Balakrishna & Co., V. DCIT,

ITA 163/RAN/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9993 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHURY ORAM
• Assessee Lawyers: S.K.PODAR
• Keywords: Business expenditure; Corroborative evidences; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI SMC BENCH, RANCHI BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 163 /RAN/2014 ASSESSMENT YEAR : 2005 - 06 BALAKRISHNA & CO., 1 ST FLOOR, MATRI BHAWAN, NEW KALIMATI ROAD, SAKCHI, JAMSHEDPUR VS. DCIT, CIRCLE - 1, JAMSHEDPUR PAN/GIR NO. AAEFB 6265 E (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.K.PODAR , AR REVENUE BY : SHRI CHAUDHURY ORAM , DR DATE OF HEARING : 13 /12/ 2016 DATE OF PRONOUNCEMENT : 13 /12/ 2016 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGA INST THE ORDER OF CIT(A) - JAMSHEDPUR, DATE 27.2.2014 FOR THE ASSESSMENT YEAR 2005 - 06 . 2. IN GROUND NOS.2 & 3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ESTIMATED ADDITION MADE BY THE ASSESSING OFFICER OUT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD TRAVELLING , TELEPHONE AND BUSINESS EXPENSES. 3. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE IN STANT CASE, THE 2 ITA NO. 163 /RAN/2014 ASSESSMENT YEAR :2005 - 06 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE SUPPORTING EVIDENCE IN RESPECT OF TRAVELLING EXPENSES. THEREFORE, HE DISALLOWED 1/8 TH OF THE TRAVELLING EXPENSES OF RS.4,69,259/ - AND MADE AN ADDITION OF RS.58,657/ - . SIMILAR LY, HE DISALLOWED 1/8 TH OF TELEPHONE EXPENSES OF RS.2,24 ,115/ - AND MADE AN ADDITION OF R S.28,014/ - . FOR THE SAME REASON ALSO, HE MADE A DISALLOWANCE OF RS.40,000/ - OUT OF BUSINESS PROMOTION EXPENSES OF RS.14,37,714/ - . 4. ON APPEAL, LD CIT (A) CONFIRMED TH E ORDER OF THE ASSESSING OFFICER. 5. BEFORE ME, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT FOR WHICH OF THE EXPENSES, THE VOUCHERS WERE NOT PRODUCED BY THE ASSESSEE OR ARE NOT VERIFIABLE. HENCE, THE ADHOC DISALLOWANCE CANNOT BE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD CIT(A). 6. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 7. I FIND THAT IN THE INSTANT CASE, THE ASSESSING OFFICER MADE AN ADDITION OF RS.58,657/ - UNDER THE HEAD TRA VELLING EXPENSES, RS.28,014/ - UNDER THE HEAD TELEPHONE EXPENSES AND RS.40,000/ - UNDER THE HEAD BUSINESS PROMOTION EXPENSES ON THE GROUND THAT THE EXPENSES ARE NOT FULLY VOUCHED AND VERIFIABLE. I FIND THAT THE ASSESSING OFFICER HAS NOT POINTED OUT FOR WHICH O F THE EXPENSES, THE ASSESSEE HAS NOT PRODUCED THE VOUCHERS WHICH ARE NOT VERIFIABLE. IN ABSENCE OF THE SAME, ADHOC 3 ITA NO. 163 /RAN/2014 ASSESSMENT YEAR :2005 - 06 DISALLOWANCE OF GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE CANNOT BE MADE IN LAW BY THE ASSESSING OFFICER. I AM THEREFORE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF EXPENSES MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LD CIT(A) IS NOT SUSTAINABLE. HENCE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND VACATE THE DISALLOWANCE OF RS.58,657 UNDER THE HEAD TRAVELLING, RS. 28,014/ - UNDER THE HEAD TELEPHONE AND RS.40,000/ - UND ER THE HEAD BUSINESS PROMOTION EXPENSES AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. IN GROUND NO.4 AND 5 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) WAS NOT JUSTIFIED I N ENHANCING THE DISALLOWANCE UNDER THE HEAD BUSINESS PROMOTION EXPENSES OF RS.9,20,000/ - . 9. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAS CLAIMED BUSINESS PROMOTION EXPENSES OF RS.14,37,714/ - , WHICH ARE NOT FULLY VOUCHED AND VERIFIABLE AND, THEREFORE, MADE AN ESTIMATED DISALLOWANCE OF RS.9,20 ,000/ - OUT OF BUSINESS PROMOTION EXPENSES. 10. THE ASSESSEE FILED APPEAL AGA INST THE DISALLOWANCE BEFORE THE LD CIT(A). LD CIT(A) OBSERVED THAT THE ASSESSEE HAS PURCHASED 1000 DIARIES FOR RS.8,10,000/ - FROM INTERNATIONAL PRINT O - PACK LTD., AND, THEREFORE, THE COST OF EACH DIARY COMES TO RS.810/ - , WHICH IS QUITE EXCESSIVE AND UNR EASONABLE. HE ALSO OBSERVED THAT THE ASSESSEE HAS PURCHASED GOLD 4 ITA NO. 163 /RAN/2014 ASSESSMENT YEAR :2005 - 06 COINS FROM UMA STRIPS LTD., NEW DELHI OF RS.6,10,000/. HE OBSERVED THAT FROM THE BILL OF UMA STRIPS LTD., IT IS FOUND THAT THE ASSESSEE HAS PURCHASED 1 KG OF GOLD COIN FOR RS.6,10,000/ - WHE REAS THE ASSESSEE COULD NOT FURNISH THE UTILIZATION OF GOLD COIN BEFORE THE ASSESSING OFFICER AND, THEREFORE, THE ASSESSING OFFICER DISALLOWED RS.6,10,000/ - TOWARDS PURCHASE OF GOLD COIN AND RS.3,10,000/ - OUT OF RS.8,10,000/ - TOWARDS PURCHASE OF 1000 DIARI ES AND THUS, MADE AN ENHANCEMENT OF RS.9,20,000/ - TO THE INCOME OF THE ASSESSEE. 11. BEFORE ME, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED DIARIES WHICH WERE GIVEN TO ITS CUSTOMERS FOR BUSINESS PROMOTION IS NOT IN DOUBT AS THE LD CIT(A) HA S HIMSELF ALLOWED DEDUCTION RS.2 LAKHS OUT OF RS.8,10,000/ - ONLY ON THE GROUND THAT THE EXPENDITURE IS EXCESSIVE AND THAT THE PROFIT SHOWN BY THE ASSESSEE IS R S.2,39,170/ - DURING THE YEAR. SIMILARLY FOR PURCHASE OF GOLD COIN, HE HAS DISALLOWED RS.6,10 ,000/ - ON THE GROUND THAT IT IS EXCESSIVE AND THE PROFIT SHOWN BY THE ASSESSEE WAS VERY MEAGRE . HE SUBMITTED T HAT THE ASSESSEE HAD PURCHASED G OLD COIN OF 1 GM EACH AND THUS 1000 GOLD COIN S WERE PURCHASED AND DISTRIBUTED AMONGST ITS CUSTOMERS. SIMILARLY, DIARIES PURCHASED WERE DISTRIBUTED TO THE CUSTOMERS AND, THEREFORE, SAME WAS CLAIMED AS DEDUCTION UNDER THE HEAD BUSINESS PROMOTION. HE HAS FILED A CHART BEFORE ME WHEREIN, HE HAS SHOWN THAT IN THE ASSESSMENT YEAR 2007 - 08, THE SALES OF THE ASSESSEE INCR EASED FROM RS.3.17 CRORES TO RS.8,61 CRORES. THUS, IT WAS HIS SUBMISSION THAT THE LD CIT(A) WAS NOT 5 ITA NO. 163 /RAN/2014 ASSESSMENT YEAR :2005 - 06 JUSTIFIED THAT THE EXPENSES CLAIMED UNDER THE HEAD BUSINESS PROMOTION WAS EXCESSIVE AS THE PROFIT SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR 2005 - 06 WA S RS.2,39,1 73/ - . HE SUBMITTED THAT BENEFIT OF THE EXPENDITURE INCURRED IS REAPED BY THE ASSESSEE IN THE FOLLOWING YEARS BY INCREASING ITS TURNOVER WHICH HAS HAPPENED IN THE CASE OF THE ASSESSEE. 12. LD D.R. COULD NOT CONTROVERT THE ABOVE SUBMISSION OF LD A.R. OF THE ASSESSEE. 13. IN VIEW OF ABOVE, I AM OF THE CONSIDERED VIEW THAT IT IS FOR THE BUSINESSMAN TO DECIDE WHICH EXPENDITURE IS TO BE INCURRED BY HIM AND WHICH ARE NOT TO BE INCURRED BY HIM. HE IS ULTIMATELY THE OWNER OF THE PROFIT OR LOSS OF THE BU SINESS. THESE ARE THE BUSINESS DECISIONS WHICH ARE TO BE TAKEN BY THE BUSINESSMAN ON BUSINESS CONSIDERATION. SINCE, THERE IS NO FINDING BY BOTH THE LOWER AUTHORITIES THAT THE EXPENSES ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINE SS OF THE ASSESSEE ABOUT THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD BUSINESS PROMOTION, I AM OF THE CONSIDERED OPINION THAT NO DISALLOWANCE CAN BE MADE OUT OF THE SAME. I, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) AND DELETE RS.9,20,000/ - BEING THE ENHANCEMENT OF DISALLOWANCE BY THE LD CIT(A) AND ALLOW GROUNDS OF APPEAL OF THE ASSESSEE. 14. GROUND NOS.1, 6 AND 7 ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION. 6 ITA NO. 163 /RAN/2014 ASSESSMENT YEAR :2005 - 06 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWE D. ORDER PRO NOUNCED IN THE OPEN COURT ON 13 /12/2016 IN THE PRESENCE OF PARTIES. SD/ - (N.S SAINI) A CCOUNTANT MEMBER RANCHI ; DATED 13 /12 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PS, ITAT, CAMP AT RANC HI 1. THE APPELLANT : BALAKRISHNA & CO., 1 ST FLOOR, MATRI BHAWAN, NEW KALIMATI ROAD, SAKCHI, JAMSHEDPUR 2. THE RESPONDENT. DCIT, CIRCLE - 1, JAMSHEDPUR 3. T H E C I T ( A ) J A M S H E D P U R . 4. CIT , JAMSHEDPUR 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//