ITO 8(2)(1), MUMBAI V. HUSH INDIA P.LTD, MUMBAI

ITA 677/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3678 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKESH MILWANI
• Assessee Lawyers: PARMINDER
• Keywords: Search and seizure; Principle of natural justice
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . . ,, !'#$ , % & BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAIYA , AM ./I.T.A. NO.8584/MUM/2011 ( ' ' ' ' / ASSESSMENT YEAR : 2008-09 M/S. HUSH INDIA PVT. LTD., 46, SAKI VIHAR ROAD, ANDHERI(E), MUMBAI-400 072 / VS. THE ITO-8(2)-1, MUMBAI ./I.T.A. NO.677/MUM/2012 ( ' ' ' ' / ASSESSMENT YEAR : 2008-09 THE ITO-8(2)-1, MUMBAI / VS. M/S. HUSH INDIA PVT. LTD., 46, SAKI VIHAR ROAD, ANDHERI(E), MUMBAI-400 072 ( % ./ )* ./PAN/GIR NO. :AAACP 6815F ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / ASSESSEE BY: SMT. PARMINDER ,-(+ / . / DEPARTMENT BY : SHRI RAKESH MILWANI / 01% / DATE OF HEARING : 01.05.2013 23' / 01% / DATE OF PRONOUNCEMENT :8.5.2013 4 / O R D E R PER N.K. BILLAIYA, AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVEN UE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-17, M UMBAI DT.28.11.2011 PERTAINING TO A.Y. 2008-09. AS BOTH THESE APPEALS W ERE HEARD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. M/S. HUSH INDIA PVT. LTD. 2 ITA NO. 8584/M/2011- ASSESSEES APPEAL 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 5,80,690/- AS UNACCO UNTED CASH AS INCOME FROM OTHER SOURCES. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE AT PARA- 6 PAGE-6 OF HIS ORDER. THE FACTS SHOW THAT SEARCH AND SEIZURE ACTION U/S. 132 WERE CARRIED OUT IN THE CASE OF SHRI JANARDHAN REDDY GROUP OF CASES, BE LLARY WHEREIN ONE DIARY WAS SEIZED BELONGING TO SHRI BHASKAR REDDY, E MPLOYEE OF M/S. OBULAPURAM MINING CO. PVT. LTD., BELLARY. THE DIAR Y CONTAINS VERY IMPORTANT INFORMATION IN RESPECT OF CONSTRUCTION AC TIVITIES OF M/S. ENNOBLE HOTEL. ACCORDING TO THE NOTING IN THE DIAR Y, IT WAS FOUND THAT ABOVE 20 TO 40% OF CONSTRUCTION EXPENSES HAVE BEEN PAID IN CASH. THE NAME OF THE ASSESSEE WAS ALSO FOUND APPEARING IN TH E DIARY WHEREIN TOTAL AMOUNT PAID IN CASH WAS SHOWN AT RS. 5,80,690/- WHI CH WERE PAID DURING THE FINANCIAL YEAR 2007-08. THE AO CONFRONTED THES E DETAILS RECEIVED FROM ADIT (INV), BELGAUM/GULBARAGA AND SOUGHT EXPL ANATION FROM THE ASSESSEE IN RESPECT OF THE TRANSACTIONS MADE BETWEE N THE ASSESSEE AND M/S. ENNOBLE HOTEL LTD. THE ASSESSEE DENIED HAVING RECEIVED ANY CASH AMOUNTING TO RS. 5,80,690/- VIDE ITS SUBMISSION DT. 27.12.2010. THE AO FURTHER OBSERVED THAT M/S. ENNOBLE HOTEL LTD. HAS S URRENDERED AN ADDITIONAL INCOME OF RS. 3.5. CRORES ON ACCOUNT OF THEIR CASH TRANSACTION. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS RECEIVED CASH PAYMENT OF RS. 5,80,690/- WHICH IT HAS NOT INCORPO RATED IN ITS BOOKS OF ACCOUNT AND WENT ON TO TREAT THIS UNACCOUNTED CA SH RECEIPT IN THE HANDS OF THE ASSESSEE AS ITS INCOME FROM OTHER SOURCES. M/S. HUSH INDIA PVT. LTD. 3 4. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFO RE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. FIRSTLY, THE ASSESSEE STR ONGLY CONTENDED THAT THE ENTIRE ADDITION HAS BEEN MADE IN VIOLATION OF PRINC IPLES OF NATURAL JUSTICE AS IT WAS NOT CONFRONTED WITH THE STATEMENT OF THE EMPLOYEE SHRI BHASKAR REDDY NOR WAS GIVEN ANY OPPORTUNITY TO CROSS EXAMIN E THE SAID PERSON. HOWEVER, DURING THE COURSE OF THE APPELLATE PROCEED INGS, VIDE LETTER DT. 7.10.2011, THE ASSESSEE WITHDREW ALL ITS ARGUMENTS/ OBJECTIONS WITH REGARD TO THE VIOLATIONS OF THE PRINCIPLES OF NATURAL JUST ICE. THE LD. CIT(A) WAS CONVINCED THAT SINCE THE ASSESSEE HAD UNDERTAKEN CO NSTRUCTION WORK FOR M/S. ENNOBLE HOTEL LTD., AND HAS RECORDED IN ITS BO OKS, PAYMENTS RECEIVED BY CHEQUE, THERE WAS A BUSINESS LINK BETWE EN THE ASSESSEE AND THE M/S. ENNOBLE HOTEL LTD. THE LD. CIT(A) WAS FU RTHER CONVINCED THAT SINCE M/S. ENNOBLE HOTEL LTD. HAS ACCEPTED UNACCOUN TED EXPENDITURE ON CONSTRUCTION OF HOTEL AND HAS DECLARED RS. 3.5 CR ORES ON THIS ACCOUNT, THE ASSESSEE MUST HAVE RECEIVED CASH AMOUNTING TO RS. 5 ,80,690/- AND ACCORDINGLY CONFIRMED THE ADDITION MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE MAIN CONTENTION OF THE ASSESSEE IS THAT DURING THE COURSE OF SURVEY OPERAT IONS IN ITS PREMISE, NOTHING INCRIMINATING HAS BEEN FOUND WHICH COULD LE AD TO THE CONCLUSION THAT THE ASSESSEE HAS RECEIVED SOME CASH PAYMENT FR OM M/S. ENNOBLE HOTEL LTD. IT IS THE SAY OF THE COUNSEL THAT THE E NTIRE ADDITION HAS BEEN MADE ON PRESUMPTION AND SURMISES WITHOUT ANY EVIDEN CE BROUGHT ON RECORD. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ORDERS OF THE LOWER AUTHORITIES. M/S. HUSH INDIA PVT. LTD. 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS AN ADMITTED FACT T HAT THE ASSESSEE HAD BUSINESS CONNECTION WITH M/S. ENNOBLE HOTEL LTD. IT IS ALSO BEEN ACCEPTED ON RECORD THAT THE ASSESSEE HAS BEEN SELLING GOODS TO M/S. ENNOBLE HOTEL LTD. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS RECEIVED PAYMENT FROM M/S. ENNOBLE HOTEL LTD. BY CHEQUE. CONSIDERI NG ALL THESE UNDISPUTED FACT, IT CANNOT BE DENIED THAT IN ALL PR OBABILITIES THE ASSESSEE MUST HAVE RECEIVED CASH PAYMENT OF RS. 5,80,690/-, SUCH TRANSACTIONS HAVE TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS CIT 214 ITR 801. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE TEST OF HUMAN PROBABILITIES, IN OUR CONSIDERATE VIEW, THERE IS NO ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). FINDINGS OF THE LD. CIT(A) IS CONFIRMED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 677/MUM/2012 REVENUES APPEAL 9. THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A() BY RAISING TWO GROUNDS OF APPEAL. GROUND NO. 1 RELATE S TO DELETION OF DISALLOWANCE OF RS. 1,33,189/- ON ACCOUNT OF FOREIG N TRAVELLING EXPENSES AND GROUND NO. 2 RELATES TO DELETION OF DISALLOWANC E OF RS. 11,11,232/- OUT OF SUNDRY EXPENSES. 10. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED FOREIGN TRAVE LLING EXPENSES AT RS. 5,32,757/-. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE ASSESSEE FILED DETAILS OF FOREIGN TRAVEL EXPENSES IN DATE-WI SE AND PERSON-WISE. THE AO WAS NOT CONVINCED BY THE EXPLANATION FURNISH ED BY THE ASSESSEE ON THE GROUND THAT AS COMPARED TO THE PREVIOUS YEAR , THE FOREIGN TRAVEL M/S. HUSH INDIA PVT. LTD. 5 EXPENSES HAVE INCREASED SUBSTANTIALLY WHEREAS THE S ALES HAVE INCREASED ONLY MARGINALLY. THE AO WAS OF THE FIRM BELIEF THA T THE ASSESSEE COULD NOT PROVE THE BONAFIDE OF SUCH EXPENSES AND WENT ON TO DISALLOW 25% OF THE FOREIGN TRAVEL EXPENSES AND MADE AN ADDITION OF RS. 1,33, 189/-. 11. THE ASSESSEE SUCCESSFULLY ARGUED THIS MATTER BE FORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT ONCE THE ASSE SSEE HAS FILED THE DETAILS OF FOREIGN TRAVEL EXPENSES, THE AO DID NOT SEEK ANY FURTHER CLARIFICATION OR DETAILS. THE LD. CIT(A) OBSERVED THAT IF THE AO WAS NOT CONVINCED WITH THE DETAILS FILED BY THE ASSESSEE, T HE AO SHOULD HAVE GIVEN A SPECIFIC OPPORTUNITY TO QUESTION THE DETAIL S. SINCE THE AO HAS NOT QUESTIONED THE DETAILS FILED BY THE ASSESSEE, THE L D. CIT(A) DELETED THE ESTIMATED DISALLOWANCE MADE BY THE AO. 12. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ONLY SUPPORTED THE FINDINGS OF THE AO. THE LD. COUNSEL FOR THE ASSESS EE DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN ITA NO. 5852/MUM /2010 IN THE CASE OF THE ASSESSEE ITSELF FOR A.Y. 2006-07 AND POINTED OU T THAT THE TRIBUNAL HAS DISCUSSED A SIMILAR ISSUE VIDE GROUND NO. 1 OF THAT APPEAL. THE LD. COUNSEL FURTHER POINTED OUT THAT THESE EXPENDITURES HAVE BEEN SUBJECTED TO FRINGE BENEFIT TAX. 13. WE HAVE CONSIDERED THE SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE ORDER OF TH E TRIBUNAL (SUPRA). WE FIND THAT THE TRIBUNAL HAS DECIDED THIS ISSUE IN FA VOUR OF THE ASSESSEE VIDE PARA-5 AND 5.1 OF ITS ORDER DT. 30.3.2012 WHICH IS AS UNDER: 5. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE AO HAS NOT DISPUT ED THE EXPENDITURE INCURRED BY THE ASSESSEE ON FOREIGN TRA VEL OF ITS DIRECTORS. HOWEVER, 20% OF THE TOTAL EXPENDITURE H AS BEEN DISALLOWED BY THE AO ON THE GROUND THAT THE EXPENDI TURE WAS M/S. HUSH INDIA PVT. LTD. 6 ON HIGHER SIDE IN COMPARISON TO THE IMPORTS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 5.1. AT THE OUTSET, WE ARE OF THE CONSIDERED OPINIO N THAT THE COMPARISON OF THE AO BETWEEN THE EXPENDITURE AND QU ANTUM OF IMPORT CANNOT BE BASIS FOR DISALLOWANCE OF THE EXPENSES, IF OTHERWISE GENUINENESS OF THE EXPENDITURE IS NOT DISPUTED. EVEN OTHERWISE, WHEN THE SAID EXPENDITURE WAS SUBJE CTED TO FRINGE BENEFIT TAX, THEN THE PARTIAL DISALLOWANCE O N THE PART OF THE AO IS NOT JUSTIFIED. FACTS AND CIRCUMSTANCES BEING IDENTICAL, RESPECTFU LLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE CONFIRM THE FINDINGS O F THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 14. GROUND NO. 2 RELATES TO DELETION OF ADDITION OF RS. 11,11,232/-. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES AMOU NTING TO RS. 90,65,092./- UNDER THE HEAD ADVERTISEMENT, SALES IN CENTIVES, COMMISSION, EXHIBITION, CONSULTANCY & PROFESSIONAL FEES, ELECTR ICITY AND LABOUR CHARGES. THE AO WENT ON TO COMPARE THE CLAIM OF TH ESE EXPENSES VIS-- VIS AS CLAIMED IN F.Y. 2006-07. THE AO NOTICED THA T THERE IS AN INCREASE OF RS. 44,44,927/-. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 1.1 2.2010. SUBMISSIONS OF THE ASSESSEE WERE REJECTED BY THE AO WHO WAS OF THE FIRM BELIEF THAT EXPENSES ARE NOT IN PROPORTION TO THE INCREASE IN T HE TURNOVER DURING THE YEAR. THE AO WAS ALSO OF THE OPINION THAT THE ASSE SSEE HAS NOT FURNISHED ANY SUPPORTING DOCUMENTS IN EVIDENCE OF THESE EXPEN SES CLAIMED DURING THE PREVIOUS YEAR AND WENT ON TO MAKE AN ESTIMATED DISALLOWANCE AT THE RATE OF 25% OF THE INCREASE IN EXPENDITURE AND MADE AN ADDITION OF RS. 11,11,232/-. 15. BEFORE THE LD. CIT(A), THE ASSESSEE STRONGLY CO NTENDED THAT THE ACTION OF THE AO IS UNJUSTIFIED IN COMPARING THE IN CREASE IN EXPENDITURES M/S. HUSH INDIA PVT. LTD. 7 VIS--VIS TURNOVER OF THE BUSINESS. IT WAS FURTHER EXPLAINED THAT BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO ALONGWITH ALL INVOICES/BILLS/VOUCHERS. THE LD. CIT(A) WAS CONVIN CED THAT THE ASSESSEE HAS FILED DOCUMENTARY EVIDENCES IN RESPECT OF EXPEN SES UNDER THE HEAD ADVERTISEMENT, EXHIBITION AND COMMISSION EXPENSES. THE LD. CIT(A) WAS ALSO CONVINCED THAT THE AO CANNOT SIT ON JUDGE MENT ON THE QUESTION OF QUANTUM OF EXPENDITURE. IT IS THE SOLE PREROGAT IVE OF THE BUSINESSMAN WHICH CANNOT BE QUESTIONED AS LONG AS THE EXPENDITU RE IS FOR THE PURPOSE OF BUSINESS AND DELETED THE ADDITION OF RS. 11,11,2 32/-. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES AND ALS O CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07, IN OUR CONSIDERATE VIEW, THE AO CANNOT QUESTION THE QUANTU M OF EXPENSE AS LONG AS THEY ARE PROVED TO BE INCURRED FOR THE PURPOSE O F BUSINESS AND FULLY SUPPORTED BY BILLS AND VOUCHERS. WE FIND THAT THE AO HAS MADE AN ADHOC DISALLOWANCE WITHOUT ANY BASIS. WE THEREFORE DECLI NE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS AC CORDINGLY DISMISSED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.5.2013 . 4 / 3' % 5 67 8.5.2013 3 / 8 SD/- SD/ (I.P. BANSAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 6 DATED 08/05/2013 . . ./ RJ , SR. PS M/S. HUSH INDIA PVT. LTD. 8 4 4 4 4 / // / ,0! ,0! ,0! ,0! 9!'0 9!'0 9!'0 9!'0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. !;8 ,0 , , / DR, ITAT, MUMBAI 6. 8< = / GUARD FILE. 4 4 4 4 / BY ORDER, -!0 ,0 //TRUE COPY// > >> > / ? ? ? ? ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI