DCIT, New Delhi V. M/s. Mohan Brothers (P) Ltd., New Delhi

ITA 277/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0091 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI EFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 277 /DEL/201 3 AY: 200 9 - 10 DCIT, CIRCLE 5(1) VS. MOHAN BROTHERS P.LTD. ROOM NO. 409 A, C.R.BDLG. B 81, OKHLA INDUSTRIAL AREA, PHASE I NEW DELHI 2 NEW DELHI 20 PAN: AAACM 0433 A ITA NO. 5 1 5 /DEL/201 3 AY: 200 9 - 10 MOHAN BROTHERS PVT.LTD. VS. DY.CIT, CIRCLE 5(1) NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SANJAY SOOD, C.A. DEPT. BY : SH. P.DAMKANUNJA, SR.D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - VIII, NEW DELHI DATED 25.10.2012 PERTAINING TO THE A.Y. 2009 - 10. 2. FACTS IN BRIEF : - THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF RUNNING A BONDED WAREHOUSE AND DEALS IN IMPORT AND REDISTRIBUTION OF BEVERAGES ETC. IT FILED ITS RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME OF RS.1 ,37 ,02,525/ - . AFTER P ROCESSING THE RETURN U/S 143(1) OF T HE INCOME TAX ACT, 1961 (THE ACT) , THE ASSESSING OFFICER (A.O.) ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 2 PASSED AN ORDER U/S 143(3) OF THE ACT ON 15 TH DECEMBER, 2011 DETERMINING THE TOTAL INCOME AT RS.2,06,76,090/ - . A NUMBER OF ADDITIONS AND DISALLOWANCES WERE MADE. 2.1. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. 2.2. AGGRIEVED, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. ITA 277/DEL/2013 (REVENUE S APPEAL) : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAD ERRED IN DELETING THE ADDITION OF RS.5 LAKHS MADE BY THE A.O. ON ACCOUNT OF FOREIGN TRAVEL WHEN THE ASSESSEE COULD NOT FILE EVIDENCE/DETAILS TO THE EFFECT THAT VISITS WERE UNDERTAKEN FOR BUSINESS PURPOSES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIF IED IN DELETING DISALLOWANCE OF RS.10 LAKHS MADE BY THE A.O. ON ACCOUNT OF FREIGHT AND CARTAGE WHEN THERE WAS ABNORMAL INCREASE IN FREIGHT AND CARTAGE EXPENSES AS COMPARED TO INCREASE IN SALES AND EXPENSES WERE NOT SUPPORTED BY BILLS AND VOUCHERS. 3. WHETH ER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING DISALLOWANCE OF RS.10,74,962/ - MADE BY THE A.O. ON ACCOUNT OF SAMPLE EXPENSES WHEN THE ASSESSEE IS DEALING IN BRANDS, WHICH ARE VERY POPULAR AND THE EXPLANATION OF THE ASSESSEE THAT THEY WERE INCURRED FOR QUANTUM JUMP WAS FOUND TO BE CORRECT. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING DISALLOWANCE OF RS.10,74,962/ - MADE BY THE AO AS PROVISIONS OF S.36(1)(VA) R.W.S. 2(24)(X) WHEN EMPLOYEES SHARE WAS DESPOTISED LATE BY THE EMPLOYER. ITA 515/DEL/2013 (ASSESSEE S APPEAL) 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. U/S 14A OF RS.95,807/ - . ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 3 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE OF STORAGE/DAMAGE AND BREAKAGE EXPENDITURE, OF RS.9 LAKHS. 3. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DRO P ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. WE HAVE HEARD SH. SANJAY SOOD, THE LD .COUNSEL FOR THE ASSESSEE AND SHRI P.DAMKANUNJNA, THE LD.SR.D.R. ON BEHALF OF THE REVENUE. 3.1 . THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED TWO PAPER BOOKS, THE FIRST ONE CONSTING OF 112 PAGES AND THE SECOND ONE CONSISTING OF 29 PAGES. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS . 5. WE FIRST TAKE UP REVENUE S APPEAL IN ITA 277/DEL/2013. 6. GROUND NO.1 IS AGAINST DISALLOWANCE OF RS.5 LAKHS MADE BY THE A.O. ON ACCOUNT OF FOREIGN TRAVEL. THE DISALLOWANCE WAS MADE ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THAT ALL THE FOREIGN VISI TS HAVE BEEN UNDERTAKEN FOR THE PURPOSE OF BUSINESS. AN ADHOC DISALLOWANCE HAS BEEN MADE TO COVER EXPENSES INCURRED ON PERSONAL VISITS. THE FIRST APPELLATE AUTHORITY DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS FILED ALL THE DETAILS OF FOREIG N TRAVEL EXPENSES ALONG WITH THE PURPOSE OF VISIT BEFORE THE A.O. THE ASSESSEE HAD ALSO PAID FRINGE BENEFIT TAX ON EXPENDITURE INCLUDING ON FOREIGN TRAVEL. HE OBSERVED THAT THE A.O. AFTER EXAMINING THE DETAILS OF VOUCHERS AND BOOKS, COULD NOT POINT OUT AN Y SPECIFIC EXPENDITURE, WHICH IN HIS OPINION , IS PERSONAL IN NATURE. HE RELIED ON CERTAIN CASE LAWS AND DELETED THE ADDITION. WE DO NOT FIND ANY INFIRMITY IN THIS FACTUAL FINDING OF ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 4 THE FIRST APPELLATE AUTHORITY. THE LD.SR.D.R. COULD NOT CONTROVERT THE SAME. THUS THIS ADHOC DISALLOWANCE, IN OUR VIEW HAS BEEN MADE BY THE A.O. ON PRESUMPTIONS AND SURMISES AND IS NOT BASED ON ANY EVIDENCE. THUS, THIS GROUND OF REVENUE IS DISMISSED. 7. GROUND NO.2 IS ON THE DELETION OF DISALLOWANCE ON ADHOC BASIS FROM OUT OF FREIGHT AND CARTAGE EXPENSES. THE FIRST APPELLATE AUTHORITY IN THIS CASE ALSO RECORDED THAT ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. REGARDING THE BILL DATED 31.3.2009 ON TULSI IMPEX PVT.LTD. AMOUNTING TO RS.2,45,536/ - , THE FIRST APP ELLATE AUTHORITY OBSERVED THAT TOTAL PAYMENTS DURING THE YEAR TO M/S TULSI IMPEX P.LTD. WAS RS.30,45,050/ - AND THIS PARTICULAR BILL WAS PRODUCED BEFORE HIM. HE RELIED ON NUMBER OF CASE LAWS AND ON THE GROUND THAT THE A.O. HAS NOT POINTED OUT TO ANY INFIRM ITY IN THE BILLS, VOUCHERS AND BOOKS OF ACCOUNTS, THE DISALLOWANCE OF EXPEN DITURE INCURRED FOR THE PURPOSE OF BUSINESS WAS HELD AS ALLOWABLE. WE DO NOT FIND ANY INFIRMITY IN THIS ORDER. ALL THE BOOKS ARE AUDITED A ND DETAILS WERE PRODUCED BEFORE THE A.O . NO INFIRMITY IN THE EVIDENCES PRODUCED HAS BEEN POINTED OUT. UNDER THESE CIRCUMSTANCES THE QUESTION OF DISALLOWANCE THAT THE EXPENDITURE THAT TOO ON ADHOC BASIS CANNOT BE ALLOWED. HENCE WE UPHOLD THE DETAILED AND SPEAKING ORDER OF THE FIRST APPELLATE AUTHORITY ON THIS ISSUE AND DISMISS THIS GROUND OF REVENUE. 8. GROUND NO.3 IS ON THE DELETION OF DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF SAMPLE EXPENSES. DISALLOWANCE WAS MADE BY THE A.O. ON THE FOLLOWING GROUNDS. (A) THERE IS NO SIGNIFICANT JUMP IN THE BUSINESS OF THE ASSESSEE AFTER INCURRING THIS EXPENDITURE, (B) THE BRANDS IN WHICH THE ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 5 ASSESSEE WAS DEALING WERE POPULAR BRANDS WHICH DID NOT REQUIRE FREE SAMPLES TO PROMOTE ITS SALES; (C ) THE EXPENDITURE IS INCURRED ON ACCOUNT OF SAMPLES, MERELY TO R EDUCE THE PROFITS OF THE ASSESSEE. 9. THESE ARE NO GROUNDS TO DISALLOW THE SAID EXPENDITURE. THE EXPENDITURE INCURRED ON MARKETING AND ADVERTISEMENT AND PROMOTIONAL ACTIVITIES MAY NOT RESULT IN IMMEDIATE JUMP IN SALES. ON A SALE OF RS.33 CRORES THE EXPENDITURE INCURRED IS ONLY RS.10.74 LAKHS. IT IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE HAS NOT INCURRED THIS EXPENDITURE OR THAT HE FAILED TO SUBSTANTIATE WITH EVIDENCE, ITS CLAIM OF HAVING INCURRED THIS EXPENDITURE. THERE IS NO DEFECTS POINTED OU T IN THE EVIDENCE BY THE A.O. THUS WE UPHOLD THE CONTENTIONS AND DISMISS THIS GROUND OF REVENUE . 10. GROUND NO.4 IS AGAINST THE DELETION OF DISALLOWANCE BEING EMPLOYEES CONTRIBUTION TO P.F. THE UNDISPUTED FACT IS THAT TH E DEPOSIT WAS MADE AFTER THE DUE DATE PRESCRIBED IN THE ACT, BUT WELL BEFORE THE DUE DATE OF FILING OF THE RETURN. THE FIRST APPELLATE AUTHORITY APPLIED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PM ELECTRONICS P.L T D. AND ALLOWED THI S GROUND OF THE ASSESSEE. WE FIND NO INFIRMITY IN THE SAME. IN THE RESULT THIS GROUND IS DISMISSED. 11 . IN THE RESULT REVENUE S APPEAL IS DISMISSED. 12. ITA 515/DEL/13 (ASSESSEE S APPEAL): THE FACTS AND SUBMISSIONS OF THE ASSESSEE HAVE BEEN BROUGHT OUT BY THE FIRST APPELLATE AUTHORITY AT PAGES 14 OF HIS ORDER WHICH IS EXTRACTED FOR READY REFERENCE. ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 6 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THAT DETAILS PLACED ON RECORD AT PAPER BOOK PAGE 117. THE AO STOCKS GOODS IN BONDED WAREHOUSE. AT TIMES, IN THE HANDLING, AND MOVEMENT ETC. BREAKAGES ETC. OF BOTTLES ETC. OCCURS. HOWEVER AS THE BOTTLES ETC. ARE STORED IN CUSTOMS BONDED WAREHOUSE, THE ASSESSEE HAS TO ACCOU NT FOR SUCH STOCK AND HAS TO BEAR THE CUSTOMS DUTY ON SUCH ITEMS OF BROKEN, SHORTAGE NATURE. DURING THE YEAR UNDER CONSIDERATION, OF THE TOTAL EXPENDITURE OF RS.9,96,122/ - A SUM OF RS.8,66,169/ - RELATED TO GOODS THAT HAD TO BE DESTROYED AS THESE GOODS HAD OUTLIVED THEIR SHELF LIFE. COPIES OF INVOICES, CHALLAN OF CUSTOMS DUTY PAID, AND BILL OF ENTRY OF HOME CONSUMPTION FOR SUCH GOODS ARE ENCLOSED IN THE PAPER BOOK. IN VIEW OF THE ABOVE IT HAS BEEN SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO MAY BE DELE TED. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT FINDINGS OF THE AO AND FACTS ON RECORD. PERUSAL OF THE FACTS ON RECORD SHOW THAT THE APPELLANT HAS SUBMITTED THAT THE GOODS HAD TO BE DESTROYED AS THEY HAD OUTLIVED THEIR SHELF LIFE. THERE ARE NO E VIDENCES ON RECORD TO SHOW THAT ON WHAT BASIS IT HAS BEEN DETERMINED THAT THE GOODS HAD OUTLIVED THEIR SHELF LIFE AND THEREFORE HAD TO BE DESTROYED. NO EVIDENCES REGARDING THE GENUINENESS OF THE ABOVE EXPENDITURE HAVE BEEN SUBMITTED BY THE APPELLANT EITH ER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. THE APPELLANT HAD ONLY SUBMITTED COPIES OF CERTAIN BILLS WHICH DO NOT SUBSTANTIATE ITS CONTENTION THAT THE ABOVE ITEMS HAD NO ;VALUE AND SO HAD TO BE DESTROYED. IN VIEW OF THE FIND INGS ABOVE AND IN VIEW OF THE FACT THAT NO EVIDENCES HAVE BEEN PROVIDED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. THIS GROUND OF APPEAL IS DISMISSED. 13. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS DISMISSED TH E GROUND OF THE ASSESSEE ON THE GROUND THAT NO EVIDENCE WAS PRODUCED TO DEMONSTRATE THE BASIS ON WHICH IT CAN BE DETERMINED THAT THE GOOD HAVE OUTLIVED THEIR SHELF LIFE AND, THEREFORE, HAVE TO BE DESTROYED. HE FILED A PAPER BOOK CONSISTING OF 29 PAGES AND DREW THE ATTENTION OF THE BENCH TO PAGES 19 TO 29 WHICH ARE PHOTO COPIES OF INVOICES, LEDGER ACCOUNTS, BILL OF ENTRY FOR EX - BOND CLEARANCE FOR HOME CONSUMPTION , EVIDENCE OF CUSTOMS DUTY ETC. ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 7 13.1. HE DREW THE ATTENTION TO THE EXPIRY DATE MENTIONED IN THE BILL OF ENTRY AND THE CUSTOMS DOCUMENTS WHICH SHOWS PAYMENT OF DUTY AND THE COMMENT DEFACED AND SUBMITTED THAT THESE DOCUMENTS CLEARLY DEMONSTRATE THAT THE SHELF LIFE OF THE PRODUCT IS EXPIRED AND THERE AFTER THE ASSESSEE PAID EXCUSE DUTY AND DESTR OYED THE GOODS. 13.2 . THE LD.SR.D.R. SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 14. AFTER HEARING RIVAL CONTENTIONS AND GOING THROUGH THE PAPER BOOK, WE FIND THAT , IN THE BILL OF ENTRY FOR EX - BOND CLEARANCE FOR HOME CONSUMPTION, THE DETAILS HAVE BEEN M ENTIONED, WHEREIN EXPIRY DATE OF THE PRODUCT IS ALSO MENTIONED. EVIDENCE HAS BEEN FILED ON PAYMENT OF EXCISE DUTY AND A STAMP WHICH READS AS DEFACED . THE LD.SR.D.R. COULD NOT CONVINCE US THAT THIS DISALLOWANCE HAS TO BE MADE FOR LACK OF EVIDENCE. IN VIEW OF THE EVIDENCE LEAD BEFORE US, WE AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 15. IN THE RESULT ASSESSEE S APPEAL IS ALLOWED. 16 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED AND ASSESSEE S APPEAL IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2015. SD/ - SD/ - ( I.C. SUDHIR ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH JUNE, 2015 MANGA ITA NO.277/DEL/13 AND 505/DEL/13 MOHAN BROTHERS P.LTD. A.Y. 2009 - 10 8 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR