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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Date of Hearing – 27.05.2016 Date of Order – 27.05.2016 2 Radiant Shipping Ltd. O R D E R PER SAKTIJIT DEY, J.M.
Appeal by the Department and the cross objection by the assessee are directed against the order dated 10th December 2010, passed by the learned Commissioner (Appeals)–9, Mumbai, for the assessment year 2001–02.
./2011 – Department’s Appeal
The solitary issue arising for consideration in this appeal is in relation to deletion of addition made of ` 27,44,42,000, by the Assessing Officer on account of unexplained cash credit.
Brief facts are, assessee a company is engaged in shipping business. For the year under consideration, assessee filed its return of income on 31st October 2001, declaring loss of ` 9,09,85,330. The assessment in case of the assessee was originally completed on 19th March 2004, determining total income of ` 19,71,20,510. The assessment order so passed was challenged before the learned Commissioner (Appeals), however, learned Commissioner (Appeals) having confirmed the assessment, assessee went in further appeal before the Tribunal and the Tribunal, vide order dated 2nd August 2007, set aside the matter back to the file of the Assessing Officer for re–adjudicating the issue in the light of the additional evidence filed by 3 Radiant Shipping Ltd.
the assessee before the learned Commissioner (Appeals). The major addition made in the original assessment, disputed by the assessee was unexplained cash credit of ` 27,44,42,000. In the original assessment, the Assessing Officer noticing that there was increase in share capital of ` 27,44,42,000, called upon the assessee to explain the same. The assessee was asked to furnish details of shares issued along with share application form for allotment of shares to shareholders along with the income tax details. The Assessing Officer pointing out various shortcomings and discrepancies in the information submitted by the assessee, treated share application money received by the assessee as unexplained cash credit under section 68 of the Income Tax Act, 1961 (for short "the Act"). In the course of fresh assessment proceedings, in pursuance to the direction of the Tribunal, the assessee again submitted copies of share application forms along with a list of shareholders with their address and PAN. The assessee also submitted that all the share applicants are assessed to tax and share application money was received through account payee cheques. The Assessing Officer after considering the submissions of the assessee in the context of evidence brought on record, however, was of the view that the explanation of the assessee is not acceptable for the following reasons:– i) The assessee failed to file the details of the Assessing Officer with whom the share applicants are assessed to tax.
4 Radiant Shipping Ltd. ii) The assessee failed to produce the bank details of the share applicants. iii) The entire new share capital raised during the year is not on account of any public issue, and has been raised from 17 close friends and relatives through multiple application and private circulation. iv) Many of these applicants/subscribers are from the same family and have invested in crores. v) The scrutiny of the photo copies of the share applications furnished during the fresh assessment proceedings make it clear that the same person has filed these forms in respect of applicants coming from Varanassi, Bharatpur, Pune and Nagpur. vi) The assessee failed to establish the capacity of the share applicant to advance money vii) The assessee failed to produce the evidences regarding the credit worthiness of the share applicants to prove the genuineness of the transactions. viii) The Hon'ble Mumbai High Court in the case of M/s Orient Trading Co. Ltd ( 49 ITR 723) held that the AO is entitled to satisfy himself about the true nature and source of amount of cash credits entered in the books of accounts of the assessee and if he is satisfied that there is no satisfactory explanation as to those entries, he would be entitled to consider them as representing undisclosed income of the assessee. Similar view has been expressed by Hon'ble Madhya Pradesh High Court in the case of CIT vs. Shivshakti Timbers reported in 229 ITR 505, wherein it is held that when the credit entries in assessee's books are not satisfactorily explained by proper documentary evidence, the deeming fiction created u/s 68 of I.T. Act will be invited.”
On the basis of the aforesaid reasoning, the Assessing Officer ultimately held that the share capital introduced by the assessee amounting to ` 27,44,42,000 as unexplained cash credit in terms of section 68 of the Act and added back to the income of the assessee for 5 Radiant Shipping Ltd.
the year under consideration. Being aggrieved of such addition, assessee challenged the same in an appeal before the learned Commissioner (Appeals).
In the course of hearing of appeal before the first appellate authority, the assessee made detailed submissions and also produced supporting evidence to justify its claim. On the basis of submissions made and evidences produced, the learned Commissioner (Appeals) called for a remand report from the Assessing Officer. On the direction of the learned Commissioner (Appeals), the Assessing Officer after examining the issue submitted two remand reports dated 4th January 2010 and 19th May 2010. After perusing the remand reports submitted by the Assessing Officer in the light of submissions made by the assessee and materials available on record, the learned Commissioner (Appeals) found that in the remand reports the Assessing Officer has stated that investments by the share applicants are through banking channel and the assessee had filed bank statement of the shareholders wherein transactions for payment by the shareholders are reflected. He also noticed that the Assessing Officer had also examined two local shareholders who confirmed the investments. As far as other shareholders are concerned, the Assessing Officer had not examined them as they did not respond to the summons issued under section 131 of the Act. Therefore, the Assessing Officer in the remand report
6 Radiant Shipping Ltd. had observed that capacity of those shareholders for making investment could not be verified. The learned Commissioner (Appeals) after verifying the facts and material on records, found that the identify of all the shareholders have been proved by the assessee except two shareholders in whose case the assessee could not file the confirmation letters. As far as other shareholders are concerned, the assessee had submitted confirmation letters, PAN, copies of bank statement and details of cheque payments and income tax returns. He also found that the assessee has also filed share allotment returns in respect of these share applicants before the Registrar of Companies. The learned Commissioner (Appeals) also found that the Assessing Officer even after examining all these evidences has not made any adverse comment against the share application money. Relying upon the decision of the Hon'ble Supreme Court in CIT v/s Lovely Exports Pvt. Ltd., [2008] 310 ITR 005 (SC) and CIT v/s Stellar Investment Ltd., [2001] 251 ITR 263 (SC), learned Commissioner (Appeals) observed, the Assessing Officer was not justified in treating the share application money as undisclosed income of the assessee barring two share applicants viz. Smt. Gayatri Devi Joshi and Shri Ramkumar Goel, in whose case the assessee was not even able to submit confirmation letters. Accordingly, the learned Commissioner (Appeals), out of the 7 Radiant Shipping Ltd. total addition made by the Assessing Officer deleted the amount of ` 27,44,42,000. Being aggrieved, the Department is before us.
The learned Departmental Representative referring to the observations made by the Assessing Officer in the remand report submitted, though the assessee has proved the identity of the share applicants but their creditworthiness have not be proved except two local share applicants. He submitted, the Assessing Officer also could not verify the creditworthiness of the share applicants as none of them appeared in response to the summons issued under section 133 and assessee also did not produce the shareholders before the Assessing Officer. Learned Departmental Representative submitted, in spite of the fact that the share application money was received in crossed cheque through proper banking channel but that itself does not prove the genuineness of the transaction unless the creditworthiness of the share applicants are proved. The learned Departmental Representative submitted, merely because the assessee has obtained confirmation letters and transactions are through banking channel it is not enough to prove the genuineness and creditworthiness of the credit appearing in the books of account. He submitted, the primary onus is on the assessee to prove all the ingredients of the cash credit. In this context, the learned Departmental Representative referring to the proviso to section 68 of the Act inserted by Finance Act, 2012 w.e.f. 1st April
8 Radiant Shipping Ltd.
2013, submitted as per the amended provisions of section 68 not only the assessee should explain the source of the credit to the satisfaction of the Assessing Officer but the creditor must also offer explanation about the nature and source of such income to the satisfaction of the Assessing Officer. Learned Departmental Representative submitted, in the present case, admittedly, many of the share applicant did not appear in response to the summons issued, therefore, the Assessing Officer was justified in treating the introduction of share capital as unexplained cash credit under section 68. He submitted, the amendment brought to section 68 by Finance Act, 2012, being clarificatory in nature will apply retrospectively. For such proposition, he relied upon the decision of the Tribunal, Kolkata Bench, in Subhlakshmi Vanijya (P.) Ltd. v/s CIT, [2015] 60 Taxmann.com 60 (Kol.).
Learned Authorised Representative on the other hand strongly supporting the decision of the learned Commissioner (Appeals) submitted, the impugned assessment year is the second year of operation. Therefore, it is practically impossible to generate such magnitude of income. Learned Authorised Representative referring to the discussions made by the learned Commissioner (Appeals) as well as the comments of the Assessing Officer in the remand report and assessment order submitted that the assessee has produced the 9 Radiant Shipping Ltd.
necessary documentary evidence to not only establish the identity of the share applicants / shareholders by furnishing their address and PAN but also to prove the genuineness of the transaction made through cheque submitted copies of the bank statement of shareholders which proves the genuineness of the transaction. He submitted, even the income tax return of the shareholders were submitted before the Assessing Officer to prove their creditworthiness. He submitted, only because some of the shareholders did not respond to the summons issued under section 131 and appeared before the Assessing Officer, for that reason alone the investment made by them cannot be disbelieved. Explaining the reason for non–appearance, learned Authorised Representative submitted, except, two all other shareholders are of different States. The two local shareholders were produced by the assessee before the Assessing Officer and the Assessing Officer after examining them being satisfied with their creditworthiness accepted the investment made by them. As far as outstation shareholders are concerned, the learned Authorised Representative submitted, since they were staying outside, they could not have come in response to the summons issued unless the Assessing Officer follows the due procedure of law by applying the provisions of Code of Civil Procedure (CPC). He submitted, as per the CPC, by providing for their travel and other related expenses for 10 Radiant Shipping Ltd. appearing as witness. He submitted, the Assessing Officer otherwise could have got them examined through jurisdictional Assessing Officers by issuing commission as their income tax particulars were filed with the Assessing Officer. Learned Authorised Representative submitted, as the Assessing Officer has not followed the due process of law, he cannot blame the assessee for non–production / non– appearance of the shareholders. The learned Authorised Representative referring to the remand report of the Assessing Officer submitted, the Assessing Officer after examining the documentary evidences brought on record has given a categorical finding in the remand report that the increase in share capital is a genuine transaction. Learned Authorised Representative submitted, that being the observation of the Assessing Officer himself, it cannot be said that the investments made by the shareholders are not genuine. Relying upon the decision of the Hon'ble Supreme Court in CIT v/s Orissa Corporation Pvt. Ltd., learned Authorised Representative submitted, it is the duty of the Assessing Officer to conduct necessary enquiry if he doubts the creditworthiness of the creditors where the creditors are income tax assessees. As far as the contention of the learned Departmental Representative regarding applicability of the proviso to section 68, the learned Authorised Representative submitted, the decision relied upon by the Department in support of such contention
11 Radiant Shipping Ltd. will not apply to the facts of the present case. He submitted, unlike the case before the Tribunal, Kolkata Bench, the assessee is a genuine company and not a paper company whose main business was conversion of black money into white. He submitted, the material on record would prove that assessee is engaged in shipping business and was earning freight and charter income. He submitted, as on 31st March 2001, assessee has earned income of ` 50.57 crore its paid–up capital was of ` 34.19 crore and bank borrowings were ` 67.48 crore. Fixed assets are to the tune of ` 102.42 crore. Thus, considering the asset and operation of the assessee its affairs cannot be compared with a paper company like Subhlakshmi Vanijya (P.) Ltd. (supra) where the department has found that it has a very meager income. Learned Authorised Representative also submitted, the proviso to section 68 of the Act being substantive provision will have no retrospective effect. For such proposition, he relied upon the decision of the Hon'ble Supreme Court in CIT v/s Vatika Township Pvt. Ltd., [2014] 367 ITR 466 (SC) and the decision of the Hon'ble Delhi High Court in CIT v/s Ansal Landmark Township Pvt. Ltd., 61 Taxmann.com 45 (Del.). He submitted, if the proviso to section 68 is held to be retrospective, it will not be possible for the assessee after 16 years to call upon the shareholders to explain their source since as per the earlier provision the assessee was not required to explain the source of 12 Radiant Shipping Ltd. source. He, therefore, submitted, there is no reason to interfere with the order of the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. We have also applied our mind to the decisions relied upon by the learned Counsels of both the parties. It is evident from the impugned assessment order, the share capital amounting to ` 27,44,42,000, was treated as unexplained cash credit primarily on the allegation that the assessee failed to furnish the bank details and income tax assessment details of the share applicants and as a result, the creditworthiness of the share applicants could not be verified. However, it is evident, in the course of hearing of appeal before the first appellate authority assessee submitted list containing details of investors who had invested in shares along with their address and amount of investment. Further, assessee had also submitted share application forms of all the investors. It is also emerging from the fact on record, shares were allotted to the share applicants and copies of the share allotment return filed by the assessee before the Registrar of Companies was also submitted before the Assessing Officer. Besides, assessee also submitted income tax assessment particulars along with the PAN of all the shareholders before the Assessing Officer along with their bank statements and who also confirmed accepting investment in shares. In the course of 13 Radiant Shipping Ltd.
remand proceeding, the Assessing Officer after examining all these documentary evidence in fact has observed as under:–
“7. From the above, it is seen that the applicants have made share investments through banking channel with the assessee company. Thus, the increase in share capital is seems to be genuine transaction.”
Having held so, the Assessing Officer went on to observe that the summons issued to out station share applicants in most of the cases though were served, except Gayatri Devi (since expired as stated by the assessee) but none of them appeared before the Assessing Officer. He, therefore, commented that the capacity of the share applicant to make investment with the assessee could not be verified. However, at the same time, the Assessing Officer also observed that on his direction, the assessee produced two local share applicants and after examining them he was satisfied that the investment made by them are genuine. Thus, from the facts on record, it is very much clear that the assessee has not only established the identity of all the share applicants, except two, but has also furnished all other necessary details like PAN, income tax assessment particulars, confirmation letters, bank statements, income tax return copies, etc. to prove the identity of the creditors’ genuineness of the transaction as well as creditworthiness of the creditors. Thus, the primary onus cast upon the assessee was discharged. Further, the genuineness of the transaction
14 Radiant Shipping Ltd. also was proved from the fact that each of the share application money was received in account payee cheque through proper banking channel. In fact, in the remand report, the Assessing Officer also accepts the investment by the share applicant to be genuine. It is not disputed by the Assessing Officer that the assessee has allotted shares also. The only adverse comment made by the Assessing Officer in the remand report is, the creditworthiness of the share applicants could not be verified as none of the outstation share applicants appeared before the Assessing Officer in person for the purpose of examination. In our view, when the assessee has furnished each and every necessary details relating to share applicants in case of the outstation persons such as confirmation letters, their bank account copies, PAN, income tax particulars, etc., and when it is proved that the summons were also served on them, only because they did not appear before the Assessing Officer, it cannot be held that their creditworthiness have not been proved. It is not disputed that all the share applicants, except two, are staying outside the State. Therefore, if they did not respond to the summons issued by the Assessing Officer under section 131, the assessee cannot do anything as they are not in the control of the assessee. On the contrary, the Assessing Officer under section 131 has enough power to enforce their attendance. Further, if the Assessing Officer was of the opinion that the creditworthiness of the 15 Radiant Shipping Ltd. share applicants can only be verified by examining them, he could have exercised the power conferred upon him under section 131 to enforce attendance of the witness as he has the plenary powers of a civil Court under the CPC while trying a suit. In fact, the Assessing Officer could have examined the concerned persons by issuing commission through jurisdictional Assessing Officer as the assessee not only provided the PAN of the share applicants but also their income tax assessment particulars. As could be seen, in the remand report the Assessing Officer has made no adverse comment against most of the share applicants except the fact that none of them appeared in response to the summons issued. On the contrary, the Assessing Officer has accepted the investments made by them as genuine. In the aforesaid facts and circumstances, the contention of the department that the assessee has failed to prove the creditworthiness of the share applicants is not acceptable. When the assessee has furnished bank statement copies, income tax return copies of the share applicants, it was open for the Assessing Officer to make necessary enquiry to verify the creditworthiness of the concerned share applicants. Merely because the share applicants staying outside the State did not appear before the Assessing Officer, no adverse inference can be drawn against the assessee. In this context, we rely upon the decision of the Hon'ble Supreme Court in Anis Ahmad & Sons v/s CIT(A), [2008] 297
16 Radiant Shipping Ltd.
ITR 441 (SC) considering the fact that the local share applicants did appear before the Assessing Officer to confirm the investment made by them in assessee’s company and the Assessing Officer was also satisfied with their claim. At this juncture, it is necessary and incumbent to deal with the argument of the Department that in view of the decision of the Tribunal, Kolkata Bench, in Subhlakshmi Vanijya (P.) Ltd. (supra), the amended provision of section 68 would apply retrospectively and in terms with the said provision, the assessee has to satisfy the Assessing Officer with reference to the investment made by the share applicant. As may be seen by Finance Act, 2012, an amendment was brought to the provision of section 68 by inserting the following proviso.
“Cash credits.
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and 17 Radiant Shipping Ltd.
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
On a plain reading of the amended provisions of section 68, it appears, to remove the ambiguity arising out of creditors appearing in the books of account relating to share application money, share capital, share premium, etc., the provision of section was amended so as to bring these investments on par with loans, advances, etc. Though, it may be a fact that the Tribunal, Kolkata Bench, in the decision relied upon by learned Departmental Representative has held the amendment to be clarificatory in nature, hence, will apply retrospectively, however, at the same time, the bench after analysing the objects behind introducing such amendment has held that like the case of loans and advances, it was always the intention of the legislature to cast obligation on the closely held companies to discharge the primary onus to prove receipt of share application money, share capital, etc. The bench further held, the amendment was brought only to overcome certain contrary judgments which created doubts about the onus of proof by holding that there was no requirement of the company to prove the share capital, etc. Thus, what the amendment brought to section 68 has tried to achieve is to 18 Radiant Shipping Ltd.
bring the credits in the nature of share capital, share application money, share premium, etc., is to be considered at par with loans and advances appearing as credit in the books of account of the assessee. Therefore, in respect of share application money, share capital, etc., an obligation has been cast upon the assessee to discharge the primary onus to prove the receipts as was the case with loans and advances. Therefore, the basic principle relating to satisfaction of three ingredients viz., identity and capacity of the creditors and genuineness of transactions as were required to be satisfied in the case of loans and advances would also be applicable to share capital, share application money. Thus, under the amended provisions also, the primary onus is on the assessee to prove the credit by satisfying the three ingredients. If we examine the facts of the present case, there is no manner of doubt that the assessee has successfully discharged its primary onus by not only establishing the identity of the share applicants but also their creditworthiness by furnishing bank statement copies, income tax returns, etc. The genuineness of the transactions also has been proved as it was through proper banking channel and the share applicants have also confirmed the investments made by them. It is also not disputed that all the share applicants are income tax assessees and not fly by night persons. In fact, the Assessing Officer in the remand report himself has accepted the investment
19 Radiant Shipping Ltd. made by the share applicants to be genuine. In these circumstances, the plea of the department that the creditworthiness of the share applicants could not be proved because of their non–appearance before the Assessing Officer cannot be accepted. Therefore, upholding the order of the learned Commissioner (Appeals) on the issue, we dismiss the ground raised by the Department.
In the result, Department’s appeal is dismissed.
Cross Objection no.163/Mum./2011
Assessee in the aforesaid cross objection has raised two grounds.
In ground no.1, assessee has challenged the decision of the learned Commissioner (Appeals) in sustaining the addition to the extent of ` 20 lakh standing in the name of Gayatri Devi and ` 1.99 crore in the name of Shri Ramkumar Goel.
As could be seen from the order of the learned Commissioner (Appeals), during the remand proceeding, the summons issued to Gayatri Devi returned un–served and in case of Shri Ramkumar Goel, though, the summons were served but he neither responded to summons nor the assessee could file any confirmation letter from the said party in support of the investment made by him. As far as Gayatri Devi is concerned, the assessee, though, stated before the Assessing
20 Radiant Shipping Ltd.
Officer that she had in the meanwhile expired but no further details with regard to her legal heirs was furnished by the assessee. The learned Commissioner (Appeals), considering the fact that the assessee was not able to even obtain confirmation letters from these two parties confirmed the addition under section 68 to that extent.
Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, as far as Gayatri Devi is concerned, she had expired and the Assessing Officer should have issued commission to examine her legal heirs. As far as Shri Ramkumar Goel is concerned, the learned Authorised Representative submitted, the very fact that summons issued by the Assessing Officer was served on him proves the identity of the person. Therefore, without making any further enquiry to establish that the investment made by him is not genuine no addition should have been made.
Learned Departmental Representative on the other hand relied upon the order of the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. Undisputedly, it is evident on record that share application money credited in the name of Gayatri Devi and Shri Ramkumar Goel, was not proved by the assessee by discharging the primary onus cast upon it. The learned Authorised Representative
21 Radiant Shipping Ltd. has accepted that no confirmation in support of their investments have been obtained from these two parties. Therefore, in our view, the assessee has failed to discharge the primary onus cast upon it to prove the three ingredients of section 68 to the satisfaction of the Assessing Officer. Though, the assessee has stated that Gayatri Devi has expired in the meanwhile but he has failed to furnish any information in relation to her legal heir or obtained any confirmation from them. Same is the situation with Shri Ramkumar Goel. Therefore, in the absence of even a confirmation letter from the parties or any other evidence of substance to eve prima–facie proof investment made by the concerned parties the assessee’s plea cannot be accepted. That being the case, we do not see any reason to interfere with the order of the learned Commissioner (Appeals) on the issue. Ground no.1, is dismissed.
In ground no.2, assessee has challenged the decision of the learned Commissioner (Appeals) in sustaining the disallowance of ` 87,18,140, on account of brokerage and commission
Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction of ` 87,18,140 on account of payment of brokerage and commission to following parties called upon the assessee to furnish necessary details to justify its claim:–
22 Radiant Shipping Ltd.
Vikalp Exports Pvt. Ltd. ` 24,20,990 Swaran Exports Pvt. Ltd. ` 62,97,150
In response to the query raised by the Assessing Officer, the assessee furnishing necessary details of the concerned parties like PAN and account copies as well as invoices raised by them and audited balance sheet and Profit & Loss account of those two companies submitted that not only the assessee has made payment through account payee cheques towards brokerage and commission to the concerned parties, but they have also included the amount received by them in the return of income filed by them. The Assessing Officer, however, did not find merit in the submissions of the assessee and disallow the deduction claimed. Being aggrieved of the disallowance, the assessee challenged the same before the learned Commissioner (Appeals).
In the course of appellate proceedings, the learned Commissioner (Appeals) directed the Assessing Officer to examine the issue again. As observed by the learned Commissioner (Appeals), the Assessing Officer in the remand report stated that the assessee could not justify the business expediency of the payments made. The learned Commissioner (Appeals) after considering the submissions of the assessee and the comment of the Assessing Officer observed though
23 Radiant Shipping Ltd. the assessee has furnished the PAN of the payees and amount was also paid through account payee cheque, however, the assessee could not prove the services rendered by the two parties. Therefore, as the assessee could not prove the business expediency by demonstrating the services rendered by the concerned parties merely because the payments were made through cheque to identifiable persons the same cannot be allowed until and unless the assessee proves the recipient have provided service to the assessee. Accordingly, the learned Commissioner (Appeals) sustaining the disallowance.
Learned Authorised Representative submitted when the Assessing Officer has not disputed that the assessee is in shipping business, assessee’s claim of brokerage and commission payment could not be disallowed. He submitted when the assessee has furnished the invoices raised by the payees along with their audited Profit & Loss account and Balance Sheet, what more the assessee can do to prove that the amounts were paid towards services rendered by the concerned parties.
Learned Departmental Representative supporting the order of the Assessing Officer and learned Commissioner (Appeals) submitted as the assessee has failed to prove that the expenditure was made for the purpose of business which could not have been allowed.
24 Radiant Shipping Ltd.
We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee is in shipping business. The Department has also accepted this fact. Therefore, it is quite natural that the assessee must be requiring the assistant and the service of certain agents for the purpose of its business and paying commission / brokerage to them. It is seen from the facts on record that before the Departmental Authorities assessee did produce the copies of audited Profit & Loss account and Balance Sheet as well as copies of the invoices to demonstrate that the payments made were towards services rendered by the parties in relation to assessee’s shipping business. However, it is the view of the Departmental Authorities that these documents do not conclusively establish the fact that the payments made towards certain services rendered by those parties and what is the nature of service rendered by them. In our view, if the nature of service provided by the concerned parties is not discernible from the invoices raised by the parties, then the Departmental Authorities should have clearly expressed the nature of proof the assessee is required to place on record to establish the allowability of expenditure. In our view, the assessee should have been given a reasonable opportunity to furnish more evidence to demonstrate that payment made was towards services rendered by the concerned persons in relation to assessee’s
25 Radiant Shipping Ltd. shipping business. In view of the aforesaid, for enabling the assessee to prove the expenditure claimed and its commercial expediency, we restore the matter back to the file of the Assessing Officer for deciding the same afresh after providing due opportunity of being heard to the assessee.
In the result, Department’s appeal is dismissed and assessee’s cross objection is partly allowed for statistical purposes. Order pronounced in the open Court on 27.05.2016