ITO, Jamshepur V. M/s Bihar Sponge Iron Ltd., Jamshepur

ITA 121/RAN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60088 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K BAJORIA SR S C
• Assessee Lawyers: N O N E

Judgement Text

ITA NO.121/R/2010 BIHAR SPONGE IRON LTD, SARAIKALA 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE: SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 121 / RANCHI / 20 10 ASSESSMENT YEAR : 200 5 - 0 6 ITO WARD - 1(3) JAMSHEDPUR VS. M/S. BIHAR SPONGE IRON LTD SARAIKELA (APPELLANT) (RESPONDENT) 1. PAN NO.AABCD 2236R APPELLANT BY: SHRI K.K. BAJORIA, SR. S.C RESPONDENT BY: N O N E DATE OF HEAR I NG: 1 5 .02.2012 DATE OF PRONOUNCEMENT: 15 .02.2012 ORDER PER B.R. MITTAL, JUDICIAL MEMBER:- THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSE SSMENT YEAR 2005-06 AGAINST THE ORDER OF LD. CIT(A) DATED 31.3.2010 DIS PUTING THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER AS UNDER: A. DELETING OF ADDITION OF RS.5 LAKHS OUT OF RS.72,23, 000/- DEBITED UNDER THE HEAD STAFF WELFARE EXPENSES ON THE GROUN D THAT EXPENSES WERE NOT FULLY VOUCHED, UNVERIFIABLE AND M ADE IN CASH. B. DELETION OF ADDITION OF RS.5 LAKHS OUT OF RS.22,49, 000/- DEBITED UNDER THE HEAD PRINTING AND STATIONERY EXPENSES ON THE GROUND THAT EXPENSES ARE NOT FULLY VOUCHED, UNVERIFIABLE A ND MADE IN CASH. C. DELETING THE ADDITION OF RS.5 LAKHS OUT OF RS.51,47 ,000/- DEBITED UNDER THE HEAD TELEPHONE, TELEX AND POSTAGE EXPENSE S ON THE GROUND THAT EXPENSES WERE NOT FULLY VOUCHED, UNVERI FIABLE AND MADE IN CASH AND THEIR UTILIZATION FOR PERSONAL EXP ENSES OF DIRECTOR AND STAFF CANNOT BE RULED OUT. D. DELETING ADDITION OF RS.5 LAKHS OUT OF RS.27,07,000 /- DEBITED UNDER THE HEAD ADVERTISEMENT AND SALE PROMOTIONS EXPENSES ON THE GROUND THAT EXPENSES WERE NOT FULLY VOUCHED, UNVERI FIABLE AND MADE IN CASH. E. DELETING THE ADDITION OF RS.5 LAKHS OUT OF RS.69,44 ,000/- DEBITED UNDER THE HEAD VEHICLE RUNNING AND MAINTENANCE EXPE NSES ON THE GROUND THAT EXPENSES WERE NOT FULLY VOUCHED, UNVERI FIABLE AND ITA NO.121/R/2010 BIHAR SPONGE IRON LTD, SARAIKALA 2 MADE IN CASH AND THEIR UTILIZATION FOR PERSONAL EXP ENSES OF DIRECTOR AND STAFF CANNOT BE RULED OUT. F. DELETING THE ADDITION OF RS.5 LAKHS OUT OF RS.1,40, 90,000/- DEBITED UNDER THE HEAD TRAVELLING AND CONVEYANCE EXPENSES O N THE GROUND THAT EXPENSES ARE NOT FULLY VOUCHED, UNVERIFIABLE A ND MADE IN CASH AND PERSONAL EXPENSES OF DIRECTOR AND STAFF CANNOT BE RULED OUT. G. DELETING THE ADDITION OF RS.7 LAKHS OUT OF RS.11,10 ,32,000/- DEBITED UNDER THE HEAD PACKING, FREIGHT AND FORWARDING EXPE NSES ON THE GROUND THAT EXPENSES WERE NOT FULLY VOUCHED, UNVERI FIABLE AND MADE IN CASH. H. DELETING THE ADDITION OF RS.5 LAKHS OUT OF RS.36,24 ,000/- DEBITED UNDER THE HEAD MISCELLANEOUS EXPENSES ON THE GROUND THAT EXPENSES ARE NOT FULLY VOUCHED, UNVERIFIABLE AND MA DE IN CASH. 2. NOTICE WAS SENT TO THE ASSESSEE BY REGISTERED PO ST BUT NOBODY APPEARED ON BEHALF OF THE ASSESSEE. THE NOTICE WAS ALSO SENT THROUGH THE D.R. THE LD. D.R. HAS FILED THE REPORT OF ITO DATE D 31.1.2012 THAT NOTICE WAS SERVED ON THE ASSESSEE. INSPITE OF IT NOBODY A PPEARED ON BEHALF OF THE ASSESSEE ON THE DATE FIXED FOR I.E. 15.2.2012. NOR THERE IS ANY APPLICATION FOR ADJOURNMENT. WE HAVE DECIDED TO PROCEED EX-PARTE A ND DISPOSE OF THIS APPEAL AFTER CONSIDERING THE SUBMISSION OF LD. D.R. AND THE MATERIAL PLACED ON RECORD. 3. WE OBSERVE THAT THE ASSESSING OFFICER HAS MADE T HE AFORESAID DISALLOWANCES OUT OF THE EXPENSES CLAIMED BY THE AS SESSEE UNDER VARIOUS HEADS, AS MENTIONED HEREIN ABOVE ON THE GROUNDS THA T THE EXPENSES CLAIMED BY THE ASSESSEE ARE NOT FULLY VOUCHED AND UNVERIFIA BLE AND MOST OF THE EXPENSES ARE MADE IN CASH. WE MAY STATE THAT THE G ROUND TAKEN BY THE ASSESSING OFFICER IN RESPECT OF THE EXPENSES VEHICL E RUNNING AND MAINTENANCE, TRAVELLING AND CONVEYANCE, TELEPHONE, TELEX AND POS TAGE THAT PERSONAL EXPENSES OF DIRECTORS AND STAFF COULD NOT BE RULED OUT CANNOT BE A GROUND TO MAKE A DISALLOWANCE AS THE ASSESSEE IS A CORPORATE ENTITY. 4. WE OBSERVE THAT ON BEHALF OF THE ASSESSEE A WRIT TEN SUBMISSION WAS FILED BEFORE THE LD. CIT(A). IT IS OBSERVED THAT O N BEHALF OF THE ASSESSEE IT WAS CONTENDED BEFORE LD. CIT(A) THAT THE ASSESSING OFFICER HAD NOT CARRIED OUT ANY VERIFICATION AND MADE DISALLOWANCES ROUTINE LY. IT IS OBSERVED THAT THE LD. CIT(A) FORWARDED THE COPY OF WRITTEN ARGUMENT F ILED BEFORE HIM TO ITA NO.121/R/2010 BIHAR SPONGE IRON LTD, SARAIKALA 3 ASSESSING OFFICER FOR HIS COMMENTS. HOWEVER, THE A SSESSING OFFICER RELIED ON THE FINDINGS OF THE ASSESSING OFFICER GIVEN IN THE ASSESSMENT ORDER. THE LD. CIT(A) HAS STATED THAT THE ASSESSING OFFICER HAS NO T BROUGHT OUT ANY FURTHER MATERIAL IN SUPPORT OF HIS FINDINGS. THE LD. CIT(A ) HAS STATED THAT THE ASSESSING OFFICER MADE DISALLOWANCES ON AN ADHOC MA NNER AND WAS NOT JUSTIFIED TO MAKE DISALLOWANCES. THE ASSESSING OFF ICER HAS NOT POINTED OUT ANY DEFECT IN THE ACCOUNTS WHICH ARE AUDITED. ACCO RDINGLY, DELETED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. AT TH E TIME OF HEARING OF THE APPEAL BEFORE US, LD. D.R. RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT MOST OF THE EXPENSES WERE INCURRED B Y THE ASSESSEE IN CASH AND ACCORDINGLY THE SAME WERE NOT VERIFIABLE. 5. WE OBSERVE THAT THE ASSESSEE HAS NOT DISPUTED BE FORE THE LD. CIT(A) THAT THE EXPENSES DEBITED BY THE ASSESSEE UNDER THE VARIOUS HEADS WERE ALSO INCURRED IN CASH AND ACCORDINGLY, WE AGREE WITH LD. D.R. THAT THE GENUINENESS OF THE SAME COULD NOT BE VERIFIED. WE OBSERVE THAT THE LD. CIT(A) HAS DELETED THE DISALLOWANCES MADE BY THE AS SESSING OFFICER CONSIDERING THE FACT THAT ACCOUNTS OF THE ASSESSEE WERE AUDITED. DELHI HIGH COURT HAS HELD IN THE CASE OF GOOD YEAR INDIA LTD. VS. CIT 246 ITR 116 THAT AVAILABILITY OF TAX AUDITED REPORT DOES NOT PRECLUD E ASSESSING OFFICER FROM CALLING FOR SUPPORTING MATERIAL FROM ASSESSEE TO JU STIFY ITS CLAIM. SUCH A POWER IS INHERENT IN THE ASSESSING OFFICER IN THE S CHEME OF THE ACT. HONBLE KOLKATA HIGH COURT HAS ALSO HELD IN LIBERTY CINEMA VS. CIT 52 ITR 153 THAT ONUS IS ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM O F EXPENSES. CONSIDERING THE ABOVE DECISIONS AND THE FACT THAT THE EXPENSES WERE ALSO INCURRED BY THE ASSESSEE IN CASH AND THE SAME WERE NOT VERIFIABLE A ND ALSO CONSIDERING THE FACT THAT THE AMOUNT DEBITED BY THE ASSESSEE UNDER VARIOUS HEADS ARE SUBSTANTIAL, WE CONSIDER IT PRUDENT THAT IT WILL BE JUSTIFIABLE TO RESTRICT THE DISALLOWANCE OF RS.2 LAKHS EACH OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD (A) STAFF WELFARE EXPENSES (B) TELEP HONE, TELEX AND POSTAGE (C) VEHICLE RUNNING AND MAINTENANCE (D) TRAVELLING AND CONVEYANCE (E) PACKING, FREIGHT AND FORWARDING AND MISCELLANEOUS E XPENSES AND RS.1 LAKH EACH OUT OF THE EXPENSES CLAIMED UNDER THE HEAD (F) PRINTING AND STATIONERY ITA NO.121/R/2010 BIHAR SPONGE IRON LTD, SARAIKALA 4 (G) ADVERTISEMENT AND SALE PROMOTION. HENCE, GROUN DS OF APPEAL TAKEN BY THE DEPARTMENT ARE ALLOWED IN PART AS INDICATED ABO VE BY RESTRICTING THE DISALLOWANCES AS INDICATED HEREIN ABOVE. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 15.02.2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI, DATED 15 TH FEBRUARY, 2012 COPY TO 1 THE ITO WARD - 1(3), JAMSHEDPUR 2 M/S. BIHAR SPONGE IRON LTD., CHANDIL, SARAIKELA 3 CIT, JAMSHEDPUR 4 THE CIT (A) , JAMSHEDPUR 5 THE DR, ITAT, JAMSHEDPUR 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RANCHI/PATNA