M/s Haldia Tabacco House, Purba Medinipur V. JCIT, RG-27, HALDIA, Purba Medinipur

ITA 1527/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4446 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2015
• Court: TRIBUNAL
• Department Lawyers: UDAY KUMAR SARDAR
• Assessee Lawyers: GAUTAM GHOSH
• Section: 143(3)

Judgement Text

I.T.A. NO. 1527/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO.1527/KOL/2015 ASSESSMENT YEAR: 2011-2012 HALDIA TOBACCO HOUSE,.............................. ...........................APPELLANT UTTAR DURGACHAK, HALDIA, PURBA MEDINIPORE-721 602 [PAN: AABFH 4307 C] -VS.- JOINT COMMISSIONER OF INCOME TAX,.................. ..................RESPONDENT RANGE-27, HALDIA, BASUDEVPUR, KHANJANCHAK, HALDIA, DIST. PURBA MEDINIPUR-721 602 APPEARANCES BY: SHRI GAUTAM GHOSH, ADVOCATE , FOR THE ASSESSEE SHRI UDAY KUMAR SARDAR, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JULY 26, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 28, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATA DAT ED 17.11.2015 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF 50% OF THE EXPENDITURE MADE BY THE LD. CIT(APPEALS) OUT OF REBATE & DISCOUNT AND SALES PROMOTION. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF ITC PROD UCTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 22.09.2011 DECLARING TOTAL INCOME OF RS.3,54,280/-. IN THE ASS ESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 25.03.2014 , THE GROSS PROFIT MARGIN OF THE ASSESSEE FROM SALE OF CIGARETTES WAS ESTIMATED BY THE ASSESSING OFFICER AT 3.33% AS AGAINST 1.20% SHOWN B Y THE ASSESSEE AND I.T.A. NO. 1527/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 2 OF 4 THE DIFFERENCE IN THE GROSS PROFIT AS WORKED OUT AT RS.39,25,759/- WAS ADDED BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ADDITION MADE BY THE ASSESSING OFFICER BY ES TIMATING THE GROSS PROFIT MARGIN FROM SALE OF CIGARETTES ON HIGHER SID E WAS DISPUTED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED T HE SAID ADDITION MADE BY THE ASSESSING OFFICER. HE, HOWEVER, FOUND THAT T HE SUMS OF RS.12,08,361/- AND RS.11,98,907/- RECEIVED BY THE A SSESSEE FROM ITS PRINCIPALS ON ACCOUNT OF REBATE & DISCOUNT AND SALE S PROMOTION EXPENSES WERE CREDITED BY THE ASSESSEE TO ITS PROFIT & LOSS ACCOUNT. IN THIS REGARD, THE EXPLANATION OFFERED BY THE ASSESSEE THAT THESE AMOUNTS RECEIVED FROM THE PRINCIPALS WERE PASSED ON TO ITS CUSTOMERS, WAS NOT FOUND FULLY ACCEPTABLE BY THE LD. CIT(APPEALS) IN THE ABSENCE O F SUFFICIENT DOCUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE IT S CLAIM. ALTHOUGH THE ASSESSEE FURNISHED MONTH-WISE DETAILS OF THE RELEVA NT AMOUNTS PAID TO THE CUSTOMERS, THE LD. CIT(APPALS) FOUND THE SAME T O BE STEREO-TYPED CONTAINING THE SAME NAMES AND THE SAME AMOUNTS. HE ALSO FOUND THAT ALL THESE AMOUNTS WERE PAID BY THE ASSESSEE IN CASH FOR WHICH NO EVIDENCE IN THE FORM OF VOUCHERS OR BILLS WAS MAINTAINED BY THE ASSESSEE. HE, THEREFORE, FOUND IT DIFFICULT TO BELIEVE THE ASSESS EES VERSION THAT THE EXPENSES RELATING TO SALES PROMOTION AND REBATE/DIS COUNT RECOVERED FROM THE PRINCIPALS WERE PASSED ON TO THE CUSTOMERS. EVE N THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE EXPRESSED HIS CONSEN T BEFORE THE LD. CIT(APPEALS) FOR DISALLOWING THE REASONABLE AMOUNT OF EXPENDITURE ON THIS COUNT. ACCORDINGLY, THE LD. CIT(APPEALS) MADE A DISALLOWANCE OF RS.12,03,634/- BEING 50% OF THE EXPENSES ON ACCOUNT OF REBATE & DISCOUNT AND SALES PROMOTION. AGGRIEVED BY THE ORDE R OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEA L BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. COUNSEL FOR THE I.T.A. NO. 1527/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 3 OF 4 ASSESSEE HAS SUBMITTED THAT SIGNBOARDS AND GLOW-BOA RDS WERE DISPLAYED AT THE SHOPS OF THE CUSTOMERS FOR WHICH THE ASSESSE E HAD PAID CERTAIN FIXED AMOUNT, WHICH GOT SUBSEQUENTLY REIMBURSED FRO M THE PRINCIPALS, IT IS OBSERVED THAT SUFFICIENT EVIDENCE TO FULLY SUPPO RT AND SUBSTANTIATE THE CLAIM OF THE ASSESSEE ON THIS ISSUE HAS NOT BEEN BR OUGHT ON RECORD. THE SPECIFIC ADVERSE FINDINGS RECORDED BY THE LD. CIT(A PPEALS) IN THIS REGARD ARE SUFFICIENT TO SHOW THAT THE CLAIM OF THE ASSESS EE OF HAVING PAID THE ENTIRE AMOUNTS RECEIVED FROM THE PRINCIPALS ON ACCO UNT OF SALES PROMOTION AND REBATE/DISCOUNT TO ITS CUSTOMERS IS N OT FULLY VERIFIABLE AND THIS POSITION WAS ACCEPTED EVEN BY THE LD. A.R. OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) WHEN HE CONSENTED FOR MAKING A REA SONABLE DISALLOWANCE. HOWEVER, KEEPING IN VIEW ALL THE FACT S OF THE CASE INCLUDING THE NATURE OF THE EXPENDITURE IN QUESTION, VIS--VI S THE BUSINESS OF THE ASSESSEE , I AM OF THE VIEW THAT THE DISALLOWANCE O F 50% OF THE RELEVANT EXPENDITURE MADE BY THE LD. CIT(APPEALS) IS ON THE HIGHER SIDE AND IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE SAME T O 20% OF THE TOTAL EXPENDITURE. ACCORDINGLY, I MODIFY THE IMPUGNED ORD ER OF THE LD. CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO RE STRICT THE DISALLOWANCE TO 20% OF THE RELEVANT EXPENDITURE. 5. IN THE RESULT, THE APPEAL OF THE ASSESESE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 28 , 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 28 TH DAY OF SEPTEMBER, 2016 COPIES TO : (1) HALDIA TOBACCO HOUSE, UTTAR DURGACHAK, HALDIA, PURBA MEDINIPORE-721 602 (2) JOINT COMMISSIONER OF INCOME TAX, RANGE-27, HALDIA, BASUDEVPUR, KHANJANCHAK, HALDIA, DIST. PURBA MEDINIPUR-721 602 I.T.A. NO. 1527/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 4 OF 4 (3) COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKAT A; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.