M/s Ispat Enterprises Pvt. Ltd., Kolkata V. ITO, Ward-6(2), Kolkata, Kolkata

ITA 1738/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9500 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2016
• Court: TRIBUNAL
• Section: 142(1)

Judgement Text

ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 1 `IN THE INCOME TAX APPELLATE TRIBUNAL,DBENCH, KOLKATA BEFORE: SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1738/KOL/2016 A.Y: 2011-12 M/S.ISPAT ENTERPRISES VS. INCOME TAX OFFICER PVT. LTD WARD 6(2), KOLKATA PAN: AAACI 6899N (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI NIRMAL KAUSHIK, FCA, LD.AR FOR THE ASSESSE E SHRI SITAL CHANDRA DAS, JCIT, SR. D.R FOR THE R EVENUE DATE OF HEARING : 17-01-2017 DATE OF PRONOUNCEMENT : 10-02-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),2, KOLK ATA DATED 29-07-2016 FOR THE ASSESSMENT YEAR 2011-12. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION MADE BY THE LD. INCOME-TAX OFFICER OF A SUM OF RS.1 ,45,765/- ON GROSS PROFIT. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION MADE BY THE LD. INCOME-TAX OFFICER OF A SUM OF RS.1 ,97,091/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY DEALING IN THE BUSINESS OF TRADING IN GALVA NIZED SHEET AND IRON. THE ASSESSEE FILED ITS RETURN OF INCOME F OR THE A.Y UNDER CONSIDERATION ON 28-09-2011 DECLARING TOTAL I NCOME OF RS.6,56,972/-. UNDER SCRUTINY NOTICES U/S. 143(2) & 142(1) OF THE ACT WERE ISSUED. AGAINST WHICH THE ASSESSEE FIL ED DETAILS, BOOKS OF ACCOUNT, BANK STATEMENTS, BILLS AND VOUCHE RS. 4. GROUND NO. 1 IS AGAINST THE ADDITION OF RS. 1,45 ,765/-ON ACCOUNT OF GROSS PROFIT. DURING THE ASSESSMENT PROC EEDINGS, THE AO FOUND THAT THE RATE OF SALE OF ITEMS WAS LOWER T HAN THE RATE OF PURCHASE. IN EXPLANATION, THE ASSESSEE SUBMITTED THAT IT CONSIDERED THE AVERAGE VALUE WHILE PREPARING A CHAR T, WHEREIN GROSS LOSS OF RS.(-) 145765.11 WAS SHOWN. THE RATE WAS LOWER THAN THE RATE OF ITEMS FOUND IN OPENING STOCK AND B ALANCE OUTSTANDING ITEMS LYING AS CLOSING STOCK WAS HIGHER RATE OF ITEMS. IN SUPPORT OF THE CONTENTION, THE ASSESSEE F URNISHED ALL PURCHASE AND SALE BILLS OF SUCH ITEMS. BUT ON VERIF ICATION THE AO FOUND THAT THE ASSESSEE HAS SOLD ALMOST ENTIRE ITEM S IN QUANTITY SHOWING OPENING BALANCE, PURCHASE, SALE AND CLOSING BALANCE FROM AUGUST 2010 TO MARCH 2011 AS PER FOLLOWING CHA RTS:- MONTH OPENING STOCK PURCHASE SALE CLOSING STOCK GROSS PROFIT QTY VALUE QTY VALUE QTY VALUE QTY VALUE AUGUST,10 0.375 16519.11 33.480 1695487.00 17.150 844209.00 16.705 845971.04 -21466.07 SEPTEMBER 16.705 845971.04 5.340 289306.00 21.670 1 065301.00 0.375 20316.43 -49659.60 OCTOBER 0.375 20316.43 0.000 0.00 0.375 18000.00 0.000 0.00 -2316 .43 NOVEMBER 0.000 0.00 0.000 0.00 0.000 0.00 0.000 0.0 0 0.00 DECEMBER 