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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
Instant appeal by the assessee is directed against the order dated 19th September 2014, passed by the learned Commissioner (Appeals)–18, Mumbai, for the assessment year 2007–08.
Brief facts are, the assessee a company is engaged in the business of manufacturing and trading in special chemicals. For the assessment year under consideration, assessee filed its return of 2 Dow Chemical International Pvt. Ltd. income on 30th September 2009, declaring nil income. Subsequently, assessee filed a revised return of income on 30th September 2009, declaring loss of ` 78,76,81,490. During the assessment proceedings, the Assessing Officer examining the Profit & Loss account found that assessee has debited an amount of ` 4,64,03,209, towards legal and professional expenditure. The Assessing Officer observing that in the preceding assessment year also, the legal and professional expenditure claimed towards payment made to the very same parties were disallowed, called upon the assessee to explain why similar disallowance should not be made in the impugned assessment year. As observed by the Assessing Officer, though, the assessee furnished details of expenditure claimed, however, it did not explain why disallowance of expenditure claimed should not be made in line with the disallowance made in the earlier assessment year. He, therefore, concluded that neither the assessee had any plausible explanation to offer nor he could furnish necessary documentary evidence to prove the expenditure. Accordingly, he made a disallowance of ` 26,93,069. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals).
Before the first appellate authority, the assessee produced copies of the invoices for payment of legal and professional charges made to PricewaterhouseCoopers Pvt. Ltd. and Strategic Analysis India Pvt.
3 Dow Chemical International Pvt. Ltd.
Ltd., as additional evidence and requested for admission of the same in terms of rule 46A of the I.T. Rules 1962. The learned Commissioner (Appeals), however, refused to admit the additional evidence by observing that the Assessing Officer has given specific opportunity to the assessee to submit complete details. In this context, he also referred to a decision of the Hon'ble Gujarat High Court in Fairdeal Filaments v/s CIT, 302 ITR 173 (Guj.). Ultimately, learned Commissioner (Appeals) upheld the disallowance. However, he directed the Assessing Officer to verify the quantum of expenditure claimed by the assessee.
Learned Authorised Representative referring to the show cause notice issued by the Assessing Officer on 15th February 2013, submitted that the Assessing Officer had asked for details of legal and professional expenses with TDS details. He submitted, in reply to the said notice, the assessee has furnished complete details of legal and professional charges. He submitted, at that stage, the Assessing Officer never required the assessee to produce invoice of the legal expenditure. He submitted, subsequently on 8th March 2013, the Assessing Officer called upon the assessee to explain as to why disallowance of legal and professional fee should not be made as similar disallowance was made in A.Y. 2008–09. Thus, it was submitted by the assessee, the Assessing Officer has already decided
4 Dow Chemical International Pvt. Ltd. to make the disallowance since similar disallowance was made in assessment year 2008–09. Learned Authorised Representative submitted, the Assessing Officer ultimately completed the assessment on 15th March 2013, which would indicate that sufficient opportunity was not granted to the assessee to submit the required evidence to prove the genuineness of the expenditure claimed. Learned Authorised Representative submitted, as the assessee could not get sufficient opportunity to provide the evidence before the Assessing Officer, the complete evidence was produced before the learned Commissioner (Appeals) by way of additional evidence. However, learned Commissioner (Appeals) without proerly examining the additional evidences produced by the assessee, rejected them in a mechanical manner. He, therefore, submitted that the matter may be restored back to the file of the Assessing Officer for deciding afresh after examining the evidences brought on record.
Learned Departmental Representative, though, supported the order of the learned Commissioner (Appeals), however, he submitted that the matter can be restored back to the file of the Assessing Officer for fresh examination.
We have considered the submissions of the parties and perused the material available on record. On a perusal of the assessment order
5 Dow Chemical International Pvt. Ltd. as well as other material on record, prima–facie we are of the view that the Assessing Officer has completed assessment in undue haste. It is also evident, he has approached the issue of disallowance of legal and professional expenses with a close mind since similar expenditure was disallowed in the earlier assessment year. In our view, without considering the validity of assessee’s claim in the impugned assessment year, the Assessing Officer cannot disallow the expenditure claimed solely on the basis that similar expenditure was disallowed in the preceding assessment year. Moreover, we find that the Assessing Officer has passed the order without proper application of mind which is evident from the fact that, though, he himself has stated that the legal and professional expenses debited to Profit & Loss account is ` 4,64,03,209, but in the table provided in Para–4 of the order the total expenditure has been shown at ` 26,93,069. Further, it is evident that the Assessing Officer has completed the assessment on 15th Mach 2013, only after two opportunities being given to the assessee to produce evidence. Be that as it may, before the first appellate authority, the assessee did produce supporting evidences towards payment made to the concerned parties as legal and professional charges. However, the learned Commissioner (Appeals) has refused to consider the additional evidences. In our view, the additional evidence produced by the assessee having crucial bearing
6 Dow Chemical International Pvt. Ltd. on the validity of the claim made by the assessee required to be considered and cannot be rejected / ignored in a perfunctory and mechanical manner. By refusing to admit the additional evidence, the learned Commissioner (Appeals) has denied a fair opportunity of being heard to the assessee thereby violated the principles of natural justice. In the aforesaid view of the matter, we deem it appropriate to set aside the impugned order of the learned Commissioner (Appeals) and restore the matter back to the file of the Assessing Officer to decide the issue of claim of legal and professional expenses afresh after considering all the evidences brought on record by the assessee. Needless to mention, the Assessing Officer must provide adequate opportunity of being heard to the assessee.
In the result, appeal stands allowed for statistical purposes. Order pronounced in the open Court on 19.08.2016