Dy. Commissioner of Income Tax, Circle-2(1), Hyderabad, Hyderabad V. Kalanikethan Silks Private Limited, Hyderabad, Hyderabad

ITA 1664/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6073 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 28-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D PRASAD RAO
• Section: 143(3)

Judgement Text

ITA NO 1664 OF 2017 KALANIKETHAN SILKS P LTD HYDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1664/HYD/2017 (ASSESSMENT YEAR: 2013-14) DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) HYDERABAD VS KALANIKETHAN SILKS PRIVATE LIMITED, HYDERABAD PAN: AACCK6385 P (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI D. PRASAD RAO, DR FOR ASSESSEE : SHRI K.C. DEVDAS O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2013-14 AGAINS T THE ORDER OF THE CIT (A)-2, HYDERABAD, DATED 19.06. 2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, TRADING IN TEXTILES AND JEWELLERY, FILED ITS RETURN OF INCOME FOR THE A.Y 2013-14 ON 7.9.2013 ADMITTING TOTAL INCOME OF RS.7,18,02,940. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE ACT, THE ASSESSEE WAS ASKED TO PRODUCE ITS BOOK S OF ACCOUNT. THE ASSESSEE FURNISHED THE INFORMATION AS CALLED FO R. DATE OF HEARING: 31.05.2018 DATE OF PRONOUNCEMENT: 0 8 . 0 6 .2018 ITA NO 1664 OF 2017 KALANIKETHAN SILKS P LTD HYDERABAD. PAGE 2 OF 5 3. ON VERIFICATION OF THE SAME, THE AO OBSERVED THA T FOR THE FOLLOWING EXPENSES, BILLS/VOUCHERS ARE SELF-MAD E AND ARE NOT PROPERLY MAINTAINED: INCENTIVE ON SALES RS.1,07,84,137 GENERATOR MAINTENANCE RS.1,08,46,145 TOTAL RS.2,16,30,282 4. OBSERVING THAT THE INFLATION EXPENSES CANNOT BE RULED OUT IN SUCH KIND OF EXPENSES, THE AO DISALLOWED 10% OF THE SAME AND BROUGHT IT TO TAX. 5. FURTHER, HE ALSO NOTED THAT DURING THE YEAR, THE ASSESSEE HAS PURCHASED OLD GOLD FROM CUSTOMERS AT RS.2,43,14,000 AND THE SAME WERE NOT SUPPORTED BY A NY BILLS/ VOUCHERS, EXCEPT THE SLIPS WHICH DOES NOT CONTAIN T HE DETAILS OF THE PARTY FROM WHOM THE OLD GOLD IS PURCHASED. HE O BSERVED THAT THESE EXPENSES HAVE BEEN INCURRED MOSTLY IN CASH. H OLDING THAT THE GENUINENESS OF THE EXPENSES COULD NOT BE VERIFI ED FROM SUCH BILLS AND VOUCHERS, AND THAT THE INFLATION OF SUCH EXPENDITURE CANNOT BE RULED OUT, HE DISALLOWED 15% OF SUCH EXPE NSES AND BROUGHT IT TO TAX. 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) WHO ALLOWED THE SAME AND AGGRIEVED BY THE R ELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) ERRED BOTH ON FACTS OF THE CASE AND IN LAW.. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHE THER THE CIT (A) IS CORRECT IN LAW IN DELETING THE ADDIT ION EVEN ITA NO 1664 OF 2017 KALANIKETHAN SILKS P LTD HYDERABAD. PAGE 3 OF 5 THOUGH THE ASSESSEE DID NOT PRODUCE PROPER BILLS AN D VOUCHERS FOR THE EXPENDITURE INCURRED BY CASH. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT (A) ERRED IN IGNORING THE FACT THAT THE AO HAS DISALLOWED ONLY 10% EXPENDITURE INCURRED BY CASH AN D FOR WHICH VOUCHERS WERE NOT MAINTAINED PROPERLY. 7. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO AN D SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY BILLS /VOUCHERS EVEN BEFORE THE CIT (A) AND THEREFORE, THE CIT (A) OUGHT TO HAVE UPHELD THE DISALLOWANCE OF 10% OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN CASH AS DONE BY THE AO. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUPPORTED THE ORDERS OF THE CIT (A) AND SUBMI TTED THAT THE ASSESSEE HAD FURNISHED ALL THE INFORMATION BEFORE T HE CIT (A), WHO HAD CALLED FOR A REMAND REPORT FROM THE AO AND IN T HE REMAND REPORT, NO ADVERSE COMMENTS WERE MADE AGAINST THE E VIDENCE SO FURNISHED BUT IT WAS ONLY SUBMITTED THAT THE SAME I S NOT ACCEPTABLE. HE ALSO DREW OUR ATTENTION TO THE CHART AT PAGE 1 OF THE PAPER BOOK, WHEREIN THE DETAILS OF THE EXPENDIT URE INCURRED BY THE ASSESSEE OVER THE YEARS IS GIVEN TO DEMONSTR ATE THAT THERE IS NO EXCESS OF EXPENDITURE CLAIMED DURING THE RELE VANT A.Y TO PRESUME THAT THE EXPENDITURE WAS INFLATED. HE SUBMI TTED THAT BOTH IN THE EARLIER YEARS, AS WELL AS, IN THE SUBSE QUENT A.YS, NO DISALLOWANCE OF EXPENDITURE OF ANY KIND WAS MADE BY THE AUTHORITIES BELOW. IN SUPPORT OF THE SAME, THE COPI ES OF THE ASSESSMENT ORDERS FOR THE AYS 2014-15, 2014-13, 201 3-12, 2012- 11 AND 2009-10 ARE FILED BEFORE US. ITA NO 1664 OF 2017 KALANIKETHAN SILKS P LTD HYDERABAD. PAGE 4 OF 5 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE CASH PAYMENTS WERE MAIN LY TOWARDS (I) THE GENERATOR MAINTENANCE; (II) INCENTIVE ON SALES; AND (III) PURCHASE OF OLD GOLD FROM THE CUSTOMERS. AS FAR AS GENERATOR MAINTENANCE IS CONCERNED, THE ASSESSEE HAS EXPLAINE D BEFORE THE CIT (A), THAT 90% OF THE GENERATOR MAINTENANCE IS B EING MAINTAINED THROUGH BILLS/ VOUCHERS OF VARIOUS PETRO L AND DIESEL BUNKS AND HAS ALSO PRODUCED THE COPIES OF THE BILLS /VOUCHERS WHICH ARE IN THE BOUND BOOKS FILED BEFORE THE CIT ( A). FURTHER, AS REGARDS THE INCENTIVE ON SALES ALSO, THE ASSESSEE H AD FURNISHED THE DETAILS OF THE WORKERS WHO HAVE DRAWN THE SALES INCENTIVES IN CASH, IN ITS VARIOUS BRANCHES IN THE STATE OF A.P, DURING THE FINANCIAL YEAR UNDER QUESTION. AS REGARDS, THE PURC HASE OF OLD GOLD, THE ASSESSEE HAD FILED THE COPIES OF THE VOUC HERS WHICH ARE PROPERLY BOUND AND PRESERVED AND IT IS SUBMITTED TH AT IS THE NORMAL PRACTICE OF THE CUSTOMERS TO BRING OLD GOLD AND BUY NEW ORNAMENTS AND IN THAT PROCESS, THE VALUE OF THE OLD GOLD WOULD BE REDUCED FROM THE ENTIRE COST OF THE NEW ORNAMENTS. IT WAS SUBMITTED THAT IN SUCH TRANSACTIONS, THERE IS NO CA SH PAYMENT, BUT IT WAS ONLY AN ADJUSTMENT OF OLD GOLD ORNAMENTS AGAINST THE PURCHASE OF NEW ORNAMENTS. 10. WE FIND THAT THE CIT (A) HAS CONSIDERED THIS IS SUE AT LENGTH AND AFTER CALLING FOR A REMAND REPORT FROM T HE AO AND AFTER VERIFYING THE DOCUMENTS FILED BEFORE HIM, HAS CONCL UDED THAT THE DISALLOWANCE OF 10% OF THE CASH PAYMENTS TOWARDS TH E INCENTIVES TO STAFF AND GENERATOR MAINTENANCE AND ALSO 15% OF THE PAYMENTS TOWARDS PURCHASE OF OLD GOLD TO BE DELETED. WE FIND THAT THE ASSESSEE HAS BEEN MAINTAINING THE BOOKS OF ACCOUNT AND NO ITA NO 1664 OF 2017 KALANIKETHAN SILKS P LTD HYDERABAD. PAGE 5 OF 5 DISALLOWANCE OF ANY EXPENDITURE EITHER IN THE EARLI ER OR SUBSEQUENT A.YS HAS BEEN MADE BY THE REVENUE AUTHOR ITIES. THE ASSESSEE HAD FILED ALL THE DETAILS BEFORE THE CIT ( A) AND THE REVENUE HAS NOT BEEN ABLE TO REBUT THE FINDINGS OF THE CIT (A) EXCEPT STATING THAT THE ASSESSEE HAS NOT FILED THE BILLS/VOUCHERS BEFORE THE CIT (A). IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT (A). 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 8 TH JUNE, 2018. VINODAN/SPS COPY TO: 1 DY.CIT, CIRCLE 2(1) 5 TH FLOOR, ROOM NO.514, SIGNATURE TOWERS, KONDAPUR, HYDERABAD 2 M/S. KALANIKETHAN SILKS PVT. LTD, H.NO.1-3-176/4/ C/15, GANDHINAGAR, SARASWATHI NILAYAM, HYDERABAD 500080 3 CIT (A) - 2, HYDERABAD 4 PR. CIT 2, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER