Assistant Commissioner of Income Tax Central Circle-2(2), Bangalore V. M/s Global Finsol Pvt Ltd , Bangalore

ITA 78/BANG/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7883 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-01-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: VINOD KUMAR NAIDU
• Keywords: Business expenditure; Search and seizure; Tax effect; Onus to prove; Set aside
• Section: 143(3); 153A; 268A; 13; 37

Judgement Text

ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NOS.75 TO 80/BANG/2018 ASSESSMENT YEARS: 2008-09 TO 2013-14 ACIT CENTRAL CIRCLE-2(2) BANGALORE VS. M/S. GLOBAL FINSOL PVT. LTD. NO.1B, 1 ST FLOOR, NO.15 1 ST CROSS, HEBBAL PAMPA EXTN. KEMPAPURA BENGALURU-560 052. PAN NO : AACCT4782B APPELLANT RESPONDENT APPELLANT BY : N O N E RESPONDENT BY : SHRI VINOD KUMAR NAIDU, A.R. DATE OF HEARING : 18.01.2021 DATE OF PRONOUNCEMENT : 18.01.2021 O R D E R PER BENCH: ALL THESE APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE COMMON ORDER DATED 12-10-2017 PASSED BY LD CIT(A)-1 1, BANGALORE AND THEY RELATE TO THE ASSESSMENT YEARS 2008-09 TO 2013-14. 2. NONE APPEARED ON BEHALF OF THE REVENUE. TH E LD COUNSEL APPEARING FOR THE ASSESSEE ALSO SOUGHT ADJOURNMENT. HOWEVER, WE NOTICE THAT THE ISSUE CONTESTED BY THE REVENUE IN T HE PRESENT APPEALS ARE SIMPLE AND NOT COMPLICATED. HENCE WE PROCEED T O DISPOSE OF THE APPEALS. ACCORDINGLY THE ADJOURNMENT REQUEST OF TH E ASSESSEE IS REJECTED. ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 2 OF 8 3. THE SOLITARY AND COMMON ISSUE URGED IN ALL T HESE APPEALS IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF PRINTING & STATIONERY EXPENSES MADE BY THE AO IN AL L THESE YEARS UNDER CONSIDERATION. 4. WE HEARD LD A.R AND PERUSED THE RECORD. TH E ASSESSEE IS A CORPORATE AGENT OF BAJAJ ALLIANCE LIFE INSURANCE CO MPANY LTD (BALIC) AND IS EARNING COMMISSION INCOME. THE REVENUE CARRI ED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 20-10-2011. CONSEQUENT THERETO, THE PRESENT ASSESSMENTS WERE CO MPLETED U/S 143(3) R.W.S. 153A OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] FOR ASSESSMENT YEARS 2008-09 TO 2012-13. THE AO, INTER ALIA, HAD FULLY DISALLOWED PRINTING EXPENSES INCURRED BY THE ASSESS EE IN THE YEARS RELEVANT TO ASSESSMENT YEAR 2008-09 TO 2012-13. TH E ASSESSEE CHALLENGED THE ADDITIONS BY FILING APPEALS BEFORE L D. CIT(A) AND THEN TO ITAT. THE TRIBUNAL, VIDE ITS COMBINED ORDER DAT ED 12.12.2014 PASSED FOR ASSESSMENT YEARS 2008-09 TO 2012-13 SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO EXAMINE FOLLOW ING FOUR ASPECTS:- I. WHETHER THE EXPENDITURES DISALLOWED PERTAIN TO THE RELEVANT ASSESSMENT YEAR. II. WHETHER THE PAYMENTS (EXPENSES) DISALLOWED BY THE ASSESSING OFFICER, WERE SUCH THAT THEY VIOLATE THE IRDA REGULATIONS AND ARE THEREFORE HIT BY THE EXPLANATIO N TO SECTION 37(1). III. WHETHER THE EXPENSES DISALLOWED WERE INDEED BUSINESS EXPENDITURE WITH REFERENCE TO THE DETAILS OF EXPENSES AND THE BENEFITS DERIVED FROM THEM. IV. WHETHER THE EXPENSES DISALLOWED, WERE ALSO CLAIMED BY THE SISTER CONCERNS. AND IF THE PAYMENTS WERE IN T HE NATURE OF REIMBURSEMENTS, THEN WHETHER THE REIMBURSEMENT AND THE RELATED EXPENSES WERE DULY ACCOUNTED IN THE BOOKS OF THE SISTER CONCERNS. ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 3 OF 8 ACCORDINGLY, THE PRESENT ASSESSMENT ORDERS CAME TO BE PASSED BY THE A.O. THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT T HE PRINTING AND STATIONERY EXPENSES WERE INCURRED FOR PRINTING PAMP HLETS EXPLAINING VARIOUS INSURANCE PRODUCTS WHICH ARE TO BE DISTRIBU TED TO PROSPECTIVE BUYERS. ACCORDINGLY, IT WAS CONTENDED THAT THESE E XPENSES ARE INCIDENTAL TO CARRYING ON THE BUSINESS OF THE ASSES SEE. HOWEVER, THE A.O. TOOK THE VIEW THE ASSESSEE HAS NOT SATISFACTOR ILY EXPLAINED THE MANNER IN WHICH THE MATERIAL PUBLISHED HAVE BEEN UT ILISED FOR THE PURPOSE OF THE BUSINESS. ACCORDINGLY, HE DISALLOWE D 50% OF THE PRINTING & STATIONERY EXPENSES CLAIMED BY THE ASSES SEE. 5. FOLLOWING THE ABOVE SAID ORDERS, THE AO MA DE IDENTICAL DISALLOWANCE OF 50% OF PRINTING & STATIONERY EXPENS ES IN AY 2013- 14 IN THE ORDER PASSED U/S 143(3) OF THE ACT. 6. THE LD. CIT(A) DELETED THE SAID DISALLOWANCE IN ALL THE YEARS UNDER CONSIDERATION WITH THE FOLLOWING OBSERVATIONS : IT IS OBSERVED THAT THE ASSESSING OFFICER DISALLOW ED 50% OF THE EXPENDITURES INCURRED UNDER THIS HEAD WITHOUT BRING ING SUFFICIENT EVIDENCE ON RECORD. THE DISALLOWANCE WAS MAINLY AD HOC AND WITHOUT ANY OBJECTIVE BASIS. THE APPELLANT COMPANY ON THE OTHER HAND ESTABLISHED THAT THE EXPENDITURE WAS TRULY INC URRED FOR THE PURPOSE OF BUSINESS, WHICH IS ALSO ADMITTED BY THE A.O. MOREOVER, THESE EXPENSES ARE DULY VOUCHED AND PAYMENTS WERE M ADE MOSTLY BY ACCOUNT PAYEE CHEQUES. ANOTHER CONTENTION OF TH E ASSESSING OFFICER WAS THAT THE PRINTED BROCHURES WERE DISTRIB UTED BY THE COORDINATORS WHO WERE NOT EMPLOYEES OF THE APPELLAN T COMPANY. THE AUTHORIZED REPRESENTATIVE ARGUED THAT THE CONTE NTS OF THE PRINTED MATERIALS WERE ALL OF THE PRODUCTS OF INSUR ANCE WHICH WERE THE BUSINESS OF THE APPELLANT. THE MERE FACT THAT IT WAS DISTRIBUTED BY THE COORDINATORS WILL NEITHER REDUCE THE EXPENDI TURE NOR DISENTITLE THE APPELLANT TO CLAIM SUCH EXPENDITURE UNDER SECTION 37 OF THE INCOME TAX ACT, 1961 AS THESE WERE INCURRED WHOLLY AND SOLELY FOR THE PURPOSE OF APPELLANTS BUSINESS. I FIND STRENGTH IN THE ARGUMENTS CANVASSED BY THE AUTHORISED REPRESENT ATIVES. SINCE, THE DISALLOWANCES WERE ON ADHOC BASIS, IT CANNOT ST AND IN VIEW OF THE DECISIONS OF THE HONOURABLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. KOHINOOR FOODS LTD (2015) 373 ITR 682 (DEL) AND VARIOUS OTHER JUDG EMENTS OF ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 4 OF 8 HONOURABLE INCOME TAX APPELLATE TRIBUNAL. I THEREF ORE, ALLOW THESE GROUNDS AND APPELLANT GETS RELIEF AS UNDER: ASSESSMENT YEAR RELIEF ALLOWED 2008 - 09 3,25,16,627 2009 - 10 90,52,982 2010 - 11 5,54,02,901 2011 - 12 63,65,307 2012 - 13 2,97,20,292 2013 - 14 35,75,476 IN THE RESULT THE APPEAL IS PARTLY ALLOWED 7. THE REVENUE IS AGGRIEVED BY THE DECISION REN DERED BY LD CIT(A) ON