Rising Sun Insurance Agency Ltd., Kolkata V. DCIT, Circle-12, Kolkata, Kolkata

ITA 437/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5320 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR HALDER
• Keywords: Condonation of delay; Capital expenditure; TDS
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.437/KOL/2017 ( / ASSESSMENT YEAR: 2011-12) RISING SUN INSURANCE AGENCY PVT. LTD. 2F, BOSE PUKUR ROAD, KOLKATA-700042. VS. DCIT, CIRCLE-12, KOLKATA ./ ./PAN/GIR NO. : AADCR 2290 R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI VIGYANESHWAR NATH DATTA, ADVOC ATE RESPONDENT BY : SHRI SHA NKAR HALDER, JCIT, SR. DR / DATE OF HEARING : 12/03/2019 /DATE OF PRONOUNCEMENT : 15/05/2018 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE , PERTA INING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST AN ORDER PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS)-15, KOLKATA WHICH IN TURN ARISES OUT O F AN ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 05.02.2014. 2. THE APPEAL FILED BY THE ASSESSEE IS BARRED BY LI MITATION BY 13 DAYS. THE ASSESSEE FILED A PETITION FOR CONDONATION OF DELAY BEFORE TH E BENCH. HAVING REGARD TO THE REASONS GIVEN IN THE PETITION FOR CONDONATION OF DE LAY AND AFTER HEARING THE LD. DR FOR THE REVENUE WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. RISING SUN INSURANCE AGENCY LTD. ITA NO.437/KOL/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 2 3. HOWEVER, IN THIS APPEAL, THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE SOLITARY GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE OF DISALLOWANCE OF RS. 23,35,179/- UND ER THE HEAD MEETING AND DEVELOPMENT EXPENSES AND FURTHER ENHANCED BY THE L D. CIT(A) TO RS. 53,00,078/-. 4. GROUND NO. 4 RAISED BY THE ASSESSEE IS NOT PRESS ED BY THE LD. COUNSEL FOR THE ASSESSEE THEREFORE WE DISMISS THIS GROUND AS NOT PR ESSED. 5. BRIEF FACTS QUA THE ISSUE ARE THAT THE DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBIT ED TO ITS PROFIT & LOSS ACCOUNT A SUM OF RS. 53,00,078/- ON ACCOUNT OF MEETING AND DE VELOPMENT EXPENSES. THESE EXPENSES WERE EXCESSIVE IN VIEW OF ASSESSING OFFICE R WHICH CAME TO 15.39% OF THE TOTAL TURNOVER. THE ASSESSING OFFICER CONSIDER ED THESE EXPENSES TO BE EXCESSIVE AND MADE A DISALLOWANCE OF RS. 23,53,179/ -. 6. ON APPEAL, THE LD. CIT(A) ENHANCED THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER UNDER THE HEAD MEETING AND DEVELOPMENT EXPE NSES TO RS. 53,00, 780/- OBSERVING THE FOLLOWING: 3. ONLY ONE ISSUE IS TAKEN IN APPEAL. ASSESEE HAD DEBITED A SUM OF RS. 53,00,780/- ON ACCOUNT OF 'MEETING AND DEVELOPMENT EXPENSES'. ASSESSING OFFICER CONSIDERED IT TO BE EXCESSIVE AND MADE A DI SALLOWANCE OF RS. 23,35,179/-. ON 30/06/2016, AR OF THE ASSESSEE ATTENDED THE HEAR ING AND FILED WRITTEN SUBMISSION. HE WAS REQUESTED TO FURNISH LEDGER ACCO UNT OF 'MEETING DEVELOPMENT EXPENSES' AND COPY OF BANK STATEMENT. NEXT DATE OF HEARING WAS FIXED ON 05/07/2016. ON THE APPOINTED DATE APPELLANT SUBMITT ED COPY OF BANK STATEMENT AND SOUGHT ADJOURNMENT IN THE 3RD WEEK OF JULY. SUB SEQUENTLY, ON 27/09/2016, THE AR FILED AUDIT REPORT AND BALANCE SHEET AND SOUGHT ANOTHER DATE FOR HEARING. NOTICE FOR HEARING DATED 03/10/2016 WAS ISSUED FIXI NG THE DATE OF HEARING ON 20/10/2016. HOWEVER, NOBODY ATTENDED ON THE APPOINT ED DATE. ANOTHER NOTICE DATED 22/11/2016 WAS ISSUED FIXING DATE OF HEARING ON 18/11/2016. THERE WAS NO COMPLIANCE TO THIS NOTICE AS WELL. ON 21/11/2016 A LETTER WAS ISSUED ASKING THE ASSESSEE TO FURNISH EXPLANATION ON CERTAIN ISSUES A ND ALSO ASKING THE ASSESSEE TO PRODUCE THE CASH BOOK AND BANK BOOK FOR VERIFICATIO N. SEVERAL DISCREPANCIES WERE POINTED OUT AND IT WAS ALSO INTIMATED THAT ENHANCEM ENT OF INCOME MAY BE MADE IF ASSESSEE FAILED TO SATISFACTORILY EXPLAIN THE QUERI ES RAISED. HEARING WAS FIXED ON 29/11/2016. HOWEVER, NOBODY ATTENDED ON THE APPOINT ED DATE NOR HAS THE ASSESSEE FILED ANY WRITTEN SUBMISSION TILL DATE. 4. APPELLANT HAS BEEN GRANTED VARIOUS OPPORTUNITIES TO PRODUCE LEDGER ACCOUNT OF MEETING AND DEVELOPMENT EXPENSES, CASH BOOKS AND BA NK STATEMENT. HOWEVER, APPELLANT PRODUCED ONLY BANK STATEMENT AND NO REASO NS WERE ASSIGNED FOR NOT FURNISHING LEDGER ACCOUNTS FOR MEETING AND DEVELOPM ENT EXPENSES AND CASH BOOK. RISING SUN INSURANCE AGENCY LTD. ITA NO.437/KOL/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 3 33 3 VIDE LETTER DATED 21/11/2016, APPELLANT WAS ASKED T O EXPLAIN THE PURPOSE OF INCURRING MEETING AND DEVELOPMENT EXPENSES. IT WAS ASKED FOR PROVIDING DETAILS OF TAX DEDUCTED AT SOURCE ON THESE EXPENSES. IT WAS AL SO ASKED TO FURNISH CASH BOOK AND BANK BOOK FOR VERIFICATION AND THE LEDGER ACCOU NT OF MEETING AND DEVELOPMENT EXPENSES. HOWEVER, THERE HAS BEEN NO CO MPLIANCE FROM APPELLANT'S SIDE TILL DATE. IT IS WORTHWHILE TO TAKE NOTE THAT MEETING AND DEVELOPMENT EXPENSES OF RS 53,00,780/- WAS NOT PAID DURING THE YEAR AND ENTIRE AMOUNT REMAINED OUTSTANDING ON THE END OF THE YEAR. DOCUME NTS SUBMITTED BY THE APPELLANT SHOWS THAT MEETINGS AND DEVELOPMENT EXPEN SES WAS PAYABLE TO M/ S. COMMERCIAL SERVICES, WHICH APPEARS TO BE A RELATED PARTY. BUT NOTHING HAS BEEN MENTIONED IN THE AUDIT REPORT. WHETHER TAX HAS BEEN DEDUCTED AT SOURCE IS NOT VERIFIABLE BECAUSE ASSESSEE HAS NOT SUBMITTED ANYTH ING IN THIS REGARD AND AUDIT REPORT SHOWS VAGUE COMMENTS, 'SHOWING ON ACCOUNTS', AGAINST THE COLUMN FOR COMPLIANCE TO TDS PROVISIONS. PERUSAL OF THE BANK S TATEMENT SHOWS THAT ALMOST 3 CRORES OF CASH HAS BEEN WITHDRAWN FROM THE BANK PUR PORTEDLY TOWARDS OFFICE EXPENSES AND OTHER LIABILITIES. SMALL AMOUNTS OF MO NEY HAVE BEEN PAID TO INDIVIDUALS THROUGH CHEQUES. HOWEVER, PURPOSE IS NO T KNOWN. SOME OF THE NAMES ARE REPETITIVE AND-IT APPEARS THAT THEY ARE THE EMP LOYEES OF ASSESSEE COMPANY. PERUSAL OF THE P&L ACCT. SHOWS THAT ASSESSEE HAS CL AIMED EXPENSES OF RS. 3,13,46,167/ - OUT OF WHICH RS. 53,00,780/- IS ON A CCOUNT OF MEETING AND DEVELOPMENT EXPENSES WHICH HAS NOT BEEN PAID. IT IS NOT ASCERTAINABLE AS TO HOW MUCH OF CURRENT EXPENSES HAVE BEEN PAID IN CASH AND HOW MUCH OF CURRENT PAYMENT IN CASH RELATES TO LIABILITIES OF EARLIER Y EARS. GENUINENESS OF THE ENTIRE EXPENSES CANNOT BE VOUCHED. PAYMENTS THROUGH CHEQUE S ARE VERY SMALL IN COMPARISON TO THE CASH WITHDRAWN FROM THE BANK FOR SETTLING EXPENSES. APPELLANT HAS NOT EXPLAINED THE PURPOSE OF MEETING AND DEVELO PMENT EXPENSES NOR HAS IT FURNISHED RELEVANT LEDGER ACCOUNTS FOR VERIFICATION . IT IS NOT KNOWN WHETHER TAX HAS BEEN DEDUCTED AT SOURCE ON THE AMOUNT CREDITED TO M/ S. COMMERCIAL SERVICES, WHICH IS SHOWING THIS RECEIPT IN ITS P & L A/C, AS CONTRACTUAL RECEIPT. UNDER THE CIRCUMSTANCES BOOK RESULTS ARE NOT ACCEPTABLE. UNDER THE FACTS AND CIRCUMSTANCES, IT APPEARS THAT CLAIM OF EXPENSES TOWARDS MEETING AND DEVELOPMENT ARE NOT GENUINE AND ARE D EBITED IN THE ACCOUNTS ONLY TO INFLATE EXPENSES. GENUINENESS OF OTHER EXPENSES ALSO CANNOT BE VERIFIED, AS ALMOST ALL THE EXPENSES ARE IN CASH BUT ASSESSEE HA S NOT PRODUCED THE CASH BOOK AND RELEVANT LEDGER ACCOUNTS FOR VERIFICATION. BESI DES THERE MAY BE ISSUES W.R. TO SECTION 40A(3). HOWEVER, IN THE ABSENCE OF ANY PROO F IN THIS REGARD, BENEFIT OF DOUBT IS GIVEN TO ASSESSEE. HOWEVER, IN RESPECT OF MEETING AND DEVELOPMENT EXPENSES, IT IS CERTAIN THAT THERE ARE NOT GENUINE. ASSESSING OFFICER HAS DISALLOWED ONLY RS. 23,53,179/- OUT OF MEETING AND DEVELOPMENT EXPENSES. HOWEVER, IN VIEW OF THE FACTS DISCUSSED ABOVE, ENTIRE CLAIM IS CONSI DERED AS NON-GENUINE. HENCE, DISALLOWANCE IS ENHANCED TO RS. 53,00,780/-. 7. AGGRIEVED BY THE ORDER THE LD. CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. RISING SUN INSURANCE AGENCY LTD. ITA NO.437/KOL/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 4 44 4 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) ENHANCED THE ASSESSMENT WITHOUT ANY COGENT REASON. BESIDES, THE LD. COUNSEL SUBMITTED THAT ENTIRE EXPENSES SHOULD BE ALLOWED, AS IT INCURRED B Y ASSESSEE FOR BUSINESS PURPOSE. ON THE OTHER HAND, THE LD. THE LD. DR HAS PRIMARILY REITERATED THE STANDS TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE DISCUSSED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE HAS INCURRED THE MEETING AND DEVELOPMENT EXPENSES FOR THE PURPOSE OF BUSINESS ACTIVITY. DURING THE ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER HAS FAILED TO DEMONSTRATE ANY COGENT REASON THAT THE EXPENSES CLAIMED BY THE ASSESSEE IS BOGUS OR THE EXPENSES CLAIMED BY TH E ASSESSEE IS INFLATED BY THE ASSESSEE TO REDUCE THE PROFIT. SECTION 37 OF THE ACT PROVIDES THAT ANY EXPENDITURE MADE BY THE ASSESSEE DURING THE COURSE OF BUSINESS AND NOT BEING A CAPITAL EXPENDITURE WILL BE ALLOWABLE AS DEDUCTION WHILE CO MPUTING THE PROFIT. THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF MEETING AND DEVELOPMENT ACTIVITIES WERE THERE IN THE PREVIOUS YEAR AND IT I S NOT A NEW EXPENDITURE CLAIMED IN THE CURRENT ASSESSMENT YEAR. THEREFORE, WE NOTE THA T THE EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND HEN CE IT IS ALLOWED U/S 37 OF THE ACT AND THEREFORE WE DELETE THE ADDITION MADE BY TH E ASSESSING OFFICER. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 15.05.2019. SD/- (S.S.GODARA) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED 15/05/2019 SB, SR. PS RISING SUN INSURANCE AGENCY LTD. ITA NO.437/KOL/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 5 55 5 COPY OF THE ORDER FORWARDED TO: 1. RISING SUN INSURANCE AGENCY LTD. 2. DCIT, CIRCLE-12, KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES