Nichrome India Ltd., Pune V. Assistant Commissioner of Income-tax,

CO 29/PUN/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2398 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Bogus purchase; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! # $% , & ' BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ( / ITA NO. 1463/PN/2015 ) * +* / ASSESSMENT YEAR : 2011-12 ACIT, CIRCLE 2, PUNE ....... / APPELLANT ) / V/S. NICHROME INDIA LTD., SAFIRE PARK GALLERIA, 2 ND FLOOR, PUNE MUMBAI ROAD, SHIVAJINAGAR, PUNE-411005 PAN : AAACT4161C / RESPONDENT #,'( / CO NO. 29/PN/2016 ) * +* / ASSESSMENT YEAR : 2011-12 NICHROME INDIA LTD., SAFIRE PARK GALLERIA, 2 ND FLOOR, PUNE MUMBAI ROAD, SHIVAJINAGAR, PUNE-411005 PAN : AAACT4161C ....... / APPELLANT ) / V/S. ACIT, CIRCLE 2, PUNE / RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 08-08-2016 / DATE OF PRONOUNCEMENT : 08-08-2016 2 ITA NO. 1463/PN/2015 & CO NO. 29/PN/2016 - / ORDER PER VIKAS AWASTHY, JM : THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, PUNE DATED 28-08-2015 FOR THE ASSESSMENT YEAR 20 11-12. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING OF PACKAGING MACHINES AND MACHINE SPARES. THE AS SESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 26-09-2011 DECLARING TOTAL INCOME OF ` 6,22,78,811/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY FIRST NOTICE WAS ISSUED TO THE ASSESSEE ON 24-09-2012. DURING THE COUR SE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE ADDITIONS/DISALLOWANCES ON ACCOUNT OF : I. BOGUS PURCHASES ` 5,99,872/-. II. CONTRIBUTION TOWARDS GRATUITY FUND ` 20,09,804/-. III. FOREIGN TRAVEL EXPENSES OF DIRECTOR AND HIS SPOUSE ` 16,54,207/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 29-03-2014, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS), ASSAILING DISALLOWANCE OF CONTRIBUTION TOWARDS GRATU ITY FUND AND FOREIGN TRAVEL EXPENSES OF DIRECTOR AND HIS SPOUSE. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER D ELETED THE ADDITION IN RESPECT OF CONTRIBUTION TOWARDS GRATUITY FUNDS AND UPHELD THE FINDINGS OF ASSESSING OFFICER IN DISALLOWING FOREIGN TRAVEL EXPENDITURE OF DIRECTOR AND HIS SPOUSE. AGAINST THE FINDIN GS OF 3 ITA NO. 1463/PN/2015 & CO NO. 29/PN/2016 COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMENT IS IN APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTIONS BEFORE THE TRIBUNAL. 3. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED AT THE OUTSET THAT THE APPEAL BY THE REVENU E IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. THE LD. AR OF THE A SSESSEE SUBMITTED THAT IN CROSS OBJECTIONS, THE ASSESSEE HAS RA ISED SOLITARY ISSUE OF DISALLOWING FOREIGN TRAVEL EXPENSES OF THE DIRECTOR A ND HIS SPOUSE. THE LD. AR SUBMITTED THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DIRECTED THE ASSESSEE T O FURNISH THE DETAILS OF FOREIGN TRAVEL EXPENSES OF THE DIRECTOR AND HIS S POUSE IN A PARTICULAR FORMAT. THE DETAILS OF THE EXPENDITURE WERE FURN ISHED ALONG WITH THE TRAVEL BILLS AND INVOICES. IT WAS CATEGORICALLY STATE D THAT WIFE OF THE DIRECTOR WAS LOOKING AFTER MARKETING AND SALES. THE P URPOSE OF VISIT WAS ALSO FURNISHED BEFORE THE ASSESSING OFFICER. HOWEVE R, THE ASSESSING OFFICER BRUSHED ASIDE THE INFORMATION FURNISHED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS MERELY FILED BILLS AND INVOICES WITHOUT SUBSTANTIATING PURPOSE OF VISIT. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE HAD SPECIFICALLY POINTED THAT THE PURPOSE OF VISIT TO SPAIN AND USA WAS TO MEET AND FINALIZE TECHNOLOGY PARTNERS FOR DEVELOPMENT OF THE PRODUCT. THE ASSESSEE HAD ENTERED INTO TECHNOLOGY AGREEMENTS WITH TOTPACK SL, SPAIN ON 1 ST SEPTEMBER, 2010 AND TECHTRON LLC, USA (PRODOPACK) ON 1 ST FEBRUARY, 2011. THE DIRECTOR AND HIS WIFE VISITED OTHER COUNTRIES VIZ. EGYPT, CA NADA AND CHINA IN SEARCH OF NEW MARKET AND TO PROMOTE THEIR PROD UCT THROUGH EXHIBITIONS. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEA LS) REJECTED THE CONTENTIONS OF THE ASSESSEE BY PLACING RELIAN CE ON THE ORDER OF PREDECESSOR IN ASSESSMENT YEARS 2007-08 AND 2008-0 9. THE 4 ITA NO. 1463/PN/2015 & CO NO. 29/PN/2016 COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS EXPORT SALES OF MORE THAN 20% OF ITS TOTAL SALES. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER MISINTE RPRETED THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1623/PN/2012 FOR ASSESSMENT YEAR 2007-08 DECIDED ON 31-10-2013. TH E TRIBUNAL HAD REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICE R TO CONSIDER THE SUBMISSIONS AND MATERIAL PUT FORTH BY THE ASSESSEE IN SUPPORT OF EXPENDITURE ON LEGAL AND PROFESSIONAL SERVICES. THE LD. AR S TATED AT THE BAR THAT THE WIFE OF MANAGING DIRECTOR OF THE ASSESSEE IS TECHNICALLY QUALIFIED AND AFTER THE DEMISE OF THE THEN MANAGING DIRECTOR OF THE ASSESSEE COMPANY IS LOOKING AFTER THE AFFAIRS OF THE ASSESS EE COMPANY. THE LD. AR CONTENDED THAT IF AN OPPORTUNITY IS AFFORDED, THE ASSESSEE CAN PLACE ON RECORD THE AGREEMENTS ENTERED INTO BY TH E DIRECTOR OF THE COMPANY ON THEIR FOREIGN VISIT DURING THE PERIOD UNDER REFE RENCE. THE FOREIGN TRAVEL UNDERTAKEN BY THE DIRECTOR WITH HIS SPOUSE AT THAT TIME WAS PURELY FOR BUSINESS PURPOSE AND IT WAS NOT A PRIVAT E/PERSONAL VISIT OF THE DIRECTOR AND HIS SPOUSE. 4. SHRI P.L. KUREEL REPRESENTING THE DEPARTMENT FAIRLY CON CEDED THAT THE APPEAL OF THE DEPARTMENT HAS LOW TAX EFFECT IN VIEW OF THE RECENT CBDT CIRCULAR NO. 21/2015, DATED 10-12-2015. HOWEVER, THE LD. DR VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ASSAILING THE FOREIGN TRAVEL EXPENSES OF THE DIREC TOR AND HIS SPOUSE. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED DOCUMENTS RELATING TO FOREIGN TRAVEL EXPENSES WHICH MAY E STABLISH DECLARED BUSINESS PURPOSE OF THE FOREIGN VISIT. THE LD. DR P RAYED FOR DISMISSING THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 5 ITA NO. 1463/PN/2015 & CO NO. 29/PN/2016 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PER USED. UNDISPUTEDLY, THE APPEAL OF THE REVENUE SUFFERS FROM LOW TA X EFFECT. THE CBDT VIDE CIRCULAR NO. 21/2015, DATED 10-12-2015 HA S RAISED THE MONETARY LIMIT OF TAX EFFECT FOR FILING OF APPEALS BY THE DEPART MENT BEFORE THE TRIBUNAL TO ` 10 LAKHS. THE CIRCULAR APPLIES TO THE APPEALS TO BE FILED BY THE DEPARTMENT IN FUTURE, AS WELL AS THE APPEALS PENDING BEFORE THE TRIBUNAL. THUS, IN VIEW OF THE CBDT CIRCULAR THE PRESENT APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. 6. IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE THE S OLITARY ISSUE IS WITH RESPECT TO FOREIGN TRAVEL EXPENDITURE OF THE DIRECTO R AND HIS SPOUSE. THE CONTENTION OF THE LD. AR OF THE ASSESSEE IS T HAT THE WIFE OF THE DIRECTOR IS TECHNICALLY QUALIFIED AND WAS WORKING FOR THE COMPANY. SHE ACCOMPANIED THE DIRECTOR DURING THE BUSINESS FOREIGN TRIPS. THE PURPOSE OF VISIT WAS FURNISHED DURING THE COURSE OF ASSESS MENT PROCEEDINGS IN THE FORMAT REQUIRED BY THE ASSESSING OFFICE R. A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD SHOWS THAT FOREIGN TRAVEL EXPENDITU RE HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. THE DISA LLOWANCE HAS BEEN MADE PRIMARILY FOR THE REASON THAT THE ASSESSEE H AS NOT BEEN ABLE TO SUBSTANTIATE THE PURPOSE OF FOREIGN TRAVEL. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT IF AN OPPORTUNITY IS GRANTED, THE ASSESSEE CAN PLACE ON RECORD THE AGREEMENTS ENTERED INTO DURING VISIT TO SPAIN AND USA. DURING THEIR VISIT TO CHINA THE DIRECTOR AND HIS SPOU SE HAD PARTICIPATED IN BUSINESS EXHIBITION TO SHOWCASE THEIR PROD UCT AND TO HAVE FIRSTHAND KNOWLEDGE OF MACHINES AND THE TECHNOLOGY IN THE AREA OF THEIR OPERATION. THE LD. AR HAS ALSO SUBMITTED THAT THE D IRECTOR AND HIS SPOUSE TRAVELLED TO EGYPT, TURKEY AND CANADA IN SEAR CH OF NEW 6 ITA NO. 1463/PN/2015 & CO NO. 29/PN/2016 MARKETS. WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE NEEDS A REVISIT TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL D ECIDE THIS ISSUE AFRESH AFTER CONSIDERING THE DOCUMENTS FURNISHED BY THE ASSESSEE TO SUBSTANTIATE THE PURPOSE OF FOREIGN VISITS OF DIRECTOR AND HIS SPOUSE DURING THE PERIOD UNDER CONSIDERATION. THE ASSESSING OFFICE R AFTER CONSIDERING THE SAME SHALL DECIDE THIS ISSUE, IN ACCORDANCE WITH LAW. ACCORDINGLY, CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED A ND THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT AFTER THE HEARING ON MONDAY, THE 08 TH DAY OF AUGUST, 2016. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 08 TH AUGUST, 2016 RK -.#/01+/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. # # $ () / THE CIT(A)-3, PUNE 4. # # $ / THE CIT-2, PUNE 5. '() *+ , # *+ , , ,-. , / DR, ITAT, B BENCH, PUNE. 6. )/0 12 / GUARD FILE. // ' // TRUE COPY// #3 / BY ORDER, 4 *. / PRIVATE SECRETARY, # *+ , / ITAT, PUNE