SUN EXPORTS, THANE V. ITO 2(4), THANE

ITA 841/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75577 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: DARMESH SHAH
• Keywords: Opportunity of being heard; Onus to prove
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENC H, MUMBAI .. , %, BEFORE S/SHRI B. R. BASKARAN, AM & AMIT SHUKLA, JM ./ ITA NO. 841/MUM/2012 ( ' ' ' ' ' ' ' ' / / / / ASSESSMENT YEAR 2006-07) SUN EXPORTS E/7 VIKAS INDS ESTATE GODDEV PHATAK ROAD BHAYANDER (E) DT THANE 401 105 / VS. THE INCOME TAX OFFICER WARD 2(4), THANE ./PAN : AASFS3218C ( * /APPELLANT ) ( +,* / RESPONDENT ) * - / APPELLANT BY : SHRI DARMESH SHAH +,* - / RESPONDENT BY : SHRI ASHOK SURI, DR - / /DATE OF HEARING : 13 TH FEB 2014 - / / DATE OF PRONOUNCEMENT : 19 TH FEB2014 / O R D E R PER B R BASKARAN, AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 12.9.2011 PASSED BY THE LD CIT(A)-II, THANE AND IT RELATES TO THE AY 2006-07. 2 THE APPEAL FILED BY THE ASSESSEE IS BARRED BY LIM ITATION BY ONE DAY. THE ASSESSEE HAS FILED A PETITION REQUESTING THE BENCH TO CONDONE THE DELAY. SUN EXPORTS 2 3 WE HAVE HEARD THE PARTIES ON THE PRIMARY ISSUE. H AVING REGARD TO THE SUBMISSION MADE IN THE PETITION FILED BY THE ASSESS EE, WE CONDONE THE DELAY IN FLING THE APPEAL AND ACCORDINGLY ADMIT THE APPEAL F OR HEARING. 4 THE SOLITARY ISSUE URGED IN THIS APPEAL RELATES T O PENALTY OF RS.1,95,064/- LEVIED BY THE AO U/S 271(1)( C) OF THE ACT, WHICH H AS BEEN CONFIRMED BY THE LD CIT(A). 5 THE FACTS THAT LED TO LEVY OF PENALTY U/S 271(1)( C) ARE DISCUSSED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF EXPORT OF STAINLESS STEEL UTENSILS TO MIDDLE EAST AND SOUTH AFRICAN COUN TRIES. THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION WAS TAKEN FOR SCRUTINY BY THE AO. IT WAS NOTICED THAT THE ASSESSEE HAS CLAIM ED TRAVELLING EXPENDITURE OF A FOREIGN TRAVEL UNDERTAKEN BY ONE OF ITS PARTNERS NA MED MR MUKESH MEHTA AND ANOTHER PERSON NAMED MR. JAYANTI MEHTA. IT WAS CLA IMED BY THE ASSESSEE THAT SHRI JAYANTI MEHTA IS THE UNCLE OF MR. MUKESH MEHTA . THE AO NOTICED THAT MR JAYANTI MEHTA IS NEITHER AN EMPLOYEE NOR A PARTNER OF THE FIRM. THE ASSESSEE ALSO DID NOT FURNISH ANY REASON AS TO WHY THE TRAVE L EXPENSE OF MR. JAYANTI METHA WAS INCURRED BY THE ASSESSEE FIRM. HENCE THE AO DISALLOWED THE PORTION OF TRAVELLING EXPENDITURE RELATABLE TO MR JAYANTHI MEHTA, WHICH WAS WORKED OUT AT RS.5,79,509/-. THE AO ALSO INITIATED PENALTY PR OCEEDINGS. BEFORE THE AO, DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSES SEE SUBMITTED THAT IT DID NOT SUN EXPORTS 3 FURNISH ANY INACCURATE PARTICULARS WITH REGARD TO T RAVEL EXPENSES. HOWEVER, THE AO NOTICED THAT THE ASSESSEE DID NOT PRODUCE ANY EV IDENCE TO SUBSTANTIATE THE NECESSITY OF INCURRING EXPENSES FOR MR. JAYANTI MEH TA; EVEN DURING THE COURSE OF PENALTY PROCEEDINGS. HENCE, THE AO TOOK THE VIEW THAT THE ASSESSEE, BY DEBITING THE EXPENSES RELATING TO THE INDIVIDUAL WH O IS NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE, HAS DELIBERATELY INFLATED THE EXPENSES; THEREBY CONCEALING THE PARTICULARS OF INCOME. ACCORDINGLY, HE LEVIED A PENALTY OF RS.1,95,064/- U/S 271(1)(C) OF THE ACT. THE ASSESSE E CHALLENGED THE PENALTY ORDER BEFORE THE LD CIT(A); BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E PARTNER OF THE ASSESSEE FIRM HAD TAKEN WITH HIM MR JAYANTI MEHTA ON A FORE IGN TOUR, THOUGH HE WAS NOT AN EMPLOYEE OR A PARTNER OF THE FIRM, SINCE SHRI JA YANTI MEHTA HAD GOT 25 YEARS OF VAST EXPERIENCE AND ALSO HE WAS WELL AWARE OF T HE MARKET TREND OF THE PRODUCTS AND FURTHER HE HAS GOT GOOD CUSTOMER CONTA CTS. HE FURTHER SUBMITTED THAT THE AO HAS DISALLOWED THE TRAVEL EXPENSES ONLY BY DISBELIEVING THE CLAIM MADE BY THE ASSESSEE. THE LD A.R FURTHER SUBMITTED THAT THE AO HAS WORKED OUT THE DISALLOWANCE BY MAKING CERTAIN ESTIMATES, I .E., WITH REGARD THE DOLLAR CURRENCY EXPENSES, THE AO HAS TAKEN THE PORTION ATT RIBUTABLE TO MR. JAYANTI MEHTA AT 50% ON ESTIMATED BASIS. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ESTIMATED DISALLOWANCES ARE NOT EXIGIBLE FOR PENALT Y U/S 271(1)(C) OF THE ACT. SUN EXPORTS 4 THE LD A.R FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PEROPRODUCTS PVT LTD ., REPORTED IN 322 ITR 158 (SC) AND SUBMITTED THAT PENALTY IS NOT LEVIABLE, EV EN IF THE CLAIM MADE BY THE ASSESSEE IS NOT SUSTAINABLE IN LAW. 7. ON THE CONTRARY, THE LD DR SUBMITTED THAT THE AS SESSEE DID NOT OFFER ANY CONVINCING EXPLANATION DURING THE COURSE OF ASSESSM ENT PROCEEDINGS AS TO WHY HE HAD INCURRED TRAVEL EXPENSES OF MR JAYANTI MEHTA , EVEN THOUGH HE HAS NOT CONNECTED TO THE ASSESSEE FIRM. THE ASSESSEE DID N OT OFFER ANY EXPLANATION EVEN DURING THE COURSE OF PENALTY PROCEEDINGS. FURTHER THE ASSESSEE DID NOT SUBSTANTIATE THAT THESE EXPENSES WERE GENUINELY INC URRED FOR BUSINESS PURPOSES. ACCORDINGLY, HE SUBMITTED THAT THE LD CIT(A) WAS JU STIFIED IN CONFIRMING THE PENALTY LEVIED BY THE AO U/S 271(1)( C) OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTION AND CAREFULLY PERUSED THE RECORD. WE ALSO CAREFULLY GONE THROUGH THE ORDER PASSED BY THE LD CIT(A). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE LD CIT(A) AND DECISION TAKEN BY HIM: 4.1. IN THE STATEMENT OF FACTS, THE CRUX OF THE CO NTENTION OF THE APPELLANT IS THAT MR. JAYANTI MEHTA IS THE RELATIVE OF THE PA RTNERS OF THE APPELLANT FIRM AND IS ALSO ENGAGED IN THE BUSINESS OF EXPORT OF UTENSILS AND HAS VAST EXPERIENCE OF 25 YEARS IN THIS LINE OF BUSINESS. TH E APPELLANT FIRM, THEREFORE, ENGAGED MR. JAYANTI MEHTA TO TRAVEL ON B EHALF OF THE FIRM TO PROCURE THE EXPORT ORDERS BY TAKING THE BENEFITS OF HIS VAST EXPERIENCE AND BUSINESS CONTACTS. IT IS EVIDENT FROM THE ABOVE THAT THE TRAVELLING EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE BUSINESS PURPOSE OF SUN EXPORTS 5 THE APPELLANT FIRM. NECESSARY EVIDENCE FOR TRAVELLI NG OF MR. JAYANTI MEHTA WERE FILED BEFORE THE AO DURING THE ASSESSMENT PROC EEDINGS. 4.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E ARGUMENTS OF THE APPELLANT AS OUTLINED ABOVE AND IN MY CONSIDERED OP INION, THERE IS NO SUBSTANCE IN THE ABOVE ARGUMENTS. IT IS AN ADMITTED FACT THAT MR. JAYANTI MEHTA IS NEITHER AN EMPLOYEE NOR IN ANY WAY CONNECT ED WITH THE BUSINESS OPERATIONS OF THE APPELLANT FIRM. ANY EXPENSES INCU RRED BY THE FIRM ARE ALLOWABLE ONLY WHEN IT IS PROVED BEYOND DOUBT THAT THE SAME HAVE BEEN INCURRED EXCLUSIVELY AND WHOLLY FOR THE PURPOSES OF THE BUSINESS. IN THE INSTANT CASE, THE APPELLANT HAS NOT BEEN ABLE TO PL ACE ANY EVIDENCE ON RECORD THAT MR. JAYANTI MEHTA, IN FACT, TRAVELLED A BROAD ON BEHALF OF THE ASSESSEE FIRM AND PROCURED THE BUSINESS FOR THE APP ELLANT FIRM. MERELY HAVING VAST EXPERIENCE IN THE LINE OF THE BUSINESS OF THE FIRM, IS NOT A SUFFICIENT CRITERIA TO A!LOW AN EXPENSE INCURRED ON A PERSON, WHO IS OTHERWISE NOT CONNECTED IN ANY WAY WITH THE BUSINES S OPERATIONS OF THE APPELLANT FIRM. NO SUCH EVIDENCE HAS BEEN PROVIDED BY THE APPELLANT EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR THE APPELLATE PROCEEDINGS BEFORE ME. 4.3. THERE IS NO SUBSTANCE IN THE ARGUMENT OF THE A PPELLANT THAT AO HAS NOT PROVIDED THEM OPPORTUNITY OF PERSONAL HEARING. THE AO HAD ISSUED SHOW CAUSE NOTICES AND IN RESPONSE TO THAT THE APPE LLANT HAD FILED A LETTER DATED 11/05/2009 CONTENDING THAT THE PENALTY IS NOT IMPOSABLE. THEREFORE, IT IS NOT CORRECT ARGUMENT OF THE APPELL ANT THAT OPPORTUNITY OF BEING HEARD HAS NOT BEEN PROVIDED TO HIM AND THIS G ROUND OF APPEAL IS THEREFORE REJECTED. 4.4 IN VIEW OF THE FACTS AND CIRCUMSTANCES MENTIONE D ABOVE, I AM IN AGREEMENT WITH THE REASONS CITED BY THE AO IN THE P ENALTY ORDER DATED 26.6.2009 THAT THE APPELLANT HAS FAILED TO GIVE ANY BONAFIDE REASON FOR INCURRING THE TRAVELING EXPENSES OF MR JAYANTI MEHA AND THEREBY INFLATED EXPENSES AND CONCEALED THE PARTICULARS OF HIS INCOM E. THE ACTION OF THE AO IMPOSING PENALTY U/S 271(10( C) OF HE INCOME AX AX, 1961, THEREFORE, FOR THE AY 2006-07 AMOUNTING TO RS.1,95,064/- IS HE REBY CONFIRMED. 9. WE NOTICE THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION TO THE SATISFACTION OF THE AO DURING THE COURSE OF PENALTY PROCEEDINGS. FURTHER, THE ASSESSEE HAS ALSO FAILED, BOTH DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS IN THE PENALTY PROCEEDINGS TO SUBSTANTIATE ITS CLAIM THAT THE TRAVELLING SUN EXPORTS 6 EXPENSES OF MR. JAYANTI MEHTA WAS INCURRED FOR BUSI NESS PURPOSES. THE CLAIM OF EXPERIENCE, KNOWLEDGE OF BUSINESS TREND, AVAILABILI TY OF BUSINESS CONTACTS WERE FOUND TO BE MERE ORAL SUBMISSIONS MADE WITHOUT BRIN GING ANY MATERIAL TO SUBSTANTIATE THE SAID CLAIM. FURTHER THE BENEFITS THAT WERE EXPECTED TO ACCRUE TO THE ASSESSEE FROM INCURRING OF TRAVEL EXPENSES OF M R. JAYANTI MEHTA WAS NOT BROUGHT ON RECORD. WE ALSO NOTICE THAT MR. JAYANTI MEHTA HAPPEN TO BE THE UNCLE OF THE PARTNERS, MEANING THEREBY THE ONUS TO PROVE THE NECESSITY OR COMMECIAL CONSIDERATION ARE HEAVY ON THE ASSESSEE. WE NOTICE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE SAID ONUS. TH US, IT IS NOTICED THAT THE TRAVELLING EXPENSES INCURRED FOR MR. JAYANTI MEHTA WAS NOT PROVED TO BE FOR BUSINESS CONSIDERATIONS. 10. IN THE CASE OF RELIANCE PETROPRODUCTS PVT L TD (SUPRA), THE DISALLOWANCE WAS RELATED TO THE INTEREST GENUINELY INCURRED FOR THE PURPOSES OF BUSINESS AND THE DISALLOWANCE WAS MADE U/S 14A OF THE ACT. THE HONBLE APEX COURT NOTICED THAT THE ASSESSEE THEREIN HAD FURNISHED ALL THE DET AILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELV ES, WERE NOT FOUND TO BE INACCURATE NOT COULD BE VIEWED AS CONCEALMENT OF IN COME ON ITS PART. FURTHER, THE HONBLE APEX COURT GAVE A SPECIFIC FINDING THAT THE DEPARTMENT DID NOT FIND ANY FAULT WITH THE PARTICULARS SUBMITTED BY THE ASS ESSEE IN ITS RETURN. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO PRO VE THAT THE TRAVEL EXPENSES OF SHRI JANTI MEHTA FOR THE PURPOSES OF ITS BUSINESS, I.E., THE ASSESSEE HAS FAILED TO SUN EXPORTS 7 ADDRESS THE VIEW OF THE AO THAT THE EXPENSES WERE I NFLATED, WHICH HAS RESULTED IN CONCEALMENT OF INCOME. UNDER THE ABOVE SET OF F ACTS, IN OUR VIEW, THE ASSESSEE CANNOT DERIVE SUPPORT FROM THE DECISION RE NDERED BY HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD (SUPRA). HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD CIT(A). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 2 '2 - 2 - ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEB 2014 . - 7 19TH FEB 2014 - SD/- SD/ - ( AMIT SHUKLA) ( B R BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 7 DATED 19 TH FEB 2014 .../ RAJ , SR. PS SUN EXPORTS 8 - +9 :9 - +9 :9 - +9 :9 - +9 :9/ COPY OF THE ORDER FORWARDED TO : 1. * / THE APPELLANT 2. +,* / THE RESPONDENT. 3. ;() / THE CIT(A)- 4. ; / CIT 5. 9 +, , / DR, ITAT, MUMBAI 6. ' / GUARD FILE. / BY ORDER, ,9 + //TRUE COPY// / // / ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI