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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Instant appeal of the assessee is directed against the order dated 13th September 2013, passed by the learned Commissioner (Appeals)– 8, Mumbai, for the assessment year 2005–06.
Brief facts are, the assessee a company originally filed its return of income for the impugned assessment year on 30th October 2005 declaring income of ` 21,45,54,130. The assessment in assessee’s
2 Deutsche Equities India Pvt. Ltd. case was completed under section 143(3) of the Income Tax Act, 1961 (for short "the Act") vide order dated 29th December 2008, determining the income at ` 36,78,21,220. Subsequently, the Assessing Officer re–opened the assessment under section 147 of the Act and issued a notice under section 148 on 27th March 2012, calling upon the assessee to submit its return of income. In compliance to the notice issued under section 148, assessee requested the Assessing Officer to treat the return of income filed originally as return of income in response to the notice issued under section 148. The assessee also objected to initiation of proceedings under section 147 on the ground that there being no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, re–opening of assessment after expiry of four years from the end of the assessment year. Of–course, the assessee also complied to Assessing Officer’s query on the subject matter of escapement income by furnishing necessary details relating to claim of expenditure incurred on conference. The Assessing Officer ultimately completed the assessment under section 143(3) r/w 147 of the Act by disallowing expenditure of ` 21,94,082, on the ground that assessee has failed to furnish evidence to prove that the expenditure incurred was on account of assessee and not for Deutsche Bank. Being aggrieved of the 3 Deutsche Equities India Pvt. Ltd. assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals), however, did not find merit in any of the ground raised by the assessee either on the validity of proceedings under section 147 or even on the merit of the disallowance made.
Learned Authorised Representative referring to the reasons recorded for re–opening of assessment submitted, there was no fresh tangible material available before the Assessing Officer for re–opening the assessment under section 147 of the Act. He submitted, the reasons recorded reveals that on re–examination of the material available on record at the time of original assessment, the Assessing Officer has formed the belief that income has escaped assessment. The learned Authorised Representative submitted, the assessee in the return of income as well as in the course of original assessment proceedings, has furnished all necessary data / evidences relating to the expenditure incurred on account of investor’s meet. In this context, he specifically referred to letter dated 22nd September 2008, filed before the Assessing Officer in the course of original assessment proceedings explaining the details of conference expenses. Referring to the annexure to the said reply, learned Authorised Representative
4 Deutsche Equities India Pvt. Ltd. submitted, details of expenditure incurred towards event management fee, hotel accommodation charges, food and other allied expenses for the conference amounted to ` 96,30,303. He submitted, the amount of ` 21,94,082, which was subject matter of re–opening was part of the total expenditure of ` 96,30,303. He submitted, in course of original assessment proceedings, the assessee not only furnished the bifurcation of the total expenditure of ` 96,30,303, but also submitted the relevant bills and vouchers in connection with such expenditure. He submitted, the Assessing Officer after examining the reply of the assessee along with evidence brought on record being satisfied with the genuineness of the assessee’s claim completed the assessment allowing the expenditure. Learned Authorised Representative submitted, though the Assessing Officer thoroughly verified the expenditure claimed by the assessee, however, since he was satisfied with assessee’s claim, he did not deal with the same in the original assessment order. Learned Authorised Representative referring to the proviso to section 147 of the Act submitted, unless there is failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment action under section 147 of the Act cannot be initiated after expiry of four years from the relevant assessment year where the assessment has already been completed under section 143(3) of the Act.
5 Deutsche Equities India Pvt. Ltd.
As far as the merit of the disallowance is concerned, learned Authorised Representative drawing our attention to the bill raised for such expenditure by Times Infotainment Media Ltd., submitted that the bill was raised in the name of the assessee and the payment was also made by the assessee. He submitted, only because in the said bill, the payee has mentioned the name of Deutsche Bank as the client, if cannot be inferred that the expenditure incurred was not for assessee’s business. He submitted, a confirmation from Deutsche Bank was also submitted before the Assessing Officer in the course of re– assessment proceedings wherein it was stated that no payment was made by them nor they have claimed any deduction for the expenditure in their return of income. He, therefore, submitted that the assessment order being legally unsustainable should be quashed.
Learned Departmental Representative contesting the claim of the assessee submitted, though, the re–opening of assessment in case of the assessee was after expiry of four years from the relevant assessment year but the re–opening is valid as the assessee has failed to disclose all material facts relevant to his assessment. He submitted, assessee has not reconciled that the amount of ` 21,94,082 was part of the total expenditure of ` 96,30,303 claimed as deduction. He,
6 Deutsche Equities India Pvt. Ltd. therefore, submitted re–opening of assessment in the circumstances is valid.
As far as the merits of the disallowance is concerned, learned Departmental Representative relying upon the observations made by the Assessing Officer and learned Commissioner (Appeals) submitted that the assessee having failed to prove that the expenditure incurred was wholly and exclusively for the purpose of assessee’s business and not on behalf of Deutsche Bank, the disallowance of expenditure was justified.
We have considered the submissions of the parties and perused the material available on record. Undisputed facts are, in assessee’s case, original assessment under section 143(3) of the Act was completed on 29th December 2008. Notice under section 148 was issued by the Assessing Officer on 28th March 2012. Thus, it is evident from the facts on record that re–opening of assessment under section 147 of the Act is after the expiry of four years from the impugned assessment year. Thus, the proviso to section 147 of the Act applies to the facts of the present case. As per the said proviso, in case of an assessment completed under section 143(3) of the Act, the condition precedent for re–opening of assessment under section 147 is, there must be failure on the part of the assessee to disclose fully and truly
7 Deutsche Equities India Pvt. Ltd. all material facts necessary for his assessment. Thus, in the light of the aforesaid statutory provisions the validity of assessment under section 147 of the Act has to be examined. As is evident from the material on record in the course of original assessment proceedings in compliance to query raised by the Assessing Officer, the assessee in its reply dated 22nd September 2008 has furnished the bills of expenditure incurred. On a perusal of the said compliance, a copy of which is placed at page–11 of the paper book, it is noticed the assessee has furnished the details of conference expenditure with break–up of such expenditure under different head as under:–
Particulars Amount (`) 3,46,743 Gifts & Articles for customers 96,30,303 Event Management fees, hotel accommodation charges, food and other allied expenses for the sales conferences 17,22,811 Client Entertainment expenses 1,16,99,857
Further, in its reply dated 28th November 2008, the assessee 9. again not only furnished break–up of such expenditure but also furnished sample copies of invoice including the invoice raised by the Times Infotainment Medial Ltd. for ` 21,94,082. The fact that these documentary evidences were produced by the assessee before the Assessing Officer in the course of original assessment proceedings is 8 Deutsche Equities India Pvt. Ltd. not disputed by the Department. Moreover, from the perusal of reasons recorded for re–opening the assessment, a copy of which is at Page–7 of the paper book, it is evident that the Assessing Officer has not referred to any fresh tangible material coming to his possession after completion of assessment rather reasons recorded demonstrate that the Assessing Officer on re–examining the material already available on record has formed a belief that expenditure of ` 21,94,082 was wrongly allowed to the assessee as it was on behalf of another company. Even, there is no allegation by the Assessing Officer in the reasons recorded that escapement of income is as a result of failure on the part of the assessee to disclose fully and truly all material facts. Thus, the aforesaid facts clearly reveals that the assessee has disclosed fully and truly all material facts necessary for his assessment in the course of original assessment proceedings and the Assessing Officer after examining these evidences completed the assessment under section 143(3). That being the case, the re–opening of assessment after expiry of four years from the relevant assessment year is invalid, hence, cannot be sustained.
In view of our aforesaid decision, though, it is unnecessary to deal with the merits of the issue, however, considering the fact that both the assessee and the Department were heard on merit for the 9 Deutsche Equities India Pvt. Ltd. sake of completeness we propose to deal with the merits of the issue also.
As already stated, the assessment was re–opened primarily for the reason that the assessee has wrongly claimed deduction of ` 21,94,082, as expenditure. The Assessing Officer while completing the assessment, after perusing the invoice raised towards the expenditure under consideration, observed that it pertain to Deutsche Bank and not the assessee company and accordingly, disallowed the expenditure of ` 21,94,082. However, on a perusal of the bill raised by the Times Infotainment Ltd., a copy of which is placed at Page–15 of the paper book, it appears, the bill of ` 21,94,082 was raised in the name of the assessee company. Only because service provider in the said bill has mentioned Deutsche Bank as client it cannot be inferred that the expenditure was not in relation to assessee’s business but was incurred on behalf of Deutsche Bank. More so, when the Deutsche Bank in letter dated 9th November 2012, has confirmed that neither they have made the payment nor claimed deduction of the amount of ` 21,94,082. In view of the aforesaid, we hold that the expenditure claimed by the assessee cannot be disallowed. In the aforesaid view of the matter, we quash the impugned assessment order passed under section 143(3) r/w section 147 of the Act.
10 Deutsche Equities India Pvt. Ltd.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 11.05.2016