Shri Indusrial Filter Febrics P Ltd, V. The A C I T 5 (1),

ITA 160/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2799 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: ANIL KHANDELWAL
• Keywords: Gift

Judgement Text

PAGE 1 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAACI3900J I.T.A.NO. 160/IND/2009 A.Y. : 2005-06 INDUSTRIAL FILTERS & FABRICS PRIVATE LIMITED, ACIT, 5(1), RING ROAD SQUARE, VS INDORE. MUSAKHEDI, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ANIL KHANDELWAL, C. A. RESPONDENT BY : SMT. APARNA KARAN, SR. DR DATE OF HEARING : 17.06.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE, DATED 03.12.2008, FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 READS AS UNDER :- PAGE 2 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN MAINTAINING THE DISALLOWANCE OF INTEREST OF RS. 50,088/- PAID TO MANSI MAHESHWARI. 4. THIS GROUND WAS NOT PRESSED, HENCE, DISMISSED, AS NOT PRESSED. 5. GROUND NO. 2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CONVEYANCE EXPENSES OF RS. 60,000/- PAID TO THE DIR ECTOR. 6. THE IMPUGNED AMOUNT WAS DISALLOWED BY THE REVENUE AUTHORITIES FOR THE REASON THAT THE ASSESSEE FAILED TO ESTABLISH THE FACT THAT THESE EXPENSES WERE INCURRED FOR THE PURPOSES OF BU SINESS. NOW THE ASSESSEE HAS PRODUCED THE COPY OF BOARDS RESOLUTIO N TO THE EFFECT THAT THE MANAGING DIRECTOR OF THE COMPANY WAS ENTITLED FOR R EIMBURSEMENT OF CONVEYANCE EXPENSES ON ACTUAL BASIS. HOWEVER, IN CA SE THE BILLS WERE NOT PRODUCED, THE AMOUNT WAS TO BE RESTRICTED TO RS. 5, 000/- PER MONTH ON SELF DECLARATION BASIS, WHICH IS A NEW EVIDENCE AND IN T HE LIGHT OF THIS EVIDENCE, THE MATTER REQUIRES RE-ADJUDICATION. HENC E, WE RESTORE THIS GROUND OF THE ASSESSEE TO THE FILE OF AO FOR ADJUD ICATION AS PER LAW AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSES SEE. 7. GROUND NOS. 3 & 4 READ AS UNDER :- PAGE 3 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 1/5 TH OF CAR RUNNING EXPENSES AMOUNTING TO RS. 47,720/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 1/10 TH OF TELEPHONE EXPENSES AMOUNTING TO RS. 47,720/-. 8. WE FIND THAT THESE EXPENSES HAVE BEEN DISALLOW ED FOR THE REASON THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT ALL THE EXPENSES CLAIMED UNDER THESE HEADS WERE INCURRED FO R BUSINESS PURPOSES ONLY. ON A QUERY FROM THE BENCH, THE ASSESSEE FAIRL Y ADMITTED THAT DIRECTORS OF THE COMPANY WERE NOT HAVING ANY OTHER VEHICLES AND BILLS FOR MOBILES WERE ALSO CLAIMED IN THE BOOKS OF THE C OMPANY. IN THESE CIRCUMSTANCES, WE HOLD THAT THE ELEMENT OF INCURREN CE OF EXPENSES FOR NON-BUSINESS PURPOSES CANNOT BE RULED OUT AND, THER EFORE, WE CONFIRM THESE FINDINGS OF THE LD.CIT(A). THUS, BOTH THESE G ROUNDS OF THE ASSESSEE ARE ALSO DISMISSED. 9. GROUND NO.5 READS AS UNDER :- PAGE 4 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF R S. 3,24,586/- BEING 1/10 TH OF EXPENSES. 10. WE FIND THAT THESE EXPENSES HAVE BEEN DISALLOWED FO R THE REASON THAT THESE INCLUDE EXPENSES INCURRED BY THE DIRECT ORS AND WAS FAMILY MEMBERS ON FOREIGN TRAVELS AND NO DETAILS REGARDING PURPOSE OF SUCH VISIT BY THEM HAVE BEEN SUBMITTED AT ANY STAGE, WHICH RES ULTED INTO AN INFERENCE OF PERSONAL TRIPS BEING CHARGED TO THE AC COUNT OF THE ASSESSEE COMPANY. EVEN AT THIS STAGE, THE LD.COUNSEL FOR THE ASSESSEE DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT SUCH FINDINGS O F THE REVENUE AUTHORITIES WERE INCORRECT. ACCORDINGLY, WE FIND NO MERIT IN THIS GROUND OF THE ASSESSEE. THE SAME IS, THEREFORE, DISMISSED. 11. GROUND NO. 6 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,00,000/- OUT OF COMMISSION ON SALES. 12. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE SUPPLIE D CERTAIN MATERIAL TO M/S. KERALA MINERALS AND METALS LIMITED AND CLAIMED EXPENSES OF RS. 1,60,500/- AS COMMISSION TO ONE M/S . TENDERS4U.COM. THE AO FOUND THAT THE COMMISSION SO PAID WAS HIGHLY EXCESSIVE AND AMOUNTED TO 65 % OF THE PROFIT S EARNED BY THE PAGE 5 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. ASSESSEE. HENCE, THE AO MADE A DISALLOWANCE OF RS. 1 LAKH. THE LD.CIT(A), ON APPEAL BY THE ASSESSEE, CONFIRMED THE ACTION OF THE AO FOR THE REASON THAT THE ASSESSEE FAILED TO BRING ANY EV IDENCE ON RECORD TO ESTABLISH THE FACT OF RENDERING OF SERVICES OF THE SAID FIRM TO THE ASSESSEE AND JUSTIFICATION OF PAYMENT OF COMMISSION AT SUCH HIGH RATE. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 13. THE LD.COUNSEL FOR THE ASSESSEE MAINLY REITERATED T HE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND THE LD. SENIOR D.R. PREFERRED TO RELY ON THE ORDER OF LD.CIT(A). 14. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 15. IT IS NOTED THAT TOTAL ORDER IS WORTH RS. 4,16,208/ - AND THE ASSESSEE HAS EARNED PROFIT OF RS. 2,42,493/- OUT OF WHICH HE HAS PAID A COMMISSION OF RS.1,60,500/-, WHICH ITSELF SPEAKS OF UNREASONABLENESS OF THE AMOUNT SO PAID, ESPECIALLY WHEN NO MATERIAL HAS BEEN BROUGHT ON RECORD TO JUSTIFY THE SAME. IN THIS VIEW OF THE MAT TER, WE DISMISS THIS GROUND OF THE ASSESSEE ALSO. 16. GROUND NO. 7 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,56,590/- OUT OF SALES PROMOTION EXPENSES. PAGE 6 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. 17. THE IMPUGNED DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER FOR THE REASON THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE LIKE BILL OF LABOUR CHARGES TO SHOW THE CONVERSION OF GOLD BARS INTO GOLD COINS FOR DISTRIBUTION AMONGST THE IMPORTANT CUSTOMERS ON COM PLETION OF 25 YEARS OF ITS EXISTENCE. THE ASSESSEE, IN APPEAL, BEFORE T HE LD.CIT(A), FURNISHED THE LIST OF CUSTOMERS TO WHOM SUCH GIFTS WERE MADE. HOWEVER, THE LD.CIT(A) REJECTED THE CLAIMS OF THE ASSESSEE FOR T HE REASON THAT THE BASIC EVIDENCE FOR CONVERSION OF GOLD BARS INTO GOLD COIN S WAS NOT PRODUCED. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. 18. THE LD. COUNSEL NARRATED THE FACTS AND REITERATED T HE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 19. THE LD. SENIOR D.R. PLACED STRONG RELIANCE ON THE O RDER OF THE LD.CIT(A). 20. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 21. IT IS NOTED THAT THAT THE ASSESSEE HAS CLAIMED TO H AVE DISTRIBUTED THE GOLD COINS AMONGST CUSTOMERS. HOWEVER, IT HAS P URCHASED A GOLD BAR AND AMOUNT OF CONVERSION OF SUCH GOLD BAR INTO GOLD COINS IS NOT CLAIMED NOR ANY EVIDENCE HAS BEEN PRODUCED TO SHOW THAT SUC H GOLD BAR WAS ACTUALLY CONVERTED INTO COINS. HENCE, IN OUR OPINIO N, THE CLAIM OF THE PAGE 7 OF 7 -. I.T.A.NO. 160/IND/2009 INDUSTRIAL FILTERS AND FABRICS PRIVATE LIMITED, IND ORE. ASSESSEE REMAINED UNSUBSTANTIATED. THUS, THIS GROUN D OF THE ASSESSEE IS ALSO DISMISSED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND JUNE, 2010. CPU*