DCIT, Ludhiana V. M/s Jamna Dass Nikka Mal Jain Saraf (P) Ltd., Ludhiana

ITA 149/CHANDI/2011

• Counselvise Citation: 14921514 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Gift
• Section: 133A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.149/CHD/2011 ASSESSMENT YEAR: 2007-08 DCIT, CIRCLE - VII, V JAMNA DASS NIKKA M AL JAIN LUDHIANA. SARAF (P) LTD., 455, THE MALL, LUDHIANA. PAN: AAACJ-4166F (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI N.K.SAINI ASSESSEE BY : SHRI ASHWANI KUMAR DATE OF HEARING : 15.03.2012 DATE OF PRONOUNCEMENT : 16.4.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 07.12.2010 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. ON THE BASIS OF THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE LD. CIT(A)-II LUDHIANA HAS ERRED I N DELETING THE ADDITION OF RS.5,83,150/- MADE BY THE AO BY APPLYING GP RATE OF PREVIOUS YEAR BY REJECTING THE BOOK VERSION U/S 145(3) OF INCOME-TAX ACT,1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-II LUDHIANA HAS ERRED IN DELETING TH E ADDITION OF RS.3,00,000/- MADE BY THE AO OUT OF BUSINESS PROMOTION EXPENSES. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-II LUDHIANA HAS ERRED IN DELETING TH E ADDITION OF RS.97,994/- MADE BY THE AO OUT OF KARVA CHAUTH EXPENSES ON ADHOC BASIS. 4. THAT THE ORDER OF LD. CIT(A) LUDHIANA BE SET ASI DE AND THAT OF THE AO BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. GROUND NOS. 4 & 5 ARE GENERAL IN NATURE AND HENC E, NEED NO SEPARATE ADJUDICATION. ACCORDINGLY, SUCH G ROUNDS OF APPEAL ARE DISMISSED. 4. IN GROUND NO.1, THE REVENUE CONTENDED THAT CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5,83,150/- MAD E BY THE AO BY APPLYING GP RATE OF PREVIOUS YEAR AND AFTER R EJECTION OF THE BOOKS OF ACCOUNT U/S 145(3) OF INCOME-TAX ACT,1 961. 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, REVENUE PLACED RELIANCE ON THE ORDER PASSED BY THE AO, WHER EAS THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE CIT(A) . THE LD. 'AR' CONTENDED THAT THE ISSUE IN QUESTION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, IN ASSESSEE'S OWN CASE B Y THE CHANDIGARH BENCH, IN ITA NO., 144/CHD/2011 A.Y. 200 6-07 DATED 29.09.2011, VIDE PARA 8 TO 11. 6. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND FOUND THAT THE ISSUE IS SQUARELY CO VERED BY THE DECISION OF ITAT CHANDIGARH BENCH CITED BY THE LD. 'AR'. ACCORDINGLY, FOR THE SAKE OF READY REFERENCE, AND P ROPER 3 APPRECIATION OF THE SAME, THE RELEVANT PART OF THE ORDER IS REPRODUCED HEREUNDER : 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SURVEY U/S 133A OF THE INCOME- TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE, PURSUANT TO WHICH THE ASSESSEE SURRENDERED RS.55 LACS AS ADDITIONAL INCOME, WHICH WAS SO INCLUDED IN THE RETURN OF INCOME FILED BY TH E ASSESSEE IN THE YEAR UNDER CONSIDERATION. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVING THAT THERE WAS FALL IN GP RATE AFTER EXCLUSION OF SURRENDER OF RS.55 LACS REJECTED THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE REASONS FOR FALL IN GP RATE. THE AO THEREAFTER PROCEEDED TO OBSERVE THAT THE YIELD OF GOLD JEWELLERY FROM 24 CARAT GOLD CONVERTED INTO 22 CARAT, 20 CARAT AND 18 CARAT OF JEWELLERY WAS ON THE LOWER SIDE AND CONSEQUENTLY THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE FOUND TO BE NOT RELIABLE. THE SAME WERE REJECTED U/S 145(3) OF THE ACT AND ADDITION ON THIS ACCOUNT WAS MADE IN THE HANDS OF THE ASSESSEE. 9. SIMILAR ISSUE OF ADDITION ON ACCOUNT OF YIELD OF GOLD JEWELLERY ON CONVERSION FROM 24 CARAT GOLD AROSE BEFORE THE TRIBUNAL IN M/S NIKKA MAL JEWELLERS, LUDHIANA VS. ACIT IN ITA NO.61/CHANDI/2008 RELATING TO ASSESSMENT YEA R 2004-05. THE TRIBUNAL VIDE ORDER DATED 24.9.200 8 HELD AS UNDER : WE ARE OF THE OPINION THAT MERELY BECAUSE THE CONSUMPTION OF GOLD RECORDED IN THE BOOKS OF ACCOUNT DID NOT CORRESPOND TO PURITY NORMS APPLIED BY THE ASSESSING OFFICER CAN AT BEST BE A REASON TO FURTHER VERIFY THE BOOKS OF ACCOUNT BUT THE SAME, BY ITSELF IS NOT A GROUND TO DISREGARD THE RESULTS SHOWN IN THE BOOKS OF ACCOUNT. AFTER ALL, THE PURITY 4 NORMS ARE ONLY INDICATIVE AND THE SAME DO NOT TAKE AWAY THE AUTHENTICITY OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNT WHICH HAVE NOT BEEN FOUND LACKING IN BONAFIDES BY THE ASSESSING OFFICER. THE PLEA OF THE ASSESSEE, THEREFORE ON THIS ISSUE IS JUSTIFIED. 10. THE TRIBUNAL FURTHER HELD AS UNDER : IN ANY CASE, THE ALLEGATION THAT THE ASSESSEE HAS MADE SALES OUTSIDE THE BOOKS OF ACCOUNT IS TOTALLY UN-SUBSTANTIATED AND IT IS A MERE CONJECTURE ON THE PART OF THE ASSESSING OFFICER. CONSIDERED IN THE ABOVE LIGHT AND COUPLED WITH THE FACT THAT ACTION OF THE ASSESSING OFFICER WAS BASED ON AN ESTIMATED PURITY NORM OF GOLD, WE FIND NO JUSTIFICATION FOR SUSTAINING ANY PART OF THE IMPUGNED ADDITION. THE CIT(A), IN OUR VIEW, OUGHT TO HAVE DELETED THE ENTIRE ADDITION OFRS.5,46,552/- AND NOT MERELY A PART OF THE ADDITION, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE ADDITION. AS A RESULT, THE ASSESSEE SUCCEEDS ON GROUND NOS. 1 TO 4 AND GROUND NO.2 IN THE APPEAL OF THE REVENUE STANDS DISMISSED. 11. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSES SEE AND FOLLOWING THE ORDER OF THE TRIBUNAL WE ARE IN AGREEMENT WITH THE ORDER OF THE CIT (APPEALS). THE RE IS NO MERIT IN THE AFORESAID ADDITION MADE BY THE ASSESSING OFFICER WITHOUT POINTING OUT ANY SALES MADE OUTSIDE THE BOOKS OF ACCOUNT. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS THE GROUND NO.1 RAISED BY THE REVENUE. 5 7. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL, ON THE SAME ISSUE, IN ASSESSEE'S OWN CASE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. IN GROUND NO.2, REVENUE CONTENDED THAT THE CIT(A ) ERRED, IN DELETING THE ADDITION OF RS.3,00,000/-, M ADE BY THE AO, OUT OF BUSINESS PROMOTION. 9. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE AO, IN THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT THE ASSESSEE UND ER THE HEAD SELLING EXPENSES CLAIMED EXPENSES INCURRED O N GIFTS TO CUSTOMERS AND ENTERTAINMENT EXPENSES IN THE SHAPE O F FOOD AND BEVERAGES. SUCH EXPENSES INCURRED SUBSTANTIALLY INCREASED FROM RS.4,80,719/- TO RS.20,85,831/-. THE AO, HAD MADE THE ADDITION ON APPRECIATING THE FACTUM TH AT THERE WAS ABNORMAL INCREASE IN SUCH EXPENSES VIS-A-VIS PR EVIOUS YEAR. IT WAS, FURTHER, OBSERVED BY THE AO THAT FOR WANT OF MAINTENANCE OF PROPER RECORD BY THE ASSESSEE, IT IS NOT FEASIBLE, TO VERIFY THE EXTENT AND GENUINENESS OF S UCH EXPENSES. ACCORDINGLY, DISALLOWANCE OF RS.3,00,000/ - WAS MADE BY THE AO, OUT OF TOTAL EXPENDITURE OF RS.20,8 5,831/-. LD. CIT(A), HOWEVER, DELETED THE IMPUGNED ADDITION ON THE GROUND THAT ALL VOUCHERS AND DOCUMENTS WERE SUBMITT ED BEFORE THE AO, BY THE ASSESSEE. HOWEVER, A CAREFUL PERUSAL OF THE ASSESSMENT ORDER DOES NOT SUPPORT ASSERTIONS MA DE BY THE CIT(A). THE ASSESSEE HAS FAILED TO PROVIDE A L IST OF SUCH CUSTOMERS, TO WHOM SUCH GIFTS WERE GIVEN, AND ALSO THE DETAILS OF SUCH SCHEMES, SUPPORTED BY SOME BROCHURE UNDER WHICH SUCH EXPENDITURE WAS INCURRED. IN VIEW OF SU CH 6 OBSERVATIONS, THE AO, HAD TO MAKE DISALLOWANCE, ON ESTIMATE BASIS. THE VIEW OF THE AO IS SUPPORTED BY THE DECIS ION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF T.V.SUNDRA M IYENGAR & SONS LTD. V CIT 241 ITR 420. NEEDLESS TO SAY THAT SUCH DISALLOWANCE MADE ON ESTIMATE BASIS, CAN NOT H AVE MATHEMATICAL PRECISION, IN QUANTIFICATION. THE ELEM ENT OF GUESS WORK CANNOT BE RULED OUT. IT IS UNDISPUTED LE GAL PROPOSITION THAT ONUS TO ESTABLISH THE GENUINENESS OF SUCH EXPENSES IS CAST ON THE ASSESSEE, BEING WITHIN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE AND ALSO IN VIEW OF THE F ACTUM OF MAKING SUCH CLAIM. HOWEVER, TO BE ON THE FAIR AND REASONABLE, THE DISALLOWANCE MADE BY THE AO, IS RED UCED TO 50% OF SUCH DISALLOWANCE. THE FINDINGS OF THE CIT( A) BEING NOT BASED ON COGENT AND CORROBORATIVE EVIDENCE, ARE SET ASIDE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE R EVENUE IS PARTLY ALLOWED. 10. THE REVENUE, IN GROUND NO.3, CONTENDED THAT CIT (A) ERRED IN DELETING THE ADDITION OF RS.97,994/-, MADE BY THE AO, OUT OF KARVA CHAUTH EXPENSES ON ADHOC BASIS . 11. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSION S, FACTS OF THE CASE, INCLUDING THE ASSESSMENT ORDER AND FIN DINGS OF LD. CIT(A). THE FINDINGS OF CIT(A), ARE REPRODUCED HEREUNDER: 4.2 REGARDING DISALLOWANCE OF RS.97,994/- ON ACCOUNT OF KARWA CHAUTH EXPENSES APPELLANT SUBMITTED THAT THE ENTIRE EXPENDITURE WAS INCURRED AS BUSINESS AND SALES EXPENSES TO PROVIDE EXTRA- SERVICE AND FACILITIES TO LADIES ON THE OCCASION OF KARVA CHAUTH, WHERE LADIES AS A MATTER OF CUSTOM AND TRADITION BUY NEW JEWELLERY. AS REGARDS, THE GENUINENESS OF THE SAID EXPENDITURE, THE ENTIRE 7 EXPENDITURE IS DULY VOUCHED AND SUPPORTED BY DOCUMENTARY EVIDENCE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT THE ABOVESAID EXPENSES INCURRED BY THE APPELLANT COMPANY ON THE OCCASION OF KARWA CHAUTH FOR BUSINESS EXPEDIENCY. AS IT IS WELL KNOWN FACT THAT THE KARWA CHAUTH IS ONE OF THE MOST IMPORTANT FESTIVAL FOR WOMEN IN INDIA AND WOMEN BUY NEW JEWELLERY ON THIS OCCASION. FURTHER, THE DECISION O F HON'BLE GUJRAT HIGH COURT IN THE CASE OF VOLTAMP TRANSFORMER LTD. 129 ITR 105, WHICH IS RELIED UPON BY THE APPELLANT IS ALSO APPLICABLE IN THIS CASE. THEREFORE, KEEPING IN VIEW THE ABOVE FACTUAL POSITION AND ABOVESAID CASE LAW, THE DISALLOWANCE ON ACCOUNT OF KARWA CHAUTH EXPENDITURE IS NOT JUSTIFIABLE WITH REGARDS TO APPELLANTS BUSINESS. THUS, ADDITION OF RS.97,994/- IS HEREBY DELETED. 12. HAVING REGARD TO THE FACT-SITUATION OF THE PRES ENT CASE AND THE FINDINGS GIVEN BY THE CIT(A), WE UPHOLD FIN DINGS OF THE CIT(A), BEING BASED ON APPRECIATION OF FACTS OF THE CASE AND THE CASE LAW RELIED UPON BY THE ASSESSEE. THUS , THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 16 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH