D.C.I.T CC - XX,kolkata, Kolkata V. M/s Todays Writting Products Ltd, Kolkata

ITA 1166/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4975 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: ROBIN MAHESHWARI ACA
• Section: 80IB

Judgement Text

1 ITA NO.1166/KOL/2013-M/S. TODAYS WRITING PRODUCTS L TD.-A.Y.2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] ITA NO.1166/KOL/2013 ASSESSMENT YEAR : 2008-09 D. C.I.T., CENTRAL CIRCLE-XX, -VERSUS- M/S.TODAYS W RITING PRODUCTS LTD. KOLKATA KOLKATA (PAN:AABCT1487E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SMT. RANU BISWAS, JCIT, SR.D R FOR THE RESPONDENT: SHRI ROBIN MAHESHWARI, ACA DATE OF HEARING : 04.02.2016. DATE OF PRONOUNCEMENT : 02.03.2016. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 16.01.2013 OF CIT(A)-CENTRAL-III, KOLKATA RELATING TO A.Y.2008-09 . 2. GROUND NOS.1 AND 1.1. RAISED BY THE REVENUE REA D AS FOLLOWS :- I.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BOTH IN FACTS AS WELL AS IN LAW IN DIRECTING THE A.O. TO ACCEPT BOOK RESULTS WITHOUT PROPER APPRECIATION OF THE FACT THAT BOOKS OF ACCOUNTS WERE ALREADY REJ ECTED FOR SPECIFIC REASONS DISCUSSED IN THE ASSESSMENT ORDER. 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO REASON OF REJECTING THE BOOKS OF ACCOUNTS WITHOUT PROPER APPRECIATION OF THE FACT THAT THE ASSESSE FAILED TO PRODUCE QUANTITATIVE DETAILS FOR RAW MATERIALS; FINISHED GOODS AND TRADED GOODS. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN BALL POINT PENS, REFILLS AND ALLIED COMP ONENTS AND STATIONERY ITEMS. FOR A.Y.2008-09 ASSESSEE FILED RETURN OF INCOME DISCLOS ING TOTAL INCOME OF RS.13,28,45,300/-. THE ASSESSEE HAD CLAIMED DEDUCTI ON U/S 80IB OF THE ACT OF A SUM 2 ITA NO.1166/KOL/2013-M/S. TODAYS WRITING PRODUCTS L TD.-A.Y.2008-09 OF RS.6,41,34,622/-. AO FOUND THAT IN THE EARLIER A SSESSMENT YEARS I.E. A.Y.2006-07 AND 2007-08 THE BOOKS OF ACCOUNT OF THE ASSESSEE HA S BEEN REJECTED AND ASSESSMENTS WERE COMPLETED BY ESTIMATING BUSINESS PROFITS OF TH E ASSESSEE. IN THE PRESENT ASSESSMENT YEAR THE ASSESSEE PRODUCED BOOKS OF ACCO UNT AND OTHER DETAILS. THE AO WAS, HOWEVER, FOUND THAT THE ASSESSEE HAD NOT PRODU CED THE STOCK REGISTER AND HAD CLAIMED EXPENSES IN THE BOOKS OF ACCOUNT WITHOUT PR OPER SUPPORTING BILLS AND VOUCHERS. HE THEREFORE REJECTED THE BOOKS OF ACCOUN T U/S 145(3) OF THE ACT. HE THEREAFTER ESTIMATED INCOME OF THE ASSESSEE AT 10% OF THE TURN OVER OF RS.2,16,18,93,260/-. THUS THE PROFIT FROM MANUFACTU RING ACTIVITY WAS DETERMINED BY THE AO AT RS.21,61,89,326/-. THERE WAS A LOSS IN TH E TRADING ACTIVITY AND AFTER SETTING OFF LOSS FROM THE TRADING ACTIVITY, AO DETERMINED T HE INCOME FROM THE BUSINESS OF THE ASSESSEE. 4. BEFORE CIT(A)THE ASSESSEE POINTED OUT THAT IT WA S A LISTED COMPANY AND WAS SUBJECT TO TAX AUDIT BESIDES STATUTORY AUDIT UNDER THE COMPANIES ACT AND QUARTERLY AUDITS. THE ASSESSEE POINTED OUT THAT THE AO DID NO T FIND ANY MISTAKE IN THE AUDITED BOOKS OF ACCOUNT AND THAT COMPLETE BOOKS OF ACCOUNT IN THE FORM OF SOFT COPY ON COMPUTER WAS PRODUCED BEFORE THE AO. THE ASSESSEE A LSO POINTED OUT THAT THE STOCK REGISTER WAS ALSO MAINTAINED IN THE COMPUTER AND TH E SOFT COPY PRODUCED BEFORE THE AO DUE TO THE TECHNICAL REASONS COULD NOT EXHIBIT T HE STOCK REGISTER MAINTAINED BY THE ASSESSEE. THE ASSESSEE RELIED ON THE DECISION OF HO NBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PANDIT BROTHERS VS CIT 26 ITR 159 WHEREIN IT WAS HELD THAT BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY BECAUSE QUANTI TATIVE DETAILS WITH RESPECT TO MATERIALS (STOCK REGISTER) ARE NOT PRODUCED OR NOT MAINTAINED. 5. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. I N HIS REMAND REPORT, THE AO ACCEPTED THAT THE ASSESSEE HAD PRODUCED SOFT COP Y OF THE STOCK REGISTER AND THAT THE AO HAD CHECKED THOSE DETAILS. NO ADVERSE COMMENTS W ERE GIVEN IN THE REMAND REPORT BY THE AO ON THE BOOKS OF ACCOUNT OF THE ASSESSEE. 3 ITA NO.1166/KOL/2013-M/S. TODAYS WRITING PRODUCTS L TD.-A.Y.2008-09 6. CIT(A) ON A CONSIDERATION OF THE REMAND REPORT W AS OF THE VIEW THAT THE ASSESSEE WAS MAINTAINING STOCK REGISTER AND THE QUA NTITATIVE DETAILS OF THE STOCK, PURCHASE AND SALES WERE VERIFIED BY THE AO AND NO A DVERSE COMMENTS WERE GIVEN BY THE AO. TAKING THESE CIRCUMSTANCES INTO CONSIDERATI ON THE CIT(A) DELETED THE ADDITION MADE BY AO. 7. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS RAI SED GROUND NO.1 AND 1.1 BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DR, WHO RELIED ON THE ORDER OF AO. THE LEARNED COUNSEL FOR THE ASSESSEE FILED BEFO RE A COPY OF THE REMAND REPORT DATED 19.12.2012 FILED BY THE AO IN THE PROCEEDINGS BEFORE CIT(A) AND RELIED ON THE ORDER OF CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT IN THE LIGHT OF THE REMAND REPORT OF THE AO ACCEPTING THE CORREC TNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE CIT(A) WAS FU LLY JUSTIFIED IN HOLDING THAT REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE U/S 1 45(3) OF THE ACT AND ESTIMATION OF PROFITS DONE BY AO WAS NOT PROPER. ACCORDINGLY GROU ND NOS. 1 AND 1.1 RAISED BY THE REVENUE ARE DISMISSED. 10. GROUND NO.2 RAISED BY THE REVENUE READS AS FOLL OWS :- 2.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAD ERRED BOTH IN FACTS AS WELL AS IN DELETING THE DISALLOWANCE OF EXPENSE OF RS.20,00,000/- TRAVELLING AND CONVEYANCE EXPENSE OF RS.6,02,187/- AND LEGAL & PRO FESSIONAL EXPENSES OF RS.5,21 ,371/- WITHOUT APPRECIATING THAT IT FAILED TO SUBST ANTIATE THE EXPENSE CLAIMS. 11. AS ALREADY STATED THE ASSESSEE INCURRED A LOSS IN ITS TRADING ACTIVITY OF RS.2,42,14,618/-. AO WAS OF THE VIEW THAT LOSS FROM TRADING ACTIVITY WAS EXCESSIVE AND SUCH LOSS WAS BECAUSE OF IMPROPER ALLOCATION OF EXPENSES BETWEEN THE TRADING 4 ITA NO.1166/KOL/2013-M/S. TODAYS WRITING PRODUCTS L TD.-A.Y.2008-09 ACTIVITY AND MANUFACTURING ACTIVITY. HE THEREFORE D ISALLOWED RS.20,00,000/- OUT OF THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT ON AN ESTIMATE BASIS. 12. ON APPEAL BY THE ASSESSEE, CIT(A) CALLED FOR A REMAND REPORT FROM THE AO, WHO IN HIS REMAND REPORT SUBMITTED THAT THE ASSESSE E HAS PRODUCED BILLS AND VOUCHERS OF MAJOR EXPENSES SUCH AS LEGAL AND PROFESSIONAL EX PENSES, TRADING PURCHASES, TRAVELLING EXPENSES, ADVERTISING EXPENSES AND MISCE LLANEOUS EXPENSES ETC AND THAT THEY WERE RANDOMLY CHECKED. 13. CIT(A) FOUND THAT IDENTICAL DISALLOWANCE OF EXP ENSES IN A.Y.2007-08 WAS DELETED BY HIS PREDECESSOR BY COMING TO A CONCLUSI ON THAT DISALLOWANCES MADE BY AO WAS PURELY ON PRESUMPTIONS, CONJECTURES OR SURMISES . FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DHAKESHWARI CO TTON MILLS LTD., VS CIT 26 ITR 775 (SC), CIT(A) HAD DELETED THE DISALLOWANCE OF EX PENSES FOR A.Y.2007-08. FOLLOWING THE AFORESAID ORDER, THE CIT(A) IN THE PR ESENT A.Y. DELETED THE ADDITION MADE BY AO. 14. AO ALSO NOTICED THAT THE ASSESSEE HAD CLAIMED U NDER THE HEAD TRAVELLING AND CONVEYANCE EXPENSES OF RS.60,21,865/-. AO WAS OF T HE VIEW THAT LOOKING INTO THE NATURE AND QUANTUM OF PARTIES IN RESPECT OF WHOM TR AVELLING AND CONVEYANCE EXPENSES WERE INCURRED, IT WAS NOT POSSIBLE TO VERIFY EACH A ND EVERY ONE OF THE EXPENSES AND HE THEREFORE HE DISALLOWED 10% OF TRAVELLING AND CONVE YANCE EXPENSES. SIMILARLY THE ASSESSEE HAD CLAIMED LEGAL AND PROFESSIONAL EXPENSE S OF RS.1,04,27,424/-. AO WAS OF THE VIEW THAT LOOKING INTO THE NATURE OF THE BUSINE SS THE QUANTUM OF EXPENSES WAS HIGHER AND HE THEREFORE DISALLOWED 5% OF LEGAL AND PROFESSIONAL EXPENSES. 15. ON APPEAL BY THE ASSESSEE CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR ON IDENTICAL ISSUE IN A.Y.2007-08 DELETED THE ADDITION MADE BY AO. CIT(A) ALSO TOOK NOTE OF THE REMAND REPORT GIVEN BY THE AO ACCEPTING THE PRODUCTION OF BILLS AND VOUCHERS FOR MAJOR EXPENSES WHICH HAD BEEN RANDOMLY TEST CHECKED AND NO ADVERSE COMMENTS WERE GIVEN BY THE AO. 5 ITA NO.1166/KOL/2013-M/S. TODAYS WRITING PRODUCTS L TD.-A.Y.2008-09 16. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS RA ISED GROUND NO.2 BEFORE THE TRIBUNAL. 17. WE HAVE HEARD THE LEARNED DR, WHO RELIED ON THE ORDER OF AO. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT (A). WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. ADMITTEDLY IN THE REMAND REPORT AO HAS NOT GIVEN ANY ADVERSE COMMENTS AFTER DUE VERIFICATION OF THE BILLS AND VOUCHERS. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ADDITION MADE BY AO WAS PURELY ON THE BASIS OF CONJECTURES, PRESUMPT IONS AND SURMISES AND WAS RIGHTLY DELETED BY CIT(A). CONSEQUENTLY GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 18. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. O RDER PRONOUNCED IN THE COURT ON 02.03.2016. SD/- SD/- [WASEEM AHMED ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.03.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. TODAYS WRITING PRODUCTS LTD., 13, BRABOURNE ROAD, KOLKATA-700001. 2.D.C.I.T., CENTRAL CIRCLE-XX, KOLKATA. 3. CIT(A)-CENTRAL-III, KOLKATA 4. CIT-CENTRAL-III, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES