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

ITA 156/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60907 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-06-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 156/CHD/2012 ASSESSMENT YEAR: 2008-09 M/S JAMNA DASS NIKKA MAL JAIN VS THE DCIT, SARAF (P) LTD., CIRCLE VII, LUDHIANA LUDHIANA PAN NO. AAACJ4166 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI N.K. SAINI DATE OF HEARING : 28.6.2012 DATE OF PRONOUNCEMENT : 29.6.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A)- II, LUDHIANA DATED 10.01.2012 RELATING TO ASSESSME NT YEAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT THE ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A)-II, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH HE WAS NOT JUSTIFIED T O ARBITRARILY UPHOLD THE DISALLOWANCE OF RS.13,41,468 /- INCURRED BY THE APPELLANT ON SALES PROMOTION. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UP HOLD THE DISALLOWANCE OF A SUM OF RS. 2,69,723/- CLAIMED BY 2 THE APPELLANT COMPANY AS LOSS ON TRADING IN COMMODITIES. 3. VIDE GROUND NO.1 OF THE APPEAL, THE ASSESSEE HA S CHALLENGED THE ACTION OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 13,41,468/-. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING AND SALE OF GOLD AND DIAMOND JEWELLE RY. THE ASSESSEE COMPANY HAS CLAIMED EXPENSES OF RS. 15,63,319/- TO WARDS THE SALES PROMOTION EXPENSES FOR THE YEAR UNDER CONSIDERATIO N. THE ASSESSEE CLAIMED THAT IT IS FOLLOWING PRACTICE OF DISTRIBUTING FREE GIFTS AS SILVER COINS, PHOTO FRAME, BAGS ETC. TO THE CUSTOMERS TO ENCOURAGE THE CUSTOMER TO PURCHASE GOODS BY MAKING PAYMENT IN CASH. THE ASSESSING OFF ICER REQUIRED THE ASSESSEE TO FURNISH THE RECORDS FOR VERIFICATION TH E FACTS, DETAILS OF CUSTOMERS TO WHOM THE ARTICLES WERE GIFTED AND ALSO TO FURNIS H EVIDENCE OF HANDING OVER THE GIFTS TO THE CUSTOMERS. THE ASSESSEE HAS ADMIT TED THAT NO SUCH RECORDS ARE MAINTAINED. FURTHER, THE ASSESSEE EXPLAINED TH AT IT HAS ACHIEVED SALES OF 27.18 CRORES FOR GOLD AND DIAMOND JEWELLERY, IN COM PARISON TO THE PRECEDING YEARS SALE OF THESE ITEMS OF RS. 18.5 CRORES CLAIME D TO BE RESULT OF THE SALES PROMOTION SCHEMED LAUNCHED BY THE COMPANY. THE ASS ESSEE ALSO FURNISHED THE BILLS OF PURCHASE OF SILVER COINS AND PHOTO FRA MES ETC. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSES SEE AND MADE AN ADDITION OF RS. 13,41,468/- WHICH WAS INCURRED DURING THE PE RIOD OF LAST 3 MONTHS. 4. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 13,41,468/- MADE BY THE ASSESSING OFFICER AND HENCE THE ASSESSE E IS IN APPEAL BEFORE THE TRIBUNAL. 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY FOLLOW ED THE PRACTICE OF DISTRIBUTION OF FREE GIFTS AS SLIVER COINS, PHOTO F RAMES, BAGS ETC. TO ALL CUSTOMERS PURCHASING GOODS IN CASH ABOVE A SPECIFIE D LIMIT AS PER SALES PROMOTION SCHEME. HE FURTHER SUBMITTED THAT THE CO MPANY FOLLOWED THIS PRACTICE IN THE PRECEDING YEARS ALSO. IN THE CURRE NT YEAR, TO INCREASE THE SALES AND TO ENCOURAGE THE CUSTOMERS TO PURCHASE GO ODS BY MAKING PAYMENT IN CASH, THE COMPANY FOLLOWED THE POLICY OF DISTRIB UTING FREE GIFTS AS SLIVER COINS AND PHOTO FRAMES ETC. TO ALL THE CUSTOMERS PU RCHASING GOODS ABOVE RS. 30,000/-. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COMPANY DID NOT PRODUCE THE NAMES AND ADDRESS OF THE CUSTOMERS TO WHOM THE SAID FREE GIFTS WERE G IVEN. HOWEVER, THE COMPANY HAS MAINTAINED BILL WISE DETAILS OF ALL THE MATERIALS ISSUED TO CUSTOMERS AS FREE GIFTS AND METHOD OF DISTRIBUTION TO CUSTOMERS FOLLOWED BY THE COMPANY IN THIS REGARD. SHRI ASHWANI KUMAR, LD . COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE COMPAN Y HAS BEEN ABLE TO ACHIEVE A TURN OVER OF RS. 27.18 CRORES FOR GOLD & DIAMOND JEWELLERY AND WATCHES IN THE YEAR UNDER CONSIDERATION AS AGAINST SUCH SALES OF 18.50 CRORES IN THE IMMEDIATELY PRECEDING YEAR. ACCORDING TO LD . COUNSEL FOR THE ASSESSEE THE INCREASE IN THE SALES WAS THE RESULT O F SALES PROMOTION SCHEMES LAUNCHED BY THE COMPANY. HE, THEREFORE, SUBMITTED THAT NO DISALLOWANCE IS CALLED FOR. SHRI ASHWANI KUMAR, LD. COUNSEL FOR TH E ASSESSEE ALSO FURNISHED THE DETAILS OF SALES PROMOTION EXPENSES FOR VARIO US ASSESSMENT YEARS. FROM THE SAID DETAILS, IT IS CLEAR THAT IN THE ASSESSMEN T YEAR 2006-07, NO DISALLOWANCE HAS BEEN MADE OUT OF SALES PROMOTION EXPENSES CLAIMED AT RS. 4 4,80,719/-. IT IS ALSO SEEN THAT IN THE ASSESSMENT YEAR 2009-10, NO DISALLOWANCE UNDER THIS HEAD HAS BEEN MADE BY THE A SSESSING OFFICER. IN THAT YEAR, THE ASSESSEE CLAIMED SALES PROMOTION EXP ENSES AT RS. 15,94,606/-. WE ALSO FIND THAT IN THE ASSESSMENT YEAR 2007-08, T HE ASSESSEE CLAIMED SALES PROMOTION EXPENSES AT RS. 20,85,831/-. THE ISSUE C AME UP BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 16.4.201 2 IN ITA NO. 149/CHD/2011 RELATING TO ASSESSMENT YEAR 2007-08 HE LD AS UNDER:- 9. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD. THE AO, IN THE CO URSE OF ASSESSMENT PROCEEDINGS, NOTED THAT THE ASSESSEE UND ER THE HEAD SELLING EXPENSES CLAIMED EXPENSES INCURRED ON GIF TS TO CUSTOMERS AND ENTERTAINMENT EXPENSES IN THE SHAPE O F FOOD AND BEVERAGES. SUCH EXPENSES INCURRED SUBSTANTIALLY INC REASED FROM RS.4,80,719/- TO RS.20,85,831/-. THE AO, HAD M ADE THE ADDITION ON APPRECIATING THE FACTUM THAT THERE WAS ABNORMAL INCREASE IN SUCH EXPENSES VIS-A-VIS PREVIOUS YEAR. IT WAS, FURTHER, OBSERVED BY THE AO THAT FOR WANT OF MAINTE NANCE OF PROPER RECORD BY THE ASSESSEE, IT IS NOT FEASIBLE, TO VERIFY THE EXTENT AND GENUINENESS OF SUCH EXPENSES. ACCORDINGL Y, DISALLOWANCE OF RS.3,00,000/- WAS MADE BY THE AO, O UT OF TOTAL EXPENDITURE OF RS.20,85,831/-. LD. CIT(A), HOWEVER , DELETED THE IMPUGNED ADDITION ON THE GROUND THAT ALL VOUCHE RS AND DOCUMENTS WERE SUBMITTED BEFORE THE AO, BY THE ASSE SSEE. HOWEVER, A CAREFUL PERUSAL OF THE ASSESSMENT ORDER DOES NOT SUPPORT ASSERTIONS MADE BY THE CIT(A). THE ASSESSE E HAS FAILED TO PROVIDE A LIST OF SUCH CUSTOMERS, TO WHOM SUCH GIFTS WERE GIVEN, AND ALSO THE DETAILS OF SUCH SCHEMES, S UPPORTED BY SOME BROCHURE UNDER WHICH SUCH EXPENDITURE WAS INCU RRED. IN VIEW OF SUCH OBSERVATIONS, THE AO, HAD TO MAKE DISA LLOWANCE, ON ESTIMATE BASIS. THE VIEW OF THE AO IS SUPPORTED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F 5 T.V.SUNDRAM IYENGAR & SONS LTD. V CIT 241 ITR 420. NEEDLESS TO SAY THAT SUCH DISALLOWANCE MADE ON ESTI MATE BASIS, CAN NOT HAVE MATHEMATICAL PRECISION, IN QUANTIFICAT ION. THE ELEMENT OF GUESS WORK CANNOT BE RULED OUT. IT IS UN DISPUTED LEGAL PROPOSITION THAT ONUS TO ESTABLISH THE GENUIN ENESS 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 R EASONABLE, THE DISALLOWANCE MADE BY THE AO, IS REDUCED 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 REVENUE IS PARTLY ALLO WED. 6. TAKING INTO CONSIDERATION THE PAST HISTORY OF TH E CASE AND ALSO THE ORDER OF THE TRIBUNAL DATED 16.4.2012 PASSED IN ITA NO. 149/CHD/2011 (SUPRA), WE HOLD THAT THE DISALLOWANCE OF RS. 2 LAC S IN THIS CASE WILL MEET THE ENDS OF JUSTICE. THE ASSESSEE GETS A RELIEF OF RS. 11,41,468/- ON THIS COUNT. 7. AT THE TIME OF HEARING OF THE APPEAL, SHRI ASHWA NI KUMAR, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUND NO.2 OF T HE APPEAL AND ACCORDINGLY WE DISMISS THE SAME AS NOT PRESSED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JUNE, 2012 SD/- SD/- (T. R. SOOD) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 29 TH JUNE, 2012 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR