DCIT, CIR-25, Kolkata, Kolkata V. Smt. Jhuma Dutta, Kolkata

ITA 1045/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6156 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE CIT LD
• Assessee Lawyers: T VARKEY J M
• Keywords: Gift; Business expenditure; Rule of consistency
• Section: 143(3)

Judgement Text

1 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA (BEFORE SHRI ABY. T. VARKEY, J.M. & DR.A.L.SAINI, A.M.) ITA NO. 1045/KOL/2017 : A.Y : 2012-13 D.C.I.T, CIRCLE-25, KOLKATA VS SMT. JHUMA DUTTA PAN: AFAPD 3070J (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI: ARINDAM BHATTACHARJEE, ADDL. CIT, LD. DR ASSESSEE BY: SHRI MIHIR BANDYOPADHYAY, ADVOCATE, LD.AR DATE OF HEARING : 23-05-2018 DATE OF PRONOUNCEMENT :- 18-07-2018 ORDER PER DR. A.L.SAINI, A.M .: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- 7, KOLKATA IN APPEAL NO. 50/CIT(A)-7/KOL/ CIRCLE-25/16-17, DATED 17/02/2017, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT, THE ACT), DATED 30-03-2015. 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS FOLLOWS:- 1. THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXPENSE ON ACCOUNT OF BUSINESS PROMOTION ON AVERAGE RATIO AS THERE WAS NO EVIDENCE THAT THE GIFTS PURCHASED BY THE ASSESSEE AND CLAIMED AS EXPENDITURE WERE DISTRIBUTED TO THE RECIPIENT AS AN INCENTIVE. 2. THAT THOUGH THE A.O. HAS CATEGORICALLY STATED IN HIS ORDER THAT THE LETTERS REGARDING PAYMENT AND ELIGIBILITY OF INCENTIVE WERE NOT DULY SERVED UPON THE 2 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA RECIPIENTS AND NO PROOF OF SERVICE WAS AVAILABLE, LD. CIT(A) HAS WRONGLY HELD THAT THE EXPENSES ARE ALLOWABLE. 3. THAT THE LD. CIT(A)HAS ERRED IN OBSERVING THAT THE PURCHASE OF GIFT ITEMS WERE GENUINE AND THEREFORE IT PROVES THAT THE EXPENSE INCURRED FOR GIFTS WERE ACTUALLY RELATED TO BUSINESS ACTIVITY. 4. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE OBSERVATION OF THE A.O. THAT THERE WERE NO UNIFORMITY ON THE RATIO OF INCENTIVE AND THE SALES TURNOVER OF THE RECIPIENT AND THEREFORE, IT TRANSPIRES THAT THE SALES PROMOTION EXPENSE IS NOTHING BUT A COLOURFUL DEVICE TO AVOID THE CLUTCH OF REVENUE. ' 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MODIFY ALL OR ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE ASSESSEE DOES BUSINESS IN TRADING OF POULTRY FEED, THROUGH HER PROPRIETARY CONCERN, M/S. J S ENTERPRISE. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD CLAIMED BUSINESS PROMOTION EXPENDITURE TO THE TUNE OF RS. 56,42,059/- IN THE PROFIT AND LOSS ACCOUNT. THE DETAILS OF THESE BUSINESS PROMOTION EXPENDITURE ARE GIVEN AT PAGE-2 OF THE ASSESSMENT ORDER. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT THE EVIDENCES IN SUPPORT OF THE CLAIM OF BUSINESS PROMOTION EXPENSES. IN RESPONSE, THE ASSESSEE SUBMITTED AN EXPLANATORY STATEMENT AND A COPY OF LEDGER ACCOUNT, STATING ABOUT THE NATURE OF EXPENDITURE AGAINST EACH DEBIT ENTRY. THE ASSESSEE FURNISHED THE EXPLANATION STATING THAT SHE HAD PURCHASED SOME ITEMS FOR MAKING FREE GIFTS TO SOME CLIENTS AND SOME OFFICIALS OF CLIENT CONCERNS FOR BUSINESS PROMOTION PROGRAMME, AND ACHIEVEMENT OF TURNOVER CRITERIA. THE EXPENSES WERE ALSO INCURRED FOR ARRANGING LUNCH PARTY FOR CLIENTS AND OFFICERS. HOWEVER, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND NOTED THAT THE ASSESSEE COULD NOT FILE SUFFICIENT EVIDENCE IN SUPPORT OF BUSINESS PROMOTION EXPENSES, 3 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA THEREFORE, HE DISALLOWED THE BUSINESS PROMOTION EXPENSES TO THE TUNE OF RS. 56,42, 059/- AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED BY THE STAND SO TAKEN BY THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR FOR THE REVENUE SUBMITTED BEFORE US THAT THERE IS NO EVIDENCE THAT THESE GIFTS PURCHASED BY THE ASSESSEE, WERE DISTRIBUTED AMONG THE RECIPIENTS AS INCENTIVES. THE GIFT ITEMS WERE PURCHASED BY THE ASSESSEE FOR HER PERSONAL USE, AND THEREFORE, THE LD. CIT-(A) HAS WRONGLY CONCLUDED THAT THESE EXPENSES WERE ALLOWABLE AS BUSINESS EXPENSES. THE GIFT EXPENDITURE INCURRED BY THE ASSESSEE DO NOT RELATE TO BUSINESS ACTIVITY OF THE ASSESSEE AND THESE EXPENSES WERE NOT FOR THE PURPOSE OF BUSINESS. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD. CIT(A). THE COUNSEL SUBMITTED THAT VARIOUS GIFT ITEMS DISTRIBUTED BY THE ASSESSEE WERE RELATED TO BUSINESS ACTIVITY TO ACHIEVE THE TURNOVER AND TO EXPAND BUSINESS PROMOTION. THESE SALES PROMOTION EXPENSES ARE NOT ONLY TO ACHIEVE BUSINESS TURNOVER IN THE ASSESSMENT YEAR UNDER CONSIDERATION, BUT IN SUBSEQUENT ASSESSMENT YEARS ALSO I.E BY THESE SALES PROMOTION EXPENSES THE ASSESSEE WOULD GET ADVANTAGE IN SUBSEQUENT ASSESSMENT YEARS ALSO. THE LD. COUNSEL ALSO SUBMITTED THAT ASSESSEE WAS CLAIMING THESE EXPENSES IN PREVIOUS YEARS AND THESE EXPENSES WERE ALLOWED IN PREVIOUS YEARS BY THE DEPARTMENT. 4 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA 8. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT EXPENDITURE ON THESE PROMOTIONAL INCENTIVES WERE INCURRED BY ASSESSEE TO INCREASE THE SALES AND TO ACHIEVE THE TARGETED TURNOVER. THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF THESE PROMOTIONAL INCENTIVES ARE VERY MUCH CLOSE WITH THE TARGET TO ACHIEVE TURNOVER. WE NOTE THAT THE ASSESSEE HAS BEEN CLAIMING THESE EXPENSES IN THE PAST AND IT HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN THE PAST. THE ASSESSING OFFICER HAS NOT DISPUTED THIS TRADING PRACTICE. FOR EXAMPLE IN FINANCIAL YEAR 2009-10 AND 2010-11, THE ASSESSEE HAD INCURRED BUSINESS PROMOTIONAL EXPENSES AND THE SAME WERE ALLOWED BY THE ASSESSING OFFICER. IT IS A WELL SETTLED LEGAL POSITION THAT FACTUAL MATTERS WHICH PERMEATE THROUGH MORE THAN ONE ASSESSMENT YEAR, IF THE REVENUE HAS ACCEPTED A PARTICULAR'S VIEW OR PROPOSITION IN THE PAST, IT IS NOT OPEN FOR THE REVENUE TO TAKE A ENTIRELY CONTRARY OR DIFFERENT STAND IN A LATER YEAR ON THE SAME ISSUE, INVOLVING IDENTICAL FACTS UNLESS AND UNTIL A COGENT CASE IS MADE OUT BY THE ASSESSING OFFICER ON THE BASIS OF CHANGE IN FACTS. FOR THAT WE RELY ON THE ORDER OF THE HONBLE SUPREME COURT IN RADHASOAMISATSANG VS. CIT 193 ITR 321 (SC), WHEREIN IT WAS HELD AS FOLLOWS: 'WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. ON THESE REASONING, IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTER - AND, IF THERE WAS NO CHANGE, IT WAS IN SUPPORT OF THE ASSESSEE WE DO NOT THINK THE QUESTION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY THE 5 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA COMMISSIONER OF LNCOME-TAX IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN.' WE ARE OF THE VIEW THAT THE ABOVE CITED PRECEDENTS ON PRINCIPLE OF CONSISTENCY ARE SQUARELY APPLICABLE TO THE ASSESSEE UNDER CONSIDERATION. IN THE FINANCIAL YEARS 2009- 10 AND 2010-11, THE ASSESSEE HAD INCURRED BUSINESS PROMOTIONAL EXPENSES AND THE SAME WERE ALLOWED BY THE ASSESSING OFFICER. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY NEW FACTS TO DISPROVE THE ASSESSEE`S CLAIM. 9. WE NOTE THAT THE ASSESSEE HAS BEEN ABLE TO PRODUCE BILLS RELATED TO THE EXPENSES AND THE CIRCULAR ISSUED TO CUSTOMERS LINKING SALES TO INCENTIVES. THE LD. AO HAS FAILED TO BRING ANY COGENT EVIDENCE ON RECORD TO PROVE THAT THE GIFTS GIVEN BY THE ASSESSEE, FOR THE PURPOSE OF BUSINESS, ARE NOT GENUINE. WE NOTE THAT ASSESSEE HAS FURNISHED FOLLOWING CHART OF BUSINESS PROMOTION EXPENSES FOR TWO YEARS BEFORE AND TWO YEARS AFTER, WHICH IS GIVEN BELOW FOR READY REFERENCE: COMPARATIVE CHART OF SALES VIS--VIS BUSINESS PROMOTION EXPENSES SL. NO. FINANCIAL YEAR NET SALES BUSINESS AVERAGE % PROMOTION EXPENSES 1. 2009-2010 RS.42,21,03,171 RS.35,10,443 0.83% 2. 2010-2011 RS.46,65,12,048 RS.36,96,760 0.79% 3. 2011-2012 * RS.34,35,56,392 RS.56,42,059 1.64% 4. 2012-2013 RS.9,57,47,024 RS.11,92,394 1.24% 5. 2013-2014 RS.6,87,57,187 RS.13,02,005 1.89% WE NOTE THAT THE AVERAGE OF THESE FOUR YEARS WAS COMPUTED BY LD CIT(A) AT 1.19%, AND THE EXCESS BUSINESS PROMOTION EXPENDITURE OF 0.45% ( THAT IS, 6 ITA NO. 1045/KOL/2017 SMT. JHUMA DUTTA 1.64% - 1.19%) SHOULD BE DISALLOWED, AS THE ASSESSEE WAS UNABLE TO PROVE THIS EXCESS EXPENDITURE IN RELATION TO TURNOVER ACHIEVED. THAT BEING SO, WE DECLINED TO INTERFERE WITH THE ORDER OF THE CIT-(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-07-2018 SD/- SD/- ( ABY. T. VARKEY ) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18-07-2018 **PRADIP (SR.PS) COPY OF THE ORDER FORWARDED TO: 1. DEPARTMENT: THE DCIT, CIRCLE-25, KOLKATA, AAYKAR BHAWAN DAKSHIN, 2 GARIAHAT ROAD (S), KOLKATA-68. 2 ASSESSEE: SMT. JHUMA DUTTA 51/A/1 R.N DAS ROAD, DHAKURIA, KOLKATA-31. 3. THE CIT- 4. THE CIT(A)- 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, SR.PS, H.O.O, ITAT, KOLKATA