M/s. Sietz Technologies India Pvt. Ltd., Faridabad V. DCIT, New Delhi

ITA 3951/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3020 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 04-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: R M MEHTA
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA A. PILLAI , JM ITA NO. 3951 /DEL/2014 : ASSTT. YEAR : 2010 - 11 ITA NO. 4910 /DEL/2014 : ASSTT. YEAR : 2011 - 12 M/S SIETZ TECHNOLOGIES INDIA PVT. LTD., PLOT NO. 38, SECTOR - 6, FARIDABAD - 121006 HARYANA VS DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 8(1), NEW DELHI - 110002 (APPELLANT) (RESPONDENT) PAN NO. AA ACN0153A ASSESSEE BY : SH. R. M. MEHTA, ADV. REVENUE BY : SH. KAUSHLENDRA TIWARI, SR. DR DATE OF HEARING : 03 .01 .201 8 DATE OF PRONOUNCE MENT : 23 .03 .201 8 ORDER PER N. K. SAINI, AM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE S EPARATE ORDER DATED 19.05.2014 AND 11.07.2014 OF THE LD. CIT(A) - XI , NEW DELHI. 2 . SINCE, THE ISSUES INVOLVED ARE COMMON IN THESE APPEALS WHICH WERE HEARD TOGETHER, SO , THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3 . AT THE FIRST INSTANCE, WE WILL DEAL WITH THE APPEAL IN ITA NO. 3951/DEL/2014 FOR THE ASSESSMENT YEAR 2010 - 11. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS & CIRCUMSTANCES OF T HE CASE & IN LAW, THE LEARNED CI T(A) HAS ERR ED IN CONFIRMING THE DISALLOWANCE OF RS. 2,81,717/ - OUT OF EXPENDITURE UNDER THE HEAD 'GIFTS AND PRESENTS'. 2. ON THE FACTS & CIRCUMSTANCES OF T HE CASE & IN LAW, THE LEARNED CI T(A) HAS ERRED IN CONFIRMING THE ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 2 DISALLOWANCE OF RS. 1,78,273/ - OUT OF EXPENDIT URE UNDER THE HEAD 'DIWALI EXPENSES'. 3. ON THE FACTS & CIRCUMSTANCES OF T HE CASE & IN LAW, THE LEARNED CI T(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF RS. 2,02,800/ - OUT OF EXPENDITURE UNDER THE HEAD 'ENTERTAINMENT EXPENSES'. 4. THAT THE LEARNED CI T( A) CONFINED THE ABOVE DISALLOWANCES OF EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EXPENSES ARE INCURRED BY THE ASSESSEE FOR STRENGTHENING THE BUSINESS RELATIONSHIP WITH ITS BUSINESS ASSOCIATES. 5. THE APPELLANT RESERVES TO ITSELF, THE RIGHT TO ADD, ALTER, AMEND, SUBSTITUTE, WITHDRAW AND OR ANY GROUND(S) OF APPEAL ON OR BEFORE THE DATE OF HEARING. 4. FROM THE ABOVE GROUNDS, IT IS NOTED THAT THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF DISALLOWANCE OUT OF EXPENDITURE OF RS.2,81,717/ - UNDER THE HEAD GIFTS AND PRESENTS , RS.1,78,273/ - UNDER THE HEAD DIWALI EXPENSES AND RS.2,02,800/ - UNDER THE HEAD ENTERTAINMENT EXPENSES . 5 . FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 06.10.2010, DECLARI NG AN INCOME OF RS.1,43,11,794/ - WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.10,68,489/ - UNDER THE HEAD GIFT & PRESENTS . THE AO POINTED OUT THAT THE FOLLOWING GIFTS COULD NOT BE CATEGORIZED AS SMALL GIFTS: SL. NO. DATE DESCRIPTION AMOUNT 1. 30/4/2009 IPAD 120 GB1 18,000/ - ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 3 2. 31/5 FRAME FROM VISHAL AI DS CENTRE 10,800/ - 3. 31/5 SILVER OUTLET BOX FROM LA BOUTIQUE 15,020/ - 4. 15/7/2009 SILVER ARTICLE FOR MD OFFICE 20,200/ - 5. 31/7 SANJEEV AGARWAL BLACK BERREY 9000 32,000/ - 6. 31/7 PHONE & WRIST WATCH 12,700/ - 7. 31/7/2009 PHONE & WRIST WATCH 12,700/ - 8. 27/8/2009 BEING AMOUNT PAID TO BIMAL JEWELLER 30,000/ - 9. 27/8/2009 BEING AMOUNT PAID TO BIMAL JEWELLER 30,000/ - 10. 27/8/2009 BEING AMOUNT PAID TO BIMAL JEWELLER 19,500/ - 11. 27/8/2009 BEING AMOUNT PAID TO BIMAL JEWELLER 19,500/ - 12. 31/8/2009 DV D CDVED 15,500/ - 13. 27/10/2009 SILVER ARTICLE MD OFFICE 16,261/ - 14. 31/10/2009 SILVER ARTICLE MD OFFICE 25,028/ - 15. 31/10/2009 LOOSE CHOCOLATE 10,688/ - 16. 12/11/2009 MOBILE PHONE 17,990/ - 17. 25/11 LCA PAULA ART AT MD OFFICE 16,875/ - 18. 26/11 CA NVAS AT MD OFFICE 26,030/ - 19. 30/11/2009 ASSORTED STATIO NERY FROM RUSHAB NOVELTY STORES 13,150/ - 20. 31/12/2009 SILVER ARTICLE 12,625/ - 21. 28/1/2010 NIKIA MOBILE 20,800/ - 22. 30/1/2010 SILVER ARTICLE 25,149/ - 23. 30/1/2010 SILVER ARTICLE 24,745/ - 24. 30/1/2010 SILVER ARTICLE 21,210/ - 25. 30/1/2010 SILVER ARTICLE 22,275/ - 26. 30/1/2010 PRINTING ON CANVAS 27,488/ - 27. 23/2/2010 BLACK BERREY 47,000/ - TOTAL 5,63,434/ - THE AO DISALLOWED 50% OF THE AFORESAID GIFTS ITEMS AND MADE THE DISALLOWANCE OF RS.2,81,717/ - . ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 4 6 . AS REGARDS TO THE DIWALI EXPENSES , THE AO NOTICED THAT FOLLOWING ITEMS APPEARED TO BE EXCESSIVE AND UNREASONABLE: SL. NO. DATE DESCRIPTION AMOUNT 1. 14.10.2009 GOLD COINS FROM AXIS BANK (14 PCS) 2,49,147/ - 2. 24.10.2009 PURCHASE BILL NO. 48 DT. 12.10.2009 & PARTY SO1980 1,07,400/ - TOTAL 3,56,547/ - HE DISALLOWED RS.1,78,273/ - BEING 50% OF THE AFORESAID EXPENSES. 7 . SIMILARLY, THE AO OBSERVED THAT THE EXPENSES INCURRED ON ACCOUNT OF FILM SHOWS, LUNCH/DINNER PARTIES WERE UNREAS ONABLE , EXCESSIVE AND LAVISHLY INCURRED. HOWEVER, HE ALLOWED THE EXPENSES UPTO RS.10,000/ - IN ONE GO AND POINTED OUT THAT FOLLOWING EXPENSES WERE MORE THAN RS.10,000/ - IN A SINGLE BILL: SL. NO. DATE DESCRIPTION AMOUNT 1. 31.07.2009 BEING AMOUNT PAID TO SA TYAM CINEPLEXES LTD. 22,500/ - 2. 29.09.2009 MR. U. K. VERMA VARIOUS BILLS OF RESTAURANT 13,231/ - 3. 31.10.2009 TICKETS FOR MOVIE FROM SATYAM CINEPLEXES 14,625/ - 4. 30.11.2009 TICKET OF MOVIE KURBAN FROM SATAYAM CINEPLEXES 18,000/ - 5. 31.12.2009 TICKE TS FROM SATYAM CINEPLEXES 19,575/ - 6. 31.12.2009 TICKETS FROM SATYAM CINEPLEXES 10,125/ - 7. 31.12.2009 TICKETS FROM SATYAM CINEPLEXES 10,125/ - 8. 02.01.2012 NEW YEAR PARTY FOR STAFF ON 26.12.2009 37,200/ - 9. 31.01.2009 MOVIE IN SATYAM CINEPLEXES 12,500 / - 10. 31.01.2010 MOVIE IN SATYAM CINEPLEXES 18,000/ - ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 5 11. 31.01.2010 MOVIE IN SATYAM CINEPLEXES 18,750/ - 12. 02.02.2010 BEING AMOUNT PAID TO SATYAM CINEPLEXES LTD. 75,000/ - 13. 02.02.2010 BEING AMOUNT PAID TO SATYAM CINEPLEXES LTD. 40,000/ - 14. 31.03. 2010 SANJEEV AGGARWAL LUNCH & DINNER WITH COSTUMERS 25,200/ - 15. 31.03.2010 LUNCH & DINNER WITH COSTUMERS VARIOUS BILL 70,769/ - TOTAL 4,05,600/ - THE AO ALSO DISALLOWED 50% OF THE AFORESAID EXPENSES. 8. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT IN THE NORMAL COURSE OF BUSINESS GIFTS & PRESENTS WERE GIVEN AND THAT BY KEEPING THE INDIAN CUSTOMS & TRADITION S IN VIEW , THE ENTERTAINMENT AND DIWALI EXPENSES WERE INCURRED AND THAT IT WAS NOT POSSI BLE FOR THE ASSESS EE TO RECEIVE AN ACKNOWLEDGMENT FOR THE GIFT S ITEMS GIVEN TO THE BUSINESS ASS OCIAT E S . 9. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO HAD BEEN REASONABLE IN MAKING THE DISALLOWANCE UNDER THE ABOVE MENTIONED HEAD OF EXPENDITURE. 10. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAD NOT GIVEN ANY FINDING THAT THE EXPENDITURE WERE PERSONAL IN NATURE . IT WAS FURTHER SUBMITTED THAT IN THE EARLIER YEAR , I.E. THE ASSESSMENT YEAR 2009 - 10, T HE DISALLOWANCE OF RS.40,000/ - ONLY WAS MADE . IT WAS ALSO SUBMITTED THAT ALL THE EXPENSES WERE INCURRED IN THE REGULAR COURSE OF BUSINESS AND RELATED TO THE BUSINESS EXIGENCY. THEREFO RE, THE DISALLOWANCE MADE BY THE AO AND SUSTAINED ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 6 BY THE LD. CIT(A) WAS NOT JUSTIFIED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: JET LITE INDIA LTD. VS CIT IN ITA NOS. 204 - 205/2002, ITA NOS. 128, 1206, 1209/2005 ORDER DATED 4.11.2005 (DEL. HC) M/ S ESCORTS SECURITIES LTD. VS DCIT, CIRCLE - 11(1), NEW DELHI IN ITA NO. 417/2013 ORDER DATED 02.06.2014 ACIT VS A.P. ART PRINTERS (P) LTD. IN ITA NO. 1832/MUM/2008 , ORDER DATED 02.03.2009 ACIT VS RAM KISHAN VERMA 143 TTJ 1 (ITAT JAI.) ACIT VS ANIL ALUMS (P) LTD. 98 TTJ 56 (ITAT AMRITSAR) UNIVERSAL PRECISION SCREWS VS ACIT, RANGE - 39, NEW DELHI (2015) 38 ITR(T) 233 11. IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR SUPPORTED THE ORDER S PASSED BY THE AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE AO ALLOWED ALL THE EXPENSES WHICH WERE BELOW RS.10,000/ - AND CONSIDERED THOSE AS GENUINE BUT MADE THE DISALLOWANCE @ 50% OF THE EXPENSE S WHICH WERE EXCEEDING RS.10,000/ - IN EACH CATEGORY. HOWEVER, NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THESE EXPENSES WERE NOT RELATED TO THE BUSINESS OF THE ASSESSEE OR THOSE WERE NOT INCURRED IN THE REGULAR COURSE OF BUSINESS. IN SUCH TYPE OF EX PENSES , ALTHOUGH PERSO NAL ELEMENT CANNOT BE RULED OUT, HOWEVER, THE DISALLOWANCE HAD BEEN MADE BY THE AO ON AD - HOC BASIS. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) IS EXCESSIVE, T HEREFORE, TO MEET THE ENDS OF JUSTICE, WE DEEM IT APPROPRIATE TO SUSTAIN THE DISALLOWANCE OF RS.50,000/ - WHICH WILL COVER UP THE LEAKAGE, IF ANY. ITA NO S. 3951 & 4910 /DE L/201 4 SIETZ TECHNOLOGIES INDIA PVT. LTD. 7 13. IN THE ASSESSMENT YEAR 2011 - 12 IN ITA NO. 4910/DEL/2014, THE IDENTICAL ISSUES ARE INVO LVED. THE ONLY DIFFERENCE IS IN THE FIGURE OF DISALLOWANCE S MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WHICH IS RS.6,95,657/ - , RS.2,67,458/ - AND RS.1,76,113/ - UNDER THE HEAD GIFTS AND PRESENTS , DIWALI EXPENSES AND ENTERTAINMENT EXPENSES RESPECTIV ELY . THEREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER FOR THE ASSESSMENT YEAR 2010 - 11 SHALL APPLY MUTATIS MUTANDIS. SINCE, THE EXPENSES INCURRED IN THE EARLIER YEAR UNDER THESE HEADS WERE RS. 13.24 LAKHS WHILE IN THIS YEAR THE EXPENSES INCURRE D ARE APPROXIMATELY RS. 22.78 LAKHS. THEREFORE, THE DISALLOWANCE OF RS.1 LAKH FOR THE ASSESSMENT YEAR 2011 - 12 WILL MEET THE ENDS OF JUSTICE TO COVER UP THE LEAKAGE OF REVENUE, IF ANY. 14 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. (OR DER P RONOUNCED IN THE COURT ON 23 /03 /2018 ) SD/ - SD/ - ( BEENA A. PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 /03 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDEN T 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR