ITO 20(2)(2), MUMBAI V. MANOJ B. SINGH, MUMBAI

ITA 8196/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3097 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 18-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2010
• Court: TRIBUNAL
• Department Lawyers: IN LAW
• Assessee Lawyers: A O WHICH SHRI C P PATHAK ASSE
• Keywords: Depreciation; Business expenditure; Additional evidence
• Section: 133(6); 37; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B MUMBAI. BEFORE JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO 8196 /MUM/201 0 ASSESSMENT YEAR: - 2006 - 07 INCOME TAX OFFICER 20( 2 )( 2 ), ROOM NO. 610 , PIRAMAL CHAMBERS, LAL BAUG, MUMBAI 400 012. VS.` MR. MANOJ B. SINGH ROW HOUSE NO. 5, GOKULDHAM MANAVSTHAL CHSL, AKV MARG, GOREGAON, MUMBAI 400 063. PAN/GIR NO. AOBPS7066K APPELLANT RESPONDENT ORDER PER RAJESH KUMAR, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT (A) DATED 15.09.2010 FOR A.Y. 2006 - 07 . THE REVENUE HAS RAISED FOLLOWING GROUNDS: - ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES IN RESPECT OF M/S SAHARA AIR LINES WHICH WERE REPORTED TO BE UNVERIFIABLE IN THE REMAND REPORT. IN CASE OF ADDITIONAL EVIDENCE POST REMAND REPORT, THE LD.CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE A.O. UNDER RULE 46A OF I T RULE IN THIS REGARD. IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF EXPENSES TO RS. 1,20,992/ - INSTEAD OF RS 3,78,1201 - MADE BY THE A.O. FOR WHICH THE REVENUE BY SHRI C.P. PATHAK ASSESSED BY SHRI JAYESH DADIA DATE OF HEARING 1 8 .08.2015 DATE OF PRONOUNCEMENT 30 .0 9 .2015 2 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 2 OF 8 ASSESSEE HAD FAILED TO PRODUCE PROPER BILLS AND VOUCHERS DURING THE ASSESSMENT PROCEEDINGS AND REMAND REPORT PROCEEDINGS TO PROVE THE GENUIN EN ESS OF THE SAME. 2. THE FIRST GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION MADE BY AO ON ACCOUNT OF FREIGHT AND COURIER CHARGES TO M /S SAHARA AIR LINES LTD AND ALSO NOT ALLOWING OPPORTUNITY TO THE AO UNDER RULE 46A OF IT RULE BEFORE ADMITTING ADDITIONAL EVIDENCES. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE , PROPRIETOR OF M/S INSTANT CARGO SERVICES , WAS ENGAGED IN THE BUSINESS OF COURIER AND CARGO HANDLING . DURING THE INSTANT YEAR THE ASSE SSEE INCURRED RS. 91,60,385/ - ON ACCOUNT OF FREIGHT & CARGO CHARGES TO SAHARA AIRLINES LTD AND CHARGED THE SAME TO THE PROFIT & LOSS A/C . THE ASSESSEES CASE FOR THE INSTANT YEAR WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS T HE ASSESSEE DID NOT TURN UP PERSONALLY OR THROUGH HIS AUTHORIZED REPRESENTATIVE DESPITE SEVERAL OPPORTUNITIES BY THE LD AO AND AS A RESULT T HE ASSESSMENT WAS FRAMED EX PARTE U/S 144 OF THE A CT . AGGRIEVED BY THE EX PARTE ASSESSMENT , THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT ( A) AND ALSO FILED APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962 FOR P LACING BEFORE THE CIT((A) BILLS , VOUCHERS, BANK STATEMENTS, CONFIRMATIONS AND OTHER RECORDS AS ADDITIONAL EVIDENCES . 4. THE LD. AO NOTED IN HIS ORDER THAT THE ASSESSEE DID NOT ATTEND THE ASSESSMENT PROCEEDINGS ON THE VARIOUS DATES THEREBY GIVING NO DETAILS OF EXPENSES , BILLS , VOUCHERS AND OTHER RECORDS . A S A RESULT NO VERIFICATION OF BOOKS COULD BE POSSIBLE . HE ALSO OBSERVED THAT THE ASSESSEE ,INTER ALIA, PAID RS. 3 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 3 OF 8 91,60,385/ - TO SAHARA AIRLINES LTD ON ACCOUNT OF FREIGHT AND CARGO CHARGES WHICH COULD NOT BE VERIFIED AS NEITHER THE ASSESSE NOR AUTHORIZED REPRESENTATIVE ATTENDED THE ASSESSMENT PROCEEDINGS. THE LD AO CALLED FOR INFORMATION U/S 133( 6) OF THE ACT FROM M/S SAHARA AIRLINES LTD , BUT THE LETTER WAS RETURNED UNDELIVERED. THUS THE LD AO DISALLOWED A SUM OF RS. 91,60,385/ - PAID TO SAHARA AIRLINES LTD OUT OF FRIGHT AND CARGO EXPENSES BESIDES OTHER DISALLOWANCES . 5. T HE LD. DR RELIED UPON THE ORDER OF AO AND SUBMITTED THAT THE PAYMENTS TO M/S SAHARA AIR LINES LTD WAS NOT VERIFIABLE AND JUSTIFIABLE EVEN IN THE REMAND REPORT . HE FURTHER SUBMITTED THAT THE ADDITIONAL EVIDENCE ADMITTED POST REMAND REPORT WITHOUT GIVING OPPORTUNITY TO AO UN DER RULE 46A OF THE INCOME TAX RULES IS PERVERSE AND PRAYED FOR QUASHING THE ORDER OF CIT(A). 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT ALL THESE EXPENSES WERE INCURRED EXCLUSIVELY FOR GENUINE BUSINESS REQUIREMENTS AND PURPOSES . THE LD. AR SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF COURIER AND CARGO HANDLING FOR WHICH CARGO AGENCY AGREEMENT DATED 11.06.2005 WAS EXECUTED WITH M/S SAHARA AIR LINES LTD. ALL THE PAYMENTS TO M/S. SAHA RA AIR LINES LTD WERE MADE BY ACCOUNT PAYEE CHEQUES AND B ILLS AND VOUCHERS CONCERNING THESE PAYMENTS W ERE DULY ACCOUNTED FOR IN THE BOOKS OF ASSESSEE. THE COMMISSION WAS ALSO PAID TO THE ASSESSEE AFTER DEDUCTION OF TDS BY M/S SAHARA AIR LINES LTD . HE FURTH ER SUBMITTED THAT THE AO WAS DULY GIVEN THE OPPORTUNITY BEFORE 4 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 4 OF 8 ADMITTING THE ADDITIONAL EVIDENCE BY THE LD. CIT(A) AND THESE WERE DISCUSSED IN DETAIL IN REMAND REPORT ITSELF . HE ALSO POINTED OUT THAT THE SIMILAR EXPENSES TO M/S SAHARA AIRLINES LTD WERE ALL OWED BY THE DEPARTMENT IN THE EARLIER YEARS. HE FURTHER SUBMITTED THAT THE LETTER TO THE SAID COMPANY WAS RETURNED UNDELIVERED AS THE COMPANY HAD BEEN MERGED WITH JET AIRWAYS. THE LD AR FINALLY PRAYED THAT THE ORDER OF CIT(A) BE UPHELD IN VIEW OF HIS SUB MISSIONS AND FACTS OF THE CASE . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL S ON RECORD. WE NOTE THAT THE CIT(A) ADMITTED THE APPLICATION FILED BY THE ASSESSEE UNDER RULE 46A OF THE INCOME TAX RULES 1962 AND SOUGHT THE R EMAND REPORT FROM THE AO QUA VARIOUS ADDITION S MADE WHICH WAS SUBMITTED BY THE ASSESSING OFFICER ON 11.06.2010. THE CIT(A) ALSO NOTED THAT THE ASSESSING OFFICER STATED IN THE REMAND REPORT THAT LETTER S WERE ISSUED U/S 133(6) TO THREE PARTIES NAMELY M/S ANNEX SERVICES PVT. LTD., M/S INDEX LOGISTICS AND M/S SAHARA AIRLINES LTD. THE CIT(A) FURTHER OBSERVED THAT THE CONFIRMATION FROM M/S ANNEX SERVICES PVT. LTD., AND M/S INDEX LOGISTICS WERE RECEIVED AND THE ACCOUNTS WERE FOUND IN THE AGREEMENT WITH THE ACCOUNTS OF ASSESSEE AS ON 31.03.2006 HOWEVER NO REPLY FROM THE M/S SAHARA AIR LINES LTD . IT IS ALSO SEEN THAT THE ASSESSEE PRODUCED BEFORE CIT(A) THE AGENCY CARGO AGREEMENT DATED 11.06.2005 WITH SAHARA AIR LINES LTD APPOINTING THE ASSESSEE ITS CAR GO AGENT ,BILLS OF COMMISSION RECEIVE D FROM M/S SAHARA AIR LINES LTD , PROOF OF TDS ON SUCH COMMISSION , RECONCILIATION OF ACCOUNTS WITH THAT COMPANY ALONG WITH RELEVANT BILLS , VOUCHERS , BANK STATEMENTS, AND LEDGER ACCOUNT ETC. WE FURTHER NOTE THAT T HE FIRST APPELLATE AUTHORITY ALSO OBSERVED 5 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 5 OF 8 THAT THE SIMILAR EXPENSES/PAYMENTS TO M/S SAHARA AIRLINES LTD WERE ALLOWED TO THE ASSESSEE IN THE EARLIER YEARS AND C ONSIDERING ALL THESE FACTS, THE CIT(A) DELETED THE ADDITION MADE BY AO. WE NOTE THAT THE ASSESSEE E NTERED INTO VARIOUS ARRANGEMENTS FOR ITS BUSINESS AND ALL THE PAYMENTS IN THE REGARD WERE MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES AS OBSERVED AND DULY VERIFIED BY THE CIT(A) AFTER ADMITTING THE ADDITIONAL EVIDENCE UNDER RULE 46A . NOW AFTER TA KING INTO CONSIDERATION ALL THESE FACTS, ORDER OF THE FIRST APPELLATE AUTHORITY AND ARGUMENTS ADVANCED BY COUNSELS FOR BOTH THE PARTIES, WE ARE OF THE CONSIDERED OPINION THAT THE PAYMENTS TO SAHARA AIR LINES LTD ARE GENUINE BUSINESS EXPENSES ADMISSIBLE U/S 37 OF THE ACT . WE , THEREFORE , CONFIRM THE ORDER OF CIT(A) . 8. GROUND NO. 2 RELATES TO RESTRICTING THE DISALLOWANCE TO RS. 1,20,992/ - BY CIT(A) AS AGAINST RS. 3,78,120/ - BY THE AO. 9. 10. THE AO DISALLOWED 10% OF THE TOTAL EXPENSES OF RS. 37,81,198 / - WHICH COMES TO RS. 3,78,120/ - ON THE GROUND THAT NO DETAIL S OF THESE EXPENSES WERE SUBMITTED BY THE ASSESSEE. 1 0 . THE CIT(A) CALLED FOR THE D ETAILS OF TOTAL EXPENSES AMOUNTING TO RS. 37,81,198/ - AND INCORPORATED THE SAME IN PARA 6.3 OF THE CIT(A) ORDER . THE CIT(A) OBSERVED THAT THE AO WAS NOT JUSTIFIED IN MAKING ADHOC DISALLOWANCE AT THE RATE OF 10% OF THE TOTAL EXPENSES CHARGED TO THE PROFIT & LOSS ACCOUNT AMOUNTING TO RS. 37,81,198/ - . THE CIT(A) WORKED OUT THE DISALLOWANCE A FTER TAKING INTO ACCOUNT THE NATURE OF EXPENSES INVOLVING , PERSONAL ELEMENT AND 6 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 6 OF 8 ALSO THE QUANTUM OF SELF MADE VOU CH ERS AND THUS RESTRICTED THE DISALLOWANCE TO RS. 1,20,992/ - BEING 10% OF RS. 12 ,09,926/ - WHICH WAS TOTAL OF TELEPHONE , TEMPO CHARGES, VEHICLES CHARGES ,CONVEYANCE, BUSINESS PROMOTION, DISCOUNT ALLOWED, DOCKE T CHARGES, ELECTRICITY CHARGES , ENTERTAINMENT EXPENSES , PROFESSIONAL FEE, REPAIRS & MAINTENANCE, STAFF WELFARE, STATIONERY AND PRINTING S AND SUNDRY EXPENSES. 1 1 . THE LD. DR RELIE D ON THE ORDER OF AO AND SUBMITTED THAT DISALLOWANCE BE MADE AT RS. 3,78,120/ - AS AGAINST RS. 1,20,992/ - . 1 2 . THE LD. AR , ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT MOSTLY THESE EXPENSES WERE FULLY VOUCHED AND WERE PAID BY A/C PA YEE CHEQUES AS WAS NOTED BY THE CIT(A) IN PARA 6.3 OF HIS ORDER . HE FURTHER CONTENDED THAT ONLY IN FEW CASES THE SELF MADE VOUCHERS WERE MADE BUT EVEN IN THOSE CASES THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. HE FURTHER SUBMITTED THAT THE BASIS ADOPTED BY THE CIT(A) WAS FAIR AND REASONABLE AND PRAYED FOR UPHOLDING THE ORDER OF CIT(A). 1 3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE RELEVANT MATERIAL S ON RECORD. THE FACTS IN BRIEF ARE THAT THE ASSESSEE DEBITED EXPENSES TO THE TUNE OF RS. 37,81,198/ - IN THE PROFIT & LOSS ACCOUNT ON VARIOUS HEADS SUCH AS SERVICE TAX, ACCOUNTING CHARGES, AUDIT FEES, DELIVERY CHARGES, DEPRECIATION, BANK CHARGES AND PROCESSING FEES, IN TEREST ON CAR LOAN, RENT, SALARIES, TELEPHONE, VEHICLE EXPENSES, CONVEYANCE, BANK INTEREST, BUSINESS 7 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 7 OF 8 PROMOTION AND VARIOUS OTHER PETTY EXPENSES. WE NOTE THAT THE LD CIT(A) OBSERVED THAT MOST OF THESE EXPENSES WERE PAID BY CHEQUES AND SOME WERE PAID IN CAS H AND ALL THESE EXPENSES WERE SUPPORTED WITH BILLS AND VOUCHERS. I N SOME CASES OF PETTY EXPENSES , SELF MADE VOUCHERS WERE MADE. WE FURTHER NOTE THAT THE CIT(A) AFTER DETAILED EXAMINATION OF THE TOTAL EXPENSES AS INCORPORATED IN PARA 6.3 OF HIS ORDER HA D REACHED A FAIR CONCLUSION TO RESTRICT THE DISALLOWANCE TO 10% OF RS. 12,09,926/ - BEING THE SUM OF VARIOUS EXPENSES AS STATED IN PARA 1 0 SUPRA , THE MAJORITY OF WHICH WERE VOUCHED AND ONLY IN FEW CASES SELF MADE VOUCHERS WERE MADE . WE ARE OF THE VIEW T HAT THE ACTION OF ASSESSING OFFICER IN DISALLOWING 10% OF TOTAL EXPENSES ON ADHOC BASIS IS AGAINST THE LAW AND EQUITY AND FURTHER WE ARE ALSO IN AGREEMENT WITH CIT(A) THAT A BLANKET 10% DISALLOWANCE OF TOTAL EXPENSES RS. 37,81, 198/ - IS NOT FAIR AND EQUITAB LE . IN VIEW OF THESE FACTS , UPHOLDING THE ORDER OF CIT(A), THE GROUND NO 2 IS DISMISSED AND DECIDED IN FAVOUR OF THE ASSESSEE. 1 4 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER 2015. SD/ - SD/ - (JOGINDER SINGH) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) MUMBAI DATED 30 - 0 9 - 2015 SKS SR. P.S 8 ITA NO 8196/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 PAGE 8 OF 8 COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI