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Income Tax Appellate Tribunal, “G”
Before: SHRI S. RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM
ACIT - 11(3)(2), M/s Wella India Hair Aayakar Bhavan, Cosmetics Pvt. Ltd. Mumbai-400 020 बिधम/ Plot No. 495, P & G Plaza, Cardinal Gracias Vs. Road, Chakala, Andheri (East), Mumbai-400 099 स्थायीलेखासं./जीआइआरसं./PAN No. AAACG2468D (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant : Shri Yogesh A. Thar /Shri Jishaan Jain/ Mrs. Palak by Porwal, ARs प्रत्यथीकीओरसे/Respondentby : Shri V. Vinod Kumar, DR सुनवाईकीतारीख/ : 15.10.2019 Date of Hearing घोषणाकीतारीख / : 06.11.2019 Date of Pronouncement आदेश / O R D E R
Per S. Rifaur Rahman, Accountant Member:
The present Appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals) - 18 in M/s Wella India Hair Cosmetics Pvt. Ltd. short referred as ‘Ld. CIT(A)’, Mumbai, dated 05.04.17 for Assessment Year (in short AY) 2012-13.
The brief facts of the case are, assessee filed its return of income for the assessment year 2012-13 on 30.11.12 declaring total loss of Rs. 12,75,59,269/-. The return was processed under section 143 (1) of the Income Tax Act 1961 (in short ‘Act’). The case was selected for scrutiny and accordingly notices under section 143 (2) was issued and served on the assessee. In response, AR of the assessee and father of the assessee appeared and filed the relevant information as called for.
Assessee is engaged in trading in hair cosmetics such as hair color, care, styling and perm products. During the assessment proceedings, AO observed that assessee debited a sum of Rs. 13,98,39,937/- to the P & L account under the head ‘advertisement and sales promotion expenses’. Assessee was asked to file party wise details along with supporting evidences. In response, the assessee submitted that the expenses includes advertisement in print media, prime television ad, posters, radio ad, sponsorships, public relations, etc and also it includes sales M/s Wella India Hair Cosmetics Pvt. Ltd. incentives and filed details of the above expenditure. On verification, AO observed that assessee company has not debited TDS on payment made to foreign entity to the extent of Rs. 1,30,44,650. Assessee submitted that TDS are not deducted as income is taxable outside India. In the absence of satisfactory explanation and supporting evidences, Rs. 1,30,44,650/- is added to the total income of the assessee. Further assessee has not deducted TDS on trade incentive of Rs. 7,26,92,948/- which is included in advertisement and sales expenses. The assessee has not furnished satisfactory explanation for non-deduction of TDS on the above amount and accordingly AO made the addition.
Aggrieved with the above order, assessee preferred an appeal before Ld. CIT(A) and submitted before him that TDS is not deductible on the foreign remittance and submitted a detail submission alongwith documentary evidences in Annexure 1 & 2, which were not furnished before AO. Ld. CIT(A) after considering the submissions and documentary evidences submitted by the assessee, observed that all these information were not furnished before AO and the assessee had not made any request under Rule 46A nor any application for admission of M/s Wella India Hair Cosmetics Pvt. Ltd. additional evidences, accordingly he rejected all the documents produced by the assesses and dismissed the appeal filed by the assessee.
Aggrieved with the above order, assessee preferred the appeal before us.
Before us, Ld. AR explained the brief facts of the case and submitted that all the relevant information was submitted before Ld. CIT(A), but Ld. CIT(A) has not appreciated the documents and dismissed the appeal on technical ground. In this respect, he relied upon the decision of Coordinate Bench of ITAT in the case of Zia Ur Rehman Vrs. ITO [2018] 96 taxmann.com 482 (Delhi).
On the other hand, Ld. DR relied upon the orders passed by the revenue authorities.
8. Considered the rival submissions and material placed on record, we notice that assessee has incurred sales and promotion expenses and made several payments outside India as well as incurred sales promotion expenses in the form of incentives to the customers and employees. All these information were M/s Wella India Hair Cosmetics Pvt. Ltd. submitted before Ld. CIT(A), but Ld. CIT(A) has rejected all the evidences submitted before him, considering the facts that assessee has not made an application for acceptance of the additional evidences. We notice that in the similar situation, Coordinate Bench of ITAT in the case of Zia Ur Rehman Vrs. ITO [2018] 96 taxmann.com 482 (Delhi) has held as under:-
7. I have heard the submissions and perused the material available on record. I find on going through the material available on record, and on a consideration of the peculiar facts and circumstances of the case that the ld. CIT(A) being aware of the procedures should have provided the assessee a specific opportunity to place its evidences by way of a proper application under Rule 46A. Opportunity to do so in all fairness should have been provided. The CIT(A) in the discharge of his responsibilities is not visualized to function in a mechanical manner. The Income Tax Act has ensured that in order to achieve an active justice delivery system the Ld. CIT(A) is more than adequately armed to ensure that only just and due tax are collected. Sub section (4) and (5) of Section 250 of the Act when read alongwith Rule 46A of the Income Tax Rule 1962 which govern the production of additional evidences before the CIT(A) not only lays M/s Wella India Hair Cosmetics Pvt. Ltd. down the procedure to be adhered to by the tax payers and the tax authority but also in Sub Rule 4 of Rule 46A, The legislative intent is more than amply declared which ensure that no constraints on the power of the Commissioner appeals are visualized in order to fulfill the ends of justice. The CIT(A) has been empower more than adequately to direct the production of any document, examination of any witness etc. "to enable him to dispose of the appeal, or for any other special cause". Accordingly in the facts of the present case I do not find why appropriate directions were not given by the Ld. CIT(A). Merely because the assessee's counsel apparently ignorant about the procedure relies upon evidences without following the due procedure does not entitle the First Appellate Authority to function mechanically. The Ld. CIT(A) is expected to act fairly and responsibly utilizing the powers with which he is endowed with the single minded aim that justice is done and not to frustrate a valid claim of the assessee on a hyper technical ground. The Appellate Forum provided under law must perform by ensuring that only just and due taxes for the state are only collected. The orders passed should not rely on the ignorances of the tax payers. The claims of the assessee must succeed or fail on merits, facts and 7 M/s Wella India Hair Cosmetics Pvt. Ltd. evidences and not on account of the ignorance of the assessee or his counsel.
7.1 In the facts of the present case I am of the view that the evidence sought to be relied upon cannot be discarded out rightly as irrelevant. The fact that such evidence may not be sufficient or complete by itself may be true and that is another story which can only be decided after consideration. I find that the evidence admittedly is relevant and crucial and consequently is directed to be admitted. At the cost of reiteration, it is again emphasized that in the eventuality the Ld. CIT(A) finds that the evidence filed is not sufficient or complete, it is expected that he shall communicate this fact to the assessee and provide the assessee to file further supporting evidence, if any either by way of an affidavit and/or relevant document to explain the purpose of the loan taken and the usage thereof. No doubt it is the duty of the assessee to justify its claims. However, admittedly where the assesse's Counsel himself is ignorant about the procedures, the occasion to castigate the assessee for not being conversant with the legal requirements is, in the least, unfortunate. It is further seen that qua the specific property there were three other co-owners. The loan as per the claim put forth was from Nainital Bank as per the finding in the impugned order which also has been taken by these M/s Wella India Hair Cosmetics Pvt. Ltd. persons apart from the assessee. The purpose of referring to the co-sharers is relevant as exercise of administrative and quasi judicial orders passed by the authorities is legitimatized only if it is seen to be fair, equal and impartial. If identically situated persons are differently taxed, such orders of Quasi Judicial Authority strike at the very root of the principles of legitimate expectation of the tax payers and thus is open to the challenge of being whimsical, arbitrary and perverse. Such an approach cannot be given legal sanction.
Accordingly, in the interest of substantial justice, the impugned order is set aside and remanded back to the file of the CIT(A) with a direction to admit the fresh evidences in accordance with the procedure prescribed by law and further provide the assessee to file supporting evidences which go to the root of the matter in case the evidence filed is found to be insufficient or incomplete and thereafter the CIT(A) shall pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Said order was pronounced in the open court at the time of hearing itself.
Respectfully following the above decision, we also remit this issue back to the file of AO for verification of additional M/s Wella India Hair Cosmetics Pvt. Ltd. evidence and we direct the AO to complete the assessment in de novo after considering the additional evidences. It is needless to say that assessee has to be given sufficient opportunity of being heard. Accordingly, grounds raised by the assessee are allowed for statistical purposes.