TMI Blog2016 (8) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) r.w.s. 153A of the Act. The assessee has supported the said plea on the strength of an order passed by the Commissioner u/s 263 of the Act, which was required to be given effect to by the Assessing Officer by amending the original assessment framed u/s 143(3) of the Act. We find that the aforesaid plea of assessee has been completely disregarded and action of the Assessing Officer has been upheld. After considering the factual matrix brought out by the assessee, we find that the impugned action of Assessing Officer is unsustainable in the eyes of law and is hereby set-aside. Thus, assessee succeeds in this Ground. Mis-declaration of PFAD as Acid Oil which has resulted in inflation of purchases - HELD THAT:- The relevant discussion in the order of Assessing Officer as well as the CIT(A) clearly shows that the only basis for the impugned addition is the findings of DRI. There is no independent finding of the Assessing Officer on the basis of any material to say that assessee has inflated its purchases by declaring the import of PFAD as that of Acid Oil. In fact, the order of CESTAT dated 4.12.2014 (supra), whose copy has been placed on record, upholds the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing genuine business expenditure in the form of director s salary of ₹ 36,00,000/-. 5. Briefly put, the relevant facts are that the appellant is a company incorporated under the provisions of Companies Act, 1956 and is, inter-alia, engaged in the business of processing of non-edible oils, manufacturing of personal care products, etc. and generation of electricity through wind mills. A search and seizure action u/s 132(1) of the Act was carried out by the Department in the case of assessee and its group associates including its Directors on 3.1.2008. As a consequence, notices u/s 153A of the Act were issued to the assessee calling for returns for Assessment Years 2002-03 to 2007-08. In response, assessee filed returns which were subject to scrutiny assessment u/s 143(3) r.w.s. 153A of the Act. In Assessment Year 2002-03 the Assessing Officer made an addition of ₹ 13,00,000/- which represented salary paid to Shri Faraz G. Joshi, its Director. The Assessing Officer disallowed the salary paid to Shri Faraz G. Joshi primarily relying on the statement recorded during the course of search u/s 132(4) of the Act. The Assessing Officer noted that in the course of search and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and accordingly he has upheld the disallowance made by the Assessing Officer. Against such a decision, assessee is in further appeal before us. 6. Before us, the learned representative for the assessee has assailed the action of lower authorities on varied grounds. Firstly, it is sought to be pointed out that Shri Faraz G. Joshi is a Director for the last 30 years and that the remuneration paid to him has always been allowed without any disallowance. It has been pointed out that even subsequently, from Assessment Year 2009-10 to Assessment Year 2012-13 such remuneration stands allowed in the scrutiny assessments made u/s 143(3) of the Act. Therefore, on the principles of consistency, it has been submitted that the disallowance is unwarranted. Secondly, it is pointed out that in the present case the disallowance has been made in the course of an assessment made u/s 153A of the Act and that there was no incriminating material found in the course of search to show that the disallowance was merited. It is pointed out that the only basis canvassed by the Assessing Officer is the statement of Shri Faraz G. Joshi recorded at the time of search u/s 132(4) of the Act, which cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is concerned, it has been pointed out that in all the assessments made upto the date of search there has been no disallowance and it is further pointed out that from Assessment Year 2009-10 onwards (post search) and upto Assessment Year 2012-13, where assessments have been done u/s 143(3) of the Act, no disallowances have been made. The aforesaid factual matrix has not been controverted by the income-tax authorities and even before us, the ld. DR has not led any material to negate the same. 9. However, as per the Revenue, in the course of search a statement of Shri Faraz G. Joshi was recorded wherein in an answer to question no. 10 it was stated that he was not attending office and nor any duty was assigned to him except consultation. On this basis, the Assessing Officer has concluded that the said Director has not rendered any services to the assessee-company and, therefore, the salary payment could not be considered as an expenditure incurred wholly and exclusively for the purposes of business. We find that assessee has appropriately explained the statement rendered by Shri Faraz G. Joshi. Even before us, the learned representative has pointed out that the answer of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a position to show compelling necessity of incurring such expenditure. In support of the aforesaid proposition, reliance can be placed on the judgment of Hon'ble Supreme Court in the case of Sasoon J. David Co. P. Ltd., 118 ITR 261 (SC). 12. Before parting, we may also refer to an additional Ground raised by the assessee on this aspect to contend that the action of Assessing Officer in disallowing the salary expenditure was not within the scope and ambit of Sec. 153A of the Act. Such plea has been raised with respect to Assessment Years 2002-03 to 2005-06 on the ground that the original assessment for such assessment years did not abate in terms of second proviso to Sec. 153A(1) of the Act. As per the judgment of Hon'ble Bombay High Court in the case of Container Warehousing Corporation, 279 CTR 389 (Bom.), addition can be made in assessment finalized u/s 153A of the Act only on basis of incriminating material found during the course of search in the context of an assessment year where the original assessment does not abate. It is sought to be pointed out that insofar as the present case is concerned, the disallowance of salary payments is not based on any incrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards Ground of appeal no. 1, it was a common point between the parties that the facts and circumstances are pari materia to those considered by us in assessee s appeal for Assessment Year 2002-03, therefore, our decision in appeal of the assessee for Assessment Year 2002-03 shall apply mutatis mutandis in Assessment Year 2004-05 also. 19. The issue in Ground of appeal no. 2 relates to disallowance made by Assessing Officer of ₹ 7,35,000/- representing payment made to Registrar of Companies towards registration and stamp duty for issuance of share capital. At the time of hearing, the learned representative submitted that the said Ground of appeal is not pressed, as such an addition had become final in the original assessment made u/s 143(3) of the Act, hence same is dismissed. 20. In the result, appeal of assessee for Assessment Year 2004-05 is partly allowed. 21. Insofar as appeal of assessee for Assessment Year 2005-06 (ITA No. 9028/Mum/2010) is concerned, the Grounds of appeal raised by assessee relate to disallowance of salary paid to Director of ₹ 95,80,000/- and exclusion of sales tax set-off of ₹ 39,91,000/- while calculating deduction u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a to the effect that the said addition even otherwise does not fall within the scope and ambit of an assessment made u/s 143(3) r.w.s. 153A of the Act as no incriminating materials/documents were found relating to the deduction claimed u/s 10B of the Act and, therefore, following the judgment of Hon'ble Bombay Hon ble Court in the case of Container Warehousing Corporation (supra), such addition is not sustainable. Therefore, it is submitted that for all the aforesaid reasons, the impugned action of the Assessing Officer is untenable. 26. On the other hand, the ld. DR appearing for the Revenue has primarily relied upon the orders of authorities below and contended that the benefit by way of sales tax set-off is not eligible for deduction u/s 10B of the Act. 27. We have carefully considered the rival submissions. A perusal of the assessment order as well as the order of CIT(A) reveals that the pleas of assessee have not been appreciated in its proper perspective. Notably, CIT(A) in para 4.3 of his order has reproduced the submission of the assessee which was to the effect that such action of Assessing Officer was untenable in the impugned proceedings carried out u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of purchases, and @ ₹ 2026/MT it worked out to ₹ 1,11,42,675/-. Accordingly, Assessing Officer made an addition of ₹ 1,11,42,675/- to the returned income. The said action of Assessing Officer has further been affirmed by the CIT(A). Against such a decision, assessee is in further appeal before us. 33. Before us, the learned representative for the assessee has made a pertinent plea to the effect that the charge made by DRI against the assessee-company, which has formed the basis for Assessing Officer to make the addition, does not survive inasmuch as the Customs, Excise Service Tax Appellate Tribunal (CESTAT), Ahmedabad vide order dated 4.12.2014 has upheld the plea of assessee that what has been imported by the assessee is Acid Oil and not PFAD and thus, the allegations made by the DRI were unsustainable. In this context, a copy of the order of CESTAT dated 4.12.2014 (supra) has also been placed on record. On the said basis it is submitted that the addition is unsustainable in the hands of the assessee. 34. On the other hand, the ld. DR has not controverted the factual matrix brought out by the assessee and has merely relied upon the orders of the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9027/Mum/2010 (supra). 42. The second leg of the penalty is with regard to disallowance of expenditure of ₹ 7,35,000/- paid to Registrar of Companies towards registration and stamp duty for issue of cumulative preference shares. In this context, the learned representative for the assessee pointed out that such disallowance was made while passing the original assessment order u/s 143(3) of the Act and at that stage no penalty proceedings were initiated on this issue. It has been pointed out that such disallowance is not made during the impugned assessment proceedings finalised u/s 143(3) r.w.s. 153A of the Act and, therefore, under these circumstances the penalty levied u/s 271(1)(c) of the Act is not justified. 43. On the other hand, the ld. DR appearing for the Revenue contended that the claim made for deduction of expenditure relating to payment made to the Registrar of Companies towards registration and stamp duty was a wrong claim as it related to issuance of share capital. 44. We have carefully considered the rival submissions. In the background of the factual matrix brought out by the learned representative for the assessee and also the fact that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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