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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI MAHAVIR SINGH & G. MANJUNATHA
Date of Hearing 14/10/2019 Date of Pronouncement 14 /10/2019 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):
These two appeals filed by the assessee are directed against common orders of the Commissioner of Income Tax (Appeals) -48, Mumbai, both dated 13/03/2018 and they pertains to the Assessment Years (AY) 2008-09 & 2009-10. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order.
The assessee has, more or less filed common grounds of appeal for both Assessment Year’s. Therefore, for the sake of brevity, grounds of appeal filed for AY 2008-09 are reproduced as under:-
1. Under the facts and circumstances of the case, the appellate order passed by the Ld. CIT (A) is illegal being against the principles of natural justice and against the provisions of IT Act, 1961 being passed without allowing any opportunity of being heard and not adjudicating the written submissions of the appellant company in true sense.
2. That the Ld. CIT(A) grossly erred in confirming the action of Ld, AO in disallowing business loss of Rs. 34,37,146/-under a presumption that the appellant company was being managed by Sh, Shirish C. Shah during A.Y. 2008-09 despite the fact that from the perusal of Para 17 of assessment order it was evident that no such relation existed in the year under consideration. 3. That the Ld, CIT(A) grossly erred in facts of the case in confirming the addition of Rs. 25,000/- made by the Ld. AO alleging that turnover of the appellant company to be bogus despite the fact that no such allegation existed for the year under consideration. 4. That the Ld. CIT(A) grossly erred in law in confirming the additions and disallowances made by the Ld. AO despite the fact that no incriminating evidences were either found or seized during the course of search. 5. The appellant craves leave to add, alter, modify and withdraw any ground of appeal before or during the appellate proceedings.
3. The brief facts of the case are that the assessee company is engaged in the business of Media and Information Technology. A search and seizure action u/s 132 of the I.T.Act, 1961 was carried out in the case of Shri Shirish C. Shah. Pursuant to requisition of certain material alleged to be pertaining to the assesee company seized during the course of search action on Shri Shirish C Shah, aassessment proceedings u/s 153C of the I.T.Act 1961 were initiated in this case and the assessment has been completed u/s 143(3) r.w.s. 153C of the I.T.Act, 1961, on 22/03/2016 after making addition of Rs 25,000/- being 1% commission on total accommodation entries provided during the year. Further, the Ld. AO had also disallowed loss claimed by the assessee under the haed income from business or profession amounting to Rs. 34,37,146/-, on the ground that the assessee company did not have any substantial business activities, except routing the turnover within group companies.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged assessment proceedings initiated u/s 143(3) r.w.s. 153C of the I.T.Act 1961, in light of certain judicial precedents. The assesse had also challenged additions made by the AO, on the ground that during the year under consideration there was no accommodation entries business, therefore, the question of estimation of commission does not arise. The Ld.CIT(A) after considering relevant submissions of the assessee and also by relied upon various judicial precedents rejected legal ground taken by the assessee challenging validity of assessment order passed by the Ld. AO u/s 153C of the I.T.Act 1961. Further, the Ld.CIT(A) had also upheld the additions made by the AO towards 1% commission income on total amount of accommodation entries provided by the assessee. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.
The Ld. AR for the assessee, at the time of hearing, submitted that the Ld.CIT(A) has dismissed, appeal filed by the assessee without allowing any opportunity of being heard and also did not adjudicating the written submissions of the assessee in true sense. The Ld. AR further submitted that if, you go through the assessment order, the Ld. AO had reproduced sales and purchases made by the assessee to various group companies, as per which, there is no transactions for the year under consideration. Therefore, estimation of commission @1% on total sales shown during the year amounting to Rs. 25 Lacs is incorrect. The Ld. AR, further submitted that the Ld. AO has disallowed total business loss claimed by the assessee, on the ground that the assessee company did not have any business activity, except providing accommodation entries. The Ld.CIT(A) has affirmed the findings of the Ld. AO without appreciating the fact that the assessee has claimed loss under the head income from business /profession, as per which, it has claimed various expenses, including interest on loans and depreciation. Therefore, the issue may be set aside to the file of the AO to verify the facts with regard to the details of accommodation entries, if any provided for the year and also, various expenses claimed by the assessee, including interest on loan and depreciation.
The Ld. DR, on the other hand, strongly supported order of the Ld. AO, as well as the Ld.CIT(A).
We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the Ld. AO has estimated 1% commission income on alleged accommodation entries provided by the assessee. It is the claim of the assessee that for the year under consideration, there were no accommodation entries within group companies. For this, the assessee referred the details of intergroup transactions recorded by the AO in Para 17 on pages 5 to 10 of assessment order. Similarly, the assessee claims that the Ld. AO has disallowed total business loss claimed for the year, on the ground that the assessee company did not have any substantial business activities, except routing the turnover within the group companies, ignoring the fact that expenses debited into the profit and loss account, includes interest on loans and depreciation on fixed assets.
Having considered arguments of the both the sides, we find that the Ld. AO was of the opinion that the assessee has routed various transactions within the group companies and accordingly, estimated 1% commission income on alleged accommodation entries provided for the year. But, if you go through the details of accommodation entries provided by the assessee within group companies, we find that in the chart reproduced by the Ld. AO in his assessment order, there are no details of purchases, as well as sales for the AY 2008-09 and 2009-10. The assessee claims that for the year under consideration, there are no transactions between group companies. If you consider claim of the assesee, in light of details of transactions reproduced by the AO in assessment order, it,s seems that there is no transactions of accommodation entries for the year under consideration. However, the fact with regard to is there any accommodation entries within the group companies from the assessee for the year under consideration needs further verification from the Ld. AO. Therefore, we set aside the issue to the file of the Ld. AO for both assessment years to re-examine the claim of the assesee and re-do the assessment denovo in accordance with law.
Similarly, in respect of disallowance of business loss claimed for the year, the claim of the assessee is that out of total expenditure debited into the profit and loss account, the Ld. AO does not even considered interest paid on loans, as well as depreciation claimed on fixed assets, while disallowing total business loss claimed for the year. Further, the assessee claims that even, if the assessee is into the business of providing accommodation entries, the resultant expenditure, including interest on loans and depreciation cannot be disallowed. We find that the Ld. AO observed that the assessee did not have any business activity, except providing accommodation entries to group companies. In case the findings of the Ld. AO are correct, then the question of allowing huge expenditure claimed by the assesee, including interest on loans and depreciation does not arise. However, the assessee claims that various expenditure debited into the profit and loss account, including interest on loans and depreciation on assets is genuine business expenditure incurred only and exclusively for the purpose of business. Facts are contradicting. We, therefore, are of the considered view that this issue is also needs verification from the Ld. AO in light of claims of the assesee and various evidences filed during the course of hearing. Hence, we set aside this issue to the file of the Ld. AO for both assessment years and direct the AO to re-do the assessment denovo in accordance with the law.
In the result, appeals filed by the assessee for AY ‘s 2008-09 and 2009-10 are treated as allowed for statistical purposes.
Order pronounced in the open court on this 14 /10/2019