Poineer Himudyog Pvt. Ltd., Hooghly V. ACIT, Cir.2 Hooghly, Hooghly

ITA 338/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1645 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Corroborative evidences
• Section: 80G

Judgement Text

1 ITA NO.338/KOL/2017 PIONEER HIMUDYOG P. LTD., AY 2011-12 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 338/KOL/2017 ASSESSMENT YEAR: 2011-12 PIONEER HIMUDYOG P. LTD. (PAN:AABCP7820P) VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, HOOGHLY APPELLANT RESPONDENT DATE OF HEARING 19.06.2017 DATE OF PRONOUNCEMENT 23.08.2017 FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI NICHOLAS MURMU, JCIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-6, KOLKATA DATED 13.01.2017 FOR AY 2011-12. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINS T THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.10,747/- WHICH WAS MA DE BY THE AO AS DONATION AND SUBSCRIPTION ACCOUNT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO WAS OF THE OPINION THAT THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD DONATION & SUBSCRIPTION WAS NOT SUPPORTED BY ANY RECEIPT OR 80G CERTIFICATE, THEREFORE, HE DISA LLOWED THE ENTIRE EXPENSES CLAIMED ON THAT BEHALF. ACCORDING TO THE ASSESSEE, THE EXPENSES IN CURRED UNDER THE HEAD DONATION & SUBSCRIPTION COMPRISED OF SUBSCRIPTION TO DIFFEREN T ORGANIZATIONS FOR PUJA AND SOCIAL ACTIVITIES. ACCORDING TO ASSESSEE, IN ORDER TO RUN THE BUSINESS PEACEFULLY IT IS UNAVOIDABLE NECESSITY TO CONTRIBUTE TO LOCAL RELIGIOUS FESTIVAL S AND SOCIAL ACTIVITIES. SINCE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF COLD STORAGE AND TO HAVE GOOD RELATIONSHIP WITH THE LOCAL RESIDENTS, THE SUBSCRIPTION IS THUS A BUSINES S NECESSITY. WE NOTE THAT THE ASSESSEE HAD 2 ITA NO.338/KOL/2017 PIONEER HIMUDYOG P. LTD., AY 2011-12 FILED THE EVIDENCE I.E. COPY OF LEDGER AND EVIDENCE OF DONATION AND SUBSCRIPTION BEFORE THE AO WHICH WE NOTE FROM PAGES 6 AND 7 OF THE PAPER BO OK. THE LEDGER IN RESPECT TO DONATION AND SUBSCRIPTION HAS BEEN SUPPORTED BY EVIDENCE WHI CH IS FOUND PLACED FROM PAGES 8 TO 28 OF THE PAPER BOOK. THUS, WE FIND THAT THE ASSESSEE HAD IN FACT FILED THE BILLS OF EACH EXPENDITURE BEFORE THE AO. WE NOTE THAT THE SUBSCRI PTION AND DONATION WAS GIVEN BY THE ASSESSEE TO VARIOUS ORGANIZATIONS TO AVOID CONFRONT ATION AND TO SMOOTH RUNNING OF ITS BUSINESS AND, THEREFORE, THE EXPENSES INCURRED BY T HE ASSESSEE ON SUBSCRIPTION AND DONATION OF RS.10,747/- IS INCIDENTAL TO ASSESSEES BUSINESS AND ARE ALLOWABLE AS BUSINESS EXPENDITURE. THIS VIEW HAS BEEN UPHELD BY THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BATA INDIA LTD. REPORTED IN (1993) 201 ITR 884 (CAL) WHEREIN IT HAS BEEN HELD AT PAGE 890 THAT CONTRIBUTION TO LOCAL PUJA AND FESTIV AL COMMITTEES OR ORGANIZATIONS TO AVOID CONFRONTATION AND FOR SMOOTH RUNNING OF ITS BUSINES S ARE ALLOWABLE AS BUSINESS EXPENDITURE. THEREFORE, WE ALLOW THIS GROUND OF APPEAL OF THE AS SESSEE. 4. THE NEXT GROUND I.E. GROUND NOS. 2 AND 3 ARE IN RESPECT TO THE ACTION OF THE LD. CIT(A) CONFIRMING THE ADDITION OF RS.1,91,258/- CLA IMED BY THE ASSESSEE UNDER THE HEAD REPAIRS. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE EXPENSES CLAIMED ON ACCOUNT OF REPAIRS ARE MADE UNDER FOUR SUB HEADS WH ICH WERE SUPPORTED ONLY BY INTERNAL VOUCHERS AND WHICH WERE PAID IN CASH. THEREFORE, H E OBSERVED THAT SINCE THERE IS A POSSIBILITY OF EXCESS CLAIM OR INFLATION OF EXPENSE S, 20% OF SUCH EXPENSES OF RS.9,65,289/- BEING RS.1,91,258/- WAS ADDED TO THE TOTAL INCOME O F THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONF IRMED THE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO HAS MADE AD HOC DISALLOW ANCE OF 20% TAKING NOTE OF THE FACT THAT THE EXPENSES WERE MADE IN CASH AND THERE WERE ONLY INTERNAL VOUCHER TO SUPPORT THE SAME AND SINCE THERE IS NO WAY TO VERIFY THE SAME AND TH ERE BEING CHANCES OF INFLATION OF THE CLAIM OF EXPENSES HE MADE THE DISALLOWANCE OF 20% O F SUCH EXPENSES OF RS.9,65,289/- BEING RS.1,91,258/-. THE LD. AR DREW OUR ATTENTION TO PAGE 31 OF THE PAPER BOOK WHICH IS THE COPY OF THE LEDGER AND EVIDENCE OF REPAIRS TO B UILDING FILED BEFORE THE AO WHICH 3 ITA NO.338/KOL/2017 PIONEER HIMUDYOG P. LTD., AY 2011-12 EXPENSES COMES TO RS.3,22,442/- (PAGE 32 OF THE PAP ER BOOK). THE LD. AR DREW OUR ATTENTION TO THE EVIDENCE FOR INCURRING EXPENDITURE WHICH IS PLACED FROM PAGES 33 TO 59 OF THE PAPER BOOK, WHICH WE CROSS VERIFIED AS A TEST C ASE WITH THE LEDGER ACCOUNT AND FOUND TO BE CORRECT. LIKEWISE, THE COPY OF THE LEDGER AND E VIDENCE OF REPAIRS FOR ELECTRIC HAS BEEN FOUND TO BE PLACED AT PAGES 60 TO 63 OF THE PAPER B OOK FROM WHERE WE FIND THE EXPENSES OF RS.1,34,967/- HAS BEEN CLAIMED WITH SUPPORTING EVID ENCE AND THE BILLS OF THE EXPENSES HAVE BEEN FOUND PLACED FROM PAGES 63 TO 106 OF THE PAPER BOOK, WHICH WE CROSS VERIFIED SOME OF THE EXPENSES AND CROSS-CHECKED FROM LEDGER ACCOUNT AND FOUND TO BE CORRECT. SIMILARLY, COPY OF THE LEDGER AND EVIDENCE OF REPAIRS TO MACHI NERY HAS BEEN PLACED BEFORE US AT PAGES 107 TO 109 FROM WHERE WE NOTE THAT THE TOTAL EXPENS ES OF RS.4,45,780/- HAS BEEN CLAIMED WITH SUPPORTING EVIDENCE AND THE BILLS HAVE BEEN F OUND PLACED FROM PAGE 102 TO 146 OF THE PAPER BOOK, WHICH WE HAVE TEST CHECKED AND FOUND TO BE CORRECT. THE LD. AR DREW OUR ATTENTION TO THE COPY OF LEDGER ACCOUNT AND EVIDENC E OF REPAIRS TO RACK AT PAGE NO. 147 OF THE PAPER BOOK, WHICH WE FIND AN AMOUNT OF RS.53,100/- HAS BEEN CLAIMED WITH SUPPORTING EVIDENCE AND IT IS FOUND FROM PAGES 148 TO 150 OF T HE PAPER BOOK, WHICH WE HAVE TEST CHECKED AND FOUND TO BE CORRECT. IN SUCH A SCENARI O, WHEN ALL THE EVIDENCE WERE FILED BEFORE THE AO AND FROM THE BILLS THE ADDRESSES OF THE SERV ICE PROVIDERS ARE AVAILABLE, SO, IF THE AO WANTED TO VERIFY THE VERACITY OF THE BILLS HE COULD HAVE EASILY VERIFIED THE VERACITY OF THE BILLS FROM THE SERVICE PROVIDERS. THUS WE NOTE THAT THE AO HAS MADE THE DISALLOWANCE ONLY ON THE BASIS OF SURMISES AND CONJECTURES. WE NOTE THAT THE ASSESSEE MAINTAINED BOOKS U/S. 44AB OF THE ACT WHICH WAS DULY AUDITED U/S. 44AB OF THE ACT AS WELL AS U/S. 227(4) OF THE COMPANIES ACT, 1956. THE ASSESSEE HAD PRODUCED THE COPY OF THE LEDGER ACCOUNT AND THE SUPPORTING VOUCHERS AND BILLS BEFORE THE AO, THEREF ORE, THE FINDING OF THE AO THAT THERE WAS NO EVIDENCE TO SUPPORT THE CLAIM IS ERRONEOUS AND W E FIND THAT ALL THE EVIDENCES WERE FILED BEFORE THE AO AND THE AD HOC DISALLOWANCE WAS NOT W ARRANTED. IN CASE, THE AO HAD ANY DOUBT IN RESPECT OF ANY BILLS, THE AO SHOULD HAVE V ERIFIED IT FROM THE PAYEES WHOSE ADDRESSES ARE AVAILABLE IN THE BILLS/VOUCHERS WHICH WERE ON RECORD. IN SUCH A SCENARIO, WITHOUT REJECTING THE BOOKS OF ACCOUNT, THE AD HOC DISALLOWANCE MADE IS NOT SUSTAINABLE IN THE EYES OF LAW WHICH VIEW THE TRIBUNAL HAS BEEN TA KING CONSISTENTLY IN SEVERAL DECISIONS. IF ANY SPECIFIC EXPENDITURE IS UNVERIFIABLE OR IS UN-V OUCHED, THEN SUCH SPECIFIC EXPENDITURE IS 4 ITA NO.338/KOL/2017 PIONEER HIMUDYOG P. LTD., AY 2011-12 DISALLOWABLE. IN THE PRESENT CASE NO SPECIFIC ITEM HAS BEEN IDENTIFIED BY THE AO TO MAKE THE DISALLOWANCE, THEREFORE, WE ARE OF THE VIEW THAT ES TIMATED DISALLOWANCE AS CONFIRMED BY THE LD. CIT(A) IS ARBITRARY EXERCISE OF POWER AND, THER EFORE, UNSUSTAINABLE IN THE EYES OF LAW AND THEREFORE, IT STANDS DELETED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.08.201 7 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23RD AUGUST, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT PIONEER HIMUDYOG P. LTD., C/O S. N. GHO SH & ASSOCIATES, ADVOCATES, SEVEN BROTHERSLODGE, P.O. BUROSHIBTAL A, P.S. CHINSURAH, DIST. HOOGHLY, PIN-712 105 2 RESPONDENT ACIT, CIRCLE-2, HOOGHLY. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY