M/s. Gram Overseas Ltd, New Delhi V. ITO, New Delhi

ITA 1635/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9847 (ITAT-DELHI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 05-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 1635/DEL/2009 ASSESSMENT YEAR : 2005-06 M/S GRAN OVERSEAS LTD., 107-109, RATTAN JYOTI BUILDING, 18, RAJENDRA PLACE, N EW DELHI 110 008. PAN: AABCG 6796R VS. INCOME TAX OFFICER, CIRCLE 12(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, CA REVENUE BY : SMT. ANUSHA KHURANA, SR. DR O R D E R PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF THE CIT (A) DATED 16 TH JANUARY, 2009 FOR ASSESSMENT YEAR 2005-06. GROUNDS OF APPEAL READ AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) HAS ERRED IN CONFIRMING THE FOLLOWI NG ADDITIONS:- 1. RS.1,14,901/-, LOSS OF DEPB LICENSES BY COMPLET ELY IGNORE THE FACT THAT SUCH DISALLOWANCE WILL ONLY REPRESENT AN INCOME WHICH WILL NEVER BE RECEIVED BY ASSESSEE AND WAS AC TUAL LOSS TO THE ASSESSEE. 2. BY WRONGLY TREATING 25% OF THE BUSINESS PROMOTI ON AND TRAVELLING & CONVEYANCE EXPENSES AS PERSONAL EXPENS ES OF RS.3,60,456/-, WHEREAS THE EXPENSES WERE GENUINELY INCURRED FOR BUSINESS PURPOSES. IT IS PRAYED THAT THE ADDIT IONS BEING ARBITRARY, MIS-CONCEIVED, ERRONEOUS AND ILLEGAL, MU ST BE ITA NO.1635/DEL/2009 2 DELETED FOR GRANTING THE RELIEF AND JUSTICE TO THE APPELLANT. 2. APROPOS GROUND NO.1, IT WAS NOTICED BY THE ASSE SSING OFFICER THAT EXPORT INCENTIVE, BEING DEPB BENEFITS, CREDITED TO PROFIT & LOSS ACCOUNT WERE SHOWN AT RS.5,25,787/-. HOWEVER, AS PER DETAILS FILED BY TH E ASSESSEE, ACCORDING TO THE ASSESSING OFFICER, SUCH BENEFITS WERE AMOUNTED TO R S.6,54,740/-. IT IS OBSERVED BY THE ASSESSING OFFICER THAT AS THE ASSESSEE IS FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING, SUCH BENEFITS SHOULD HAVE BEEN ACCOUNTE D FOR ON ACTUAL BASIS AND, THUS, HE HELD THAT EXPORT INCENTIVE ACCRUED TO THE ASSESSEE DURING THE YEAR ARE RS.6,54,740/- INSTEAD OF RS.5,25,787/- CREDITED TO PROFIT & LOSS ACCOUNT AND BALANCE AMOUNT OF RS.1,28,953/- WAS ADDED TO THE IN COME OF THE ASSESSEE. THE ADDITION WAS AGITATED IN AN APPEAL FILED BEFORE THE LD. CIT (A). IN THE STATEMENT OF FACTS IT WAS SUBMITTED THAT LICENCE WAS SOLD FOR A SUM OF RS.5,25,787/- WHEREAS THE ASSESSING OFFICER HAS TAKEN THE VALUE O F LICENCE AS THE INCOME OF THE ASSESSEE IGNORING THE FACT THAT LICENCE WAS ALR EADY SOLD AND THE REALIZED VALUE WAS THE TRUE INCOME OF THE ASSESSEE. LD. CIT (A), AFTER GOING THROUGH THE DETAILS OBSERVED THAT THE DEPB BENEFIT ACCOUNTED FO R BY THE ASSESSEE ON THE BASIS OF ACCRUAL SYSTEM OF ACCOUNTING WAS OF AN AGG REGATE SUM OF RS.6,40,688/- WHICH HAVE BEEN RETURNED BY THE ASSESSEE AS TAXABLE AMOUNT. IN THE BOOKS OF ACCOUNT AN AMOUNT OF RS.1,14,901/- WAS REDUCED BY T HE ASSESSEE FROM THE DEPB ACCOUNT ON THE GROUND THAT THE SAME REPRESENTE D DISCOUNT ON DEPB SALES. HE OBSERVED THAT NO SUCH DISCOUNT WAS EVIDE NT ON THE ACTUAL CREDIT MADE ON RESPECTIVE DATES. THE ACCRUED AMOUNT OF RS.2,89 ,377/- WAS NOT SOLD BY THE END OF THE YEAR, THEREFORE, THE EVENTUAL DISCOUNT, IF ANY, ON SUCH CREDIT OR SALE IN ANY FUTURE TIME WILL ONLY BE CONTINGENT. IT IS NOT PROPER TO ALLOW FOR A DISCOUNT ON DEPB ACCRUED ON THAT ACCOUNT BEFORE A SALE. HE OBS ERVED THAT THERE IS NOTHING ON RECORD TO SHOW THAT DEPB CREDIT HAS BEEN SOLD AT SUCH A DISCOUNT IN ANY EARLIER YEAR. IN THIS MANNER THE LD. CIT (A) HAS S USTAINED THE ADDITION OF RS.1,14,901/- IN RESPECT OF DEPB CREDIT. THE ASSES SEE IS STILL AGGRIEVED, HENCE, IN APPEAL. ITA NO.1635/DEL/2009 3 3. IT WAS SUBMITTED BY LD. AR THAT THE LD. CIT (A) HAS OBSERVED THAT THERE IS NOTHING ON RECORD TO SHOW THAT SUCH DEPB CREDIT HAS BEEN SOLD. HE SUBMITTED THAT THE LD. CIT (A) HAS NOT PROPERLY APPRECIATED T HE FACTS. HE SUBMITTED THAT IN THE STATEMENT OF FACTS FILED BEFORE HIM, IT WAS CLE ARLY STATED THAT THE LICENCE HAS ALREADY BEEN SOLD AND REALIZED VALUE IS THE TRUE IN COME OF THE ASSESSEE, THEREFORE, THE DEFICIT IS ALLOWABLE. HE SUBMITTED THAT IT WILL MEET THE END OF JUSTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSES SING OFFICER WITH A DIRECTION TO ALLOW THE CLAIM OF THE ASSESSEE AFTER NECESSARY VER IFICATION. 4. ON THE OTHER HAND, LD. DR, RELYING ON THE ORDER OF THE LD. CIT (A) PLEADED THAT THE ADDITION SUSTAINED BY THE LD. CIT (A) IS R IGHT AND THIS GROUND OF THE ASSESSEE SHOULD BE DISMISSED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT HAS BEEN RECORDED IN THE ORDER OF THE LD. CIT (A) THAT THERE IS NOTHING ON RECORD TO SHOW THAT SUCH D EPB CREDIT HAS BEEN SOLD AT SUCH A DISCOUNT IN ANY EARLIER YEAR. AS AGAINST THA T IN THE STATEMENT OF FACTS FILED BEFORE THE LD. CIT (A) IT WAS STATED BY THE ASSESSE E THAT THE LICENCE HAS ALREADY BEEN SOLD. THIS IS A MATTER OF VERIFICATION AND WE SEE NO REASON FOR NOT RESTORING THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR NEC ESSARY VERIFICATION AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE AND AFTER GIVING OPPORTUNITY TO THE ASSESSEE FOR PLACING EVIDENCE ON RECORD, HE WILL DECIDE THIS ISSUE AS PER PROVISIONS OF LAW. WE DIRECT ACCORDIN GLY. THIS GROUND FOR STATISTICAL PURPOSES IS CONSIDERED TO BE ALLOWED. 6. APROPOS GROUND NO.2, IT WAS NOTICED BY THE ASSES SING OFFICER THAT EXPENSES UNDER THE HEAD BUSINESS GUEST, MEETINGS AN D SALES PROMOTION EXPENSES AND TRAVELING EXPENSES WERE NOT FULLY SUPP ORTED BY VOUCHERS AND IT WAS SO REMARKED BY THE AUDITORS TO STATE THAT PERSO NAL USER ELEMENT COULD NOT BE ASCERTAINED. THIS FACT HAS BEEN MENTIONED IN PARA 4 OF THE ASSESSMENT ORDER. ITA NO.1635/DEL/2009 4 THE EXPENSES CLAIMED IN THIS REGARD UNDER THESE THR EE HEADS ARE RS.16,41,824/- WHICH ARE CATEGORIZED AS UNDER:- (IN RS.) I. BUSINESS GUEST, MEETING & PROMOTION EXPENSES 45 4208 II. TRAVELING & CONVEYANCE EXPENSES 517495 III. TRAVELING EXPENSES (DIRECTORS) 670121 ----------- 1641824 ======= 7. IT WAS SUBMITTED TO ASSESSING OFFICER THAT KEEPI NG IN VIEW THE FACT THAT THESE EXPENSES WERE NOT FULLY SUPPORTED BY VOUCHERS , THE ASSESSEE ITSELF HAS ADDED AN AMOUNT OF RS.50,000/- TO THE COMPUTATION O F INCOME AND, THEREFORE, NO FURTHER ADDITION WAS CALLED FOR. HOWEVER, THE ASSE SSING OFFICER DISALLOWED 25% OF THESE EXPENSES AND MADE ADDITION OF RS.3,60,456/ - BY REDUCING RS.50,000/- WHICH WAS ADDED BY THE ASSESSEE. THE DISALLOWANCE HAS BEEN SUSTAINED BY THE LD. CIT (A) AFTER EXAMINING THE DETAILS FILED BY TH E ASSESSEE. 8. IT WAS SUBMITTED BEFORE US BY LD. AR THAT THOUG H THE FACT OF NOT MAINTAINING PROPER SUPPORTING VOUCHERS FOR ALL THE EXPENSES CANNOT BE DENIED IN VIEW OF THE REMARKS OF AUDITOR, BUT KEEPING IN VIEW THE BUSINESS OF THE ASSESSEE AND KEEPING IN VIEW THAT THE ASSESSEE IS A LIMITED COMPANY, IT WAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT (A) IS ON HIGHER SIDE. HE DREW OUR ATTENTION TOWARDS T HE FINDINGS OF THE LD. CIT (A) AND STATED THAT SOME DISCREPANCIES HAVE BEEN POINTE D OUT BY HIM, BUT THEY ARE ALSO NOT TO THE EXTENT THE ADDITION IS MADE AND SUS TAINED. 9. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND LD. CIT (A). ITA NO.1635/DEL/2009 5 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. A SUM OF RS.50,000/- WAS ALSO ADDED BY THE ASSESSEE TO THE COMPUTATION OF INCOME ON THIS ACCOUNT. HOWE VER, KEEPING IN VIEW THE REQUEST OF THE LD. AR AND KEEPING IN VIEW THE FACTS MENTIONED BY THE LD. CIT (A) IN PARA 3.1 OF THE IMPUGNED ORDER, WE ARE OF THE OP INION THAT IT WILL MEET THE INTEREST OF JUSTICE IF A FURTHER RELIEF OF RS.60,45 6/- IS GIVEN TO THE ASSESSEE. NOW THE ADDITION SUSTAINED IS TO THE EXTENT OF RS.3 LAC OUT OF RS.3,60,456/-. THIS GROUND IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. . 12. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.08 .2009. [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 21.08.2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES