M/s. Shah Jivraj Nanchand & Sons, Surat V. The Dy. CIT, Circle-2, Surat

ITA 2859/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9185 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 201

Judgement Text

ITA NO. 2859/AHD/2013 ASSESSMENT YEA R 2008 - 09 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM ] ITA NO. 2859/AHD/2013 ASSESSMENT YEAR 2008 - 09 SHAH JIVRAJ NANCHAND & SONS ..... .......... .APPELLANT JIVRAJ HOUSE, PLOT NO 109 B, B ESIDE VANDANA DYEING, CENTRAL ROAD NO 7, UDHNA, SURAT 394 210 [PAN: AAJFS4004P] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2, SURAT. .. ......... RESPONDENT APPEARANCES BY: JIGNESH N KHATRI FOR THE APPELLANT JAMES KURIAN FOR T HE RESPONDENT D ATE OF CONCLUDING THE HEARING : 21.11.2016 DATE OF PRONOUNCING THE ORDER : 15 . 0 2 .2017 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 30 TH OCTOBER 2013 , PA SSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2008 - 09. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 1. THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) ERRED IN LAW AND ON FACTS ON ACCOUNT OF SALES PROMOTION EXPENSES AND RESTRICTING TO 15% AS AGAINST 33% DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER, THE LEARNED CIT(A) HAS NOT CONSIDERED THAT THE LEARNED ASSESSING OFFICER HAS ADMIT TED THAT BILL OF GIFTS, PUBLICATION COPY OF ADVERTISEMENT WAS FURNISHED. THE LEARNED CIT(A) HAS ALREADY IGNORED THE VERITY THAT THE LEARNED ASSESSING OFFICER HAD NOT FOUND ANY INHERENT DEFECTS IN VOUCHERS AND SUPPORTING DOCUMENTS BUT JUST AS SOME OF THE S CHEMES COULD NOT BE NARRATED ADDITION WAS DONE ON ACCOUNT OF SALES PROMOTION EXPENSES. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THERE IS AN ITA NO. 2859/AHD/2013 ASSESSMENT YEA R 2008 - 09 PAGE 2 OF 3 AB N O RMA L INCREASE IN THE SALE PROMOTION EXPE NSES BUT THERE IS NO VISIBLE INCREASE IN THE SALES, WHICH, ON THE CONTRARY, HAS GONE DOWN. THE CONTENTION OF THE ASSESSEE WAS THAT THE EXPENSES ARE DULY VOUCHED FOR AND THAT THE SUBSTANTIAL INCREASE IN SALES HAS TAK EN PLACE IN THE SUBSEQUENT YEARS. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSED. HE DID NOT ACCEPT THE EXPLANATIONS OF THE ASSESSEE, HELD THAT SUCH HIGH SALES PROMOTION EXPENSES WERE NOT REQUIRED, NOTED THAT THERE WERE SOME SELF MADE VOUCHERS OF CASH EX PENSES AS WELL AND CONCLUDED THAT 33% OF THE SALES PROMOTION EXPENSES SHOULD BE DISALLOWED. A DISALLOWANCE OF RS 14,04,810 WAS ACCORDINGLY MADE. IN APPEAL, LEARNED HELD THAT CERTAIN SALE PROMOTION EXPENSES HAVE BEEN INCURRED BY THE APPELLANT BY WAY OF CA SH EXPENDITURE AND CONSIDERING THAT SUCH EXPENSES ARE NOT SUBJECT TO VERIFICATION, THE DISALLOWANCE IS UPHELD IN PRINCIPLE BUT RESTRICTED THE QUANTUM OF DISALLOWANCE TO 15%. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE H EARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE HAVE NOTED THAT THE CIT(A) HAS UPHELD THE IMPUGNED DISALLOWANCE PRIMARILY BECAUSE THERE ARE CERTAIN CASH EXPENSES WHICH CANNOT BE FULLY VERIFIED, BUT THEN WHAT H HAS APPARENTLY OVERLOOKED IS THAT OUT OF TOTAL EXPENSES OF RS 42,56 LAKHS, ONLY RS 1.54 LAKHS HAVE BEEN INCURRED IN CASH . EVEN SO FAR AS EXPENSES ARE CONCERNED, NO SPECIFIC DEFECTS ARE POINTED OUT IN THE BILLS AND VOUCHERS. IN OUR CONSIDERED VIEW, THE MERE FACT THAT A SMALL PART OF EXPENSES IS MADE IN CASH, 15% OF ENTIRE EXPENSES CANNOT BE DISALLOWED. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY STATES THAT HE HAS NO OBJECTION TO THE DISALLOWANCE BEING RES TRICTED TO 15% OF CASH EXPENSES, BECAUSE OF SMALLNESS OF THE AMOUNT INVOLVED. IN THIS VIEW OF THE MATTER, WE RESTRICT THE DISALLOWANCE TO 15% OF CASH EXPENSES INCURRED IN THIS HEAD. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. GROUND NO. 1 IS THUS PARTLY A LLOWED IN THE ABOVE TERMS. 7. IN THE SECOND GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 2. ON THE FACT AND IN THE CIRCUMSTANCE OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING INTEREST TO THE TUNE OF RS.1,65,230 O N ACCOUNT OF INTEREST PAID ON LOAN AND ADVANCES AT 15% AGAINST THAT CHARGED FROM PARTNERS AT 12%. THE LEARNED CIT (APPEALS) CONFIRMED THE SAME WITHOUT ADDUCING THE FACT THAT ALL PAYMENTS WERE MADE BY CHEQUES, TAX WAS DEDUCTED AT SOURCES AND DEPOSITED IN T IME, CONFIRMATION COPY WERE FURNISHED WITH P.A.N. AND THE LEARNED ASSESSING OFFICER HAS SIMPLY STATED IN ITS ORDER THAT THERE IS NO COMMERCIAL ITA NO. 2859/AHD/2013 ASSESSMENT YEA R 2008 - 09 PAGE 3 OF 3 VIABILITY OF SUCH EXPENSES, WHEN ASSESSEE HAS ALREADY COMPLIED ITS DUTY FOR PROVING THE GENUINENESS OF THE CLAIM. 8. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE ASSESSING OFFICER CONSIDERED PAYMENT OF INTEREST @ 15% ON UNSECURED LOANS FROM FRIENDS AND RELATIVES AS EXCESSIVE AND UNREASONABLE. IT WAS ALSO N OTED THAT THE LOAN IS GIVEN TO THE PARTNERS @12% INTEREST. ACCORDINGLY, DISALLOWANCE OF RS 2,55,233 WAS MADE. THE PLEA OF THE ASSESSEE WAS THAT IF THE DISALLOWANCE IS TO BE MADE BECAUSE FUNDS BORROWED AT HIGHER RATE HAVE BEEN GIVEN TO THE PARTNERS, THE DI SALLOWANCE SHOULD BE RESTRICTED TO 90,000 AS SUCH AN AMOUNT IS RS 30,00,000 ONLY. THIS PLEA WAS ALSO REJECTED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. NOT SATISFIED, THE ASSESSEE IS IN SECOND APPEAL BEF ORE US. 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE SEE MERITS I N THE PLEA OF THE ASSESSEE. THE DISALLOWANCE OF INTEREST, ON THE GROUND THAT THE FUNDS BORROWED HAVE BEEN USED FOR GIVING LOAN AT LOWER INTEREST TO THE PARTNER, HAS TO BE RESTRICTED TO THE FUNDS ADVANCED DURING THE YEAR, AND THAT AMOUNT IS RS 30,00,000. THE DISALLOWANCE SHOULD, ACCORDINGLY, BE RESTRICTED TO RS 90,000. TO THIS EXTENT, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. 10. GROUND NO. 2 IS ALSO THUS P ARTY ALLOWED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 15 TH DAY OF FEBRUARY, 2017. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 15 TH DAY OF FEBRUARY , 201 7 . COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD