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Facts
The Assessee appealed against additions of Rs.1,18,300 for formation expenses (treated as capital) and Rs.34,55,041 for unsubstantiated transit expenses by the Assessing Officer, which were affirmed by the Ld. Commissioner. The Assessee failed to comply with multiple opportunities to furnish details before the Ld. Commissioner.
Held
The Tribunal observed that the Ld. Commissioner's order was ex-parte and not based on proper consideration of documents or explanation due to the Assessee's non-compliance. To ensure a just decision, the Tribunal set aside the impugned order and remanded the case back to the Ld. Commissioner to decide afresh after providing the Assessee a reasonable opportunity of being heard.
Key Issues
The key issues were the classification of formation expenses as revenue or capital, the substantiation of transit expenses, and whether the Assessee was afforded adequate opportunity to present its case before the lower authorities.
Sections Cited
250
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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Present for: Assessee by : Shri Bhavesh Mehta, Ld. A.R. Revenue by : Shri Srinivas P., Ld. Sr. D.R. Date of Hearing : 27 . 11 .2024 Date of Pronouncement : 19.02.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 22.08.2023, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2015-16.
M/s. Ceva Logistics India Pvt. Ltd.
In this case, the Assessee during the AY under consideration claimed the amount of Rs.1,18,300/- on account of formation expenses as ‘revenue in nature’ and filed the relevant details before the Assessing Officer (AO) who on perusing the same, treated the said amount of Rs.1,18,300/- as ‘capital expenditure’ and added the same in the income of the Assessee by observing and holding as under: “The Assessee is engaged in the business of freight forwarding and logistics business and revenue from operations. Expenditure incurred was for the formation of the company and therefore could not amount to revenue expenditure and would fall under “capital expenditure”. It is an established position of law that any expenditure incurred by any company in connection with formation of the company, is a capital expenditure.”
2.1 Further, the AO also observed that the Assessee during the AY under consideration has also debited an amount of Rs.16,88,39,237/- on account of transit expenses and on being asked the Assessee produced the details of the expenses up to the amount of Rs.16,53,84,196/- but not the amount of Rs.34,55,041/- being difference in the aforesaid figures. And therefore the AO show caused the Assessee by issuing a letter dated 01.09.2017, in response to which the Assessee has not submitted/produced any relevant details i.e. invoices, bills, vouchers, challans etc. and has also not shown any business expediency of the transit expenses by stating that the Assessee is unable to locate the voucher/invoices, bills, challans from the record room. As the Assessee could not produce/furnish any invoices, bills, vouchers and challans in respect of balance amount of Rs.34,55,041/- till passing of the assessment order, therefore the AO added the difference of Rs.34,55,041/- in the total income of the Assessee.
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner, however, in spite of affording three opportunities, except seeking adjournment on one occasion M/s. Ceva Logistics India Pvt. Ltd. eventually made no compliance and therefore the Ld. Commissioner in the constrained circumstances, vide impugned order dated 22.11.2023 affirmed the aforesaid addition by dismissing the appeal of the Assessee.
The Assessee, being aggrieved, is in appeal before this Court. The Assessee has raised various legal grounds as well as challenged the addition on merit and controverted the findings of the Ld. Commissioner as well as of the AO.
On the contrary, the Ld. D.R. refuted the claim of the Assessee by supporting the orders passed by the authorities below.
Heard the parties and perused the material available on record. Admittedly, in the absence of relevant documents/details and explanation, the authorities below have made and affirmed the aforesaid addition and it is a fact that the impugned order is an ex- parte order and not based on any reply and relevant documents and therefore the issues involved in the instant case remained to be adjudicated in its right perspective and proper manner. Therefore, considering the peculiar facts and circumstances in totality and for the just decision of the case and substantial justice, this Court is inclined to set aside the impugned order and remand the instant case to the file of the Ld. Commissioner for decision afresh, suffice to say by affording reasonable opportunity of being heard to the Assessee. Thus, the case is accordingly remanded to the Ld. Commissioner for decision afresh.
Order pronounced in the open court on 19.02.2025.