Plastic Products Engg Company, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 1317/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6429 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business expenditure
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI G.D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI D. K. TYAGI, JUDICIAL MEMBER I.T.A. NO. 1317 / AHD/2009 (ASSESSMENT YEAR 2005-06) M/S. PLASTIC PRODUCTS ENGG. CO., NEAR NAROL DISTT. COURT, P.O. NAROL, AHMEDABAD, VS. ACIT, CIRCLE 6, AHMEDABAD PAN/GIR NO. : AACFP 3903B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N SOPARKAR, AR RESPONDENT BY: SHRI PRAKASH DUBEY, SR. DR O R D E R PER SHRI D. K. TYAGI, JM: THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED AGA INST THE ORDER DATED 03.03.2009 OF CIT(A) XI, AHMEDABAD FOR THE ASSESSME NT YEAR 2005-06. I) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING ADDITION OF RS.2,00,806/- BEING AD HOC DISALLOWANCE @ 10% MADE BY THE A.O. OUT OF PROCESSING CHARGES PAID. II) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING ADDITION OF RS.50,000/- OUT OF TRAVELING, CONVEYANC E, TELEPHONE, POSTAGE AND VEHICLE EXPENSES. III) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NO T DEDUCTION OF RS.1,01,954/- U/S 80IB WHICH WAS DENIED BY THE A.O. HIMSELF. INSTEAD HE DIRECTED THE A.O. TO GRANT THE SAME. 2. GROUND NO.1 RELATES TO DISALLOWANCE OF RS.20,00, 806/- OUT OF PROCESSING CHARGES. DURING THE ASSESSMENT PROCEEDI NGS, A.O. FOUND THAT THE ASSESSEE HAS DEBITED RS.20,80,067/- TOWARDS PROCESS ING CHARGES. ASSESSEE I.T.A.NO.1317/AHD/2009. 2 WAS REQUIRED TO JUSTIFY THE SAME AND FURNISH THE CO PIES OF BILLS AND AGREEMENT WITH THE PARTIES TO WHOM CHARGES WERE PAI D. ASSESSEES REPLY WAS AS UNDER: RAW MATERIAL IS PROCESSED THROUGH JOB WORK UNIT NO .1 WHILE THE JOB WORK IN UNITS NO. 2 & 3 IS LESS AND COPIES OF INVOI CE OF EACH OF THE PARTIES TO WHOM JOB WORK WAS GIVEN IS ENCLOSED. 3. ON VERIFICATION THE A.O. FOUND THAT THE ASSESSEE HAS FURNISHED SOME COPIES OF THE INVOICES RELATING TO THIS YEAR OF MEA GER AMOUNT LIKE RS.654/- AND RS.2,550/- ONLY. THE OTHER BILLS FURNISHED PER TAIN TO SUBSEQUENT YEAR. SINCE THE ASSESSEE FAILED TO FURNISH THE AGREEMENT AND NATURE OF WORK DONE, A.O. WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED T O JUSTIFY SUCH PROCESSING CHARGES DEBITED TO THE P & L ACCOUNT AND OTHER EXPE NSES WERE ALSO NOT VERIFIABLE AND HE MADE DISALLOWANCE @ 10% BEING RS. 2,00,806/-. IN APPEAL, THIS ACTION OF THE A.O. WAS CONFIRMED BY THE LD. CI T(A). FURTHER AGGRIEVED, NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) THAT THE ASSESSEE IS REGISTERED WITH EXCISE AUTHORITIES AND THE NECESSARY CHALLANS UNDER RUE 57 F2 HAVE ALSO BEEN PREPARED BY THE ASSESSEE FOR SENDING THE MATERIAL OUTSIDE FOR PROCESSING/JOB WORK AS WELL AS FOR MATERIAL RECEIVE D AFTER JOB WORK. THE ASSESSEE HAS ALSO MAINTAINED PRODUCTION REGISTER AS REQUIRED UNDER CENTRAL EXCISE ACT. THE LABOUR PAYMENTS WERE ALSO DULY POS TED BY NECESSARY VOUCHERS. THE TAX DUE ON THESE PAYMENTS HAS ALSO B EEN DEDUCTED FROM THE BILLS TO WHOM PROCESSING CHARGES WERE PAID. IT WAS ALSO CONTENDED THAT THE PARTIES CONCERNED ARE HAVING PAN AND THE PAYMENTS W ERE ALSO MADE BY A/C PAYEE CHEQUES. THE ASSESSEE ALSO FILED COPIES OF T DS RETURN COVERING THE PAYMENTS MADE TO THE ABOVE PARTIES ON WHICH TAX WAS DEDUCTED AND DEPOSITED WITH THE GOVERNMENT, BEFORE THE LD. CIT(A ). ON THE BASIS OF I.T.A.NO.1317/AHD/2009. 3 THESE SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT THE ADDITION MADE BY THE A.O. AND SUSTAINED BY LD. CIT(A) IS NOT SUSTAINABLE. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT ALL THE RELEVANT DETAILS PERTAINING TO PROCESSING C HARGES HAVE BEEN FILED BY THE ASSESSEE. THE ASSESSEE IS ALSO REGISTERED WIT H EXCISE DEPARTMENT, THE MOVEMENT OF MATERIAL SENT OUTSIDE THE PREMISES OF T HE ASSESSEE AND RECEIVED AFTER THE JOB WORK IS ALSO MONITORED BY EXCISE DEPA RTMENT AND NO DISCREPANCY IN THE SAME HAS BEEN BROUGHT ON RECORD BY THE A.O. THE TDS RETURNS GIVING ALL THE DETAILS ABOUT THE PERSONS TO WHOM PAYMENTS HAVE BEEN MADE, TAX HAS BEEN DEDUCTED AND HAD ALSO BEEN DEPOS ITED WITH THE GOVERNMENT ARE ALSO ON RECORD. THE AUTHORITIES BEL OW WITHOUT BRINGING ANY MATERIAL TO THE CONTRARY ON RECORD, HAVE DISALLOWED 10% OF THE EXPENSES WHICH IS NOT AT ALL JUSTIFIABLE IN THE LIGHT OF THE SE FACTS OF THIS CASE AND THE ADDITION SO MADE IS HEREBY DELETED. THIS GROUND OF ASSESSEES APPEAL STANDS ALLOWED. 6. THE 2 ND GROUND RELATES TO CONFIRMATION OF ADDITION OF RS.5 0,000/- OUT OF TRAVELING, CONVEYANCE, PETROL AND VEHICLE EXPENS ES BY THE LD. CIT(A). DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVE D THAT ASSESSEE HAS DEBITED EXPENSES TO THE AMOUNT OF RS.15,78,271/- ON ACCOUNT OF TRAVELING, CONVEYANCE, TELEPHONE, POSTAGE & VEHICLE EXPENSES. THE ASSESSEE WAS REQUIRED TO JUSTIFY THESE EXPENSE BEING WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSES. THE ASSESSEE FURNISHED LEDG ER ACCOUNTS AND ON VERIFICATION, IT WAS FOUND THAT MOST OF THE PAYMENT S WERE MADE IN CASH. FURTHER, THE ASSESSEE DID NOT MAINTAIN ANY LOG BOOK BY WHICH IT IS DISTINGUISHED BETWEEN THE PERSONAL AND BUSINESS EXP ENDITURE. ACCORDINGLY, PERSONAL ELEMENT CANNOT BE RULED OUT FOR THESE TYPE S OF EXPENSES. THE SAME CANNOT BE SAID TO BE WHOLLY AND EXCLUSIVELY INCURRE D TOWARDS BUSINESS I.T.A.NO.1317/AHD/2009. 4 EXPENSES. ACCORDINGLY, 1/5 TH OF THE CLAIMED EXPENSES I.E. RS.3,15,665/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE TREATING IT AS NON BUSINESS EXPENSES. IN APPEAL, THE LD. CIT(A) RESTRICTED THI S ADDITION TO RS.50,000/- ONLY AGAINST WHICH THE ASSESSEE IS NOW IN APPEAL BE FORE US. 7. BEFORE US, IT WAS ARGUED ON BEHALF OF THE ASSESS EE THAT THE EXPENSES WERE SUPPORTED BY PROOF OF TRAVEL AND THE EXPENSES DID NOT INCLUDE EXPENSES OF FAMILY MEMBERS OF THE PARTNERS. WITH REGARD TO TELEPHONE EXPENSES, IT WAS SUBMITTED THAT THE EXPENSES DEBITED TO P&L ACCO UNT RELATE TO ONLY TELEPHONES INSTALLED AT FACTORY PREMISES AND TELEPH ONES INSTALLED AT THE RESIDENCE OF THE PARTNERS WERE PAID BY THEM FROM TH EIR PERSONAL ACCOUNT. WITH REGARD TO THE VEHICLE EXPENSES IT WAS SUBMITTE D THAT THE PARTNERS WERE HAVING THEIR PERSONAL VEHICLES AND THE EXPENSES DEB ITED TO THE P 7 L ACCOUNTS WERE EXCLUSIVELY FOR THE VEHICLES OF THE FIRM FOR T HEIR USE ONLY FOR THE PURPOSE OF BUSINESS. BUT, NO EVIDENCE IN SUPPORT O F THESE SUBMISSIONS WERE FILED BEFORE US OR CLAIMED TO HAVE BEEN FILED BEFOR E THE AUTHORITIES BELOW. THEREFORE, WE FIND NO MERIT IN THESE SUBMISSIONS OF THE ASSESSEE AND THE ORDER PASSED BY THE LD. CIT(A) IS HEREBY UPHELD. T HIS GROUND OF ASSESSEES APPEAL STANDS DISMISSED. 8. GROUND NO.3 WAS NOT PRESSED AT THE TIME OF HEARI NG AND THEREFORE, DISMISSED AS NOT PRESSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PAR TLY ALLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE 2011. SD./- SD./- (G. D. AGARWAL) (D.K.TYAGI) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED :17 TH JUNE, 2011 SP I.T.A.NO.1317/AHD/2009. 5 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION 13/6/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/6/11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 15/6/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 17/6/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 17/6/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/6/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..