SUKAN AGENCIES PVT. LTD., MUMBAI V. ITO 2(3)(2), MUMBAI

ITA 862/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0730 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 862 /MUM/20 1 6 ASSESSMENT YEAR: 2012 - 2013 M/S SUKAN AGENCIES PVT. LTD., 202, RUBY TERRACE, PEARL PRE. CHS LTD., VILE PARLE (E AST), MUMBAI - 400057 PAN: AAACS5243A VS. THE ITO 2(3)(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.M. PORWAL RESPONDENT BY : SHRI RAJESH KUMAR YADAV DATE OF HEARING: 08/05 /201 7 DATE OF PRONOUNCEMENT: 17 / 0 5 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 18/12/2015 PASSED BY LD. CIT (APPEALS ) - 6 , MUMBAI FOR THE A S S ESSMENT YEAR 2012 - 2013 , WHEREBY THE LD. CIT(A) H AS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING IN DIAMOND WHEELS FILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME AS NIL. THE CASE WAS SELECTED FOR SCRUTINY AND IN RESPONSE TO THE NOTICE U/S 142(1) OF THE ACT, THE ASSESSEE FILED RELEVANT DETAILS AS CALLED FOR BY THE AO . 2 ITA NO. 862/MUM/2016 ASSESSMENT YEAR: 2012 - 2013 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WA S NOTICED THAT THE ASSESSEE HAD SHOWN CURRENT LIABILITY OF RS. 7 5 CRORE IN ITS BALANCE SHEET . ACCORDINGLY, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF TRANSACTION ENTERED WITH THE CONCERNED PARTIES . THE ASSESSEE COMPANY CONTENDED THAT IT HAD RECEIVED AN O RDER FROM M/S. D.B. POWER LTD. FOR SUPPLY OF C EMENT AND S TEEL. ACCORDINGLY, THE COMPANY CONTACTED M/S. W RITER & PUBLISHERS PVT. LTD. , AND ASKED TO PROVIDE THE SAID ITEMS , WHICH AGREED TO SUPPLY THE SAME . THE ASSESSEE COMPANY RECEIVED RS. 75 CRORE FROM M/S. D.B. POWER LTD. THE SUPPLIER , M/S. WRITER & PUBLISHERS PVT. LTD AGREED TO SUPPLY C EMENT AND ALSO OFFERED 1% DISCOUNT TO THE ASSESSEE COMPANY O N THE SALE VALUE. LATER ON THE M/S. D.B. POWER LTD. CANCELLED ITS ORDER. M/S. WRITER AND PUBLISHERS PV T . LTD. RET URNED SAID AMOUNT TO THE ASSESSEE COMPANY AND THE COMPANY FURTHER RETURNED THE SAME TO M/S. D.B. POWER LTD . THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ARRIVED AT THE CONCLUSION THAT THE ASSESSEE MIGHT HAVE RECEIVED A COMPENSATION OF 75 L AKH I.E., 1% OF THE TOTAL AMOUNT RETURNED . IN APPEAL, THE LD. CIT (A) CONFIRMED THE ACTION OF THE AO. 4 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEALS) , THE ASSESSE PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 75 LAKHS BEING 1% OF THE ADVANCE AMOUNT OF RS. 75 LAKHS RECEIVED FROM M/S D.B. POWER LTD. TOWARDS SUPPLY OF CEMENT & STEEL. 2. THE CIT (A) ERRED IN NOT APPRECIATING THE LETTER DATED 24 TH JANUARY, 2012 OF M/S. WRITERS & PUBLISHERS PVT. LTD. WHEREIN THEY HAD AGREED TO AN AMOUNT EQUAL TO 1% OF THE VALUE AS DISCOUNT. 3. THE CIT (A) ERRED IN NOT APPRECIATING THAT ORDER PLACED BY M/S. D.B. POWER LTD. WAS SUBSEQUENTLY CANCELLE D BY THEM AND 3 ITA NO. 862/MUM/2016 ASSESSMENT YEAR: 2012 - 2013 ADVANCE AMOUNT OF RS. 75 LAKHS PAID TO M/S. WRITERS & PUBLISHERS PVT. LTD. WAS RETURNED TO M/S. D.B. POWER LTD. BY THE APPELLANT COMPANY. 4. THE CIT (A) ERRED IN NOT APPRECIATING THAT THE ADDITION MADE BY THE ITO WAS WITHOUT ANY MATERIAL IN HIS POSSESSION BUT WAS MERELY BASED ON PURE GUESS. 5. THE CIT (A) ERRED IN CONFIRMING AN ADDITION OF RS. 75 LAKHS MERELY ON ASSUMPTION THAT THE APPELLANT COMPANY MIGHT HAVE RECEIVED COMPENSATION ON THE TOTAL ADVANCE OF RS. 75 CRORE. HE FAILED TO APPRECIATE THE F ACT THAT THE ORDER WAS SUBSEQUENTLY CANCELLED AND HENCE TRANSACTION COULD NOT BE COMPLETED AND, THEREFORE, NO DISCOUNT ACCRUED TO THE ASSESSEE COMPANY WHICH WAS NEVER RECEIVED BY THE APPELLANT COMPANY. 6. THE CIT (A) ERRED IN NOT APPRECIATING THAT THE APPELL ANT COMPANY DID NOT HAVE THE RIGHT TO CLAIM 1% DISCOUNT WHEN THE SAME DID NOT ACCRUE TO IT IN THE LIGHT OF CANCELLATION OF ORDER BY M/S D.B. POWER LTD. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO PRESS GR OUND NO. 2 TO 6 BEING CONNECTED TO THE GROUND NO. 1. ACCORDINGLY, WE DISMISSED GROUND NO. 2 TO 6 AS NOT PRESSED. AS REGARDS THE MAIN GROUND I.E., GROUND NO. 1, THE LD. COUNSEL SUBMITTED THAT THE LD. CIT (A) HAS WRONGLY UPHELD THE FINDINGS OF THE AO. THE AD DITION MADE BY THE AO IS BAD IN LAW AS THE SAME HAS BEEN MADE ON THE BASIS OF ASSUMPTION AND PRESUMPTION. SINCE, THE DEAL COULD NOT BE FINALIZED, THERE WAS NO OCCASION TO THE ASSESSEE FOR AVAILING 1% DISCOUNT ON THE AMOUNT REC EIVED FROM THE PARTY CONCERNED . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE IMPUGNED ORDER IS NOT BASED ON EVIDENCE ON RECORD, THE SAME IS LIABLE TO BE SET ASIDE . 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELIED ON THE CONCURRENT FINDINGS OF THE AUTHORITIES B ELOW. 4 ITA NO. 862/MUM/2016 ASSESSMENT YEAR: 2012 - 2013 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL PLACED BEFORE US. THE ONLY ISSUE WHICH REQUIRES ADJUDICATION IN THIS APPEAL IS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN CONFIRMI NG THE ADDITION OF RS . 75,00,000/ - BEING 1% OF THE ADVANCE OF RS. 75 CRORE RECEIVED FROM M/S D.B. POWER LTD. FOR SUPPLY OF CEMENT AND STEEL ? 8. WE NOTICE THAT T HE AO HAS MADE ADDITION OF RS. 75,00,000/ - TO THE INCOME OF THE ASSESSEE TREATING THE SAME AS A CCRUED OR RECEIVED OR DEEMED TO HAVE BEEN RECEIVED FOR THE SERVICES RENDERED TO THE PARTIES IN ARRANGING FINANCIAL TRANSACTION USING A COLORABLE DEVICE OF PURCHASE AND SALE OF STEEL AND CEMENT. AS PER THE DETAILS FURNISHED AND THE DOCUMENTS SUBMITTED BEFOR E THE AO DURING ASSESSMENT PROCEEDINGS, THE AMOUNT OF RS. 75 CRORES RECEIVED BY THE ASSESSEE COMPANY FROM M/S D.B. POWER LTD. WAS TRANSFERRED TO THE ACCOUNT OF M/S WRITER & PUBLISHERS LTD. FROM WHOM CEMENT WAS TO BE PURCHASED AND THE SAID AMOUNT WAS FURTHE R RETURNED TO M/S D.B. POWER LTD. BY THE ASSESSEE ON CANCELLATION OF THE DEAL. SO , IT IS NOT THE CASE OF THE AO THAT THE AMOUNT IN QUESTION WAS WITHHELD OR UTILIZED BY THE ASSESSEE OR THE SAME WAS NOT RETURNED TO M/S D.B. POWER LTD. SO FAR AS DISCOUNT OF 1 % NEGOTIATED BETWEEN THE ASSESSEE AND M/S WRITER & PUBLISHERS LTD. IS CONCERNED, FROM T HE CONTENTS OF LETTER FROM M/S. WRITER AND PUBLISHERS PVT. LTD. IT CAN BE CONFERRED THAT THE ASSESSEE WAS ENTITLED FOR THE SAID DISCOUNT ON THE TOTAL VALUE OF THE SALE. THE RELEVANT PORTION OF THE LETTER READS AS UNDER: - AN AMOUNT EQUAL TO ONE PERCENT OF SALE VALUE WILL BE GIVEN AS DISCOUNT ON THE PRICE ALREADY QUOTED FOR SOLICITING THE ORDER FROM YOU. 9. SINCE, THE DEAL COULD NOT BE FINALIZED, THE ASSESSEE COMPANY W AS NOT ENTITLED TO CLAIM THE SAID DISCOUNT OR AMOUNT EQUIVALENT TO 1% OF THE TOTAL 5 ITA NO. 862/MUM/2016 ASSESSMENT YEAR: 2012 - 2013 AMOUNT RECEIVED FROM M/S D.B. POWER LTD. AO HAS MADE THE SAID ADDITION HOLDING AS UNDER: . HENCE THE UNDERSIGNED IS OF THE CONSIDERED VIEW THAT FOR THE SERVICES RENDERED, T HE ASSESSEE MIGHT HAVE RECEIVED/ MAY RECEIVE A COMPENSATION WHICH IS NOT LESS THAT 1% OF THE TOTAL AMOUNT UNDER CONSIDERATION. 10. IN THE ABSENCE OF ANY EVIDENCE TO ESTABLISH THAT THE ASSESSEE WAS ENTITLED TO RECEIVE THE SAID AMOUNT OR THE ASSESSEE HAS IN FACT RECEIVED THE SAID AMOUNT, THE AO HAD NO JURISDICTION TO MA KE ADDITION ON THE BASIS OF ASSUMPTION AND PRESUMPTIONS. AO HAS BASED HIS FINDINGS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ASSIGN ANY REASON FOR NO T DEDUCTING 1% DISCOUNT OFFERED BY TH E COMPANY IN RESPECT OF SUPPLY OF CEMENT AND STEEL. 11. HENCE, IN OUR CONSIDERED OPINION, T HE FINDINGS OF THE AO ARE NOT BASED ON ANY EVIDENCE. MOREOVER, THE AO HAS NOT EXPLAINED THE REASON AS TO WHY HE HAS REJECTED THE CONTENTION OF THE ASSESSEE WHICH IS DULY CORROBORATED BY THE DOCUMENTARY EVIDENCE. IN ORDER TO REBUT THE DOCUMENTARY EVIDENCE WHICH CORROBORATES THE CONTENTION OF THE ASSESSEE, THE AO MUST HAVE BROUGHT ON RECORD SOME COGENT AND CONVINCING EVIDENCE. SINCE, WE DO NOT FIND ANY COGENT REASON S FOR NOT ACCEPTING THE CONTENTION OF THE ASSESSEE, THE ADDITION IN QUESTION IS BAD IN LAW AND THE LD CIT(A) HAS WRONGLY AFFIRMED THE ASSESSMENT ORDER. IT IS AN ADMITTED FACT THAT THE DEAL WAS ULTIMATELY CANCELLED AND THE ENTIRE AMOUNT WAS REMITTED TO M/S D.B. POWER LTD., THEREFORE, THERE IS NO REASON TO CONFIRM THE ADDITION MADE ON THE BASIS OF ASSUMPTION . HENCE , WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE . WE , THEREFORE , SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND ALLOW THE SOLE GROUND O F THE APPEAL OF THE ASSESSEE. THE AO IS DIRECTED TO DELETE THE ADDITION. 6 ITA NO. 862/MUM/2016 ASSESSMENT YEAR: 2012 - 2013 IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2012 - 2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 17 TH MAY , 2017 . SD / - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 17 / 0 5 / 2017 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