M/s Kamalia Sales, V. I.T.O.,

ITA 4/RAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85436 (ITAT-RANCHI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2014
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ORAM JCITLD
• Assessee Lawyers: AJAY PODDAR ADVOCTE LD

Judgement Text

1 ITA NO.04/RAN/14 M/S. KAMALIA SALES INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 04 /RAN/1 4 A.Y 200 6 - 07 M/S. KAMALIA SALES, RANCHI VS. INCOME - T AX OFFICER, WARD 2 ( 1 ), RANCHI PAN: AABFK7153K ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT : SHRI AJAY PODDAR, ADVOCTE , LD.AR FOR THE RESPONDENT : SHRI CHOUDHARY ORAM, JCIT/LD.DR DATE OF HEARING : 25 - 11 - 2014 DATE OF PRONOUNCEMENT: 25 - 11 - 2014 ORDER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 19.11.2013 PASSED BY LD CIT(A), RANCHI FOR ASSESSMENT YEAR 2006 - 07 IN RESPECT OF THE FOLLOWING ISSUES: - ( A ) ADDITION RELATING TO INFLATED PURCHASES. ( B ) DISALLOWANCE OF SALARY PAID TO SRI P.K.KAMALIA U/S 40A(2)(A) ( C ) DISALLOWANCE OF PART OF EXPENSES. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A DEALER IN CONSUMER DURABLES, ELECTRONIC GOODS, DOMESTIC APPLIANCES ETC. THE FIRST ISSUE RELATES TO THE ADDITION RELATING TO INFLATION OF PURCHASES. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION ON 2.12.2005 AND IT WAS NOTIC ED THAT THERE WERE DISCREPANCIES IN THE PHYSICAL STOCK. THE VALUE OF PHYSICAL STOCK WAS DETERMINED AT RS.48,99,894/ - AT THE TIME OF SURVEY. SINCE THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM RELATING TO THE REASONS FOR THE DISCREPANCY, THE AO, DURING TH E COURSE OF ASSESSMENT PROCEEDING, ADDED 2.5% OF RS.48,99,894/ - TO THE TOTAL INCOME OF THE ASSESSEE TO COVER THE INFLATED PURCHASES. THE LD CIT(A) REDUCED 2 ITA NO.04/RAN/14 M/S. KAMALIA SALES THE SAID DISALLOWANCE TO 1.80%. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. HAVING HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE, WE ARE OF THE VIEW THAT THIS ISSUE WOULD MEET THE ENDS OF JUSTICE, IF THE DISALLOWANCE IS SUSTAINED TO 1% OF THE VALUE OF RS.48,99,984/ - . ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIR ECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION AT THE LEVEL STATED ABOVE. 4. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF SALARY OF RS.1,08,000/ - PAID TO SHRI P.K.KAMALIA, WHO HAPPENED TO BE THE FATHER OF ONE OF THE PARTNERS. THE AO DISALLOWED THE CL AIM ON THE REASONING THAT THE NAME OF SHRI P.K.KAMALIA DID NOT FIND PLACE IN THE LIST OF WORKERS AND ALSO ON THE GROUND THAT HE IS RELATED TO THE PARTNERS. THE LD CIT(A) ALSO CONFIRMED THE SAID ADDITION. HOWEVER, THE LD A.R SUBMITTED BEFORE US THAT THE I DENTICAL PAYMENTS MADE TO SHRI P.K.KAMALIA IN THE EARLIER YEARS HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. WE ALSO HEARD LD D.R. IN OUR VIEW, THE SALARY PAID TO THE RELATIVE AS DEFINED IN SEC. 40A(2)(B) CAN BE DISALLOWED ONLY IF IT IS NOT COMPARABLE WIT H THE MARKET VALUE FOR THE SERVICES RENDERED AND IN THAT CASE ALSO, ONLY THE EXCESS PAYMENTS WARRANT A DISALLOWANCE. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT SHRI P.K.KAMALIA DID NOT RENDER ANY SERVICES TO THE ASSESSEE HEREIN. THE DISALLOWANCE HAS BEEN MADE ONLY FOR THE REASON THAT HIS NAME DID NOT FIND PLACE IN THE LIST OF WORKERS, WHICH CANNOT BE CONSIDERED AS A CORRECT APPROACH. HENCE, IN OUR VIEW, THE IMPUGNED DISALLOWANCE IS NOT JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE OR DER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLOWANCE. 5. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PART OF EXPENSES INCURRED ON DRESS AND SHOES OF THE STAFFS. THE DISALLOWANCE OF RS.9,050/ - AND RS.15,000/ - MADE BY THE ASSE SSING OFFICER WAS REDUCED TO RS.2,260/ - AND RS.3,750/ - BY THE 3 ITA NO.04/RAN/14 M/S. KAMALIA SALES LD CIT(A). THE FIRST APPELLATE AUTHORITY SUSTAINED PART OF THE ADDITION ON THE REASONING THAT THE ASSESSEE DID NOT FURNISH PROOF FOR PURCHASE OF SHOES AND DRESSES. HAVING ACCEPTED MAJOR PORTIO N OF THE EXPENSES, WE ARE OF THE VIEW THAT THERE IS NO REASON TO DISALLOW A SMALL PORTION, IF ONE CONSIDERS THE SMALLNESS OF THE CLAIM. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ABOVE SAID DISALLOWANCES . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 - 11 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DATE: 25 .11.2014 PLAC E : RANCHI PP, SPS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT : M/S. KAMALIA SALES, GEL CHURCH COMPLEX, MAIN ROAD, RANCHI - 1 2 THE RESPONDENT: I T O, W 2 ( 1 ), RANCHI 3..THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUIT BENCH, RANCHI 6. GUARD FILE. T RUE COPY, BY ORDER, ASSTT. REGISTRAR 4 ITA NO.04/RAN/14 M/S. KAMALIA SALES 1. DATE OF DICTATION .............25 - 11 - 2014....................... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ........................OTHER MEMBER .......26 - 11 - 2014........................ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT...................25 - 11 - 14 ....... ........................................................... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ....................................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ......................................... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................................................................................................. 9. D ATE OF DESPATCH OF THE ORDER ..............................................................