Crystal Ceramic Industries Pvt. Ltd., Mehsana V. The Deputy Commissioner of Income Tax, Circle-1(1)(2), Ahmedabad

ITA 1338/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8318 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN DATES OF HEARING OF
• Section: 13

Judgement Text

CRYSTAL CERAMIC INDUSTRIES PVT . LTD . ITA NO. 1338/AHD/2017 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [ CORAM : HON BLE JUSTICE P . P BHAT T , PRESIDENT AND PRAMOD KUMAR, VP ] ITA NO . 1338 / AHD / 2017 ASSESSMENT YEAR : 2012 - 13 CRYSTAL CERAMIC INDUSTRIES PVT . LTD . ............. APPELLANT P&O - KAIYAL, TALUKA - KADI, DIST . MEHSANA, GUJARAT 382705 ( PAN NO . AADCC2915L ) VS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 1 ( 1 )( 2 ) AHMEDABAD ....... RESPONDENT APPEARANCES BY TUSHAR HEMANI FOR THE APPELLANT L . P JAIN FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : DECEMBER 20 TH , 2019 DATE OF PRONOUNCING THIS ORDER : MARCH 12 TH , 2020 O R D E R PER BENCH: 1 . BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF LEARNED CIT ( A ) S ORDER DATED 20 TH JANUARY 2017, IN THE MATTER OF ORDER UNDER SECTION 143 ( 3 ) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2012 - 13 . 2 . THE APPEAL IS TIME BARRED BY 63 DAYS BUT THE ASSESSEE APPELLAN T HAS MOVED A CONDONATION PETITION, SUPPORTED BY THE AFFIDAVIT DATED 6 TH NOVEMBER 2017, BY SHRI J . B PATEL, CA, ON THE GROUND THAT THERE WAS LAPSE BY THE CHARTED ACCOUNTANT CONCERNED . HAVING PERUSED THE MATERIAL ON CRYSTAL CERAMIC INDUSTRIES PVT . LTD . ITA NO. 1338/AHD/2017 PAGE 2 OF 4 RECORD, AND HAVING HEARD THE RIVAL CONTENT IONS THEREON, WE DEEM IT FIT AND PROPER TO CONDONE THE DELAY . ORDERED ACCORDINGLY . 3 . IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : - 1 . THE LEARNED CIT ( A ) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS . 2,89,578 /- OUT OF MISCELLANEOUS EXPENSES . LD . CIT ( A ) FAILED TO APPRECIATE THAT THE EXPENDITURE IN QUESTION WERE ACTUAL EXPENSES AND NOT MERE PROVISION OF UNASCERTAINED LIABILITY . 4 . BRIEFLY STATED, RELEVANT MATERIAL FAC TS ARE LIKE THIS . THE ASSESSEE BEFORE US IS A MANUFACTURER OF CHEMICALS, MIXTURES AND CERAMIC TILES . DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN PROVISION OF RS . 3,53,717 /- IN RESPECT OF MISCELLANEO US EXPENSES . WHEN HE PROBED THE MATTER FURTHER, IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE HAS DEBITED THE EXPENSES AND CREDITED THE PROVISION FOR EXP MKT, AND FROM THE SAID PROVISION, THE PAYMENTS ARE MADE . IT WAS FURTHER EXPLAINED THAT DUE TO HEAVY NUMBER OF MARKETING EMPLOYEES, INSTEAD OF CREDITING EACH AND EVERY EMPLOYEE NAME, ASSESSEE COMPANY IS HAVING THE PRACTICE OF CREDITING A SINGLE ACCOUNT, I . E MARKETING EXPENSES FROM WHICH ALL THE PAYMENTS ARE MADE . NOT SATISFIED WITH THE EXPLANATION, THE ASSESSING OFFICER DISALLOWED, WHAT HE TREATED AS PURE PROVISION COMPONENT, RS . 2,89,578 /- ON THE GROUND THAT ANY PROVISION MADE IS NOT AN ALLOWABLE EXPENDITURE . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT ( A ) BUT WITHOUT A NY SUCCESS . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 5 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD ANY DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 6 . IT IS A PLAIN AND SIMPLE ACCOUNTING TREATMENT THAT INSTEAD OF CREDITING THE ACCOUNT OF EMPLOYEE CONCERNED, THE CREDIT IS AFFORDED TO PROVISION FOR MARKETING EXPENSES . HOWEVER, THAT ACCOUNTING TREATMENT, RIGHT OR WRONG, WOULD NOT RENDER AN OTHERWISE ADMISSIBLE DEDUCTION INAD MISSIBLE . AS HELD BY HON BLE SUPREME COURT, IN THE CASE OF BHARAT EARTH MOVERS VS CIT [( 2000 ) 245 ITR 428 ( SC )] , IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN AN ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED .. AND WHAT SHOULD BE CERTAIN IS INCURR ING OF LIABILITY . IN THIS LIGHT EVEN A PLAIN LOOK AT THE ACCOUNT WOULD SHOW, ALL THESE DEBITS, WITH CORRESPONDING CREDITS TO PROVISION FOR MARKETING EXPENSES ARE FOR SPECIFIC BILL AMOUNTS . IN VIEW OF THIS FACTUAL POSITION WE DELETE THE IMPUGNED DISALLOW ANCE OF RS . 2,89,578 /-. THE ASSESSEE GETS THE RELIEF ACCORDINGLY . CRYSTAL CERAMIC INDUSTRIES PVT . LTD . ITA NO. 1338/AHD/2017 PAGE 3 OF 4 7 . GROUND NO 1 IS THUS ALLOWED . 8 . IN GROUND NO 2 TO 3, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES :- 2 . THE LEARNED CIT ( A ) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS . 8,18,400 /- OUT OF ADVERTISEMENT EXPENSES . 3 . THE LEARNED CIT ( A ) HAS ERRED IN NOT GIVING THE APPELLANT SUFFICIENT OPPORTUNITY TO JUSTIFY ITS CLAIM OF ADVERTISEMENT EXPENSES . 9 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING NOTICED THAT ADVERTISEMENT EXPENSES OF RS . 56,42,195 /- INCLUDE PAYMENT OF RS . 8,18,400 /- TO COX AND KINGS FOR THAILAND PACKAGE FOR 24 PERSONS . NEITHER HE COULD FIND ANY BUSINESS JUSTIFICATION, NOR ANY TAX WAS DEDUCTED AT SOURCE FROM THIS PAYMENT . ACCORDINGLY, RS . 8,18,400 /- OUT OF ADVERTISEMENT EXPENSES, WAS DISALLOWED . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 10 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 11 . WE FIND THAT IT HAS BEEN THE CASE OF THE ASSESSEE THAT THE CIT ( A ) HAS DECIDED THE ISSUE AGAINST HIM WITHOU T AFFORDING DUE OPPORTUNITY OF HEARING, AND THE CIT ( A ) HAS DISMISSED THE APPEAL ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED THE REQUISITE EXPLANATIONS EVEN BEFORE THE CIT ( A ). IN THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE MATTER SHOULD BE REMITT ED TO THE FILE OF THE CIT ( A ) FOR ADJUDICATION DENOVO AFTER GIVING ONE MERE OPPORTUNITY OF HEARING TO THE ASSESSEE, BY WAY OF A SPEAKING ORDER, AND IN ACCORDANCE WITH THE LAW . ORDERED, ACCORDINGLY . 12 . GROUND NO 2 AND 3 ARE THUS ALLOWED FOR STATISTICAL PURPOSES . 13 . GROUND NO 4 AND 5 WERE NOT PRESSED FOR SMALLNESS OF AMOUNT . CRYSTAL CERAMIC INDUSTRIES PVT . LTD . ITA NO. 1338/AHD/2017 PAGE 4 OF 4 14 . GROUND NO 6 AND 7, BEING GENERAL IN MATTER, DO NOT CALL FOR ANY ADJUDICATION . 15 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERM INDICATED ABOVE . ORDER PRONOUNCED U NDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - JUSTICE P . P BHATT PRAMOD KUMAR ( PRESIDENT ) ( VICE PRESIDENT ) AHMEDABAD, DATED TH E 12 TH DAY OF MARCH , 2020 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD