M/s Pearl Deinks Ltd., New Delhi V. ITO, New Delhi

ITA 2123/DEL/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7498 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: GANJAL SRIVASTAVA
• Keywords: Wrong claim
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: F NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT, AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 2123 /DEL/2011 (ASSESSMENT YEAR:- 2007-08) PEARL D R INKS LTD. B-42, LAWRENCE ROAD, INDUSTRIAL AREA NEW DELHI PAN : AAACP4210C (APPELLANT) VS ITO WARD-14(2) C. R. BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. VED JAIN, CA, & SH. GANJAL SRIVASTAVA RESPONDENT BY SH. AMRIT LAL, SR. DR ORDER PER CHANDRA MOHAN GARG, JM THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)-XVII, NEW DELHI, DATED 15/2/2011 PASSED IN FIRST APPEAL NO. 150/CIT(A)-XVII/DEL/2009-10 FOR ASSESSMENT YEAR 20 07-08. 2. GROUND NO. 1 IS GENERAL AND GROUND NO. 2(B)A AND (C) ARE ONLY SUPPORTIVE GROUND TO GROUND NO. 2(A). DATE OF HEARING 18.05.2016 DATE OF PRONOUNCEMENT 03 .08.2016 2 ITA NO. 2123/DEL/2011 3. THE MAIN EFFECTIVE GROUND OF THE ASSESSEE READ A S FOLLOWS:- 2(A). THE HONBLE CIT(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF A SUM OF RS.40,59,064/- OUT OF ADVE RTISING AND PUBLICITY EXPENSES REPRESENTING WALL PAINTING AND O THER ADVERTISEMENT EXPENSES PAID TO M/S VISION & IMAGES ON THE ALLEGED BELIEF THAT THE PARTY WAS MERELY USED AS A CONDUIT FOR PROVIDING FAKE BILLS OF VARIOUS EXPENSES. 3. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.25,136/- REPRESENTING I NTEREST PAID TO M/S GEE CAPITAL TFS LTD. BEING INTEREST ON ASSET S ON HIRE PURCHASE ON THE GROUND THAT NO TDS HAS BEEN DEDUCTE D ON THE AFORESAID INTEREST. GROUND NO. 2(A) OF THE ASSESSEE:- 3. APROPOS ABOVE GROUND, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE MATERIALS PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS DRA WN OUR ATTENTION TO PAGE 1 & 2 OF THE ASSESSMENT ORDER AND CONTENDED TH AT THE A.O MADE DISALLOWANCE AND ADDITION OF RS.40,59,064/- FOR WAL L PAINTINGS AND PEPSI LOGO PAID TO M/S VISION & IMAGES ONLY ON THE BASIS THAT NOTICE ISSUED TO THIS ENTITY RECEIVED WITH THE REMARKS LE FT. THE LD. COUNSEL ALSO POINTED OUT THAT THE CIT(A) DISMISSED CLAIM OF THE ASSESSEE BY TAKING A HYPER TECHNICAL APPROACHES AND WITHOUT PROPER 3 ITA NO. 2123/DEL/2011 APPRECIATION OF FACTS. THIS IMPUGNED ORDER WAS BE SET ASIDE. HE DREW OUR ATTENTION TO PARA 2.4 OF THE ORDER OF THE CIT(A ) AND POINTED OUT THAT THE FIRST APPELLATE AUTHORITY WITHOUT PROVIDIN G OPPORTUNITY TO EXPLAIN ITS CASE PROPERLY. THE LD. COUNSEL POINTED OUT THAT AS PER ASSESSEE PROFIT & LOSS A/C (APB PAGE 11), SCHEDULE 12 TO FINAL ACCOUNTS (APB PAGE 24) THE TOTAL TURNOVER WAS 13 CRORES AND IN THE FIELD OF COLD DRINKS AND BEVERAGES ADVERTISEMENT AND PUBLICITY HA S VITAL ROLE TO PLAY TO BOOST SALE OF THESE ITEMS AND ASSESSEE GENUINELY INCURRED EXPENDITURE ON LOGO AND WALL PAINTINGS BY MAKING IM PUGNED PAYMENT TO M/S VISION. THE LD. COUNSEL ALSO SUBMITTED THAT THE ASSESSEE FILED COPY OF THE RETURN OF INCOME OF THE PAYEE AT PAGES 141 TO 142 OF ASSESSEES PAPER BOOK AND EXPLAINED BEFORE CIT(A) T HE BASIS OF CLAIM AS NOTED BY THE CIT(A) AT PAGES 3 TO 6 OF THE IMPUGNED ORDER. 4. THE LD. COUNSEL ALSO DRAWN OUR ATTENTION TO OPER ATIVE PARA 2-4 OF THE IMPUGNED ORDER OF CIT(A) AND CONTENDED THAT MER ELY BECAUSE NOTICE U/S 133(6) WAS NOT RESPONDED ON ACCOUNT OF S HIFTING OF PAGE FROM EARLIER PLACE IS NOT A LEGALLY TENABLE GROUND FOR MAKING DISALLOWANCE. THE LD. COUNSEL VEHEMENTLY POINTED O UT THAT LACK OF FUNDS FOR BUSINESS PURPOSE AND INCOME OF VERY LOW A MOUNT IN THE HANDS OF THE ASSESSEE CANNOT BE A BASIS FOR MAKING DISALL OWANCE AND ADDITION IN REGARD TO ADVERTISEMENT AND PUBLICITY EXPENSES G ENUINELY INCURRED 4 ITA NO. 2123/DEL/2011 ON THE ASSESSEE BY MAKING PAYMENT THROUGH BANKING C HANNELS THUS CLAIM SHOULD BE ALLOWED AND ADDITION MAY FINDING BY DELETED. TO SUPPORT ABOVE CONTENTIONS THE LD. COUNSEL HAS PLAC ED RELIANCE ON THE FOLLOWING ORDERS OF THE TRIBUNAL & HONBLE GUJRAT H IGH COURT:- A. FORTE POINT CONSTRUCTION P. LTD 7 ITR 205 [2011] ITAT, DELHI B. ITO VS. HARDROCK ELECTRIC & ENGG CO. ITA NO. 4955/MUM/2008, ITAT MUMBAI C. CIT VS. BMS PROJECTS (P) LTD 44 TAXMANN.COM 206 [2014] GUJARAT HIGH C OURT D. AMITABH BACHCHAN CORPN. LTD VS. DCIT 56 TAXMANN.COM 77 [2015] [MUM-TRI] ITAT, MUMBAI 5. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) STRONGLY SUPP ORTED THE ACTION OF THE A.O AND CONTENDED THAT THE CIT(A) AFTER PROPER APPRECIATION OF FACTS UPHELD THE ORDER OF THE A.O ON THIS ISSUE WHI CH REQUIRES NO INTERFERENCE. 6. ON CAREFUL CONSIDERATION OF ABOVE IN THE PRESENT CASE THE A.O DISMISSED CLAIM OF THE ASSESSEE BY MERELY OBSERVING THAT THE NOTICE ISSUED U/S 133 (6) OF THE ACT COULD NOT BE SERVED O N THE PAYEE (M/S IMAGES) AS IT LEFT THE PREMISES. THE CIT(A) PROCEE DED TO CONFIRM THE SAME BY OBSERVING THAT NO PAYMENT HAS BEEN MADE UP TO 3 RD JULY 2006 5 ITA NO. 2123/DEL/2011 AND ALL THE PAYMENTS HAVE BEEN MADE ON TWO DATES I. E ON 5/8/2006 THROUGH 13 CHEQUES OF AROUND FIGURE OF RS.4,00,000/ - EACH. THE CIT(A) FURTHER OBSERVED, FROM THE COPY OF THE FIR OF PAYEE , THAT A SUM OF RS.137,391/- HAS BEEN SHOWN AS INCOME FROM 7 FIRMS . THE CIT(A) ALSO ALLEGED THAT THE BALANCE SHEET AND P & L A/C OF PAY EE HAVE BEEN SUBMITTED AND ONLY RS.25,224/- HAS BEEN SHOWN AS IN COME FROM THE FIRM VISION AND M/S IMAGES. THE CIT(A) ALSO ALLEGE D THAT ONLY A SMALL SUM OF RS.43,557/- HAS BEEN SHOWN UNDUE THE HEAD CA SH AND BANK BALANCES WHICH CLEARLY SHOWN THAT IT DID NOT HAVE A NY SOURCE FOR INCURRING HUGE EXPENSES ON SALARY MATERIAL CONSUMED ETC FROM ITS OWN POCKET AND THERE ARE DISCREPANCIES IN THE TDS CLAI M PLACED BY SHRI RAJENDER KUMAR, THE PROPRIETOR OF PAYEE FIRM. AFTE R OBSERVING ABOVE, THE CIT(A) UPHELD THE DISALLOWANCE BY CONCLUDING TH AT MR. RAJENDERA KUMAR HAS BEEN USED AS A CONDUIT FOR PROVIDING FAKE BILLS OF VARIOUS EXPENSES IN THE VARIOUS FIELDS. 7. IN OUR CONSIDERED VIEW THE ALLEGATIONS LABELED A GAINST THE PAYEE CANNOT BE HELD AS SUSTAINABLE AND ACCEPTABLE FOR MA KING DO ALLOWANCE WITHOUT BRINGING ON ANY COGENT EVIDENCE OR ALLEGATI ON TO SHOW THAT THE ASSESSEE SHIFTED FUNDS IN THE GARB OF FAKE BILLS BY USING MR. RAJENDRA KUMAR AS CONDUIT FOR MAKING FALSE CLAIM. IT IS ALS O NOT CASE OF THE CIT(A) THAT MR. RAJENDRA KUMAR AND HIS PAYEE FIRM I S NOT IN THE 6 ITA NO. 2123/DEL/2011 BUSINESS OF ADVERTISEMENT AND PUBLICITY AND THESE B ILLS ARE BOGUS AND THE ASSESSEE RECEIVED THE IMPUGNED AMOUNT OF PAYMEN T MAKE FROM MR. RAJENDRA KUMAR AND THUS IT IS NOT ALLOWABLE. WE MA Y POINT OUT THAT THE LACK OF FINANCIAL RESOURCES FOR CONDUCT OF BUSI NESS AND MAJOR INCOME OR LOW INCOME BY THE PAYEE CANNOT BE A BASIS FOR MAKING DISALLOWANCE AS TO BASIS OF DOUBT ONLY. THE PAYEE IS A TAX PAYER AND IF HE LEFT THE EARLIER PLACE OF BUSINESS THEN HE MAY B E CALLED FROM NEW ADDRESS TO EXPLAIN HIS POSITION AND IN THE EXTENT O F RETURN OF NOTICE UNSERVED ON THE OLD ADDRESS CAN BE OBTAINED FROM TH E PAYER ASSESSEE TO ESTABLISH ITS CLAIM. WE ARE OF THE CONSIDERED O PINION THAT THE CIT(A) UPHELD THE ADDITION ON WRONG PREMISE AND BY CONSIDE RING THE IRRELEVANT FACTS AND THUS WE DECLINE TO ACCEPT CONC LUSION DRAWN IN THE FIRST APPELLATE ORDER. AT THE SAME TIME, FROM THE EXPLANATION AND DOCUMENTS FILED BY THE ASSESSEE WE CLEARLY OBSERVE THAT THE ASSESSEE SUBMITTED ALL RELEVANT DOCUMENTS, EVIDENCE AND EXPL ANATION WITHIN HIS CONTROL TO ESTABLISH ITS CLAIM AND BY SHOWING THAT THE PAYEE M/S VISION AND IMAGES RECEIVED PAYMENT THROUGH BANKING CHANNEL S TOWARDS BILLS RAISED FOR LOGO AND WALL PAINTING WHICH IS NOTHING BUT ACTUAL ADVERTISEMENT AND PUBLICS EXPENSES. THE DR DID NOT TAKE THE ASSESSEE TO SUBMIT NEW ADDRESS OF THE PAYEE THUS ADDITION CA NNOT BE MADE ONLY BECAUSE NOTICE U/S 133(B) OF THE ACT COULD NOT BE S ERVED UPON THE 7 ITA NO. 2123/DEL/2011 ASSESSEE DUE THE REASONS BEYOND CONTROL. WE MAY AL SO POINT OUT THAT 10 YEARS HAVE BEEN ELAPSED AFTER TRANSACTION THUS A T THIS STAGE WE CANNOT EXPECT THE ASSESSEE TO SUBMIT MORE EVIDENCE S TO SUPPORT ITS CLAIM WHICH IS SUFFICE TO ESTABLISH GENUINENESS OF THE CLAIM WHICH WAS INCORRECTLY DISALLOWED BY THE AUTHORITIES , IN VIEW OF ABOVE DISCUSSION, WE DEMOLISH THE CONCLUSION OF THE CIT(A) AND WE DIR ECT THE A.O TO ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, GROU ND NO. 2(A) IS ALLOWED. GROUND NO.3 8. WE HAVE HEARD ARGUMENTS OF BOTH SIDES ON THE IS SUE OF DISALLOWANCE OF RS.25,136/- REPRESENTING THE AMOUNT OF INTEREST PAID BY THE ASSESSEE TO M/S GE CAPITAL TFL (H ON HIRE PURCHASE. 9. ON CAREFUL CONSIDERATION OF THE SAME WE ARE OF T HE CONSIDERED OPINION THAT AS PER CBDT, VIDE INSTRUCTION NO. 1425 /CBDT DATED 16/11/87 THE AMOUNT OF PAYMENT OF INTEREST ARE HIRE PURCHASES CANNOT BE CHARACTERIZED AS INTEREST PAYABLE AND THIS PROVI SIONS OF SECTION 194A OF THE ACT ARE NOT ATTRACTED IN SUCH TRANSACTI ONS. ACCORDINGLY, WE ACCEPT CONTENTIONS OF THE LD. COUNSEL OF THE ASS ESSEE AND THERE FROM, GROUND NO. 3 OF THE ASSESSEE IS ALSO ALLOWED. 8 ITA NO. 2123/DEL/2011 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D ON BOTH THE COUNTS. ORDER POUNCED IN THE OPEN COURT ON 03/08/2016. SD/- SD/- (G.D. AGRAWAL) (C. M. G ARG) VICE PRESIDENT JUDICIAL MEMBER DATED: 03/08/2016 VL/- COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR ITAT, NEW DELHI 9 ITA NO. 2123/DEL/2011 DATE 1. DRAFT DICTATED ON 02.08.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 02.08.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .0 8 .2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .0 8 .2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.