LMJ Services Limited, Kolkata V. DCIT, Circle - 8, Kolkata, Kolkata

ITA 298/KOL/2011

• Counselvise Citation: 29823514 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 25-08-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 21-02-2011
• Court: TRIBUNAL
• Department Lawyers: B K DAS
• Assessee Lawyers: ARTI DEBNATH; MANISH BAJORIA
• Keywords: Gift; Business expenditure; Additional evidence

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 298/KOL/2011 %& '(/ ASSESSMENT YEAR : 1998-99 (*+ / APPELLANT ) LMJ SERVICES LIMITED, KOLKATA (PAN: AAACL 4868Q) (,-*+/ RESPONDENT ) D.C.I.T., CIRCLE-8, KOLKATA *+ . / '/ FOR THE APPELLANT: SMT.ARTI DEBNATH & SHRI MANISH BAJORIA ,-*+ . / '/ FOR THE RESPONDENT: SHRI B.K.DAS 0%1 . !# /DATE OF HEARING : 10.05.2012. 2' . !# /DATE OF PRONOUNCEMENT : 23.05.2012. '3 / ORDER . .. . ! ! ! !. .. . , '# PER SHRI C.D.RAO, AM THE ABOVE APPEAL IS FILED BY THE ASSESSEE AGAINST O RDER DATED 30.12.2010 OF THE LD. CIT-(A)-XIX, KOLKATA PERTAINING TO A.YR. 1998- 99 2. IN THIS APPEAL ASSESSEE HAS FILED THE FOLLOWING GROUNDS :- 1. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ENTERTAINMENT EXPENSES AMOUNT ING TO RS.1,28,529/- STATING THAT THE SAME ARE NOT BUSINESS EXPENDITURE. 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT TRAVELING & CONVEYANCE EXPENSES AMOUNTING TO RS. 1,86,093/- STATING THAT THE SAME ARE NOT BUSINESS EXPENDITURE. 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISCOUNT ON VEHICLE AMOUNTING TO RS. 6,94,993/- IN RELATION TO DISCOUNT ALLOWED 2 4. FOR THAT THE LD. CIT(A) ERRED IN DISMISSING THE GROUND FOR INITIATING PENALTY U/S 271 (1) ( C) BY THE A.O. STATING THAT THE GROUND IS PRE MATURE FOR ADJUDICATION.. 5. FOR THAT THE DISALLOWANCES MADE IS WRONG AND UNJ USTIFIED AND THEREFORE, BE DELETED BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. FOR THAT THE APPELLANT CRAVES LEAVES TO ADD, ALT ER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEALS. 2. GROUND NOS. 5 AND 6 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY ADJUDICATION. HENCE THE SAME ARE DISMISSED. 3. GROUND NO.4 RAISED BY ASSESSEE WAS NOT ARGUED B Y THE LD. COUNSEL FOR ASSESSEE. HOWEVER, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS JUSTIFIED IN DISMISSING THE GROUND OF ASSESSEE REGARDING INITIATION OF PENALTY U/S 271 (1)(C) OF THE IT ACT BY STATING THAT THE GROUND IS PRE-MATURE FOR ADJUDICATION SINCE THE AO HAS NOT LEVIED PENALTY YET THOUGH MENTIONED IN THE ASSESSMENT ORDER REGARDING THE INITIATION OF PENALTY. 4. THE BRIEF FACTS IN RESPECT OF GROUND 1 TO 3 ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT THE AO HAS DISALLOWED AN AMOUNT OF RS.1, 28,529/- ON ACCOUNT OF ENTERTAINMENT EXPENSES BY OBSERVING THAT THE COMPAN Y HAS FAILED TO PRODUCE BILLS RELATING TO ALL PURCHASES THROUGH MRJ.K.JAIN. THERE FORE HE DISALLOWED THE EXPENDITURE INCURRED BY HIM ON VARIOUS HEADS AS MENTIONED IN TH E IMPUGNED ORDER AT PAGE NO.3. SIMILARLY HE DISALLOWED AN AMOUNT OF RS.1,86,093/- ON ACCOUNT OF TRAVELING EXPENDITURE AGAIN IN RESPECT OF PAYMENTS MADE THROU GH SHRI J.K.JAIN, WHO IS ONE OF THE DIRECTORS OF THE COMPANY. HE FURTHER OBSERVED T HAT THE EXPENDITURE AS NARRATED BY AO AT PARA NO.4 IS NOT INCURRED FOR THE BUSINESS PU RPOSES AS NO EVIDENCE COULD BE PRODUCED BY THE COMPANY. LASTLY HE DISALLOWED AN AM OUNT OF RS.6,94,993/- ON ACCOUNT OF DISCOUNT ON VEHICLES 4.1. ON APPEAL THE LD. CIT(A) HAS CONFIRMED ALL TH E ADDITIONS BY OBSERVING AS UNDER :- (4.2) I HAVE CONSIDERED THE SUBMISSION OF THE APP ELLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPIES OF LEDGE R ACCOUNT AND BILLS AND VOUCHERS ETC. PRODUCED BY THE APPELLANT. ON GOING THROUGH THE COP IES OF BILLS AND VOUCHERS PRODUCED BY THE APPELLANT, IT IS OBSERVED THERE WERE CERTAIN PURCHASES OF JEWELLERY ITEMS AND OTHER BIG ITEMS WHICH WERE CLAIMED TO BE GIFTED TO THE PE RSONS OF MARUTI LTD. HOWEVER, I AM 3 OF THE OPINION THAT THERE IS NO EVIDENCE WHICH MAY PROVE THAT THE APPELLANT-COMPANY HAS GIVEN SUCH EXPENSIVE ITEMS AS GIFT TO THE MARUTI LT D. PERSONS AND AS TO WHETHER THEY CAN BE TERMED AS ENTERTAINMENT EXPENSES. I AM NOT INC LINED TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE EXPENSES OF RS. 1,28,529/- W ERE INCURRED FOR THE PURPOSE OF BUSINESS. IN VIEW OF ABOVE, THE DISALLOWANCE MADE B Y THE AO AMOUNTING TO RS.1,28,529/- IS CONFIRMED. THE GROUND NO. 1 IS DIS MISSED. (5.2) I HAVE CONSIDERED THE SUBMISSION OF THE APP ELLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPIES OF BILLS AND VOUCHERS WITH RESPECT TO PAYMENTS MADE TO THE TRAVEL AGENTS ON PERUSAL OF BI LLS AND VOUCHERS, IT IS OBSERVED THAT FROM THOSE DOCUMENTS IT CANNOT BE INFERRED THAT THE EXPENDITURE WERE INCURRED FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE HAD BEEN INCUR RED ON ACCOUNT OF AIR TICKETS, HOTEL BILLS AND OTHER MISCELLANEOUS EXPENSES. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPINION THAT THE A.O. WAS JUSTIFIED IN MAKING THE D ISALLOWANCE OF RS.1,86,093/-, BECAUSE, THE APPELLANT HAS FAILED TO PROVE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF APPELLANTS BUSINESS . THE DISALLOWANCE OF RS.1,86,093/- IS CONFIRMED. THE GROUND NO. 2 IS DISMISSED. (6.2) I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ASSESSMENT ORDER. DURING THE APPELLATE PROCEEDINGS, THE APPELL ANT HAS SUBMITTED THE RECONCILIATION STATEMENT OF DISCOUNT ON VEHICLE. ON PERUSAL OF SAI D STATEMENT, IT IS OBSERVED THAT THE APPELLANT HAS SUBMITTED A COMPLEX WORKING FOR DISCO UNT ON VEHICLE AND HAS SHOWN DIFFERENT ACCOUNTS LIKE DISCOUNT ON VEHICLE, DISCOU NT ON LABOUR SCHEME, DISCOUNT TEA A/C AND DISCOUNT LABOUR P.N. A/C. ETC. HOWEVER, DUR ING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT COULD NOT EXPLAIN THE NA TURE OF VARIOUS ACCOUNTS. UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE A.O. WA S JUSTIFIED IN MAKING THE DISALLOWANCE OF RS.4,94,933/- AND THE DISALLOWANCE MADE BY HIM IS UPHELD. WITH REGARD TO DISALLOWANCE OF RS.2 LAKH, ON PERUSAL OF COPY OF BILL ISSUED TO SHRI OM PRAKASH FOR SALE OF MARUTI ESTEEM, IT IS OBSERVED THAT THE INVO ICE WAS ISSUED FOR THE FULL VALUE OF THE CAR AND NOT FOR THE DISCOUNTED VALUE. THUS, THERE I S NO EVIDENCE THAT THE ESTEEM CAR WAS ACTUALLY DAMAGED AND THE DISCOUNT OF RS. 2 LAKH WAS GIVEN TO SHRI CM PRAKASH. IN VIEW OF ABOVE, I UPHELD THE ACTION OF THE A.O. MAKING FU RTHER DISALLOWANCE OF RS. 2 LAKH ON ACCOUNT OF DISCOUNT. TO SUM UP, THE DISALLOWANCE AG GREGATING TO RS.6,94,933/- IS UPHELD. THE GROUND NO. 3 IS DISMISSED. 4.2. AGGRIEVED BY THIS NOW ASSESSEE IS IN APPEAL BE FORE US. 5. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR ASSESSEE SUBMITTED THE DETAILS OF EXPENSE BILLS, VOUCHERS AND LEDGER ACCOU NT RELATING TO ENTERTAINMENT EXPENSES WHICH ARE PLACED AT PAGES 1 TO 27 OF THE P APER BOOK AND EXPENSE BILLS, VOUCHERS AND LEDGER ACCOUNT RELATING TO TRAVELING A ND CONVEYANCE WHICH ARE PLACED AT PAGES 28 TO 90 OF THE PAPER BOOK. AND ARGUED THAT T HOUGH THE LD. CIT(A) HAS ACCEPTED THE BILLS SUBMITTED BEFORE HIM HE CONFIRMED THE ACT ION OF AO BY SIMPLY STATING THAT HE IS OF THE OPINION THAT THERE WAS NO EVIDENCE WHICH MAY PROVE THAT THE ASSESSEE COMPANY GAVE SUCH EXPENSIVE ITEMS AS GIFT TO THE MA RUTI LTD. IN RESPECT OF 4 ENTERTAINMENT EXPENDITURE. SIMILARLY IN RESPECT OF TRAVELING EXPENDITURE HE IS OF THE OPINION THAT AO WAS JUSTIFIED IN MAKING THE DISALLO WANCE OF RS.1,86,093/- BECAUSE THE ASSESEE HAS FAILED TO PROVE THAT THE EXPENDITURE WA S INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THEREFORE T HE LD. COUNSEL CONTENDED THAT THE LD. CIT(A) THOUGH ACCEPTED THE ADDITIONAL EVIDENCES HAS NOT PROPERLY APPLIED HIS MIND WHETHER THEY ARE GENUINE OR NOT AND EVEN THE REMAND REPORT WAS NOT CALLED FOR BEFORE CONFIRMING THE ACTION OF AO. HE FURTHER CONT ENDED THAT BECAUSE OF THE HUGE TURN OVER OF RS.25 CRORES THE AMOUNT OF MISCELLANEO US EXPENDITURE AS WELL AS THE TRAVELING EXPENDITURE DISALLOWED BY THE REVENUE IS NOT JUSTIFIED. THEREFORE HE REQUESTED TO DELETE THE SAME. 6. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHAL F OF THE REVENUE HAS RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES IN RESPECT OF DISALLOWANCE ON ACCOUNT OF ENTERTAINMENT EXPENDITURE AND TRAVELING AND CONVEYA NCE EXPENSES BY POINTING OUT THAT THE LD. COUNSEL FOR ASSESSEE HAS NOT SUBSTANTIATED THE CLAIM THAT IT IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AS WELL AS THE AMOUNTS OF WHICH ARE RECEIVED ARE GENUINE DELIVERED TO THE PARTIES MENTI ONED. 7. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD INCLUDING THE BILLS IN RESPECT OF ENTERTAINMENT AS WELL AS TRAVELING AND CONVEYANCE WE ARE OF THE VIEW THAT SINCE THE GE NUINENESS OF THE EXPENDITURE HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES TAKING INTO CONSIDERATION OF THE TOTAL TURN OVER OF THE ASSESSEE COMPANY, IN OUR CONSIDERED OPI NION, THAT THESE EXPENSES ARE NECESSARILY INCURRED FOR PRODUCING SUCH HUGE TURN O VER IN THE COMPETITIVE MARKET. SINCE AGAIN THE REVENUE HAS NOT DISPUTED THE EXPEND ITURE. WE FIND NO JUSTIFICATION TO SIMPLY DISALLOW THE SAME BASED ON PRESUMPTIONS, SUR MISES AND CONJECTURE. THEREFORE WE DELETE THE ADDITIONS ON ACCOUNT OF ENTERTAINMENT , TRAVELING AND CONVEYANCE EXPENSES. 8. AS REGARDING THE DISALLOWANCE ON ACCOUNT OF DISC OUNT THE LD. COUNSEL FOR ASSESSEE HAS REQUESTED TO ACCEPT THE ADDITIONAL EVI DENCES FILED BEFORE US I.E. THE LEDGER 5 ACCOUNT IN RESPECT OF DISCOUNT ON VEHICLES AND SURV EYORS REPORT WHICH ARE PLACED AT PAGES 1 TO 6 AND 7 TO 8 AND FURTHER RELIED ON THE F OLLOWING DECISIONS OF ITAT : I) RAJMOTI INDUSTRIES VS INCOME TAX OFFICER 52 ITD 286, II) SIKANDER PUBLISHING (P)LTD VS DCIT 81 TTJ 249 AND III)MAHAVIR PRASAD GUPTA VS JCIT 100 TTJ 1078 WHICH ARE PLACED AT PAGES 9 TO 29 OF THE PAPER BOOK AND HE REQUESTED RESTORE THE MATTER TO THE FILE OF AO TO DECIDE THE SAME AFRESH AFTER TAKING INTO CONSIDERATION OF THE ADDIT IONAL EVIDENCES. 9. AS REGARDING THE SETTING ASIDE OF THE ISSUE IN R ESPECT OF DISCOUNT CHARGES THE LD. DR APPEARING ON BEHALF OF THE REVENUE HAS NOT RAISE D ANY OBJECTION FOR THE SAID REQUEST OF THE LD. COUNSEL FOR ASSESSEE. 10 .AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE AD DITIONAL EVIDENCES FILED BY ASSESSEE WILL BE ESSENTIAL IN ORDER TO DISPOSE OF THIS ISSUE . THEREFORE IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO RE-DEC IDE THE MATTER AFRESH AFTER TAKING INTO CONSIDERATION THE ADDITIONAL EVIDENCES IN RESPECT O F DISCOUNT ON VEHICLES FILED BY ASSESSEE AFTER GIVING A REASONABLE OPPORTUNITY OF B EING HEARD TO ASSESSEE. 11. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 23.05.2012. SD/- SD/- , ,, , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 23.05.2012. R.G.(P.S.) 6 '3 . ,4 5'4'6- COPY OF THE ORDER FORWARDED TO: 1. LMJ SERVICES LIMITED, 30, JAWAHARLAL NEHRU ROAD, KO LKATA-700016. 2 D.C.I.T., CIRCLE-7(2), KOLKATA. 3. THE C.I.T. 4. CIT(A)-XIX, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES