DCIT 1(1)(2), MUMBAI V. HSBC ASSETS MANAGEMENT (I) P.LTD, MUMBAI

ITA 7528/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9811 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 22-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: UDAYA BHASKAR JAKKA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Additional evidence; Set aside
• Section: 80G; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI M.BALAGANESH (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 7528/MUM/2016 ASSESSMENT Y EAR: 2006 - 07 THE DY. COMMISSIONER OF INCOME TAX 1(1)(2), 579, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 VS. M/S HSBC ASSETS MANAGEMENT (I) PVT. LTD., 16 - V N ROAD, FORT, MUMBAI - 400020 PAN: AABCH0007N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI UDAYA BHASKAR JAKKA ( D R ) ASSESSEE BY : SHRI NIRAJ SHETH (A R ) DAT E OF HEARING: 28/01 /201 9 DATE OF PRONOUNCEMENT: 26 / 04 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 18.08.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2006 - 07 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S 254 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. I N THE PRESENT CASE, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 80,84,70,797/ - . SINCE, THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES , VALUE OF WHICH WAS OVER 15 CRORES , THE CASE WAS SELECTED FOR SCRUTINY, ACCORDINGLY, ORDER U/S 92CA(3) OF THE ACT WAS PASSED BY THE TRANSFER PRICING OFFICER (TPO), MUMBAI AND ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS. 81, 70,82,170/ - . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT 2 ITA NO. 7528 / MUM / 2016 ASSESSMENT YEAR: 2006 - 07 (A) PARTLY ALLOWED THE RELIEF IN RESPECT OF DISALLOWANCE ON ACCOUNT OF CREDIT CARD EXPENSES AND BUSINESS PROMOTION EXPENSES , HOWEVER, UPHELD THE ADDITIONS ON ACCO UNT OF PRIOR PERIOD EXPENSES AND ALSO UPHELD THE DISALLOWANCE OF 80G DEDUCTION. STILL AGGRIEVED, THE ASSESSEE CHALLENGED THE IMPUGNED ORDER BEFORE THE ITAT. THE REVENUE ALSO FILED THE CROSS APPEAL . THE ITAT PARTLY ALLOWED BOTH THE APPEALS AND SET ASIDE THE ISSUE RELATING TO BUSINESS PROMOTION EXPENSES AMOUNTING TO RS. 69,93,864/ - TO THE FILE OF AO OBSERVING THAT THE AUTHORITIES BELOW HAVE NOT EXAMINED THE RECORD FILED BY THE ASSESSEE. DURING THE SET ASIDE PROCEEDINGS, 3. AFTER GOING THROUGH THE SUBMISSION S MADE BY THE ASSESSEE AND THE DOCUMENTS FURNISHED THE AO FOUND THAT THE ASSESSEE HA S NOT FURNISHED COMPLETE DETAILS AND DOCUMENTS TO SUBSTANTIATE ITS CLAIM. ACCORDINGLY, THE AO AFFORDED FURTHER OPPORTUNITY TO FURNISH THE EVIDENCE, HOWEVER, THE ASSESSEE FA ILED TO COMPLY WITH THE SAME . ACCORDINGLY, THE AO INVOKING PROVISIONS OF SECTION 144 OF THE ACT PROCEED TO DISALLOW 50% OF THE BUSINESS PROMOTION EXPENSES AND DETERMINED THE TOTAL INCOME AT RS. 82,40,76,031/ - . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER P ASSED U/S 143 (3 ) R.W.S. 254 OF THE ACT BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE SET ASIDE ORDER PASSED U/S OF 144 OF THE ACT AND CONSEQUENTLY DELETED THE DISALLOWANCE MADE BY THE AO. 4 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT (A) ERRED IN QUASHING THE ORDER U/S 144 OF THE IT ACT IGNORING THE FINDINGS OF THE AO BROU GHT OUT IN THE ORDER GIVING EFFECT TO THE ITAT ORDER, THAT THE ASSESSEE DID NOT FULLY COMPLY WITH THE REQUIREMENT OF FURNISHING DOCUMENTARY EVIDENCE IN RESPECT OF 17 IDENTIFIED TRANSACTIONS OF BUSINESS PROMOTION EXPENSES? 3 ITA NO. 7528 / MUM / 2016 ASSESSMENT YEAR: 2006 - 07 2. WHETHER ON THE FACTS AND CI RCUMSTANCES AND IN LAW, THE LD. CIT (A) WAS CORRECT IN ALLOWING APPEAL OF THE ASSESSEE AND HOLDING THAT THE ACTION OF AO ASSUMING JURISDICTION U/S 144 OF THE ACT IS LIABLE TO BE DELETED? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS CORRECT IN DELETING THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES OF RS. 1,39,87,728/ - WITHOUT APPRECIATING THE FINDINGS BROUGHT OUT BY AO IN THE ORDER GIVING EFFECT TO ITAT ORDER THAT THE ASSESSEE MERELY FURNISHED NARRATION OF E XPENSE HEAD AS GIVEN IN THE LEDGER AND DID NOT FURNISH DOCUMENTARY PROOF/EVIDENCES AS TO ALLOWABILITY OF EXPENSES AS BUSINESS PROMOTION EXPENSES? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT UPHOLD ING THE ORDER OF THE AO BY ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF PAPER BOOK FURNISHED DURING APPELLATE PROCEEDINGS WHICH WAS NOT FURNISHED DURING ASSESSMENT PROCEEDINGS AND THEREBY VIOLATING RULE 46A AS NO OPPORTUNITY HAS BEEN GIVEN TO THE AO TO EXA MINE THE ADDITIONAL EVIDENCE? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS CORRECT IN NOT SUSTAINING THE DISALLOWANCE OF RS. 69,93,864/ - ENHANCED BY THE AO BY HOLDING THAT AO CANNOT TRAVEL BEYOND THE DIRECTI ON OF ITAT WHEN THE AO IS LEGALLY EMPOWERED BY ITAT TO EXAMINE THE ISSUE AS THE ISSUE HAS BEEN RESTORED TO THE FILE OF AO FOR EXAMINING DENOVO? 5. AT THE OUTSET, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE AO HAS PASSED THE ASSESSMENT OR DER BY INVOKING SECTION 144 OF THE ACT AS THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE TO SUBSTANTIATE ITS CLAIM DESPITE GIVING SUFFICIENT OPPORTUNITY FOR THIS PURPOSE. DURING THE SE T ASIDE PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE AO TO PRODUCE THE DETAIL S OF PRIOR PERIOD EXPENSES AND EXPLANATION FOR NATURE OF EXPENDITURE WITH SUPPORTING 4 ITA NO. 7528 / MUM / 2016 ASSESSMENT YEAR: 2006 - 07 DOCUMENTS, DETAILS OF NATURE PURPOSE AND EVIDENCE OF BUSINESS PROMOTION PAYMENTS WITH JUSTIFICATION OF CLAIM AND RECONCILIATION OF REVERSAL ENTRIES OF THE SAID EXPENDITURE WITH RESPECT TO REVERSE ENTRIES DISCUSSED IN THE ORDER OF THE LD. CIT (A). IN RESPONSE THEREOF THE ASSESSEE SUBMITTED SOME OF THE DETAILS ALONG WITH THE WRITTEN SUBMISSIONS. THE LD. DR INVITED OUR ATTENTION TO THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE A O TO DEMONSTRATE TH AT THE ASSESSEE DID NOT PRODUCE THE REQUIRED DOCUMENTS/EVIDENCE DURING THE SET ASIDE PROCEEDING. THE LD. DR FURTHER SUBMITTED THAT SINCE THE DOCUMENTS WERE NOT PRODUCED BEFORE AO THE LD. CIT(A) OUGHT TO HAVE SOUGHT REMAND REPORT FROM THE ASSESSEE OR SENT THE SAME TO THE AO FOR VERIFICATION. THE LD. DR FURTHER SUBMITTED THAT SINCE, THE DOCUMENTS RELIED UPON BY THE LD. CIT(A) HAVE NOT BEEN VERIFIED, THE SAME ARE REQUIRED TO BE VERIFIED, THEREFORE THE IMPUGNED ORDER MAY BE SET ASIDE AND THE MATTER MAY BE SENT BACK TO AO FOR DECIDING THE ISSUE ON MERIT IN THE LIGHT OF THE DOCUMENTS RELIED UPON BY THE LD CIT(A) 6. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE DOCUMENTS AND DETAILS WERE FURNISHED BEFORE THE AO DURING THE SE T ASIDE PROCEEDINGS AND SINCE, THE LD. CIT(A) HAS PASSED THE ORDER AFTER EXAMINING THE DOCUMENTS ON RECORD IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE, THERE IS NO INFIRMITY IN THE SAID ORDER TO INTERFERE WITH. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. THE AO HAS MADE DISALLOWANCE IN QUESTION FOR THE REASONS THAT THE ASSESSEE HAS FAILED TO PRODUCE THE DOCUMENTS AND DETAILS TO SUBSTANTIATE THE CLAIM. THE AO HAS REPROD UCED THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE TO THE DETAILS CALLED FOR U/S 142 (1) OF THE ACT, WHICH IS AS UNDER: - AS REGARDS GROUND N O . 2: ADDITION OF THE PRIOR PERIOD EXPENSES 1. DURING THE CAPTION YEAR UNDER CONSIDERATION, EXPENSES WITH REGARD TO THE VICTORY LAP CONTEXT HAD BEEN INCURRED TO THE TUNE OF RS. 7,93,016/ - . THE SAID CONTEST WAS HELD IN THE PREVIOUS YEAR 2004 - 05 AND IS EVIDENCE FROM THE BUSINESS PROMOTION EXPENSES 5 ITA NO. 7528 / MUM / 2016 ASSESSMENT YEAR: 2006 - 07 SUBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE INVOICE/BILL WAS RECEIVED ONLY IN THE CAPTION F.Y. AS REGARD GROUND 3: DISALLOWANCE OF BUSINESS PROMOTION EXPENSES: 2. WE HAD SUBMITTED ALL THE RELEVANT, DETAILS A CALLED FOR A IN THE ASSESSMENT PROCEEDINGS. THE LEDGER FOR THE BUSINESS PROMOTION EXPENSES SUBM ITTED IN THE COURSE OF ASSESSMENT IS ATTACHED HEREWITH. 3. AS FAR AS THE REVERSAL OF RS. 70,48,933/ - IS CONCERNED, THE DETAILS ARE AS UNDER: - A) WE HAD INCURRED ON AGGREGATE EXPENDITURE OF RS. 3,00,31,686/ - AS INITIAL EXPENSES IN RESPECT OF LAUNCH OF HSBC ADVA NTAGE INDIA FUND OF THE MUTUAL FUND. IN ACCORDANCE WITH REGULATIONS 52(4) TO 52(7) OF SEBI (MUTUAL FUNDS) REGULATION, 1996, ASSET MANAGEMENT COMPANY MAY CHARGE THE MUTUAL FUND WITH INVESTMENT AND ADVISORY SERVICES UNDER REGULATION ASSET MANAGEMENT COMPANY MAY CHARGE THE MUTUAL FUNDS WITH THE EXPENSES MENTIONED IN REGULATION 52(4) OF SEBI (MUTUAL FUNDS) REGULATION, 1996. THEREFORE, THE APPELLANT HAS REVERSED AN AMOUNT OF RS. 70,48,933/ - AS CHARGED TO THE SCHEMES. 8. ON THE OTHER HAND, THE LD. CIT ( A) HAS ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO COMPLY WITH ALL THE TERMS OF NOTICES U/S 142 (1) OR 143 (2) OF THE ACT. THE LD. CIT (A) HAS FURTHER MENTIONED IN THE ORDER THAT AO HAS EVEN NOT STAT ED IN THE ORDER THAT THE APPELLANT HAS NOT COMPLIED WITH THE TERMS OF NOTICE. THEREFORE, THERE IS A JURISDICTIONAL DEF ECT IN THE ACTION OF AO IN INVOKING POWERS U/S 144 OF THE ACT AND MAKING DISALLOWANCE ON AD HOC BASIS AND SUSTAINING THE DISALLOWANCE OF P RIOR PERIOD EXPENDITURE. THE LD. CIT (A) HAS FURTHER MENTIONED THAT THE AO HAS FAILED TO TAKE COGNIZANCE OF THE DETAILS FILED BY THE APPELLANT. J URISDICTION U/S 144 OF THE ACT CAN ONLY BE INVOKED WHEN THE APPELLANT FAILS TO COMPLY WITH THE TERMS OF NOTICE U/S 142 (1) AND 143 (2) OF THE ACT. 9. HENCE, FROM THE ORDERS OF THE AUTHORITIES BELOW IT CAN BE CONCLUDED THAT EITHER THE DOCUMENTS RELIED UPON BY THE LD. CIT (A) WERE NOT AVAILABLE BEFORE 6 ITA NO. 7528 / MUM / 2016 ASSESSMENT YEAR: 2006 - 07 THE AO DURING THE SET ASIDE PROCEEDINGS OR THE AO DID NOT EXAMINE DOCUMENTS PRODUCED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE DEEM IT APPROPRIATE TO SEND THE MATTER BACK TO THE AO FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF THE DOCUMENTS RELIED UPON BY THE LD.CIT (A) AS IN OUR CONSIDERED VIEW, THE SAME REQUIRE EXAMINATION/VERIFICATION BY THE AO. WE ACCORDINGLY , SET ASIDE THE FINDINGS OF THE LD. CIT (A) IN THE INTEREST OF JUSTICE AND SEND THE ISSUE BACK TO THE AO WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH, AFTER VERIFYING THE DOCUMENTS RELIED UPON BY THE CIT ( A) AND AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007 - 2008 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL , 2019 . SD/ - SD/ - ( M. BALAGANESH ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 26 / 0 4 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI