M/S.EXEMPLARR WORLDWIDE SHIP vs. THE ASSISTANT COMMISSIONER O

TCA.No.229 of 2021 In the High Court of Judicature at Madras Dated : 30.3.2021 Coram The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Ms.Justice R.N.MANJULA Tax Case Appeal No.229 of 2021 M/s.Exemplarr Worldwide Shipping Solutions P. Ltd., Karaikkal ...Appellant Vs The Assistant Commissioner of Income Tax, Circle-1, Income Tax Department, 1, Sekkanganni Street, Gandhi Nagar, Kumbakonam-1. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 26.4.2019 made in I.T.A.No.115/Chny/2019 on the file of the Income Tax Appellate Tribunal, Chennai 'A' Bench for the assessment year 2012-13. For Appellant: Mr.A.S.Sriraman For Respondent: Mr.M.Swaminathan, SSC assisted by Ms.V.Pushpa, JSC 1/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 Judgment was delivered by

T.S.SIVAGNANAM

We have heard Mr.A.S.Sriraman, learned counsel appearing for the appellant – assessee and Mr.M.Swaminathan learned Senior Standing Counsel assisted by Ms.V.Pushpa, learned Junior Standing Counsel appearing for the respondent – Revenue. 2. This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 26.4.2019 made in ITA.No.115/Chny/2019 on the file of the Income Tax Appellate Tribunal, Chennai 'A' Bench (for brevity, the Tribunal) for the assessment year 2012-13. 3. The Revenue has filed this appeal by raising the following substantial questions of law : “1. Whether the adhoc/arbitrary disallowance of expenses charged in the audited financial statements of the appellant is permissible within the scope of law relating to the computation of taxable total income under the Act ? 2. Whether the audited financial statements of the previous year relating to the assessment year under consideration could be considered as sufficient and acceptable in the 2/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 context of considering the correctness of the action of the respondent/Assessing Officer in making adhoc/arbitrary disallowance of expenses under dispute? 3. Whether the implied acceptance of violation of the principles of natural justice in deciding the main two issues in para 6 and para 7 of the impugned order would be applicable equally to the third issue disputed in the present appeal ? 4. Whether the Appellate Tribunal is correct in denying another opportunity to the appellant for production of the related details/ documents for incurring of such expenses wholly and exclusively for the purpose of business within the scope of Section 37(1) of the Act and other provisions governing in relation thereto under the Act? And 5. Whether non production of the related details/documents for proving the incurring of expenses under dispute in the context of the violation of the principles of natural justice would be considered as perversity in recording its conclusions on facts and in law?” 4. The assessee was on appeal before the Tribunal on three 3/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 issues, one pertaining to loan transaction with M/s.Great Meera Finlease Private Limited. The second issue was pertaining to deduction of tax at source with regard to the loan obtained from the said finance company and the third issue pertains to disallowance of other expenses to the tune of Rs.50.59 lakhs. On the first two issues, the Tribunal remanded the matter to the Assessing Officer for a fresh consideration. On the third issue, the Tribunal noted that the Assessing Officer granted 50% relief and held that the assessee had not submitted the detailed statement of expenditure with supporting material before the Tribunal. Therefore, the Tribunal rejected the argument of the assessee. 5. Before us, the learned counsel appearing for the appellant – assessee would submit that the Tribunal, having accepted that the assessee furnished details during the course of hearing on 16.4.2019 in the form of a paper book comprising of 62 pages, ought not to have stated that no details were produced before the Tribunal. 6. Mr.M.Swaminathan, learned Senior Standing Counsel appearing for the respondent – Revenue would submit that the conduct of the assessee would clearly show that they were not 4/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 cooperating in the assessment proceedings. Apart from that, they did not contest the matter before the CIT(A). Before the Tribunal, the assessee did not produce any material to justify the claim towards expenses and the Tribunal noted that the Assessing Officer himself granted 50% relief and ultimately dismissed the assessee's appeal on the said ground. 7. Under normal circumstances, we would have agreed with Mr.M.Swaminathan, learned Senior Standing Counsel. But, two factors weigh in our mind to take slightly a different view. Firstly, the assessment order was passed under Section 144 of the Act. The Assessing Officer would state that as per the profit and loss account, the assessee claimed other expenses to the tune of Rs.50,49,786/- and that in the absence of evidence, the claim of the assessee could not be verified. We of the view that the Assessing Officer could have very well disallowed the entire expenditure for the reasons stated by him. However, he would state that considering the volume of the status of the company and the volume of business of the company, 50% of the expenses was disallowed. Thus, the Assessing Officer was of the prima facie view that the assessee would have incurred expenses under various heads mentioned by them. The assessee has 5/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 to be fully blamed for inviting such a finding. Had they produced relevant documents to justify the expenditure claimed by them, which, according to them, were towards vessel handling charges, traveling and conveyance allowances, labour charges, secretarial expenses, postage and courier, then, in all probabilities, the assessee might have got relief before the Tribunal. 8. The second aspect is that before the First Appellate Authority, the assessee did not effectively contest the matter though they were represented by an authorized representative, who appeared to have given an explanation, which, in all probabilities, did not appeal to the First Appellate Authority and he had stated that the authorized representative had no explanation as to why additions made were incorrect or excessive. Only before the Tribunal, the assessee had taken up the matter seriously and they have been able to convince the Tribunal for two of the three issues required to be remanded. 9. Therefore, considering the overall facts and circumstances and since the Assessing Officer has to reconsider two of the issues, we would like the Assessing Officer to look into the issue relating to other expenses claimed by the assessee for 50% of disallowance. If the 6/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 assessee is able to produce documents, the Assessing Officer shall consider the same and redo the assessment along with the other two issues, which have been remanded to him by the Tribunal. 10. The above tax case appeal is accordingly disposed of on the above terms. The substantial questions of law are left open. No costs. 30.3.2021

To 1.The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Circle-1, Income Tax Department, 1, Sekkanganni Street, Gandhi Nagar, Kumbakonam-1. RS 7/8 https://www.mhc.tn.gov.in/judis/ TCA.No.229 of 2021 T.S.SIVAGNANAM,J AND R.N.MANJULA,J RS TCA.No.229 of 2021 30.3.2021 8/8 https://www.mhc.tn.gov.in/judis/