JMC Projects (India) Ltd., Ahmedabad V. The Dy.CIT., Circle-4, Ahmedabad

ITA 2119/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6535 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: M K PATEL
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T. K. SHARMA, JUDICIAL MEMBER AND SHRI A. N74. PAHUJA, ACCOUNTANT MEMBER I.T.A. NO. 2119 / AHD/2009 (ASSESSMENT YEAR 2006-07) M/S. JMC PROJECTS (INDIA) LTD., A-104, SHAPATH-4, OPP. KARNAVATI CLUB, S. G. ROAD, AHMEDABAD VS. DCIT, CIRCLE -4, AHMEDABAD PAN/GIR NO. :AAACJ3814E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI M K PATEL, AR RESPONDENT BY: SHRI A. K. PATEL, DR O R D E R PER SHRI T. K. SHARMA, JM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER DATED 04.05.2009 OF CIT(A) VIII, AHMEDABAD UPHOLDING THE DISALLOWANCE OF RS.1.50 LACS ON ACCOUNT OF GIFT-BONI AND CHANDALA E XPENSES OUT OF TOTAL EXPENSES OF RS.3,52,909/- FOR THE ASSESSMENT YEAR 2 006-07. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION. FOR THE A SSESSMENT YEAR IN APPEAL, IT FILED ITS RETURN OF INCOME DECLARING NIL INCOM E. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE VIDE NOTICE DATED I.T.A.NO. 2119/AHD/2009 2 26.02.2008 TO HOW CAUSE AS TO WHY GIFT-BONI AND CHA NDALA EXPENSES OF RS.7,05,817/- SHOULD NOT BE DISALLOWED. THE A.O. A LSO ASKED THE ASSESSEE TO PRODUCE ALL THE DETAILS, DOCUMENTS MAINTAINED IN SU PPORT OF THESE EXPENSES CLAIMED. IN RESPONSE TO THE SAID NOTICE, THE ASSE SSEE VIDE LETTER DATED 10.03.2008 SUBMITTED ITS REPLY, THE RELEVANT PORTIO N OF WHICH IS AS UNDER: ....DURING THE YEAR COMPANY HAS INCURRED GIFT, BO NI, AND CHANDALA EXPENSES OF RS.705817/-. THE ABOVE EXPENSES ARE GEN UINELY INCURRED FOR THE PURPOSE OF BUSINESS AND AS .PER CU STOMS AND TRADITIONS OF THE BUSINESS. YOUR HONOUR WILL APPRECIATE THAT THE COMPANY IS HAV ING TURNOVER OF RS.254.24 CRORES AND PRESENCE IN MANY S TATES AND HAVING MULTIPLE SITES. NECESSARY VOUCHERS-DOCUMENTS ARE ALSO WITH COMPANY BUT THEY WILL BE HUGE IN NUMBERS. ALL THESE EXPENSES ARC GENERALLY EXPENDED FOR BUSIN ESS PURPOSE. ALL VOUCHERS, BILLS & RECORDS ARE AVAILABL E WITH US. IF YOU WISH TO VERIFY, PLEASE PROVIDE US REASONABLE TIME . TO PRODUCE AS THE SUPPORTING DOCUMENTS ARE' AVAILABLE AT VARIOUS REG IONAL OFFICES AND PROJECTS SITES. IT MAY BE NOTED THE LEARNED C1T (A) HAS ALLOWED ABO VE EXPENSE 100 % IN THE ASST. YEAR 2005-06. A COPY OF JUDGMENT IS ON YOUR RECORD. IN VIEW OF THE ABOVE SLATED FACTS NO DISALLOWANCE S HALL BE MADE AS THESE EXPENSES ARE PERMISSIBLE UNDER THE LAW AND DO ES NOT AFFECT TAX LIABILITY BY THE COMPANY...' 3. AFTER CONSIDERING THE AFORESAID REPLY, THE A.O. IN PARA 4.2 OF THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED ALL THE VOUCHERS OF EXPENSES CLAIMED, FOR VERIFICATION. TH E ASSESSEE HAS ALSO NOT FURNISHED EVIDENCE SHOWING TO WHOM THE PAYMENT OF S UCH EXPENSES WERE MADE. ACCORDINGLY, THE A.O. OBSERVED THAT THE CLAI M OF THE ASSESSEE IS NOT FULLY SUPPORTED BY DOCUMENTARY PROOF. WITH REGARD TO THE CONTENTION OF THE ASSESSEE THAT CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE FOR THE ASSESSMENT YEAR 2005-06 AND ALLOWED 100% OF EXP ENSES CLAIMED, THE A.O. OBSERVED THAT THIS HAS NO MERIT AS THE DEPARTM ENT HAS NOT ACCEPTED THE I.T.A.NO. 2119/AHD/2009 3 DECISION OF LD. CIT(A) AND PREFERRED APPEAL BEFORE ITAT ON THIS ISSUE. HE ACCORDINGLY DISALLOWED 50% (I.E. RS.3,52,909/-) OF THE GIFT-BONI, CHANDALA EXPENSES CLAIMED. 4. ON APPEAL BEFORE CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSEE IS HAVING TURNOVER OF RS.254.21 CRORES AND HAD PRESENC E IN MANY STATES. IT WAS EXPLAINED THAT THESE EXPENSES WERE MADE FOR BUSINES S PURPOSE AND THE ASSESSEE HAS ALSO PAID THE FRINGE BENEFIT ON ACCOUN T OF SUCH EXPENSES. 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, LD. CIT(A) HELD AS NATURE OF THESE EXPENSES IS SUCH THAT THE PROFIT PART THEREOF BEING INCOME FOR NON BUSINESS PURPOSE COULD NOT BE RULED OUT. SINCE THE ASSESSEE HAS MADE FRINGE BENEFIT BY FILING SEPA RATE RETURNS, HE TOOK THE VIEW THAT DISALLOWANCE MADE BY THE A.O. IS ON THE H IGHER SIDE. HE ACCORDINGLY RESTRICTED THE SAME TO RS.1.50 LACS AND ALLOWED THE RELIEF OF RS.2,02,909/-. AGGRIEVED WITH THIS ORDER OF LD. CI T(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE SHRI M K PATEL APPEARED AND CONTENDED THAT IN THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE O F RS.2,17,622/- MADE BY THE A.O. OUT OF GIFT-BONI AND CHANDALA EXPENSES. L D. COUNSEL FOR HE ASSESSEE FURTHER EXPLAINED THAT IN THE ASSESSMENT Y EAR 2005-06, THE APPEAL OF THE REVENUE WAS DISMISSED ON ACCOUNT OF LOW TAX EFF ECT. ON THIS BASIS, COUNSEL FOR THE ASSESSEE CONTENDED THAT DISALLOWANC E TO THE EXTENT OF RS.1.50 LACS CONFIRMED BY THE LD. CIT(A) IN ASSESSMENT YEAR UNDER APPEAL, IS ON THE HIGHER SIDE AND THE SAME BE REDUCED SUBSTANTIALLY. I.T.A.NO. 2119/AHD/2009 4 7. ON THE OTHER HAND, THE LD. D.R., APPEARING ON BE HALF OF THE REVENUE, DREW OUR ATTENTION TO THE REASONS RECORDED BY THE A O AS WELL AS BY THE LD. CIT(A), IN THE IMPUGNED ORDERS. HE POINTED OUT THAT THE ASSESSEE, NEITHER BEFORE THE AO NOR BEFORE THE LD. CIT(A), HAS FURNIS HED THE COMPLETE DETAILS SHOWING TO WHOM SUCH EXPENSES WERE PAID. THE CLAIM OF THE ASSESSEE WAS NOT FULLY SUPPORTED BY DOCUMENTARY EVIDENCES. THERE FORE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE PRECEDING ASSESSMENT YEAR, TOTAL EXPENSES UNDER THIS HEAD INCURRED BY TH E ASSESSEE WAS RS.4,35,255/-. IN THE ASSESSMENT YEAR UNDER APPEAL , ASSESSEE HAS INCURRED TOTAL EXPENSES UNDER THIS HEAD RS.7,05,817/-. NEI THER BEFORE THE A.O. NOR BEFORE THE LD. CIT(A), THE ASSESSEE HAS FURNISHED E VIDENCE SHOWING TO WHOM THE PAYMENTS OF SUCH EXPENSES WERE MADE. THE CLAIM OF THE ASSESSEE IS NOT FULLY SUPPORTED BY DOCUMENTARY EVIDENCE. KE EPING IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT DISALLOWANCE TO THE EXTENT OF RS.1,50,000/- OUT OF TOTAL EXPENSES CLAIMED RS.7,05,817/- IN THE ASSESSMENT YEAR UNDER APPEAL IS NEITHER EXCESSIVE NOR UNREASONABLE. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LD. CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2011. SD/- SD/- (A. N. PAHUJA) (T. K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED : 3 RD JUNE, 2011 I.T.A.NO. 2119/AHD/2009 5 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..