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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI G.S. PANNU & SHRI PAWAN SINGH
Appellant by : Shri J.S. Kini, AR Respondent by : Shri Rajeev Gubgotra, DR Date of Hearing : 14-06-2019 Date of Pronouncement : 19-06-2019 O R D E R PER G.S. PANNU, VICE PRESIDENT:
The captioned appeal by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-40, Mumbai, dated 21-01-2015, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order dated 11-03-2011 passed by the Assessing Officer (AO), Mumbai u/s. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The assessee has raised the following Grounds of Appeal:
“1 . On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in .dismissing the appeal.
: 2 : 2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that too without giving full and proper opportunity of being heard in the matter.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that too without appreciating fully and properly the facts and circumstances of the case.
On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in upholding the action of the learned A.O. in disallowing commission expenses of Rs. 43,07,691/-.
On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in upholding the action of the learned A.O. in disallowing conveyance and travelling expense amounting to Rs.50,000/-.
6. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in upholding the action of the learned A.O. in disallowing business promotion expenses amounting to Rs.10,000/-.
The appellant craves leave to add, alter, amend or delete any or all of the grounds of appeal at any time”.
In this appeal, although the assessee has raised multiple Grounds of Appeal, but essentially, three disputes haves been raised. Firstly with regard to disallowance of commission expenses of Rs.43,07,691/-, disallowance of Rs.50,000/- out of conveyance and travelling expenses and Rs.10,000/- out of business promotion expenses.
4. The appellant before us is an individual, who is stated to be in the business of export of pharmaceutical raw materials and bulk drugs. In the course of assessment proceedings, the Assessing Officer noted that the assessee had incurred commission expenditure by way of payments of Rs.43,07,691/- to twenty parties as per details in para 6.1 of : 3 : the assessment order. The Assessing Officer has disallowed the entire expenditure on the ground that the same was bogus/inflated. Though the Assessing Officer has passed a detailed assessment order, but in sum and substance, he has relied on the verification exercise carried out by him in the course of assessment proceedings for the earlier assessment year 2009-10. Pertinently, there is no verification or enquiry conducted with regard to the expenditure claimed in the instant assessment year.
5. Before us, it has been explained by the Ld.Representative that at no stage, assessee has been given an appropriate opportunity in as much as during the assessment proceedings, assessee was asked to produce fourteen parties out of twenty parties within a short time. It was explained that the assessment proceedings commenced as early as September, 2011, but it was only in February, 2013, assessee was asked to produce the parties within a span of four to six working days. It was also pointed out that the entire payment of commission was made through banking channel and all the requisite particulars of the recipients viz., address and PAN details etc., were furnished to the Assessing Officer. It was pointed out that for the assessment year 2009-10, the disallowance was only to the extent of Rs.2,50,000/- and not the entire expenditure. Explaining the background, the Ld.Representative pointed out that prior to assessment year 2009-10, the entire expenditure on account of commission was allowed. It was only in assessment year 2009-10 that a portion of the commission expenditure was disallowed, : 4 : whereas in the instant year, the entire expenditure has been disallowed. It is reiterated by the assessee that the assessee would be in a position to discharge his onus if an appropriate opportunity is provided.
On the other hand, Ld.DR appearing for the Revenue, reiterated the stand of the lower authorities, but has not seriously opposed the plea of the assessee for an opportunity afresh, before the Assessing Officer.
We have carefully considered the rival submissions. A pertinent aspect which emerges from perusal of the order of the CIT(A) as well as the Assessing Officer is that the disallowance has been made primarily based on the enquiries conducted for the preceding assessment year of 2009-10. In fact, the entire discussion in the assessment order, including the reference made to issuance of notices u/s.133(6) and summons u/s.131 of the Act is in the context of assessment proceedings for the assessment year 2009-10 and not in relation to instant assessment year. It has also been brought out by the Ld.Representative that while in assessment year 2009-10, a portion of the expenditure was disallowed to the extent of Rs.2,50,000/-, whereas in the instant year, the entire expenditure has been disallowed. Considering the entirety of circumstances, it clearly emerges that there is a certain amount of inadequacy in the orders of the authorities below and also on the part of assessee in not discharging the onus cast on him to explain the impugned expenditure on commission. It has been explained by the Ld.Representative that the time permitted to produce the parties was very short : 5 : and that the issue was raised by the Assessing Officer towards the fag end of the assessment proceedings. Be that as it may, in our considered opinion, it would meet the ends of justice if the matter is restored back to the file of Assessing Officer, who shall Denovo examine the issue and pass an order afresh in accordance with law. We may clarify here that the Assessing Officer shall allow the assessee a reasonable opportunity of being heard in the matter and only thereafter, shall pass an order afresh on this aspect as per law.
7.1. Insofar as the other two disallowances out of conveyance & travelling expenditure and business promotion expenditure are concerned, relevant discussion in the assessment order reveals that they have been made purely on adhoc basis. The Assessing Officer has sought to justify the disallowances on mere generalized observations, without pointing out any specific infirmities. Accordingly, such disallowances are directed to be deleted.
In the result, the appeal of assessee is partly allowed, as above.