Rajoo Engineers Ltd., RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Junagadh Circle, JUNAGADH

ITA 211/RJT/2013

• Counselvise Citation: 21124914 RSA 2013
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J B JHAVERI D R
• Assessee Lawyers: M N MANVAR
• Keywords: Opportunity of being heard

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI B. R. JAIN AM ITA NO. 211/RJT/2013 / ASSESSMENT YEAR 2008-09. RAJOO ENGINEERS LIMITED, JUNAGADH ROAD, MANAVADAR PAN : AABCR3204M ( / APPELLANT V/S THE ASSTT. CIT, JUNAGADH, CIRCLE-1, JUNAGADH. / RESPONDENT ! ' #$ / ASSESSEE BY SHRI M.N. MANVAR, C.A. % ! ' #$ / REVENUE BY SHRI J.B. JHAVERI, D.R. # & ' ! ( / DATE OF HEARING 31-12-2013 ) ! ( / DATE OF PRONOUNCEMENT 31 - 12-2013 / ORDER PER B. R. JAIN, A. M. : THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATE D 21/03/2013 OF DR. K. SHRINIVAS REDDY, LEARNED CIT(A)-IV, RAJKOT R AISES THE SOLITARY GROUND AS UNDER:- 1. THE LEARNED CIT(A)-IV HAS ERRED IN LAW AND ON F ACTS IN LUMP SUM DISALLOWANCE OF RS. 6,76,390/- BEING 10% OF RS. 67,63,897/- CONSISTING OF VARIOUS TRAVELING EXPENSE S, TELEPHONE EXPENSES, CAR EXPENSES, HOTEL EXPENSES, H OTEL ADMINISTRATION EXPENSES AND HOTEL CHARGES AS DESCRI BED IN ASSESSMENT ORDER ON THE ALLEGED GROUND THAT THE SAI D EXPENDITURE CANNOT BE CONSIDERED EXCLUSIVELY FOR BU SINESS PURPOSE AND PART OF THE EXPENDITURE CONSIDERED AS P ERSONAL NATURE. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A PUB LIC LIMITED COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING AND PROCES SING OF PLASTIC MACHINERY. THE A.O. FOUND THAT THE ASSESSEE HAS INC URRED EXPENSES AGGREGATING TO RS. 67,63,897/- UNDER VARIOUS HEADS OF ACCOUNT AS UNDER:- ITA 211/RJT/2013 2 1. TRAVELING MANUFACTURING INTERNAL EXPENSES: RS. 10,169/- 2. TRAVELING FOREIGN RS. 12,74,179/- 3. TRAVELING SALES SERVICE FOREIGN RS. 01,62,272/ - 4. TRAVELING SERVICE DOMESTIC RS. 12,57,106/- 5. TRAVELING SALES DOMESTIC RS. 02,94,516/- 6. TRAVELING MANUFACTURING FOREIGN RS. 02,60,614/ - 7. TRAVELING MANUFACTURING DOMESTIC RS. 02,06,789 /- 8. TELEPHONE EXP. RS. 10,84,588/- 9. CAR EXP. RS. 18,91,584/- 10. HOTEL EXP. RS. 02,54,388/- 11. HOTEL ADMINISTRATION EXP. RS. 10,506/- 12. HOTEL CHARGES RS. 57,186/- TOTAL RS. 67,63,897/- SINCE WHOLE OF THE EXPENDITURE AS AFORESAID WERE NO T FOUND INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES, HE CO NSIDERED PART OF SUCH EXPENDITURE AS PERSONAL IN NATURE AND PROCEEDED TO MAKE A DISALLOWANCE OF RS. 6,76,390/- EQUAL TO 10% OF TOTAL EXPENDITURE OF RS. 67,63,897/- ON REASONABLE BASIS. 3. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 4. THE APPELLANTS CASE IS THAT IN THE PAST, DISALL OWANCE OF EXPENSES MADE STOOD DELETED BUT THE A.O. DID NOT TAKE INTO A CCOUNT THE HISTORY OF THE CASE. WHEREAS THE REVENUE ON THE OTHER HAND, HAS S TATED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE EXPENSES I NCURRED ARE WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES AND DO NOT HA VE ANY ELEMENT OF PERSONAL USE. REASONABLE DISALLOWANCE OF EXPENSES M ADE, THEREFORE, NEEDS NO INTERFERENCE. 5. HEARD PARTIES WITH REFERENCE TO THE MATERIAL ON RECORD. IT IS CORRECT THAT REASONABLE DISALLOWANCE OF EXPENSES IS PERMISS IBLE. SUCH A VIEW CAN BE FOUND ENTERTAINED BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KANAHIYA LAL JANGIR VRS. ACIT (2008) 217 CTR (RAJ) 354. THE A.O. IN THE PRESENT CASE IN APPEAL, HOWEVER, DID NOT HAVE OPPOR TUNITY TO EXAMINE ASSESSEES CLAIM IN RIGHT PERSPECTIVE. WE, THEREFOR E, SET ASIDE THE DISALLOWANCE AND REMIT THE ISSUE BACK TO THE A.O. F OR CONSIDERING THE ITA 211/RJT/2013 3 ASSESSEES EXPLANATION WITH REFERENCE TO MATERIAL T HAT MAY BE LAID ON RECORD TO SUBSTANTIATE THAT THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE REM IT PROCEEDINGS, HE SHALL TAKE DECISION IN ACCORDANCE WITH LAW AFTER PROVIDIN G REASONABLE AND EFFECTIVE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, APPEAL BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2013. SD/- SD/- ( T. K. SHARMA ) ( B. R. JAI N ) #*% /JUDICIAL MEMBER $( #*% / ACCOUNTANT MEMBER *$+ ,*-/ ORDER DATE 31/12/2013 /RAJKOT *RANJAN / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- RAJOO ENGINEERS LIMITED, JUNAGADH. . 2. /RESPONDENT-THE THE ASSTT. CIT, CIRCLE-1, JUNAGADH. 3. #-2- & 3 / CIT-I, RAJKOT. 4. & 3 - / CIT (A)-IV, RAJKOT. 5. 789 , , / DR, ITAT, RAJKOT 6. 9; <= / GUARD FILE. TRUE COPY *$+ #$ / BY ORDER , PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.