Income Tax Appellate Tribunal - Mumbai
Shirdi Industries Ltd., Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E": MUMBAI
BEFORE SHRI J.SUDHAKAR REDDY (AM) AND
SHRI R.S. PADVEKAR (JM)
ITA No. 2597/Mum/2007
(Asstt. Year : 2001-02)
ACIT, 9(3), Mumbai ... Appellant
Room No. 229,
2nd Floor, Ayakar Bhavan,
M.K. Road, Mumbai - 20
V/s.
M/s. Shirdi Industries Ltd. ... Respondent
601, Vandana Apartment,
Malvani Marve Road,
Malad (West), Mumbai
PAN : -
Appellant by :Mr. Naveen Gupta
Respondent by :Mr. A.L. Sharma
:ORDER:
PER R.S. PADVEKAR, J.M
The Revenue has filed this appeal challenging the impugned order of the Ld CIT(A)- IX, Mumbai dated 31.1.2007 for the A.Y. 2001-02.
2. The only solitary issue is in respect of the professional fees of Rs. 25 lacs paid by the assessee to M/s. Standard Tin Works (P) Ltd., which was disallowed by the A.O, but allowed by the Ld CIT(A).
3. We have heard the parties. The assessee filed the return of income which was selected for scrutiny and the assessment was completed u/s. 143(3) of the Act. Subsequently, the CIT - IX, Mumbai vide his order u/s. 263 of the Act dt. 21.3.2005 has set aside the assessment order and one of the issue was payment of the professional fees of Rs. 25 Lacs to M/s. Standard 2 ITA No. 2597/Mum/2007 Tin Works (P) Ltd. The assessee contended that the said amount was paid as a commission to M/s. Standard Tin Works (P) Ltd. for introduction and liasoning work with M/s. Prashant Projects Ltd. for getting the work of Rs. 63,82,985/-. The assessee filed the debit notes and copy of balance sheet received from M/s. Standard Tin Works (P) Ltd. and also confirmation letter. In the confirmation letter given by M/s. Standard Tin Works (P) Ltd., it was stated that professional fees due and receivable from the assessee for the accounting year ending on 31.3.2001 was Rs. 25 lacs and the same was paid by the assessee by different cheques. The A.O. was not satisfied with the explanation of the assessee, as in his view, no prudent business man would incur an expenditure of Rs. 25 lacs to obtain the orders of Rs. 63,82,985/-. The A.O., therefore, disallowed the professional fees of Rs. 25 lacs which was claimed as a deduction by the assessee. The assessee filed the disallowance before the Ld CIT(A) and found favour. The Ld CIT(A) deleted the addition by giving the following reasons :
"2.3 I have carefully gone through the above facts of the case and I am not convinced with the reasons given by the assessing officer for making disallowances of the commission paid to M/s. Standard Tin Works P. Ltd. for liasoning work. Its not the AO's prerogative to decide the resonableness of the expenditure incurred for the business purpose. Such addition on surmises and conjecture cannot be sustained. All the parties are identifiable and also income- tax payee. There is no material/evidence brought on record by the AO to prove that it is a bogus expenditure or no services were rendered. It may be seen that in the earlier years as well as in the subsequent years also the consultancy charges disclosed (as per the audited balance sheet and profit and loss account) by the appellant has been accepted by the department therefore there is no cogent reason for not accepting the same in the year under consideration. The appellant has also placed reliance on he Hon'ble SC judgement in he case of Lalchand Bhagat Ambikaram vs. CIT 37 ITR 288 (SC), Dhakeshwari Cotton Mills Ltd. vs. CIT 26 ITR 775, Omar Salay Mohammed Saith vs. CIT 37 ITR 151 wherein the Hon'ble Court has 3 ITA No. 2597/Mum/2007 held that any finding arrived at on suspicion, conjectures and surmises and without any evidence is perverse and cannot stand the test of appeal. In the appellant's case it is clearly established by the appellant that services have been rendered, parties are not related and they are Income-tax payee, the Director of the appellant company is also well qualified, payments have been made by account payee cheque. Thus there is no material on record to prove that expenditure has not been incurred for the purpose of business. Hence the appellant's claim is allowed."
Now the Revenue is in appeal before us.
4. There is no dispute about the fact that the assessee company is engaged in providing the consultancy servises to different parties in respect of import and export related matter. In the present case, it is also not disputed that the assessee rendered some consultancy services to M/s. Prashant Projects Ltd. It is claimed that M/s. Standard Tin Works (P) Ltd. has made the liasoning work and also the introduction of the said party, from whom the assessee could get an order for consulting work of Rs. 63,82,985/-. The A.O expressed the doubt about the genuineness of the said expenditure. We are also unable to understand what was the nature of the services rendered by the assessee company to M/s. Prashant Projects Ltd. as nothing has been filed before us in respect of the nature of the work as per the agreement/contract between the assessee and M/s. Prashant Projects Ltd. Moreover, nothing has been placed before us to show that M/s. Standard Tin Works (P) Ltd. has a major role in getting the order from M/s. Prashant Projects Ltd. Merely stating that M/s. Standard Tin Works (P) Ltd. has done the laisoning work for obtaining the order from M/s. Prashant Projects Ltd. is not sufficient. In our opinion, this issue needs proper verification in respect of the nature of services rendered by M/s. Standard Tin Works (P) Ltd. to the assessee as well as the nature of consulting services rendered by the assessee to M/s. Prashant Projects Ltd. Both the parties agreed that the issue may be set aside to the file of the A.O for fresh consideration. We, therefore, set aside the issue to the file of the A.O with the direction that the A.O should examine this 4 ITA No. 2597/Mum/2007 issue whether the professional fees paid by the assessee company to M/s. Standard Tin Works (P) Ltd. is as per the terms of the agreement. The A.O. also should examine the nature of services rendered by the assessee company to M/s. Prashant Projects Ltd. Accordingly, the order of the Ld CIT(A) is set aside.
5. In the result, Revenue's appeal is allowed for the statistical purposes.
Order pronounced in the open court on 28th day of January , 2010.
Sd/- Sd/-
(J . SUDHAKAR REDDY) (R.S.PADVEKAR)
ACCOUNTANT MEMBER J UDICIAL MEMBER
Mumbai, on this 28th day of January , 2010.
:US
Copy to:
1. Appellant
2. Respondent ,
3.The CIT(A)- IX, Mumbai
4.The CIT -IX, Mumbai
5.The DR, "E" be nch, Mumbai
6.Guard File
BY ORDER
True co py
Asstt..Re gistrar, ITAT, Mumbai.