Itxa/1424/2012 Of The Commissioner Of Income Tax - 5 v. M/S. Tolani Shipping Co Ltd

itxa-1424-12.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1424 OF 2012 … Commissioner of Income Tax-5v/s.M/s.Tolani Shipping Co.Ltd. ...Appellant ...Respondent … Mr.Abhay Ahuja for the Appellant.Mr.Nilesh Joshi with Mr.A.K.Jasani for the Respondent. ... CORAM : S.C.DHARMADHIKARI & A.A. SAYED, JJ. P.C. DATED : 26 NOVEMBER 2014 This Appeal of the Revenue challenges the order passed by the Income Tax Appellate Tribunal on 29 June 2011. 2.Mr.Ahuja, learned Counsel for the Revenue, submits that all the four questions which have been formulated at pages 5 & 6 of the Paper Book are substantial questions of law. 3. In relation to those, the common argument is that the Assessing Officer had found from the loose papers that a substantial sum was paid to M/s.Sharada Erectors Pvt.Ltd. That sum was stated to be a part of a deal or transaction to buy an immoveable property or a flat. Later on, it was discovered and from itxa-1424-12.doc the loose papers themselves that deduction made of Rs.32,40,000/- on account of alleged non-provision of certain amenities found absolutely no basis nor any explanation. In the absence of any document, which would indicate the nature of the amenities either special or standard one, it would not be possible to uphold the stand of the Assessee. The Assessing Officer and the Commissioner were right in the conclusion that they reached. In relation to deletion of addition of Rs.2,55,71,689/- by the Commissioner and sustaining only the addition of Rs.17,10,744/-, Mr.Ahuja submits that it would not be possible to accept the explanation and which comes after enormous delay that the persons to whom the amounts were paid in cash were either not employees or that the amounts were not paid, as then stated before the Tribunal, towards any benefit. In such circumstances, presumption of the Assessing Officer was correct. The Tribunal was in error in granting complete reliefs to the Assessee. Meaning thereby not only the deletion of Rs.2,55,71,689/- by the Commissioner be sustained, but also his order to the extent of upholding Assessing Officer's exercise and to the extent of Rs.17,10,744/- has been interfered with. The Tribunal's order is, therefore, termed as erroneous and perverse. itxa-1424-12.doc 4.Mr.Joshi, appearing on behalf of the Assessee, on the other hand, would submit that from the tenor of the grounds in this Memo of Appeal it is apparent that the Tribunal's order to the extent of deletion of the addition of Rs.2.55 crores and odd has been impugned. In other words, when the Tribunal deletes the addition also of Rs.17 lakhs made by the Commissioner that part of the Tribunal's order has not been questioned or challenged. Secondly, in relation to payment of Rs.1,23,00,000/- for acquisition of immoveable property admeasuring 3600 sq.ft. is concerned, there a deduction has been made of Rs.32,40,000/- for non-provision of certain amenities. That deduction cannot be construed as an investment by the Assessee in M/s.Sharada Eractors Pvt.Ltd. Therefore, that addition has also been deleted and rightly by the Tribunal. The Tribunal's order is based entirely on the factual material and there is no perversity therein. However, re-appreciation and re-appraisal of the factual materials and documentary evidence on record is not permissible in this Court's limited jurisdiction. For these reasons the Appeal be dismissed. itxa-1424-12.doc itxa-1424-12.doc 5.We have perused the relevant parts of the order passed by the Assessing Officer, the Commissioner and the Tribunal. With regard to payment made to M/s.Sharada Eractors Pvt.Ltd., we have on record a table or a chart, which has been referred to by the Assessing Officer as well. In his order itself, a reference has been made to this chart. M/s.Tolani Shipping Company Limited is an entity which has acquired office premises admeasuring 3600 sq.ft. The total amount computed at the rate of Rs.3,400/- per sq.ft. is of Rs.1,22,40,000/-. There is a deduction made of Rs.32,40,000/- and net payable is Rs.91,80,000/-. Pertinently both the Assessing Officer and the Commissioner did not dispute the transaction. They did not term it as dubious or suspicious or bogus either. The transaction is found to be genuine and admitted. The transaction is between two distinct legal entities, one is a Public Limited Company and other is in building business called M/s.Sharada Eractors Pvt.Ltd., Pune. The acquisition of the office premises is under an agreement executed by parties. While it is true that there is a deduction made of Rs.32,40,000/-, but what has transpired on record is, that is taken to be an investment in M/s.Sharda Reality Pvt. Ltd. and that is how the addition is made. In relation to that the Tribunal has from the record itself arrived at the conclusion that the itxa-1424-12.doc full value of the consideration has been disclosed in the books of account. The Assessee has filed ledger account in the books of account of M/s.Tolani Pvt.Ltd. and it can be seen that the fixed assets have been disclosed at the value of Rs.61,37,000/-, Rs.49,00,000/- have been paid to M/s.Sharada and amount of Rs.12,37,000/- is shown as amount due to M/s.Sharada Erectors Pvt.Ltd. The office premises were sold to Tolani Shipping Co.Ltd. for the same amount of Rs.61,37,000/- and the amount due to M/s.Sharada Erectors Pvt.Ltd. was also transferred to Tolani Shipping Co.Ltd. The full amount has been disclosed in their Books of Account. There is , thus, no unaccounted money or amount, which can be brought to tax. The complaint of Mr.Ahuja is that none of the explanations and which have been noted by the Assessing Officer or the Commissioner in this regard particularly non-provision of amenities have been noticed by the Tribunal. We find that the Tribunal has rested its conclusion not only on the production of books, disclosure of full consideration therein as also the genuiness of the entries in the ledger account, but because of that it did not deem fit and proper to go into an issue whether the Assessee furnished adequate evidence in support of his stand that the builder reduced the price as certain amenities, which the Builder was itxa-1424-12.docoriginally required to provide have not so provided. There is no evidence produced by the Assessee in support of this argument is the conclusion reached by the Tribunal. However, it faulted the Revenue for not having examined the builder. The confirmation of the transaction given by the builder has not been put to any party. Therefore, the builders who ordinarily do not give any discount, having not been approached and called for or summoned for further scrutiny that the Tribunal deem it fit not to touch this aspect of the controversy. That by itself does not mean that the Tribunal's earlier conclusion can be termed as perverse. Once the Tribunal concluded that the reduction in purchase price of the capital assets could not be termed as undisclosed income, far from it being treated as an investment in the Private Company M/s.Sharada Erectors Pvt.Ltd., that we are of the opinion that the first question cannot be termed as a substantial question of law. 6.With regard to other issues or questions, there is some substance in the argument of Mr.Joshi that the wording of the grounds or questions of law denotes that the Revenue is not aggrieved by the deletion of the addition of Rs.17,10,744/-. However, in order to do complete justice we proceeded on the itxa-1424-12.doc footing that the Revenue is also aggrieved by the deletion of this addition. However, the Tribunal rightly faults both the Assessing Officer and the Commissioner for having indulged in a exercise resulting in their findings being based on purely conjectures and surmises. The instance of surmise or assumption has been given by the Tribunal. In para 20 of its order the Tribunal rightly held that the departmental representative does not contradict the specific argument and the statements of the Assessee that names of the persons mentioned in the loose papers are not those of the employees except a few. Without full scrutiny and conclusion based on two loose papers without any further evidence of the Assessee having made unofficial cash payment, therefore, was not found to be sufficient material. More so, when the employees were not summoned. By finding out as to who are the employees, the Assessing Officer or the Commissioner could have proceeded. However, a explanation which was not found to be satisfactory or believable in relation to few employees does not mean that the Commissioner or the Assessing Officer can straightway conclude that this must be the position in relation to all employees and they may have benefited by any unofficial cash payment. 8/10 itxa-1424-12.doc 7.Both the Assessing Officer and the Commissioner lost sight of the fact that they are dealing with employees of M/s.Tolani Pvt.Ltd. Employees are from an organized sector and working in a company. There are certain benefits and facilities admissible to them. There are certain deductions also which have to be statutorily made. They are all documented and recorded. By perusing such documents and record, the Commissioner could have easily ascertained the names of the employees and by comparative process found out whether the loose sheets contained names of the employees or the names of certain third parties are being termed as employees by the Revenue. The Commissioner did not undertake any such exercise and yet sustained the addition of Rs.17,10,744/-. The Tribunal in para 20 of the order, therefore, faults him and says that all the additions have been made on surmises and conjectures. It is in these circumstances that we do not accept the argument of Mr.Ahuja that the Tribunal's order is perverse or vitiated by any error of law apparent on the face of record. We do not think that the Tribunal misread or misinterpreted section 132 and particularly sub-section 4A thereof either. 9/10 itxa-1424-12.doc 8.For these reasons, the Appeal fails and it is dismissed. No costs. (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.) 10/10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CROSS OBJECTION NO.7 OF 2012 IN INCOME TAX APPEAL NO.1424 OF 2012 … M/s.Tolani Shipping Co.Ltd.v/s.Commissioner of Income Tax-5 ...Appellant ...Respondent … Mr.Nilesh Joshi with Mr.A.K.Jasani for the Appellant.Mr.Abhay Ahuja for the Respondent. ... CORAM : S.C.DHARMADHIKARI & A.A. SAYED, JJ. P.C.: DATED : 26 NOVEMBER 2014 In the light of our order passed in main Appeal, Cross- Objection does not survive. Disposed of as such. (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.)