THE ABOVE SAID ISSUE IN ALL THE YEARS UNDER CONS IDERATION AND HENCE IT HAS FILED PRESENT APPEALS BEFORE US. 8. WE NOTICE THAT THE RELIEF ALLOWED BY LD CI T(A) IN AY 2009-10, 2011-12 AND 2013-14 ARE RS.90.52 LAKHS, RS.63.65 LA KHS AND RS.35.75 LAKHS RESPECTIVELY. THE TAX EFFECT OF THE ABOVE SAID RELIEF IN EACH OF THE YEARS IS LESS THAN RS.50.00 LAKHS. AT THIS JUNCTURE, WE PREFER TO EXTRACT THE CIRCULAR NO.17/2019 DATED 08 TH AUGUST, 2019 ISSUED BY THE CBDT BELOW:- CIRCULAR NO. 17/2019-INCOME TAX F. NO. 279/MISC. 142/2007-ITJ(PT.) GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD DIRECT TAXES JUDICIAL SECTION NEW DELHI, 8TH AUGUST 2019 SUBJECT: FURTHER ENHANCEMENT OF MONETARY LIMITS F OR FILING OF APPEALS BY THE DEPARTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL , HIGH COURTS AND SLPS/APPEALS BEFORE SUPREME COURT AMENDMENT TO CI RCULAR 3 OF 2018 MEASURES FOR REDUCING LITIGATION. REFERENCE IS INVITED TO THE CIRCULAR NO. 3 OF 2018 DATED 11.07.2018 (THE CIRCULAR) OF CENTRAL BOARD OF DIREC T TAXES (THE BOARD) AND ITS AMENDMENT DATED 20TH AUGUST, 2018 VIDE WHIC H MONETARY LIMITS FOR FILING OF INCOME TAX APPEALS BY THE DEPA RTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL, HIGH COURTS AND SLPS /APPEALS BEFORE SUPREME COURT HAVE BEEN SPECIFIED. REPRESENTATION H AS ALSO BEEN ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 5 OF 8 RECEIVED THAT AN ANOMALY IN THE SAID CIRCULAR AT PA RA 5 MAY BE REMOVED. 2. AS A STEP TOWARDS FURTHER MANAGEMENT OF LITIGATI ON, IT HAS BEEN DECIDED BY THE BOARD THAT MONETARY LIMITS FOR FILIN G OF APPEALS IN INCOME-TAX CASES BE ENHANCED FURTHER THROUGH AMENDM ENT IN PARA 3 OF THE CIRCULAR MENTIONED ABOVE AND ACCORDINGLY, TH E TABLE FOR MONETARY LIMITS SPECIFIED IN PARA 3 OF THE CIRCULAR SHALL READ AS FOLLOWS: S.NO. APPEALS/SLPS IN INCOME-TAX MATTERS MONETARY LIMIT (RS.) 1. BEFORE APPELLATE TRIBUNAL 50,00,000 2. BEFORE HIGH COURT 1,00.00,000 3. BEFORE SUPREME COURT 2,00,00,000 3. FURTHER, WITH A VIEW TO PROVIDE PARITY IN FILING OF APPEALS IN SCENARIOS WHERE SEPARATE ORDER IS PASSED BY HIGHER APPELLATE AUTHORITIES FOR EACH ASSESSMENT YEAR VIS--VIS WHERE COMPOSITE ORDE R FOR MORE THAN ONE ASSESSMENT YEARS IS PASSED, PARA 5 OF THE CIRCU LAR IS SUBSTITUTED BY THE FOLLOWING PARA: 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EF FECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE T HAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPEC IFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN A SSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. FURTHER, EVEN IN THE CASE OF COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTH ORITY WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT Y EAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONE TARY LIMIT SPECIFIED IN PARA 3. IN CASE WHERE A COMPOSITE ORDER/ JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE EACH ASS ESSEE SHALL BE DEALT WITH SEPARATELY. 4. THE SAID MODIFICATIONS SHALL COME INTO EFFECT FR OM THE DATE OF ISSUE OF THIS CIRCULAR. 5. THE SAME MAY BE BROUGHT TO THE NOTICE OF ALL CON CERNED. ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 6 OF 8 6. THIS ISSUES UNDER SECTION 268A OF THE INCOME-TAX ACT,1961. 7. HINDI VERSION WILL FOLLOW. (NEETIKA BANSAL) DIRECTOR, (ITJ) CBDT, NEW DELHI 9. THE ABOVE CITED CIRCULAR OF CBDT MAKES IT CLE AR THAT THE TAX EFFECT HAS TO BE COMPUTED SEPARATELY IN EACH OF THE YEAR, EVEN IF THE LD CIT(A) HAS PASSED A COMBINED ORDER ON THE COMMON ISSUE. WE HAVE NOTICED THAT THE TAX EFFECT INVOLVED IN THE AP PEALS FILED BY THE REVENUE FOR AY 2009-10, 2011-12 AND 2013-14 ARE LES S THAN RS.50.00 LAKHS, BEING THE MONETARY LIMIT PRESCRIBED BY THE CBDT FOR PREFERRING APPEALS BEFORE THE TRIBUNAL AGAINST THE ORDER PASSED BY LD CIT(A). ACCORDINGLY, WE DISMISS THE APPEALS OF TH E REVENUE FILED FOR AY 2009-10, 2011-12 AND 2013-14 IN LIMINE, ON THE G ROUND OF LOW TAX EFFECT. 10. NOW WE SHALL TAKE UP THE APPEALS FILED BY T HE REVENUE FOR AY 2008-09, 2010-11 AND 2012-13. WE NOTICE THAT THE LD CIT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING THAT THE AO H AS MADE DISALLOWANCE ON ADHOC BASIS. WE NOTICE FROM THE A SSESSMENT ORDER THAT THE AO ON THE REASONING THAT THE ASSESSEE HAS FAILED TO EXPLAIN SATISFACTORILY THE MANNER IN WHICH THE MATERIALS PU BLISHED WERE USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, I.E., IT APPEARS THAT THE ENTIRE PRINTED MATERIALS WERE NOT USED FOR THE PURP OSES OF BUSINESS CARRIED ON BY THE ASSESSEE AND HENCE HE HAS RESTRIC TED THE CLAIM TO 50%. IT IS WELL SETTLED PROPOSITION OF LAW THAT T HE ONUS TO PROVE THE EXPENDITURE AND ITS CONNECTION WITH THE BUSINESS CA RRIED ON BY THE ASSESSEE WOULD LIE UPON THE ASSESSEE. ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 7 OF 8 11. THE LD A.R SUBMITTED THAT THE ENTIRE PRINTE D MATERIALS WERE USED FOR THE PURPOSES OF BUSINESS CARRIED ON BY THE ASSESSEE ONLY. HOWEVER, SINCE THE ASSESSEE HAS NOT FURNISHED SATIS FACTORY EXPLANATIONS BEFORE THE AO WITH REGARD TO THE MANNE R OF UTILISATION OF PRINTED MATERIALS, IN THE INTERESTS OF NATURAL J USTICE, WE ARE OF THE VIEW THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF AO SO THAT THE ASSESSEE MAY FURNISH EXPLANATIONS TO THE SATISFACTI ON OF THE AO. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT (A) ON THIS ISSUE IN AY 2008-09, 2010-11 AND 2012-13 AND RESTORE THE SAME TO THE FILE OF AO. WE DIRECT THE ASSESSEE TO FURNISH THE DETAILS OF MANNER OF UTILISATION OF PRINTING AND STATIONERY EXPENSES FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. AFTER HEARING THE ASSESS EE, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 12. IN THE RESULT, THE APPEALS FILED BY THE REV ENUE FOR AY 2008-09, 2010-11 AND 2012-13 ARE TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES. THE APPEALS FILED BY THE REVENUE FOR THE REMAINING THREE YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JAN, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH JAN, 2021. VG/SPS ITA NOS.75 TO 80/BANG/2018 M/S. GLOBAL FINSOL PVT. LTD., BANGALORE PAGE 8 OF 8 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.