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Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri Ravish Sood & Shri N.K. Pradhan
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-17, Mumbai, dated 30.06.2017 which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 21.03.2013. The assessee has assailed the impugned order by raising before us the following grounds of appeal:
P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) “1. In the facts and circumstances of the case and in law the Ld. CIT Appeal erred in: 1.1 Passing the impugned appellate order, upholding certain additions and disallowances made by the Learned Assessing Officer in the impugned assessment order being the alleged differences between the AIR information and the appellant's own records without invoking any provisions of law. 1.2 Holding and stating that adequate opportunity was given for reconciliation during assessment proceedings, remand proceedings and enough opportunity was provided and copy of Remand Report was provide but not considering the contention and the submission of the appellant that the relevant information ought to have been collected from the respective parties by issuing notices u/s. 133(6) as also providing the opportunity to the appellant to cross-examine the parties whenever and wherever required. 1.3 Upholding the addition in respect of Haworth India Pvt. Ltd., and Norasia Container Lines Ltd. aggregating to Rs. 1,29,113/-though the appellant had stated and submitted that the notice u/s. 133(6) ought to have been issued in respect of the said parties as it did not have any transactions with the said party. 1.4 C o n fi rm in g t h e a ddi ti on s r e pr e s en tin g a ll eg e d unr e c on c il e d a m o u n t s aggregating to Rs.28,77,478/- under Category II, though it was specifically informed during the assessment proceedings, remand proceedings as well as in the appellate proceedings that the said parties had quoted wrongly the Permanent Account Number of the appellant instead of Permanent Account Number of the principal of the appellant i.e. Mitsui O.S.K. Liens Ltd., Japan and therefore no additions ought to be made in respect of the same aggregating to Rs. 28,77,478/-. 1.5 Confirming the addition in respect of Vigneshwara Exports Ltd. under Category IV, though however the appellant had submitted that a Credit Note issued for Rs. 1,13,766/- ought to be considered. 1.6 Confirming the additions aggregating to Rs. 5,95,063/- in Category V, though however it was submitted to the Learned Assessing Officer / CIT (A) that the differences were on account of recording of the transactions at different times in the books of the appellant and the corresponding entries by the parties based on vessel arrival and sailing date/s and thus the transactions were recorded in different financial years. 1.7 Confirming the addition of Rs. 55,880/- in respect of small un- reconciled transactions.
2. It is humbly prayed that the reliefs as prayed and such other and further reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice, should be granted.
3. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.”
Briefly stated, the assessee company which is carrying on the business of a shipping agent, local and international forwarding agent, freight contractors etc. had e-filed its return of income for A.Y. 2009- 10 on 29.09.2013, declaring its total income at Rs.4,84,67,050/-. The P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) return of income filed by the assessee was processed as such under Sec.143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings the ITS details pertaining to the assessee were retrieved from the computer database. It was observed by the A.O that the assessee could not reconcile the ITS details with its books of accounts. In the backdrop of the aforesaid fact, it was noticed by the A.O that there was a mismatch with respect to certain transactions as per the ITS details and the books of accounts of the assessee, as under:
Name of the party As per AIR As per books Difference (A) (B) (B-A) A.T.C (CLEARING AND SHIPPING) 1,062,801 - (1,062,801) APL INDIA PVT. LTD. 11,898 11,262 (636) AVON LIFESYTLE PRODUCTS 52,608 - (52,608) BESTEX MM INDIA PVT. LTD. 74,316 3,876 (70,440) CMA CGM GLOBAL INDIA 33,254 32,542 (712) CMA CGM SA FRANCE 5,097 - (5,097) COMPANIA SUD AMERICANA DE 4,670 - (4,670) VAPORES CONTINENTAL CARRIERS PVT. 3,316 - (3,316) COVALENT LABORATORIES PVT. 7,263 - (7,263) CSAV AGENCIES INDIA PVT. LTD. AS 9,612 (9,612) AGENTS NORASIA CONTAINER LINES LTD. DIAMOND MANAGEMENT & TECHNOLOGY 10,706,718 - (10,706,718) CONSULTANTS PVT. FMI AUTOMOTIVE COMPONENTS 107,310 103,810 (3,500) FORBES GOKAK LTD. PATVOLK DIVISION 92,650 - (92,650) GGL INE PVT. LTD 70 (1,403) (1,473) HAWORTH INDIA PVT. LTD. 109,659 (109,659) HT MUSIC & ENTERTAINMENT COMPANY 269,664 201,963 (67,710) KHEMKA KLOTHINGS PVT. LTD 21,826 19,859 (1,967) LG ELECTRONICS INDIA PVT LTD. 1,876 - (1,876) MAHINDRA LOGISTICS LTD. 209,447 209,389 (58) MARITIME SERVICES PVT LTD 420 (420) METRO FABRICS 86,858 49,206 (37,651) MITSUI O.S.K. BULK SHIPPING 1,292,094 1,112,768 (179,326) NORASIA CONTAINER LINES LTD. 19,454 (19,454) OASIS SHIPPING PRIVATE LTD 18,465 18,068 (397) ODYSSEY LOGISTICS PVT LTD 30,272 (30,272) OPERA CLOTHING 515,008 514,930 (78) PANASONIC SALES SERVICES 38,266 (38,266) PUSHPANJALI OVERSEAS PVT 442,770 (442,770) R.S. GLOBAL SHIPPING (I) LTD 1,253,301 (1,253,301) SAMSUNG INDIA ELECTRONICS 139,893 (139,893) SHETRON LIMITED 63,264 (63,264) SICAL DISTRIPARKS LIMITED 9,000 (9,000) SOLID STATE SYSTEMS PVT.LTD 23,690 (23,690) SPL INDUSTRIES LTD 341,409 219,520 (121,889) SUNLINE EXPORTS LIMITED 75,118 - (75,118)
P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2)
TEAMGLOBLE LOGISTICS 10,017 1,577 (8,440) TOYOTA TSUSHO INDIA PVT. LTD 15,113 11,241 (3,872) VANASTHALI TEXTILE INDUSTRIES 425,332 378,381 (46,951) LIMITED VIGNESHWARA EXPORTS LTD 2,232,711 2,118,945 (113,766) VIPUL DYE CHEM LIMITED 25,293 (25,293) YANG MING LINE (INDIA) PVT. LTD. 12,591 10,098 (2,493) Total 19,854,394 5,016,032 (14,838,362)
Accordingly, the A.O holding a conviction that the aforesaid unreconciled amount of Rs.1,48,38,362/-was the understated receipts of the assessee, thus added the same to its returned income.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). In the course of the appellate proceedings the CIT(A) called for a „remand report‟ from the A.O and the counter comments of the assessee to the same. After deliberating on the facts of the case in the backdrop of the „remand report‟ filed by the A.O and the counter comments of the assessee the CIT(A) deleted certain additions, observing as under:
“I have carefully considered the submissions and arguments of the AR of the appellant company and also carefully gone through the Assessment Order. The remand report submitted by the A.O and comments on remand report submitted by the appellant has been considered. The appellant has relied on certain decisions of the Hon'ble Tribunal. There is no dispute with the proposition laid down in these decisions. The adequate opportunity was given for reconciliation during assessment proceeding, during remand proceeding and even enough opportunity was provided when the copy of remand report was forwarded for appellant comment. Thus the proposition laid down has been fully complied with. Category I The AO had confirmed the reconciliation of transaction amounting to Rs.1,07,06,718/-with respect to Diamond Trading and Consultancy Ltd. reported in the AIR with the appellant's books. The reconciliation is on the basic fact that the appellant had not entered into any transaction with Diamond Trading and Consultancy Ltd and this fact has been ratified through revising their e-TDS return. Therefore, the addition made by the AU of unreconcile amount of Rs.1,07,06,718 pertaining to Diamond Trading and Consultancy Ltd. is hereby deleted. In respect of the reconciliation of transaction of Rs.75,118 pertaining to Sunline Exports Ltd, the appellant submitted that the party had revised its return and accordingly, the said amount does not appear in the AR of the appellant. The AU is directed to delete the addition of Rs 75, 118 after proper verification.
P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2)
One of the involved unreconciled party is appellant's principal i.e. Mitsui OSI<Lines Ltd. The appellant in the remand proceedings has submitted its own reconciliation but has not submitted any confirmation from the principal during the remand proceedings or appellate proceedings. It is also the duty of appellant to contact the parties to clarify the position as it had done in the case of Diamond Trading and Consultancy Ltd. However, the appellant has not resorted to such efforts which resulted in non-reconciliation of the balance unreconciled transactions.
With respect to the parties namely Haworth India P.Ltd Rs.1,09,659/- and Norasia container lines Ltd. Rs.19,454/- are concerned, it is submitted that the AU has not issued any verification letter u/s.133(6) of the Act. The AO's remand report was forwarded to the appellant. The burden to prove as well as onus of reconciliation was on the appellant, which the appellant has failed to do. Thus the addition of unreconcile amount are confirmed. Category II In case of category II, the total unreconcile amount is Rs.28,67,478/-. During the remand proceeding, it was admitted before the AU that all the parties are known to the appellant and they have transacted with the principal of the appellant company and erroneously quoted the PAN of the appellant company. Once, the reconciliation is related to the principal of the appellant company, it was incumbent upon the appellant company to ensure filing of reconciliation statement of the principal along with confirmation before the A.O. The burden to prove as well as the onus has not been discharged. It is also mentioned by the A.O that no reply has been received from RS Global Shipping India Ltd. for an amount of Rs.12,53,301/- and the appellant has also expressed its inability to prove and explanation in this regard. Thus, the addition of unreconcile amount of Rs.28,67,478/- by the A.O is confirmed. Category III The reconciliation has been provided with respect to the parties appearing under category III hence addition of Rs.3,01,215/- is deleted. Category IV Under category IV, the appellant company has recorded a credit note of Rs.1,13,766/- from Vigneshwara Exports Ltd and has stated that the same has not been recorded by the party. However, no confirmation has been provided to this effect. Hence, addition of this amount is confirmed. Category V In case of parties appearing under category V, it is submitted that the difference is on account of recording of this transactions on different time line in the books of account of the appellant company and that of corresponding party on account of recording of transaction is based on vessel arrival and sailing date and thus having been in different financial year. However, no confirmations/ nor any documentary evidence has been provided to this effect. Hence the addition of Rs.5,95,063/- is confirmed. Category VI The appellant has not provided reconciliation, claiming that the differences are small and neither the reconciliation has been provided. Hence the addition of Rs.55, 880/- is confirmed.
P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) Thus, the appeal filed by the appellant company is partly allowed u/s 250 read with section 251 of the Income Tax Act 1961.”
The assessee being aggrieved with the sustaining of the balance addition of Rs. 37,71,300/- by the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee took us through the facts of the case. It was submitted by the ld. A.R, that the A.O had without any basis added the entire unreconciled amount of the ITS details to the returned income of the assessee. It was submitted by the ld. A.R that in the course of the assessment proceedings though the A.O was specifically requested to issue notices under Sec. 133(6) to the parties in whose context the mismatch between the ITS details and the „books of accounts‟ of the assessee had emerged, however, the said request of the assessee was summarily brushed aside. It was vehemently submitted by the ld. A.R, that as the assessee had not entered into any transaction with the parties in respect of whom understatement of income was being alleged, therefore, it was practically impossible on its part to disprove the alleged transactions by placing on record the confirmations of the said parties. It was further submitted by the ld. A.R, that in respect of the unreconciled amounts aggregating to Rs.28,77,478/- pertaining to certain parties listed in „Category II‟, though it was specifically brought to the notice of the A.O that the said parties which had transacted with its principal i.e Mitsui O.S.K Lines Ltd., Japan, had inadvertently quoted the PAN number of the assessee instead as that of its principal with whom they had transacted, however, the said claim was also summarily scrapped and additions were made in the hands of the assessee. The ld. A.R took us through the explanation that was filed by the assessee with the A.O and submitted that the same was most arbitrarily brushed aside by him. It was averred by the ld. A.R that as the „gross receipts‟ of the assessee for the year under consideration P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) amounting to Rs.46,33,20,273/- was substantially higher than the aforesaid unreconciled difference which worked out to a miniscule 0.07% of the said receipts, therefore, no adverse inferences could have justifiably been drawn in its hands. The ld. A.R in support of her aforesaid contention relied on a host of judicial pronouncements viz. (i) Shri S. Ganesh Vs. The Asst. Commissioner of Income Tax 11 (ITA No. 527/Mum/2010); (ii) Threadneedle Investment Fund ICVC Asia Fund Vs. ACIT [2012] 27 taxman.com 321 (Mumbai ITAT); (iii) ANS Law Associates Vs. ACIT [ITA No. 5181/Mum/2012 (Mum ITAT) (2015); (iv) A.F. Ferguson & Co. Vs. JCIT [ITA No. 5037/Mum/2012] (Mum ITAT) (2015); (v) DCIT Vs. G. Selva Kumar (Bang ITAT) (2011); and (vi) Arati Raman Vs. DCIT [ITA No. 245/Bang/2012] (Bang ITAT) (2013).Apart there from, it was submitted by the ld. A.R that the issue under consideration was squarely covered by the assesses own case for the immediately succeeding year i.e A.Y. 2010- 11 viz. Mitsui O.S.K Lines (India) Pvt. Ltd. Vs. Dy. CIT, Mumbai [ITA No. 7757/Mum/2014] (Mumbai ITAT) (copy placed on record). The ld. A.R taking us through the facts involved in the aforesaid case submitted, that a similar addition of Rs. 7,30,755/- that was made by the A.O in respect of the unreconciled ITS data in the said year viz. A.Y 2010-11, was on appeal deleted by the Tribunal. In the backdrop of her aforesaid contentions it was submitted by the ld. A.R that the addition of the unreconciled amount of Rs.37,71,300/- made in the hands of the assessee could not be sustained and was liable to be vacated.
Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee despite sufficient opportunity had failed to reconcile the ITS details as against its „books of account‟, therefore, the CIT(A) was constrained to sustain the addition of the unreconciled P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) amount of Rs.37,71,300/- in the hands of the assessee. It was submitted by the ld. D.R that in respect of certain parties it was claimed by the assessee that the same pertained to the transactions that were entered into by the said parties with its principal viz. Mitsui O.S.K. Lines, Japan, however, they had inadvertently quoted the PAN of the assessee. It was submitted by the ld. D.R that even the aforesaid claim that the transactions of certain parties with its principal had on account of a wrong quoting of PAN by them wrongly formed part of its ITS details could also not be substantiated by the assessee by obtaining the confirmation of the said fact either from its principal or from the said parties. Accordingly, it was submitted by the ld. D.R that as the addition of Rs. 37,71,300/- sustained by the CIT(A) was well in order, therefore, the appeal filed by the assessee was bereft of any merit and was liable to be dismissed.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, the ITS details retrieved by the A.O from the computer data base in the case of the assessee could not be reconciled against its „books of accounts‟ and a mismatch of Rs.1,48,38,362/- had initially emerged. Accordingly, the A.O holding a conviction that there was an understatement of receipts of Rs.1,48,38,362/- by the assessee, had thus added the same to its returned income. On appeal, the CIT(A) called for a „remand report‟ from the A.O and after perusing the same in the backdrop of the counter comments of the assessee restricted the addition to the extent of Rs.37,71,300/-. We find that it has been the claim of the assessee that it had not entered into any transaction with the parties pertaining to whom the aforesaid discrepancies in the receipts had so emerged. As is discernible from the records, the assessee in order to dispel any P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) doubts in respect of its aforesaid explanation had in the course of the assessment proceedings specifically requested the A.O to issue notices under Sec. 133(6) to the respective parties so that the factual position may emerge. However, we find that the A.O except for harping on the fact that there was a mismatch between the ITS details as against that accounted for by the assessee in its „books of accounts‟, had in all his wisdom chosen not to put in any effort to dislodge the aforesaid claim of the assessee and therein prove to the contrary. We are of the considered view that now when the assessee had categorically declined of having entered into any transaction with certain parties figuring in the ITS details in context of whom the aforesaid mismatch had emerged, therefore, it was incumbent on the part of the A.O to have made necessary verifications instead of summarily discarding the said claim of the assessee. Rather, we are of a strong conviction that now when it was the case of the lower authorities that the mismatch in the ITS represented the understatement of the receipts of the assessee, who on the contrary had declined the same, therefore, it was obligatory on the part of the said lower authorities to have conclusively proved on the basis of clinching evidence that the said amount was in fact the suppressed income of the assessee. In our considered view, the assessee who had clearly distanced itself from certain transactions as were discernible in its ITS details could not be expected to have disproved the claim of the revenue by obtaining confirmations from the parties with whom it had ostensibly not entered into any transaction. In fact, we are of a strong conviction that it was for the A.O to have proved to the hilt on the basis of irrefutable documentary evidence that the mismatch in the ITS details were the unaccounted receipts of the assessee. Be that as it may, as observed by us hereinabove, a similar issue had also arisen in the assesses own case for the immediately succeeding year viz. A.Y. 2010-11. As is P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) discernible from the aforesaid order, the addition of the unreconciled amount of ITS details of Rs.7,30,755/- was deleted by the Tribunal, observing as under:
“5. We have carefully considered the submissions of the parties, perused the material placed before us including the orders of authorities below and case laws relied upon by the parties. We find that the addition has been made qua un-reconciled entries appearing in the AIR information/Form No.26AS which was totally denied by the assessee that it had never any business transactions with these parties during the year. We further find that the AO has not bothered to investigate the matter further and simply added the amount of un-reconciled entries in the income of the assessee. The case of the assessee also finds strong support from the decision in the case of ACIT V/s BLR India Pvt. Ltd (supra) in which identical issue has been decided in favour of the assessee. The relevant portion of the decision is reproduced below : “6. We have considered the rival submissions and perused the material on record. The ld. DR submitted before us that the assessee was not able to re- concile the difference between the books of account with the AIR information and therefore, the addition was rightly made. Per contra, the ld. AR submitted before us that reconciliation of AIR data is not possible with the books of accounts as the information in the AIR were not put into the computer by the assessee but by those parties who deducted the TDS from the contractual payments made to the assessee. Thus there was every possibility that some deducted tax at sources on payment basis whereas others on accrual basis and in some cases might have wrongly deducted the TDS. The AR further submitted that the total sales as shown in the books of accounts were Rs.2,42,06,01,170/- whereas the total sales in AIR report were Rs. 48,42,51,354/- which is just 20% of the total sales of the assessee. Out of the said AIR entries the assessee had reconciled the entries amounting to Rs.46,97,07,933/- meaning thereby that 97% of the AIR entries were reconciled by the assessee. The difference mismatch might be due to faulty return filed by the 3 rd party. The ld. AR further submitted that in order to verify the unreconciled items of AIR information, the AO has sent notice under section 133(6) to various parties on the addresses provided in the AIR information twice but all the notices were returned back undelivered to the department which proved that the AIR information could not be relied upon to make addition in the hands of the assessee. The ld. AR further submitted before us that the issue was covered in favour of the assessee by the decision of co-ordinate Bench in its own case in dated 24.5.2013. The ld.AR also relied upon the decision of the Tribunal in the case of Shri S Ganesh V/s ACIT in ITA No.527/Mum/2010 (AY 2006-07) dated 8.12.2010, wherein it has been held that in absence any record contrary to the fact, the revenue authorities could not make any addition on account of AIR information. We find from the above, that the case of the assessee is squarely covered by its own decision in M/s. BLR India Pvt. Ltd (supra) the relevant findings of the said order are reproduced below: “2.4. We have heard the rival submissions and perused the material before us. We find that the assessee had shown higher income than the income reported in the report received by the AO. It reconciled all the accounts wherever ledger entries were made available to it. Only in one case he could not reconcile the entries. From the RR of the AO it is evident that the facts P a g e | M/s Mitsui O.S.K. Lines (India) Pvt. Ltd. Vs. The DCIT-Range-8(2) narrated by the FAA (para 2.2) are correct and based on sound footings. FAA had upheld a portion of addition where assessee had failed to reconcile the figure. In our opinion, in these circumstances, his order does not suffer from any factual or legal infirmity. Therefore, confirming his order we decide Ground No.1 against the AO.” We therefore, following the decision of the co-ordinate bench of the Tribunal uphold the order of the ld. CIT(A). This ground of appeal is dismissed and the AO is directed accordingly.”
6. The facts of the assessee‟s case are squarely covered by the decision cited (supra) and we respectfully following the ratio laid down in the above decision, direct the AO to delete the addition.”
8. We find that in the case before us, it is a matter of fact borne from the records that the receipts of the assessee of Rs. 46,33,20,273/- for the year under consideration are substantially higher than the unreconciled amount of receipts of Rs.37,71,300/- i.e miniscule 0.07% of the said receipts. In our considered view, the fact that the „gross receipts‟ of the assessee during the year are substantially in excess as in comparison to the miniscule unreconciled ITS amount of Rs. 37,71,300/- does support the claim of the assessee that no adverse inferences on the basis of the said standalone mismatch of ITS details could have been validly drawn in its hands. Apart there from, we are of a strong conviction that as the A.O had failed to conclusively prove that the unreconciled receipts of Rs.37,71,300/- (as was gathered by him from the ITS details)was the understated income of the assessee, therefore, we do not find any justifiable reason to sustain the addition made by him. We thus in terms of our aforesaid observations, and also respectfully following the view taken by the Tribunal in the assesses own case for A.Y 2010-11, viz. Mitsui OSK Lines (India) Pvt. Ltd. Vs. Dy. CIT-8(2), Mumbai (ITA No. 7757/Mum/2014); dated 22.08.2016, vacate the addition of Rs.37,71,300/- sustained by the CIT(A). Accordingly, the order of the CIT(A) is set aside and the addition of Rs. 37,71,300/- sustained by him is deleted.