DCIT, New Delhi V. M/s. Oriflame India Pvt. Ltd., New Delhi

ITA 2811/DEL/2015

• Counselvise Citation: 281120114 RSA 2015
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 21-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YATENDRA SINGH
• Assessee Lawyers: SANJEEV KACHHAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH SMC SMC SMC SMC- -- -2 22 2 : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 2811/DEL/2015 2811/DEL/2015 2811/DEL/2015 2811/DEL/2015 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2008 2008 2008 2008 - -- - 09 0909 09 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -19(1), 19(1), 19(1), 19(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ORIFLAME INDIA PVT.LT M/S ORIFLAME INDIA PVT.LT M/S ORIFLAME INDIA PVT.LT M/S ORIFLAME INDIA PVT.LT D., D.,D., D., GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 076. 110 076. 110 076. 110 076. PAN : AAACO0256B. PAN : AAACO0256B. PAN : AAACO0256B. PAN : AAACO0256B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YATENDRA SINGH, SR.DR. RESPONDENT BY : SHRI SANJEEV KACHHAL, CA. DATE OF HEARING : 21.07.2015 21.07.2015 21.07.2015 21.07.2015 DATE OF PRONOUNCEMENT : 18.09.2015 18.09.2015 18.09.2015 18.09.2015 ORDER ORDER ORDER ORDER THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 16 TH FEBRUARY, 2015 OF LEARNED CIT(A)-7, NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,48,966/- MADE BY THE AO ON ACCOUNT OF DISALLOWAN CE OF EXPENSES AS UNEXPLAINED WITHOUT APPRECIATING THE MATERIAL ON RECORD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN NOT ALLOWING REASONABLE OPPORTUNITY UNDER RULE 46A OF THE INCOME TAX RULES 1 962 TO THE AO IN RESPECT OF AFFIDAVIT GIVEN BY THE ASSESSEE BEFORE THE LD.CIT(A). ITA-2811/DEL/2015 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5,00,000/- MADE BY THE AO ON ACCOUNT OF BUSINESS PROMOTION WITHOUT APPRECIATING THE FACTS ON RECORD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.5,00,000/- MADE BY AO ON ACCOUNT OF WRITING OFF O F OBSOLETE ITEMS WITHOUT APPRECIATING THE FACTS ON RECOR D. 5. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRE SH GROUND(S) OF APPEAL AND/OR DELETE OR AMEND ANY OF TH E GROUND(S) OF APPEAL. 3. VIDE GROUND NO.1 & 2, THE GRIEVANCE OF THE DEPAR TMENT RELATES TO THE DELETION OF THE ADDITION OF `3,48,966/-. THE F ACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS FOR THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER GOT AN AIR INFORMATION THAT A PAYMENT OF `3,48,466/- WAS MADE B Y THE ASSESSEE AGAINST THE CREDIT CARD. THE ASSESSING OFFICER MADE TH E ADDITION BY OBSERVING THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDEN CE WITH REGARD TO THE SAID PAYMENT. WHEN THE ASSESSEE CARRIED T HE MATTER TO LEARNED CIT(A), IT WAS SUBMITTED THAT THE ASSESSING OFFIC ER HAD NOT MADE ANY DISCUSSION WHILE MAKING THE DISALLOWANCE AND T HAT IN THE PRECEDING YEAR, THE LEARNED CIT(A) HAS DELETED THE SI MILAR ADDITION. LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE FILED AN AFFIDAVIT STATING THE REIN THAT THE AMOUNT IN QUESTION DID NOT PERTAIN TO HIM. LEARNED CIT(A) ACCORDINGLY DELETED THE ADDITION. BEING AGGRIEVED, THE DEPARTM ENT IS IN APPEAL. 4. LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFIC ER BUT COULD NOT CONTROVERT THIS FINDING OF THE LEARNED CIT (A) THAT THE SAID EXPENSES DID NOT RELATE TO THE ASSESSEE. ITA-2811/DEL/2015 3 5. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSE SSEE SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT (A) ON THIS ISSUE. 6. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. SINCE THE AMOUNT IN QUESTION DID NOT BELONG TO THE ASSESSEE, A SIMI LAR DISALLOWANCE WAS ALSO DELETED BY THE THEN LEARNED CIT( A) IN THE PRECEDING YEAR AND NOTHING IS BROUGHT ON RECORD TO SU BSTANTIATE THAT THE ORDER OF THE THEN LEARNED CIT(A) FOR THE PRECED ING YEAR ON THE SAME ISSUE WAS CHALLENGED BY THE DEPARTMENT, THEREFORE, I DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 7. VIDE GROUND NO.3, THE ISSUE RELATES TO THE DELETION OF THE ADDITION OF `5,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BUSINESS PROMOTION. 8. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTIC ED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF `9,59,16,912/- UNDER THE HEAD BUSINESS PROMOTION EXPENSES. HE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE EXPENSES AND PRODUCE THE VOUCHERS FOR T HE SAME. ACCORDING TO THE ASSESSING OFFICER, THE VOUCHERS PRODUCE D WERE INCOMPLETE AND MANY OF THOSE WERE NOT SUPPORTED WITH PROPER EVIDENCE. HE, THEREFORE, DISALLOWED `5,00,000/- ON AD-HOC BASIS. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER DID NOT GIVE E VEN A SINGLE INSTANCE OF VOUCHERS WHICH WERE NOT COMPLETE OR WERE NOT SUPPORTED BY PROPER EVIDENCE. IT WAS FURTHER STATED THAT THE A SSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT ALONG WITH ALL THE VOUCHE RS WHICH COULD HAVE BEEN EASILY VERIFIED BY THE ASSESSING OFFICER. IT WAS ALSO ITA-2811/DEL/2015 4 SUBMITTED THAT NO SPECIFIC DEFECT OR DISCREPANCY HAD BEEN POINTED OUT BY THE ASSESSING OFFICER. LEARNED CIT(A), AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION BY OBSERVI NG THAT THE ASSESSING OFFICER HAD MADE AN AD-HOC ADDITION WITHO UT GIVING ANY INSTANCE OF BILL/VOUCHER WHICH WAS NOT GENUINE. NOW, THE DEPARTMENT IS IN APPEAL. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER MADE THE AD -HOC DISALLOWANCE BUT DID NOT POINT OUT ANY SPECIFIC INSTAN CE WHERE THE EXPENSES WERE NOT INCURRED FOR THE BUSINESS PURPOSES OR T HE VOUCHERS WERE NOT SUPPORTED WITH PROPER EVIDENCE. IN THAT VI EW OF THE MATTER, I DO NOT SEE ANY INFIRMITY IN THE ORDER OF LEARNED CIT (A) ON THIS ISSUE. 10. THE LAST ISSUE VIDE GROUND NO.4 RELATES TO THE DELE TION OF DISALLOWANCE OF `5,00,000/- MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF WRITING OFF OF OBSOLETE ITEMS. 11. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTIC ED THAT THE ASSESSEE HAD WRITTEN OFF `1,16,05,161/- ON ACCOUNT OF O BSOLETE ITEMS. HE ASKED THE ASSESSEE TO JUSTIFY THE SAME. IN RESPONSE, TH E ASSESSEE SUBMITTED THAT IT DID NOT SELL EXPIRED OR DAMAGED PRO DUCTS. THEREFORE, PRODUCTS WHICH COULD NOT BE SOLD WITHIN THE STIPULATED USE BEFORE DATE, THE SAME WERE DESTROYED AFTER VERIFICATION AND CONSU LTATION WITH THE OPERATION MANAGER. IT WAS FURTHER STATED THAT DURING THE REGULAR STOCK COUNTING IF SOME OF THE PRODUCTS WHICH WERE NOT SUITAB LE FOR SALE DUE TO BAY-LINE SHORTAGES AND/OR DAMAGES, SUCH PRODUCTS WER E ALSO DESTROYED. THE ASSESSING OFFICER DID NOT FIND MERIT IN THE ABOVE ITA-2811/DEL/2015 5 SUBMISSIONS OF THE ASSESSEE AND MADE AN AD-HOC DISALLOWANCE OF `5,00,000/- BY OBSERVING THAT THE WRITING OFF OF OBSO LETE ITEMS WAS NOT PROPERLY SUPPORTED WITH CORRESPONDING VOUCHERS AND ENTRIES OF DELETION IN THE STOCK REGISTER. 12. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT STOCK KEEPING OF PRODUCTS OF THE ASSESSEE WAS ON THE BASIS OF PRODUCT CODE AND WHEREIN APART FRO M PHYSICAL ACCOUNTING THE PHYSICAL COUNTING AND EXPIRY DATE OF THE PRODUCT WAS ALSO CONSIDERED DURING THE MONTHLY BASIS DURING STOCK C OUNT EXERCISE. IT WAS FURTHER STATED THAT DURING THE REGULAR STOCK CO UNT, IF WAREHOUSE SUPERVISOR FINDS SOME OF THE PRODUCTS WHICH ARE NOT SUI TABLE FOR SALE DUE TO BAY-LINE SHORTAGES AND/OR DAMAGES, NECESSARY DETA ILS WERE SENT TO THE STOCK CONTROLLER AND PLANNING MANAGER AND AFT ER APPROVAL OF THE OPERATION MANAGER, SUCH PRODUCTS WERE PHYSICALLY DESTRO YED. IT WAS FURTHER SUBMITTED THAT COMPLETE DETAILS OF ITEMS DESTRO YED ALONG WITH THE DATE OF DISCONTINUATION, QUANTITY AND VALUE THER EOF HAD BEEN SUBMITTED TO THE ASSESSING OFFICER VIDE LETTER DATED 07 .12.2011. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER HAD MADE THE ADDITION OF `5,00,000/- OUT OF TOTAL INVENTORY WRITTEN OFF OF ` 1,16,05,161/- ON AD- HOC BASIS WITHOUT POINTING OUT EVEN A SINGLE INSTANCE O F LEAKAGE WITH AN OBSERVATION THAT THE SAME HAD BEEN MADE TO COVER T HE LEAKAGES POSSIBLE IN WRITING OFF OBSOLETE ITEMS. LEARNED CIT(A ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFF ICER HAD NOT GIVEN ANY DETAILS OF WHAT VOUCHERS WERE MISSING AND MADE THE AD-HOC DISALLOWANCE WITHOUT ANY BASIS. HE, THEREFORE, DELETED THE SAME. NOW, THE DEPARTMENT IS IN APPEAL. 13. LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFF ICER AND THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS RIVAL SUBMISSIONS RE ITERATED THE ITA-2811/DEL/2015 6 SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND SUPPORTE D THE IMPUGNED ORDER. 14. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND MATERIAL ON RECORD, IT IS NOTICED THAT THE ASSESSING OFF ICER MADE THE AD-HOC DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC ITEM OUT OF THE DETAILS FURNISHED BY THE ASSESSEE, WHICH WERE NOT OBSOLETE OR DESTROYED. THE ASSESSEE EXPLAINED THAT THE ITEMS WHICH W ERE OBSOLETE, EXPIRED AND DAMAGED WERE ONLY DESTROYED BEC AUSE THOSE COULD NOT BE SOLD WITHIN THE STIPULATED USE BEFORE THE DATE. THEREFORE, I AM OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIE D IN DELETING THE AD- HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER AND ACCO RDINGLY DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPE AL. 15. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DI SMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 18.09.2015. SD/- ( (( ( N.K. SAINI N.K. SAINI N.K. SAINI N.K. SAINI ) )) ) ACC ACC ACC ACC OUNTANT MEMBER OUNTANT MEMBER OUNTANT MEMBER OUNTANT MEMBER VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TAX , DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -19(1), NEW DELHI. 19(1), NEW DELHI. 19(1), NEW DELHI. 19(1), NEW DELHI. 2. RESPONDENT : M/S ORIFLAME INDIA PVT.LTD., M/S ORIFLAME INDIA PVT.LTD., M/S ORIFLAME INDIA PVT.LTD., M/S ORIFLAME INDIA PVT.LTD., GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, GROUND FLOOR, CORPORATE ONE, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, PLOT NO.5., NHCC, JASOLA, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 076. 110 076. 110 076. 110 076. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR