ACIT 7(2) ( 2), MUMBAI V. NAT STEEL EQUIPMENT P.LTD, MUMBAI

MA 721/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 5563 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARSHANANWANI; DEEPAK TRALASHWALA
• Keywords: Search and seizure
• Section: 254(2)

Judgement Text

P A G E | 1 M.A. NOS.7 20 & 7 21 /MUM/2018 (ARISING OUT OF ITA NOS. 5 0 70 & 4 01 1/MUM/2013 ) IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER M.A. NOS. 7 20 & 721 /MUM/2018 (ARISING OUT OF ITA NOS. 5070 & 4011 /MUM/2013 M/S NAT STEEL EQUIPMENT ASST. COMMISSIONER OF INCOME - TAX - 7(2)(2) PRIVATE LIMITED, VS. 126B, 1 ST FLOOR, AAYKAR BHAWAN, G.D. AMBEDKAR MARG, MUMBAI 400 020. NAIGAUM ROAD, LOWER PAREL, MUMBAI 400014 PAN AAACN5119J (APPLICANT) (RESPONDENT) APPLICANT BY: SHRI ABI RAMA KARTHIKEYAN, D.R RESPONDENT BY: SHRI. DEEPAK TRALASHWALA AND MS. VARSHA NANWANI, A.R S DATE OF HEARING : 12 .0 7 .2019 DATE OF PRONOUNCEMENT: 0 9 . 10 .2019 O R D E R PER RAVISH SOOD, JM: THE PRESENT MISCELLANEOUS APPLICATION S FILED BY THE REVENUE ARISES FROM THE CONSOLIDATED ORDER THAT WAS PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS OF THE ASSESSEE VIZ. M/S NAT STEEL EQUIPMENT PVT. LTD. VS. DCIT - 7(1), MUMBAI IN I ITA NO. 4011/MUM/2013 & ITA NO. 5070 /MUM/2013, DATED 13. 06.2018 FOR A.Y. 2009 - 10 & A.Y. 2010 - 11 , RESPECTIVELY. 2. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED , THAT THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE AFORESAID APPEAL S IS FOUND TO BE SUFFER ING FROM CERTAIN MISTAKE S, WHICH BEING APPARENT FROM RECORD HAD THUS RENDERED THE SAME AMENABLE FOR P A G E | 2 M.A. NOS.7 20 & 7 21 /MUM/2018 (ARISING OUT OF ITA NOS. 5 0 70 & 4 01 1/MUM/2013 ) RECTIFICATION TO THE SAID EXTENT. THE LD. D.R SUBMITTED THAT A COMMON ISSUE WAS INVOLVED IN BOTH THE APPLICATIONS. ADVERTING TO THE MISCELLANEOUS APPLICATION FOR A.Y 2009 - 10, IT WAS SUBMITTED BY THE LD. D.R, THAT THE MISTAKE IN THE ORDER OF THE TRIBUNAL PERTAINED TO ITS OBSERVATIONS RECORDED WHILE VACATI NG OF THE DISALLOWANCE OF RELATED PARTY PAYMENTS OF RS. 38,87,705/ - THAT WERE MADE BY THE A.O U/S 40A(2)(A) OF THE ACT. IT WAS AVERRED BY THE LD. D.R, THAT THE DISALLOWANCE MADE U/S 40A(2)(A) WAS DELETED BY THE TRIBUNAL, FOR THE REASON, THAT THE A.O HAD WORKED OUT THE SAME ON AN ADHOC BASIS VIZ. 30% OF THE PAYMENTS MADE TO THE RELATED PARTIES , WITHOUT PLACING O N RECORD ANY MATERIAL WHICH COULD PROVE TO THE HILT THAT THE PAYMENTS WERE FOUND TO BE EXCESSIVE OR UNREASONABLE. ADVERTING TO THE IMPUGNED MISTAKE IN THE ORDER OF THE TRIBUNAL, IT WAS AVERRED BY THE LD. D.R, THAT THE TRIBUNAL AT PAGE 7 OF ITS ORDER HAD OB SERVED THAT THOUGH THE ASSESSEE COMPANY HAD PAID SALARY TO ONE OF ITS RELATED PARTY FOR HIS SERVICES RENDERED AS A GENERAL MANAGER VIZ. MR. ZORU BHATHENA , HOWEVER, THE SAME WAS WRONGLY CONSIDERED BY THE A.O AS A PAYMENT TOWARDS COMMISSION. IT WAS SUBMITTED BY THE LD. D.R, THAT THE PAYMENTS MADE TO MR. ZORU BATHENA COMPRISED OF TWO PARTS VIZ. (I). SALARY (AS GENERAL MANAGER): RS. 80,60,000/ - ; AND (II).COMMISSION: RS. 12,00,000/ - . IN ORDER TO FORTIFY HIS AFORESAID CLAIM, THE LD. D.R HAD DRAWN OUR ATTENTION TO FORM NO. 16 AND DETAILS OF THE COMMISSION PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN THE BACKDROP OF HIS AFORESAID CONTENTIONS, IT WAS AVERRED BY THE LD. D.R , THAT THE ORDER PASSED BY THE TRIBUNAL SUFFERED FROM A MISTAKE WHICH WAS APPA RENT FROM RECORD. 3. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED, THAT THE REVENUE BY FILING THE PRESENT APPLICATION WAS AS A MATTER OF FACT SEEKING REVIEW OF THE ORDER PASSED BY THE TRIBUNAL. IT WAS SUBMITTED BY THE LD. A.R, THAT AS THERE WAS NO MISTAKE APPARENT FROM RECORD, THEREFORE, THE APPLICATION FILED BY THE REVENUE DESERVED TO BE DISMISSED. 4. WE HA VE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION. AS OBSERVED BY US HEREINABOVE, THE TRIBUNAL IN A.Y 2009 - 10 HAD DELETED THE DISALLOWANCE MADE BY HE A.O U/S 40A(2)(A), FOR THE REASON, THAT THE SAME WAS W OR KED OUT BY HIM ON AN ADHOC BASIS VIZ. 30% OF THE AGGREGATE RELATE D PARTY PAYMENTS OF RS. 1,29,59,018/ - , WITHOUT PLACING ON RECORD ANY MATERIAL WHICH COULD PROVE TO THE HILT THAT THE PAYMENTS WERE FOUND TO BE EXCESSIVE OR UNREASONABLE. ACCORDINGLY, THE TRIB UNAL BEING OF THE VIEW THAT THE DISALLOWANCE MADE U/S P A G E | 3 M.A. NOS.7 20 & 7 21 /MUM/2018 (ARISING OUT OF ITA NOS. 5 0 70 & 4 01 1/MUM/2013 ) 40A(2)(A) WAS NOT PRINCIPALLY MAINTAINABLE, AS THE REQUISITE CONDITIONS THEREIN PROVIDED WERE NOT FOUND TO HAVE BEEN SATISFIED, HAD THUS VACATED THE SAID DISALLOWANCE. AS FOR THE OBSERVATIONS OF THE TRI BUNAL, THAT THE PAYMENT THAT WAS MADE BY THE ASSESSEE COMPANY TO MR. ZORU BATHENA, FOR HIS SERVICES RENDERED AS A GENERAL MANAGER WERE WRONGLY HELD BY THE A.O AS A COMMISSION PAYMENT, WE FIND THAT THE SAME WERE NEVER REBUTTED BY THE LD. D.R IN THE COURSE O F THE HEARING OF THE APPEAL. IN OUR CONSIDERED VIEW, THE REVENUE CANNOT BE PERMITTED TO FILE FRESH DOCUMENTS , WHICH WERE NEVER THERE BEFORE THE TRIBUNAL IN THE COURSE OF THE HEARING OF THE APPEAL, FOR CANVASSING THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL HAD PROCEEDED WITH ON INCORRECT FACTS. AS THE POWERS VESTED WITH THE TRIBUNAL U/S 254(2) OF THE ACT ARE CONFINED TO RECTIF ICATION OF A MISTAKE WHICH IS GLARING AND APPARENT FROM RECORD, THEREFORE, CONSIDERING OF THE FRESH MATERIAL FILED BY THE R EVENUE IN ITS ATTEMPT TO SEEK RE - APPRECIATION OF THE FACTS FROM A NEW PERSPECTIVE, IN OUR CONSIDERED VIEW WOULD NOT BE PERMISSIBLE. WE THUS ARE OF THE CONSIDERED VIEW THAT THE APPLICATION FILED BY THE REVENUE UNDER SEC. 254(2) FOR A.Y 2009 - 10 CANNOT BE ACC EPTED, AND IS ACCORDINGLY DISMISSED. 5. AS FOR THE APPLICATION FILED BY THE REVENUE FOR A.Y 2010 - 11 IS CONCERNED, WE FIND, THAT IT IS CLAIMED BY THE REVENUE THAT THE FACTS INVOLVED IN THE SAID YEAR AS REGARDS THE DISALLOWANCE MADE U/S 40A(2)(A), REMAIN S THE SAME. WE HAVE PE RUSED THE ORDER OF THE TRIBUNAL AND ARE OF THE CONSIDERED VIEW , THAT THE OBSERVATIONS IN CONTEXT OF PAYMENTS MADE BY T HE ASSESSEE TO MR. ZORU BATHENA IN A.Y 2010 - 11 ARE RECORDED IN A DIFFERENT BACKGROUND AS IN COMPARISON TO THOSE RECORDED IN A.Y 2009 - 10. ADMITTEDLY, IN THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2010 - 11, THE TRIBUNAL HAD DELETED THE DISALLOWANCE U/S 40A(2)(A) OF RS. 68,40,000/ - THAT WAS UPHELD BY THE CIT(A) [OUT OF TOTAL DISALLOWANCE U/S 40A(2) (A) OF RS. 1,02,55,500/ - MADE BY THE A.O]. AS IN THE PRECEDING YEAR VIZ. A.Y 2009 - 10, THE TRIBUNAL HAD DELETED THE DISALLOWANCE , FOR THE REASON, THAT THE SAME WAS WORKED OUT BY THE A.O ON AN AD HOC BASIS VIZ. 30% OF THE AGGREGATE OF THE RELATED PAYMENTS, W ITHOUT PLACING ON RECORD ANY MATERIAL WHICH COULD PROVE TO THE HILT THAT THE SAME WERE FOUND TO BE EXCESSIVE OR UNREASONABLE . AS REGARDS THE PAYMENTS MADE TO MR. ZORU BATHENA WERE CONCERNED, THE TRIBUNAL HAD REFERRED TO THE OBSERVATIONS OF THE CIT(A) , WHO HAD OBSERVED THAT THE A.O HAD WRONGLY CONCLUDED THAT THE AMOUNT OF RS. 1,13,85,000/ - WAS PAID TO MR. ZORU BATHENA AS COMMISSION, AS THE FACT WAS THAT THE SAID PAYMENT WAS MADE BY WAY OF SALARY TO HIM. ACCORDINGLY, THE OBSERVATION OF THE TRIBUNAL AS REGARDS THE NATURE OF THE PAYMENTS P A G E | 4 M.A. NOS.7 20 & 7 21 /MUM/2018 (ARISING OUT OF ITA NOS. 5 0 70 & 4 01 1/MUM/2013 ) MADE BY THE ASSESSEE TO MR. ZORU BATHENA IN A.Y 2010 - 11 WAS BASED ON THE FINDING S OF THE CIT(A) TO THE SA ID EFFECT. AT THE TIME OF HEARING OF THE APPEALS THE LD. D.R HAD NOT ASSAILED THE CORRECTNESS OF THE AFORESAID OBSERVATIONS OF THE FIRST APPELLATE AUTHORITY. ON THE BASIS OF THE AFORESAID FACTS , WE ARE OF THE CONSIDERED VIEW , THAT THE REVENUE IN THE GARB OF THE PRESENT MISCELLANEOUS APPLICATION , IS IN FACT SEEKING REVIEW OF THE ORDER PASSED BY THE TRIBUNAL AND, THAT TOO ON THE BASIS OF CERTAIN FACTS WHICH WERE NEVER CLAIMED TO BE INCORRECT IN THE COURSE OF THE HEARI NG OF THE APPEAL. WE ARE AFRAID THAT SEEKING DISLODGING OF THE VIEW ARRIVED AT BY THE TRIBUNAL IN THE GARB OF AN APPLICATION FILED UNDER SEC. 254(2) IS NOT PERMISSIB LE UNDER LAW. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW , THAT THE SEEKING OF REVIEW OF THE ORDER IN THE GARB OF THE APPLICATION FILED BY THE REVENUE U/S 254(2) CANNOT BE ACCEPTED, AND IS THUS REJECTED. WE THUS ARE OF THE CONSIDERED VIEW, THAT THE APPLICA TION FILED BY THE REVENUE UNDER SEC. 254(2) FOR A.Y 2010 - 11 CANNOT BE ACCEPTED, AND IS ACCORDINGLY DISMISSED. 6. RESULTANTLY, BOTH THE MISCELLANEOUS APPLICATIONS FILED BY THE REVENUE VIZ. M.A NO. 720/MUM/2018 AND M.A NO. 721/MUM/2018, FOR A.Y 200 9 - 10 AND A.Y 2010 - 11, ARE DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 0 9 .10.2019. S D / - S D / - (SHAMIM YAHYA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 09 . 10 .2019 PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI