The ACIT, Circle-10, Ahmedabad V. Anik Engineers, Ahmedabad

ITA 150/AHD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4389 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N DIVETIA
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEM BER ANIK ENGINEERS, 202-203, SUR SARTHI CENTRE OPP. CENTRAL BANK OF INDIA, AMBABADI, AHMEDABAD PAN: AABFA 7316 E (APPELLANT) VS DCIT, CIRLCE-10, AHMEDABAD (RESPONDENT) ACIT, CIRLCE-10, AHMEDABAD (APPELLANT) VS ANIK ENGINEERS, 202-203, SUR SARTHI CENTRE OPP. CENTRAL BANK OF INDIA, AMBABADI, AHMEDABAD PAN: AABFA 7316 E (RESPONDENT) REVENUE BY: SRI P.L. KUREEL, SR.D.R. ASSESSEE BY: SRI S.N. DIVETIA, A.R. DATE OF HEARING : 22-08-2013 DATE OF PRONOUNCEMENT : 06-09-20 13 ITA NO. 3502/AHD/2010 ASSESSMENT YEAR 2007-08 ITA NO. 150/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 2 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVE NUE AGAINST THE ORDER OF LD. CIT(A)-XVI DATED 08/11/2010. FIRST WE WILL TAKE UP ASSESSEES APPEAL IN ITA NO. 3502/AHD/2010. 2. IN THIS APPEAL ASSESSEE IS AGGRIEVED BY THE ACTI ON OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 7,98,268/- MADE BY A SSESSING OFFICER IN RESPECT OF DIFFERENCE IN THE CLOSING BALANCE OF M/S . SCHNEIDER ELEC. INDIA P. LTD. 3. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFI CER ISSUED NOTICE U/S 133(6) TO M/S SCHNEIDER ELEC. INDIA PVT. LTD FOR TH E CONFIRMATION OF ITS ACCOUNT FURNISHED BY THE ASSESSEE AND AFTER PERUSAL OF THE ACCOUNT SUBMITTED BY THIS COMPANY, ASSESSING OFFICER FOUND THAT THERE WAS A DIFFERENCE IN THE CLOSING BALANCE. THE ASSESSING OFFICER ASKED THE A SSESSEE TO RECONCILE THE DIFFERENCE, THE ASSESSEE COULD NOT RECONCILE THE DI FFERENCE OF RS. 7,98,268/-. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THIS AMOUNT SHOULD NOT BE ADDED TO HIS INCOME. THE ASSESSEES REPLY WAS THAT DIFFEREN CE OF RS. 7,97,455/- WAS IN RESPECT OF SCHNEIDER ELECTRIC INDIA PVT. LTD. THIS COMPANY HAS ISSUED CREDIT NOTES AND CREDITED THIS AMOUNT IN THEIR BOOK S. HOWEVER DUE TO DISPUTE SAID CREDIT NOTES HAVE NOT BEEN CONSIDERED BY THE A SSESSEE AND THEREFORE THERE IS A MARGINAL DIFFERENCE OF 813/- IF THESE CR EDIT NOTES ARE CONSIDERED. ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION A ND WAS OF THE VIEW THAT I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 3 SINCE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING, THEREFORE ANY CREDIT NOTE RECEIVED FROM THE PARTY SHOULD BE CREDI TED AS INCOME IN ITS BOOKS OF ACCOUNTS. FURTHER, SUCH DISPUTE DID NOT HAVE AN Y RELEVANCE WITH REGARD TO THE APPROVAL OF THE INCOME BY WAY OF CREDIT NOTES. THIS INCOME HAS COME INTO LIGHT ONLY WHEN INFORMATION WAS CALLED FROM TH E PARTY U/S 133(6). THE ASSESSING FURTHER NOTED THAT ALMOST 90% OF THE BUSI NESS WAS FROM ONLY ONE PARTICULAR SCHNEIDER ELECTRIC INDIA PVT. LTD. AND A S SUCH THE ASSESSEE WAS IN CONSTANT TOUCH WITH THE SAID PARTY. MOREOVER, THERE WAS NO CORRESPONDENCE TO SHOW THAT THERE WAS ANY DISPUTE REGARDING DEFICI ENCY IN THE PRODUCT, RATE, QUANTITY DISCOUNTS ETC., AND, THEREFORE, THE ARGUME NT OF THE ASSESSEE THAT THERE WAS DISPUTE WAS NOTHING BUT AN AFTERTHOUGHT. SINCE THERE IS NO CONFIRMATION OF THE CREDIT NOTE AMOUNTING TO RS. 7, 98,268 AND THE ASSESSEE HAS NOT MADE ANY CORRESPONDING ENTRIES OF THE SAID CREDITS IN ITS BOOKS OF ACCOUNTS, THE AO THEREFORE ADDED THIS SUM TO THE IN COME OF ASSESSEE. IN APPEAL THIS ACTION OF THE AO HAS BEEN CONFIRMED BY LD. CIT(A). 4. BEFORE US LEARNED COUNSEL OF THE ASSESSEE PLACIN G RELIANCE ON THE WRITTEN SUBMISSIONS BEFORE LD. CIT(A) ARGUED THAT B EFORE LD CIT(A) AN ALTERNATIVE PLEA WAS TAKEN BY THE ASSESSEE WHICH WA S NOT CONSIDERED BY HIM. IF THAT SUBMISSION WAS TAKEN INTO CONSIDERATION, TH ERE WOULD HAVE BEEN ADDITION OF RS. 2,75,374/- INSTEAD OF RS. 7,98,268/ -. HE THEREFORE PLEADED THAT ALTERNATIVE PLEA TAKEN BY THE ASSESSEE BEFORE LD. CIT(A) MAY KINDLY BE TAKEN INTO CONSIDERATION AND RELIEF MAY BE GIVEN TO THE ASSESSEE ACCORDINGLY. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(A). I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 4 5. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E RECORD, WE FIND THAT ALTERNATE PLEA TAKEN BY ASSESSEE BEFORE LD. CIT(A) READS AS UNDER:- WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNATIVE, THE APPELLANT SUBMITS THAT THE AO HAS WORKED OUT THE DIFFERENCE I N THE OPENING BALANCE BETWEEN TWO ACCOUNTS AT RS. 9,06,533/- BUT IT WILL BE NOTICED FROM THE BARE PERUSAL OF THE CHART GIVEN AT PARA 4. 1 OF THE ORDER ITSELF THAT SUCH DIFFERENT IS RS. 14,28,614/- (2,04,81,591 - RS. 1,90,52,977/-) WHEREAS THE DIFFERENCE IN THE CLOSING BALANCE IS RS . 17,03,988/- AND THUS THE INCREMENTAL DIFFERENCE FOR THE YEAR UNDER APPEAL IS RS. 2,75,374/- AND NOT RS. 7,97,455/- AS WORKED OUT BY THE AO. THEREFORE THERE SHOULD NOT BE ANY ADDITION OF RS. 7,98,268/- BUT IT SHOULD BE RESTRICTED TO RS. 2,75,374/- SINCE THIS REQUIRES VERIFICATION AT THE END OF AO, THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH CONSIDERATION AND IF TH E PLEA OF THE ASSESSEE IS FOUND CORRECT, RELIEF BE GIVEN TO THE ASSESSEE ACCO RDINGLY. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS E. NOW COMING TO REVENUES APPEAL IN ITA NO. 150/AHD/2 010 6. REVENUE IN THIS APPEAL IS AGGRIEVED BY THE RELIE F GIVEN BY THE LD. CIT(A) IN RESPECT OF DISALLOWANCE OF TPC EXPENSES O F RS. 5,43,154/-, ENTERTAINMENT EXPENSES OF RS. 1,00,292/-, CONVEYANC E EXPENSES OF RS. 1,94,821/- AND PROFESSIONAL EXPENSES OF RS. 62,775 /- 7. WITH RESPECT TO DISALLOWANCE OUT OF TPC EXPENSES OF RS. 5,43,154/-, THE ASSESSING OFFICER HAS STATED THAT THE EXPENDITU RE WAS PAID TO THE EMPLOYEES OF THE ASSESSEE AS REIMBURSEMENT OF VARIO US EXPENSES. THE AO FURTHER STATED THAT OUT OF TOTAL CLAIM OF EXPENSES OF RS. 8,57,838/-, A SUM OF RS. 2,28,471/- WAS SHOWN AS UNPAID. ACCORDING TO H IM, IT WAS UNBELIEVABLE I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 5 THAT THE TPC EXPENSES REMAINED UNPAID, BECAUSE SUCH EXPENSES WERE GIVEN TO THE EMPLOYEES EITHER IN ADVANCE AND THEY ARE REI MBURSED IMMEDIATELY BECAUSE THE EMPLOYEES WERE NOT CAPABLE OF AFFORDING SUCH EXPENSES, CONSIDERING THEIR MEAGER SALARY. THE AO THEREFORE DISALLOWED THE UNPAID AMOUNT OF RS. 2,28,471/-. HE FURTHER OBSERVED THAT THERE WAS NO CHECK OVER THE EXPENSES AND, HE THEREFORE DISALLOWED 50% OF TH E REMAINING EXPENDITURE WHICH AMOUNTED TO RS. 3,14,683/-. HE THEREFORE MAD E THE TOTAL DISALLOWANCE OF 5,43,154/-. LD. CIT(A) HOWEVER FOUND THIS DISAL LOWANCE ON HIGHER SIDE AND RESTRICTED IT TO 15% OF THE TOTAL EXPENSES. WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) AS IT IS NOT ALWAYS POSSIBLE FO R OBTAINING RECEIPTS/VOUCHERS FROM THE THIRD PARTIES TO SUBSTAN TIATE THE CLAIM OF THE EXPENSES. THIS GROUND OF REVENUE IS DISMISSED. 8. WITH RESPECT TO DISALLOWANCE OUT OF ENTERTAINMEN T EXPENSES OF RS. 1,00,292/-, THE ASSESSING OFFICER HAS MENTIONED THA T THE ASSESSEE HAS CLAIMED A SUM OF RS. 1,57,675/- AS ENTERTAINMENT EXPENSES O UT OF WHICH 42,909/- HAVE REMAINED UNPAID. THESE EXPENSES WERE PAID TO THE EMPLOYEES PERFORMING THE DUTY AS LABOURERS WHO WERE NOT CAPAB LE OF SPENDING EVEN SMALL AMOUNTS. HE THEREFORE DISALLOWED THE UNPAID AMOUNT AND FURTHER DISALLOWANCE 50% OF THE REMAINING AMOUNT HOLDING TH AT THERE WAS NO CHECK ON THESE EXPENSES. THUS A TOTAL DISALLOWANCE OF RS . 1,00,292/- WAS MADE BY AO. BEFORE LD. CIT(A) IT WAS ARGUED THAT A SUM OF RS. 1,52,675/- HAS ALREADY BEEN CONSIDERED FOR PAYMENT OF TAX UNDER FB T RETURN AND HENCE DOUBLE DISALLOWANCE CANNOT BE MADE. KEEPING THIS SUBMISSION OF THE ASSESSEE LD. CIT(A) HAS RIGHTLY DIRECTED THE AO TO VERIFY FROM FBT RETURN AND IF THIS AMOUNT WAS ALREADY CONSIDERED THERE THE N THIS DISALLOWANCE I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 6 WOULD STAND DELETED TO THE EXTENT SHOWN IN FBT RETU RN. THIS GROUND OF REVENUE IS ALSO DISMISSED. 9. WITH RESPECT TO DISALLOWANCE OUT OF CONVEYANCE E XPENSES OF RS. 1,94,821/-, THE AO HAS MENTIONED IN HIS ORDER THAT ASSESSEE HAS CLAIMED A SUM OF RS. 3,22,544/- OUT WHICH RS. 67,099,/- REMAI NED UNPAID. THESE EXPENSES WERE PAID TO THE EMPLOYEES AGAINST PERFORM ING THE DUTY WHO WOULD NOT BE CAPABLE OF SPENDING EVEN SMALL AMOUNTS. THE AO DISALLOWED THE UNPAID AMOUNT AND FURTHER MADE AN DISALLOWANCE OF 5 0% OF THE REMAINING AMOUNT HOLDING THAT THERE IS NO CHECK ON THESE EXPE NSES AND HE MADE A TOTAL DISALLOWANCE OF RS. 1,94,821/-. IN RESPECT OF THIS GROUND ALSO ASSESSEE TOOK THE PLEA THAT THIS AMOUNT HAS ALREADY BEEN CONSIDER ED IN FBT RETURN AND TAX HAS ALREADY BEEN PAID. KEEPING THIS SUBMISSION OF THE ASSESSEE LD. CIT(A) DIRECTED THE AO TO VERIFY FROM FBT RETURN AND IF TH IS AMOUNT WAS ALREADY CONSIDERED THERE THEN THIS DISALLOWANCE WOULD STAND DELETED TO THE EXTENT SHOWN IN FBT RETURN. WE FIND NO INFIRMITY IN THIS DIRECTION OF LD. CIT(A) AND THE ORDER OF LD. CIT(A) IS HEREBY UPHELD. THIS GROUND OF REVENUE IS ALSO DISMISSED. 10. WITH RESPECT TO DISALLOWANCE OUT OF PROFESSIONA L EXPENSES OF RS. 62,775/-, ASSESSING OFFICER HAS MENTIONED THAT EXC EPT FOR FURNISHING VOUCHERS FOR CLAIM OF EXPENSES ASSESSEE HAS NOT BEE N ABLE TO SUBSTANTIATE THE REASONABLENESS OF THESE PAYMENTS. HE THEREFORE DIS ALLOWED 50% OF THESE EXPENSES WHICH COMES TO RS. 62,775/-. BEFORE LD. C IT(A) IT WAS SUBMITTED THAT THESE EXPENSES PERTAINED TO SALES TAX, EXCISE AND COMPUTER CONSULTANTS AND HENCE WERE FOR THE BUSINESS PURPOSES. KEEPING THIS SUBMISSION IN VIEW I.T.A NOS.3502/AHD/2010 &150/AHD2011 A.Y. 200 7-08 PAGE NO ANIK ENGINEERS VS. DCIT 7 LD. CIT(A) HAS RIGHTLY DELETED THIS DISALLOWANCE B Y HOLDING THAT AO HAS MADE THIS DISALLOWANCE PURELY ON ADHOC BASIS WITHOU T GOING INTO THE DETAILS OF THE EXPENSES AND THEREFORE THE ORDER PASSED BY H IM IS HEREBY UPHELD. THIS GROUND IS ALSO DISMISSED. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 06/09/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,