A.C.I.T Cir - 54,kolkata, Kolkata V. M/s Golden Trust Financial Services, Kolkata

ITA 214/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100269 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2013
• Court: TRIBUNAL
• Department Lawyers: UDAY KR SARKAR JCITSR
• Assessee Lawyers: DR SOMNATH GHOSH
• Keywords: Gift; Opportunity of being heard

Judgement Text

ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] ITA NO.1751/KOL/2012 ASSESSMENT YEAR : 2007-08 GOLDEN TRUST FINANCIAL SERVICES -VERSUS- D.C.I.T., CIRCLE-54, KOLKATA KOLKATA (PAN:AACFG 8395 A) (APPELLANT) (RESPONDENT) ITA NO.214/KOL/2013 ASSESSMENT YEAR : 2007-08 A.C.I.T., CIRCLE-54, -VERSUS- GOLDEN TRUST FINAN CIAL KOLKATA SERVICES, KOLKATA (PAN:AACFG 8395 A) (APPELLANT) (RESPONDENT) FOR THE ASSESSEE: DR.SOMNATH GHOSH, FCA FOR THE DEPARTMENT: SHRI UDAY KR.SARKAR, JCIT,SR.DR DATE OF HEARING : 03.12.2015. DATE OF PRONOUNCEMENT : 09.12.2015. ORDER PER SHRI N.V.VASUDEVAN, JM : ITA NO.1751/KOL/2012 IS AN APPEAL BY THE ASSESSEE W HILE ITA NO.214/KOL/2013 IS AN APPEAL BY THE REVENUE. BOTH T HESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 22.11.2012 OF CIT(A)-XXXVI, KOLKATA RELATING TO A.Y.2007-08. 2. GROUND NO.1 RAISED BY THE ASSESSEE IN THIS APPEA L WAS NOT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 3. GROUND NO.2 RAISED BY THE ASSESSEE IN THEIR APPE AL AND GROUND NOS 1 TO 3 RAISED BY THE REVENUE IN ITS APPEAL CAN BE CONVENIE NTLY DECIDED TOGETHER. THESE GROUNDS READ AS FOLLOWS :- ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 2 ASSESSEES GROUNDS OF APPEAL 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA HAS ERRED IN LAW AS WELL A S IN FACT IN CONFIRMING THE DISALLOWANCE AND ADDITION OF AN EXPENDITURE OF RS.1 ,38,32,946/- FOR BUSINESS/SALES PROMOTION EXPENSES. REVENUES GROUNDS OF APPEAL (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAS ERRED IN DELETING ADDITION OF RS.2,66,66,749/- OUT OF TOTAL DISALLOWANCE/ADDITION OF RS.4,16,65,896 MADE BY AO IN RESPECT OF SALES PROMO TION EXPENSES RELYING ON THE SUBMISSION AND BILLS FOR COST OF THE PURCHASE SUBMI TTED BY THE ASSESSEE .. (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.2,66,66,749/- OUT OF T OTAL DISALLOWANCE OF RS.4,16,65,896 MADE IN RESPECT OF SALES PROMOTION EXPENSES WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD TO THE A.O. WHEN THE ASSESSEE FAILED TO SUBST ANTIATE SUCH EXPENSES BY FILING NECESSARY EVIDENCE DURING ASSESSMENT PROCEEDINGS. (3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF CIT(A) IS PERVERSE AS OUT OF TOTAL DISALLOWANCES OF RS.4,04,99,695/- THE SUM OF RS.2,66,66,749/- WAS DELETED WITHOUT CONSIDERING THE NEXUS OF EXPENDITURE TO EAR N BUSINESS BY THE ASSESSEE. 4. THE FACTS WITH REGARD TO THE ABOVE SAID GROUNDS ARE AS FOLLOWS : THE ASSESSEE IS A FIRM. IT IS ENGAGED IN THE BUSINESS OF ACTING AS CORPORATE AGENT OF LIFE INSURANCE PRODUCTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS T HE AO NOTICED THAT THE ASSESSEE HAD CLAIMED AS DEDUCTION WHILE COMPUTING BUSINESS I NCOME A SUM OF RS.4,04,99,695/- UNDER THE HEAD BUSINESS/SALES PROMOTION EXPENSES. AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE ABOVE SAID SUM FOR TH E REASON THAT THE ASSESSEE HAD NOT FILED EVIDENCE TO SHOW THAT THE AFORESAID EXPENSES WERE FOR THE PURPOSE OF BUSINESS PROMOTION/SALES PROMOTION. AO WAS ALSO OF THE VIEW THAT THE ASSESSEE WAS EARNING COMMISSION FROM SELLING INSURANCE POLICIES AND SUCH EXPENSES FOR BUSINESS PROMOTION AND SALES PROMOTION WERE NOT REQUIRED TO BE INCURRE D BY THE ASSESSEE. HE, THEREFORE, HELD THAT THE AFORESAID EXPENSES WERE UNWARRANTED A ND UNJUSTIFIED. 5. BEFORE CIT(A) THE ASSESSEE FILED ALL THE REQUIRE D EVIDENCE WHICH WERE ALSO BEFORE THE AO AND SUBMITTED THAT THE EXPENSE IN QUE STION WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E. ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 3 6. THE CIT(A) AFTER TAKING CONSIDERATION OF THE PH OTO COPIES OF THE BILLS AND EVIDENCES OF PAYMENT OF THE EXPENSES THROUGH BANKIN G CHANNELS CONCLUDED AS FOLLOWS :- MATTER WAS EXAMINED IN DETAILS. APPELLANT WAS ASKE D TO PRODUCE ALL BILLS RELATING TO BUSINESS PROMOTION AND SALES WITH VARIOUS SCHEMES. APPELLANT PRODUCED ALL BILLS RELATING TO SALES PROMOTION EXCEPT OF RS.1,38,32,94 6/-. THESE BILLS WERE NOT FOUND TO BE AVAILABLE WITH THEM. OUT OF THESE MANY ARE CASH VO UCHERS AND THEY WERE ALSO NOT PRODUCED. IN THE ABSENCE OF BILLS AND VOUCHERS EXPE NSES TO THE EXTENT OF RS.1,38,32,946/- COULD NOT BE VERIFIED AND LINKED W ITH VARIOUS SCHEMES. HENCE OUT OF TOTAL EXPENSES UNDER THE HEAD BUSINESS/SALES PROMOT ION OF RS.4,04,99,695/- DISALLOWED BY A.O. SUM OF RS.1,38,32,946/- IS CONFIRMED AS DIS ALLOWANCE AND BALANCE OF RS.2,66,66,749/- IS DELETED. APPELLANT GETS RELIEF OF RS.2,66,66,749/. 7. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A) REVE NUE HAS RAISED GROUND NOS. 1 TO 3 . AGGRIEVED BY ORDER OF CIT(A) SUSTAINING A PA RT OF DISALLOWANCE MADE BY AO, ASSESSEE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE EVIDENCE ON RECORD. AT PAGES 62 TO 93 OF THE PAPER BOOK FILED BY THE ASSES SEE THE PHOTO COPIES OF THE BILLS AND VOUCHERS RELATING TO THE SALES PROMOTION EXPENSES H AVE BEEN FILED. AT PAGES 94 TO 110 THE ASSESSEE HAS FILED LEDGER COPY OF THE SALES PRO MOTION EXPENSES. A SUMMARY OF THE NAMES OF THE PERSONS TO WHOM THE BUSINESS/SALES PRO MOTION EXPENSES INCURRED BY THE ASSESSEE WERE PAID AND THEIR CORRELATION WITH SUPP ORTING BILLS FILED IN THE PAPER BOOK AT PAGES 60 AND 61 ARE GIVEN IN THIS SUMMARY. THE S AME IS GIVEN AS ANNEXURE TO THIS ORDER FOR BETTER APPRECIATION OF FACTS. FROM A PERU SAL OF THE STATEMENT, IT IS CLEAR THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF THE BILL S AND VOUCHERS IN RESPECT OF THE ENTIRE SALES PROMOTION EXPENSES. THE CIT(A)OBSERVATION T HAT THE APPELLANT HAD PRODUCED ALL BILLS RELATING TO SALES PROMOTION EXCEPT TO THE EXTENT OF RS.1,38,32,946/- IS THERE FORE INCORRECT. IT IS FURTHER NOTICED THAT IN RESPE CT OF PAYMENT MADE TO P.A.TIME INDUSTRIES, NO BILLS AND VOUCHERS HAVE BEEN FILED. THE PAYMENTS TO THIS PARTY TOTALLING RS.8,70,000/- IS NEGLIGIBLE COMPARED TO THE VOLUME OF EXPENDITURE INCURRED BY THE ASSESSEE UNDER THIS HEAD. EVEN IN RESPECT OF THIS E XPENDITURE THE PAYMENT IN QUESTION ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 4 HAS BEEN MADE BY ACCOUNT PAYEE CHEQUES. A PERUSAL O F THE BILLS AND VOUCHERS SHOWS THAT THE EXPENDITURE IN QUESTION HAS BEEN INCURRED ON PURCHASE OF GIFT ITEMS. THUS IT IS CLEAR THAT THE ASSESSEE HAS ESTABLISHED INCURRING O F BUSINESS PROMOTION/SALES PROMOTION EXPENSES. AO/CIT(A) HAVE NOT GIVEN ANY VALID BASIS AS TO WHY THESE EXPENSES SHOULD NOT BE REGARDED AS PERMISSIBLE DEDUCTION. CIT(A) HA VING ACCEPTED THAT THE EXPENDITURE IN QUESTION IS WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS OF THE ASSESSEE OUGHT TO HAVE ALLOWED THE ENTIRE DEDUCTION . HE OUGHT NOT TO SUSTAINED PART OF THE ADDITION ON A WRONG ASSUMPTION THAT BILLS IN RE LATION TO A PART OF THE EXPENDITURE WERE NOT FILED BY THE ASSESSEE AND ON THIS BASIS S USTAINED PART OF THE DISALLOWANCE MADE BY THE AO. 9. FOR THE REASONS GIVEN ABOVE WE ALLOW GROUND NO.2 RAISED BY THE ASSESSEE AND DISMISS GROUND NOS. 1 TO 3 RAISED BY THE REVENUE. 10. GROUND NO.4 RAISED BY THE REVENUE IN ITS APPEAL READS AS FOLLOWS :- (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DELETING DISALLOWANCES OF RS.19,99,898/- MADE IN RESPECT OF 17 NON-OPERATIONAL BRANCH OFFICES IGNORING THE FACT SUCH NATURE OF EXPENSES CANNOT BE CONSIDERED FOR INOPERATIVE BRANCHES. 11. AO DISALLOWED A SUM OF RS.19,99,898/- WHICH WER E EXPENSES INCURRED IN CONNECTION WITH 17 VACANT BRANCHES OF THE ASSESSEE. BEFORE CIT(A) THE ASSESSEE EXPLAINED THAT THESE BRANCHES ARE MOSTLY RURAL AND SEMI URBAN AREAS. SOME TIMES THE STAFFS ARE DEPUTED ON TEMPORARY BASIS FROM ONE BRAN CH TO ANOTHER, THOUGH THEIR SALARIES ARE PAID FROM THE BRANCHES IN WHICH THEY WERE ORIGI NALLY POSTED. THIS IS DONE BECAUSE OF THE HUMAN RESOURCE DEPLOYMENT STRATEGY OF THE FI RM. SO, NO BRANCH WAS LEFT WITHOUT ANY STAFF AT ANY POINT OF TIME. HOWEVER, IF ONLY SA LARY REGISTER IS CONSIDERED, IT MAY HAPPEN THAT IT WILL PORTRAY THAT A BRANCH IS RUNNIN G WITHOUT ANY STAFF AT ANY PARTICULAR POINT OF TIME. BUT THE ACTUAL SITUATION IS NOT SO. THE ASSESSEE POINTED OUT THAT THE LD. AO HAS CONSIDERED THE SALARY REGISTER FOR THE MONTH OF MARCH, 2007 ONLY. FOR THAT REASON THE LD. AO HAS ARRIVED AT A WRONG CONCLUSION THAT FOR 17 BRANCHES THERE WAS NO ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 5 STAFF OF THE FIRM. THE ASSESSEE ALSO POINTED OUT T HAT THERE ARE BOUND TO BE SOME EXPENSES FOR THE MAINTENANCE OF THE BRANCHES LIKE RENT, ELECTRICITY, STATIONERY AND TRAVELLING ETC. ALSO, THROUGH THE 17 BRANCHES (AS MENTIONED BY THE LD. A.O. IN HIS ASSEMENT ORDER) BUSINESS WAS GENERATED. THE GENERAT ION OF BUSINESS BY ITSELF JUSTIFY THE EXPENSES. A LIST OF BRANCHES OF THE ASSESSEE A ND THE NAMES OF THE EMPLOYEES ALONG WITH THEIR POSTING BRANCHES WAS ALSO FILED BE FORE CIT(A) BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. IT WAS ARGUED THAT THE LD. A.O HAS NOT CONSIDERED THE ABOVE MENTIONED FACTS AND EVEN WITHOUT IDENTIFYING THE SO CALLED 17 BRANCHES DISALLOWED EXPENSES TO THE TUNE OF RS.19,99,898/- RELATING TO THOSE BRANCHES. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT WAS CONTENDED THAT THE LD . A.O. HAS EVEN ALSO FAILED TO IDENTIFY THE NATURE AND HEADS OF THE ITEMS OF EXPEN DITURES TO BE DISALLOWED ON THIS ACCOUNT. 12. THE CIT(A) AFTER CONSIDERING THE ABOVE SUBMISSI ONS WAS OF THE VIEW THAT THE EXPENSES IN QUESTION WERE INCURRED FOR UPKEEP AND F UNCTIONING OF THE BRANCHES AND HAD TO BE ALLOWED AS DEDUCTION. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE FACTS AS BROUGHT BEFORE CIT(A) THE ADDITION WAS RIGHTLY DELE TED BY CIT(A). WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF CIT(A). ACCO RDINGLY GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WHILE THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 09.12.2015. SD/- SD/- [ WASEEM AHMED ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:.09.12.2015. R.G.(.P.S.) ITA NO.1751/KOL/2012 & 214/KOL/2013 GOLDEN TRUST FINANCIAL SERVICES A.Y.2007-08 6 COPY OF THE ORDER FORWARDED TO: 1. GOLDEN TRUST FINANCIAL SERVICES, S.B.MANSION, 16 , R.N.MUKHERJEE ROAD, KOLKATA-700001. 2. THE D.C.I.T., CIRCLE-54, KOLKATA. 3. THE C.I.T.(A)-XXXVI, KOLKATA 4. THE CIT- XX,KOLKATA 6. C.I.T.(DR), KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES