CSB Sliding Bearing India (P) Ltd., New Delhi V. ITO, New Delhi

ITA 4546/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4221 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Unexplained expenditure; Additional evidence; Corroborative evidences
• Section: 40A(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI DELHI DELHI DELHI, BENCH , BENCH , BENCH , BENCH B BB B , NEW DELHI , NEW DELHI , NEW DELHI , NEW DELHI BEFORE SHRI R. P. TOLANI, JUDICIAL MEMBER AND SHRI K. D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4546 /DEL/2010 (ASSESSMENT YEAR 2006-07) M/S. CSB SLIDING BEARING INDIA (P) LTD., VS. ITO, WARD 3(4), 26-A, FLAT NO.206, NEW DELHI. AKASH DEEP BUILDING, BARAKHAMBA ROAD, NEW DELHI- 110 001 (APPELLANT) (RESPONDENT) PAN AACCC5779P APPELLANT BY: SHRI TARUN KANDHAR, CA SHRI SANJAY AHUJA, ADV. RESPONDENT BY: SHRI AMRENDRA KUMAR, SR. DR ORDER ORDER ORDER ORDER PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: 1. THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2006-07 ARISES OUT OF THE ORDER OF LD. CIT(A) VI, NEW DELHI . THE GROUNDS OF APPEAL RAISED ARE REPRODUCED AS UNDER: 1) BECAUSE THE LD. CIT(A) VI ERRED IN LAW AS WELL AS ON THE FACTS WHILE CONFIRMING THE DISALLOWANCES/ADDITIONS MADE BY THE ASSESSING OFFICER. 2) BECAUSE THE LD. CIT(A) HAS ERRED IN SAYING THAT THE SUBMISSION MADE BY THE APPELLANT COMPANY IN THE FOR M OF LEDGER ACCOUNT ARE NOT SUPPORTED/SUBSTANTIATED BY P ROPER EVIDENCE IGNORING THE FACT THAT COPY OF LEDGER A/CS OF BOTH THE DIRECTORS NAMELY SH. JITENDRA NATH AND SH. ANIRUDH NATH ARE SELF EXPLANATORY. 3) BECAUSE THE LD. CIT WAS UNJUSTIFIED IN UPHOLDING THE DECISION OF LD. ASSESSING OFFICER ON THE GROUND THA T THE APPELLANT FAILED TO FILE ANY EVIDENCE IN SUPPORT OF AMOUNT SPENT ON LOCAL CONVEYANCE (TAXI CHARGES) ETC. DURIN G VISIT TO CHINA BY THE DIRECTORS OF THE APPELLANT COMPANY. 4) BECAUSE THE LD. CIT(A) HAS IGNORED THE CIRCUMSTA NCES, NATURE OF TRANSACTION AS WELL AS NECESSITY UNDER WH ICH ADVANCE PAYMENT OF ` 50,000/- WAS MADE IN CASH TO H OTEL FOR I.T.A.NO. 4546/DEL/2010 2 BOOKING OF HALL TO ORGANIZE A SEMINAR FOR LAUNCHING OF NEW PRODUCTS OF CHINA IN INDIA. 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO CON FIRMATION OF ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69 OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED DETAILS OF EXPENSE PAYABLE AT ` 64,970.45 AND SUNDRY CREDITORS OF ` 8, 56,902/- TOTALING TO ` 9,21,872/-. THE ASSESSING OFFICER FURTHER NOT ED THAT THE ASSESSEE COMPANY HAD CLAIMED LIABILITY AT ` 9,93,8 00/- IN THE BALANCE SHEET. THEREFORE, THERE WAS DISCREPANCY OF ` 71,928/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FILE THE BREAK UP OF LIABILITIES. IN RESPONSE THERETO, THE ASSESSEE SUB MITTED A LETTER SHOWING FURTHER AMOUNTS PAYABLE ON ACCOUNT OF SHRI ANIRUDH NATH AT ` 40,646/- AND SHRI JITENDRA NATH AT ` 29,007/- AND DUTIES AND TAXES OF ` 12,275/-. THE ASSESSING OFFICER ADDED THE AMO UNT OF ` 71,928/- ON THE GROUND THAT THE ENTRIES WERE UNSUPPORTED BY ANY EVIDENCE. 3. BEFORE CIT(A), IT WAS SUBMITTED THAT THE ASSESSI NG OFFICER HAD ASKED FOR THE BREAKUP OF LIABILITIES. HOWEVER, HE NEVER ASKED ANY EVIDENCE IN SPORT OF SUCH LIABILITIES. THE ASSESSE E FILED ADDITIONAL EVIDENCE UNDER RULE 46A IN THE SHAPE OF COPY OF ACC OUNTS OF SHRI JITENDRA NATH AND SHRI ANIRUDH NATH AND PHOTOCOPY O F THE CHALLAN OF CENTRAL SALES TAX PAID IN SUPPORT OF EVIDENCE OF BR EAK-UP OF LIABILITIES. THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER IN HIS RE MAND REPORT HAD STATED THAT ASSESSEE HAD FURNISHED A COPY OF LEDGER ACCOUNT OF CSB SLIDING BEARING INDIA PVT. LTD. WHEREIN AMOUNTS OF ` 40,646/- AND ` 29,007/- HAVE BEEN SHOWN AS PAYABLE AS ON 01.04.200 6 IN RESPECT OF SHRI ANIRUDH NATH AND SHRI JITENDRA NATH. THESE LIABILITIES WERE PAID UP TO 24.05.2006 AND 25.07.2006 RESPECTIVELY. IT WAS FURTHER INFORMED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD FILED COPY OF CENTRAL SALES TAX CHALLAN EXHIBITING PAYMENT OF ` 12,275/- ON 24.04.2006. IN THE REJOINDER, THE LD. A.R. FOR T HE ASSESSEE I.T.A.NO. 4546/DEL/2010 3 SUBMITTED THAT THE ASSESSING OFFICER HAD NOT ASSIGN ED ANY REASON FOR NOT ACCEPTING THE SAME AS ADDITIONAL EVIDENCE. LD. CIT(A) ON CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AN D REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, OBSERVED THAT THE COPIES OF ACCOUNTS WERE NOT SUPPORTED BY ANY EVIDENCE. UN DER THESE CIRCUMSTANCES, LD. CIT(A) CONFIRMED THE ADDITION. 4. BEFORE US, LD. A.R. FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSING OFFICER HAD MADE ADDITION OF ` 71,928/- O N ACCOUNT OF NON SUBMISSIONS OF EVIDENCE IN SUPPORT OF DETAILS OF BR EAKUP OF LIABILITIES. LD. CIT(A) HAS UPHELD THE ISSUE ON TH E GROUND THAT NO SUPPORTING EVIDENCE WAS FILED. HE FURTHER SUBMITTE D THE AMOUNTS OUTSTANDING IN THE CASE OF SHRI JITENDRA NATH AND S HRI ANIRUDH NATH WERE ON ACCOUNT OF REMUNERATION PAYABLE TO THE DIRE CTORS WHICH WAS EVIDENT FROM THE COPIES OF ACCOUNTS. ON THE OT HER HAND, LD. SR. DR SUPPORTED THE ORDER OF CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE TH ROUGH THE SALARY ACCOUNT OF SHRI JITENDRA NATH AND SHRI ANIRUDH NATH . SHRI JITENDRA NATH HAS BEEN PAID SALARY/REMUNERATION @ ` 5,000/- PER MONTH. THE BALANCE OUTSTANDING AS ON 31.03.2006 WAS ` 29,0 07/-. IN THE CASE OF ANIRUDH NATH THE REMUNERATION HAS BEEN PAID @ `10,000/- PER MONTH. AT THE CLOSE OF ACCOUNTING YEAR, THE OU TSTANDING BALANCE WAS ` 40,646.28. THE ASSESSEE HAD ALSO FILED PROOF OF PAYMENT OF SALES TAX OF ` 12,275/- ON 24.04.2006. IN VIEW OF THESE FACTS, IT IS EVIDENT THAT THE OUTSTANDING LIABILITY OF ` 71,928/ - IS EXPLAINED. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPAN CY IN HIS REMAND REPORT. THE ASSESSING OFFICER WHILE COMPUTING INCO ME HAD ALLOWED THE SALARY PAYABLE TO THE DIRECTORS. THEREFORE, TH E OUTSTANDING AMOUNT PAYABLE AS ON 31.03.2006 IS PROPERLY EXPLAIN ED AND HENCE, NO ADDITION CAN BE MADE ON THIS ACCOUNT. WE ACCORD INGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. I.T.A.NO. 4546/DEL/2010 4 6. THE NEXT ISSUE RELATES TO DISALLOWANCE OF CONVEY ANCE EXPENSE RELATING TO FOREIGN VISIT BY THE DIRECTORS OF THE A SSESSEE COMPANY. THE FACTS STATED IN BRIEF RELATING TO THIS GROUND A RE THAT THE ASSESSEE COMPANY CLAIMED EXPENSES OF ` 1,86,339/- ON ACCOUNT OF FOREIGN TRAVELING. OUT OF THIS AMOUNT AN AMOUNT OF ` 89,00 0/- WAS CLAIMED TO HAVE BEEN SPENT ON LOCAL CONVEYANCE FOR WHICH NO VOUCHERS WERE PRODUCED. THE ASSESSING OFFICER REQUIRED THE ASSES SEE TO JUSTIFY THE EXPENSES AND FURNISH THE VOUCHERS. SINCE THE ASSES SEE DID NOT PRODUCE VOUCHERS FOR VERIFICATION, THE ASSESSING OF FICER DISALLOWED AN AMOUNT OF ` 50,000/-. 7. BEFORE CIT(A), IT WAS SUBMITTED THAT THE ASSESSE E HAD FILED DETAILS OF EXPENSE ALONG WITH SUPPORTING VOUCHERS I N THE FORM OF AIR TICKETS, FOREIGN CURRENCY PURCHASED AND HOTEL BILL S. A LETTER DATED 12.11.2008 WAS FILED REGARDING PLACES VISITED AND JUSTIFICATION/PURPOSE OF VISIT OF DIRECTORS ABROAD. IT WAS ALSO SUBMITTED THAT THE EXPENSES AMOUNTING TO ` 89,000/- WERE INCURRED ON LOCAL CONVEYANCE (TAXI CHARGES) DURING THE STAY IN CHINA. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY T HE ASSESSEE OBSERVED THAT THE ASSESSEE DID NOT SUBSTANTIATE THE EXPENDITURE OF ` 89,000/- INCURRED ON CONVEYANCE CHARGES. THEREFOR E, DISALLOWANCE MADE BY THE ASSESSING OFFICER AT ` 50,000/- WAS REA SONABLE. 8 . WE HAVE HEARD BOTH THE PARTIES. DURING THE COU RSE OF HEARING, THE ASSESSEE REITERATED SIMILAR ARGUMENTS AND NO EV IDENCE IN SUPPORT OF EXPENDITURE OF ` 89,000/- HAS BEEN FURNI SHED. THE TOTAL EXPENDITURE INCURRED ON FOREIGN TRAVELING IS ` 1,86 ,339/- WHICH INCLUDES AIR TICKETS, HOTEL BILLS AND LOCAL CONVEYA NCE CHARGES. IT IS INTERESTING TO NOTE THAT OUT OF ` 1,86,339/-, THE A SSESSEE HAS INCURRED ` 89,000/- ON LOCAL CONVEYANCE AND THE BAL ANCE AMOUNT OF ` 97,339/- WAS INCURRED ON ACCOUNT OF AIR TICKETS A ND HOTEL CHARGES. THE EXPENDITURE INCURRED ON LOCAL CONVEYANCE DOES N OT I.T.A.NO. 4546/DEL/2010 5 COMMENSURATE WITH THE EXPENDITURE INCURRED ON AIR T ICKETS AND THE HOTEL CHARGES SINCE THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO SUPPORT ITS CLAIM THAT AN AMOUNT OF ` 89,000/- WAS INCURRED ON LOCAL CONVEYANCE (TAXI CHARGES), WE DO NOT FIND ANY INFIR MITY IN DISALLOWING AN AMOUNT OF ` 50,000/- ON ACCOUNT OF F OREIGN TRAVEL EXPENSES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER PASSED BY LD. CIT(A) CONFIRMING THE ADDITION. 9. THE LAST ISSUE FOR CONSIDERATION RELATES TO DISA LLOWANCE OF ` 50,000/- ON ACCOUNT OF SEMINAR EXPENSES. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE CLAIMED AN AMOUNT OF ` 5,31,337/- PAID TO HOTEL INTERCONTINENTAL EROS, NEW DELHI. TH E ASSESSING OFFICER ASKED THE ASSESSEE TO FILE THE EVIDENCE WIT H REGARD TO THIS PAYMENT AND ALSO THE PURPOSE OF SUCH EXPENSES. THE ASSESSING OFFICER ON EXAMINATION OF THE DETAILS FILED BY THE ASSESSEE NOTED THAT THE INVITATION LETTER MENTIONED THE DATE OF ME ETING AS ON 19.11.2005 WHEREAS THE COPY OF BILLS SHOWED THAT TH E DINNER WAS HOSTED ON 27.11.2005. THE ASSESSING OFFICER FURTHE R NOTED THAT THE ASSESSEE HAD NOT MENTIONED ANYTHING ABOUT THE STAY ARRANGEMENT OF SUCH INVITEES AND THE BENEFITS EARNED FROM SALES OF PRODUCTS ETC. THE ASSESSING OFFICER FURTHER NOTED THAT ASSESSEE H AD PAID AN AMOUNT OF ` 50,000/- IN CASH TO THE HOTEL. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 50,000/ -. 10. BEFORE LD. CIT(A), IT WAS SUBMITTED THAT SEMINA R WAS ORGANIZED AT HOTEL INTERCONTINENTAL EROS NEW DELHI ON 19.11.2005 TO LAUNCH THE PRODUCT OF CSB CHINA IN INDIA TO CONVINC E THE BUYERS AND TO CLEAR THEIR DOUBTS ABOUT THE QUALITY AND WORKMA NSHIP OF CSB PRODUCTS. INVITATION LETTERS ALONG WITH LITERATURE OF THE PRODUCTS WERE SENT TO THE CUSTOMERS INVITING THEM TO THE SEM INAR. A SEMINAR WAS HELD AS SCHEDULED ON 19.11.2005 FOLLOWED BY COC KTAIL AND DINNER. THE SEMINAR WAS NOT HELD ON 27.11.2005 AS POINTED OUT BY THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED TH AT THE SUM OF ` I.T.A.NO. 4546/DEL/2010 6 50,000/- WAS PAID IN CASH ON 2.11.2005 AS ADVANCE F OR BOOKING THE HALL OF THE HOTEL INTERCONTINENTAL EROS, NEW DELHI AS THEY REFUSED TO ACCEPT THE CHEQUE FOR BOOKING. THEREFORE, NO CHOIC E WAS LEFT WITH THE ASSESSEE BUT TO PAY IN CASH. SUBSEQUENT PAYMEN T OF `3,11,584/- WAS MADE THROUGH A/C PAYEE CHEQUE AND F INAL BILL WAS SETTLED ON 26.11.2005 WHICH WAS ALSO PAID THROUGH C HEQUE. 11. THE ASSESSEE FILED ADDITIONAL EVIDENCE UNDER RU LE 46A IN THE SHAPE OF CERTIFICATE FROM HOTEL INTERCONTINENTAL ER OS, NEW DELHI. LD. CIT(A) CALLED FOR THE COMMENTS OF THE ASSESSING OFF ICER. THE ASSESSING OFFICER IN HIS REMAND REPORT INFORMED THA T THE ASSESSEE HAD FILED A COPY OF UNDATED LETTER FROM HOTEL INTER CONTINENTAL EROS, NEW DELHI WHEREIN IT HAS BEEN MENTIONED THAT THE AS SESSEE HAD HOSTED COCKTAIL DINNER ON 19.11.2005 AT THE HOTEL A ND PAID ` 5,31,337/-. LD. CIT(A) AFTER CONSIDERING THESE FA CTS NOTED THAT ASSESSING OFFICER HAD NOT POINTED OUT ANY DISCREPA NCY IN THE CONTENTS OF THE CERTIFICATE OFFERED BY HOTEL INTERC ONTINENTAL EROS, NEHRU PLACE, NEW DELHI. SHE ACCORDINGLY DIRECTED T HE ASSESSING OFFICER TO DELETE THE ADDITION TO THE EXTENT THE PA YMENT WAS MADE THROUGH CHEQUES. HOWEVER, SHE CONFIRMED THE DISALL OWANCE OF ` 50,000/- PAID IN CASH AS THE PAYMENT WAS MADE IN CO NTRAVENTION OF SECTION 40A(3) OF THE ACT. 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ABOVE FACT S, IT MAY BE NOTED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION TO THE EXTENT OF ` 50,000/- WHICH WAS PAID IN CASH. SHE HAD APPLIED THE PROVISIONS OF SECTION 40A(3). UNDER SECTION 40A(3) IF ANY PAYMEN T IS MADE IN CASH EXCEEDING ` 20,000/- THE DEDUCTION WILL NOT BE ALLOWABLE. THE CONTENTION OF THE ASSESSEE THAT HOTEL MANAGEMENT DI D NOT AGREE AT THE TIME OF BOOKING OF THE SPACE TO ACCEPT THE PAYM ENT THROUGH CHEQUE AND THEREFORE THE PAYMENT OF ` 50,000/- WAS MADE IN CASH. WE ARE UNABLE TO ACCEPT THIS CONTENTION. THE BOOKI NG WAS MADE ON I.T.A.NO. 4546/DEL/2010 7 2.11.2005 FOR THE CONFERENCE WHICH WAS HELD ON 19.1 1.2005. THE ASSESSEE HAD MADE SUBSEQUENT PAYMENT THROUGH CHEQUE S. WHEN HOTEL MANAGEMENT COULD ACCEPT CHEQUES FOR THE AMOUN T OF ` 4,81,337/- THERE WAS NO REASON THAT THE BOOKING AMO UNT WAS NOT ACCEPTED BY THE HOTEL THROUGH CHEQUE. MOREOVER, NO EVIDENCE HAS BEEN FILED SUGGESTING THAT HOTEL MANAGEMENT HAS REU SED TO ACCEPT THE PAYMENT THROUGH CHEQUE. THEREFORE, THE PAYMENT MADE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) C ANNOT BE ALLOWED AS DEDUCTION. ACCORDINGLY WE DO NOT FIND ANY INFIR MITY IN THE ORDER PASSED BY LD. CIT(A) CONFIRMING HT ADDITION OF ` 50 ,000/-. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST APR., 2011. SD./- SSD./- (R. P. TOLANI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:21 ST APR., 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI