M/s Visions Today, Chandigarh V. Add. CIT, Chandigarh

ITA 328/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8350 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.328/CHD/2013 ( ASSESSMENT YEAR : 2009-10) M/S VISIONS TODAY, VS. THE ADDL.C.I.T.., SCO 33, SECTOR 33-D, RANGE-IV, CHANDIGARH. CHANDIGARH. PAN: AAAFV6739R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 11.02.2016 DATE OF PRONOUNCEMENT : 16.03.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 11.1.2013, RELATING TO ASSESSMENT YEAR 2009-10. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD SHOWN GROSS SALES OF RS.8,62,26,118/- AND AFTER ALLOWING CREDIT/DISCOUNT GIVEN DIRECTLY TO THE PARTIES, THE G.P. RATE OF 4.18% WAS DECL ARED. THE 2 ASSESSEE HAD CLAIMED AN AMOUNT OF RS.24,61,505/- AS DISCOUNT ALLOWED TO CUSTOMERS. WHEN QUESTIONED, TH E ASSESSEE EXPLAINED THAT IT WAS THEIR BUSINESS COMPU LSION TO ALLOW DISCOUNT TO ITS CUSTOMERS. THE ASSESSING OFFICER FURTHER ASKED TO JUSTIFY THE ALLOWANCE OF DISCOUNT IN VIEW OF THE CLEAR CUT GUIDELINES IN INS PRESS HANDBOOK 2 008- 09. REJECTING THE EXPLANATION GIVEN BY THE ASSESSE E, THE ASSESSING OFFICER DISALLOWED AMOUNT OF RS.24,61,505 /-. 3. BEFORE THE LEARNED CIT (APPEALS), IT WAS STATED THAT THE WHOLE ISSUE BEFORE THE ASSESSING OFFICER A ROSE ON A QUERY RAISED BY THE ASSESSING OFFICER WITH REGARD TO DISCOUNT ALLOWED TO SISTER CONCERN M/S WHITEFLAME ADVERTISEMENT PRIVATE LIMITED. HOWEVER, THE DISALL OWANCE HAS BEEN MADE BY THE ASSESSING OFFICER, ULTIMATELY, ON THE BASIS OF THE FACT THAT THE DISCOUNTS WERE GIVEN IN VIOLATION OF TERMS OF GUIDELINES ISSUED BY INS. THE DISALLOW ANCE HAS BEEN MADE INDULGING IN SUSPICION, SURMISES AND CONJECTURES ONLY. RELIANCE WAS PLACED ON THE JUDGM ENT OF JURISDICTION HIGH COURT IN THE CASE OF CIT VS. RAM NARAIN GOEL, 224 ITR 180. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CONFIRME D THE DISALLOWANCE STATING THAT IN THE PRESENCE OF SPECIF IC AND CLEAR CUT GUIDELINES OF INS, THERE WAS NO REASON FO R THE ASSESSEE TO GIVE SUCH DISCOUNTS, THE ASSESSEE IS NO T SUPPOSED TO GIVE UNNECESSARY DISCOUNTS. 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE STATED BEFORE US THAT THE INS GUIDELINES ARE JUST THE RULE S MADE BY THE INS. THE ASSESSEE BEING A MEMBER OF THE INS IS SUPPOSED TO FOLLOW THE SAME. HOWEVER, THESE ARE NO PROVISIONS OF ANY STATUTE, THEREFORE, THE DISALLOWA NCE SOLELY ON THIS BASIS CANNOT BE MADE. FURTHER, WITH REGARD TO M/S WHITEFLAME ADVERTISEMENT PRIVATE LIMITED, OU R ATTENTION WAS INVITED TO THE DETAILS OF DISCOUNT GI VEN TO VARIOUS PARTIES, ALSO FILED BEFORE THE LOWER AUTHOR ITIES, TO SHOW THAT NO DISCOUNT WAS GIVEN TO THIS COMPANY DUR ING THE YEAR. 5. THE LEARNED D.R. RELYING ON THE ORDER OF THE LEARNED CIT (APPEALS) STATED THAT BEING A MEMBER OF THE INS, THE ASSESSEE HAS TO FOLLOW ITS RULES AND CONTR AVENTION OF SUCH RULES CAN BE THE BASIS FOR DISALLOWANCE. A S REGARDS M/S WHITEFLAME ADVERTISEMENT PRIVATE LIMITE D, THE LEARNED D.R. STATED THAT THE FACTUAL INACCURACY POINTED OUT TO THE BENCH HAS NOT BEEN RAISED IN THE FORM OF SPECIFIC GROUND BEFORE THE LEARNED CIT (APPEALS) . 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ISSUE TO BE DECIDED BY US IS WHETHER THE DISALL OWANCE OF DISCOUNTS GIVEN BY THE ASSESSEE IS CORRECT OR NO T. THE CONTROVERSY INITIATED BEFORE THE ASSESSING OFFICER WITH THE 4 ISSUE OF DISCOUNT ALLOWED TO THE SISTER CONCERN M/S WHITEFLAME ADVERTISEMENT PRIVATE LIMITED, HOWEVER, AS SHOWN TO US, NO DISCOUNT HAS BEEN ALLOWED TO THIS COMPANY DURING THE YEAR. HOWEVER, THIS IS ALSO A F ACT THAT THE ASSESSING OFFICER HAS DISALLOWED THE DISCOUNT C LAIMED BY THE ASSESSEE ON THE BASIS OF CONTRAVENTION OF IN S RULE. THE SAID RULE OF INS, AS REPRODUCED BY THE ASSESSIN G OFFICER IN HIS ORDER AND ALSO SHOWN TO US BY THE LE ARNED COUNSEL FOR THE ASSESSEE, DURING THE COURSE OF HEAR ING, ON PERUSAL OF HANDBOOK OF INS RULES, READ AS UNDER : THE TRADE DISCOUNT ALLOWED TO THE AGENCY BY THE MEMBERS SHALL BE RETAINED IN FULL BY THE AGENCY AND SH ALL NOT BE SHARED OR REBATED TO ANY OTHER PERSON, FIRM OR C OMPANY, DIRECTLY OR INDIRECTLY EXCEPT: WHEN AN AGENCY REBATES FULL TRADE DISCOUNT TO ITS CLI ENTS AND IS PAID A SERVICE FEE ITS SERVICES PROVIDED THAT TH E AMOUNT OF THE SERVICE FEE SO RECEIVED SHALL NOT BE LESS 15%, SUCH SERVICES FEE BEING LEVIED ON THE GROSS AND NOT ON THE NET AMOU NT. 7. THE ASSESSEE IS UNDOUBTEDLY A MEMBER OF THE INS HOWEVER, WE ALSO OBSERVE THAT ALLOWABILITY OF A PARTICULAR ITEM OF EXPENDITURE CLAIMED BY THE ASSES SEE UNDER THE INCOME TAX ACT IS NOT BASED ON WHETHER A CONDITION OF ANY SUCH RULES ARE COMPLIED WITH OR NO T. THE INCOME TAX ACT IS A COMPLETE CODE IN ITSELF. IT IS A SELF CONTAINED CODE AND ALLOWABILITY OR NON-ALLOWABILITY OF ANY SUCH EXPENDITURE ARE TO BE LOOKED WITHIN THE ACT IT SELF. THERE IS NO PROVISION IN THE ACT TO DISALLOW SUCH D ISCOUNT. 5 IT IS A MATTER ON RECORD THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THESE DISCOUNTS. IF TH ERE IS ANY VIOLATION OF SUCH RULES, THERE MAY BE CONSEQUEN TIAL PROVISION IN THE INS RULES ITSELF, IT IS NOT FOR TH E ASSESSING OFFICER, ACTING AS PER THE MANDATE OF INC OME TAX ACT, TO DISALLOW THE SAID EXPENSES. WE ALSO OB SERVE THAT IN THE SAME RULE OF THE INS, IN THE SECOND PAR T SOME CONSEQUENTIAL ACT IN THE CASE OF CONTRAVENTION OF T HE RULE HAS ALSO BEEN PRESCRIBED. 8. FURTHER, WITH REGARD TO LEARNED CIT (APPEALS) OBSERVATION THAT THE ASSESSEE IS NOT SUPPOSED TO GI VE UNNECESSARY DISCOUNTS, WE WANT TO STATE THAT IT IS A BUSINESSMANS PREROGATIVE TO RUN HIS BUSINESS THE W AY HE WANTS. THE INCOME TAX AUTHORITIES CANNOT SIT IN TH E ARMCHAIR OF THE BUSINESSMAN AND GUIDE HIM AS TO HOW MUCH OF EXPENDITURE HE SHOULD INCUR. IN VIEW OF TH E ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE TH E DISALLOWANCE. THE GROUND NO.1 AND 2 OF THE APPEAL ARE ALLOWED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE PREFERRED NOT TO PRESS GROUND NOS.3 AND 4. THEREFORE, GROUND NOS.3 AND 4 ARE DISMISSED AS NOT PRESSED. 10. THE GROUND NO.5 OF APPEAL IS WITH REGARD TO DISALLOWANCE OF INTEREST AMOUNTING TO RS.67,640/-. 6 11. THE BRIEF FACTS ARE THAT THE ASSESSEE HAD GIVE N LOANS TO THE FOLLOWING PERSONS DURING THE YEAR : I) SMT. ANURADHA RS.2,15,840/- II) SHRI MAHESH TIWARI RS. 60,000/- III) M/S QUADREX MARKETING RS.1,30,024/- IV) SHRI VIKAS SHARMA RS.1,07,820/- 12. THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICE R THAT S/SHRI MAHESH TIWARI AND VIKAS SHARMA ARE EMPLOYEES AND DUE TO THEIR FAMILY REQUIREMENTS, ADV ANCES WERE GIVEN. NO EXPLANATION REGARDING OTHERS WAS GI VEN. THE ASSESSING OFFICER MADE ADDITION OF AN AMO UNT OF RS.67,640/- ON ACCOUNT OF INTEREST UNDER SECTION 36 (1)(III) OF THE ACT. 13. BEFORE THE LEARNED CIT (APPEALS), SUBMISSIONS WERE REITERATED, HOWEVER, REJECTING THE SAME, RELYI NG ON THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 2 86 ITR 1 (P&H), CONFIRMED THE ADDITION. 14. THE LEARNED COUNSEL FOR THE ASSESSEE STATED BEFORE US THAT S/SHRI MAHESH TIWARI AND VIKAS SHARM A ARE EMPLOYEES OF ASSESSEE AND GIVING ADVANCES TO TH EM OUT OF THEIR FAMILY REQUIREMENTS, COMES UNDER THE REALM OF BUSINESS EXPEDIENCY. RELIANCE WAS PLACED ON A RECE NT JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. HERO CYCLES P. LTD., 228 ITR 463. 7 15. THE LEARNED D.R. RELIED ON THE ORDER OF LOWER AUTHORITIES. 16. AFTER HEARING BOTH THE PARTIES, WE FIND OURSEL VES IN AGREEMENT WITH THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE THAT THE ADVANCES GIVEN TO STAFF ARE O UT OF COMMERCIAL EXPEDIENCY. ONCE A PERSON IS EMPLOYED IN A BUSINESS, ALL HIS FAMILY NEEDS ARE TO BE FULFILLED FROM THAT BUSINESS ONLY AND TO RETAIN THE STAFF, BUSINESS HAS TO EXTEND THESE KINDS OF FACILITIES. IN VIEW OF THIS THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N MADE ON ACCOUNT OF INTEREST TO THESE TWO PERSONS. THE G ROUND NO.5 OF THE APPEAL IS PARTLY ALLOWED. 17. THE GROUND NO.6 OF APPEAL IS CONSEQUENTIAL IN NATURE. 18. THE GROUND NO.7 OF APPEAL IS GENERAL AND NEEDS NO ADJUDICATION. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8