Income Tax Appellate Tribunal - Ahmedabad
Robinson Impex (I) Pvt.Ltd.,, ... vs Department Of Income Tax on 16 January, 2012
1 ITA No.811/Ahd/2006 with
C.O.No.138/AHD/2006 A.Y.2002-03.
IN THE INCOME TAX APPELLATE TRIBUNAL "A "BENCH, AHMEDABAD
(BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B.R. BASKARAN,AM)
I.T.A. No. 811/AHD/2006
(Assessment Year: 2002-2003)
Income Tax Officer, Vs. Robinson Impex (India) Ltd.,
Ward 5(3), 403, Sanjay Tower,
2nd Floor, C.U.Shah College Opp.C.N.Vidyalaya,
Building,Ashram Road, Ambawadi,
Ahmedabad. Ahmedabad.
(Appellant) (Respondent)
C.O.NO.138/AHD/2006
(Arising out of I.T.A. No. 811/AHD/2006)
(Assessment Year: 2002-2003)
Robinson Impex (India) Ltd., Vs. Income Tax Officer,
403, Sanjay Tower, Ward 5(3),
Opp.C.N.Vidyalaya, 2nd Floor, C.U.Shah College
Ambawadi, Building,Ashram Road,
Ahmedabad. Ahmedabad.
(Appellant) (Respondent)
On behalf of the Revenue. Mr. P.K. Srivastava, Sr. D.R.
On behalf of the Assessee. Mr. S.N.Soparkar, Sr.Advocate.
आदे श)/ORDER
(आदे Date of hearing : 16-1-2012 Date of Pronouncement : 19-1-2012 PER: SHRI B.R. BASKARAN, A.M. The appeal of the revenue and the cross objection of the assessee are directed against the order dated 24.01.2006 passed by Ld CIT (A)-XI, Ahmedabad and they relate to the assessment year 2002-03.
2 ITA No.811/Ahd/2006 withC.O.No.138/AHD/2006 A.Y.2002-03.
2. In the appeal of the revenue, following three issues are contested.
(a) Deletion of Rs.69,75,846/- relating to Commission expenses.
(b) Deletion of Rs.51,36,721/- relating to Finance Charges.
(c) Deletion of Rs.36,60,925/- relating to Call money receipts.
3. The facts of the case are stated in brief. The assessee is engaged in various business activities like (a) managing Health care business, (b) Exports, (c) Trading and (d) Binary marketing. It filed its return of income for the year under consideration declaring a loss of Rs.27,64,190/-. The said return of income was taken up for scrutiny and the assessing officer made various additions. In the appeal filed before the Ld CIT (A), the first appellate authority deleted the additions stated in para 2 supra. Hence the revenue is in appeal before us assailing the decision of Ld CIT (A) in granting the relief stated above.
4. The first issue relates to the deletion of Rs.69,75,846/- relating to Commission expenses. The assessee claimed a sum of Rs.84,47,845/- as deduction towards Commission payments, out of which a sum of Rs.79,46,846/- was claimed to have been paid to Shri Sandeep Mehta, proprietor of M/s Safal Inc., Mumbai. When enquired about this payment, the assessee filed copies of Agreement entered between it and M/s Sandeep Mehta and also copies of ledger accounts. According to the assessee, it has paid commission to Shri Sandeep Mehta in the form of Commission as well as reimbursement of expenses. Accordingly, the assessee stated that it could not produce vouchers or bills relating to the expenses incurred on behalf of Shri Sandeep Mehta. The assessing officer called for details of said commission from Shri Sandeep Mehta u/s 133(6) of the Act, to which he replied that he has received only a sum of Rs.9,71,000/- from the assessee company. The 3 ITA No.811/Ahd/2006 with C.O.No.138/AHD/2006 A.Y.2002-03.
AO also recorded a statement u/s 131 of the Act from Shri Sandeep Mehta and in the said statement also he averred that he has received only Rs.9,71,000/- from the assessee company. The assessing officer has extracted relevant portions of the statement recorded in the assessment order. Shri Sandeep Mehta also denied that the assessee company has incurred any expense on his behalf and also furnished a copy of ledger account of the assessee company as available in his books of account, which depicted receipt of Rs.9,71,000/- only. By fully placing reliance on the said statement of Shri Sandeep Mehta, the AO proceeded to disallow the alleged excess commission payment of Rs.69,75,846/-.
5. It is very pertinent to note that the AO denied the opportunity of cross examination of Shri Sandeep Mehta by stating that the said person is actually a witness of the assessee company. Before the AO, the assessee strongly stood by its books of account and accordingly categorized the statement of Shri Sandeep Mehta as blatant lies. In the appellate proceeding, the Ld CIT (A) found fault with the AO in not confronting the terms of agreement with Shri Sandeep Mehta and also in not affording opportunity of cross examination to the assessee. Since the impugned addition was made by placing reliance on the statement of Shri Sandeep Mehta only, the CIT (A) did not find merit in the impugned addition and accordingly deleted the same. Aggrieved, the revenue is in appeal before us.
6. The Ld D.R strongly supported the order of the A.O and stated that the assessing officer has taken pains to investigate into the issue and has found out that the commission expenses accounted by the assessee are in excess. On the contrary, the Ld A.R contended that the impugned addition could not be made as the assessee was denied opportunity of cross examination. In this regard, he relied 4 ITA No.811/Ahd/2006 with C.O.No.138/AHD/2006 A.Y.2002-03.
upon the decision dated 13.4.2010 passed by Hon'ble High Court of Gujarat in the case of D.C.I.T Vs. Mahendra Ambalal Patel in Tax Appeal No.462 of 1999.
7. We have heard the rival contentions on this issue. It is very important to note that the AO has placed full reliance on the confirmation letter of Shri Sandeep Mehta and also the statement taken from him to come to the conclusion that the commission paid by the assessee to Shri Sandeep Mehta is only Rs.9,71,000/- and not Rs.79,46,846/- as accounted for in the books of the assessee company. It is settled position of law that an assessee could not be put in a disadvantageous position on the basis of evidences collected behind his back without confronting the same with him. To this extent, we do not find any justification in the action of the assessing officer in not affording the opportunity of cross examination of Shri Sandeep Mehta to the assessee.
8. The Ld A.R placed reliance on the decision of Hon'ble jurisdictional Gujarat High Court in the case of Mahendra Ambalal Patel, referred supra, to contend that the impugned addition is liable to be deleted in the absence of cross examination. We have carefully considered the said decision and notice that the said decision has been rendered in the context of Chapter XIV-B of the Act relating to block assessment. There cannot be any dispute that the provisions of the Act relating to the block assessment is a separate code by itself, wherein the evidences found during the course of search are the only basis for making the block assessment. In the above said case, the AO therein made the addition in the hands of the assessee "M", on the basis of statements recorded from "S" and "M.V". However, the Tribunal noticed that the other record available with the department clearly proved that the said statements are not correct. Since the said statements were not corroborated with any other evidence found during the course of search and further 5 ITA No.811/Ahd/2006 with C.O.No.138/AHD/2006 A.Y.2002-03.
the facts prevailing in the record of the department were otherwise, the Tribunal took the view that the addition could not have been made only on the strength of the statement alone and accordingly the said addition was deleted. The said view of the Tribunal was upheld by the Hon'ble High Court. Thus, we notice that the decision in the above said case has been rendered in the context of Chapter XIV-B of the Act on the basis of facts and circumstances prevailing in that case. Accordingly, in our view, the assessee could not take support of the said decision in the regular assessment proceeding.
9. Turning to the facts of the instant case, the contention of the assessee is that statement made by Shri Sandeep Mehta is totally against the facts and evidences available with it. Further, it was pointed out that the AO has failed to confront the "Agreement" entered by it with Shri Sandeep Mehta, which is the sole basis for incurring the impugned commission expenses. The assessee has also pointed out that the said person had stated in his statement that he provided service to the assessee only up to May, 2001. However, we notice that the assessee has produced certain vouchers to prove that the said Shri Sandeep Mehta was providing services to the assessee beyond that date also, which fact was not properly appreciated by the A.O. Further, the AO has also failed to appreciate the contention of the assessee that the impugned commission payments consisted of two components viz., the commission paid to Shri Sandeep Mehta and the reimbursement of expenses. In our view, the AO was more influenced by the statement given by Shri Sandeep Mehta. The action of the AO in not affording the opportunity of cross examination to the assessee is against the principles of natural justice. In view of the above discussions, we are of the view that the impugned issue requires re- consideration at the end of the assessing officer, in which the AO should invariably provide opportunity of cross examination of Shri Sandeep Mehta to the assessee.
6 ITA No.811/Ahd/2006 withC.O.No.138/AHD/2006 A.Y.2002-03.
Accordingly, we set aside the order of the Ld CIT (A) on this issue and restore the same to the file of the AO with a direction to consider the issue by duly considering the agreement, books of account, the nature of commission expenses and other evidences that may be produced before him by the assessee. More importantly, the AO should provide the opportunity of cross examination and also sufficient opportunity of being heard to the assessee.
10. The next issue in the appeal of the revenue relates to the disallowance of Rs.51,36,721/- relating to the "Finance charges" claimed by the assessee. The "Finance Charges" claimed by the assessee related to interest payable on loans taken from the following banks:-
(a) Ahmedabad People's Co-op Bank Ltd Account No.51
(b) Ahmedabad People's Co-op Bank Ltd Account No.54
(c) Ahmedabad People's Co-op Bank Ltd Account No.1004
(d) Ahemadabad people's Co-op Bank Ltd Vehicle loan
(e) Pragati Co-op Bank, Ahmedabad
(f) Andhra Bank The AO noticed that the interest payable on the said bank loans were shown as outstanding as at the year end, to which the provisions of sec.43B are attracted unless the assessee makes payment of the same before the due date for filing return of income. Accordingly, the AO issued show cause notice to the assessee proposing disallowance as per the provisions of sec.43B of the Act. However, the assessee sought time to furnish its reply, but ultimately did not file reply before finalizing the assessment order. Since the assessee failed to furnish its reply, the AO disallowed the sum of Rs.51,36,721/- stated above u/s 43B of the Act.
11. Before Ld CIT (A), it was submitted that the interest payable to Andhra Bank was paid before the due date for filing the return of income. In respect of the interest payable to the co-operative banks cited above, it was submitted that they 7 ITA No.811/Ahd/2006 with C.O.No.138/AHD/2006 A.Y.2002-03.
do not fall in the category of "Scheduled Bank" as defined in sec.11(5)(iii) of the Act and hence the provisions of sec.43B of the Act shall not apply to the said interest claim. Accepting the contentions of the assessee, the Ld CIT (A) deleted the impugned addition. Aggrieved, the revenue is in appeal before us.
12. Before us, the assessee did not file any evidence to show that the above cited Co-operative banks would not fall in the category of Scheduled Bank as defined in sec. 11(5)(iii) of the Act, more particularly the copy of Second Schedule to the Reserve Bank India Act, 1934. The Ld D.R also submitted that the said claim of the assessee needs verification. We also notice that the claim of payment of interest payable to the Andhra Bank before the due date of filing the return of income has been accepted by the Ld CIT (A) without confronting the same with the AO. The Ld A.R submitted that he could furnish the copy of Second Schedule to the Reserve Bank of India Act existed at the relevant point of time. Even if the relevant schedule is submitted before us, the same is required to be examined at the end of the AO. Accordingly, we set aside the order of Ld CIT (A) on this issue and restore the same to the file of the AO with a direction to verify the claim of the assessee in this regard and take appropriate decision in accordance with law. The assessee is also directed to file necessary documents to support its contentions.
13. The next issue in the appeal of the revenue relates to the addition made u/s 68 of the Act in respect of share application money. During the year under consideration the share capital of the company got increased by Rs.36,60,925/- on receipt of share application money/fresh allotment of shares. The AO called for details of the share holders who have made fresh contributions in certain format. However, the assessee supplied those details which were available with it and in particular, it could not furnish the Permanent Account Number of share holders 8 ITA No.811/Ahd/2006 with C.O.No.138/AHD/2006 A.Y.2002-03.
whose contribution was more than Rs.50,000/-. The AO issued notices to those share holders, numbering 13, calling for details. However, six share holders did not respond and the letters issued to other share holders were returned with remarks "Incomplete address" or "Left". Hence the AO added the above said sum of Rs.36,60,925/- to the total income of the assessee u/s 68 of the Act. The Ld CIT (A) deleted the said addition by placing reliance on the following decisions:-
(a) Interlink Petroleum Ltd Vs. DCIT (2004)(83 TTJ 274 (Ahd).
(b) CIT Vs. Steller Investment Ltd (2000) (Delhi)
(c) CIT Vs. Sophia Finance Co. (205 ITR 98).
Aggrieved, the revenue is in appeal before us.
14. The Ld D.R submitted that the assessee has failed to discharge the burden placed upon it u/s 68 of the Act, i.e. it has failed to prove the identity and credit worthiness of the creditors and also the genuineness of the transactions. Further the notices issued to the share holders were either not responded or returned unserved. Accordingly, he submitted that the impugned amount of Rs.36.60 lakhs is liable to be added u/s 68 of the Act. On the other hand, the Ld A.R submitted that the assessee has furnished to the AO all the details that were available with it. Since it is a share application money received from the public and the assessee is public limited company, it could not have control over the share holders. Accordingly, the Ld A.R submitted that the assessee could not be penalized for non-compliance of the notices by the concerned share holders. In this regard, he relied upon the decision dated 06-08-2010 rendered by this bench of Tribunal in the case of Belgium Glass Ceramics (P) Ltd in ITA No.552/Ahd/2008, wherein the tribunal has taken the decision in favour of the assessee under identical facts by duly considering the decisions rendered by various courts and Tribunal, including the order of Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd.
9 ITA No.811/Ahd/2006 withC.O.No.138/AHD/2006 A.Y.2002-03.
15. We have heard the rival contentions on this issue. There is no dispute with regard to the fact that the impugned amount of Rs.36.60 lakhs pertains to Share application money and the assessee has furnished the names and addresses of the share holders along with other details that were available with it. Hence the decision rendered in the case of Belgium Glass Ceramics (P) Ltd by duly considering the various decisions including the decision of Hon'ble Delhi High Court in the case of M/s Divine Leasing & finance ltd (299 ITR 268) and the order of Hon'ble Apex Court in the case of M/s Lovely Exports (P) Ltd squarely covers the issue under consideration. Accordingly, we do not find any infirmity in the decision of Ld CIT (A) on this issue.
16. The Ld A.R did not press the Cross objection filed by the assessee and hence the grounds raised in the Cross objection are dismissed as not pressed.
17. In the result, the appeal of the revenue is treated as partly allowed for statistical purposes and the cross objection of the assessee is dismissed.
Order pronounced in Open Court on 19- 1 - 2012.
Sd/- Sd/-
(G. C. GUPTA) (B.R. BASKARAN)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad.
S.A.Patki.
10 ITA No.811/Ahd/2006 with
C.O.No.138/AHD/2006 A.Y.2002-03.
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals)-XI, Ahmedabad.
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad.
1.Date of dictation 17 - 1 -2012
2.Date on which the typed draft is placed before the Dictating 17 / 1 / 2012 Member................Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S - -2012.
4.Date on which the fair order is placed before the Dictating Member for pronouncement - -2012
5.Date on which the fair order comes back to the Sr.P.S./P.S - -2012
6.Date on which the file goes to the Bench Clerk - -2012.
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................