NEPTUNE CONTAINER LINE & LOGISITICS P.LTD, MUMBAI V. DCIT CIR 2(2)(OSD), MUMBAI

ITA 7028/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3910 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 17-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANDHIR GUPTA
• Assessee Lawyers: H N MOTIWALA
• Keywords: Business expenditure; Capital expenditure
• Section: 37(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NOS. 7027 & 7028/MUM/2011 (ASSESSMENT YEARS:2003-04 & 2004-05) NEPTUNE CONTAINER LINE & LOGISTICS PVT. LTD., 26-27, 4 TH FLOOR, KAMER BUILDING, 38 CAWASJI PATEL STREET, FORT, MUMBAI 400 001 APPELLA NT VS. DCIT 2(2)(OSD), MUMBAI 400 001 RESPONDENT PAN: AAACN5667P /BY APPELLANT : SHRI H. N. MOTIWALA, A.R. /BY RESPONDENT : SHRI RANDHIR GUPTA, D.R. /DATE OF HEARING : 02.08.2016 /DATE OF PRONOUNCEMENT : 08.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH APPEALS HAVE BEEN FILED BY ASSESSEE AGAINST TH E ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-5, M UMBAI, DATED 06.07.2011 FOR BOTH A.YS. I.E. 2003-04 & 2004 -05. SINCE, THESE APPEALS PERTAIN TO SAME ASSESSEE AND O N SIMILAR ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 2 ISSUE, SO THEY ARE BEING DISPOSED OF BY COMMON ORDE R FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.7028/MUM/2011 FOR A.Y. 2004-05, ASSESS EE HAS FILED APPEAL ON FOLLOWING GROUNDS: 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL ) 5, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN CONFIRMING THE ADDITIO NS OF RS.8,53,910/- ON ACCOUNT OF BOGUS EXPENDITURE DISALLOWED BASED ON THE INVESTIGATIONS DONE BY EOW, WHERE AS DETAILS AVAILABLE ON THE RECORDS SHOWS PRO PER CARE WAS TAKEN AT THE TIME OF PAYMENT AND THE LEARN ED ASSESSING OFFICER HAS RELIED ONLY ON THE FINDINGS O F EOW. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) 5, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER EVEN KNOWN THE FACT THAT SHRI PIYUSH CHHEDA WAS ARRESTED AND RELEASED ON THE BAIL, AND THESE STATEMENTS WERE RECORDED BY EOW, WHICH HAS NO RELEVANT ON THE OUR COMPANY AS WE HAVE GIVEN THESE CHEQUES TO M/S EUREKA CORPORATION (PROP DILIP MEHTA), WHICH WAS FRAUDULENTLY ENCHASED BY SH RI PIYUSH CHHEDA AND A CASE OF FRAUD IS ALREADY BEING FILED BY DILIP MEHTA FOR RECOVERY OF AMOUNT, AND OU R PARTY TO THIS, THEN THIS AMOUNT CANT BE ADDED BACK TO US AS BOGUS EXPENSE. 2. ASSESSING OFFICER MADE ADDITION OF RS.8,53,910/- ON ACCOUNT OF BOGUS EXPENDITURE BASED ON INVESTIGATION DONE BY ECONOMIC OFFENCE WING (HEREINAFTER CALLED AS EOW ), WHEREIN HE OBSERVED THAT PAYMENTS WERE MADE IN THE NAMES OF SHRI PIYUSH CHHEDA, SHRI DHAVAL NAIK AND M/S. EUREKA CORPORATION. ON THE BASIS OF STATEMENTS OF SHRI PI YUSH CHHEDA AND SHRI DAWAL NAIK TO EOW, SHRI PIYUSH CHHE DA ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 3 ALONG WITH WIFE SMT. MEENAL CHHEDA HAD OPENED FRAUD ULENT BANK ACCOUNTS WHERE THEY HAD DEPOSITED CHQUES, WHIC H THEY OBTAINED FRAUDULENTLY WITH THE HELP OF SHRI MAYUR W ALIA. THE AMOUNT WHICH WAS DUE TO EUREKA CORPORATION WAS BEIN G PAID AFTER OBTAINING THE PROPER INVOICES DEDUCTING THE T DS AND ISSUED ACCOUNT PAYEE CHEQUES. THE OWNER OF EUREKA CORPORATION WHO HAS FILED THE FIR WITH THE POLICE F OR NOT RECEIPT OF CHEQUES AND CONCERNED POLICE STATION FOU ND THAT THESE CHEQUES WERE FRAUDULENTLY ENCASHED BY SHRI PI YUSH CHHEDA BY OPENING THE FRAUDULENT ACCOUNT WITH THE B ANK AND FOR THAT, POLICE ARRESTED HIM AND RECOVERED THE DET AILS AND AMOUNT FROM HIM. EUREKA CORPORATION HAS SHOWN THE S AID AMOUNT OUTSTANDING. CHEQUES ISSUED TO PIYUSH CHHED A AND DAWAL NAIK WAS AGAINST PROPER INVOICES. ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF BOGUS EXPENDITURE DETAI LED AS UNDER: S. NO. NAME F.Y. 2002-03 F.Y. 2003-04 TOTAL 1 PIYUSH CHHEDA 180682 119755 300437 2 EUREKA CORPORATION 632765 632765 3 DHAVAL NAIK 356208 101390 457598 TOTAL 536890 853910 13,90,800 IN APPEAL, THIS ADDITION WAS CONFIRMED BY CIT(A). 2.1 ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT EXPENDITURE IN QUESTION AT THE HAND OF ASSESSEE WAS GENUINE, SO, SAME SHOUL D BE ALLOWED. ON THE OTHER HAND, LD. DEPARTMENTAL REPRE SENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 4 2.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE IS ENGAGE D BUSINESS OF SERVICES RELATED TO SHIPPING AGENT/MULTIMODAL TR ANSPORT OPERATOR/INTERNATIONAL FREIGHT FORWARDING AGENTS. ASSESSEES SALES PERSON CANVAS THE CARGOES AND APPROACH THE SH IPPERS/ EXPORTERS/CUSTOM HOUSE AGENTS AND FREIGHT BROKERS. AS PER THE INDUSTRY PRACTICE, IT OFFERS BORKERAGE/COMMISSI ON TO CUSTOMERS WHICH RANGES AS PER THE CONTRACT. THE KE Y PERSON WITHIN THE WHOLE TRANSACTION IS SALES EXECUTIVE/SAL ES PERSON/ SALES MANAGER OF THE COMPANY WHO AGREES TO PAY THE COMMISSION ON BEHALF OF COMPANY THROUGH THE BROKER EUREKA CORPORATION, PIYUSH CHHEDA AND DAVAL NAIK AND COMPA NY WAS RECEIVING THE CARGO AND AS PER AGREED TERMS BY THE MANAGER, COMPANY WAS LIABLE TO PAY THE BROKERAGE/COMMISSION AGAINST THE INVOICES RAISED BY THEM. DURING THIS PERIOD, C OMPANY HAS ISSUED ALL THE CHEQUES AGAINST INVOICES RAISED BY T HEM. AFTER CHECKING THE TDS CERTIFICATES, EUREKA CORPORATION C OMPLAINED THAT THE CHEQUES NET AMOUNTING TO RS.5,99,398/- WER E NOT RECEIVED BY HIM AS PER THE TDS CERTIFICATES AND LOD GED COMPLAINT FOR FRAUDULENT ENCASHMENT OF CHEQUES. IT WAS SUBMITTED THAT THE SHIPMENTS IN QUESTION WERE ALL G ENUINE BUSINESS TRANSACTIONS AND NOT BOGUS AS ALLEGED. AS PER SECTION 37(1) OF THE ACT, ANY EXPENDITURE (NOT BEIN G EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR P ERSONAL EXPENSES OF ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESS ION SHALL BE ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 5 ALLOWED IN COMPUTING INCOME CHARGEABLE UNDER THE HE AD PROFITS AND GAINS OF BUSINESS OR PROFESSION. COM MISSION PAID TO PIYUSH CHHEDA AND DHAVAL NAIK SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. EVEN COMMISSION WAS DUE/PAID AND PAYABLE TO EUREKA CORPORATION. HOWEVER, THESE CHEQ UES ISSUED TO EUREKA CORPORATION WERE FRAUDULENTLY ENCA SHED BY PIYUSH CHEDDA AND MINAL PIYUSH CHEDDA. IT DOES NOT CHANGE THE COLOUR OF LIABILITY IN THE HANDS OF ASSESSEE. THERE IS NOTHING ON RECORD TO SUGGEST THAT ASSESSEE HAD NOT INCURRED THIS EXPENDITURE IN LIEU OF SERVICES RENDERED TO IT . THERE IS CONNIVANCE OF ASSESSEE IN FRAUDULENT DIVERSION OF T HE AMOUNT TO FRAUDULENT PERSONS INSTEAD OF EUREKA CORPORATION . ASSESSEE HAS CLAIMED THE EXPENDITURE AS IT HAS SHOWN AND CHE QUES WERE ISSUED IN THE NAME OF EUREKA CORPORATION AGAINST SE RVICES RENDERED BY IT. IRRESPECTIVE OF THE FACT THAT SAME HAS NOT REACHED DESTINATION IN SPITE OF THEIR USUAL MODE OF PAYMENT THROUGH BANKING CHANNEL. MOREOVER, THE SAID AMOUNT WAS PAID AFTER DEDUCTING TDS. IT SHOWS THAT BONAFIDE OF PAY MENT IN THIS REGARD. IN THIS SITUATION, EXPENDITURE IN QUESTION SHOULD NOT BE DISALLOWED ON THE BASIS OF STATEMENTS OF SOMEBOD Y IN PROCEEDINGS BEFORE EOW. MOREOVER, THERE IS NOTHING ON RECORD THAT THE PROCEEDINGS OF EOW WERE CONFRONTED TO THE ASSESSEE IN THIS REGARD IN ANY MANNER. SEQUENCE OF THE FACTS S HOW THAT ASSESSEE MADE PAYMENT TO EUREKA CORPORATION, WHICH WAS FRAUDULENTLY CORNERED BY SHRI PIYUSH CHHEDA AND OTH ER. AS STATED ABOVE, FOR THE SAME, DILIP MEHTA OF M/S. EUR EKA CORPORATION FILED A COMPLAINT FOR RECOVERY OF THE A MOUNT IN ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 6 QUESTION. IT SHOWS THAT DILIP MEHTA OF M/S. EUREKA CORPORATION HAS NO GRIEVANCES AGAINST ASSESSEE. SO , THE EXPENDITURE IN QUESTION SHOULD NOT BE DISALLOWED IN THE HANDS OF ASSESSEE, IRRESPECTIVE OF THE FACT THAT SAME HAS BEEN FRAUDULENTLY CORNERED BY SOMEBODY, FOR WHICH, SEPAR ATE LEGAL PROCEEDING CLAIMED TO BE SUBJUDICE. ACCORDINGLY, T HIS AMOUNT IN QUESTION SHOULD NOT BE DISALLOWED. REGARDING OT HER AMOUNTS, PAYMENTS HAD BEEN MADE OF RS.1,19,755/- TO PIYUSH CHHEDA AND RS.1,01,390/- TO DHAVAL NAIK. THOSE PAY MENTS TO PIYUSH CHHEDA AND DHAVAL NAIK SHOULD NOT BE DISALLO WED ON THE ANALOGY OF EUREKA CORPORATION AS SAME HAVE BEEN PAID TO RESPECTIVE PARTIES AGAINST THEIR SERVICES RENDERED TO ASSESSEE. THE FACTS OF EUREKA CORPORATION ARE DIFFERENT FROM THE PAYMENTS MADE TO PIYUSH CHHEDA AND DHAVAL NAIK. TH ESE HAVE BEEN INCURRED BY ASSESSEE FOR THE BUSINESS PUR POSE. SO, SAME SHOULD NOT BE DISALLOWED FOR REASONS DISCUSSED ABOVE. ACCORDINGLY, THESE AMOUNTS IN QUESTION ARE DIRECTED TO BE ALLOWED. 2.3 AS A RESULT, APPEAL FILED BY ASSESSEE FOR A.Y. 2004-05 IS ALLOWED. 3. IN ITA NO.7027/MUM/2011 FOR A.Y. 2003-04, ASSESS EE HAS FILED APPEAL ON FOLLOWING GROUNDS: 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL ) 5, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN CONFIRMING THE ADDITIO NS OF RS.5,36,890/- ON ACCOUNT OF BOGUS EXPENDITURE DISALLOWED BASED ON THE INVESTIGATIONS DONE BY EOW, ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 7 WHERE AS DETAILS AVAILABLE ON THE RECORDS SHOWS PRO PER CARE WAS TAKEN AT THE TIME OF PAYMENT AND THE LEARN ED ASSESSING OFFICER HAS RELIED ONLY ON THE FINDINGS O F EOW. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) 5, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER EVEN KNOWN THE FACT THAT SHRI PIYUSH CHHEDA WAS ARRESTED AND RELEASED ON THE BAIL, AND THESE STATEMENTS WERE RECORDED BY EOW, WHICH HAS NO RELEVANT ON THE OUR COMPANY AS WE HAVE GIVEN THESE CHEQUES TO M/S EUREKA CORPORATION (PROP DILIP MEHTA), WHICH WAS FRAUDULENTLY ENCHASED BY SH RI PIYUSH CHHEDA AND A CASE OF FRAUD IS ALREADY BEING FILED BY DILIP MEHTA FOR RECOVERY OF AMOUNT, AND OU R PARTY TO THIS, THEN THIS AMOUNT CANT BE ADDED BACK TO US AS BOGUS EXPENSE. 4. THE ISSUE OF EXPENDITURE OF RS.5,36,890/- ON ACC OUNT OF ALLEGED BOGUS EXPENDITURE IS ORIGINATING FROM EOW PROCEEDINGS, WITH REGARD TO SOME ALLEGED BOGUS TRAN SACTIONS IN CASE OF EUREKA CORPORATION. IN FACT, BOTH PARTIES, NAMELY, PIYUSH CHHEDA AND DHAVAL NAIK HAVE ALSO RENDERED INDEPENDENT SERVICE TO THE ASSESSEE IN THE YEAR CON SIDERATION FOR WHICH PAYMENT HAS BEEN MADE. TDS ON THE AMOUNT HAS BEEN PAID BUT SAME HAS BEEN DISALLOWED ON THE ANALO GY OF EUREKA CORPORATION. THE PAYMENTS OF EUREKA CORPORA TION IN A.Y. 2004-05 ARE ON DIFFERENT FOOTINGS AND DISALLOW ED BY ASSESSING OFFICER, WHICH HAS ALSO BEEN DELETED BY U S VIDE PARA 2 OF THIS ORDER. HOWEVER, DRAWING SAME ANALOGY I.E . INVESTIGATION OF EWO AMOUNT IN QUESTION HAS BEEN DI SALLOWED BY REVENUE AUTHORITIES. IN THIS REGARD, THE STAND OF ASSESSEE IS VERY CLEAR THAT PIYUSH CHHEDA AND OTHER WERE GIVEN THE AMOUNTS IN QUESTION IN LIEU OF SERVICES RENDERED BY THEM. ITA NOS.7027 & 7028/MUM/11 A.YS. 03-04 & 04-05 [NEPTUNE CONTAINER LIN & LOGISTICS P. LTD. VS. DCI T] PAGE 8 EVEN THOUGH, THESE PARTIES COMMITTED SAME FRAUD WIT H REGARD TO PAYMENT TO EUREKA CORPORATION IN A.Y. 2004-05. IT DOES NOT MEAN THAT THE PAYMENT MADE TO THESE PARTIES IN RESP ECT OF THEIR SERVICES RENDERED TO ASSESSEE ALSO GOES BOGUS . SO, RELYING ON THE DECISION FOR A.Y. 2004-05 ON THIS ISSUE, DIS ALLOWANCE FOR THE YEAR UNDER CONSIDERATION FOR BOTH PARTIES IS AL SO NOT JUSTIFIED. SAME IS DIRECTED TO BE DELETED. 5. IN THE RESULT, BOTH APPEALS FILED BY ASSESSEE AR E ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 08 TH DAY OF AUGUST, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 08/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. BY ORDER / , / , ,