SNJ Distillers Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 300/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9264 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S VIDHYA
• Keywords: Agreed addition; Right to appeal
• Section: 143(3); 153A; 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NOS. 300 TO 303/MDS/2016 / ASSESSMENT YEARS : 2010-11 TO 2013-14 M/S. SNJ DISTILLERS PVT. LTD., NEW NO.99, CANAL BANK ROAD, CIT NAGAR, NANDHANAM, CHENNAI 600 035. PAN AALCS9312F ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(I), CHENNAI. RESPONDENT) / APPELLANT BY : MS. S. VIDHYA, FCA / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 11.04.2016 '# ! / DATE OF PRONOUNCEMENT : 27.05.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 7. 1.2016 FOR THE ASSESSMENT YEARS 2010-11, 2011-12, 2012-13 AND 2013-14. - - ITA 300 TO 303/16 2 SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THEY ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OFF B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O JURISDICTION U/S.153A OF THE ACT, SO AS TO FRAME THE ASSESSMENT U/S.143(3) R.W.S.153A OF THE ACT. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALES OF DISTILLERY PRODUCTS. IT WHOLLY SUPPLIES ITS PRODUCTS TO TAMIL NADU STATE MARKETING CORPORATION (TASMAC). THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR THE ASST. YEARS 2010-11 TO 2013-14 AS UNDER : SL.NO. A.Y. INCOME RETURNED 1 2010-11 21,70,94,520/- 2 2011-12 31,33,82,675/- 3 2012-13 30,02,25,570/- 4 2013-14 24,97,00,560/- THE SEARCH WAS CONDUCTED IN THE OFFICE PREMISES OF M/S. SNJ DISTILLERS PVT. LTD. AT NO.99, CANAL BANK ROAD, CIT NAGAR, NANDHANAM, CHENNAI 600 035 ON 15.05.2012. THEREF ORE, NOTICE U/S.153A OF THE ACT WAS ISSUED TO THE ASSESS EE COMPANY - - ITA 300 TO 303/16 3 TO FILE THE RETURN OF INCOME. ACCORDINGLY, THE ASS ESSEE FILED RETURN OF INCOME. AFTER ISSUING STATUTORY NOTICES, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.1 53A OF THE ACT ON 30.3.2015 FOR THE ASST. YEARS 2010-11 TO 201 3-14 BY MAKING DISALLOWANCE/ADDITION ON FOUR COUNTS I.E. (I ) DISALLOWANCE OF BUSINESS PROMOTION EXPENSES, (II) DISALLOWANCE U /S.14A R.W. RULE 8D, (III) ADDITION IN RESPECT OF BOGUS PURCHAS E AND (IV) DISALLOWANCE U/S.69A OF THE ACT. APART FROM THIS, THE ASSESSEE COMPANY ALSO OBJECTED THE ASSUMPTION OF JURISDICTIO N BY THE ASSESSING OFFICER, IN THE ABSENCE OF ANY INCRIMINAT ING MATERIAL SEIZED. THE OBJECTION WAS REJECTED BY THE AO STATI NG THAT THE CONDITIONS STIPULATED U/S.153A OF THE ACT WAS SATIS FIED IN THE CASE UNDER CONSIDERATION AND HENCE, THE PROCEEDINGS CANNOT BE DROPPED. AGGRIEVED BY THIS ORDER OF THE AO, THE AS SESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WHO CONFIRMED TH E FINDING OF THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BE FORE US. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. AT THE TIME OF HEARING, THE LD. AR HAS NOT PUT ANY SERIOUS OBJECTION IN FRAMING ASSESSMENT U/S.153A OF THE ACT. MORE SO, IN THE PRESENT CASE, THE ASSESSMENT WAS FR AMED - - ITA 300 TO 303/16 4 CONSEQUENT TO SEARCH IN THE CASE OF THE ASSESSEE AN D DULY RECORDING PANCHANAMA ON THE BASIS OF INCRIMINATING MATERIAL. HENCE, WE DO NOT FIND ANY INFIRMITY IN FRAMING THE ASSESSMENT U/S.153A OF THE ACT AND THE SAME IS CONFIRMED. THI S GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 5. THE NEXT GROUND IN ALL THESE APPEALS IS WITH REG ARD TO DISALLOWANCE OF SALES PROMOTION EXPENSES ON THE REA SON THAT IT IS AN AGREED ADDITION. THE AO DISALLOWED THE SALES PROMOTION EXPENSES IN THESE ASSESSMENT YEARS ON THE BASIS OF CONSENT GIVEN BY THE ASSESSEE TO MAKE THAT ADDITION, AS THE ASSESSEE HAS FAILED TO PRODUCE THE EVIDENCE IN SUPPORT OF TH E CLAIM OF EXPENDITURE AS FOLLOWS : SL.NO. A.Y. INCOME RETURNED 1 2010-11 35,17,423 2 2011-12 1,10,58,298 3 2012-13 91,06,397 4 2013-14 1,33,35,005 THE CIT(APPEALS) CONFIRMED THE SAME, THOUGH THE ASS ESSEE PRAYED BEFORE HIM THAT THE BILLS AND VOUCHERS ARE A VAILABLE AND GIVE A CHANCE TO PRODUCE THE SAME. THE CIT(APPEALS ) OBSERVED THAT THE ASSESSEE CANNOT AVAIL THE OPPORTUNITY, SIN CE IT WAS - - ITA 300 TO 303/16 5 AGREED THE ADDITION BEFORE THE AO. HE PLACED RELIA NCE ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF RAMANLAL KAMDAR V. CIT (108 ITR 73). AGAINST THIS, THE ASSE SSEE IS IN APPEAL BEFORE US. 6. THE LD. AR, PLEADED BEFORE US THAT AT THE TIME O F ASSESSMENT, ALL THE BILLS ARE NOT READILY AVAILABLE AND DUE TO PAUCITY OF TIME, THE ASSESSEE WAS NOT ABLE TO PRODU CE THE SAME BEFORE THE AO. BEFORE THE CIT(APPEALS), THE ASSESS EE TOOK A PLEA TO GIVE AN OPPORTUNITY TO PRODUCE THE AVAILABL E BILLS. HOWEVER, THE CIT(APPEALS) REJECTED THE PLEA OF THE ASSESSEE STATING THAT NO APPEAL LIES AGAINST THE AGREED ADDI TION. UNDER THESE CIRCUMSTANCES, THE LD. AR, PRAYED THIS BENCH FOR RECONSIDERATION OF THE ASSESSEES REQUEST. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION, THE VERY ASSESSMENT HAS TO BE MADE AS PER LAW. THE CONSENT GIVEN BY THE ASSESSEE OR A UTHORIZED REPRESENTATIVE CANNOT GIVE THE RIGHT TO THE AO TO M AKE ADDITION, AS HELD BY THE JUDGMENT IN THE CASE OF MARIAM AYSHA V. - - ITA 300 TO 303/16 6 COMMISSIONER OF AGRICULTURAL INCOME-TAX (104 ITR 38 1), THE CONSENT CANNOT BE A REASON TO SUSTAIN THE ADDITION . BEFORE US, THE LD. AR, SUBMITTED THAT ALL THE EVIDENCES IN SUP PORT OF BUSINESS PROMOTION EXPENSES ARE AVAILABLE AND THE P AYMENTS ARE MADE BY CHEQUE AS WELL AS CASH AND SOUGHT ONE M ORE CHANCE TO PRODUCE THE SAME BEFORE THE AO. IN OUR O PINION, THE PLEA OF THE ASSESSEE IS JUSTIFIED. IN OUR OPINION, THE ASSESSEE IS HAVING THE RIGHT OF APPEAL EVEN IT IS AGREED TO ADD ITION BEFORE THE AO. DUE TO PAUCITY OF TIME, THE ASSESSEE COULD NOT PRODUCE THE MATERIAL. NOW, THE EVIDENCE IS AVAILABLE REGARDING THIS EXPENDITURE BEFORE THE ASSESSEE AND IT REQUIRES TO BE EXAMINED BY THE AO. 9. IT IS TO BE NOTED THAT THE REVENUE AUTHORITIES H AVE NOT DOUBTED THE INCURRING OF EXPENDITURE FOR SALES PROM OTION. HOWEVER, THEY DOUBTED THE QUANTUM OF EXPENDITURE IN CURRED. THE BUSINESS CANNOT BE CARRIED ON WITHOUT INCURRING SALES PROMOTION EXPENDITURE. THE LD. AR PLEADED, BEFORE US, THAT MOST OF THESE PAYMENTS WERE PASSED THROUGH BANKING CHANN ELS. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE OF ENTIRE SALE S PROMOTION EXPENDITURE IS NOT PROPER. IF THE SALE PROMOTION E XPENDITURE ARE - - ITA 300 TO 303/16 7 NOT SUPPORTED BY PROPER BILLS OR VOUCHERS OR RECEIP TS AND PAYMENTS HAVE BEEN MADE ONLY BY CASH, THEN THERE AR E CHANCES OF INFLATING OF SUCH CASH EXPENDITURE. EVEN IF IT IS SO, THE ENTIRE EXPENDITURE CANNOT BE DISALLOWED. SINCE, THERE IS POSSIBILITY OF INFLATING OF CASH EXPENDITURE, DISALLOWANCE OF CERT AIN PERCENTAGE OF THE EXPENDITURE TO BE MADE. FROM THIS POINT OF VIEW, IF THE EXPENDITURE IS NOT FULLY VOUCHED, THE ASSESSING OFF ICER IS DIRECTED TO DISALLOW ONLY 10% OF THE UNSUPPORTED CA SH EXPENDITURE OUT OF THIS AND HE SHALL NOT DISALLOW 1 00% OF SUCH EXPENDITURE. ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION. IT IS NEEDLESS TO SAY THAT THE AO SHALL NOT BE PREJUDICED BY EARLIER ACTION OF THE AS SESSEE THAT IT WAS AGREED THE ADDITION VIDE ITS LETTER DATED 16.3. 2015. HE SHALL TOTALLY OVERLOOK THAT LETTER AND RE-EXAMINE THE MAT ERIALS TO BE PRODUCED BEFORE HIM AND DECIDE THE ISSUE AFRESH, IN THE LIGHT OF OUR OBSERVATION HEREIN ABOVE. THIS GROUND IS ALLOW ED FOR STATISTICAL PURPOSES. 10. THE LAST GROUND IN ITA NO.302/MDS/2016 IS WITH REGARD TO LEVY OF INTEREST U/S.234A AND 234B OF THE ACT. - - ITA 300 TO 303/16 8 11. THE INTEREST UNDER SECTION 234A IS CHARGEABLE F ROM THE DATE OF EXPIRY OF THE NOTICE PERIOD GIVEN UNDER SEC TION 153A TO THE DATE OF COMPLETING THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A OF THE ACT, AS HELD BY THE TRIBUNAL IN THE CASE OF ACIT V. VN. DEVADOSS [93 DTR 73 CHENNAI (TRIB.). TH E INTEREST UNDER SECTION 234B IS TO BE LEVIED ONLY ON THE ADDI TIONAL TAX LEVIED ON THE ENHANCED INCOME DETERMINED UNDER SECT ION 143(3) R.W.S. 153A OF THE ACT. THEREFORE, THE PERIOD OF CH ARGING OF INTEREST SHOULD BE FROM THE DATE OF DETERMINATION O F INCOME UNDER SECTION 143(1) OR 143(3) TO THE DETERMINATION OF ENHANCED INCOME UNDER SECTION 143(3) R.W.S. 153A OF THE ACT. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 27 TH OF MAY, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 27 TH MAY, 2016. MPO* - - ITA 300 TO 303/16 9 ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.