M/s. Nitin Spinners Ltd., BHILWARA V. DCIT, BHILWARA

ITA 501/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5293 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L MOURYA
• Assessee Lawyers: GOUTAM BAID
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 5 01 / JODH /201 5 (ASST. YEAR : 2011 - 12 ) M/S. NITIN SPINNERS LTD., 16 - 17 K.M. STONE , CHITTOR ROAD , HAMIRGARH, BHILWARA. VS. DC IT, CIRCLE , BHILWARA . PAN NO. AAACN 7529 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOU T AM BAID A R . DEPARTMENT BY : SHRI S.L. MOURYA - DR DATE OF HEARING : 11 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 11 / 03 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , AJMER , DATED 0 2/ 09 /201 5 . 2. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE READS AS UNDER: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT9A) ERRED IN SUSTAINING THE ARBITRARY DISALLOWANCE OUT OF SALES COM M ISSION TO THE EXTENT OF RS. 7,50,000/ - OUT OF TOTAL DISALLOWANCE OF RS. 15,00,000/ - BY THE LD. AO FROM THE TOTAL SALES COMMISSION OF RS.5,56,06,316/ - . THE ADDITION SUSTAINED MAY KINDLY BE DELETED. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED TOTAL COMMISSION EXPENSES OF RS. 5,56,06,316/ - ON SALES. THE ASSESSING OFFICER FOUND THAT THESE WERE MORE THAN THE IMMEDIATELY PRECEDING 2 ITA NO. 501 / JODH /201 5 ASSESSMENT YEAR. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE OBSERVED TH A T THE ASSESSEE HAS NOT FURNISHED ANY JU STIFICATION REGARDING INCREASE IN COMMISSION AND THERE ARE NO NORMS REGARDING COMMISSION BASIS SALES, NEITHER THE ASSESSEE HAS FURNISHED DOCUMENTARY EVIDENCE REGARDING THE COMMISSION TO BE ALLOWED ON THE VARIOUS STAGES OF GOODS SOLD/STOCK SOLD/PRODUCTION S ALES/ WASTAGE SALES/BY - PRODUCTS GENERATED BY THE ASSESSEE. THE ASSESSEE HAS NOT MAINTAINED STOCK - REGISTER REGARDING THE PRODUCTION/WASTAGE SALES/BY - PRODUCTS GENERATED BY THE ASSESSEE. THE ASSESSEE HAS NOT PRODUCED ANY RECORD REGARDING THE SPECIFIC AGENTS WHICH HAS GOT DONE BUSINESS IN FAVOUR OF THE ASSESSEE AND ITS EFFORTS , T HE ASSESSEE HAS GAINED MORE SALES AND HE HAS NOT GOT MORE PROFIT THAN THE LAST YEAR . THUS, THE SUNDRY DEBTORS ARE MORE THAN THE LAST YEAR IT MEANS THERE ARE DEFAULTERS IN THE PAYMENT SIDE WHICH ARE DUES FROM THE SALES SI D E . LOOKING TO THE DEFECTS, IT APPEARS THAT THE ASSESSEE HAS CLAIMED SALES COMMISSION ON HIGHER SIDE . K EEPING IN VIEW THE ABOVE DEFECTS, THE ASSESSING OFFICER DISALLOWED LUMP - SUM RS. 15,00,000/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO RS. 7,50,000/ - IN PLACE O F RS. 15,00,000/ - MADE BY THE ASSESSING OFFICER BY OBSERVING THAT SOME DISALLOWANCE OUT OF THE EXPENSES WAS REQUIRED TO BE MADE AND THAT THE DISALLOWANCE MADE WAS ON HIGHER SIDE . 5. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUED AND SUBMITTED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OUT OF THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE WITH O UT SATISFYING , WHICH OF THE COMMISSION PAYMENTS ARE NOT GENUINE OR IN EXCESS . W ITH O UT POIN T IN G OUT ANY SPECIFIC DEFECT, THE ASSESSING OFFICER CANNOT MAKE DISALLOWANCE OUT OF THE COMMISSION EXPE NSES CL A IMED BY THE ASSESSEE ON ADHOC 3 ITA NO. 501 / JODH /201 5 BASIS, HENCE, COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN RETAINING DISALLOWANCE OF RS. 7,50,000/ - OUT OF RS. 15,00,000/ - DIS A LLOWED BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND , DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS CLAIMED COMMISSION PAYMENT DURING THE YEAR TO THE EXTENT OF RS. 5,56,06,316/ - . THE ASSESSING OFFICER HAS MADE ADHOC DISALLOWANCE OF RS. 15,00,000/ - OUT OF THE TOTAL COMMISSION EXPENSES CLAIMED BY THE ASSESSEE. WHILE DOING SO, THE ASSESSING OFFICER HAS NOT POINTED OUT , WHICH OF TH E COMMISSION EXPENSES, THE ASSESSEE IS UNABLE TO PROVIDE DETAILS AND EVIDENCES A N D FOR WHICH OF THE COMMISSION IS EXCESSIVE . IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS MADE COMMISSION PAYMENT TO HIS RELATIVES IN VIOLATION OF SEC. 40A(2) ( D) OF THE ACT. IN ABSENCE OF ANY SPECIFIC FINDING IN MAKING THE DISALLOWANCE, IN OUR CONSIDERED VIEW, THE DISALLOWANCE OUT OF COMMISSION OF RS. 7,50,000/ - SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT IN ACCORDANCE WITH LAW AND REQUIRE S TO BE DELETED. WE, THEREFORE, DEL E TE THE DISALLOWANCE OF RS. 7,50,000/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 8. GROUND NO.2 OF THE APPEAL READS AS UNDER: - 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING THE AR B ITRAR Y DISALLOWANCE OUT OF REPAIRS TO MACHINERY TO THE EXTENT OF RS. 75,000/ - AS AGAINST THE DISALLOWANCE OF RS. 1,50,000/ - MADE BY THE LD. AO OUT OF TOTAL EXPENDITURE UNDER THE HEAD REPAIRS TO MACHINER Y FOR RS. 53.15 LAC. THE ADDITION SUSTAINED MAY KINDLY BE DELETED. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED RS. 53.15 LAC . AS EXPENSES TOWARDS REPAIRS TO MACHINERY. THE ASSESSING OFFICER 4 ITA NO. 501 / JODH /201 5 FOUND THAT SOME VOUCHERS ARE PREPARED ON SIMPLE PAPER AND THESE ARE NOT VERIFIED BY THE SUPERVISORY STAFF THAT WHAT TYPE MACHINERY WAS GOT REPAIRED . THEREFORE, HE DISALLOWED RS. 1,50,000/ - OUT OF REPAIR TO MACHINERY EXPE N SES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 10 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) VACATED THE DISALLOWANCE AND WHILE DOING SO, HE OBSERVED TH A T SOME DISALLOWANCE OUT OF EXPENSES IS REQUIRED TO BE MADE . BUT, ACCORDING TO HIM , THE DISALLOWANCE MADE IS ON HIGHER SIDE. THEREFORE, HE SUSTAINE D DISALLOWANCE OF RS. 75,000/ - OUT OF RS. 1,50,000/ - MADE UNDER THE HEAD REPAIRS TO MAC H INERY EXPENSES. 11 . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER , WHERE AS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUED TH A T SUSTAINING DISALLOWANCE OF RS. 75,000/ - , OUT OF R EPAIRS TO MACHINERY EXPENSES , WITHOUT POINTING OUT ANY SPECIFIC DEFECT , WAS NOT IN ACCORDANCE WITH LAW AND HENCE, IT SHOULD BE DELETED. 12 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT DISALLOWANCE OF RS. 1,50,000/ - OUT OF REPAIRS TO MACHINERY EXPENSES WAS MADE BY THE ASSESSING OFFICER ON ADHOC BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE DETAILS OF REPAIRING EXPENSES. THE COMMISSIONER OF INCOME TAX (APPEALS), IN OUR CONSID E RED VIEW, WAS NOT JUSTIFIED IN SUSTAI NI NG THE DISALLOWANCE OF RS.75,000/ - OUT OF THE DISALLOWANCE OF RS. 1,50,000/ - MADE BY THE ASSESSING OFFICER WITHOUT POINTING OUT , FOR WHI CH OF THE REPAIRING EXPENSES , VOUCHERS OR DETAILS ARE NOT AVAI LA BLE OR ARE NOT VERIFIABLE. THEREFORE, IN OUR CONSID E RED OPINION, THE DISALLOWANCE SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) CANNOT BE UPHELD , WE DELETE THE DISALLOWANCE OF RS.75,000/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 5 ITA NO. 501 / JODH /201 5 13 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON FRIDAY , THE 11 TH DAY OF MARCH , 201 6 AT JODHPUR . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 11 TH MARCH , 201 6 . VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY I.T.A.T., JODHPUR .