DCIT, Bhubaneswar V. Trahi Jagannath Construction Pvt. Ltd., Bhubaneswar

ITA 300/CTK/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5396 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: T K AGARWAL
• Keywords: Gift

Judgement Text

1 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 DCIT, CIRCLE 1(2) BHUBANESWAR. VS. TRAHI JAGNNATH CONSTRUCTION (P) LTD., PLOT NO.481, SAHID NAGAR, BHUBANESWAR. PAN/GIR NO. AACCT 7402 L (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI T.K.AGARWAL, AR REV ENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 21 /09 / 2017 DATE OF PRONOUNCEMENT : 21 /09 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 30.3.2015 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF R S .8,33,074/ - UNDER THE HEAD INCENTIVE, COMMISSION, ETC.. 2 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,65,56,746/ - TOWARDS INCENTIVES, BROKERAGE AND COMMISSION AS UNDER: 1) INCENTIVE WITH TDS : RS.42,32,601/ - 2) INCENTIVE TO STAFF - P : RS.27,96 ,100/ - 3) INCENTIVE TO STAFF : RS.10,25,222/ - 4) INCENTIVE : RS.53,05,723/ - 5) BROKERAGE AND COMMISSION : RS.31,97,100 TOTAL: RS.1,65,56,746/ - THE ASSESSING OFFICER OBSERVED THAT ALTHOUGH THE LIST OF PAYMENTS WAS FURNISHED BUT IT WAS NOT EXPLAINED HOW SUCH PAYMENTS RELATE TO LAND TRANSACTIONS. THE ASSESSING OFFICER FURTHER FOUND THAT TDS HAS BEEN DEDUCTED FOR AN AMOUNT OF RS.42,32,601/ - . HENC E, THE ASSESSING OFFICER DISALLOWED RS.12,32,414/ - BEING 10% ON ESTIMATE BASIS FOR THE AMOUNT OF RS.1,23,24,145/ - (RS.1,65,56,746 RS.42,32,601/ - ) AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) OBSERVED THAT NO ENQUIRIES WERE M ADE BY THE ASSESSING OFFICER BEFORE ESTIMATING THE DISALLOWANCE. THE ASSESSING OFFICER HAS HIMSELF ADMITTED THAT THE LIST OF EXPENSES RUNS 49 PAGES AND NO SAMPLE ENQUIRIES WERE MADE TO TEST THE GENUINENESS OF THE CLAIM OF EXPENDITURE . THE CIT(A) FURTHER OBSERVED THAT TDS HAS BEEN MADE ON CERTAIN INCENTIVES. THE I INCENTIVES PAID TO STAFF SHOULD NOT HAVE BEEN SUBJECTED TO THE ESTIMATED DISALLOWANCE . THE ASSESSING OFFICER COULD HAVE 3 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 RESERVATIONS REGARDING PAYMENT OF BROKERAGE & COMMISSION FOR RS.31,97,100/ - A ND INCENTIVES OF RS.53,05,72 3/ - . HE OBSERVED THAT THE ESTIMATE MADE BY THE ASSESSING OFFICER IS WILD ONE, HENCE THE SAME REQUIRES M ODIFICATION. SINCE THE ASSESSEE HAS NOT SUPPORTED THE EXPENSES IN THE NATURE OF BROKERAGE & COMMISSIO N (RS.31,97,100) AND INCENTIVE (RS.53,05,723/ - ) TOTALING TO RS.85,02,823/ - , THE CIT(A) FOUND IT JUSTIFIABLE TO RESTRICT THE DISALLOWANCE TO 3% OF SUCH EXPENSES , WHICH COMES TO RS.2,55,085/ - . HE ALSO FURTHER OBSERVED THAT SINCE PROVISIONS OF SECTION 194H HAVE BEEN VIOLATED, TH E ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING EXPENSES OF RS.1,44,255/ - . ACCORDINGLY, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.3,99,340/ - AND ALLOWED RELIEF OF RS.8,33,074/ - TO THE ASSESSEE. 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS LD A.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE ASSESSING OFFICER HAS MADE DISA LLOWANCE ON ESTIMATE BASIS WITHOUT CONDUCTING ENQUIRIES ALTHOUGH THE LIST OF PAYMENTS MADE BY THE ASSESSEE WAS FURNISHED. AS THE DETAILS WERE BEFORE THE ASSESSING OFFICER, HE COULD HAVE TEST CHECKED THE GENUINENESS OF INCENTIVES PAID TO DIFFERENT PERSONS. NO SPECIFIC ERROR COULD BE POINTED OUT BY LD D.R. IN THE FINDINGS OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE TO 3% AS AGAINST 10% ESTIMATED BY THE ASSESSING OFFICER. IN VIEW OF 4 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 ABOVE, WE FIND NO GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL OF REVENUE IS DISMISSED. 8. IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING ADDITION OF RS.26,10,773/ - UNDER THE HE AD P ROJE C T & LAND DEVELOPMENT EXPENSES. 9. THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS INCURRED EXPENSES OF RS.5,22,15,468/ - TOWARDS PROJECT & L AND DEVELOPMENT EXPENSES. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE FAILED TO EXPLAIN THE NATURE AND BASIS OF SUCH HIGH EXPENSES. THEREFORE, HE DISALLOWED AN AMOUNT OF RS.26,10,773/ - @5% OF RS.5,22,15,468/ - ON ESTIMATE BASIS. 10. ON APPEAL, THE CIT(A) OBSERVED THAT ASSESSEE SUBMITTED THAT IT HAS FURNISHED ALL THE DETAILS A ND DOCUMENTS AND EXPLAINED THE EXPENSES MADE DURING THE ASSESSMENT PROCEEDINGS. HE FURTHER OBSERVED THAT NO ENQUIRIES WHATSOEVER WERE MADE BY THE ASSESSING OFFICER TO FIND OUT TH AT THE EXPENSES ARE NOT GENUINE OR ANY DEFECTS COULD BE POINTED OUT IN THE BI LLS & VOUCHERS. HENCE, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 11. LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE COULD NOT EXPLAIN THE NATURE AND BASIS OF EXPENSES 5 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 BEFORE THE ASSESSING OFFI CER AND, THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 12. LD A.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT NO MATERIAL COULD BE BROUGHT BEFORE US BY LD D.R. TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(A) THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECTS IN THE BILLS AND VOUCHERS FURNISHED BY THE ASSESSEE. THEREFORE, WE CONFIRM THE ORDER O F THE CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 14. IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,59,515/ - UNDER THE HEAD PAYMENT MADE IN RESPECT OF PRIZE AND GIFT. 15. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED RS.31,90,319/ - TOWARDS PAYMENTS PRIZES AND GIFTS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO FURNISH THE PRIMARY DOCUMENTS/ EVIDENCE TO SUBSTANTIATE THAT THE EXPENSES HAVE BEEN M ADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, HE ESTIMATED THE DISALLOWANCE @ 10% OF RS.31,90,319/ - WHICH COMES TO RS.3,19,031/ - . 16. ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1,59,516/ - @ 5% OF RS.31,90,319/ - AS AGAINST RS.3,19,031/ - ESTIMATE BY THE ASSESSING OFFICER ON THE GROUND THAT ALL THE EXPENSES MAY NOT BE FOR BUSINESS PURPOSES. 6 ITA NO. 300/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 17. DURING THE COURSE OF HEARING, LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SP ECIFIC ERROR IN THE FINDINGS OF THE LD CIT(A) THAT SINCE ALL EVIDENCES WERE NOT PRODUCED, THE EXPENSES HAVE TO BE ESTIMATED. HOWEVER, SINCE ESTIMATE IS ON HIGHER SIDE, HE REDUCED THE DISALLOWANCE TO RS.1,59,516/ - TO MEET THE ENDS OF JUSTICE. IN VIEW OF ABOVE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A) , WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 18. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 21 /09 /2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 21 /09 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : DCIT, CIRCLE 1(2) BHUBANESWAR. 2. THE RESPONDENT. TRAHI JAGNNATH CONSTRUCTION (P) LTD., PLOT NO.481, SAHID NAGAR, BHUBANESWAR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//