Suyog Electriclas Pvt.Ltd., Baroda V. The Dy.CIT.,Circle-4(1), Baroda

ITA 3800/AHD/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9175 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 24-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.3800/AHD/2008 ASSESSMENT YEAR:2004-05 DATE OF HEARING:30.7.09 DRAFTED:31.7.09 SUYOG ELECTRICALS LTD. 24, ARUNODAY SOCIETY, 1-MADHUVAN APARTMENT, ALKAPURI, BARODA PAN NO.AACCS9412R V/S. DY. CIT CIRCLE-4(1), AAYAKAR BHAVAN, 4 TH FLOOR, RACE COURSE, BARODA (APPELLANT) .. (RESPONDENT) ITA NO.3801/AHD/2008 ASSESSMENT YEAR:2005-06 SUYOG ELECTRICALS LTD. 24, ARUNODAY SOCIETY, 1-MADHUVAN APARTMENT, ALKAPURI, BARODA PAN NO.AACCS9412R V/S. THE INCOME TAX OFFICER, WARD 4(3), AAYAKAR BHAVAN, 4 TH FLOOR, RACE COURSE, BARODA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI M.J. SHAH, AR REVENUE BY:- SHRI SANJEEV KASHYAP, SR.DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE TWO APPEALS BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-III, BARODA IN APPEAL NO.CAB/III-278 & 164/07-08 DATED 15-10-2008. THE ASSESSMENTS WERE FR AMED BY THE DCIT, CIRCLE- 4(1) BARODA AND ITO, WADRD-4(3) BARODA U/S.143(3) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE THEIR O RDERS DATED 27-11-2006 AND 11012- 2007 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 R ESPECTIVELY. ITA NO.3880-81/AHD/2008 A.Y 04-05 & 05-06 SUYOG ELECTRICALS LTD. DCIT CIR -4(1) BARODA PAGE 3 CONSIDERING THIS, THE PART DISALLOWANCE OF THE COMM ISSION WAS MADE. THE SIMILAR DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 2001-02 WH ICH WAS CONFIRMED BY THE TRIBUNALS ORDER DATED 29-09-2007. SINCE THE DISAL LOWANCE OF COMMISSION, ON SIMILAR FACTS HAVE BEEN UPHELD BY THE TRIBUNAL, THE AO IS JUSTIFIED IN MAKING DISALLOWANCE IN THIS YEAR ALSO. THE DISALLOWANCE MA DE IN THAT YEAR WAS ABOUT 26% WHICH IS CLOSE TO THE DISALLOWANCE MADE BY THE AO T HIS YEAR ALSO. WE FURTHER FIND FROM THE ARGUMENTS OF LD. COUNSEL FOR THE ASSESSEE THAT IN THE ASSESSMENT YEAR 2004-05 DISALLOWANCE WAS MADE AT 18% AND HE STATED THAT EVEN SALES AS ON 31-03- 2004 WAS 14.36 CRORES AND IN ASSESSMENT YEAR 2005-0 6 IT WAS 25.93 CRORES. AFTER GOING THROUGH THE TURNOVER, LD COUNSEL STATED THAT THE DISALLOWANCE OF COMMISSION CAN BE ESTIMATED AT A REASONABLE RATE. WE FIND THA T THE AO HAS NO DOUBT HELD THAT THIS COMMISSION IS NOT FOR THE PURPOSE OF BUSINESS AND MADE PART DISALLOWANCE. GOING BY THE TURNOVER OF THE ASSESSEE AND FACT THAT IN THESE TWO YEARS, THE ASSESSEE HAS SHOWN BETTER GP, A REASONABLE ESTIMATE IN BOTH YEARS CAN BE MADE AT RS.1.50 LAKHS IN EACH OF THE ASSESSMENT YEAR. ACCORDINGLY, ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE INCOME BY TAKING DISALLOWANCE OF RS. 1.50 LAKHS IN EACH OF THE ASSESSMENT YEAR. THIS COMMON ISSUE IN BOTH THE APPE ALS OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IN ITA NO.3800/AHD/2008 IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMED THE DISALL OWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALES PROMOTION EXPENSES AT R S.66,860/-. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS ARE THA T THE ASSESSEE SHOWN IN ITS PROFIT AND LOSS A/C. SALES PROMOTION EXPENSES OF RS.87,830 /-. ON PERUSAL OF THE LEDGER ACCOUNT, IT WAS SEEN THAT OUT OF TOTAL EXPENSES OF RS.87,830/- A SUM OF RS.66,860/- HAS BEEN INCURRED FOR THE PURPOSE OF PURCHASE OF GO LD ORNAMENTS AND THE ASSESSEE HAS NOT GIVEN ANY DETAILS WITH RESPECT TO THE NEED OF INCURRING SUCH EXPENDITURE AND DETAILS ABOUT THE PERSON TO WHOM THE JEWELLERY HAVE BEEN GIVEN. THE ASSESSEE FAILED TO PROVE THESE EXPENSES THAT THE SAME HAVE B EEN INCURRED FOR BUSINESS PURPOSES. ACCORDINGLY, THE SAME IS DISALLOWED AND ADDED TO THE TOTAL INCOME U/S.37(1) OF THE ACT. THE ASSESSEE CLAIMED DEDUCTIO N OF RS.66,680/- ON ACCOUNT OF PURCHASE OF JEWELLERY BY CLAIMING THE SAME A SALES PROMOTION EXPENSES. HOWEVER,