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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order of Learned Commissioner of Income Tax (Appeals) – 52, Mumbai [hereinafter referred to as the “CIT(A)”], passed under section 250 of the
The brief facts as culled out from the orders of lower authorities are that the assessee company is stated to be in business of land developers, builders and contractors and borrowing and lending money, etc. The return of income for AY 2011-12 was filed on 29.09.2011. A search action u/s 132 of the Act was initiated against the Yashovardhan Birla Group on 7.01.2014 including the assessee’s premises. A notice u/s 153A was issued to the assessee on 21.03.2014. In response, the AR of the assessee vide letter dated 15.04.2014 sought time to file the return. In compliance to the notice u/s 153A of the Act, despite taking more time, the assessee failed to file the return. Hence a show cause notice was issued dated 09.01.15 asking the assessee as to why the provision of section 276CC of the Act should not be invoked. Ultimately on 23.11.15, the assessee filed return alongwith audit report, balance sheet, etc. In the return, the assessee declared the total return of Rs. (-) 57,15,388/- under normal provisions and Rs. (-) 62,68,633/- u/s 115JB of the Act. Statutory notice u/s 142(1) of the Act alongwith detailed questionnaire dated 16.11.15 was issued to which response was filed on behalf of the assessee.
Birla Infrastructure Limited 3. During the course of assessment proceedings, it is observed that the assessee had paid stamp duty penalty of Rs. 3,47,410/-; since the said payment was penal in nature, hence a sum of Rs. 3,47,410/- was disallowed and added to the total income of the assessee in view of explanation-2 section 37(1) of the Act.
During the course of assessment proceedings, it was further noticed that as per annexure 1-3CD-Part-A the assessee is in receipt of Rs. 1 crore which was not reflected in the P & L Account. The explanation offered by the assessee was not found satisfactory because the tax auditor certified the receipt of commission, hence there was no reason for not routing the same through the P & L a/c, hence, an amount of Rs. 1 crore was added to the total income of the assessee.
5. It was further noticed during the assessment proceedings that the assessee has debited an amount of Rs. 4,58,64,778/- being interest expenses. From the balance sheet, it was noticed that the assessee had made investment out of borrowed fund in the equity shares and income from which is exempt, therefore after deducting suo moto disallowance of Rs. 2,70,858/-, a sum of Rs. 3,00,266/- was added u/s 14A of the Act to the total income of the assessee which was arrived at Rs. 49,32,290/-. Page | 3
6. Aggrieved by the assessment order, the assessee filed the appeal before the Ld. CIT(A) who has partly allowed the appeal, but confirmed the disallowance on account of stamp duty penalty Rs. 3,47,410/- and commission amount of Rs. 1 crore.
Aggrieved by the impugned order, the assessee is in appeal before us raising the following grounds of appeal:-
1. a. The Ld. CIT(A) has erred in facts and in law in making an addition of Rs.1,00,00,000/- on account of commission receipts reflecting in Form 3CD without considering the facts and circumstances of the case. The same be deleted. b. The Ld. CIT(A) has erred in not relying on audited Financial Statements which clearly report commission receipts as Nil. The same be considered and addition be deleted.
2. The Ld. CIT(A) has erred in making an addition of Rs.3,47,410/- on account of Stamp Duty Penalty without considering the facts and circumstances of the case. The same be considered and addition be deleted.
The assessee craves leave add, alter or delete to the grounds of appeal at the time of or before hearing.
Ground no. 1
It pertains to addition of Rs. 1 crore on account of commission receipt and the Ld. CIT(A) while rejecting the relief to the assessee was of the opinion that the explanation offered by the Ld. AR was not satisfactory. It was further observed that since the tax auditors certified the receipt of commission, it was required to be reflected in P & L a/c which was not done, hence the said amount was added to the total income.
The Ld. AR of the assessee submitted that the assessee wants to submit CA certificate in relation to classification of commission income of Rs. 1 crore under consultancy charges based on audited annual accounts including the ledger account. It is further submitted that the ld. CIT(A) had asked the appellant to provide the complete set of audited annual accounts. An application under Rule 29 of Income Tax Appellate Tribunal Rules 1963 has been filed before us by the assessee seeking permission to adduce additional evidence in support of claim of assessee with respect to the said amount required to be deducted from the total Birla Infrastructure Limited income. Certain documents /copy of documents as additional evidence have been filed alongwith application. The Ld. DR submitted that no justified reason has been assigned by the assessee for not filing the additional evidence before the lower authorities, hence the application be rejected and Ground no. 1 be dismissed.
Now the question before us is whether the assessee/appellant can be permitted to adduce additional evidence in order to establish that the commission amount of Rs. 1 crore was not routed through P & L a/c as the same was certified as consultancy charges under “Schedule N-Other income”.
The assessee/appellant has sought permission of the additional evidence under Rule 29 of Appellate Tribunal Rules, 1963. Therefore, let us examine the Rule 29 of the Appellate Tribunal Rules, 1963.
“Production of additional evidence before the Tribunal: - 29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by Birla Infrastructure Limited them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”
In support of their application, the assessee/appellant has relied the judgment of the Hon’ble Bombay High Court reported as Smt. Prabhavati S. Shah Vs. Commissioner of Income Tax, (1998) 231 ITR 1. Para 9 of the judgment of the Hon’ble Bombay High Court referred (supra) is relevant and reproduced as under:
“9. We are also of the opinion that in the facts and circumstances of this case, even under rule 46A of the Rules the assessee should have been allowed to produce the additional evidence. The Appellate Assistant Commissioner, in our view, was not correct in holding that the case of the assessee did not fall in any of the four exceptions set out in sub-rule (1) of rule 46A. In fact, the present case would fall under clause (c) of subrule (1) of rule 46A because the assessee had no occasion to collect this evidence earlier. He could have reasonably expected that the creditors will appear before the Income-tax Officer in compliance with the summons issued by him. He was never informed by the Income-tax Officer that the creditors were not available or unidentifiable. If he had been informed by the Income-tax Officer in the course of assessment proceedings that he was not inclined to accept the loans as genuine because of the nonavailability of the creditors, he could have tried to satisfy him about the genuineness of the loan by producing other evidence. At the time of hearing of the appeal, the appellant tried to satisfy the Appellate Assistant Commissioner Birla Infrastructure Limited about the genuineness of one of the loans by producing material which he could collect in the meantime. This case, therefore, will fall under clause (c) of sub-rule (1) of rule 46A of the Rules. In any view of the matter, we are of the opinion that in the instant case, the Appellate Assistant Commissioner should have considered the evidence produced by the assessee in regard to the loan of Rs. 40,000 from Champaklal Dalpatrai. In view of the above, we answer question No. 3 in the negative and in favour of the assessee. In view of the above answer to question No. 3, questions Nos. 1 and 2 need not be answered.”
The Hon’ble High Court of Karnataka in of 2018, M/s. Google India Private Ltd. Vs. The Commissioner of Income Tax, order dated 17.04.2021 has been pleased to hold that if additional evidence is to be considered and allowed by the Tribunal, the parties to the proceedings or the affected party should be well aware of the said material/additional evidence, before the same is considered by the Hon’ble Tribunal. Para 19 of the judgement of the Hon’ble High Court of Karnataka in of 2018 referred (supra) is relevant and reproduced as under:
“19. In the considered opinion of this Court, keeping in view Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and also keeping in view the fact that the material on the basis of which the order has been passed was not furnished to the appellant at any point time, the order passed by the Tribunal is certainly violative of Page | 8 Birla Infrastructure Limited principles of natural justice and fair play as the appellant was not afforded an opportunity to rebut fresh evidence especially when such evidence was based on Google study.”
We have examined the contents of the application for additional evidence to find out the reasons for not producing the said evidence before the Lower Authorities. It is stated in the application is as under:
The Appellant submits that assessee's plea was rejected by Hon. CIT(A) on the ground that Hon. CIT(A) had asked the appellant to provide complete set of audited annual accounts.
2. The Appellant submits the CA Certificate in relation to classification of commission income of Rs.1,00,00,000/- under consultancy charges under "Schedule N- Other Income" based on audited annual accounts including the ledger account of sunrise enterprises, 26AS Statement and bank statement enclosed in Exhibit-1.
The Appellant submits that the Additional Evidence is of vital importance, and will be of assistance in determining the contentions of the Appellant. In order to support the request that additional evidence be permitted to be taken on the record of this Hon'ble Tribunal, and to be considered at the time of disposing the appeal, the Appellant places reliance on rulings as under:
a) Rule 29 of ITAT Rules permits admission of additional evidence "for any other substantial cause". The Hon'ble Supreme Court in the case of K.Venkataramiah vs A. Seetharama Reddy & Ors ((1963) AIR 1526), held that "any other substantial cause" includes a case where even though the court finds that it is able to pronounce judgment on the b) The Appellant also relies on ruling of the Hon'ble Delhi High Court in the case of CIT vs. Text Hundred India (P) Ltd. (351 ITR 57 (Delhi)) wherein it was held that the tribunal has the power to admit additional evidence in its discretion if it was necessary to do substantial justice.
4. By way of this application, the Appellant seeks the permission of the Hon'ble Bench under Rule 29 of the ITAT Rules to place on record additional evidence.
In the event the Hon'ble Tribunal were to permit the additional evidence no harm or prejudice to the Revenue will be caused to the Revenue; on the contrary grave hardship and prejudice would be caused to the Appellant, if the application for additional evidence were to be rejected.
In the circumstances, it is hereby prayed that additional evidence in the form of annual accounts be accepted.
It is thus evident from the contents of the application that the assessee/appellant could not produce these documents under the impression that the submission made in that regard would be considered by Ld. AO and Ld. CIT(A). On perusal of assessment order para 7, we have noticed that the Ld. AO did not consider the explanation of the assessee being not satisfactory because the tax auditors have certified the receipt of commission and no reason was given for not routing the “5.4. Decision: In the Annexure - I to Form 3CD, the auditor has quantified the receipt as "Commission Received" Rs.1 crore. However, the ledger account submitted by the appellant is titled as "Consultancy Charges Received". In the said ledger, it is stated as "Being Consultancy charge receivable from M/s. Sunrise Enterprises as per our invoice no.1 dated 10/01/2011". Thus, there is a clear difference in nomenclature. Besides, the ledger shows that payment is receivable. Despite specifically having been asked for "Audited annual accounts" vide notice dated 30.06.2023, the appellant has only submitted select pages of the financial accounts. For instance, the P&L account is not furnished. The schedules to the balance sheet have also not been furnished in entirety. As per the balance sheet, the sundry debtors is shown as Rs.74,09,844/- as on 31.03.2011 but the detailed schedule is not enclosed. In fact, this figure remains unchanged from the earlier year balance. The appellant has not been able to conclusively prove that these represent one and the same, and/or that they have been fully accounted for. The Schedule-N has 2 separate headings of "Commission Received" and "Consultancy Charges". The "Commission Received is indeed shown as NIL as per Schedule N. Under these circumstances, the addition made by the AO is upheld and the ground stands dismissed.”
It is thus evident from the decision of the lower authorities that the relief has been denied to the assessee without giving sufficient opportunity to adduce evidence on the issue concerned, hence it makes out a case in favor of assessee to allowing additional evidence by this Tribunal as sought in the application by the assessee. For that reasons, Birla Infrastructure Limited the end of justice requires that assessee/appellant be given opportunity to file additional evidence in support of his claim with respect to allowance of Rs. 1 Crore which has been added by the AO and confirmed by the Ld. CIT(A).
Rule 30 of the Appellate Tribunal Rules, 1963 provides as under:
Mode of taking additional evidence: - 30. Such document may be produced or such witness examined or such evidence adduced either before the Tribunal or before such income-tax authority as the Tribunal may direct.
In view of the provisions of the Rule 30 of the Appellate Tribunal Rules, 1963 and in the given facts and circumstances, the case is restored to the file of the Ld. AO who shall consider the additional evidence to be filed by the assessee/appellant before the Ld. AO within the period of 60 days from this order.
For the above reasons, the ground no. 1 of the appeal is allowed for statistical purposes.
Ground no. 2 Birla Infrastructure Limited 21. It pertains to addition of Rs. 3, 47,410/- on account of disallowance of the said amount having been paid as stamp duty penalty. The Ld. AO has disallowed the said amount on the following observations in para no. 6 of his order:-
6. During the course of assessment proceedings it is observed from the ledger of Stamp duty penalty (Tardeo), produced the assessee had paid stamp duty penalty of Rs. 3, 47,410/-. Since this payment is penal in nature, the AR of the assessee was asked as to why the same should not be disallowed. The explanation offered by the AR of the assessee is not satisfactory the said amount of Rs. 3, 47,410/- is disallowed and added to the total income of the assessee in view Explanation to sec. 37(1) of the Act.
The Ld. CIT(A) has decided the said issue in para no. 4 to 4.5 of his order and the same is extracted as under:-
´4. Ground no.1: This is related to the addition of Rs. 3,47,410/- made on account of penalty.
4.1. Findings of the AO: The assessee had paid stamp duty penalty of Rs. 3,47,410/-. Since this payment is penal in nature, the AR of the assessee was asked as to why the same should not be disallowed. The explanation offered by the AR of the assessee is not satisfactory and the amount of Rs. 3,47,410/- is disallowed and added to the total income of the assessee in view of Explanation to sec. 37(1) of the Act.
4.2. The assessee has submitted as under:
Birla Infrastructure Limited During the year the assessee had entered into an agreement with Birla Industries Group Charity Trust dated 05/06/2008 for which Stamp Duty was required to be paid. However there was a delay and the assessee had to pay Rs. 3,47,410/- in addition to the Stamp Duty as penalty. This penalty amount was not debited to the Profit & Loss account but was transferred to Work in Progress (inventories). Since this amount was not claimed as an expense in the Profit & Loss Account, the same was not added to the net profit in the computation of income. Further this fact is confirmed by the auditor in his tax audit report where the amount of penalty is mentioned as NIL. Copy of the Tax Audit report is enclosed in Exhibit 1. The details of Work-in- progress has been filed with the Ld AO vide submission dated 04.01.2016. Copy of the said submission is enclosed in Exhibit 2.
In light of the above facts, since the amount is not debited to profit & loss account any addition to the returned income is not warranted and hence your honour is requested to kindly delete the same.
4.3. Decision: Any payment on account of penalty is not an allowable deduction u/s.37(1) of the Act. The appellant has confirmed that the amount paid was in the nature of penalty, in its written submission. Hence, the same is not allowable.
4.4. The appellant has then contended that the said amount was not debited to P&L a/c but was added to Work-in-Progress (WIP). I am unable to accept this contention of the appellant for various reasons. No evidence has been brought before me or that it was demonstrated before the AO has been shown to me. The appellant has only given select pages of ledgers / financials. Hence, this argument is not acceptable. Even if it were true, still the same would not be allowable as deduction, for what cannot be allowed directly cannot be allowed indirectly. This is in line with various decisions of Birla Infrastructure Limited Hon. Supreme Court. For instance, in the case of Jagir Singh vs Ranbir Singh on 8 November, 1978, AIR 1979 SC 381, the Hon'ble SC held as under: "What may not be done directly cannot be allowed to be done indirectly, that would be an evasion of the statute. It is a "well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance" (per Abbott G.J. in Fox v. Bishop of Chester (1824) 2 B & C 635 "To carry out effectually the object of a Statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined" (Maxwell, 11th edition, page 109).". The appellant has not brought out any evidence that it has disallowed such expenses from WIP resulting in any kind of disallowance, albeit which have effect in future.
4.5. In view of the above discussion, the action of the AO is upheld. The ground stands dismissed.´
It is thus evident that assessee is claiming that the tax audit report (Exhibit -1) and details of work in progress (Exhibit-2) were submitted on 04.09.16 before the Ld. AO. However the Ld. AO discussed nothing about that submission and the Ld. CIT(A) has denied the relief on the ground that no evidence was brought by the appellant with respect to addition of said amount to work in progress (WIP) by the assessee. We do not find any legal justification for the observation of Ld. CIT(A) that the assessee was not entitled to the allowance of the said amount as deduction even if the same is shown in work in progress (WIP) on the ground that the said amount has been paid as penalty. It seems that the Page | 15 Birla Infrastructure Limited Ld. CIT(A) has misunderstood the payment of stamp duty under the Indian Stamp Act 1899. The payment of penalty in addition to stamp duty is nothing but payment of enhanced stamp duty by the appellant for the reasons of delay in making the payment of penalty as per the provision of Indian Stamp Act 1899. On perusal of the written submission of the assessee contained in page 3 of the paper book, it is noticed that “During the year the assessee had entered into an agreement with Birla Industries Group Charity Trust dated 05/06/2008 for which Stamp Duty was required to be paid. However there was a delay and the assessee had to pay Rs. 3,47,410/- in addition to the Stamp Duty as penalty. This penalty amount was not debited to the Profit & Loss account but was transferred to Work in Progress (inventories). Since this amount was not claimed as an expense in the Profit & Loss Account, the same was not added to the net profit in the computation of income. Further this fact is confirmed by the auditor in his tax audit report where the amount of penalty is mentioned as NIL. Copy of the Tax Audit report is enclosed in Exhibit 1. The details of Work-in-progress has been filed with the Ld AO vide submission dated 04.01.2016. Copy of the said submission is enclosed in Exhibit 2.”
Thus all necessary documents in support of submissions with respect to the stamp duty penalty amount were already submitted to the lower Birla Infrastructure Limited authorities who failed to consider the same in fair and just manner. Payment of enhanced stamp duty due to delay as has been done by the assessee does not tantamount to payment of penalty on violation of any statutory provision, therefore the assessee cannot be denied benefit of deduction on that account and the addition made by AO and confirmed by the Ld. CIT(A) is not legally sustainable. Accordingly, the Ground no. 2 is allowed in favour of the assessee and AO is directed to delete the addition of Rs. 3,47,410/-
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 22.05.2025.