KALYAN JEE SAREE WALEY PVT. LTD., MEERUT V. JCIT, RANGE- 1, MEERUT

ITA 4131/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1202 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 133(6); 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 4131 /DEL/201 7 [ASSESSMENT YEAR: 2 0 0 7 - 0 8 ] KALYAN JEE SAREE WALEY [P] LTD VS. THE JCIT 83 - 84, SADAR BAZAR RANGE - 1 MEERUT MEERUT PAN : AACCK 2651 C [APPELLANT] [RESPONDENT] DATE OF HEARING : 0 4 . 0 9 .201 8 DATE OF PRONOUNCEMENT : 04 .0 9 .2018 ASSESSEE BY : SHRI K. SAMPATH, ADV. SHRI V. RAAJAKUMAR, ADV REVENUE BY : S HRI ANIL KUMAR SHARMA, SR. DR ORDER PER N .K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] ALIGARH DATED 2 8 . 0 3 .201 7 PERTAINING TO ASSESSMENT YEAR 20 0 7 - 0 8 . 2 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 2,28,240/ - AS CESSATION OF LIABILITY U/S 41(1) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRADER OF SAREES AND LADIES DRESS MATERIAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICES U/S 133(6) OF THE ACT WERE SENT TO SEVERAL PARTIES WHICH WERE SUNDRY CREDITORS FROM WHOM RAW MATERIALS WERE PURCHASED BY THE ASSESSEE FOR ITS MANUFACTURING AND TRADING ACTIVITIES. THE ASSESSING OFFICER FOUND THAT IN THE CASE OF M/S HOSHIAR SINGH SURESH CHANDRA SAREES PVT L TD. THOUGH THE NOTICE WAS SERVED BUT THERE WAS NO COMPLIANCE. THE ASSESSEE WAS CONFRONTED WITH THE RESULT OF THE ENQUIRIES MADE U/S 133(6) OF THE ACT. THE ASSESSEE WAS ONCE AGAIN GIVEN AN OPPORTUNITY TO PRODUCE THE PARTY ALONGWITH CONFIRMATION TO ESTABLI SH THE VERACITY OF THE TRANSACTIONS MADE BY THE ASSESSING OFFICER. ON RECEIVING NO PLAUSIBLE REPLY, THE ASSESSING OFFICER PROCEEDED BY MAKING ADDITION OF RS. 2,88,240/ - . 3 4. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) AND EXPLAINED THAT FROM M/ S HOSHIAR SINGH SURESH CHANDRA SAREES PVT LTD., THE ASSESSEE HAD MADE PURCHASES. SUPPORTING BILLS WERE FURNISHED AND VERIFIED BY THE ASSESSING OFFICER AND NO DISCREPANCY WAS FOUND. IT WAS STRONGLY CONTENDED THAT MERELY BECAUSE THE ASSESSEE COULD NOT PROD UCE THE PERSON, ADDITION CANNOT BE MADE AS CESSATION OF LIABILITY U/S 41(1) OF THE ACT. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE ME. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT THE ASSESSING OFFICER MADE THE ADDITION BY TREATING RS. 2,88, 240/ - AS BOGUS CREDITOR WHEREAS THE LD. CIT(A) CONFIRMED THE ADDITION AS CESSATION OF LIABILITY. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT BY ANY STRETCH OF IMAGINATION, SECTION 41(1) DOES NOT APPLY ON THE FACTS OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY ERROR OR DEFECT IN THE BILLS SEIZED A ND HAS TR E A TED THE PURCHASE S AS BOGUS MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PERSON. 4 6. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 8 . I HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT IN FURTHERANCE OF ITS BUSINESS, THE ASSESSEE HAD MADE PURCHASES FROM VARIOUS PERSONS. THERE IS NO DENYING THAT ON E OF THE PARTIES, NAMELY, M/S HOSHIAR SINGH SURESH CHANDRA SAREES PVT LTD. COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER. AT THE SAME TIME, IT IS AN UNDISPUTED FACT THAT NOTICE U/S 133(6) OF THE ACT WAS SERVED UPON THE SAID PARTY. NOTHING PREVENTED THE ASSESSING OFFICER TO ISSUE SUMMONS U/S 131 OF THE ACT TO THE SAID PARTY. BE THAT AS IT MAY, I FAIL TO UNDERSTAND HOW THE PROVISIONS OF SECTION 41(1) OF THE ACT APPLY ON THE FACTS OF THE CASE IN HAND. THERE IS NO QUESTION OF CESSATION OF LIABILITY AND, THEREFORE, THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION UNDER THE SAID SECTION. THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THE PURCHASES WERE BOGUS AND CORRESPONDING SALES ARE ALSO BOGUS. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE BR OUGHT ON RECORD, I DO NOT FIND ANY MERIT IN THE ADDITION SO MADE. I DIRECT THE ASSESSING 5 OFFICER TO DELETE THE ADDITION OF RS. 2,88,240/ - . GROUND NO. 1 IS ALLOWED. 9. GROUND NO. 2 RELATES TO THE ADDITION OF RS. 96,758/ - UNDER VARIOUS HEADS. 10. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O WAS OF THE OPINION THAT THE SUPPORTING BILLS AND VOUCHERS IN RESPECT OF THE FOLLOWING EXPENSES HAVE NOT BE PRESENTED: BUSINESS PROMOTION EXPENDITURE RS 1,66,916/ - ADVERTISEMENT EXPENDITURE, RS 2,65,823/ - TRAVEL EXPENDITURE, RS 1,98,627/ - STATIONARY AND PRINTING EXPENDITURE, RS 32,916/ - SHOP MAINTENANCE EXPENDITURE, RS 95,875/ - MISC EXPENDITURE, RS 39,809/ - EMPLOYEE WELFARE EXPENDITURE, RS 41,483/ - BONUS EXPENDITURE, RS 42,000/ - VEHICLE RUNNING & MAINTENANCE EXPENDITURE . RS 72,506/ - REFRESHMENT EXPENDITURE, RS 1,16,300/ - FALL EXPENDITURE RS 1,89,688/ - 6 11. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT THE DETAILS OF EXPENSES HAVE REMAINED UNSUBSTANTIATED. ACCORDINGLY, THE ASSESSING OFFICER FORMED AN OPINION THAT THE G.P. RATE SHOWN BY THE ASSESSEE IS NOT CORRECT. THE ASSESSING OFFICER ACCORDINGLY COMPUTED THE G.P. RATE @ 25% ON TOTAL SALE OF RS. 27700870/ - AND ACCORDINGLY, G.P. WAS TAKEN AT RS. 69,25,218/ - . AFTER RED UCING THE G.P. OF RS. 48,12,487/ - AS SHOWN BY THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF RS. 21,12,731/ - . 12. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE DETAILS AND BILLS OF EXPENSES WERE PRODUCED BUT THE LD. CIT(A) DID NOT BUY THE S AME TO BE CORRECT. HOWEVER, THE LD. CIT(A) WAS OF THE OPINION THAT FOR THE PURPOSE OF BUSINESS, CERTAIN EXPENSES MUST HAVE BEEN INCURRED BY THE ASSESSEE. THEREFORE, TO TEST THE REASONABLENESS OF THE EXPENSES, THE LD. CIT(A) MADE THE FOLLOWING WORKING: 7 13. ACCORDINGLY, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 96,758/ - . SA LE FOR A/Y 2007 - 08 2,77,00,870 SALE FOR A/Y 2006 - 07 2,83,74,544 RATIO 0.9762578 FOR AY 2007 - 08 FOR AY 2006 - 07 PROPORTIONATE ALLOWABLE EXP. DIFFERENCE DISALLOWANCE ADVERTISEMENT EXPENDITURE 265823 351296 342955.4613 - 77132.4613 0 TRAVELLING EXPENDITURE 198627 284465 277711.1761 - 79084.1761 0 STATIONARY & PRINTING 32916 23027 22480.28844 10435.71156 10435.71156 BUSINESS PROMOTION 166916 157480 153741.0789 13174.92111 13174.92111 SHOP MAINTENANCE 95875 107367 104817.8716 - 8942.87159 0 MISC EXPENSES 39809 30726 29996.49727 9812.50273 9812.50273 STAFF WELFARE 41483 39919 38971.23526 2511.764743 2511.764743 REFRESHMENT 0 3337 3257.77229 - 3257.77229 0 BONUS 116300 115562 112818.3043 3481.695715 3481.695715 FALL EXPENSES 189688 172610 168511.8595 21176.14054 21176.14054 VEHICLE RUNNING 72526 37245 36360.72189 36165.27811 36165.27811 96758.01451 8 14. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTENDED THAT THE BASIS ON WHICH THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) ARE NOT ONLY ERRONEOUS BUT ALSO ILL O G I C A L . 15. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 16. I HAVE CAREFULLY CONSIDERED THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER. THOUGH THE ASSESSING OFFICER HAS MADE ADDITION TAKING THE G.P. RATE AS BASIS, THE LD. CIT(A) CONFIRMED PART DISALLOWANCE ON A DIFFERENT REASONING. THE BASIS GIVEN BY THE FIRST APP ELLATE AUTHORITY IS BY COMPARING THE TURNOVER OF IMMEDIATELY PRECEDING ASSESSMENT YEAR WITH THAT OF THE YEAR UNDER CONSIDERATION. THE RATIO SO DETERMINED BY THE LD. CIT(A) DOES NOT HAVE ANY STRONG FOOTING. EACH ASSESSMENT YEAR IS A SEPARATE UNIT AND, THE REFORE, THE BASIS ADOPTED BY THE LD. CIT(A) IS ERRONEOUS. HOWEVER, EVEN BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT CERTAIN EXPENSES ARE NOT PROPERLY SUPPORTED BY BILLS AND VOUCHERS. THEREFORE, IN MY OPINION, ADDITION OF RS. 50,000/ - SHOULD MEET THE ENDS OF JUSTICE . I 9 ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS. 50,000/ - . GROUND NO. 2 IS PARTLY ALLOWED. 1 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 0 4 . 0 9 .2018 . S D / - [N.K. BILLAIYA] ACCOUNTANT MEMBER DATED: 0 4 T H SEPTEMBER , 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI 10 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER