Sigma Services & Advertisers Pvt. Ltd., Paschim Medinipur V. DCIT, Circle - 2, Midnapore, Midnapore

ITA 342/KOL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6814 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 30-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2011
• Court: TRIBUNAL
• Department Lawyers: S S GUPTA
• Assessee Lawyers: D R SINDHAL
• Section: 194C

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 . 323/KOL/2011 %& '(/ ASSESSMENT YEAR : 2007-08 (*+ / APPELLANT ) D.C.I.T., CIRCLE-2, MIDNAPORE - % - - VERSUS - . (-.*+/ RESPONDENT ) M/S. SIGMA SERVICES & ADVERTISES PVT. LTD, PASCHIM MEDINIPUR (PAN-AAECS 899 R) $ $ $ $ / ITA NO . 342/KOL/2011 %& '(/ ASSESSMENT YEAR : 2007-08 (*+ / APPELLANT ) M/S. SIGMA SERVICES & ADVERTISES PVT. LTD, PASCHIM MEDINIPUR (PAN-AAECS 899 R) - % - - VERSUS - . (-.*+/ RESPONDENT ) D.C.I.T., CIRCLE-2, MIDNAPORE *+ / 0 '/ FOR THE APPELLANT: SHRI D.R.SINDHAL -.*+ / 0 '/ FOR THE RESPONDENT: SHRI S.S.GUPTA '1 / ORDER . .. . ! ! ! !. .. . , , , , '# '# '# '# PER SHRI C.D.RAO, AM THE ABOVE CROSS APPEALS ONE FILED BY THE REVENUE A ND THE OTHER FILED BY THE ASSESSEE ARE AGAINST THE ORDER DATED 23.12.2010 OF THE CIT(A)-XXXVI, KOLKATA PERTAINING TO A.YR. 2007-08. 2 ITA NO.323/KOL/2011 (BY THE REVENUE): 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD.CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITIONS FOR VIOLATION OF SECT.40A(IA), AMOUNTING TO RS.1,13 ,59,812/- ON ACCOUNT OF FOLLOWING HEAD(S) AND OBJECTIONS RAISED BY THE AO : - SL.NO. HEAD OBJECTION RAISED BY AO 1. ADVT.EXPENSES ASSESSEE HAD FAILED TO PRODUCE ORI GINAL EXEMPTION CERTIFICATE REQUIRED 194C(2). 2. MARKETING WAGES WAGE PAYMENT WAS MADE TO CONTRACTED PERSONS ATTRACTS TDS PROVISIONS WHICH THE ASSESSEE FAILED TO DEDUCT. 3. TRANSPORTATION THE ASSESSEE FIRM HAD MADE CHEQUE PAYMENTS TO DIFFERENT TRANSPORT AGENCIES BUT THE ASSESSEE IS FAILED TO DEDUCT TDS ON SUCH AMOUNTS. 4. LOADING & UNLOADING ASSESSEE WAS FAILED TO DEDUCT TDS. 2. THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS OF THE CASE IN ARRIVING AT THE CONCLUSION THAT THE AO HAS NOT FURNISHED THE DETAIL S IN REMAND REPORT. 3. THE LD. CIT(A) HAS NOT APPRECIATED IN DELETING T HE ADDITIONS U/S 40A(IA) WITHOUT LOOKING TO THE FACTS THAT THE ASSESSEE HIMS ELF HAS NOT PRODUCED THE DETAILS ON WHICH THE COMMENTS OF AO WERE CALLED IN THE REMAND REPORT. 4. THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS O N DISALLOWANCES OF DELIVERY VEHICLE RUNNING MAINTENANCE, AMOUNTING TO RS.41,42, 509/- WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCES IN SUPPORT OF RISE IN DELIVERY VEHICLE RU NNING & MAINTAINING EXPENSES AND ALSO NON DEDUCTION OF TDS BY THE ASSES SEE FOR AN AMOUNT OF RS.41,42,509/-. 5. THE LD. CIT(APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.32,72,822/- AND DELETING THE OTHER PART OUT OF THE TOTAL DISALL OWANCE MADE AT RS.1,43,86,839/- BY THE AO WITHOUT APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVID ENCES FOR THE REASON INCREASE IN EXPENSES. 6. THE CIT(APPEALS) HAS ALSO ERRED IN FACTS AND CIR CUMSTANCES OF THE CASE IN DELETING ON ACCOUNT OF THE ADDITION OF RS.2 CRORE W ITHOUT APPRECIATING THE FACTS OF THE CASE THAT DURING THE YEAR UNDER CONSIDERATIO N ALL THE MAJOR SOFT DRINKS COMPANIES HAVE REGISTERED GROWTH IN THEIR SALES. BU T THE ASSESSEE STATED THAT DUE TO MEDIA HYPE IN THE NAME OF PESTICIDES THE CON SUMPTION AS WELL AS SALES HAD GONE DOWN WHICH WAS NOT SEEMS TO GENUINE. ITA NO.342/KOL/2011 (BY THE ASSESSEE) : 1. FOR THAT UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE AT 10% OF EXPENDITURE IN CURRED ON EACH OF THE 3 FOLLOWING HEADS OF EXPENSES AND THEREBY CONFIRMING A TOTAL DISALLOWANCE OF RS.32,72,822/-. HEAD OF EXPENDITURE 10% OF THE EXPENSES CONFIRMED BY CIT(A) DELIVERY VEHICLE RUNNING EXPENSES RS.29,22,133/- TELEPHONE CHARGES RS. 79,531/- COMPUTER EXPENSES RS. 10,330/- TRAVELLING EXPENSES RS. 2,10,738/- STAFF INCENTIVE RS. 12,775/- WATCH & WARD EXPENSES RS. 12,775/- TOTAL RS.32,72,822/- 3. THE BRIEF FACTS OF THE CASE ARE THE AO WHILE DO ING THE SCRUTINY ASSESSMENT HAS MADE THE FOLLOWING ADDITIONS FOR VIOLATING OF SECTI ON 40(A)(IA) BY OBSERVING THAT ON THOROUGH SCRUTINY OF THE PAPERS & DOCUMENTS FIL ED ALONG WITH THE RETURN AND IN THE COURSE OF HEARING IT WAS FOUND THAT THE ASSESSEE DEBITED THE FOLLOWING AMOUNTS WITHOUT DEDUCTING TDS AS REQUIRED U/S 194C( 2) ON A/C. OF AMOUNT DEBITED ADVERTISEMENT RS.55,34,262/- MARKETING WAGES RS.37,75,321/- TRANSPORTATION RS.12,27,560/- LOADING & UNLOADING RS. 8,22,669/- 3.1. IN ALL THE ABOVE HEADS OF ACCOUNTS THE AO IS O F THE VIEW THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194C AND HENCE THE ASSESSE E HAS NOT RECOVERED THE SAME. HE DISALLOWED BY APPLYING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. 3.2. ON ACCOUNT OF DELIVERY VEHICLE RUNNING MAINTEN ANCE THE AO DISALLOWED BY OBSERVING THAT THE ASSESSEE HAD DEBITED HUGE AMOUNT OF RS.2,92,21 ,327/- ON ACCOUNT OF DELIVERY VEHICLE RUNNING MAINTENANCE. WHEREAS ONLY RS.2,50,78,818/- WAS DEBITED IN THE LAST YEAR. IT WAS OBSERVED THAT THOU GH THE VOLUME OF SALES HAD DECLINED REMARKABLY THE DELIVERY VEHICLE RUNNING MA INTENANCE CHARGES WERE ON HIGHER SIDE. THE ASSESSEE HAD FAILED TO SUBMIT ANY DETAILS IN RESPECT OF THE INCREASE IN DELIVERY VEHICLE RUNNING MAINTENANCE. T HEREFORE, IN COMPARISON TO THE LAST YEAR THE ASSESSEE DEBITED AN AMOUNT OF MOR E THAN RS.41,42,509/-. IN ABSENCE OF PROPER DOCUMENTARY EVIDENCE THE ABOVE AM OUNT IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3.3. ON ACCOUNT OF THE FOLLOWING EXPENSES THE AO DI SALLOWED BY OBSERVING THAT 4 AN ANALYSIS OF THE ASSESSEES P&L A/C REVEALS THAT THE ASSESSEE HAD MADE THE FOLLOWING EXPENSES DURING THE CURRENT YEAR AND PREV IOUS YEAR :- SL.NO . EXPENDITURE ON A/C OF CURRENT YEAR PREVIOUS YEAR 1. TELEPHONE CHARGES 7,95,110/- 6,05,758/- 2. COMPUTER EXPENSES 1,03,297/- 78,609/- 3. TRAVELLING 21,07,380/- 18,96,442/- 4. STAFF INCENTIVES 1,27,751/- 1,11,495/- 5. WATCH & WARD 3,73,155/- 2,73,777/- 6. UNSORTED EMPTY/EMPTY EXCHANGE CHARGES 1,50,69,695/- 12,23,568/- TOTAL DIFFERENCE RS.1,43,86,939/- THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR HI KE IN EXPENDITURE. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED IN ABSEN CE OF ANY DOCUMENTARY EVIDENCES FOR THE REASON. INCREASE IN EXPENSES. THE REFORE, THE DIFFERENTIAL AMOUNT OF EXPENSES IN COMPARISON TO LAST YEAR I.E. RS.1,43,86,939/- IS DISALLOWED AND IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT HAS BEEN OBSERVED THAT THE SALES HAVE DECREASED FROM RS.55,79,73,222/- TO RS.46,76,26,177/- IN 2006-07 I N COMPARISON TO THE PREVIOUS YEAR 2005-06. THE SALES FIGURE HAVE REGIST ERED A DECLINE OF RS.9,07,47,045/-. THE ASSESEE WAS ASKED TO EXPLAIN THE CAUSE FOR IT. 3.4. AGAIN ON ACCOUNT OF SUPPRESSION OF SALES THE A O DISALLOWED BY OBSERVING THAT THE ASSESSEE IN HIS WRITTEN SUBMISSION STATED THAT DUE TO MEDIA HYPE IN THE NAME OF PESTICIDES THE CONSUMPTION AS WELL AS SALES HAD GONE DOWN. THE CONTENTION OF THE ASSESSEE IS NOT TENABLE BECAUSE D URING THE YEAR UNDER CONSIDERATION ALL THE MAJOR SOFT DRINKS COMPANIES H AVE REGISTERED GROWTH IN THEIR SALES. THEREFORE, ON ESTIMATE BASIS RS.2,00,0 0,000/- IS DISALLOWED ON SALES AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3.5. ON APPEAL THE LD. CIT(A) HAS DELETED ALL THE A DDITIONS EXCEPT AN AMOUNT OF RS.32,72,822/- ON ACCOUNT OF THE FOLLOWING EXPENSES : HEAD OF EXPENDITURE 10% OF THE EXPENSES CONFIRMED BY CIT(A) DELIVERY VEHICLE RUNNING EXPENSES RS.29,22,133/- TELEPHONE CHARGES RS. 79,531/- COMPUTER EXPENSES RS. 10,330/- TRAVELLING EXPENSES RS. 2,10,738/- STAFF INCENTIVE RS. 12,775/- WATCH & WARD EXPENSES RS. 12,775/- TOTAL RS.32,72,822/- 5 3.6. AGGRIEVED BY THIS NOW BOTH THE ASSESSEE AS WEL L AS THE REVENUE IS IN APPEAL BEFORE US BY TAKING THE ABOVE GROUNDS OF APPEAL. 4. AT THE TIME OF HEARING BEFORE US, THE LD. DR APP EARING ON BEHALF OF THE REVENUE HAS CONTENDED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE SIMPLY BASED ON THE SUBMISSIONS AND WITHOUT APPRECIATING T HE FACTS. THEREFORE, HE REQUESTED TO SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTO RE THAT OF THE AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS CONTENDED THAT THE AO IS NOT JUSTIFIED IN DOING THE DISALLOWING ON ADHOC BASIS WITHOUT COMPARING THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES EVEN AFTER THE ASSESSEES SUBMISSIONS THAT THE MARKETING WAGES TO THE EXTENT OF RS.37,75,321/- DOES NOT COME UNDER THE PROVISION OF SECTION 194C AND THEY FALL U /S 192 OF THE ACT AND HE FURTHER SUBMITTED THAT EVEN AFTER APPLYING THE PROVISIONS O F SECTION 192 OF THE ACT THE ASSESSEE IS NOT AT FAULT FOR RECOVERY OF THE TDS SI NCE ALL THESE PAYMENTS ARE WITHIN THE TAXABLE LIMITS. 5.1. AS REGARDING OTHER DISALLOWANCES, HE CONTENDED THAT THE LD. AO IS NOT JUSTIFIED TO MAKE ADHOC DISALLOWANCE AND THE LD. CIT(A) ALSO IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE AT 10%. AGAIN ON ACCOUNT OF ENHANCEMEN T OF RS.2 CRORES ON SUPPRESSION OF SALES HE CONTENDED THAT THE AO IS NOT JUSTIFIED TO MAKE THESE ADDITIONS AFTER DISALLOWING THE EXPENSES TO THE EXTENT OF RS.1,43,8 6,939/-. THEREFORE, HE REQUESTED TO ACCEPT THE ACCOUNTS OF THE ASSESSEE AND DELETE THE SUSTENANCE OF RS.32,72,822/- MADE BY THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON PERUS AL OF MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT NEITHER THE LD. AO NOR THE LD. CIT(A) HAS FAIRLY EXAMINED THE ISSUES IN DETAIL BEFORE COMING TO TH E CONCLUSION WHETHER THE ISSUES ARE REQUIRED DISALLOWANCE OR TO BE SUSTAINED. THEREFORE , IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE ALL THE ISSUES TO THE FILE OF THE AO TO DECIDE AFRESH AFTER TAKING INTO CONSIDERATION THE S TATISTICS OF THE ASSESSES OF THE PAST 3 6 TO 5 YEARS AND THE COMPARATIVE CASES OF THE SIMILA R NATURE OF BUSINESS BEFORE DISALLOWING THE EXPENDITURE OR MAKING ANY ADDITIONS . 7. IN THE RESULT THE REVENUE AND THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 24.06.2011. SD/- SD/- MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , ,, , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 24.06.2011. '1 / -2 3'2'4- COPY OF THE ORDER FORWARDED TO: 1. M/S.SIGMA SERVICES & ADVERTISERS PVT. LTD., BISHAND EO BUILDING, KHARIDA GATE, KHARAGPUR, DIST. PASCHIM MEDINIPUR. 2 THE D.C.I.T., CIRCLE-2, MIDNAPORE. 3. THE CIT, 4. THE CIT(A)-XXXVI, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA .2 -/ TRUE COPY, '1%9/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)