DCIT 2(1)(1), MUMBAI V. ADITYA BIRLA INSURANCE BROKERS LTD, MUMBAI

ITA 6720/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3199 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Additional evidence; Corroborative evidences
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD , JM ITA NO. 6720 /MUM/ 2016 (ASSESSMENT YEAR: 2010 - 11 ) DY. CIT - 2(1)(1), R. NO. 561, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 VS. M/S. ADITYA BIRLA INSURANCE BROKERS LTD. 2 ND FLOOR, APPEJAY, SHAHID BHAGAR SINGH ROAD, FORT, MUMBAI - 400 013 PAN/GIR NO. AABCB8091 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI SATISHCHANDRA RAJORE RESPONDENT BY : SHRI NITESH JOSHI DATE OF HEARING : 26.12.2018 DATE OF PRONOUNCEMENT : 26.02 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 4, MUMBAI (LD.CIT(A) FOR SHORT) DATED 03.08.2016 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCED OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY TO THE ASSESSI NG OFFICER AND THEREFORE VIOLATED RULE 46A.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCED OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY AO DESPITE NON - DISCHANRGE OF ONUS TO ESTABLISH THAT THE ENTIRE EXPENSES UNDER VARIOUS HEADS ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS.' 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERAL INSURANCE BROKING AND ADVISORY SERVICES. 4. THE ASSESSING OFFICER (A.O. FOR SHORT) MADE AN ADHOC 20% DISALLOWANCE OUT OF THE EXPENSES, BY NOTING THAT COMPLETE DETAILS AND VOUCHERS WERE NOT PROVIDED. HE HELD AS UNDER: 2 ITA NO. 6720/MUM/2016 3. IT IS SEEN FROM THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS DEBITED INTER ALIA FOLLOWING EXPENSES: - STAFF WELFARE EXPENSES 4513775 LEGAL & PROFESSIONAL CHARGES 9623362 ADVERTISEMENT & BUSINESS PROMOTION EXPENSES 1540281 TRAVELLING AND CONVEYANCE EXPENSES 546624 1 SERVICE CHARGES 27561399 MISCELLANEOUS EXPENSES 2694137 TOTAL 51399195 4. DURING THE COURSE OF HEARING ON 22.02.2012, THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF THE ABOVE EXPENSES ALONG WITH SUPPORTING EVIDENCES. IN RESPONSE TO THE SAME, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE BY THEIR LETTER DATED 08.03.201 3 HAD SUBMITTED DETAILS OF TRAVELLING & CONVEYANCE EXPENSES, STAFF WELFARE EXPENSE AND MISCELLANEOUS EXPENSES. FURTHER, BY LETTER DATED 01.03.2013, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THE DETAILS OF LEGAL AND PROFESSIONAL CHARGES, ADV ERTISEMENT & BUSINESS PROMOTION EXPENSES AND SERVICE CHARGES. HOWEVER, IT IS SEEN FROM THE DETAILS SUBMITTED, IT IS NOTICED THAT THE ASSESSEE HAS ONLY SUBMITTED ONLY FEW DETAILS IN RESPECT OF THE ABOVE EXPENSES. THE SAME IS TABULATED AS UNDER: NATURE OF EXPENSES TOTAL EXPENSES CLAIMED AS PER P &L DETAILS SUBMITTED BY THE ASSESSEE STAFF WELFARE EXPENSES 4513775 370636 LEGAL & PROFESSIONAL CHARGES 9623362 2238911 ADVERTISEMENT & BUSINESS PROMOTION EXPENSES 1540281 127198 TRAVELLING AND CONVEYANCE EXPENSES 5466241 664542 SERVICE CHARGES 27561399 153519 6 3 MISCELLANEOUS EXPENSES 2694137 571321 5. FURTHER, FROM THE VOUCHERS / BILLS SUBMITTED, IT IS NOTICED THAT MOST OF THE BILLS ARE NOT SUPPORTED WITH PROPER EVIDENCES TO SUBSTANTIATE THE ASSESSEE S CLAIM. FURTHER, THE ASSESSES HAS FAILED TO SUBMIT ALL THE DETAILS IN R ESPECT OF ITS CLAIM. HENCE, AS THE ASSESSEE COMPANY HAS NOT DISCHARGED ITS ONUS OF SUBSTANTIATING THEIR CLAIM THAT THE ABOVE REFERRED EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ABSENCE OF SUPPORTING EVIDENCES, 20% OF SUCH EXPENSES OF RS.51399195 / - AMOUNTING TO RS.1,02,79,839/ - IS HEREBY TREATED AS EXPENSES NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS A ND ACCORDINGLY IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U / S. 271(1)(C) ARE INITIATED SEPARATELY FOR CONCEALMENT OF INCOME. 5. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY REFERENCE TO SUBMISSION BEFORE HIM AND REFERRING TO THE CASE LAWS THAT ADHOC DISALLOWANCE IS NOT PERMISSIBLE. HE HELD AS UNDER: 3.2. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFIC ER AS WELL AS RIVAL SUBMISSION OF THE APPELLANT, CAREFULLY. I FIND THAT THE APPELLANT HAS DEBITED STAFF WELFARE EXPENSES, 3 ITA NO. 6720/MUM/2016 LEGAL & PROFESSIONAL CHARGES, ADVERTISEMENT & BUSINESS PROMOTION EXPENSES, TRAVELLING & CONVEYANCE EXPENSES, SERVICE CHARGES AND M ISCE LLANEOUS EXPENSES, TOTALING TO RS.5,13,99,195/ - . THE LD. ASSESSING OFFICER HAS DISALLOWED 20% OF SUCH EXPENSES FOR WANT OF FULL DETAILS WHICH CANNOT BE SUSTAINED AS THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN BILLS AND VOUCHERS NOR HAS ISSUED A NY SHOW - CAUSE NOTICE REVEALING THE REASONS AS TO WHY HE WAS GOING TO DISALLOW 20% OF SUCH ENTIRE EXPENSES. OBVIOUSLY, DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ZEROX COPIES OF ALL THE BILLS AND VOUCHERS ARE NOT PRODUCED UNLESS THE ASSESSING OFFICER D EMANDS FOR IT. WHEN TH E ASSESSEE HAS SUBMITTED PART OF DETAILS AND SAMPLE COPY OF THE BILLS OF SUCH EXPENSES, IT WAS THE RESPONSIBILITY OF THE ASSESSING OFFICER TO FURTHER CALL FOR FULL INFORMATION AND SUPPORTING EVIDENCES. BUT THE ASSESSING OFFICER HAS NO T DONE SO, HENCE, DISALLOWANCE OF EXPENDITURE DESE RVES DELETION. FURTHER, IN THE APPELLATE PROCEEDING, THE APPELLANT HAS SUBMITTED THE DETAILS & VOUCHERS OF SUCH EXPENSES IN ANNEXURE - 1 TO 6. THE NATURE OF EXPENSES IS THAT, I T CANNOT BE PRESUMED THAT THERE IS A PERSONAL ELEMENT INVOLVED. FURTHER, THE APPELLANT GETS SUPPORT FROM THE DECISION OF HON'BLE ITAT, MUMBAI BENCH IN THE CASE OF M/S. JOHNSON & JOHNSON LTD. VS. ACIT, ITA NO.9106/MUM/2004 DATED 15.02.2013 AND DCIT VS. LYKA LABS LTD.(2009) 116 ITD 457 (MU M). FURTHER, THERE IS A PLETHORA OF JUDGEMENTS OVER THIS ISSUE, DISAPPROVING AD H OC DISALLOWANCE OF EXPENDITURE. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. DEPARTME NTAL REPRESENTATIVE (LD. DR FOR SHORT) RELIED UPON THE ORDERS OF THE A.O. H E SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE ALL THE NECESSARY DETAILS REQUIRED BY THE A.O. HENCE, ADHOC DISALLOWANCE HAS BEEN DONE. FURTHER, HE REFERRED TO THE GROUND RAISED THAT THE LD. CIT(A) HAS ERRED IN ADMITTING THE ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE. 8. PER CONTRA, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A.O. HAS MADE AN ADHOC DISALLOWANCE WITHOUT POINTING OUT THE SPECIFIC DEFECT IN THE DETAILS SUBMITTED. HE REFERRED TO THE SEVERAL CASE LAWS FOR THE PROPOSITION THAT THE ADHOC DISALLOWANCE CANNO T BE DONE. HE REFERRED TO THE FOLLOWING DECISIONS: 1. DCIT VS. UNITED CONCEPT & SOLUTION PVT. LTD . (IN ITA NO. 1768/DEL/2016 VIDE ORDER DATED 8.12.2017); 2. ASST. CIT VS. GANPATI ENTERPRISES LTD. (2013) 142 ITD 118 (DEL); AND 3. DY. CIT VS. LYKA LABS LTD . (2009) 116 ITD 457 (MUM) 4 ITA NO. 6720/MUM/2016 FURTHER HE SUBMITTED THAT AFTER FURTHER EXAMINATION THE LD. CIT(A) HAS GIVEN A FINDING OF THE FACT AND HENCE HE SUBMITTED THAT NO DISALLOWANCE SHOULD BE DONE. FURTHER, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THE SAMPLE COPIES OF THE DETAILS. 9. UPON CAREFUL CONSIDERATION, WE FIND THAT THERE IS NO DOUBT THAT THE A.O. HAS MADE AN ADHOC DISALLOWANCE. IT IS SETTLED THAT IT HAS BEEN HELD IN A NUMBER OF CASE LAWS THAT ADHOC DISALLOWANCE CANNOT BE SUSTAINED DE HORS THE A.O. POINTING OUT SPECIFIC IRREGULARITY. THE MAIN GRIEVANCE RAISED BY THE REVENUE IS THAT THE LD . CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE WITHOUT GIVING ANY OPPORTUNITY TO THE A.O. WE FIND THAT THIS GROUND IS MISPLACED, AS THE LD. CIT(A) HAS NOT MENTIONED THAT THE ASSESSEE HAD SUBMITTED THE DETAILS OTHER THAN THAT WAS SUBMITTED BEFORE THE A.O. UPON EXAMINATION OF THE SAM PLE COPIES OF THE DETAILS SUBMITTED BY THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT THE NATURE OF THE EXPENSES IS THAT IT CANNOT BE PRESUMED THAT THERE IS A PERSONAL ELEMENT INVOLVED. WE FIND THAT THE ASSESSEE IS A CORPORATE ENTITY. WITHOUT POINTING OUT A SPECIFIC INSTANCE OF EXPENDITUR E INCURRED FOR PERSONAL ELEMENT DISALLOWANCE OF EXPENSES FOR PERSONAL USES IN THE HANDS OF THE CORPORATE ENTITY IS NOT PERMISSIBLE. THE CASE LAWS REFERRED BY THE LD. CIT(A) ARE GERMANE. ACCORDINGLY, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 10. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 . 0 2 . 2 0 1 9 S D / - S D / - ( RAVISH SOOD ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 6 . 0 2 . 2 0 1 9 ROSHANI , SR. PS 5 ITA NO. 6720/MUM/2016 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI