The ACIT, Circle-8, Ahmedabad V. M/s. Winners Business Link Pvt.Ltd., Ahmedabad

ITA 1375/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6302 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH

Judgement Text

ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 1 IN THE INCOME TAX APPELLATE TRIBUNAL - A BENCH, A HMEDABAD. (BEFORE SHRI MUKUL KUMAR SHRAWAT & SHRI A. K. GARODIA) I.T.A.NO. 1375/AHD/2009 (ASSESSMENT YEAR: 2006 -2007) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. WINNERS BUSINESS LINK PVT. LTD., ABOVE CANARA BANK, JIVAN KAMAL CHAMBERS, NAVRANGPURA, AHMEDABAD. (RESPONDENT) PAN: AAACW 1747 J APPELLANT BY : SHRI KARTAR SINGH, CIT (DR) RESPONDENT BY : NONE. ( )/ ORDER PER: SHRI A.K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT (A)- XIV, AHMEDABAD DATED 18-02-2009 FOR ASSESSMENT YEAR 2006-07. 2. THE GROUND NO.1 RAISED BY THE REVENUE IS AS UNDE R:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,31,95,051/- REJECTING THE ACCOUNTI NG POLICIES. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF NOTICE AND HENCE WE DECIDE THIS APPEAL EX-PARTE QUA THE ASSESSEE. 4. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENG AGED IN THE BUSINESS OF PROVIDING DISCOUNT CARDS. THE CARDS ARE ISSUED TO T HE MEMBERS ON PAYMENT OF PRESCRIBED FEES, WHICH IS CALLED MEMBERSHIP FEES . THE PERIOD OF MEMBERSHIP VARIES BETWEEN ONE TO THIRTY YEARS. THE PAYMENT FOR THE ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 2 MEMBERSHIP FEE IS ONE TIME ONLY AND IS NON-REFUNDAB LE AND THE MEMBERSHIP IS NON TRANSFERABLE. THE CARD CARRY CERTAIN BENEFIT S TO THEIR HOLDERS IN THE FORM OF FACILITY OF DISCOUNT ON PURCHASES MADE BY T HEM FROM SPECIFIED SHOPS/BUSINESS ESTABLISHMENTS AS ALSO INSURANCE COV ERAGE UNDER CERTAIN POLICIES OF GENERAL INSURANCE. THE SALE OF CARD IS MADE THROUGH AGENTS WHO GET COMMISSION FOR THEIR SERVICES. THE SYSTEM OF A CCOUNTING FOLLOWED BY THE ASSESSEE-COMPANY IS ON MERCANTILE BASIS. THE INCOME IS RECOGNIZED AS IT ACCRUES AS MENTIONED IN THE POLICY OF REVENUE RECOG NITION AND THE EXPENSES ARE ALSO ACCOUNTED ON ACCRUAL BASIS. THE STAND OF T HE DEPARTMENT IS THIS THAT THE MEMBERSHIP FEES SHOULD BE SHOWN AS INCOME IN TH E YEAR OF RECEIPT. THE A.O. HAD NOTED THAT IN THIS YEAR, ASSESSEE HAS RECE IVED MEMBERSHIP FEE OF RS.14,37,44,200/- INCLUDING RS.169.02 LAKHS ON ACCO UNT OF ENTRY FEES BUT THE ASSESSEE HAS SHOWN INCOME IN THIS YEAR FOR RECEIPT OF RS.553.56 LAKHS AND NOT RS.1473.44 LAKHS. THE A.O. MADE ADDITION OF THE DIFFERENCE AMOUNT OF RS.884.09 LAKHS. SIMILARLY FOR EXPENSES ALSO, A.O. HELD THAT TOTAL EXPENSES INCURRED DURING THIS YEAR ON ACCOUNT OF COMMISSION AND INSURANCE IS RS.1154.84 LAKHS WHEREAS ASSESSEE HAS CLAIMED DEDUC TION OF RS. 702.11 LAKHS ONLY AND HENCE IT IS HELD BY THE A.O. THAT DE DUCTION SHOULD BE ALLOWED TO THE ASSESSEE OF THE ENTIRE EXPENSES OF RS. 1154. 84 LAKHS AS AGAINST RS.70.71 LAKHS CLAIMED BY THE ASSESSEE. A.O. MADE N ET ADDITION OF RS.4,31,95,051/-.BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) HAS NOTED I N PARAGRAPH 3.2 OF HIS ORDER THAT THIS ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR VARIOUS ASSESSMENT YEARS I.E. A.Y. 1989-90 TO 1998-99 IN IT (SS) NO.206/AHD/2004, IT (SS) A.NO .30/AHD/2003, ITA NIO.2197/AHD/2004 & ITA NOS.3221, 3396, 3395/AHD/20 03 DATED 23-12- ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 3 2005. THE LD. CIT (A) HAS FOLLOWED THIS TRIBUNAL O RDER AND DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND NOW THE REVENUE IS IN APPEAL BEFORE US. 5. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESS MENT ORDER 6. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. D.R. A ND PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDER OF THE LD. CIT (A). WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVO UR OF THE ASSESSEE AS PER PARAGRAPH 3.3.6 WHICH IS REPRODUCED BELOW:- 3.3.6 IN VIEW OF THE CLEAR FINDING IN ORDER DATED 23-12-2005 BY THE HON. ITAT AHMEDABAD BENCH, IN THE APPELLANTS O WN CASE AND SUBSEQUENT APPEAL ORDERS PASSED BY CIT (A) FOR ASSE SSMENT YEARS 2002-03 AND 2003-04 AND ORDER OF ITAT DATED 8-2-20 06 IN ITA NO.2083/AHD/2005 FOR A.Y. 2002-03,GROUNDS OF APPEAL NO.1,2 & 3 ARE ALLOWED IN SO FAR AS THE MAIN ADDITION OF RS.4, 31,95,051/- IS CONCERNED FOR MAINTAINING CONSISTENCY AND FOLLOWING THE JUDGMENT OF THE HON. ITAT, AHMEDABAD ON THE POINT OF METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. 7. THE LD. D.R. OF THE REVENUE COULD NOT SHOW US TH AT THE FACTS IN THE PRESENT YEAR ARE NOT IDENTICAL TO THE FACTS IN A.Y. 2002-03 AND 2003-04 IN WHICH THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. C.I.T.(A). HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF THE C.I.T. (A) . 8. THUS, GROUND NO.1 OF THE REVENUE IS REJECTED. 9. GROUND NO.2 OF THE APPEAL IS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE DISALLOWANCE MADE ON ACCOUNT OF MEETING EXPENSES AM OUNTING TO RS.1,00,000/-. 10. ON THIS ISSUE ALSO LD. D.R. OF REVENUE SUPPORTE D THE ASSESSMENT ORDER. ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 4 11. WE HAVE CONSIDERED HIS SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THIS ISSUE HAS BEEN DECIDED VI DE PARAGRAPH 3.4.3 OF HIS ORDER WHICH IS REPRODUCED BELOW:- 3.4.3. WHILE DISALLOWING RS.1,00,000/-OUT OF MEETI NG EXPENSES, THE A.O. OBSERVED THAT MOST OF THE EXPENSES WERE IN CURRED IN CASH AND THERE WAS NO CHECK OVER SUCH EXPENSES AND THE PURPO SE OF WHICH THESE AMOUNTS WERE SPENT COULD NOT BE ASCERTAINED AND THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY DETAILS. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A.R. OF THE APPELLANT FURNISHED A COPY OF ASSESSMENT ORDER FOR FRINGE BENEFIT PASSED FOR A.Y. 2006-07 AN D SUBMITTED THAT AN AMOUNT OF RS.17,74,909/- HAS ALREADY BEEN ADDED THERE TOWARDS MEETING EXPENSES, HENCE THE DISALLOWANCE OF RS. 1 L AKH MADE IN INCOME TAX AMOUNTS TO DOUBLE TAXATION AND THE SAME MAY BE DELETED. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMI SSION OF THE A.R. AS MEETING EXPENSES OF RS. 17,74,909/- HAVE ALREADY BEEN ADDED IN FRINGE BENEFIT ASSESSMENT, WHICH INCLUDED THE AMOUN T OF RS.1 LAKH NOW ASSESSED IN INCOME TAX, THIS ADDITION OF RS. 1 LAKH IS HELD TO BE NOT JUSTIFIED. HENCE I DIRECT THE A.O. TO DELETE TH E ADDITION SO MADE. 12. FROM THE ABOVE PARAGRAPH OF LD. CIT (A) WE FIND THAT THIS ADDITION HAS BEEN DELETED ON THIS BASIS THAT MEETING EXPENSE S OF RS.17.75 LAKHS HAVE ALREADY BEEN ADDED IN FRINGE BENEFIT ASSESSMENT. WE FIND THAT THE LD. CIT (A) HAS HELD THAT SINCE MEETING EXPENSES OF RS.17.7 5 LAKHS HAS ALREADY BEEN ADDED IN FRINGE BENEFIT ASSESSMENT, FURTHER ADDITIO N OF RS.1 LAKH UNDER INCOME TAX IS NOT JUSTIFIED. 13. WE ALSO FIND THAT THIS ADDITION MADE BY THE A.O . IS SIMPLY ON THIS BASIS THAT A LUMPSUM DISALLOWANCE OF RS.1 LAKH IS M ADE FOR WANT OF CHECK TOWARDS EXPENSES WITHOUT GIVING ANY ADVERSE FINDING OR WITHOUT POINTING OUT EVEN SOME EXPENSES WHICH ARE BOGUS OR WHICH ARE NOT FOR BUSINESS PURPOSE. IN THE ABSENCE OF THAT, WE FEEL THAT DISALLOWANCE M ADE BY THE A.O. IS NOT JUSTIFIED AND HENCE WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. C.I.T.(A). THUS, GROUND NO.2 OF REVENUES APPEAL IS REJECTED. ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 5 14. GROUND NO.3 AND 4 ARE GENERAL AND DO NOT CALL F OR ADJUDICATION. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 06 - 2011. SD/- SD/- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATED: 30 - 6 - 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XIV, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.1375/A HD/2009. ASSESSMENT YEAR 2006-07. 6 1.DATE OF DICTATION 22 - 06 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 23 /06 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..