IN CURRED BY INDIA INFOLINE LTD ON DAY TODAY BASIS. IT IS ALSO AN UND ISPUTED FACT THAT THERE EXISTS NO AGREEMENT FOR SHARE OF THE EXPENDITURES B ETWEEN INDIA INFOLINE LTD AND THE ASSESSEE. IT IS ALSO AN ADMITTED FACT THAT THE ALLOCATION HAS BEEN MADE ON ADHOC/ESTIMATED BASIS. THERE IS NOTHI NG ON RECORD TO SHOW HOW MANY PERSONS WERE EMPLOYED BY INDIA INFOLINE LT D. FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE . NO DETAIL RELATI NG TO THE BROKERAGE AND COMMISSION HAS BEEN BROUGHT ON RECORD. THE NAMES O F THE PERSONS TO WHOM SUCH BROKERAGE /COMMISSION HAS BEEN PAID FOR T HE BUSINESS OF THE ASSESSEE. IN THE ABSENCE OF SPECIFIC DETAILS, THE AO WAS LEFT WITH NO CHOICE BUT TO MAKE ADHOC DISALLOWANCE OF THE EXPEND ITURE. THE LD. CIT(A) DELETED THE ADDITION AS IN HIS OPINION, THER E WAS NO LOSS TO THE REVENUE. WE DO NOT FIND ANY JUSTIFICATION IN THIS F INDINGS OF THE LD. CIT(A) AS THE ISSUE BEFORE HIM WAS WHETHER THE EXP ENDITURE CLAIMED BY THE ASSESSEE ARE REASONABLE AND SUFFICIENT FOR ITS BUSINESS. THE FINDINGS ITA NO. 6124/M/2011 4 OF THE LD. CIT(A) IS ACCORDINGLY ERRONEOUS SINCE IN DIA INFOLINE HAS ALLOCATED THE EXPENDITURE ON ESTIMATED BASIS, WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE AO WHO DISALLOWED THE EXPENDITU RE ON ADHOC BASIS. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LD. CIT (A) AND RESTORE THAT OF THE AO. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2014 *#7 4 , ) # 8 9*: 23.7.2014 4 ; SD/- SD/- (D.MANMOHAN ) (N.K. BILLAIYA) !' /VICE PRESIDENT #) *+ / ACCOUNTANT MEMBER MUMBAI; 9* DATED : 23.7.2014 . . ./ RJ , SR. PS *#7 *#7 *#7 *#7 4 44 4 15% 15% 15% 15% <#%,5 <#%,5 <#%,5 <#%,5 / COPY OF THE ORDER FORWARDED TO : 1. -0 / THE APPELLANT 2. 12-0 / THE RESPONDENT. 3. = ( ) / THE CIT(A)- 4. = / CIT 5. %>; 15 , , / DR, ITAT, MUMBAI 6. ; ? / GUARD FILE. *#7 *#7 *#7 *#7 / BY ORDER, 2%5 15 //TRUE COPY// / . . . . (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI