ACIT, New Delhi V. M/s. Li & Fung India Pvt. Ltd., New Delhi

ITA 3807/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4277 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Keywords: Additional evidence
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3807 /DEL/2010 ASSESSMENT YEAR : 2004-05 ACIT, LI & FUNG INDIA PVT. LTD., CIRCLE-4 (1), 216-OKHLA INDL. AREA, NEW DELHI. V. PHASE-III, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACL AAACL AAACL AAACL- -- -2634 2634 2634 2634- -- -M MM M APPELLANT BY : MS. ANUSHA KHURANA, SR. DR. RESPONDENT BY : SHRI AJAY VOHRA, ADVOCATE. ORDER PER A.K. GARODIA, AM: THIS IS REVENUE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)-VII, NEW DELHI DATED 22.6.2010 FOR ASSESSMENT YEAR 2004-05. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. THE ORDER OF LD CIT(A) IS ERRONEOUS & CONTRARY TO FAC TS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF `.8 ,07,345/-, `.10,51,461/- & `.14,99,235/- MADE BY THE ASSESSING OFF ICER PAGE 2 OF 7 ITA NO.3807/DEL/10 DISALLOWING EXPENSES ON ACCOUNT OF STAFF TRAINING, STAFF RECRUITMENT & ENTERTAINMENT EXPENSES RESPECTIVELY. 2.1. THE LD CIT(A) HAS ERRED IN IGNORING THE FACT TH AT THE ASSESSEE DID NOT DELIBERATELY FILE ANY DOCUMENTS OR EVID ENCE IN SUPPORT OF THESE EXPENSES DURING ASSESSMENT PROCEEDINGS DESPITE HAVING BEEN PROVIDED DUE OPPORTUNITIES. 3. THE LD CIT(A) ACCEPTED ADDITIONAL EVIDENCES UNDER RULE 46A OF THE IT RULES WITHOUT FOLLOWING THE PROCEDURE LAID DO WN BY LAW FOR ACCEPTING ADDITIONAL EVIDENCES UNDER RULE 46A OF IT RULES, 1962. 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE EXPENSES OF STAFF TRAININ G WERE CLAIMED AT `.8,07,345/-. THE ASSESSING OFFICER HAS OBSERV ED THAT NO DETAILS/VOUCHERS OF THE EXPENSES WERE FILED. THE ASSESSING OFFICER HAD ALSO OBSERVED THAT THE ASSESSEE COMPANY HAD FAILED TO SUB STANTIATE REASONABLENESS AND GENUINENESS OF THE EXPENSES. THE ASSESSING OFFICER FURTHER NOTED THAT THE EXPENSES ON STAFF RECRU ITMENT WERE CLAIMED AT `.10,51,461/- AND FOR THIS ALSO, NO DETAIL S/VOUCHERS OF THE EXPENSES WERE FILED. FOR THIS EXPENSES ALSO, IT IS NOTED B Y THE ASSESSING OFFICER THAT THE COMPANY HAS FAILED TO SUBSTANT IATE REASONABLENESS AND GENUINENESS OF THE EXPENSES. THEREAFTER , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED ENTERTAINMENT EXPENSES OF `.14,75,554/- AND `.23,681/ - TOTALING `.14,99,235/-. FOR THIS EXPENSES ALSO, THE ASSESSING OFFICE R MADE SAME OBSERVATION THAT NO DETAILS/VOUCHERS OF THE EXPENSES WER E FILED AND HENCE THE ASSESSEE COMPANY FAILED TO SUBSTANTIATE REASONAB LENESS AND GENUINENESS OF THE EXPENSES. THE ASSESSING OFFICER DISA LLOWED ALL THESE THREE EXPENSES IN TOTO. BEING AGGRIEVED, THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A). BEFORE LD C IT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER HAD V IDE QUERY PAGE 3 OF 7 ITA NO.3807/DEL/10 NO.1 IN THE NOTICE ISSUED U/S 142(1) OF THE INCOME T AX ACT, 1961 ASKED THE ASSESSEE TO SUBMIT VOUCHERS OF ALL EXPENSES CLAIMED DU RING THIS YEAR BUT DURING THE COURSE OF HEARING ON 11.10.2006, THE ASSESSING OFFICER INFORMED THE AR OF THE ASSESSEE THAT IT WAS NOT REQUIRED TO SUBMIT THE AFORESAID VOUCHERS/SUPPORTING DOCUMENTS. IT WAS FURTHER SUBMITTED BEFORE LD CIT(A) THAT THE ASSESSING OFFICER D ID NOT ASK FOR ANY DETAIL/JUSTIFICATION IN SUPPORT OF THESE EXPENSES A T ANY TIME IN THE COURSE OF ASSESSMENT PROCEEDINGS. THEREAFTER, IT WAS SUBMI TTED BY LD AR OF THE ASSESSEE BEFORE LD CIT(A) THAT THE EXPENSES INC URRED ON STAFF TRAINING WAS ON TRAINING OF ITS EMPLOYEES ON VARIOUS OC CASIONS DURING THE COURSE OF THE BUSINESS OF THE ASSESSEE AND IN VIEW OF I NCREASING COMPETITION, IT BECOMES NECESSARY TO CONSTANTLY IMPROVE UPON AND UPGRADE ONESELF WITH THE LATEST DEVELOPMENT/TRENDS IN THE BUSINESS. REGARDING INCURRING OF STAFF RECRUITMENT EXPENSES, IT WAS SUBMITTED THAT THESE EXPENSES COMPRISES PAYMENT MADE TO RECRUITMEN T AGENCY/PLACEMENT CONSULTANTS FOR THE RECRUITMENT OF N EW EMPLOYEES DURING THIS YEAR. IT WAS ALSO SUBMITTED THAT IT IS COMM ON KNOWLEDGE THAT EMPLOYER SEEKING ASSISTANCE OF PLACEMENT CONSULTAN TS FOR THE PURPOSE OF RECRUITMENT. THE SAID CONSULTANT SELECT PRO SPECTIVE EMPLOYEES FOR THEIR CLIENTS FROM THE INTERNET AND OTH ER SOURCES AND COORDINATE WITH THE CANDIDATES AND THEIR CLIENTS TO A RRANGE FOR INTERVIEWS ETC. IT WAS ALSO SUBMITTED THAT COPIES OF VO UCHERS AND OTHER SUPPORTING DOCUMENTS IN SUPPORT OF THESE EXPENSES ARE SUBM ITTED IN THE PAPER BOOK. IT IS ALSO SUBMITTED THAT THESE EXPENSE S HAVE BEEN INCURRED IN THE COURSE OF BUSINESS AND HENCE SHOULD BE A LLOWED. REGARDING INCURRING OF ENTERTAINMENT EXPENDITURE, I T WAS SUBMITTED THAT THESE ARE INCURRED ON MEAL EXPENSES AND OTHER EXP ENDITURE IN RESPECT OF FOREIGN BUYERS VISITING THE ASSESSEE COMPANY. I T WAS ALSO SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSI NESS OF SOURCING OF GARMENTS, HANDICRAFTS ETC. IT IS ALSO SUBMITT ED THAT THE PAGE 4 OF 7 ITA NO.3807/DEL/10 BUYERS OF THE SAID PRODUCTS VISIT THE PREMISES OF THE ASSE SSEE FOR INSPECTION OF GOODS AND IN ACCORDANCE WITH THE CUSTOM OF TRADE, THE ASSESSEE INCURS CERTAIN EXPENDITURE ON THE STAY, MEAL ETC . OF THE BUYERS. IT WAS ALSO SUBMITTED THAT COPIES OF VOUCHERS A ND OTHER SUPPORTING DOCUMENTS IN SUPPORT OF THESE EXPENSES ARE ANN EXED IN THE PAPER BOOK. ONE MORE SUBMISSION WAS MADE THAT SIMILAR EX PENSES WERE INCURRED IN EARLIER YEARS AND IN SUCCEEDING YEAR S ALSO AND A COMPARISON CHART OF THE EXPENSES INCURRED IN THE PRESE NT YEAR UNDER THESE THREE HEADS AND ALSO IN TWO PRECEDING YEARS AND TWO SUCCEEDING YEARS HAS BEEN NOTED BY THE LD CIT(A) AT PAGE NO.4 OF HIS ORDER. LD CIT(A) OBTAINED REMAND REPORT FROM THE ASSESSING OFFICE R. THE ASSESSING OFFICER HAS SUBMITTED REMAND REPORT ON DATED 12 .3.2010. AFTER CONSIDERING THE REMAND REPORT, LD CIT(A) HAS DE LETED THE ENTIRE ADDITION UNDER THESE THREE HEADS. NOW, THE REVENUE I S IN APPEAL BEFORE US. 4. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. REGARDING GROUND NO.3, IT WAS SUBMITTED BY HER THAT T HERE WAS NO JUSTIFICATION FOR ADMISSION OF ADDITIONAL EVIDENCE BY LD CIT(A) BECAUSE ADEQUATE OPPORTUNITY WAS PROVIDED BY THE ASSESSING OFFIC ER. AS AGAINST THIS, LD AR OF THE ASSESSEE SUPPORTED THE ORDER O F LD CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. FIRST, WE DECIDE THE G ROUND NO.3 OF THE REVENUE REGARDING ADMISSION OF ADDITIONAL EVIDENCE. I N THIS REGARD, IT IS NOTED BY THE LD CIT(A) ON PAGE NO.7 OF HIS ORDER TH AT CIRCUMSTANCES MENTIONED IN CLAUSE (C ) & (D) OF RULE 46A DID EXIST IN THE PRESENT CASE. AS PER CLAUSE ( C) OF RULE 46A, THE ASSESSEE CAN PRODUCE ADDITIONAL EVIDENCE IF THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE BEFORE THE ASSESSING OFFICER. AS PER CLAUSE (D) PAGE 5 OF 7 ITA NO.3807/DEL/10 OF RULE 46A, THE ASSESSEE CAN SUBMIT ADDITIONAL EVIDENC E BEFORE THE LD CIT(A) IF THE ASSESSING OFFICER HAS MADE THE ORDER APPE ALED AGAINST THEM GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. REGARDING EXISTENC E OF THESE CONDITIONS IN THE PRESENT CASE, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LD CIT(A) THAT THE ASSESSING OFFICER DID ASK IN THE NOTICE ISSUED BY HIM U/S 142(1) OF THE ACT AS PER QUERY NO.1 TO SUBMI T VOUCHERS OF ALL EXPENSES CLAIMED DURING THIS YEAR BUT IN THE COURSE OF HEARING ON 11.10.2006, THE ASSESSING OFFICER INFORMED THE AR OF T HE ASSESSEE THAT IT WAS NOT REQUIRED TO SUBMIT AFORESAID VOUCHERS/SUPPORT ING DOCUMENTS. NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US OR BEFORE LD CIT(A) THAT THIS CONTENTION OF THE ASSESSEE BEFORE LD CIT(A) IS NOT CORRECT. IN OUR CONSIDERED OPINION, LD CIT(A) HAS RI GHTLY ADMITTED THE ADDITIONAL EVIDENCE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND SINCE HE HAS OBTAINED THE REMAND REPORT FROM THE ASSESSING OFFICER ALSO, WE DO NOT FIND ANY MERIT IN GROUND NO. 3 OF THE REVENUES APPEAL. THE SAME IS REJECTED. 6. REGARDING THE MERIT OF DELETION OF ADDITION, WE FIND THAT LD CIT(A) HAS NOTED IN PARA NO.5.5. OF HIS ORDER THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE, DEDUCTION HAS BEEN ALLOWED BY THE ASSESSIN G OFFICER UNDER ALL THESE THREE HEADS IN PRECEDING YEARS I.E. IN ASSESSMENT YEAR 2002-03 AND 2003-04 AND ALSO IN SUCCEEDING YEARS I.E. IN ASSESSMENT YEAR 2005-06 AND 2006-07. LD CIT(A) HAS ALSO OBSERVED IN PARA NO.5.4 OF HIS ORDER THAT THE ASSESSING OFFICER HAS NOT BEEN ABLE TO POINT OUT ANY DISCREPANCY IN THE ACCOUNTS OF THE ASSESSEE. IT IS AL SO OBSERVED BY HIM IN THE SAME PARA THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY NEW FACTS OR EVIDENCE IN ORDER TO SUBSTANTIATE TH E FACT THAT THESE THREE EXPENSES WERE NOT INCURRED FOR THE PURPOSES OF BU SINESS. PAGE 6 OF 7 ITA NO.3807/DEL/10 CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) AND HENCE WE CONFIRM THE SAME . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED, 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 8 TH APRIL, 2011. SD/- SD/- (R.P. TOLANI) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.08.4.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 7 OF 7 ITA NO.3807/DEL/10