STOCK TRADER PVT. LTD., MUMBAI V. ITO 2(3)4, MUMBAI

ITA 629/MUM/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8270 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 06-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 629 / MUM . /2011 ( ASSESSMENT YEAR : 2004 05 ) STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FORT, MUMBAI 400 001 PAN AAACS7235A . APPELLANT V/S INCOME TAX OFFICER WARD 2 ( 3 )( 4 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI NITESH JOSHI A/W SHRI ANKIT JAIN REVENUE BY : SHRI MANOJ KUMAR DATE OF HEARING 17 .0 1 .201 9 DATE OF ORDER 12.0 4 .2019 O R D E R PER SAKTIJIT DEY. J.M. T HE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 12 TH NOVEMBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 6, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2005 06. 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 2,49,49,375, BEING PROFESSIONAL FEES PAID TO PREROY A.G. (PAG). 2 STOCK TRADERS PVT. LTD. 3 . BRIEF FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNT OF ` 2,49,49,375, TOWARDS PROFESSIONAL FEES PAID TO PAG CALLED FOR NECESSARY DETAILS . A FTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE IS NO MATERIAL TO SHOW THAT SERVICES WERE ACTUALLY RENDERED BY PAG NECESSITATING PAYMENT OF SUCH FEE. FURTHER, TAKING NOTE OF THE FACT THAT IN EARLIER ASSESSMENT YEARS SIMILAR DEDUCTION CLAIMED WAS DISALLOWED , T HE ASSESSING OFFICER PROCEEDED TO DISALLOW THE PAYMENT OF ` 2,49,49,375, AND ADDED BACK TO THE INCOME OF THE ASSESSEE. T HOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, IT WAS UNSUCCESSFUL. 4 . AT THE O UTSET, LEARNED AUTHORISED REPRESENTATIVE FAIRLY SUBMITTED THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE IN THE PRECEDING ASSESSMENT YEARS. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ITA NO.1501/MUM./2004 & ORS., DATED 31 ST OCTOBER 2018. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR S . 3 STOCK TRADERS PVT. LTD. 6 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE DISPUTE RELATING TO ALLOWABILITY OF PROFESSIONAL FEE PAID TO PAG IS A RECURRING ISSUE BETWEEN THE ASSESSEE AND THE DEPARTMENT FROM THE ASSESSMENT YEAR 1995 96 ONWARDS. WHILE DECIDING ASSESSEES APPEALS FOR THE AS SESSMENT YEAR S 1995 96 TO 1997 98, THE TRIBUNAL HAD UPHELD THE DISALLOWANCE MADE BY THE DEPARTMENTAL AUTHORITIES . F OLLOWING THE AFORESAID DECISION, THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL IN ITA NO.1820/MUM./2004 DT.31.10.2018 FOR THE ASSESSMENT YEAR 2000 01, HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE REPRODUCE D HEREIN BELOW: 8. ON A CAREFUL READING OF THE AFORESAID ORDER OF THE TRIBUNAL WE HAVE NOTICED THAT THE BENCH HAS DECIDED THE ISSUE AGAINST THE ASSESSEE AFTER CONSIDERING ALMOST IDENTICAL ARGUMENTS OF THE ASSESSEE AS WAS ADVANCED BEFORE US. NOTABLY, THE AFORESAID DECISION OF THE TRIBUNAL WAS SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEALS ON IDENTICAL ISSUE IN A SSESSMENT YEARS 1998 99 AND 1999 2000, VIDE ITA NO.4493/ MUM./2003, DATED 11 TH JULY 2018 AND ITA NO.4473/MUM./2003, DATED 11 TH JULY 2018, RESPECTIVELY. THUS, AS COULD BE SEEN FROM THE AFORESAID FACTS, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE I N THE PRECEDING ASSESSMENT YEARS THE TRIBUNAL HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AS REGARDS THE DECISION CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, AFTER CAREFUL READING OF THE SAID DECISION, WE ARE OF THE VIEW THAT THE SAID DEC ISION HAVING BEEN RENDERED UNDER DIFFERENT SET OF FACTS IS NOT APPLICABLE TO THE PRESENT APPEALS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEARS, AS REFERRED TO ABOVE, WE UPHOLD THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER. THIS GROUND IS DISMISSED. 4 STOCK TRADERS PVT. LTD. 7 . IN VIEW OF THE AFORESAID, FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE AS REFERRED TO ABOVE, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. GROUND RAISED IS DISMISSED. 8 . IN GROUND NO.2, 3 AND 4, THE ASSESSEE HAS CHALLENGED PART DISALLOWANCE MADE OUT OF BUSINESS CENTRE FEES PAID TO PREMCHAND ROYCHAND & SONS AND TELEPHONE EXPENSES INCURRED AT DIRECTORS RESIDENCE. 9 . BRIEF FACTS ARE, DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 85,07,600, TOWARDS PAYMENT OF BUSINESS CENTRE FEES TO PREMCHAND ROYCHAND & SONS CALLED FOR NECESSARY DETAILS AND AFTER EXAMINING THEM HE WAS OF THE VIEW THA T THE BUSINESS ACTIVITIES OF THE ASSESS EE IS VERY LIMITED IN ITS SCOPE. THEREFORE , INCURRING OF SUCH HUGE EXPENDITURE IS NOT REQUIRED. OBSERVING THAT SIMILAR DEDUCTION CLAIMED IN ASSESSMENT YEAR 2003 04 IN RESPECT OF PAYMENT MADE TO A RELATED PERSON WAS DI SALLOWED UNDER SECTION 40A(2) OF THE ACT , HE DISALLOWED THE SAME. SIMILARLY, THE ASSESSING OFFICER ALSO DISALLOWED 50% OUT OF THE TOTAL TELEPHONE EXPENSES INCURRED FOR DIRECTORS RESIDENCE. 10 . WHILE DECIDING THE DISPUTED ISSUE, LEARNED COMMISSIONER (APPEALS) FOLLOWING HIS DECISION IN ASSESSEES OWN CASE FOR THE 5 STOCK TRADERS PVT. LTD. ASSESSMENT YEAR 2003 04 DECIDED THE ISSUE PARTIALLY IN FAVOUR OF THE ASSESSEE BY ALLOWING 10% OUT OF BUSINESS CENTRE FEES AND RESTRICTING THE DISALLOWANCE IN RESPECT OF TELEPHONE EXPENDITURE AT DIRECTO RS RESIDENCE TO 1/3 RD OF SUCH EXPENDITURE. 11 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , LEARNED COMMISSIONER (APPEALS) IN THE EARLIER ASSESSMENT YEARS HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE DISALLOWANCE UNDER SECTION 14A OF THE ACT SINCE THE I NCOME TO BE EARNED BY THE ASSESSEE FROM SUCH INVESTMENT IS EXEMPT. HE SUBMITTED , THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2000 01 IN ITA NO.1820/MUM./ 2004 DT.31.10.2018 HAS ALSO DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISAL LOWANCE UNDER SECTION 14A OF THE ACT BY FOLLOWING THE DIRECT IONS OF THE TRI BUNAL IN APPEALS DECIDED FOR ASSESSMENT YEAR S 1998 99 AND 1999 2000. HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS COMMITTED AN ERROR IN DISALLOWING 90% OF THE EXPENDITURE BY REF ERRING TO THE ORDER PASSED BY HIM FOR THE ASSESSMENT YEAR 2003 04 , SINCE , IN ASSESSMENT YEAR 2003 04 DIVIDEND INCOME WAS TAXABLE WHICH IS NOT THE CASE IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, DISALLOWANCE HAS TO BE MADE UNDER SECTION 14A OF THE ACT. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE OBSERVATIONS OF THE TRIBUNAL IN ORDER DATE 31 ST OCTOBER 2018, IN ITA NO.1820/MUM./2004. 6 STOCK TRADERS PVT. LTD. 12 . WE HAVE CONSIDERED R IVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 01, IN ITA NO.1820/MUM./2004, THE TRIBUNAL HAS HELD AS UNDER: 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. NO DOUBT, THE ASSESSING OFFICER HAS DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE AS NOT ALLOWABLE UNDER SECTION 37(1) AND 40A(2)(A) OF THE ACT. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) HAS MODIFIED THE DECISION OF THE ASSESSING OFFICER BY HOLDING THAT THE DISALLOWANCE OF EXPENDITURE CAN ONLY BE MADE UNDER SECTION 14A OF THE ACT. WHILE DOING SO, HE HAS FOLLOWED HIS DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999 2000. AS COULD BE SEEN, WHILE DECIDING IDENTIC AL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1998 99 AND 1999 2000 IN THE ORDERS REFERRED TO ABOVE, THE TRIBUNAL, THOUGH, HAS AGREED WITH THE LEARNED COMMISSIONER (APPEALS) THAT DISALLOWANCE OF EXPENDITURE HAS TO BE MADE UNDER SECTION 14A OF THE AC T, HOWEVER, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT SUCH DISALLOWANCE ONLY TO THE INVESTMENT YIELDING DIVIDEND INCOME DURING THE RELEVANT ASSESSMENT YEAR. THERE BEING NO DIFFERENCE IN FACTS IN THE IMPUGNED ASSESSMENT YEAR, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A BY FOLLOWING THE DIRECTIONS OF THE TRIBUNAL IN APPEALS DECIDED FOR ASSESSMENT YEARS 1998 99 AND 1999 2000. GROUNDS ARE DISPOSED OFF ACCORDINGLY. 13 . FACTS BEING IDENTICAL, WE DIRECT THE ASSESSING OFFICER TO COMPUTE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL. WHILE DOING SO, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER ONLY THOSE INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME DURING THE R ELEVANT PREVIOUS YEAR. GROUNDS ARE DISPOSED OFF ACCORDINGLY. 7 STOCK TRADERS PVT. LTD. 14 . IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF FOREIGN AIR TRAVEL EXPENDITURE AMOUNTING TO ` 8,28,432, TO THE DIRECTORS WIFE. 15 . AT THE OUTSET, LEARNED COUNSEL S APPEARING FOR THE PARTIES HAVE AGREED BEFORE US THAT THIS ISSUE HAS BEEN CONSISTENTLY DECIDED AGAINST THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR S . CONSIDERING THE AFORESAID SUBMISSIONS OF THE LEARNED COUNSEL S FOR THE PARTIES AND TAKING NOTE OF THE DECISION OF THE TRIBUN AL ON IDENTICAL ISSUE IN ORDER DATED 31 ST OCTOBER 2018 CITED SUPRA, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. GROUND IS DISMISSED. 16 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.04.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 12.04.2019 8 STOCK TRADERS PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI