BUHLER (INDIA) PVT LTD vs. THE DEPUTY COMMISSIONER OF INCOME TAX

Q: Which sections of the Income-tax Act were involved?

Section 143(1), Section 143(3), Section 260A

ITA/614/2013HC KarnatakaKAHC01046718201319 August 2014Bench: N.KUMAR,RATHNAKALA5 pages

AI SummaryRemanded

What did the High Court hold?

The High Court held that the ITAT's finding that the assessee had not produced any evidence to substantiate its claim regarding commission expenditure was ex facie illegal. This was because the assessee had submitted an invoice for ₹1,14,00,000 for AY 2008-09 and other documents, which were part of the record before the Appellate Commissioner and should have been considered by the Tribunal. The Tribunal dismissed the miscellaneous petition without looking into these documents. Therefore, the High Court found that the order of the ITAT could not be sustained. The Court decided to set aside both impugned orders and remit the entire matter back to the ITAT for fresh consideration. The ITAT is to hear the appeals afresh in light of the available documents and any further documents pointed out by the appellant, and also consider the judgments to be relied upon by both parties before passing appropriate orders. The High Court explicitly stated that the ITAT should not be influenced by any observations made by the High Court in its order.

What were the facts?

The assessee, Buhler (India) Pvt. Ltd., engaged in manufacturing and servicing food processing machines, filed its return declaring an income of ₹15,31,55,764 for Assessment Year 2007-08. The return was processed under Section 143(1) and later taken up for scrutiny under Section 143(3), resulting in an assessment order determining income at ₹17,24,34,920 with additions. The assessee appealed to the Appellate Authority, which partly allowed the appeal. Further appeal to the Income Tax Appellate Tribunal (ITAT) resulted in dismissal, confirming the additions. The ITAT's reasoning was that commission expenditure was not an ascertained liability and no evidence was brought on record for disallowance. The assessee then filed a miscellaneous petition with the ITAT, submitting an invoice for ₹1,14,00,000 for commission for AY 2008-09 and other documents. This petition was also dismissed without considering the documents, leading to the present appeals before the High Court.

What were the issues?

1. Whether the ITAT erred in dismissing the assessee's appeal by holding that the commission expenditure was not an ascertained liability and no evidence was brought on record for disallowance, when the assessee had produced documentary evidence (invoice for ₹1,14,00,000 for AY 2008-09 and other documents) before the Tribunal? Assessee's Contention: The assessee argued that the ITAT's finding that no evidence was produced was ex facie illegal, as they had submitted an invoice and other documents. These documents were part of the record before the Appellate Commissioner and should have been considered. The assessee relied on the fact that the documents were produced along with the appeal memos before the High Court and had not been looked into by the Tribunal. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in response to the assessee's arguments regarding the evidence.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(3),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA, BANGALORE

DATED THIS THE 19TH DAY OF AUGUST 2014

PRESENT

THE HON’BLE MR. JUSTICE N.KUMAR

AND

THE HON’BLE MRS.JUSTICE RATHNAKALA

INCOME TAX APPEAL NO.614 OF 2013 C/W INCOME TAX APPEAL NO.616 OF 2013

BETWEEN :

BUHLER (INDIA) PVT. LTD. (A PRIVATE CO. LTD. BY SHARES, INCORPORATED UNDER THE COMPANIES ACT, 1956) HAVING ITS OFFICES AT NO.13D, KIADB INDUSTRIAL AREA ATTIBELE, BANGALORE-562 107 REP. HEREIN BY ITS MANAGING DIRECTOR, MR.DIPAK MANE ... COMMON APPELLANT

(BY SRI.NAGESHWAR RAO, ADV.)

AND :

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(2) BANGALORE – 560 001 ... COMMON RESPONDENT

(BY SRI.K.V.ARAVIND, ADV.) ---

ITA.614/2014 is filed under Section 260A of I.T.Act, 1961 arising out of Order dated 22.2.2013 in ITA

2 No.434/Bang/2012 for the assessment year 2007-08 praying to formulate the substantial questions of law stated therein and set aside the appellate order dated 22.2.2013 passed by the ITAT, Bangalore in appeal proceedings No.ITA.434/Bang/2012 and quash any proceedings instituted pursuant to the directions issued thereunder. ITA.616/2013 is filed under Section 260A of I.T.Act, 1961 arising out of Order dated 2.8.2013 in M.P.65/Bang/2013 in ITA No.434/Bang/2012 for the assessment year 2007-08 praying to formulate the substantial questions of law stated therein and set aside the appellate order dated 2.8.2013 passed by the ITAT ‘C’ Bench, Bangalore in M.P.65/Bang/2013 in ITA No.434/Bang/2012 and quash any proceedings instituted pursuant to the directions issued thereunder

These appeals coming on for Admission this day, N.KUMAR J., delivered the following:

JUDGMENT

Both these appeals are preferred by the assessee against the original order and the order passed against the miscellaneous petition refusing to review the original order. Therefore, they are taken up for consideration together and disposed of by this common order.

The assessee is a Company engaged in the manufacture, trading, servicing and maintenance of food processing machines. They have filed the returns declaring the income of `15,31,55,764/-. The returns was

3 processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short). Later, it was taken up for scrutiny. An order came to be passed under Section 143(3) of the Act determining the income of the assessee at `17,24,34,920/- making certain additions. Aggrieved by the said order, the assessee preferred an appeal. The Appellate Authority passed an order on 30.12.2011 partly allowing the appeal and dismissing on certain other aspects. Against the said order, the assessee preferred an appeal to the Tribunal. The Tribunal dismissed the appeal by its order dated 22.2.2013 confirming the order passed by the Appellate Authority and confirming the additions made by the Assessing Authority. The reason given was that the commission expenditure was not an ascertained liability and no evidence has been brought on record for disallowance. Therefore, the assessee filed a miscellaneous application enclosing the copy of the invoice raised to the extent of `1,14,00,000/- showing the commission for the assessment year 2008-09 and they also produced documents. Without looking into the said documents, the

4 miscellaneous petition also came to be dismissed. That is how, the assessee is before this Court challenging both the orders. Along with the appeal memos, they have produced invoice and other documents. The said documents are not looked into by the Tribunal. They are the documents which are produced by the assessee before the Appellate Commissioner. The said documents were part of the record. Therefore, the findings recorded by the Tribunal that the assessee has not produced any evidence to substantiate his claim, is ex facie illegal. Therefore, the order cannot be sustained. It is appropriate to remand the matters back to the Tribunal to enable them to hear the appeals afresh in the light of the documents which are available on record and which will be pointed out by the appellant in the course of arguments. They also shall take into account the judgments to be relied on by both the parties and then pass appropriate orders. Hence, we pass the following: ORDER

Both the appeals are allowed. Impugned orders are set aside. The entire matter is remitted back to the

5 Tribunal for fresh consideration and in accordance with law, without in any way being influenced by any of the observations made by this Court in this order.

Sd/- JUDGE

Sd/- JUDGE RV

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