The ACIT, Circle-4, Baroda V. M/s. Rekvina Laboratories Ltd., Baroda

ITA 2267/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94605 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 28-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 06-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.2267/AHD/2013 / ASSTT. YEAR: 2003-2004 ACIT, CIR.4 BARODA. VS M/S.REKVINA LABORATORIES LTD. 328, PARADISE COMPLEX SAYAJIGUNJ BARODA 390 005. PAN : AABCR 0054 R ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI SOMOGYAN PAL, SR.DR ASSESSEE BY : SHRI SUNIL TALATI / DATE OF HEARING : 28/09/2015 / DATE OF PRONOUNCEMENT: 16/10/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-III, BARODA DATED 20.6.2013 FOR THE ASSTT .YEAR 2003-04. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .FIRST APPELLATE AUTHORITY HAS ERRED IN DELETING THE ADDITION OF RS. 10,04,000/- WHICH WAS ADDED BY THE AO BY MAKING THE DISALLOWANCE OUT OF M ARKETING AND COMMISSION EXPENSES, PERTAINING TO THE ASSTT.YEAR 2 006-07. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FIELD ITS RETURN OF INCOME ON 29.11.2003 DECLARING A LOSS OF RS.18,20,4 50/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UND ER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS DEBITED AN EXPENDITURE OF ITA NO.2267/AHD/2013 2 RS.10,04,000/-. IT HAS ANNEXED A NOTE ON ACCOUNTS ALONG WITH SCHEDULE-20 FILED WITH THE RETURN OF INCOME. THE N OTE READS AS UNDER: THE COMPANY HAS ACCOUNTED DURING THE YEAR EXPORT S ALES OF RS.49,72,659/- MADE ON 22.12.2009 BY IT AGENTS RAJA T ENTERPRISE, BOMBAY. IN THE SAME WAY IT HAS ACCOUNT ED FOR PURCHASE OF RS.41,89,890/- OF F.Y.1999-2000 AS EXPL AINED TO THE AUDITOR THE SAID DETAILS WERE RECEIVED BY THE COMPA NY ON 18.5.2002 AND HENCE ACCOUNTED DURING THE YEAR 2002- 03. HOWEVER, THE EXPORT SALES CONSIDERATION WAS RECEIVE D AFTER ACCOUNTING OF EXPORT BILLS. IT IS ALSO MENTIONED B Y THE AUDITOR THAT ABOVE MATTER WAS REPORTED IN THE FINANCIAL YEAR 199 9-2000 IN NOTE-9 OF SCHEDULE-20. 4. THE LD.AO HAS CONFRONTED THE ASSESSEE TO EXPLAIN THE IDENTITY OF RAJAT ENTERPRISE AND NATURE OF SERVICE PROVIDED BY THE RAJAT ENTERPRISE TO THE ASSESSEE. THE ASSESSEE HAS CONTENDED THAT T HE COMPANY HAS ACCOUNTED EXPORT SALES OF RS.49,72,659/- MADE ON 22 .12.1999 BY HIS AGENT, RAJAT ENTERPRISE. IN THE SAME WAY, IT HAS A CCOUNTED FOR PURCHASE OF RS.41,89,890/- OF FINANCIAL YEAR 1999-2 000. SINCE THE ASSESSEE HAS OFFERED INCOME ON EXPORT SALES DURING THIS YEAR, IT HAS CLAIMED THE COMMISSION EXPENDITURE IN THIS YEAR. T HE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE RECORDED THE FOLLOWING FINDINGS: IT IS UNBELIEVABLE THAT AFTER EXPIRY OF TWO THREE ASSESSMENT YEARS, SALES AND PURCHASE ON BEHALF OF THE ASSESSEE HAS BEEN COMMUNICATED BY ITS COMMISSION AGENT AND ON BASIS O F SUCH INFORMATION, THE ASSESSEE IS DEBITING RS.10,04,000/ - AS EXPENSES IN THE CURRENT YEAR. IN FACT THE INCOME IS GENERAT ED FOR SALES AND PURCHASE ACTIVITIES DURING THE FINANCIAL YEAR 1999- 2000 RELEVANT TO THE ASSESSMENT YEAR 2000-01 AS COMMUNICATED BY I TS COMMISSION AGENT AND THE SAID INCOME IS ASSESSABLE FOR THE ASSTT.YEAR 2000-01 RELEVANT TO THE FINANCIAL YEAR 1 999-00 I.E. THE YEAR TRANSACTION ON SUBSTANTIVE BASIS. THE ASSESSE E HAS DEBITED TO THE PROFIT & LOSS ACCOUNT RS.10,04,000/- ON ACCO UNT OF MARKETING AND COMMISSION EXPENSES DURING THE FINANC IAL YEAR UNDER CONSIDERATION I.E. ON 25.09.2002. THE ASSESS EE HAS NOT SUBMITTED SUPPORTING IN RESPECT OF THESE EXPENSES A S DISCUSSED ABOVE. THEREFORE SAID EXPENSES ARE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE ON SUBSTANTIVE BAS IS. ITA NO.2267/AHD/2013 3 THE LD.AO IN THIS WAY MADE DISALLOWANCE OF RS.10,40 ,000/-. 5. ON APPEAL, THE LD.FIRST APPELLATE AUTHORITY HAS DELETED THIS DISALLOWANCE BY OBSERVING AS UNDER: 7.4 I HAVE CONSIDERED THE APPELLANTS SUBMISSIONS AND THE AOS OBSERVATIONS. ABOVE FACTS MAKE IT CLEAR THAT THE A O HAS NOT TAXED THE INCOME ON ACCOUNT OF EXPORT MADE THROUGH RAJAT EXPORTS IN THE A.Y.2000-01. HENCE, THE INCLUSION OF THIS INCO ME BY THE APPELLANT IN THE A.Y.2003-04 BECOMES FINAL. THE AP PELLANT HAS ALSO BEEN ABLE TO EXPLAIN THE TRANSACTIONS WITH RAJ AT ENTERPRISE AND THE NATURE OF SERVICES RENDERED BY THIS FIRM. HENCE THE AO IS DIRECTED TO ALLOW THE DEDUCTION OF MARKETING AND CO MMISSION EXPENSES PAID TO RAJAT ENTERPRISES AS THE INCOME EA RNED BY THE APPELLANT IS ON ACCOUNT OF SUCH EFFORTS ONLY. 6. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE AO HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSESSMENT YEAR 2000-01 WOULD BE REO PENED AND THIS ISSUE BE EXAMINED IN THAT YEAR, BECAUSE, TRANSACTIO N PERTAINS TO THE FINANCIAL YEAR 1999-2000. WE HAVE BEEN INFORMED TH AT NO ACTION HAS BEEN TAKEN IN THE ASSTT.YEAR 2000-01, MEANING THERE BY, THE ASSESSMENT OF INCOME BECOME FINAL IN THIS YEAR, AS OBSERVED BY THE CIT(A). ONCE INCOME IS OFFERED AND TAXED IN THIS Y EAR, THE EXPENSES ARE ALSO TO BE ALLOWED IN THIS YEAR ONLY. THE LD.F IRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS IN RIGHT PERSPECTIVE, WE DO NOT SEE ANY REASON TO INTERFERENCE IN THE ORDER OF THE LD.CIT(A). 7. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 16 TH OCTOBER, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 16/10/2015