DCIT, CIR-12(1), KOLKATA, Kolkata V. M/s IFB Industries Ltd., Kolkata

ITA 1414/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1912 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA
• Assessee Lawyers: DR SOMNATH GHOSH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A NO. 1414/KOL/20 16 ASSESSMENT YEAR : 2007-0 8 DCIT, CIRCLE-12(1), KOLKATA -VS- M/S I FB INDUSTRIES LTD. [PAN: AAACI 6561 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SOUMYAJIT DAS GUPTA, ADDL. CIT FOR THE RESPONDENT : DR. SOMNATH GHOSH, ADVOC ATE DATE OF HEARING : 26.12.2017 DATE OF PRONOUNCEMENT : 05.01.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-9, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO.728/CIT(A)- 9/CIR-12/2014-15/KOL DATED 18.03.2016 AGAINST THE O RDER PASSED BY THE DCIT, CIRCLE- 12(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 24.12.2009 FOR THE ASSE SSMENT YEAR 2007-08. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 60,79,000 /- MADE ON ACCOUNT OF OPERATING AND ADMINISTRATIVE EXPENSES ON AN AD HOC BASIS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FINE BLANK COMPONENTS, TOOLS, HOME APPLIANCES AND TRADING. THE 2 ITA NO.1414/KOL/2016 M/S IFB INDUSTRIES LTD. A.YR. 2007-08 2 ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 29.10.2007 FOR THE ASSESSMENT YEAR 2007-08 SHOWING NIL INCOME AFTER SET OFF BROUGHT FO RWARD LOSSES. THE LD. AO OBSERVED THAT THE ASSESSEE COMPANY HAD DEBITED RS. 3,03,95,000/- IN ITS PROFIT AND LOSS ACCOUNT ON ACCOUNT OF OTHER SUNDRY EXPENSES UNDER THE HEAD OPERATING AND ADMINISTRATIVE EXPENSES. THE LD. AO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE FULL EVIDENCES IN SUPPORT OF THIS EXPENDITURE AND ACCORD INGLY PROCEEDED TO DISALLOW 20% OF THE SAME AMOUNTING TO RS. 60,79,000/- ON AN ESTIMAT ED BASIS IN THE ASSESSMENT. THE ASSESSEE FILED THE DETAILS OF OTHER SUNDRY EXPENSES TO THE TUNE OF RS. 3,03,95,000/- WHICH IS REPRODUCED AS UNDER: BREAKUP OF OTHER SUNDRY EXPENSES FINANCIAL YEAR 2006-07 ASSESSMENT YEAR 2007-08 SL. NO. DESCRIPTION AMOUNT(RS.) 1. LICENSE FEES 1,60,500 2 MEMBERSHIP AND SUBSCRIPTION 1,75,000 3 MISCELLANEOUS EXPENSES FOR GARDEN MAINTENANCE 10, 25,600 4 WARRANTY EXPENSES FOR THE FREE DELIVERY OF SPARES AND PARTS FOR THE HOME APPLIANCES 1,81,26,332 5 ENTRY TAX 6,72,200 6 LEGAL EXPENSES 11,25,800 7 GUEST HOUSE EXPENSES 40,85,068 8 AUDIT FEE AND OTHER EXPENSES 22,59,000 9 INTERNAL AUDIT FEES 27,65,500 TOTAL 3,03,95,000 THE LD. CIT(A) DELETED THIS DISALLOWANCE ON THE GRO UND THAT BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE LD. AO AND NO DEFECTS WERE FOU ND THEREON BY THE LD. AO AND 3 ITA NO.1414/KOL/2016 M/S IFB INDUSTRIES LTD. A.YR. 2007-08 3 ACCORDINGLY, THERE IS NO CASE FOR MAKING ANY ESTIMA TED ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED BY DELETING THE ADDITION OF RS. 60,79,000/- MADE BY AO ON ACCOUNT OF OPERATING AND ADMINISTRATIVE EXPENSES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE RELYING UPON TH E DOCUMENTARY EVIDENCES OF THE OTHER SUNDRY EXPENSES PRODUCED BEFORE HIM WH ICH WAS NOT PRODUCED BY THE ASSESSEE BEFORE THE AO AND NO REMAND REPORT HAS BEEN CALLED FOR BY THE LD. CIT(A) IN CONTRAVENTION TO THE PROVISION UN DER RULE 46A OF THE I.T.RULE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE LD. AO. IN RESPONSE TO THIS, THE LD. AR VEHEMEN TLY RELIED ON THE ORDER OF THE LD. CIT(A) AND ARGUED THAT THE ADDITION WAS MADE ONLY O N AN ESTIMATED BASIS BY THE LD. AO. WE FIND THAT NO DEFECTS WERE FOUND IN THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE BEFORE THE LD. AO AND WITHOUT REJECTING TH E BOOKS OF ACCOUNTS AFTER POINTING OUT CERTAIN DEFECTS THEREON, THERE CANNOT BE ANY ES TIMATED ADDITION. WE ALSO FIND LOT OF FORCE IN THE RELIANCE PLACED BY THE LD. AR ON THE D ECISION OF DELHI TRIBUNAL IN THE CASE OF DCIT VS. GYMKHANA CLUB REPORTED IN [2010] 6 ITR (TRIB)808 (ITAT)(DEL) DATED 17.09.2010 WHEREIN IT WAS HELD AS UNDER: 25. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT AD HOC DISALLOWANCE WAS MADE BY THE ASSESSING OFFIC ER ON ESTIMATED BASIS WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. AS PER THE ASSESSING OFFICER, USE OF TELEPHONE FOR PERSONAL PURPOSES OF EMPLOYEES, CANNOT BE RULED OUT. THIS ASPECT IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE HIGH COURT OF GUJRAT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS. CIT AS RE PORTED IN [2002] 253 ITR 749. BY RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE HIGH COURT OF GUJRAT (SUPRA), WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) ON THIS ISSUE. GROUND NO. 4 OF THE REVENUES APPEAL STANDS REJECTE D. 4 ITA NO.1414/KOL/2016 M/S IFB INDUSTRIES LTD. A.YR. 2007-08 4 IN VIEW OF THE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF DELHI TRIBUNAL WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). ACCORDINGLY T HE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 05.01.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 05.01.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-12(1), KOLKATA, P-7, CHOWRINGHEE SQ UARE, AAYAKAR BHAWAN, 7TH FLOOR, KOLKATA-700069. 2. M/S IFB INDUSTRIES LTD., 14, TARATOLA ROAD, KOLK ATA-700088 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S