Richa Knitwears, New Delhi V. Addl. CIT, New Delhi

ITA 4480/DEL/2010

• Counselvise Citation: 448020114 RSA 2010
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: DR S NARAYANAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T. A. NO.4480/DEL/2010 ASSESSMENT YEAR : 2006-07 RICHA KNITWEARS, ADDL. COMMISSIONER OF INCOME-TAX , A-41, MAYAPURI INDL. AREA, VS. RANGE-27, NEW DELHI . PHASE-I, NEW DELHI. PAN: AAAFR0101P (APPELLANT) (RESPONDENT ) APPELLANT BY: DR. S. NARAYANAN, ADVOCATE. RESPONDENT BY: SMT. PRATIMA KAUSHIK, SR. DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: IN THIS APPEAL, FILED BY THE ASSESSEE, THE ONLY ISS UE INVOLVED IS WITH REGARD TO THE DISALLOWANCE OF TRAVELING EXPENSES TO THE EXTENT OF RS.12,06,534/- MADE BY THE ASSESSING OFFICER AND FU RTHER CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS. DURING THE YEAR THE ASSESSEE HAS, INTER ALIA, MADE EXPORT SALES OF RS.891,937,908/-, DOMESTIC SAL ES OF RS.26,274,573/- 2 AND HAS ALSO SHOWN INCOME FROM JOB WORK AT RS.12,73 ,576/-. DURING THE YEAR, IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD BOUGHT FOREIGN EXCHANGE OF RS.60,32,670/-. THE DETAILS OF UTILIZATION OF F OREIGN EXCHANGE WERE FURNISHED BEFORE THE AO. HOWEVER, THE AO NOTED THA T THE DETAILS OF UTILIZATION OF FOREIGN EXCHANGE WERE NOT FOUND FULL Y SUPPORTED BY RELEVANT BILLS/VOUCHERS. THE AO, THEREFORE, DISALLOWED 20% OF THE SAME ON ESTIMATE BASIS. THEREFORE, THE SUM OF RS.12,06,534/- WAS DI SALLOWED BY THE AO FROM THE EXPENSES. 4. ON AN APPEAL, THE LEARNED CIT(A) CONFIRMED THE A DDITION BY HOLDING THAT THE ASSESSEE HAS NOT FURNISHED THE DOCUMENTARY EVIDENCE TO PROVE THAT BUSINESS MEETING WITH THE PARTIES WERE TAKEN PLACE AT ANY SPECIFIC VENUE SITUATED AT PLACES WHERE THE ASSESSEES PERSONS HAD VISITED, AS NO BILLS AND VOUCHERS OF EXPENDITURE OF THIS KIND WERE PRODUCED. THE LEARNED CIT(A) ALSO OBSERVED THAT NO DOCUMENT EITHER E-MAIL OR POS TAL CORRESPONDENCE WITH THE PERSONS WITH WHOM THE MEETING INTENDED TO TAKE PLACE WAS FURNISHED. THE LEARNED CIT(A) THEREFORE, CONFIRMED THE LUMP SU M DISALLOWANCE OF RS.12,06,534/- OUT OF FOREIGN TRAVELLING EXPENSES M ADE BY THE AO. 5. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IN THE COURSE OF HEARING OF THIS APPEAL, THE LEA RNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT IDENTICAL DISALLOWANCE WA S MADE IN THE ASSESSMENT 3 YEARS 2004-05 AND 2005-06 ALSO. IN ASSESSMENT YEAR 2004-05, THE ITAT VIDE ORDER DATED 31.03.2009 IN ITA NO.1684/DEL/2008 , DELETED THE DISALLOWANCE MADE BY THE AO OUT OF FOREIGN TRAVELLI NG EXPENSES. IN THAT DECISION, THE TRIBUNAL FOLLOWED ANOTHER DECISION OF TRIBUNAL IN THE CASE OF M/S. CONTINENTAL CARRIERS PVT. LTD. (ITA NO.5320/DE L/2004) DATED 3 RD AUGUST, 2007. IT WAS FURTHER POINTED OUT THAT THE ITAT DECISION IN THE ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2004-05 HAS BEEN SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 28.10.2010 IN ITA NO.3428/DEL/2009. HE THEREFORE, CONTENDED THAT THE ISSUE INVOLVED IN THIS CASE IS SQUARELY COVERED BY THE AFORESAID TWO DECISIONS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE PERTAINI NG TO THE ASSESSMENT YEARS 2004-05 AND 2005-06. 7. THE LEARNED DR ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THE ASSESSMENT YEAR 2004-05 THE SUM OF RS.18,89,812 /- WAS DISALLOWED BY THE AO OUT OF THE FOREIGN TRAVELLING EXPENSES. IN THAT YEAR THE ASSESSEE MADE EXPORT TURNOVER NEARLY TO THE EXTENT OF RS.53 CRORE S. AFTER CONSIDERING THE FACTS OF THE CASE, THE DISALLOWANCE MADE BY THE AO WAS DELETED BY THE TRIBUNAL. IN ASSESSMENT YEAR 2005-06 20% OF FOREIG N EXCHANGE OF 4 RS.41,06,906/-, WHICH COMES TO RS.8,21,381/- WAS DI SALLOWED BY THE AO FOR THE REASON THAT THE DETAILS OF UTILIZATION OF FOREI GN EXCHANGE PURCHASED WAS NOT FOUND FULLY SUPPORTED BY RELEVANT BILLS/VOUCHER S. THE AFORESAID DISALLOWANCE OF RS.8,21,381/- MADE BY THE AO IN ASS ESSMENT YEAR 2005-06 HAS BEEN DELETED BY THE TRIBUNAL AFTER FOLLOWING TH E TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 . THE RELEVANT PORTION OF TRIBUNALS ORDER DATED 28.10.2010 IN ITA NO.3428 /DEL/2009 PERTAINING TO THE ASSESSMENT YEAR 2005-06 IS AS UNDER:- 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS DELETED THE ADDITION, AFTER CONSIDERING THE TRIBUNA L DECISIONS IN THE ASSESSEES OWN CASE IN ITA NO. 1684/DEL/2008 FOR A.Y. 2004-05. IN THIS ORDER DATED 31.3.2009 THE TRIBUNA L HAS CONCLUDED AS UNDER:- WE HAVE CAREFULLY GONE THROUGH THE RECORDS AND CONSIDERED THE RIVAL SUBMISSIONS. THE ASSESSEE HAS A LARGE EXPORT TURN OVER NEARLY TO THE EXTENT OF RS.53 CRORES DURING THE YEAR IN QUESTION. IN A.Y. 2002-03 SUCH TURN OVER WAS ONLY RS.31 CRORES AND THE EXPENDITURE INCURRED IN THAT YEAR, WHICH WAS CLAIMED AND ALLOWED BY THE DEPARTMENT, WAS 2.19%. IN OUR VIEW, THE CLAIM OF THE EXPENDITURE IS NOT UNREASONABLE, HAVING REGARD TO THE BUSINESS REQUIREMENT. NOW THE QUESTION IS WHETHER THESE CAN BE ALLOWED WHEN THE ASSESSEE HAS NOT PRODUCED CERTAIN VOUCHERS IN RELATING TO THE HOTEL AND OTHER EXPENSES OR THE DETAILS AS REGARDS THE FOREIGN EXCHANGE UTILIZATION. THE ASSESSEE HAS JUSTIFIED THE EXPENSES BY A COMPARATIVE CHART AND THE REVENUE DOES NOT SERIOUSLY DOUBT THE EXISTENCE OF THE BUSINESS CONNECTION WITH THE PLACE, WHICH 5 THE EMPLOYEES AND PARTNERS HAVE VISITED. THE EXPENDITURES CLEARLY ARE FOR THE PURPOSE OF BUSINESS. ONCE THERE IS A BUSINESS NEXUS, THE DEPARTMENT OUGHT TO HAVE ACCEPTED REASONABLE EXPENSES INCURRED IN RELATION THERETO. IN THE CASE OF CONTINENTAL CARRIERS (P) LTD., (SUPRA), AN IDENTICAL ISSUE CAME UP BEFORE THE ITAT AND THE TRIBUNAL HAS ACCEPTED MUCH LARGER PERCENTAGE OF SUCH EXPENDITURE. ALTHOUGH IT CANNOT BE STATED THAT THE TWO CASES HAVE IDENTICAL FACTS BUT AT LEAST TH E DEFECTS POINTED OUT IN BOTH THESE CASES ARE ALMOST IDENTICAL IN NATURE. IN OUR VIEW, THE ASSESSEE HAS A LARGE EXPORT TURN OVER AND HAS ALSO LARGE PURCHASES OF RAW MATERIAL FROM THE COUNTRIES WHEREIN TRAVEL TO THESE COUNTRIES ARE DISPUTED BY THE REVENUE. IN OUR VIEW, THE CLAIM OF THE ASSESSE E IS REASONABLE AND SHOULD HAVE BEEN ACCEPTED. THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE IN QUESTION IS, THEREFORE, DELETED. 6.1 WE FIND THAT FACTS OF THE PRESENT CASE ARE SIM ILAR TO THE ONE DISCUSSED BY THE TRIBUNAL IN THE AFORESAID ORDE R. MOREOVER, THE ASSESSING OFFICER HAS MADE ONLY AN E STIMATED DISALLOWANCE OF 20% AND IN LIGHT OF THE DISCUSSION ABOVE, THE SAME CANNOT BE SUSTAINED. HENCE, FOLLOWING THE TRI BUNAL DECISION AS ABOVE, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS). ACCORDINGLY, WE UPHOLD THE SAME. 9. RESPECTFULLY FOLLOWING THE AFORESAID TRIBUNALS ORDERS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004-05 AND 2005- 06 BASED ON IDENTICAL FACTS, WE DO NOT FIND ANY JUSTIFICATION IN CONFIRMI NG THE ADDITION OF RS.12,06,534/- MADE BY THE AO AND FURTHER CONFIRMED BY THE LEARNED CIT(A) OUT OF FOREIGN EXCHANGE OF RS.60,32,670/- BOUGHT BY THE ASSESSEE FOR THE 6 PURPOSE OF FOREIGN TRAVELLING EXPENSES. WE, THEREF ORE, DELETE THE SAME AND ALLOW THIS APPEAL FILED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 11. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 16 TH SEPTEMBER, 2011. SD/- SD/- (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 TH SEPTEMBER, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.