M/S.SAI KIRAN CLEARING COMPANY PRIVATE LIMITED , MUMBAI V. PR. CIT-2, MUMBAI

ITA 969/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2079 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 20-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B. JAYA KUMAR
• Keywords: Corroborative evidences; Assessment record; Set aside
• Section: 263; 143(3); 142(1); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBERAND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 969 /MUM. /2019 ( ASSESSMENT YEAR : 20 15 16 ) M/S. SAI KIRAN CLEARING CO. PVT. LTD. 202, 2 ND FLOOR PLOT NO.1, RATAN GALAXIE JAWAHARLAL NEHRU ROAD, MULUNE (W) MUMBAI 400 080 PAN AAFCS2365A . APPELLANT V/S PCIT OF INCOME TAX CIRCLE 2, MUMBAI . RESPONDENT ASSESSEE BY : SHRI MADHUR AGARWAL REVENUE BY : SHRI B. JAYA KUMAR DATE OF HEARING 16.09.2019 DATE OF ORDER 06.12.2019 O R D E R PER SAKTIJIT DEY. J.M. T HE CAPTIO NED APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE ORDER DATED 21 ST JANUARY 2019, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE LEARNED P RINCIPAL C OMMISSIONER OF INCOME TAX (PCIT) 2, MUMBAI, FOR THE ASSESSMENT YEAR 2015 16. 2 M/S. SAI KIRAN CLEARING CO. PVT. LTD. 2. BRIEF FACTS ARE, THE ASSESSEE COMPANY IS CARRYING ON BUSINESS AS CUSTOM HOUSE AGENT, CLEARING & FORWARDING AGENT AND TRANSPORT & LABOUR CONTRACTOR. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2015, DECLARING TOTAL INCOME OF ` 1,06,88,550. THE ASSESSMENT IN CA SE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 30 TH JUNE 2017, ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. AFTER COMPLETION OF THE ASSESSMENT AS AFORESAID, LEARNED PCIT , IN EXERCISE OF POWER CONFERRED UNDER SECTION 263 OF THE ACT , CALLED FOR AND EXAMINED THE ASSESSMENT RECORDS OF THE ASSESSEE. AFTER EXAMINING THE ASSESSMENT RECORD S, LEARNED PCIT WAS OF THE VIEW THAT IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS SHOWN NET REVENUE FROM OPERATIONS AT ` 2,62,91,752, INSTEA D OF GROSS REVENUE RECEIVED FROM CLEARING & FORWARDING AND AGENCY CHARGES. HE OBSERVED , TO ARRIVE AT THE NET REVENUE, THE ASSESSEE MUST HAVE DEBITED CERTAIN EXPENSES WHICH MUST HAVE REDUCED THE GROSS RECEIPTS. HE OBSERVED , WHILE ACCEPTING THE NET REVENUE O FFERED BY THE ASSESSEE, THE ASSESSING OFFICER FAILED TO EX AMINE VARIOUS EXPENSES INCURRED/ CLAIMED BY THE ASSESSEE TO ARRIVE AT NET FIGURE. HE OBSERVED , THE ASSESSING OFFICER FAILED TO EXAMINE WHETHER SUCH EXPENSES ARE GENUINE AND SUPPORTED BY DETAILS AND V OUCHERS AND WHETHER THEY ARE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. FURTHER, HE OBSERVED , THE ASSESSING OFFICER FAILED 3 M/S. SAI KIRAN CLEARING CO. PVT. LTD. TO ENQUIRE WHETHER THE GROSS RECEIPTS SHOWN BY THE ASSESSEE IS RECONCILED WITH FORM NO.26AS AND AIR DATA. BEING OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT MADE PROPER ENQUIRY TO VERIFY THE AFORESAID FACTS, LEARNED PCIT ISSUED NOTICED TO THE ASSESSEE REQUIRES TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE REVISED. IN REPLY TO THE SHOW CAUSE NOTICE AS WELL AS IN THE COURSE OF PROCEEDINGS BEFORE LEARNED PCIT, THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MA DE DUE ENQUIRY WITH REGARD TO EXPENDITURE CLAIMED BY THE ASSESSEE AND HAS EXA MINED ALL NECESSARY INFORMATION/DETAILS/ SUPPORTING EVID ENCES FURNISHED BY THE ASSESSEE. HOWEVER, LEARNED PCIT WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE. FURTHER, IT W AS SUBMITTED BY THE ASSESSEE THAT BEING A CLEARING & FORWARDING AGENT, THE ASSESSEE HAS TO INCUR VARIOUS EXPENSES ON BEHALF OF CUSTOMER AND IT RECEIVES AGENCY CHARGES FROM THE CUSTOMER. IT WAS SUBMITTED , SINCE THE ASSESSEE HAD TO INCUR CERTAIN EXPENDITURE ON BEHALF OF THE CUSTOMER, MAJOR PORTION OF THE SALE BILL IS TOWARDS REIMBURSEMENT OF EXPENSES. THE AFORESAID ARGUMENTS ON MERITS A LSO DID NOT FIND FAROUR WITH LEARNED PCIT . HE OBSERVED , THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ACCEPTED THE RETUR N ED INCOME WITHOUT MAKING ENQUIRY AND VERIFICATION WHICH HE WAS REQUIRED TO MAKE. THUS, HE ULTIMATELY CONCLUDED THAT DUE TO SUCH LAPSE ON THE PART OF THE ASSESSING OFFICER, THE EXPENDITURE CLAIMED BY THE ASSESSEE HAVE NOT BEEN VERIFIED WHICH MADE THE 4 M/S. SAI KIRAN CLEARING CO. PVT. LTD. ASSES SMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE CLAIMED AFTER DUE VERIFICATION AND ENQUIRIES. 3. THE LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED, IN COURS E OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER , ON 17 TH MAY 2017, HAD ISSUED NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE. DRAWING OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER, HE SUBMITT ED , THE ASSESSEE WAS SPECIFICALLY DIRECTED TO RECONCILE THE INCOME SHOWN BY THE ASSESSEE WITH AIR DATA AND THE ASSESSING OFFICER HAS ALSO DIRECTED THE ASSESSEE TO FURNISH SUCH DATA IN THE FORMAT PROVIDED BY HIM. HE SUBMITTED , IN REPLY TO THE NOTICE AND QUE STIONNAIRE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE HAD FURNISHED ITS REPLY SUBMITTING ALL THE DETAILS RELATING TO THE EXPENDITURE S CLAIMED WITH SUPPORTING EVIDENCE S . HE SUBMITTED , THE ASSESSEE ALSO FURNIS HED RECONCILIATION STATEMENT EXPLAINING THE AI R INFORMATION/ DATA. HE SUBMITTED , AS PER THE REVENUE RECOGNITION POLICY CONSISTENTLY FOLLOWED BY THE A SSESSEE, GROSS RECEIPTS FROM SERVICES TO THE CUSTOMERS TOWARDS CLEARING & FORWARDING OF THEIR IMPORT AND E XPORT INCLUDES VARIOUS REIMBURSABLE EXPENDITURE INCURRED ON BEHALF OF THEM ON ONE SIDE AND AGENCY CHARGES AS MAIN SOURCE OF INCOME OF THE ASSESSEE ON THE OTHER SIDE. HE SUBMITTED , MAJOR PORTION OF SALE BILLS 5 M/S. SAI KIRAN CLEARING CO. PVT. LTD. RAISED BY THE ASSESSEE ON CUSTOMER IS FOR REIMBURSEMENT OF EXPENSES WHICH WERE INCURRED ON BEHAL F OF THE CUSTOMER AND IS RECEIVED OR RECEIVABLE FROM THEM EITHE R IN ADVANCE OR AFTER RAISING THE BILLS. HE SUBMITTED , THE FRE IGHT FORWARDING CHARGES SHOWN IN CREDIT SIDE OF THE PROFIT & LOSS ACCOUNT IS NET OF GROSS RECEIPT MINUS EXPENDITURE INCU RRED ON BEH ALF OF THE CUSTOMER F OR CLEARING & FORWARDING THEIR CONSIGNMENT AND ALSO INCLUDES AGENCY COMMISSION. HE SUBMITTED , THE AUDITOR HAS ALSO CERTIFIED THE AFORESAID FACT IN THE AUDIT REPORT IN FORM NO.3CA. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE HAS FURNISHED VOLUMINOUS EVIDENCES RELATING TO THE EXPENDITURE INCURRED ON BEHALF OF THE CUSTOMER AND HAS ALSO FURNISHED RECONCILIATION STATEMENT TO RECONCILE THE INCOME AS PER BOOKS AND AS PER FORM NO.26AS. HE SUBMITTED , ALL SALES BILLS, INVOICES WERE FURNISHED BEFORE THE ASSESSING OFFICER WITH BIFURCATION AND THE TOTAL TURNOVER OF THE ASSESSEE AS PER BOOKS MATCHES WITH THE FIGURE AS SHOWN IN THE PROFIT & LOSS ACCOUNT. HE SUBMITTED , AFTER CONDUCTING DUE ENQUI RY AND NECESSARY VERIFICATION, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ALLOWING THE EXPENDITURE S CLAIMED. HE SUBMITTED , LEARNED PCIT HAS NOT POINTED OUT A SINGLE DEFECT OR DEFICIENCY EITHER IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE OR I N THE EVIDENCES FURNISHED REGARDING CLAIM OF EXPENDITURE. HE SUBMITTED , IN SUCH CIRCUMSTANCES, EXERCISE OF POWER 6 M/S. SAI KIRAN CLEARING CO. PVT. LTD. UNDER SECTION 263 OF THE ACT SIMPLY FOR THE PURPOSE OF GOING THROUGH THE SAME EXERCISE OVER AGAIN IS INVALID. HE SUBMITTED , THE OBSERVATIONS MA DE BY LEARNED PCIT IS OF GENERAL NATURE WITHOUT REV EALING ANY SPECIFIC INSTANCE OF LAPSE OR NON ENQUIRY BY THE ASSESSING OFFICER. THUS, HE SUBMITTED , THE ORDER PASSE D UNDER SECTION 263 OF THE ACT DE SERVES TO BE QUASHED. 4. THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUBMITTED , IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOT VERIFIED THE GENUINENESS OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. HE SUBMITTED , NO ENQUIRY HAS BEEN CONDUCTED BY THE ASSESSING OFFICER WITH REGAR D TO THE NET INCOME SHOW N BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. HE SUBMITTED , MERELY BECAUSE ASSESSEES ACCOUNTS ARE AUDITED AND THE ASSESSEE HAS FILED AUDITORS CERTIFICATE, IT CANNOT BE SAID THAT ALL THE EXPENSES INCURRED BY THE ASSESSEE ARE GENUINE. FURTHER, HE SUBMITT ED , LEARNED PCIT HAS SIMPLY SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENSES AFTER DUE VERIFICATION AND ENQUIRY . THEREFORE , NO PREJUDICE IS CAUSED TO THE ASSESSEE. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT , ASSESSEES BOOKS OF ACCOUNT ARE UNDER STATUTORY AUDIT AND THE ASSESSEE HAS DULY FILED AUDITED FINANCIAL 7 M/S. SAI KIRAN CLEARING CO. PVT. LTD. STATEMENTS ALONG WITH ITS RETURN OF INCOME. IT IS ALSO A FACT THAT THE ASSESSEE IS CARRYING ON BUSINESS AS A CUSTOM HOUSE, CLEARING & FORWARDING AGENT. THEREFORE, IT IS REQUIRED TO INCUR CERTAIN EXPENSES ON BEHALF OF ITS CUSTOMERS. FROM THE MATERIAL ON RECORD, IT IS NOTICED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, VIDE NOTICE DATED 17 TH MAY 2 017, ISSUED UNDER SECTION 142(1) OF THE ACT AND THE ANNEXURE APPENDED THERETO HAS CALLED FOR VARIOUS INFORMATION/ DE TAILS FROM THE ASSESSEE, INCLUDING , RECONCILIATION OF INCOME AS PER BOOKS OF ACCOUNT , AIR DATA AND FORM NO.26AS. THUS, AS COULD BE SEEN, THE ASSESSING OFFICER HAS SPECIFICALLY ENQUIRED INTO THE INCOME DEBITED TO THE PROFIT & LOSS ACCOUNT AND HAS CALLED UPON THE ASSESSEE TO RECONCILE THE DIFFFERENCE BETWEEN THE INCOME SHOWN AND THE INCOME AS PER AIR INFORMATION AND FORM NO.26AS. IN RESPONSE TO THE SAID QUERY, TH E ASSESSEE HAS FURNISHED ALL NECESSARY INFORMATION/ DETAILS WITH SUPPORTING EVIDENCE S . IN FACT, RECONCILIATION S TATEMENTS HAVE BEEN FILED BY THE ASSESSEE EXPLAINING THE DIFFERENCE IN INCOME SHO WN IN THE BOOKS AND THE INCOME APPEARING IN AIR INF ORMATION/ FOR M NO.26AS. ALL THESE EVIDENCES , AS SUBMITTED IN THE PAPER BOOK , WERE ALSO FILED BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. ALL THE INVOICES RAISED BY THE ASSESSEE ON CUSTOMERS AS WELL AS THIRD PARTIES HAVE ALSO BEEN FILED. THE ASSESSEE HAS ALSO EXPLAINED THE REVENUE RECOGNITION POLICY CONSISTE NTLY FOLLOWED 8 M/S. SAI KIRAN CLEARING CO. PVT. LTD. BY THE ASSESSEE. ON A PERUSAL OF THE IMPUGNED ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSING OFFICER HAS SPECIFI CALLY STATED THAT THE REQUISITE DETAILS CALLED FOR AS PER THE QUESTIONNAIRE WERE NOT ONLY PLACED ON RECORD BUT WERE DULY VERIFIED BY HIM. HE HAS ALSO REFERRED TO ASSESSEES EXPLANATION AND RECONC ILIATION OF THE AIR INFORMATION/ FORM NO.26A. THUS, AS COULD B E SEEN FROM THE FACTS ON RECORD, THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS, HAS EXAMINED AND ENQUIRED INTO THE INCOME SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AND H AS ALSO VERIFIED THE DETAILS OF EXPENDITURE S CLAIMED. THUS, IN SUCH CIRCUMSTANCES, THE ALLEGATI ON OF LEARNED PCIT THAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY ON THE ISSUES REFERRED TO BY HIM IS WITHOUT ANY BASIS AND CONTRARY TO THE FACTS AND MATERIALS ON RECORD. FURTHER, ON A PERU SAL OF THE IMPUGNED ORDER OF LEARNED PCIT , IT IS NOTICED THAT HE HAS NOT POINTED OUT EVEN A SINGLE DEFECT OR DEFICIENCY IN THE EVIDENCES FILED BY THE ASSESSEE . EVEN, HE HAS NOT DEALT WITH A SINGLE ITEM OF EXPENDITURE, WHICH ACCORDING TO HIM, IS EITHER NON GENUINE OR UNREASONABLE. ON T HE CONTRARY, WHILE SETTING ASIDE THE ASSESSMENT ORDER, LEARNED PCIT HAS HIMSELF DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE CLAIMED BY THE ASSESSEE AFTER DUE VERIFICATION AND ENQUIRIES. WHEN THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PRO CEEDINGS HAS ALREADY ENQUIRED INTO AND VERIFIED THE EXPENDITURE S CLAIMED BY THE ASSESSEE, IT IS NOT UN DERSTOOD 9 M/S. SAI KIRAN CLEARING CO. PVT. LTD. WHAT MORE VERIFICATION/ ENQUIRY HAS TO BE CONDUCTED BY HIM. THUS, PRIMA FACIE, IT APPEARS THAT LEARNED PCIT HAS EXERCISED HIS POWER UNDER SECTION 263 OF THE ACT TO INITIATE A ROVING AND FISHING ENQUIRY WITHOUT POINTING OUT ANY SPECIFIC ERROR IN THE ASSESSMENT ORDER WHICH MADE IT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THEREFORE, IN OUR CONSIDERED OPINION, THE BASIC CONDITIONS OF SECTI ON 263 OF THE ACT IN THE PRESENT CASE ARE NOT FULFILLED. ACCORDINGLY, WE QUASH THE ORDER PASSED UNDER SECTION 263 OF THE ACT. CONSEQUENTLY, THE ORDER PASSED BY THE A .O. IS RESTORED. GROUNDS ARE ALLOWED. 6. IN THE RESULT, APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 06.12.2019 SD/ - M. BALAGANESH ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 06.12.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI