THE ASSTT.CIT, B.K. Circle., V. THE Adambhai Nasirbhai Choudhary,

ITA 2646/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9242 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-08-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 02-06-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA SENIOR
• Assessee Lawyers: P M MEHTA
• Keywords: Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE SHRI P K BANSAL AND MAHAVIR SINGH) ITA NOS.2646 AND 3196/AHD/2003 WITH C O NOS.163 AND 164/AHD/2004 (ASSESSMENT YEARS: 1998-99 AND 2000-01) THE ASSISTANT COMMISSIONER OF INCOME- TAX, BANASKANTHA CIRCLE, PALANPUR V/S SHRI ADAMBHAI NASIRBHAI CHAUDHARY, ADARSH TRACTOR, DISA HIGH WAY, PALANPUR (APPELLANT) (RESPONDENT) APPELLANT BY :- SHRI P M SHUKLA, SENIOR DR RESPONDENT BY:- SHRI P M MEHTA O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THESE TWO APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE AS SESSEE ARE ARISING OUT OF TWO SEPARATE ORDERS OF THE CIT(A) DA TED 24-03- 2003 AND 26-05-2003. THE EFFECTIVE GROUNDS TAKEN BY BOTH THE PARTIES ARE AS UNDER:- ITA NO.2146/AHD/2003 FOR AY 1998-99 BY THE REVENUE :- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.5,78,723/- MADE ON ACCOUNT OF SALES PROMOTION EXPENSES. ITA NO.3196/AHD/2003 FOR AY 2000-01 BY THE REVENUE :- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS.50,000/- MADE ON ACCOUNT OF OFFI CE EXPENSES. 2 2 THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OF RS.24,797/- MADE ON ACCOUNT OF TRAV ELLING EXPENSES. 3 THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OF RS.3,31,850/- MADE ON ACCOUNT OF SA LES PROMOTION EXPENSES. ITA NO.2146/AHD/2003 FOR AY 1998-99 BY THE REVENUE :- 2.1 THE ONLY GROUND IN THIS APPEAL FILED BY THE RE VENUE RELATES TO DELETION OF AN ADDITION OF RS.5,78,723/- MADE ON ACCOUNT OF SALES PROMOTION EXPENSES. THE BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE FURNISHED THE DETAILS SHOWING NAMES AND AMOUNTS PENDING AS SALES PROMOTION EXPENSES, AS UND ER:- SR. NO. NAME AND ADDRESS OF THE PERSON AMOUNT (RS.) 1 PRAKASH DEVA PATEL, SANTWADA, TAL: DHANERA 28850 2 AJUBHAI NATHA PATEL, RADHANPUR 32660 3 HASANALI M MAJAR, KAMALPUR, PALANPUR 33300 4 CHATARABHAI PURA PATEL, DELANKOT, THARAD 32900 5 PETHABHAI KHETA PATEL, MANDLA, THARAD 30500 6 SHIYA NATHA PATEL, RADHANPUR 27380 7 DEVJI DALA PATEL, SATWADA, DHANERA 33900 8 TAMASHIYA R HATHAWADA, THARAD 32500 9 BAUBHAI KARSAN RAVAL, SEJALPUR, PALANPUR 33600 10 AHMEDBHAI BADSHAH, KAMALPUR, PALANPUR 33400 11 MONGHASINH BHERAJI RAJPUR, RAH, THARAD 33900 12 SHABBIR I BADSHAH, KAMALPUR, PALANPUR 31400 13 BHAGVAN KHETA PATEL, MANDLA, THARAD 32000 14 JUMASHA TAMAMISHA JINEJO, HATHAWADA, THARAD 34200 15 RAMSANG AJMAL PATEL, DUCHAKWADA, DEODAR 30493.50 16 ISMAIL SATTAR JINKOVA, SEJALPURA, PALANPUR 33900 17 YUNUSBHAI N JUNAKIYA, DANGIYA, PALANPUR 32800 18 ABDULBHAI KAMALPIRIYA, KAMALPUR, PALANPUR 31000 ------------- 578723.50 ======== 3 THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION LETT ERS OR COPY OF CONTRA ACCOUNT OF THE PARTIES TO WHOM SALES PROMOT ION EXPENSES HAVE BEEN PAID. THE ASSESSEE WAS ALSO ASK ED TO PRODUCE THE PERSONS TO WHOM SALES PROMOTION EXPENSE S WERE PAID. ACCORDING TO THE AO, THE ASSESSEE NEITHER FIL ED THE CONFIRMATION LETTERS / COPIES OF CONTRA ACCOUNTS (F ROM THE BOOKS OF PARTIES) NOR ANY OTHER EVIDENCE TO PROVE THAT (I ) ACTUALLY THE MONEY HAVE BEEN RECEIVED BY THOSE PERSONS; (II) THE PAYMENT OF MONEY WAS MADE FOR SOME SERVICES REFLECTED TO SALE S PROMOTION; AND (III) THE EXPENDITURE WAS LAID OUT WHOLLY, SOLELY AND EXCLUSIVELY FOR GENUINE PURPOSE ONLY. THEREFOR E, THE AO HELD THAT IT IS ESTABLISHED THAT THE ASSESSEE HAS F AILED TO DISCHARGE HIS ONUS OF JUSTIFYING THE CLAIM OF DEDUCTION OF RS .5,78,723/- AS SALES PROMOTION EXPENSES. HE ACCORDINGLY DISALLOWED THE ENTIRE AMOUNT OF RS.5,78,723/- AND ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. WHEN THE MATTER WENT IN APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE, BY OBSERVING AS UN DER:- 5.3 THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE A PPELLANT AND THE REMAND REPORT HAVE BEEN CONSIDERED. IN THE REMAND P ROCEEDING THE CONFIRMATIONS WERE SENT TO THE AO AND HE HAS EXAMIN ED THE ISSUE BY ISSUE OF SUMMONS TO THE PAYEES. IT IS SEEN THAT THE PAYMENT MADE FOR THIS YEAR IN PROPORTION OF SALES IS COMPARABLE WITH THE SIMILAR PAYMENTS IN EARLIER YEARS AND THAT SUCH PAYMENT WAS NOT DISALLOWED IN THE PAST. FURTHER THE AO HIMSELF HAS NOT ISSUED SUM MONS TO 5 PERSONS AND, THEREFORE, THERE WAS NO JUSTIFICATION FOR DISA LLOWANCE OF COMMISSION PAYMENT TO SUCH PERSONS. IN RESPECT OF P AYMENTS TO THE PERSONS WHO COULD NOT BE SERVED SUMMONS AND WHO COU LD NOT REMAIN PRESENT THE EXPLANATION OF THE APPELLANT APPEARS TO BE PLAUSIBLE THAT ON ACCOUNT OF RIOTS IN THE STATE THE PERSONS MIGHT HAV E LEFT THEIR PREMISES OR THE PERSONS COULD NOT HAVE REMAIN PRESENT. HOWEV ER, THEIR AFFIDAVITS ARE AVAILABLE TO CONFIRM THE RECEIPT OF COMMISSION. THE DISALLOWANCE OF COMMISSION CANNOT BE MADE SIMPLY BE CAUSE THE SUMMON ISSUED TO THE PERSON DID NOT RESPOND ON THE SUMMON WAS NOT 4 SERVED, PARTICULARLY, WHEN THERE OF SITUATION IN WH ICH RIOT WAS THERE. IN FACT, ANOTHER OPPORTUNITY SHOULD HAVE BEEN GIVEN TO THE APPELLANT TO EXPLAIN THE SITUATION. MERELY BECAUSE THE PERSONS C OULD NOT GIVE THE NAMES OF THE PURCHASER OF TRACTOR THE VILLAGE WHERE THE TRACTORS WERE SOLD, IT DID NOT ESTABLISH THAT THE TRACTORS WERE A CTUALLY NOT SOLD OR COMMISSION WAS NOT PAID. THIS CAN BE APPRECIATED PA RTICULARLY IN VIEW OF THE FACT THAT IN SPITE OF THIS, THEY HAVE CONFIR MED THE RECEIPT OF PAYMENT AND IT IS NOT THE CASE OF THE AO THAT SUCH PAYMENTS HAVE BEEN REVERTED BACK TO THE APPELLANT. CONSIDERING THESE F ACTS I HOLD THAT THERE WAS NO JUSTIFICATION FOR DISALLOWANCE OF THE COMMIS SION PAYMENT MADE BY THE AO. I, THEREFORE, DIRECT THE AO TO DELE TE THE DISALLOWANCE OF RS.5,78,000/-. 2.2 THE LEARNED DR SUPPORTED THE ORDER OF THE AO, WHILE THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFO RE THE CIT(A) AND RELIED ON THE ORDER OF THE CIT(A). 2.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE ASSESSEE H AS SUBMITTED THE DETAILS OF THE SALES PROMOTION EXPENSES SHOWING NAMES AND ADDRESSES OF THE PERSONS TO WHOM THE AMOUNTS HAVE B EEN PAID, AND THE DETAILS OF TRACTORS FOR SALE OF WHICH SUCH PAYMENTS WERE MADE TO THE DIFFERENT PERSONS AND ALSO THE DETAILS OF PERSONS TO WHOM THE TRACTORS WERE SOLD. WE ALSO NOTED THAT SUM MONS WERE ISSUED TO 13 PARTIES OUT OF 18 PARTIES AND OUT OF 1 3 PERSONS, FOUR PERSONS COULD NOT BE SERVED SUMMONS. HOWEVER, WE FI ND THAT THE ASSESSEE ALSO FURNISHED CONFIRMATIONS OF THE RECIPI ENTS BY WAY OF AFFIDAVITS. FURTHER, IT WAS CONTENDED BY THE ASSESS EE THAT IN THE PAST ALSO SIMILAR PAYMENTS WERE MADE AND WERE ALLOW ED AS DEDUCTION AS BUSINESS EXPENDITURE. IN OUR OPINION, THE CIT(A) HAS RIGHTLY OBSERVED THAT MERELY BECAUSE THE PERSON S COULD NOT GIVE THE NAMES OF THE PURCHASER OF TRACTOR THE VILL AGE WHERE THE TRACTORS WERE SOLD, IT DID NOT ESTABLISH THAT THE T RACTORS WERE 5 ACTUALLY NOT SOLD OR COMMISSION WAS NOT PAID. THIS CAN BE APPRECIATED PARTICULARLY IN VIEW OF THE FACT THAT I N SPITE OF THIS, THEY HAVE CONFIRMED THE RECEIPT OF PAYMENT AND IT I S NOT THE CASE OF THE AO THAT SUCH PAYMENTS HAVE BEEN REVERTED BAC K TO THE APPELLANT. WE, THEREFORE, DO NOT FIND ANY ILLEGALIT Y OR INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANC E OF RS.5,78,723/-. WE ACCORDINGLY UPHOLD THE ORDER OF T HE CIT(A) IN THIS REGARD. THUS, THE GROUND TAKEN BY THE REVENUE STANDS DISMISSED. THE APPEAL FILED BY THE REVENUE IS DISMI SSED. ITA NO.3196/AHD/2003 FOR AY 2000-01 BY THE REVENUE :- 3.1 GROUND NO.1 IN THIS APPEAL FILED BY THE REVENU E RELATES TO DELETION OF DISALLOWANCE OF RS.50,000/-. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE INCURRED TOTAL OF FICE EXPENSES OF RS.3,17,981/-. THE ASSESSEE WAS REQUIRED BY THE AO TO FURNISH THE DETAILS REGARDING NAMES AND ADDRESSES OF THE PE RSONS FOR WHOM SUCH EXPENSES HAVE BEEN INCURRED. AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE, THE AO DISALLOWED 1/4 TH BEING RS.50,000/- TREATING THE SAME NOT FOR BUSINESS PURP OSE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED T HE DISALLOWANCE BY OBSERVING AS UNDER:- 3.3 THE ARGUMENT OF THE APPELLANT AND FACT OF THE CASE HAS BEEN CONSIDERED. THE AO HAS DISALLOWED RS.50,000/- BEING 1/4 TH EXPENSES WHICH IS TAKEN AS THE EXPENSE INCURRED NOT FOR THE BUSINESS PURPOSE. IT HAS BEEN MENTIONED IN THE ORDER THAT THE EXPENSES I NCURRED DURING THE MONTH OF OCTOBER TO DECEMBER AS COMPARED TO THE NUM BER OF TRACTORS SOLD WERE REASONABLE WHEREAS THE EXPENSES RELATING TO JANUARY TO MARCH IN COMPARISON TO THE NUMBER OF TRACTORS SOLD ARE NOT REASONABLE. HENCE, THE DISALLOWANCE OF 1/4 TH OF EXPENSES HAVE BEEN MADE. THE ARGUMENT OF THE APPELLANT IN THIS RESPECT IS QUITE CONVINCING AS IT HAS BEEN STATED THAT SUCH EXPENSES SHOULD NOT BEEN TAKEN AS DIRECTLY PROPORTIONATE TO THE NUMBER OF TR ACTORS SOLD. THE SALE OF TRACTORS ARE NOT EFFECTED ACROSS THE COUNTER ON A SINGLE VISIT. IT TAKES 6 TIME. MOREOVER, THE SALE OF SPARE PARTS AMOUNTING T O RS.65,55,770/- HAS NOT BEEN TAKEN INTO ACCOUNT BY THE AO WHICH IS IN ADDITION TO THE SALE OF TRACTORS. CONSIDERING THE FACT THAT OFFICE EXPENSES CANNOT BE CO-RELATED WITH THE SALE OF NUMBER OF TRACTORS FOR MAKING DISALLOWANCE. HENCE, THE DISALLOWANCE OF RS.50,000/ -, ON THIS ACCOUNT, IS DELETED. 3.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY CONSIDERED THE SAME. WE HAVE ALSO GONE THROUGH THE ORDER OF THE CIT(A). WE FIND THAT THE CIT(A) HAS DEALT WITH THE ISSUE IN GREAT DETAIL AND HA RIGHTLY SUCH EXPENSES SHOULD NOT BEEN TAKEN AS DIRECTLY PROPORTIONATE TO THE NUMBER OF TRACTORS SO LD AND THAT THE SALES OF TRACTORS ARE NOT EFFECTED ACROSS THE COUNT ER ON A SINGLE VISIT. IT TAKES TIME. MOREOVER, THE SALE OF SPARE P ARTS AMOUNTING TO RS.65,55,770/- HAS NOT BEEN TAKEN INTO ACCOUNT B Y THE AO WHICH IS IN ADDITION TO THE SALE OF TRACTORS. IN OU R OPINION, THE CIT(A) HAS RIGHTLY HELD THAT THE OFFICE EXPENSES CA NNOT BE CO- RELATED WITH THE SALE OF NUMBER OF TRACTORS FOR MAK ING DISALLOWANCE. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE CIT(A). WE ACCORDINGLY UPHO LD THE ORDER OF THE CIT(A) IN THIS REGARD DELETING THE DISALLOWA NCE. 4 GROUND NO.3 IN THIS APPEAL RELATES TO DELETION O F DISALLOWANCE OF SALES PROMOTION EXPENSES OF RS.3,31 ,850/-. AT THE OUTSET, THE LEARNED DR AND THE LEARNED AR AGREE D THAT THE ISSUE AND THE FACTS INVOLVED IN THE YEAR UNDER CONS IDERATION ARE SIMILAR TO THOSE INVOLVED IN THE EARLIER YEAR I.E. AY 1998-99. THEREFORE, FOR THE REASONS ALREADY DISCUSSED IN PAR A-2 OF OUR ORDER ABOVE, WE CONFIRM THE ORDER OF THE CIT(A) DEL ETING THE DISALLOWANCE. 7 5 NOW COMING TO THE CROSS OBJECTIONS FILED BY THE ASSESSEE, THE LEARNED AR DID NOT PRESS THE CROSS OB JECTIONS AND HENCE THE SAME STAND DISMISSED, AS NOT PRESSED. 6 IN THE RESULT, THE APPEALS FILED BY THE REVENUE AND THE ASSESSEES CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28-08-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 28-08-2009 COPY OF THE ORDER FORWARDED TO : 1. SHRI ADAMBHAI NASIRBHAI CHAUDHARY, ADARSH TRACTO R, DISA HIGH WAY, PALANPUR 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, BANASK ANTHA CIRCLE, PALANPUR 3. THE CIT CONCERNED 4. THE CIT(A)-XV, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/A R, ITAT, AHMEDABAD