The ACIT, Srinagar V. M/s. Trans Asia Industries Exposition P. Ltd., Srinagar

ITA 449/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5805 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.449(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :AAACT5881H THE ASSTT. COMMR. OF INCOME-TAX, VS. M/S. TRANS ASI A INDUSTRIES CIRCLE -3, SRINAGAR. EXPOSITION (P) LTD. SRINAGAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. TARSEM LAL, DR ASSESSEE BY:SH. MUSHTAQ AHMED MIR,COST. ACCOUNTA NT ORDER PER MEHAR SINGH, AM, THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A), DATED 28.01.2010, PASSED UNDER SECTION 250 (6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO IN SHORT THE AC T) FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF ONL Y RS.10,000/- AND DELETING THE BALANCE ADDITION OF RS.2,90,000 OUT OF THE TOTAL DISALLOWANCE OF RS.3,00,000/- MADE OUT OF THE GUID E EXPENSES CLAIMED AT RS.3,95,05,287/- WITHOUT APPRECIATING T HAT THAT DISALLOWANCE WAS REASONABLE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF ONL Y RS.500/- AND 2 DELETING THE BALANCE ADDITION OF RS.99,000 OUT OF T HE TOTAL DISALLOWANCE OF RS.1,00,000/- MADE OUT OF THE PARC HI EXPENSES CLAIMED AT RS.2,24,080/- WITHOUT APPRECIATING THAT THAT DISALLOWANCE WAS REASONABLE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF ONL Y RS.5,000/- AND DELETING THE BALANCE ADDITION OF RS.2,19,080 OUT OF THE TOTAL DISALLOWANCE OF RS.2,24,080/-/- MADE OUT OF THE ST AFF WELFARE & MISC. EXPENSES CLAIMED AT RS.22,40,798/- WITHOUT A PPRECIATING THAT THAT DISALLOWANCE WAS REASONABLE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A TRADER AND EXPORTER IN CARPETS AND OTHER HANDICRAFT. DURING TH E YEAR UNDER REFERENCE, THE TURNOVER OF THE ASSESSEE WAS RS.22.83 CRORES IN COM PARISON TO RS.13.33 CRORES AS IN THE IMMEDIATELY PRECEDING YEAR. THE G .P. AT RS.10.33 CRORE IS 45.22% AS AGAINST RS.6.89 CRORES AT 51.7% IN THE IM MEDIATELY PRECEDING YEAR. THE FALL IN G.P. HAS BEEN ACCEPTED BY THE A. O. IN VIEW OF THE INCREASED TURNOVER. 3.1. DURING THE COURSE OF TEST-CHECK OF BOOKS OF A CCOUNT AND OTHER DOCUMENTS, IT WAS NOTICED BY THE AO THAT THE ASSESS EE HAD DEBITED EXPENSES AMOUNTING TO RS.3,95,05,287/- ON ACCOUNT OF GUIDE CHARGES AND RS.31,75,010/- ON ACCOUNT OF PARCHI EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THESE EXPENSES. IT WAS EXPLAI NED BY THE ASSESSEE THAT THAT THE EXPENSES IN RESPECT OF GUIDE CHARGES ARE THE EXPENSES BORNE BY THE ASSESSEE IN RESPECT OF THE PAYMENTS MADE TO PERSONS ACCOMPANYING THE TOURISTS/CUSTOMERS, AS THESE PERSONS PLAY A MAJOR R OLE IN BRINGING THE BUSINESS FOR THE ASSESSEE AND AS A RESULT, THEY ARE PAID CERTAIN AMOUNT DEBITED AS GUIDE CHARGES. THE TAXI DRIVER/AUTO DR IVERS ARE ALSO PAID CERTAIN AMOUNTS FOR BRINGING CUSTOMERS TO THE ASSE SSEES SHOWROOM. THESE EXPENSES ARE DEBITED UNDER THE HEAD PARCHI EXPENSE S. THE AO EXAMINED 3 THE VOUCHERS PRODUCED IN RESPECT OF THESE EXPENSES AND FOUND SOME OF THE EXPENSES WERE NOT PROPERLY VOUCHED AND HAND MADE BI LLS HAD BEEN MAINTAINED. IN MOST OF THE CASES PAYMENTS HAVE ALSO BEEN MADE IN CASH. THE AO DOUBTED THE GENUINENESS OF THESE EXPENSES FOR BU SINESS PURPOSES. TO COVER UP SUCH INADMISSIBLE AND UNREASONABLE EXPENSE S, THE AO MADE A DISALLOWANCE OF RS.3,00,000/- UNDER THE HEAD GUIDE CHARGES AND RS.1,00,000/- UNDER THE HEAD PARCHI EXPENSES OUT OF THESE EXPENSES. THUS, THIS WOULD RESULT IN A TOTAL ADDITION OF RS.4,00,0 00/- UNDER THESE HEADS. 3.2. FURTHER, THE ASSESSEE HAD DEBITED EXPENSES AMO UNTING TO RS.19,27,476/- AND RS.3,13,322/- UNDER THE HEAD STAFF WELFARE & MISC. EXP. IN THE COURSE OF TEST CHECK, THE A.O. OBSERVE D THAT SOME OF THE PAYMENTS HAD BEEN MADE IN CASH AND PROPER VOUCHERS & BILLS HAD NOT BEEN MAINTAINED. THEREFORE, TO COVER UP INADMISSIBLE AND UNVOUCHED EXPENSES HAVING BEEN DEBITED UNDER THESE HEADS, THE A.O. DIS ALLOWED 10% OF THE EXPENSES, WHICH RESULTED IN AN ADDITION OF RS.2,24, 080/-. 4. BEING AGGRIEVED WITH THE ORDER OF THE A.O., ASSE SSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO UPHELD THE ADDITION OF O NLY RS.10,000/- UNDER THE HEAD GUIDE EXPENSES, RS.500/- UNDER THE HEAD PARCHI EXPENSES AND RS.5,000/- UNDER THE HEAD STAFF WELFARE AND MISC. EXPENSES. NOW, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) AND IS IN APPEAL BEFORE US. 5. THE LD. DR RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. HE SUBMITTED THAT THE ACTION OF THE LD. CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE ADDITIONS TO MEAGER SUM. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED ON THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSI ONS MADE BEFORE HIM. 4 7. WE HAVE HEARD THE PARTIES, CAREFULLY PERUSED AND CONSIDERED THE FACT SITUATION OF THE CASE AND GONE THROUGH IMPUGNED ASS ESSMENT ORDER AS WELL AS IMPUGNED APPELLATE ORDER. THE AO MADE THE DISALLOWA NCE OF RS.3,00,000/- OUT OF GUIDE EXPENSES CLAIMED AT RS.3,95,05,287/- ON THE GROUND OF NON- MAINTENANCE OF PROPER VOUCHERS AND NON-GENUINENESS OF SUCH EXPENSES. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE COGENT AND CORROBORATIVE EVIDENCE IN SUPPORT THE EXPENSES, AS CLAIMED. IT IS INCUMBENT UPON THE ASSESSEE TO DISCHARGE THE ONUS BY PROVING GENUINENESS OF SUCH EXPENSES. THE LD. CIT(A), IN THIS CASE MADE A WILD GUESS IN DELETING SUCH ADDITIONS. THE ADDITIONS WERE DELETED ON THE PLEA IT IS SINCERELY FELT THAT TO MEET THE ENDS OF JUSTICE A TOKEN DISALLOWANCE OF RS.10,000/- ON ACCOUNT OF GUIDE EXPENSES AS WELL AS RS.500/- I N PARCHI EXPENSES ARE MADE. SUCH PLEA OR ESTIMATE IS AN IRRATIONAL ESTIMATE, WHICH CANNOT BE SUSTAINED, AS THE ESTIMATE ITSELF MUST BE FOUNDED O N THE RATIONALITY, REASONABLENESS AND DULY SUPPORTED BY PRIMA FACIE EV IDENCE. THUS, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF THE GUIDE EXPENSES CLAIM ED AT RS.3,95,05,287/-, IT WOULD BE IN THE FITNESS OF THINGS TO ESTIMATE THE D ISALLOWANCE AT RS.1,50,000/-. ACCORDINGLY, THE ORDER OF THE CIT(A) IS AMENDED TO THIS EXTENT. 7.1. ON SIMILAR GROUND AND FACTS OF THE CASE, THE L D. CIT(A), UPHELD THE ADDITION OF RS.500/- ONLY AND DELETED THE ADDITION OF RS.99,000/- OUT OF TOTAL DISALLOWANCE OF RS.1,00,000/- MADE BY THE AO IN RES PECT OF CLAIM OF RS.31,75,010/- ON ACCOUNT OF PARCHI EXPENSES. THE GROUND OF ADDITION MADE BY THE AO AND GROUND OF DELETION MADE BY THE C IT(A) ARE THE SAME, AS DISCUSSED ABOVE. THUS, HAVING REGARD TO THE FACT SITUATION OF THE CASE AND FAIRNESS AND RATIONALITY AND NATURE OF BUSINESS, W E ARE OF THE CONSIDERED 5 OPINION THAT THE ADDITION SHOULD BE UPHELD TO THE E XTENT OF RS.50,000/-. ACCORDINGLY, THE ORDER OF THE CIT(A), IS AMENDED TO THIS EXTENT. 7.2. AS REGARDS THE ADDITION OF RS.5000/- UPHELD BY THE LD. CIT(A), BY DELETING THE ADDITION OF RS.2,19,080/- OUT OF TOTAL DISALLOWANCE OF RS.2,24,080/- MADE OUT OF THE STAFF WELFARE & MISC . EXPENSES CLAIMED AT RS.22,40,798/-, WE ARE OF THE OPINION THAT THE LD. CIT(A), WAS REASONABLE IN UPHOLDING THE SAID ADDITION. HENCE, ORDER OF THE CI T(A), ON THIS GROUND IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 23RD JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 23RD JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. TRANS ASIAN INDUSTRIES, NISHAT, S RINAGAR. 2. THE ACIT,CIR.3,SRINAGAR. 3. THE CIT(A), JAMMU. 4. THE CIT,JAMMU. 5. THE SR DRASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.