ACIT, Thrissur V. M/s Kerala Dhana Vyavasaya Kuries & Loan P ltd, Thrissur

ITA 391/COCH/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0837 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-07-2009
• Court: TRIBUNAL
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.391/COCH/2009 ASSESSMENT YEAR:2006-07 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE- 1(1), TRICHUR. VS. M/S. KERALA DHANA VYAVASAYA KURIES & LOANS(P) LTD., THRISSUR. PA NO.AAACK 9822B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI T.J.VINCENT,JR.DR RESPONDENT B Y SHRI JOSE KAPPAN O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-I, KOCHI, DATED 21-4- 2009. THE ASSESSMENT YEAR INVOLVED IS 2006-07. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY DOING THE BUSINESS OF CONDUCTING CHITS. WHILE FRAMING THE A SSESSMENT U/S.143(3), THE ASSESSING OFFICER DISALLOWED A PORT ION OF THE TRAVELLING EXPENSES. THIS IS THE FIRST ISSUE. T HE TOTAL CLAIM OF TRAVELLING EXPENDITURE DURING THE YEAR IS RS.2,4 9,773/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE BILLS AND VOUCHERS IN SUPPORT OF THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. ASSESSING OFFICER FURTHE R NOTICED 2 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. THAT A SUM OF RS.24,000/- IS SHOWN AS TRAVELLING EX PENSES TO FARIDABAD. ASSESSEE HAS NOT PRODUCED ANY VOUCHERS OR SUPPORTING EVIDENCE FOR THE CLAIM IN THE FORM OF TR AIN TICKETS OR BOARDING EXPENSES PAID. THE ASSESSING OFFICER OBSERVED THAT FARIDABAD BRANCH IS ONLY A NAME SAKE BRANCH AN D WHOLE ACTIVITIES ARE CARRIED OUT FROM TRICHUR ONLY. FOR WANT OF BILLS AND VOUCHERS, THE ASSESSING OFFICER DISALLOWE D 25% OF THE TRAVELLING EXPENSES, WHICH COMES TO RS.62,443/- . ON APPEAL, THE LD. CIT(APPEALS) FOUND THAT THE SUM OF RS.62,443/- DISALLOWED BY THE ASSESSING OFFICER IS EXCESSIVE. THEREFORE, HE RESTRICTED THE DISALLOWANCE ONLY TO T HE EXTENT OF RS.24,000/-. AGGRIEVED BY THIS FINDING OF THE L D. CIT(APPEALS), THE REVENUE IS ON APPEAL BEFORE THE T RIBUNAL. 3. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS A CLEAR CUT FINDING OF THE LD. ASSESSING OFFICER THAT THERE IS NO VOUCHERS AND BILLS. FURTHER, THE OBSERVATION OF THE ASSESSING OFFICER T HAT FARIDABAD BRANCH IS ONLY A NAME SAKE BRANCH AND WHO LE ACTIVITIES ARE CARRIED OUT FROM TRICHUR ONLY. IN T HE ABSENCE OF ANY PROOF IN THE FORM OF BILLS AND VOUCHERS FOR THE EXPENDITURE INCURRED, ASSESSING OFFICER DISALLOWED 25% OF THE TRAVELLING EXPENSES, WHICH, IN OUR VIEW IS JUST IFIED. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(AP PEALS) ON 3 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICE R. THUS, THE FINDING OF THE LD. ASSESSING OFFICER IS CONFIRM ED. 4. THE NEXT ISSUE IN RESPECT OF THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES. THE TOTAL EXPENDITUR E UNDER THE HEAD BUSINESS PROMOTION COMES TO RS.11,06,123 O N VARIOUS ITEMS UNDER OPERATING AND OTHER EXPENSES, W HICH MAINLY CONSIST OF EXPENSES FOR PURCHASE OF CAKES, H OTEL BILLS, COST OF DISCTRIBUTION EXPENSES OF SWEETS ON FESTIVA L SEASON TO SUBSCRIBERS, INCENTIVE GIVEN TO SUBSCRIBERS, EXPENS ES OF SUBSCRIBERS MEETING, REFRESHMENT EXPENSES IN THE NA TURE OF MEETING EXPENSES, STAFF TOUR EXPENSES, TRAVEL AND F OOD ITEMS, KURI PROCEEDING EXPENSES ON KURI DATES FOR T REATING SUBSCRIBERS, MEETING EXPENSES ON THE DATE OF BOARD/ GENERAL MEETING VIZ. TEA AND SNACKS, ETC. THE ASSESSING OF FICER ISSUES SUMMONS AND ASKED THE ASSESSEE TO PRODUCE BI LLS AND VOUCHERS, SUPPORTING THE EXPENSES CLAIMED IN THE PR OFIT AND LOSS ACCOUNT. SOME OF THE BILLS AND VOUCHERS PROD UCED BY THE ASSESSEE WERE VERIFIED. MOST OF THE EXPENSES INCURRED IN CASH WERE NOT FULLY VERIFIABLE. THEREFORE, ASS ESSING OFFICER WAS OF THE VIEW THAT EXPENDITURE WAS NOT IN CURRED IN CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESS EE. THE EXPENSES SHOULD HAVE BEEN EXPENDED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS AND MOST OF THE EXPENDI TURE ARE 4 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. IN PERSONAL EXPENDITURE. THEREFORE, THE EXPENSES ON FAMILY TOUR TO GOA, COORG AND SUCH TOURIST PLACES AND HOTE L ROOM RENT BILLS ARE IN THE NATURE OF PERSONAL EXPENSES. HENCE, THE LD. ASSESSING OFFICER DISALLOWED A SUM OF RS. 3 LAKHS OUT OF THE TOTAL CLAIM OF RS.11,06,123/-. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE ENTIRE ADDITION. AGGRIE VED, THE REVENUE IS ON APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ONCE THE EXPENSES ARE CLAIMED U/S.37 IT IS FOR THE ASSESSEE TO PROVE THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS AND THERE IS NO PERSONAL ELEMEN T. THERE IS NO PROOF THAT THE ENTIRE EXPENSES WERE INC URRED FOR THE PURPOSE OF BUSINESS AS THE ASSESSEE COMPANY IS CONDUCTING CHITTY, WE ARE UNABLE TO UNDERSTAND THE PURPOSE OF GOING GOA, COORG AND OTHER ATTRACTIVE PLACES. T HE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT THAT IT IS NE CESSITATED TO ENCOURAGE THE SUBSCRIBERS. WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT DISCHARGED ITS BURDEN OF CLAIMING U/S.37 WHICH IS A GENERAL PROVISION. BUSINESS PROMOTION EXPENSES CLAIMED IS NOT AN ALLOWABLE EXPENDITURE AS THE ASSE SSING OFFICER HIMSELF HAS FOUND THAT IT IS NOT EXPENDED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN OTHER WORDS, THE 5 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. ASSESSING OFFICER FOUND THAT IT IS FOR THE PERSONAL PLEASURE AND THERE IS NO IMPROVEMENT IN THE BUSINESS OF THE ASSESSEE. THEREFORE, WE AGREE WITH THE FINDINGS O F THE LD. ASSESSING OFFICER AND CONFIRM THE DISALLOWANCE OF R S. 3 LAKHS OUT OF RS.11,06,123/-. HENCE, THE ORDER OF THE FIR ST APPELLATE AUTHORITY IS SET ASIDE AND THAT OF THE AS SESSING OFFICER IS RESTORED. THIS ISSUE IS DECIDED IN FAV OUR OF THE REVENUE AND AGAINST THE ASSESSEE. 6. THE LAST ISSUE FOR OUR CONSIDERATION IN THIS APP EAL IS THE DISALLOWANCE OF CANVASSING COMMISSION TO THE EXTENT OF RS.21,05,880/- U/S.41(1). 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI ALS AVAILABLE ON RECORD. AS PER THE DETAILS FILED BEF ORE THE ASSESSING OFFICER, THE ASSESSING OFFICER WAS OF THE VIEW THAT CANVASSING COMMISSION WAS PAYABLE FROM 31-3-1999 WH ICH COMES TO RS.21,05,880/-. THE LIABILITY STILL OUTS TANDING, I.E. IT IS OUTSTANDING FOR MORE THAN SEVEN YEARS. THER EFORE, ASSESSING OFFICER DISALLOWED BY INVOKING THE PROVIS IONS OF SECTION 41(1) OF THE ACT. ON APPEAL, THE LD. CIT( APPEALS) IT WAS CONTENDED THAT THE ASSESSING OFFICER INVOKED 41 (1) WITHOUT ESTABLISHING WHETHER THERE IS ANY CESSATION OR REMISSION OF THE LIABILITY DURING THE RELEVANT YEAR . THE LD. 6 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE CLEARED THE LIABILITY SUBSEQUENTLY BY CHEQUES AND FILED A LIST OF DETAILS OF PAYMENT FROM CANVASSING COMMISSION PAYABLE AS ON 31 -3- 2006, WHICH INCLUDES THE NAME OF THE PARTY, AMOUNT, DATE, CHEQUE NO./CASH, BANK & BRANCH, DATED 3-11-2008. T HUS, THE ASSESSEE HAS ALREADY PAID SUBSEQUENTLY. ACCO RDING TO THE ASSESSEE THIS WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER AT THE STAGE OF ASSESSMENT PROCEEDINGS. A P ERUSAL OF SECTION41(1), IT IS MADE CLEAR THAT IN RESPECT OF A TRADING LIABILITY, IN ORDER TO ATTRACT THE PROVISIONS OF SE CTION 41(1) THERE MUST BE REMISSION OR CESSATION OF THAT LIABIL ITY DURING THE RELEVANT ASSESSMENT YEAR. THE LD. CIT(APPEALS ) HAS CLEARLY POINTED OUT THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT THE LIABILITY OF THIS AMOUNT TOWARDS CANVASSING COMMISSION IS CEA SED TO EXIST OR REMITTED DURING THE ASSESSMENT YEAR. THE ONLY REASON STATED BY THE ASSESSING OFFICER FOR THE APPL ICABILITY OF SECTION 41(1) IS THAT THE LIABILITY WAS STILL OUTST ANDING FOR MORE THAN 7 YEARS. THIS IS NOT JUSTIFIED AND THE ASSESSING OFFICER HAS NOT MADE ANY EFFORT TO FIND OUT WHETHER THERE IS ANY CESSATION OR REMISSION OF THE LIABILITY DURING THE RELEVANT ASSESSMENT YEAR. SUFFICIENT EVIDENCES PRODUCED BY THE ASSESSEE BEFORE CIT(APPEALS) TO PROVE THAT SUBSTANT IALLY 7 ITA NO.391/COCH/2009 KERALA DHANA VYAVA SAYA KURIES & LOANS P.LTD. LIABILITY HAS BEEN PAID OFF DURING THE ASSESSMENT Y EAR 2007- 08 AND 2008-09. THE ASSESSMENT YEAR UNDER APPEAL IS 2006-07. AFTER VERIFYING THE BOOKS AND BANK STATE MENTS THE LD. CIT(APPEALS) FOUND THAT IT IS CLEAR THAT TH E ASSESSEE HAS IN FACT DISCHARGED THE OUTSTANDING LIABILITY IN SUBSEQUENT ASSESSMENT YEARS. THIS WAS NOT CONTROVERTED BY TH E LD. DR BEFORE US. HENCE, WE AGREE WITH THE FINDING OF TH E LD. CIT(APPEALS) ON THIS ISSUE. ACCORDINGLY, WE UPHOL D HIS FINDINGS ON THIS ISSUE. THUS, THIS GROUND OF APPE AL RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 14 TH MARCH,2011. PM. COPY FORWARDED TO: 1. THE ACIT., CIRCLE-1(1), TRICHUR. 2. M/S. KERALA DHANA VYAVASAYA KURIES & LOANS (P) L TD., SHORNUR ROAD, THRISSUR. 3. CIT(A)-I, KOCHI. 4. CIT, THRISSUR. 5. D.R.