Anand Jewellers Pvt. Ltd., Ranchi V. ACIT, C.C.2, Ranchi

ITA 19/RAN/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2758 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 23-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VINAY JALAN; RAJIV RANJAN
• Keywords: Gift; Fair market value
• Section: 143(3); 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH VIRTUAL HEARING AT KOLKATA BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.19/Ran/2020 Assessment Year: 2015-16 Anand Jewellers Pvt. Ltd. Shri Vinay Kumar Jalan, M/s. O.P. Jalan and Associates Consultants LLP, 48 Cart Sarai Road, Upper Bazar, Ranchi- 834001. PAN: AADCA1883F Vs. ACIT, CIRCLE-3, Ranchi Central Revenue Building (Annexe) Ranchi – 834001 (Appellant) (Respondent) Present for: Appellant by : Shri Vinay Jalan, FCA & Shri Rajiv Ranjan, CA Respondent by : Shri Sanjay Mukherjee, CIT(DR) Date of Hearing : 22.02.2022 Date of Pronouncement : 09.05.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is directed against the order no. ITBA/APL/S/250/2019-20/1025204866(1) dated 14.02.2020 passed by the Ld. CIT(A), Ranchi for A.Y. 2015-16 against the assessment order u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT, Circle – 3, Ranchi, dated 29.12.2017. 2. The assessee is before the Tribunal in this appeal challenging, inter alia five additions/disallowances made by the Ld. AO and confirmed by the Ld. CIT(A) which are as under – i. The Ld. CIT(A) erred in confirming the addition so preferred by the Ld. Assessing Officer amounting to Rs. 13,36,350/- being the ITA No.19/RAN/2020 Anand Jewellers Pvt. Ltd. A.Y. 2015-16 2 "allotment of shares over and above FMV" without appreciating the Goodwill of the company. ii. The Ld. CIT(A) erred in confirming the addition so preferred by the Ld. Assessing Officer amounting to Rs. 46,000/- on account of deferred expenditure written off. iii. The Ld. CIT(A) erred in confirming the addition so preferred by the Ld. Assessing Officer amounting to Rs. 3,20,334/- on account of assets written-off. iv. The Ld. CIT(A) erred in confirming the addition so preferred by the Ld. Assessing Officer amounting to Rs. 2,040/- on account of Income Tax Payment. v. The Ld. CIT(A) erred in restricting the addition to 10% and confirming an amount of Rs. 41,399/- on account of gift items debited to P&L Account. 3. Brief facts of the case are that the assessee company is engaged in the business of trading in jewellery. Return of income was filed on 11.09.2015 reporting a total income of Rs. 81,83,450/-. A survey u/s 133A of the Act was conducted on 24.07.2014 and also the case was selected under CASS. Ld. AO completed the assessment wherein additions/disallowances totaling to Rs. 3,12,50,490/- were made and the total income was assessed at Rs. 3,94,33,940/-. Aggrieved, assessee went in appeal before the Ld. CIT(A) who gave substantial relief, sustaining additions/disallowances only to an extent of Rs. 17,46,123/- for five different items which are in appeal before the Tribunal, tabulated below - S. No. Issues Amount (Rs.) 1 Issue of Share at premium 13,36,350 2 Deferred expenditure written off 46,000 3 Asset written-off 3,20,334 4 Income Tax Payment 2,040 5 Gift items expenses 41,399 TOTAL 17,46,123 ITA No.19/RAN/2020 Anand Jewellers Pvt. Ltd. A.Y. 2015-16 3 4. Ld. Counsel for the assessee placed on record a written submission in support of his claim on the five grounds of appeal. He also made his oral submission explain his case. For ground no. 4 relating to claim of income-tax payment of Rs. 2,040/-, the Ld. Counsel submitted it as ‘not pressed’. 4.1 Ld. CIT(DR) relied on the findings given by the Ld. CIT(A) and the Ld. AO. He submitted that in respect of valuation of shares, the financials have been rightfully taken from the balance sheet as on 31.03.2014 which was made available by the assessee. Value of goodwill claimed by the assessee for the purpose of valuation of shares issued to Shri Shubham Gupta is not reflected in the balance sheet and nothing has been brought on record by the assessee to substantiate the said claim. Further, it submitted that in respect of deferred expenditure written off, there is no reference to section 35D of the Act. Ld. CIT(DR) also submitted that for the assets written off, the same are depreciable assets and ought to have been treated through the respective block of assets which has been rightfully disallowed by the Ld. AO and sustained by the Ld. CIT(A). In respect of disallowance towards expenses on gift items, Ld. CIT(DR) submitted that it has been appropriately restricted at 10% of the total expenses of gift items as against 25% done by the Ld. AO and therefore does not warrant any further relief. 5. We have heard the rival contentions, perused the material on record and given it a thoughtful consideration. Each of the ground of appeal is dealt seriatim by us, herein below – 5.1 Ground no. 1 - Rs. 13,36,350/- allotment of shares over and above FMV: We note that during the course of assessment, LD. AO observed that assesses has allotted its shares over and above the Fair Market Value (FMV) since allotment should have been determined on the basis of NAV. Ld. AO computed the NAV from the balance sheet of the assessee as on 31.03.2014 at Rs. 26.46 per share against Rs. 30 at which the shares were allotted. The difference of Rs. 3.54 per share on 3,77,500 shares totaling to Rs. 13,36,350/- was added to the total income of the assesses company u/s. 56(2)(viib) of the Act under the head income from other sources. It is also noted that assessee claimed that value of goodwill has not been considered in arriving at the NAV since the company is a growing concern. To substantiate this claim, nothing was brought on record by the assessee before the Ld. CIT(A) and also not before us. ITA No.19/RAN/2020 Anand Jewellers Pvt. Ltd. A.Y. 2015-16 4 Accordingly, we do not find any justification to interfere with the finding given by the Ld. CIT(A) of confirming the said addition. This ground of appeal is therefore, dismissed. 5.2 Ground no. 2 - Rs. 46.000/- deferred expenditure written off: It is noted by the Ld. AO that the company had debited an amount of Rs 46,000/- towards deferred expenditure written off which was not relevant to the year under consideration which has been confirmed by the Ld. CIT(A). There is nothing brought on record to substantiate the claim made by the assessee. Accordingly, we do not find any reason to interfere with the finding given by the Ld. CIT(A) in sustaining the addition. This ground of appeal is therefore, dismissed. 5.3 Ground no. 3 - Rs. 3,20,334/- on account of assets written off: Ld. AO noted that the assessee had claimed an amount of Rs. 3,20,334/- towards assets written off which is not an allowable expenditure in the Profit and Loss account, rather, it should have been adjusted with particular block of asset. Ld. CIT(A) confirmed the addition since assessee could not bring anything on record to refute the same. Ld. Counsel repeated the same assertion before us and we find no reason to interfere with the finding given by Ld. AO and the CIT(A), confirming the addition. This ground of appeal is therefore, dismissed. 5.4 Ground no. 4 - Rs. 2.040/- on account of income tax payment: Ld. Counsel did not press on this ground. Even other, claim of income- tax payment is not an allowable claim under the Act. Accordingly, this ground is dismissed as not pressed. 5.5 Ground no. 5 - Rs. 41,399/- on account of gift item expenses: It is observed that Ld. AO disallowed 25% of the expenses of Rs. 41,13,985/- claimed by the assessee towards gift items since they were mostly in cash, amounting to Rs. 1,03,496/-. Ld. CIT(A) restricted the said disallowance to 10% at Rs. 41,399/- giving partial relief which we also find to be justifiable in absence of any substantive material brought ITA No.19/RAN/2020 Anand Jewellers Pvt. Ltd. A.Y. 2015-16 5 on record by the assessee. This ground of appeal is therefore, dismissed. 6. In the result, all the five grounds are dismissed and accordingly, the appeal of the assessee is dismissed, as aforesaid. Order pronounced in the open court on 09.05.2022. Sd/- Sd/- (RAJPAL YADAV) (GIRISH AGRAWAL) VICE-PRESIDENT ACCOUNTANT MEMBER Kolkata, Dated: 09.05.2022 Biswajit, Sr. P.S. Copy to: 1. The Appellant: Anand Jewellers Pvt. Ltd. 2. The Respondent: ACIT, Circle-3, Ranchi 3. The CIT, Concerned, Ranchi 4. The CIT (A) Concerned, Ranchi 5. The DR Concerned Bench //True Copy// [ By Order Sr. Private Secretary ITAT, Kolkata Benches, Kolkata