ACIT 2(1), MUMBAI V. ATC CLEARINGG & SHIPPING P.LTD, MUMBAI

ITA 8584/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3411 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 8738/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 A.T.C. CLEARING & SHIPPING PVT. LTD., 901, PENINSULA TOWERS, GANPATRAO KADAM MARG, OFF. SANAPATI BAPAT MARG, LOWER PAREL (WEST) MUMBAI 400 013. % % % % / VS. THE ACIT (2)(1), MUMBAI. ' '# ./ ( ./ PAN/GIR NO. : AAACA 3307K ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ./ I.T.A. NO. 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 THE ACIT 2(1), MUMBAI. % % % % / VS. A.T.C. CLEARING & SHIPPING PVT. LTD., 901, PENINSULA TOWERS, GANPATRAO KADAM MARG, OFF. SANAPATI BAPAT MARG, LOWER PAREL (WEST) MUMBAI 400 013. ' '# ./ ( ./ PAN/GIR NO. : AAACA 3307K ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) REVENUE BY SHRI MANOJ KUMAR ASSESSEE BY SHRI PRAKASH PANDIT % 3 4# / DATE OF HEARING : 19/06/2013 5 & 3 4# / DATE OF PRONOUNCEMENT : 19/06/2013 ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 2 '6 / O R D E R PER I.P.BANSAL,J.M: THESE ARE CROSS APPEALS AND THEY ARE DIRECTED AGAI NST ORDER PASSED BY LD. CIT(A)-4, MUMBAI DATED 29/09/2010 FOR ASSESS MENT YEAR 2007-08. THE GROUNDS OF APPEAL RAISED BY ASSESSEE AS WELL AS REVENUE READ AS UNDER: REVENUES GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.15.OO LACS MADE OUT OF EXPENSES CLAIMED ON ACCOUNT OF EXAMINAT ION, PACKING AND REPACKING, LABOUR CHARGES AND CRANE & FORKLIFT WITH OUT APPRECIATING- A) THAT THE ONUS WAS UPON THE ASSESSEE TO PROVE THA T PAYMENTS WERE MADE FOR THE EXPENSES INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF ITS BUSINESS WHICH THE ASSESSEE COMPLETELY FAILE D TO DISCHARGE. B) THAT SELF-MADE VOUCHERS CANNOT BE BASIS FOR ALLO WANCE OF SUCH EXPENDITURE AS ASSESSEE FAILED TO FURNISH ANY CORRO BORATIVE EVIDENCE ESTABLISHING THE EXISTENCE OF THIRD PARTY AND THE S ERVICES RENDERED BY THEM. C) THAT SELF-MADE VOUCHER CANNOT BE ADMITTED AS AN EVIDENCE OF AN EXPENDITURE UNLESS SAME IS CORROBORATED WITH OTHER EVIDENCES TO ESTABLISH THE EXISTENCE OF THIRD PARTY TO WHOM THE PAYMENTS WERE MADE AND THE SERVICES RENDERED BY THEM. D) THAT AS THE ASSESSEE FAILED TO PROVE THAT EXPENS ES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSI NESS AND THE SAME CANNOT BE ALLOWED AS EXPENDITURE U/S.37(1) OF THE I .T.ACT. ASSESSEES GROUNDS OF APPEAL: 1. (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (APPEALS) ERRED IN CONFIRMING ADDITI ON OF RS.1,53,325/- U/S. 14A OF THE INCOME TAX ACT, 1961 BEING THE EXPE NSES ATTRIBUTED TO THE EXEMPT DIVIDEND INCOME. ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 3 (2) THE REASONS GIVEN BY THE C.I.T. (APPEALS) FOR C ONFIRMING ADDITION OF RS.1,53,325/- U/S.14A OF THE INCOME TAX ACT, 1961 B EING THE EXPENSES ATTRIBUTED TO THE EXEMPT DIVIDEND INCOME ARE WRONG, INSUFFICIENT. REVENUES APPEAL: 2. THE ASSESSEE COMPANY IS A CUSTOM HOUSE AGENT. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT FOLLO WING EXPENSES WERE CLAIMED BY THE ASSESSEE WHICH WERE INCURRED IN CASH AND FOR WHICH SELF PREPARED VOUCHERS WERE SUBMITTED AND IN SOME OF THE CASES THIRD PARTY BILLS AND SUPPORTING EVIDENCES WERE NOT ATTACHED. (I) EXAMINATION RS. 20,05,656/- (II) PACKING & REPACKING RS.1,05,40,399/- (III)LABOUR CHARGES RS. 16,29,230/- (IV) CRANE & FORKLIFT RS. 5,96,929/- 2.1 THE ASSESSEE EXPLAINED AS UNDER: I) ALL THE EXPENSES HAVE BEEN INCURRED ON DAY TO D AY BASIS IN THE NORMAL COURSE OF BUSINESS. II) THE EXPENSES WERE INCURRED BY THE OUTDOOR STAFF , RESPONSIBLE TO CARRY OUT ALL THE ABOVE OPERATIONAL FUNCTIONS ON THE SITE AND HAS TO INCUR EXPENSES IN CASH. III) THE PAYMENTS, WHICH ARE MADE TO UNORGANIZED LA BOUR, CARPENTER ETC., HAS TO BE MADE WHILE CARRYING OUT THE JOB AND THERE FORE, IT IS DONE BY THE STAFF WHO VISITS FOR WORK AT THE RESPECTIVE SIT ES IV) STAFF DEPLOYED AT ANDHERI (AIR CARGO COMPLEX), JAWAHARLAL NEHRU PORT AND MUMBAI PORT INCURS THE CASH EXPENSES FOR VARIOUS PU RPOSES: IT IS IMPORTANT TO MAKE A NOTE OF THE BREADTH AT WHICH AL L EXPENSES ARE INCURRED. ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 4 2.2 THE AO DID NOT FOUND SUCH EXPLANATION OF THE AS SESSEE SATISFACTORY. BASED ON THE FOLLOWING FACTS HE HAS ARRIVED AT A CO NCLUSION THAT SOME PART OF THOSE EXPENDITURE WERE REQUIRED TO BE DISALLOWED. I) THERE IS NO DOUBT THE CASH EXPENSES HAVE BEEN IN CURRED. II) THE FACT HAS BEEN ADMITTED BY THE REPRESENTATIV E OF THE ASSESSEE THAT SOME OF THE CASH EXPENSES ARE NOT SUPPORTED BY THIR D PARTY BILLS FOR WHICH HE IS TAKING A PLEA THAT THE EXPENSES WERE IN CURRED ON DAY TO DAY BASIS IN THE NORMAL COURSE OF BUSINESS. III) IT IS NOT DENIED THAT AFTER VERIFICATION OF TH E BOOKS, VOUCHES AND OTHER RELEVANT OF DETAILS, THE REPRESENTATIVE OF THE ASSE SSEE WAS ASKED TO FURNISH SPECIFIC DETAILS OF HEADS OF EXPENSES WITH COMPLETE VOUCHERS. ACCORDINGLY, THE AO DISALLOWED 10% APPROXIMATELY OF THE CASH EXPENDITURE CLAIMED IN RESPECT OF EACH OF HEAD AND AGGREGATED A MOUNT OF RS. 15,00,000/- HAS BEEN DISALLOWED. 3. BEFORE LD.CIT(A) IT WAS SUBMITTED THAT EXPENSES CANNOT BE DISALLOWED MERELY BECAUSE THESE HAVE BEEN INCURRED IN CASH. IN THE SUBMISSIONS MADE BEFORE AO VIDE LETTER DATED 21/12/2009, THE D ETAILS AND NATURE OF EXPENSES INCURRED BY THE ASSESSEE WAS EXPLAINED. T HE ASSESSEE MAINTAINED COMPLETE SET OF BOOKS OF ACCOUNT. INVOICES WERE P RODUCED MENTIONING FULL DETAILS NAMELY, NUMBER., DATE, JOB NO., PARTIES NA ME AND PARTIES ADDRESS AND MOSTLY THE MAJOR EXPENSES WERE IN THE SHAPE OF CUSTOMS DUTY, CMC CHARGES, STAMP DUTY, ESCORT FEE ETC. WERE IN THE NA TURE OF REIMBURSEMENT AND REIMBURSEMENT ARE OFFERED TO TAX. THE AO DID NOT POINT OUT THAT ANY OF THESE EXPENDITURE ARE BOGUS IN NATURE AND BASED ON CERTAIN DECISIONS IT WAS PLEADED THAT SUCH ADDITION COULD NOT BE MADE. LD. CIT(A) AFTER CONSIDERING THESE SUBMISSIONS HAS ARRIVED AT THE CONCLUSION THA T ASSESSEE HAD FILED ALL THE DETAILS OF THESE EXPENDITURE. THE AO DISALLOW ED THE CLAIM ON THE GROUND THAT THESE EXPENDITURE WERE INCURRED IN CASH AND THERE WERE NO THIRD PARTY EVIDENCE. IN THIS TYPE OF BUSINESS AC TIVITY OF THE ASSESSEE THERE IS A POSSIBILITY OF NON AVAILABILITY OF THIRD PART Y BILL. THE BOOKS OF ACCOUNT ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 5 WERE PRODUCED BY THE ASSESSEE BEFORE AO ALONG WITH BILLS AND VOUCHERS. THE AO DID NOT POINT OUT ANY DEFICIENCY IN THE BOOKS OF ACCOUNT. HE HAS ALSO NOT POINTED OUT THAT ANY EXPENDITURE IS BOGUS. MER ELY ON SUSPICION DISALLOWANCE CANNOT BE MADE. FOR HOLDING SO LD. CI T(A) HAS RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF M/S. NEW GLOBAL SHIPPING SERVICES PVT. LTD. VS. ACIT,ITA NO.2408/MUM/2006 DA TED 23/11/2007, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES 10% ADH OC DISALLOWANCE OF CASH EXPENSES WAS DELETED. IN THIS MANNER LD. CIT (A) HAS DELETED THE ADDITION. THE DEPARTMENT IS AGGRIEVED AND HAS FIL ED THE AFOREMENTIONED APPEAL. 4. LD. D.R RELYING UPON THE ORDER PASSED BY AO SUBM ITTED THAT ASSESSEE COULD NOT FULLY SUBSTANTIATE THE CASH EXPENDITURE I NCURRED BY IT. THEREFORE, AO WAS JUSTIFIED IN MAKING PART DISALLOWANCE OF THO SE EXPENDITURE AND THE ADDITION HAS WRONGLY BEEN DELETED BY LD. CIT(A). HE SUBMITTED THAT DISALLOWANCE DELETED BY LD. CIT(A) SHOULD BE RESTOR ED AND APPEAL FILED BY THE REVENUE SHOULD BE ALLOWED. 5. ON THE OTHER HAND, LD. A.R REFERRED TO THE DETAI LED SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE AO. HE SUBMITTED THAT I N THE BUSINESS ACTIVITY OF THE ASSESSEE SUCH EXPENSES ARE INCURRED ON ROUT INE BASIS. ALL THE BOOKS OF ACCOUNT WERE REGULARLY MAINTAINED BY THE ASSESSE E. THE ASSESSMENT HAS BEEN FRAMED ON THE BASIS OF BOOKS OF ACCOUNT. THE AO DID NOT POINT OUT ANY VOUCHER AS NON-GENUINE. THE ADDITION MADE IS A DHOC AND THE SAME HAS RIGHTLY BEEN DELETED BY LD. CIT(A). THEREFORE , HE PLEADED THAT DEPARTMENTAL APPEAL SHOULD BE DISMISSED. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WE HAVE ALSO GONE THROUGH THE ASS ESSMENT ORDER AS WELL AS THE ORDER PASSED BY LD. CIT(A). AFTER CAREFUL C ONSIDERATION OF ALL THESE MATERIALS WE ARE OF THE OPINION THAT LD. CIT(A) HAS COMMITTED NO INFIRMITY IN DELETING THE DISALLOWANCE. THE ASSESSEE HAS MAI NTAINED BOOKS OF ACCOUNT ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 6 IN REGULAR COURSE OF ITS BUSINESS. ALL THESE BOO KS OF ACCOUNT ALONGWITH BILLS AND VOUCHERS WERE PRODUCED BEFORE THE AO. IT IS N OT THE CASE OF AO THAT ANY EXPENDITURE SHOWN BY THE ASSESSEE IS BOGUS. TH E ASSESSMENT HAS BEEN FRAMED ON THE BASIS OF BOOKS OF ACCOUNT. THE DISAL LOWANCE MADE BY THE AO IS NOT BASED ON ANY SPECIFIC VOUCHER FOR WHICH IT C AN BE SAID THAT ASSESSEE DID NOT INCUR SUCH EXPENDITURE. THE DISALLOWANCE IS ADHOC AND ON ESTIMATE BASIS. NO SINGLE EVIDENCE HAS BEEN BROUGHT ON RECO RD TO SHOW THAT ANY EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF ITS BUSINESS OR IT WAS NOT ACTUALLY INCURRED. IN THESE CIRCUMST ANCES, WE DECLINE TO INTERFERE WITH THE RELIEF GRANTED BY LD. CIT(A) AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ASSESSEES APPEAL:- 7. THE ASSESSEE HAS EARNED DIVIDEND INCOME TO THE T UNE OF RS.14,53,374/-. THE AO BY INVOKING RULE 8D MADE DI SALLOWANCE OF A SUM OF RS.3,27,511/- UNDER THE PROVISIONS OF SECTION 14 A OF THE ACT. LD. CIT(A) FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. VS. DCIT,328 ITR 81 (BOM) HAS HELD THAT RULE 8D IS NOT APPLICABLE. HOWEVER, HE HAS RESTRICTED T HE DISALLOWANCE TO THE EXTENT OF 0.5% OF THE AVERAGE INVESTMENT EMPLOYED F OR EARNING THE EXEMPT INCOME AND DISALLOWANCE IS RESTRICTED TO RS.1,53,32 5/-. THE DEPARTMENT DID NOT FILE ANY APPEAL AGAINST THE DELETED DISALLOWANC E. THE ASSESSEE IN ITS APPEAL IS AGITATING THE ADDITION SUSTAINED BY LD. C IT(A). 8. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. IN THE PRESENT CAS E AO HAS INVOKED RULE 8D FOR MAKING DISALLOWANCE UNDER SECTION 14A OF THE AC T. AS PER AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COU RT RULE 8D CANNOT BE APPLIED TO ASSESSMENT YEARS PRIOR TO A.Y 2008-09. THEREFORE, LD. CIT(A) HAS RIGHTLY HELD THAT RULE 8D COULD NOT BE APPLIED. HO WEVER, AT THE SAME TIME IN THE AFOREMENTIONED DECISIONS IT HAS BEEN OBSERVE D BY THEIR LORDSHIPS THAT FOR ASSESSMENT YEARS PRIOR TO A.Y 2008-09 THE AO HAS TO ENFORCE THE ./ I.T.A. NO. 8738 & 8584/MUM/2010 ( % % % % & & & & / ASSESSMENT YEARS : 2007-08 7 PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE AO IS DUTY BOUND TO DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONAB LE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE AL L THE GERMANE MATERIAL ON RECORD. THE LD. CIT(A) HAS CONSIDERED 0.5% OF AVER AGE INVESTMENT FOR THE PURPOSE OF DISALLOWANCE IN REGARD TO EXEMPT INCOME. LD. AR COULD NOT PLACE ANY MATERIAL ON RECORD TO SHOW THAT SUCH VIEW TAKEN BY LD. CIT(A) WAS NOT IN CONFORMITY OF LAW. THEREFORE, WE DECLINED TO INTERFERE IN THE ADDITION SUSTAINED BY LD. CIT(A). WE CONFIRM HIS ORDER ON H IS ISSUE AND APPEAL FILED BY THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/06/2013 . '6 3 & #' 7 8%9 19/06//2013 3 : SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 8% DATED 19/06/2013 '6 '6 '6 '6 3 33 3 *4;< *4;< *4;< *4;< ='<&4 ='<&4 ='<&4 ='<&4 / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5.