Shri Madanlal Vijayvargiya, Indore V. The ITO, Indore

ITA 492/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2500 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE

Judgement Text

- 1 - IN THE INCOME TAX APPELATE TRIBUNAL, SMC-I BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO. 492/IND/09 A.Y. 2006-07 MADANLAL VIJAYVARGIYA INDORE APPELLANT PAN AARPV-0666L VS INCOMETAX OFFICER 2(2) INDORE RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE, CA RESPONDENT BY SMT. APARNA KARAN, SR. DR O R D E R THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) DATED 10.9.2009 ON THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE AD DITION OF RS.81,765/- ON ACCOUNT OF TARGET DISCOUNT ALLOWED T O M/S MANGILAL VIJAYVARGIYA. - 2 - 2. IT WAS PROVED BEFORE THE LD. CIT(A) AND THE LD. A.O. THAT THE EXPENSES INCURRED WERE FOR THE PURPOSES OF THE BUSI NESS OF THE ASSESSEE AND WERE AS PER THE STIPULATED AGREEME NT. THE DISALLOWANCE MADE MAY PLEASE BE DELETED. 3. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE DISA LLOWANCE OF RS.10,860/- OUT OF TRAVELLING EXPENSES. THE ADDITIO N MAY PLEASE BE DELETED OR IN THE ALTERNATIVE BE RESTRICT ED TO A REASONABLE FIGURE. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHRI S. S. DESHPANDE, LEARNED COUNSEL FOR THE ASSESSEE AND SMT. APARNA KA RAN, LEARNED SENIOR DR. THE FIRST GROUND CHALLENGED BY THE ASSESSEE PE RTAINS TO THE ADDITION OF RS. 81,765/- ON ACCOUNT OF TARGET DISCOUNT ALLOW ED TO M/S MANGILAL VIJAYVARGIYA. THE CONTENTION RAISED BY THE ASSESS EE IS THAT THE ASSESSEE IS C&F OF JK CEMENT AND GAVE INCENTIVE TO 25 PARTIE S/DISTRIBUTORS OUT OF WHICH ONLY ONE WAS DISALLOWED ON THE GROUND THAT IT WAS GIVEN TO SISTER CONCERN. OUT ATTENTION WAS INVITED TO PAGE 11 OF T HE PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT EVE RY PARTY WAS SUPPOSED TO ACHIEVE THE SALE TARGET OF 5000 TONS WH EREAS NONE OF THE PARTIES EXCEPT ONE I.E. M/S MANGILAL VIJAYVARGIYA & SONS ACHIEVED THIS TARGET. IT WAS POINTED OUT THAT M/S MANGILAL VIJAY VARGIYA & SONS SOLD CEMENT TO THE TUNE OF 13,607.50 TONS FOR WHICH HE W AS PAID THE - 3 - COMMISSION @ RS. 6/- PER TON AS INCENTIVE. ON THE OTHER HAND, THE LEARNED SENIOR DR STRONGLY DEFENDED THE IMPUGNED OR DER BY CONTENDING THAT THE INCENTIVE, IF ANY, WAS PAID TO SISTER CONC ERN WHICH IS QUITE UNJUSTIFIED, THEREFORE, THE IMPUGNED ORDER WAS STRO NGLY DEFENDED. 2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSE SSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF DISTRIBUTORSHIP OF CEMEN T. THE ASSESSEE PURCHASES CEMENT FROM THE COMPANY AND SUPPLIES IT T O THE RETAIL TRADERS. THE ASSESSEE GETS COMMISSION ON THE SAID SUPPLIES W HICH WAS TO THE TUNE OF RS. 7,59,136/- DURING THE RELEVANT PERIOD. THE ASSESSEE ALLOWED A SPECIAL DISCOUNT OF RS.81,765/- TO M/S MANGILAL VIJ AYVARGIYA & SONS, A PROPRIETORSHIP CONCERN OF HIS SON. ADMITTEDLY, THE SPECIAL DISCOUNT WAS GIVEN FOR ACHIEVING THE PRE-FIXED TARGET OF 5000 MT @ RS. 6/- PER MT. THE LD. ASSESSING OFFICER ALLOWED THE INCENTIVE, IF ANY, TO ALL THE OTHER PARTIES EXCEPT GIVEN TO M/S MANGILAL VIJAYVARGIYA & SONS ON THE GROUND THAT IT WAS PAID TO SISTER CONCERN AND THE SPECIAL DISCOUNTS ARE NORMALLY ALLOWED BY THE MANUFACTURERS TO THE DISTRIBUTORS AN D NOT BY THE DISTRIBUTORS TO THE RETAILERS. THE TOTAL GROSS INC OME OF THE SON WAS RS.2,67,932/- WHO IS ALSO A TAX PAYER. THE STAND OF THE REVENUE IS THAT THE ASSESSEE UNDER THE GUISE OF SPECIAL DISCOUNT HA S MINIMISED HIS TAX LIABILITY AND DIVERTED THE INCOME. IF THE TOTALITY OF FACTS IS ANALYSED, THERE - 4 - IS NO DISPUTE TO THE FACT THAT IT IS A TRADE PRACTI CE AND OUT OF 25 PARTIES THE ASSESSING OFFICER HAS SUSPECTED THAT THE SPECIAL DI SCOUNT WAS WRONGLY GIVEN TO BENEFIT THE SON OF THE ASSESSEE. I AM OF THE CONSIDERED OPINION THAT IT IS NOT THE CASE THAT THE SON OF THE ASSESSE E IS THE ONLY RETAILER AND THERE ARE OTHER VARIOUS PARTIES ALSO TO WHICH THE S ALE INCENTIVE IS EQUALLY APPLICABLE. HOWEVER, THE OTHER PARTIES DID NOT ACH IEVE THE GIVEN TARGET AS IS EVIDENT FROM PAGE 11 OF THE PAPER BOOK AND ON LY M/S MANGILAL VIJAYVARGIYA & SONS HAS ACHIEVED THIS TARGET BY SEL LING THE CEMENT TO THE TUNE OF 13,607.50 MT CONSEQUENTLY, HE WAS RIGHT LY GIVEN THE SALES INCENTIVE BECAUSE THE EXPENSES WERE INCURRED FOR TH E PURPOSE OF BUSINESS OF THE ASSESSEE AS PER STIPULATED AGREEMENT BETWEEN THE PARTIES. IN VIEW OF THESE FACTS, THIS GROUND OF THE ASSESSEE IS ALLO WED. 3. THE NEXT GROUND PERTAINS TO MAINTAINING THE DISA LLOWANCE OF RS.10,830/- OUT OF TRAVELLING EXPENSES. THE CONTENT ION RAISED ON BEHALF OF THE ASSESSEE IS THAT THE ADDITION IS BASED ON SU RMISES WHICH NEEDS TO BE DELETED. ALTERNATIVELY, IT WAS ARGUED THAT IT M AY BE RESTRICTED TO A REASONABLE FIGURE. ON THE OTHER HAND, THE LD. DR S TRONGLY DEFENDED THE DISALLOWANCE BY CONTENDING THAT THE DISALLOWANCE IS IN THE NATURE OF PERSONAL USE. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE CLAIMED EXPENSES OF - 5 - RS.24,540/- TOWARDS TRAVELLING EXPENSES. ON VERIFI CATION OF RECORD/BILLS/VOUCHERS IT WAS FOUND THAT THE ASSESSE E PAID RS.10,860/- TO CHARVI TOURS ON 25.9.2005 FOR PERSONAL TOUR WHICH W AS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. EV EN BEFORE US, THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE EVIDENCING THAT THE IMPUGNED AMOUNT WAS INCURRED FOR BUSINESS PURPOSES. SIMILAR IS THE SITUATION BEFORE THE LEARNED FIRST APPELLATE AUTHOR ITY. IN VIEW OF THIS FACT, THERE IS NO MERIT IN THE GROUND OF THE ASSESSEE CON SEQUENTLY THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF HEARING ON 30 TH NOVEMBER, 2009. SD/- (JOGINDER SINGH) JUDICIAL MEMBER IST DECEMBER, 2009 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR DN/-