0.000 0.00 22,945 119903.00 6.790 320871.0 0 16.155 844821.66 -34210.34 JANUARY,11 16,155 886825.50 5,230 279422.00 4.540 2 15196.00 16.845 886825.50 -22222.16 ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 3 FEBRUARY 16,845 886825.50 0.000 0.00 2.685 150092.0 0 14.160 745470.41 8736.91 MARCH 14,160 745470.41 0.000 0.00 6.780 329730.00 7 .380 391113.00 -24627.41 TOTAL LOSS -145765.11 5. AS THE ASSESSEE COULD NOT PRODUCE THE ENTIRE BIL LS AND THE AO WAS OF THE OPINION NO BUSINESSMAN WILL PURCHASE GOODS AT A HIGHER RATE AND SELL THE SAME ITEMS IN THE PERIOD O N A MUCH LOWER RATE AND IN THE ABSENCE OF SALE BILLS, THE AO ADDED THE ENTIRE LOSS OF RS.1,45,765/- TO THE TOTAL INCOME OF THE ASSESSEE. 6. IN APPEAL, BEFORE THE CIT-A THE ASSESSEE SUBMITT ED A CHART SHOWING TRADING RESULT OF GROSS PROFIT OF CURRENT Y EAR COMPARING WITH THE LAST PRECEDING THREE YEARS 2011-12, 2010-1 1, 2009- 2010 & 2008-09. THE COMPARATIVE DETAILS OF WHICH A S SUBMITTED BY THE ASSESSEE BEFORE THE CIT-A ARE REPR ODUCED HEREWITH:- ASSESSMENT YEAR 2011-12 OPENING STOCK 9,62,25,152.05 SALES 50,63,25,171.35 PURCHASE 47,99,92,208.61 CLOSING STOCK 7,74,00,547. 66 LIFTING CHARGES 5,24,191.00 GROSS PROFIT 69,84,167.35 TOTAL 58,37,25,719.01 GROSS PROFIT RATIO= RS.1.379% AS PER PARA 32(A) OF TAX AUDIT REPORT. PURCHASE IS NET OF RS.29,80,938.40, CREDIT NOTE AND DISCOUNT RECEIVED FROM SUPPLIERS SALE IS NET OF RS120434/-, DEBIT NOTES RAISED BY CUSTOME RS. ASSESSMENT YEAR 20110-11 OPENING STOCK 2,77,13,898.78 SALES 37,03,74,751.08 PURCHASE 43,24,59,734.93 CLOSING STOCK 9,62,25,152. 05 LIFTING CHARGES 7,34,222.58 GROSS PROFIT 56,92,046.84 TOTAL 46,65,99,903.13 46,65,99,903.13 GROSS PROFIT RATIO= RS.1.537% AS PER PARA 32(A) OF TAX AUDIT REPORT. PURCHASE IS NET OF RS.10407905/-, CREDIT NOTE FROM SUPPLIERS SALE IS NET OF RS. 2600/-, DEBIT NOTES RAISED BY CUSTOMERS. ASSESSMENT YEAR 2009-2010 OPENING STOCK 4,91,62,411.62 SALES 25,74,36,552.50 PURCHASE 23,08,99,093.45 CLOSING STOCK 2,77,13,898. 78 LIFTING CHARGES 4,47,220.00 GROSS PROFIT 46,41,726.21 TOTAL 28,51,50,451.28 28,51,50,451.28 GROSS PROFIT RATIO= RS.1.803% AS PER PARA 32(A) OF TAX AUDIT REPORT. PURCHASE IS NET OF RS.6316167.21, NET CREDIT NOTE FROM SUPPLIERS. ASSESSMENT YEAR 2008-2009 OPENING STOCK 3,37,29,919.47 SALES 20,83,86,594.00 PURCHASE 21,78,56,307.28 CLOSING STOCK 4,91,62,411. 62 ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 4 LIFTING CHARGES 3,82,647.00 GROSS PROFIT 55,80,131.87 TOTAL 25,75,49,005.62 25,75,49,005.62 GROSS PROFIT RATIO= RS.2.677% AS PER PARA 32(A) OF TAX AUDIT REPORT. PURCHASE IS NET OF RS.3569063.20, NET CREDIT NOTE FROM SUPPLIERS. 7. IN SUPPORT OF THE CONTENTIONS, THE ASSESSEE HAS ALSO RELIED ON THE FOLLOWINGS:- 1) RAMCHANDAR SIVNARAYAN V. CIT (1978) 111 ITR 263( SC) 2) SUTLEJ COTTON MILLS LTD V. CIT (1979) 116 ITR 1 (SC) 3) DAVIDSON OF INDIA P.LTD V. CIT (1983) 140 ITR 344 (CAL). 4) CIT V. DHNARIGIRI RAJA NARSINGIRIJI 91 ITR 544( SC) 5) CIT V. DALMIA CEMENT LTD 254 ITR 377, AND 6) CIT V. NATIONAL RAYAN COMMERCIAL CO. LTD 193 IT R 744 8. THE CIT-A HAS NOT ACCEPTED THE SUBMISSIONS OF AS SESSEE FOR THE REASON THAT THE ASSESSEE IN MOST OF CASES S OLD THE GOODS DIRECTLY TO THE SALE PARTY BY NOT TAKING ANY DELIVERY AND CONFIRMED THE ADDITION MADE BY THE AO FOR NON SUBMI SSION OF CONFIRMATION FROM THIRD PARTY. 9. BEFORE US THE LD.AR OF THE ASSESSEE SUBMITS THA T THE AO EXAMINED SUCH ITEMS, WHICH SOLD AT LOWER RATE AND D ID NOT SEE THE PROFITS BY THE ASSESSEE ON OTHER ITEMS. THE ASS ESSEE FILED ALL THE REQUIRED DETAILS BEFORE THE AO AND ALSO REF ERRED TO THE ORDER OF ASSESSMENT TO SHOW THAT THE AO ACKNOWLEDGE D THE SUBMISSIONS OF RELEVANT DETAILS. 10. ON THE OTHER HAND, THE LD.DR APPEARING ON BEHAL F OF THE REVENUE HAS RELIED ON THE ORDERS OF THE AO AND THE CIT-A. 11. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE AO EXAMINED ONLY SUCH I TEMS, WHICH WERE SOLD BY THE ASSESSEE AT LOWER RATES AS FORMULA TED BY THE ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 5 AO IN HIS ORDER AT PAGE-6, BUT BEFORE THE CIT-A THE ASSESSEE FILED THE DETAILS OF GROSS PROFIT FOR THE LAST THRE E YEARS COMPARING THE GROSS PROFIT OF CURRENT YEAR. WE FIND THAT THE AO AND CIT-A ONLY DOUBTED THE TRANSACTIONS THAT THE AS SESSEE SOLD THE SAME ITEMS TO THE SAME PURCHASE PARTY IN THE SA ME MONTH AT LOWER RATE. BEFORE US THE LD.AR OF THE ASSESSEE SUBMITS THAT SOME ITEMS WERE SOLD AT LOWER RATES. WE FIND FORCE IN THE CHART AS SUBMITTED/FILED BEFORE THE AO/CIT-A, WHEREIN THE ASSESSEE HAS FURNISHED THE DETAILS OF PURCHASE/OPENING STOCK , SALE/CLOSING STOCK. THE CASE LAWS AS RELIED ON BY T HE ASSESSEE ARE RELEVANT AND APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE AO AND CIT-A BOTH HAVE NOT CONSIDERED THE SAME. THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT-A IS NOT JU STIFIED. WE ALSO FIND THAT THE ASSESSEE HAS SUBSTANTIATED ITS C LAIM BY FURNISHING THE DETAILS BEFORE THE AO/CIT-A. ACCORDI NGLY, THE ADDITION MADE ON THIS ISSUE REQUIRES TO BE DELETED. THEREFORE, GROUND NO.1 AS RAISED BY THE ASSESSEE IS ALLOWED. 12. NEXT GROUND RELATES TO DISALLOWANCE OF RS.1,97, 091/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. 13. ON EXAMINATION OF BILLS AND VOUCHERS AS PRODUCE D BY THE ASSESSEE BEFORE THE AO, HE FOUND THAT AN AMOUNT OF RS.1,97,091/- WAS INCURRED BY THE ASSESSEE ON ACCOU NT OF FOREIGN TRAVEL EXPENSES FOR ITS DIRECTOR, SRI SANJA Y KUMAR JAIN, HIS WIFE, SMT. RAKHI JAIN AND THEIR SON, SRI SAURAV JAIN AND DAUGHTER, SURBHI JAIN. THE SAID TOUR WAS ORGANIZED BY TRAVEL AGENT, M/S. COX & KINGS, KOLKATA. ON VERIFICATION, THE AO FOUND THAT THE SAID TOUR WAS ARRANGED FOR ENTERTAINMENT A ND IN THE ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 6 ABSENCE OF ANY EVIDENCE SHOWING THAT THE SAID EXPEN DITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS, HE AO DISALLOWED AND ADDED AN AMOUNT OF RS.1,97,091/- TO THE INCOME OF THE ASSESSEE 14. THE CIT-A CONFIRMED THE ACTION OF THE AO BY OBS ERVING THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE SH OWING THAT SUCH EXPENDITURE WAS INCURRED FOR THE BENEFIT OF BU SINESS OF ASSESSEE. 15. BEFORE US THE LD.AR OF THE ASSESSEE SUBMITS THA T THE SAID TOUR WAS ON SUO MOTU TO EXAMINE AND ANALYSE THE BUSINESS PROSPECTS OF ASSESSEE IN THE TRADE OF IRON AND STEE L IN THE EUROPEAN MARKET. IN SUPPORT OF HIS CONTENTION, HE R EFERRED TO RESOLUTION PASSED BY THE BOARD OF DIRECTORS AT PAG E 8 OF THE PAPER BOOK WHEREIN SRI SANJAN KUMAR JAIN WAS ONE OF ITS DIRECTORS SINCE INCEPTION OF THE COMPANY. THE LD.AR OF THE ASSESSEE HAS RELIED ON THE FOLLOWING CASE LAWS:- 1. CIT V. WOODCRAFT PRODUCTS LTD (1993) 69 TAXMAN 4 15(CAL) 2.CIT V. J.K INDUSTRIES (P) LTD (1969) 71 ITR 594(C AL) 16. THE LD.DR HAS RELIED ON THE ORDERS OF THE AO/CI T-A. 17. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE COULD NOT ADDU CE ANYTHING BEFORE THE AUTHORITIES BELOW THAT SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND INFORMATION SAID TO HAVE BEEN SO COLLECTED WAS UTILISED FOR THE BENEFIT AND PURPO SE OF ASSESSEES BUSINESS. THE LD.AR EXCEPT SHOWING THE B OARD RESOLUTION NOTHING HAS BEEN PLACED ON RECORD THAT INFORMATION ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 7 SO COLLECTED FROM SUCH TOUR AGENT WAS PUT TO BENEFI T OF ASSESSEES BUSINESS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT PRODUCE ANYTHING TO SUBSTANTIATE ITS CLAIM THAT THE SAID EXPENDITURE WAS INCURRED FOR THE PURP OSE OF ASSESSEES BUSINESS. WE FIND THAT THE SAID TOUR WAS FULLY PERSONAL. THUS, WE ARE NOT INCLINED TO INTERFERE WI TH THE ORDER OF THE CIT-A, WHO CONFIRMED AND UPHELD THE ACTION O F THE AO IN DOING SO. WE UPHOLD THE ORDER OF THE CIT-A ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF ASSESSEES APPEAL IS DI SMISSED. 18. IN THE RESULT, THE APPEAL OF ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 /02 /2017 WASEEM AHMED S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 10-02 -2017 SD/- SD/- *PP/SPS: COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT/ASSESSEE : M/S.ISPAT ENTERPRISES PVT . LTD C/O SRI JITENDRA KAUSHIK, ADVOCATE, 19-D, MUKTARAM BABU ST, KOL-7. 2 THE RESPONDENT/DEPARTMENT- THE INCOME TAX OFFICER WARD 6(2),AAYKAR BHAWAN,P-7, CHOWRINGHEE SQUARE, KO LKATA-69. 3 4. THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR ITA NO.1 738/KOL/16 M/S. ISPAT ENTERPRISES PVT.LTD 8