Darshan Mekani, Kolkata V. DCIT, Circle - 10, Kolkata , Kolkata

ITA 1713/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1663 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO. 1713/KOL/20 17 ASSESSMENT YEAR : 2010-1 1 DARSHAN MEKANI -VS.- D.C.I.T., CIRCLE-10, KOLKATA KOLKATA [PAN : ADNPM 2668 J] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT : MD. GHAYAS UDDIN, ADDL. CIT DATE OF HEARING : 25.01.2018. DATE OF PRONOUNCEMENT : 02.02.2018. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11.05.2017 OF CIT(A)- 18, KOLKATA RELATING TO A.Y.2010-11. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN DISALLOWING 2 0% OF THE DISCOUNT EXPENSES CLAIMED BY THE ASSESSEE AS A DEDUCTION WHILE COMPUTING INCO ME FROM BUSINESS. 3. THE ASSESEE IS AN INDIVIDUAL. THE ASSESSE CARRI ES ON THREE SEPARATE BUSINESSES UNDER THREE DIFFERENT NAMES VIZ. WEAVERS STUDIO, R ANGEEN AND BLACK CIRCLE STUDIO. WEAVERS STUDIO IS ENGAGED IN THE BUSINESS OF SELLI NG READY MADE GARMENTS. RANGEEN STUDIO IS ENGAGED IN THE BUSINESS OF DYEING AND PRI NTING TEXTILES AND BLACK CIRCLE STUDIO IS ENGAGED IN THE BUSINESS OF MUSIC RECORDING STUDI O. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT IN THE PROFIT AND L OSS ACCOUNT OF WEAVERS STUDIO THE ASSESSEE HAD DEBITED A SUM OF RS.30,06,615/- UNDER THE HEAD DISCOUNT, RS.3,44,156/- UNDER THE HEAD SALES PROMOTION EXPENSES AND RS .3,88,538/- UNDER THE HEAD EXHIBITION CHARGES FOR EXHIBITING ASSESEES PRODUC TS IN VARIOUS CITIES OF INDIA. 2 ITA NO.1713/KOL/2017 DARSHAN MEKANI A.YR.2010-11 2 ACCORDING TO THE AO THE ASSESSEE HAD NOT FURNISHED DETAILS OF THESE EXPENSES NOR HAD HE PRODUCED ANYTHING TO SUBSTANTIATE THE CLAIM FOR DED UCTION OF THE AFORESAID EXPENSES. THE AO WAS OF THE VIEW THAT IN THE GIVEN CIRCUMSTANCES 20% OF THE EXPENDITURE CLAIMED IN THE AFORESAID EXPENSES SHOULD BE DISALLOWED. THE AO ACCORDINGLY DISALLOWED A SUM OF RS.6,01,323/- 4. BEFORE CIT(A) THE ASSESSEE CLAIMED THAT IT HAD F ILED COMPLETE DETAILS OF DISCOUNTS GIVEN AND IT HAD ALSO FILED BOOKS OF ACCOUNTS FOR V ERIFICATION OF THE AO. THE ASSESSEE ALSO FILED THE PERCENTAGE OF DISCOUNT SALES PROMOTI ON AND EXHIBITION CHARGES TO GROSS SALES. THE ASSESSEE POINTED OUT THAT IN THE PRESENT ASSESSMENT YEAR THE DEDUCTION CLAIMED UNDER THE AFORESAID HEADS WAS 8.77% OF GROS S SALES WHEREAS IT WAS 8.13% AND 9.69% RESPECTIVELY IN THE PRECEDING TWO YEARS. 5. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE A O. IN THE REMAND REPORT THE AO ISSUED NOTICE TO 60 PARTIES U/S 133(6) OF THE INCOM E TAX ACT, 1961 (ACT) TO WHOM DISCOUNT WAS CLAIMED TO HAVE BEEN GIVEN BY THE ASSE SSEE. SOME OF THE NOTICES WERE RETURNED AS ADDRESSES WERE NOT CORRECT. IN RESPECT OF SOME OF THE NOTICES ISSUED PARTIES DID NOT RESPOND. SOME PARTIES DENIED HAVING RECEIVE D ANY DISCOUNT FROM THE ASSESSE. THE ASSESSEE FILED A REJOINDER TO THE REMAND REPORT OF THE AO IN WHICH THE ASSESSEE POINTED OUT THAT THE PAYMENT FOR THE ENTIRE NET SAL ES (SALE VALUE DISCOUNT) WERE RECEIVED BY CHEQUES AND THAT PROVED THAT THE NET SA LES FIGURES SHOWN IN THE BILLS HAVE ALONE BEEN PAID AND RECEIVED BY THE ASSESSEE AND TH EREFORE THE DISCOUNT ALLOWED BY THE ASSESSEE HAD TO BE ACCEPTED. 6. THE CIT(A) HOWEVER DID NOT AGREE WITH THE AFORES AID SUBMISSION OF THE ASSESSEE AND HE CONFIRMED THE ORDER OF AO BY OBSERVING AS FO LLOWS :- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE. MANY OF THE CLIENTS HAVE MADE PAYMENTS TH ROUGH CHEQUES AND IN THOSE CASES ASSESSEE'S CLAIMS MAY BE VERIFIED. BUT THERE ARE STILL A LARGE NUMBER OF 3 ITA NO.1713/KOL/2017 DARSHAN MEKANI A.YR.2010-11 3 CUSTOMERS WHO HAVE PAID IN CASH AND IN THOSE CASES ASSESSEE'S CLAIMS CANNOT BE VERIFIED. KOLKATA, ITAT DECISION CITED BY THE APPEL LANT IS NOT RELEVANT BECAUSE A.O. HAS STATED THAT THE DISCOUNT CLAIMS ARE EXCESS IVE. BESIDES A.O. HAS ALSO TRIED TO VERIFY THE CLAIM OF DISCOUNT BY ISSUING NOTICES U/S 133(6), BUT HE HAS NOT RECEIVED POSITIVE RESPONSES FROM A NUMBER OF PARTIE S. THERE ARE ALSO A NUMBER OF PARTIES WHOSE ADDRESSES WERE NOT FOUND TO BE CORREC T. HENCE, GENUINENESS OF THE ENTIRE DISCOUNT CANNOT BE VOUCHED. UNDER THE CIRCUM STANCES, I AM OF THE OPINION THAT DISALLOWANCE OF 20% OF THE NET DISCOUNT IS JUS TIFIABLE. HENCE, DISALLOWANCE OF RS.6,01,323/- IS CONFIRMED. 7. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HA S PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION AS WERE MADE BEFORE THE LOWER AUTHORITIES. THE LD. DR RELIED ON THE ORD ER OF CIT(A) 9. I AM OF THE VIEW THAT THE PLEA OF THE ASSESSEE C ANNOT BE REJECTED IN TOTO. BEFORE THE AO IT APPEARS THAT THE ASSESSEE WAS NOT GIVEN A NY SHOW CAUSE NOTICE ON THIS ISSUE. IN THE PROCEEDINGS BEFORE CIT(A) A REMAND REPORT WAS C ALLED FROM THE AO. THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO 60 PARTIES. WHAT IS THE MATERIAL IN THE REMAND REPORT OF THE AO IS THE DENIAL OF SOME OF THE PARTIES OF HAVI NG RECEIVED ANY DISCOUNT. IT IS NOT DISPUTED THAT THE SALES WERE TO NUMEROUS PARTIES AN D NOTICE U/S 133(6) WAS ISSUED BY THE AO WAS ONLY TO SOME OF THE PARTIES ON RANDOM BASIS. IT IS NOT CLEAR FROM THE ORDER OF CIT(A) AS TO HOW MAY PARTIES DENIED HAVING RECEIVED ANY DISCOUNT FROM THE ASSESSEE. THE FACT THAT THE NET SALES DISCLOSED BY THE ASSESS EE IN THE PROFIT AND LOSS ACCOUNT AND THE SALES BILLS WERE RECEIVED BY CHEQUES WOULD GO T O SHOW THAT THE ASSESSE HAD NOT RECEIVED ANY AMOUNT OVER AND ABOVE WHAT IS MENTIONE D AS SALES IN THE BOOKS OF ACCOUNTS SUPPORTED BY BILLS. KEEPING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF 10% OF THE EXPENSES UNDER THE VARIOUS HEADS CLAIMED BY THE ASSESSEE IS DISALLOWED. I HOLD AND DIRECT ACCORDINGLY. 4 ITA NO.1713/KOL/2017 DARSHAN MEKANI A.YR.2010-11 4 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT 02.02.2018. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 02.02.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. DARSHAN MEKANI, 5/1, ANIL MOITRA ROAD, KOLKATA-7 00019. 2. D.C.I.T., CIRCLE-10, KOLKATA. 3. CIT(A)-18, KOLKATA 4. C.I.T-4, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES