DCIT, New Delhi V. Sh. Pawan Kumar Kansal, New Delhi

ITA 1454/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7399 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Gift
• Section: 80IB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI H.S.SIDHU , JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO. 1454 /DEL/201 2 AY : - 200 8 - 09 DCIT, CIRCLE 21(1), F - 2 VS. PAWAN KUMAR KANSAL VIKAS BHAWAN, I.P.ESTATE A 7, ANTRIKSH APARTMENTS NEW DELHI SECTOR XIV, EXTN. ROHINI NEW DELHI 110 085 PAN: AHEPK 0574 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER SHARMA, SR.D.R. RESPONDENT BY : S H. VED JAIN & MS.RANO JAIN, C.A . O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD. CIT (A) X XII, NEW DELHI DT. 19.01.2012 PERTAINING TO THE AY 200 8 - 09 . 2. FACTS IN BRIEF: - THE FACTS OF THE CASE ARE BROUGHT OUT AT PARA 4 OF THE LD.CIT(A) S ORDER WHICH I S EXTRACTED FOR READY REFERENCE. 4. FACTS OF THE CASE : APPELLANT IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STAINLESS STEEL CUTLERIES AND UTENSILS IN THE NAME AND STYLE OF M / S JAGDAMBA EXPORTS. THE MAJORITY OF THE PRODUCTS OF THE APPELLANT ARE BEING EXPORTED OUT OF INDIA. IT HAS GOT ITS MANUFACTURING UNITS AT 153, 1&1, EPIP, KUNDLI, DISTT. SONIPAT. IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS REJECTED BOOKS O F ACCOUNTS OF THE APPELLANT U/S 145 OF THE LT. ACT ON THE GROUND THAT APPELLANT HAS NOT MAINTAINED STOCK REGISTERS, PRODUCTION REGISTER, OPENING AND CLOSING STOCK QUANTITY WISE AND QUALITY WISE AND THE VALUE OF CONSUMABLE STOCK AND PACKING MATERIAL HAS N OT BEEN TAKEN INTO INVENTORY. THE ASSESSING OFFICER HAS MENTIONED THAT CLOSING STOCK OF FINISHED GOODS HAS BEEN VALUED AT RS. 180/ - PER KG WHEREAS THE AVERAGE SALE VALUE OF THE FINISHED GOODS COMES TO RS. 214.23 INCLUDING GROSS PROFIT. AFTER REDUCING GROS S PROFIT MARGIN @ 3.13%, THE VALUE OF FINISHED GOODS PER KG. WORKS OUT AT RS.207 .53. THIS VALUE WAS ADOPTED BY THE ASSESSING OFFICER FOR ITA 1454/DEL/2012 AY 2008 - 09 PAWAN KUMAR KANSAL 2 VALUING THE STOCK OF FINISHED GOODS AND AN ADDITION OF RS. 60,81,102/ - WAS MADE ON THIS ACCOUNT. IN THE PRODUCTION PR OCESS, THE APPELLANT HAS DECLARED GENERATION OF SCRAP @ 48.930/0 FOR MANUFACTURING OF CUTLERY AND UTENSILS. HOWEVER, ASSESSING OFFICER HAS MENTIONED IN ORDER THAT GENERATION OF SCRAP HAS BEEN FIXED AT 41.176% BY THE CENTRAL EXCISE AUTHORITIES IN THE PRODUC TION OF UTENSILS AND CUTLERIES. THEREFORE, THE AO ADOPTED THE GENERATION OF SCRAP @ 41.176% AND THE EXCESS SCRAP CLAIMED BY THE APPELLANT WAS TREATED AS RAW MATERIAL USED IN UNACCOUNTED PRODUCTION OF FINISHED GOODS IN THE FORM OF CUTLERY AND UTENSILS. ON THE BASIS OF THIS THE AO AHS MADE AN ADDITION OF RS.3,42,35,779/ - . THE AO HAS ALSO ADDED 20% I.E. RS.2,68,485/ - OUT OF BUSINESS PROMOTION EXPENSES AND RS.3,00,000/ - OUT OF THE COMMISSION AND INCENTIVE PAYMENT CLAIMED BY THE ASSESSEE. THE AO HAS ALSO DISA LLOWED DEDUCTION CLAIMED U/S 80IB OF THE I.T.ACT. 2.1 . AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY CALLED FOR A REMAND REPORT TO VERIFY THE CONTENTIONS OF THE ASSESSEE ABOUT MAINTENANCE OF STOCK REGISTER, PRODUCTION REGISTER AND DETAILS OF OPENING STOCK AND CLOSING STOCK BOTH QUALITY AND QUANTITY WISE. THE AO GAVE OPPORTUNITY TO THE ASSESSEE AND THEREAFTER GAVE A REMAND REPORT. THE ASSESSEE FILED A REJOINDER WITH THE REMAND REPORT. AFTER CONSIDERING THE REMAND REP ORT AND THE OBJECTIONS OF THE ASSESSEE, THE FIRST APPELLATE AUTHORITY GRANTED RELIEF. 2.2 . AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS IN VIEW OF THE FAILURE OF THE ASSESSEE IN PRODUCING REQUISITE DETAILS AND DOCUMENTS BEFORE THE THEN ASSESSING OFFICER TO ENABLE HIM TO DEDUCE THE PROPER INCOME OF THE ASSESSEE. 3. WHET HER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ACCEPTING THE PLEA OF THE ASSESSEE THAT THE COST OF FINISHED GOODS DOES NOT INCLUDE THE COST OF PACKING MATERIALS, WITHOUT ANY CONCLUSIVE EVIDENCE WITH THE LD. CIT(A) FOR GRANT OF R ELIEF TO THE ASSESSEE IN THIS REGARD, AND COMPLETELY IGNORING THE FACTS OF THE CASE AND THE REMAND REPORT OF THE ASSESSING OFFICER. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE 48.93 % SCRAP, AS CLAIMED BY THE ASSESSEE, AND DELETING THE TOTAL A DDITION ON ACCOUNT OF EXCESS SCRAP ALLEGEDLY GENERATED BY THE ITA 1454/DEL/2012 AY 2008 - 09 PAWAN KUMAR KANSAL 3 ASSESSEE BEYOND 41.17%, AS FIXED B Y THE EXCISE AUTHORITIES, BUT TREATED AS SALES OUTSIDE THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER, BY IGNORING THE FACTS AND EARLIER FINANCIAL RESULTS OF THE ASSESSEE, PARTICULARLY IN VIEW OF SCRAP PERCENTAGE AND GROSS PROFIT DECLARED BY THE ASSESSEE I N THE EARLIER YEARS WHEREIN THE ASSESSEE HAS CLAIMED AND RECEIVED BACK REFUND OF EXCISE - DUTY. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BUSINESS PROMOTION EXPENSES, BY ACCEPT ING THE PLEA OF THE ASSESSEE, IN SPITE OF THE FACT THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS AND SUPPORTING DOCUMENTS REGARDING THE PERSONS AND THE PURPOSE OF GIFTS MADE TO THEM, NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE REMAND PROCEEDIN GS. 5 . WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INCENTIVE AND COMMISSION EXPENSES, BY ACCEPTING THE PLEA OF THE ASSESSEE, IN SPITE OF THE FACT THAT THE ASSESSEE DID NOT FURNISH ANY PROPER DETAILS, EVIDENCE AND THE SUPPORTING DOCUMENTS FOR THE JUSTIFICATION OF ABOVE EXPENSES, NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE REMAND PROCEEDINGS. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND AMEND, ALTER OR ADD ANY OTHER GROUND OF APPEAL. 3. WE HAVE HEARD SHRI SAMEER SHARMA, LD.SR.D.R. ON BEHALF OF THE REVENUE AND MR.VED JAIN, THE LD.COUNSEL FOR THE ASSESSEE. 4 . ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF LOWER AUTHORITIES, WE HOLD AS FOLLOWS. 5 . IN THE REMAND REPORT THE CONTENTIONS OF THE ASSESSEE THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS WAS ACCEPTED BY THE AO. THE AO ALSO ACCEPTED THE CONTENTION THAT HE HAS NOT BEEN ABLE TO POINT OUT ANY DISCREPANCY IN THE BOOKS OF ACCO UNTS AND STOCK RECORD PRODUCED BY THE ASSESSEE BEFORE HIM. THUS, IN OUR VIEW, THE FIRST APPELLATE AUTHORITY HAD NO OTHER OPTION BUT TO REJECT THE ACTION OF AO IN REJECTING THE BOOKS OF ACCOUNTS. HENCE GROUND NO.1 OF THE REVENUE IS DISMISSED. ITA 1454/DEL/2012 AY 2008 - 09 PAWAN KUMAR KANSAL 4 6. GROUND N O.2 IS ON THE ISSUE OF VALUATION OF FINISHED GOODS. THE AO IN PARA (II)(A) OF HIS REMAND REPORT SPECIFICALLY MENTIONED THAT HE HAS EXAMINED COPY OF THE LEDGER ACCOUNT ON PACKING MATERIAL, STOCK RECORD ETC. THE AO WAS NOT ABLE TO POINT OUT ANY DISCREPANC Y IN THE CLAIM OF THE ASSESSEE THAT THE COST OF FINISHED GOODS DOES NOT INCLUDE THE COST OF PACKING MATERIAL. IN THE ABSENCE OF ANY ADVERSE FINDING BY THE AO, IN THE REMAND REPORT, THE FIRST APPELLATE AUTHORITY WAS RIGHT IN ACCEPTING THIS CLAIM OF THE ASS ESSEE. HENCE GROUND NO.2 OF THE REVENUE IS DISMISSED. 7. GROUND NO.3 IS AGAINST THE FINDING OF THE LD.CIT(A), WHEREIN HE ALLOWED 48.93% SCRAP, AS CLAIMED BY THE ASSESSEE. IN THE REMAND REPORT THE AO HAS, ON THE ISSUE OF GENERATION OF SCRAP, ACCEPTED THE FACT THAT THE ASSESSEE HAS PRODUCED COMPLETE DETAILS OF THE SCRAP GENERATED AND SCRAP SOLD. THE AO ALSO OBTAINED NECESSARY CONFIRMATIONS FROM THE PARTIES TO WHOM THE SCRAP WAS SOLD. THE AO ALSO ACCEPTED THE FACT THAT THE PERCENTAGE OF SCRAP FIXED BY THE EXCISE AUTHORITIES WAS ONLY, FOR THE PURPOSE OF GIVING INCENTIVES TO THE ASSESSEE AND HAS NO EFFECT ON THE ACTUAL FACTS OF THE CASE. THE ASSESSEE HAD SUBMITTED VARIOUS LETTER S TO THE EXCISE AUTHORITIES FOR REVISION OF THE NORMS OF SCRAP FIXED BY THEM. IN VIEW OF THE ABOVE OBSERVATIONS BY THE AO IN THE REMAND REPORT, WE FIND NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AND HENCE WE DISMISS GROUND NO.3 OF THE REVENUE. 8. GROUND NO.4 IS AGAINST DELETION OF AN ADDITION MADE ON ACCOUNT OF BUSI NESS PROMOTION EXPENSES. HERE ALSO, IN THE REMAND REPORT, THE AO WAS UNABLE TO POINT OUT ANY DISCREPANCY OR ERROR IN THE EXPLANATION GIVEN BY THE ASSESSEE. THE AO HAD MADE AN ADHOC DISALLOWANCE WITHOUT SPECIFYING ANY DETAILS. THE ASSESSEE HAD PRODUCED COMPLETE DETAILS OF THESE EXPENSES DURING THE COURSE OF REMAND PROCEEDINGS. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY . THUS WE DISMISS GROUND NO.4 OF THE REVE NUE. ITA 1454/DEL/2012 AY 2008 - 09 PAWAN KUMAR KANSAL 5 9. WITH REGARD TO DELETION OF AN ADDITION MADE ON ACCOUNT OF INCENTIVE AND COMMISSION EXPENSES, THE FIRST APPELLATE AUTHORITY AT PARA 12.3 PAGE 28 HELD AS FOLLOWS. I HAVE CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER, SUBMISSION OF THE AP PE LLANT, REMAND REPORT AND REJOINDER OF APPELLANT. THE ASSESSING OFFICER HAS DIS ALLOWED RS.3 LAKHS BEING INCENTIVE AND COMMISSION PAID BY THE APPELLANT TO TWO OF ITS EMPLOYEE M/S RASHI JAIN & NARENDER BISHT. THE ASSESSING OFFICER HAS MADE THIS ADDITION TH AT NO AGREEMENTS HAVE BEEN SUBMITTED IN THIS REGARD. IN THE REMAND PROCE EDINGS THE ASSESSING OFFICER HAS AGAIN EXAMINED THE ISSUE AND THE APPELLANT HAS SUBMITTED DETAILS OF THE SAME ALONG WITH THE BILLS, ETC. I HAVE EXAMINED THE ISSUE AND IT IS SEEN THAT APPELLANT HAS PAID THIS COMMISSION ON THE EXPORTS FOR WHICH COMPLETE DETAILS WITH NAME OF THE PARTY, QUANTITY, PERCENTAGE AT WHICH THIS COMMI SSION/INCENTIVE HAS BEEN PAID. FURTHER THE APPELLANT HAS ALSO IDENTIFIED THE PERSONS TO WHOM THIS COMMISSION HAS BEEN PAID. THE ASSESSING OFFICER IN THE RE MAND PROCEEDINGS HAS NOT BEEN ABLE TO FIND OUT ANYTHING ADVERSE DESPITE THE APPELLANT GIVING COMPLETE DETAILS EXCEPT STATING THAT THERE IS NO AGREEMENT FOR THE SAME. HOWEVER, THE FACT REMAINS THAT THIS PAYMENT HAS BEEN MADE AS A MATTER OF CO MMERCIAL EXPEDIENCY AND ON THE BASIS OF EXPORT OF ORDERS PROCURED BY ABOVE NAMED PERSONS. I NOTICE THAT THE APPELLANT HAS BEEN PAYING THIS COMMISSION EVERY YEAR. DURING THE YEAR IT HAS PAID COMMISSION OF RS.9,99,448/ - . THE DISALLOWANCE OF RS.3 LAC IN VIEW OF THE ABOVE DETAILS AND THE NATURE OF THE SERVICES RENDERED BY THE RECIPIENT WAS NOT JUSTIFIED. ACCORDINGLY I DIRECT THE ASSESSING OFFICER TO DELETE TH IS ADDITION. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 9.1. THE LD.SR.D.R. WAS UNABLE TO CONTROVERT THIS FACTUAL FINDING OF THE LD.CIT(A). THUS WE DISMISS GROUND NO.5 OF THE REVENUE. 10. GROUND NO.6 IS GENERAL IN NATURE. 11. BEFORE PARTING, WE EXPRESS OUR SERIOUS CONCERN AT TH E TYPE OF APPEALS BEING FILED BY T HE REVENUE. DURING THE REMAND PROCEEDINGS THE AO ACCEPTED EACH AND EVERY CONTENTION OF THE ASSESSEE OR WAS UNABLE TO DISLODGE THE CONTENTIONS OF THE ASSESSEE AND WHEN THE LD.CIT(A) BASES HIS ORDER ON THE REMAND REPORT OF THE AO, THE AO DISPUTES THE FINDIN GS OF THE LD.CIT(A) AND FILES THIS APPEAL. A SENIOR OFFICER IN THE RANK OF COMMISSIONER OF INCOME TAX APPROVES FILING OF SUCH FRIVOLOUS APPEALS. SUCH A CALLOUS APPROACH IS TO ITA 1454/DEL/2012 AY 2008 - 09 PAWAN KUMAR KANSAL 6 BE DEPRECATED . WE AWARD COSTS OF RS.10,000/ - TO THE ASSESSEE IN THIS MATTER . 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED WITH COSTS . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER,2014. SD/ - SD/ - ( H.S. SIDHU ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 29 TH OCTOBER , ,2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR