M/s. Leader Exports, Jalandhar V. Addl. Commissioner of Income-tax, Jalandhar

ITA 503/ASR/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7716 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 28-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LAXMAN SINGH
• Keywords: Assessment record
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.503(ASR)/2011 ASSESSMENT YEAR:2006-07 PAN:AABFL0633R M/S. LEADER EXPORTS, VS. ADDITIONAL COMMR. OF INCO ME-TAX, JALANDHAR. RANGE-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SANDEEP VIJH, CA RESPONDENT BY:SH. LAXMAN SINGH, CIT(DR) DATE OF HEARING :03/05/2012 DATE OF PRONOUNCEMENT:07/05/2012 ORDER PER BENCH: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F THE CIT(A), JALANDHAR, DATED 25.07.2011 FOR THE ASSESSMENT YEA R 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING A DISALLOWANCE OF RS .29,624/- OUT OF FOREIGN TRAVELING EXPENSES @ 20% OF THE EXPE NSES IN FOREIGN CURRENCY PAID IN CASH. AT ANY RATE THE DISA LLOWANCE IS HIGHLY EXCESSIVE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) HAS ERRED IN UPHOLDING THE REDUCTION OF THE CLAIM OF EXPENSE UNDER THE HEAD CONSUMABLES STORES TO THE EX TENT OF RS.87,000/-. 2 2(A) THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING T HE EXPLANATION REGARDING THE MATHEMATICAL MISTAKE MADE BY THE AO W HILE COMPUTING THE ALLEGED EXCESS CONSUMPTION. 2(B) THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING T HE MONTHLY DETAIL OF SALES WHILE DECIDING THE ISSUE. 2(C) THE LD. CIT(A) HAVING SUSTAINED PART DISALLOWA NCE, SHOULD HAVE DIRECTED THE AO TO ALLOW THE BENEFIT OF THE SA ME AS OPENING STOCK OF THE NEXT ASSESSMENT YEAR AS PURCHA SE OF CONSUMABLE STORES HAS NOT BEEN HELD TO BE BOGUS. 3. AS REGARDS GROUND NO.1 THE BRIEF FACTS ARE THAT THE ASSESSEE HAD CLAIMED TOUR AND TRAVELING EXPENSES OF RS.4,52,166/ -, MOST OF WHICH PERTAIN TO FOREIGN TOURS MADE BY THE PARTNERS OF THE FIRM. OUT OF THE SAID EXPENSES, EXPENSES OF RS.2,61,030/- HAD BEEN INCURRED OUT OF FOREIGN CURRENCY PURCHASED AND CREDIT CARD. IT WAS OBSERVED THAT THE ASSESSEE DID NOT HAVE ANY BILLS AND VOUCHERS TO FULLY SUBSTANTIATE ITS CLAIM . THE ASSESSEE SUBMITTED AN EXPLANATION, WHICH WAS NOT FOUND SATISFACTORY AND A CCORDINGLY, THE AO DISALLOWED RS.52,000/- ON ACCOUNT OF FOREIGN TRAVE L EXPENSES CLAIMED BY THE ASSESSEE. 3.1. BEFORE THE LD. CIT(A), THE ASSESSEE MADE SUBMI SSION THAT EXPENSES AMOUNTING TO RS.148121/- HAVE BEEN INCURRED IN CASH WHICH ALLEGED TO HAVE BEEN INCURRED WITHOUT ANY SUPPORT OF THE BILLS AND VOUCHERS, BY THE AO. THE SAID EXPENSES HAD BEEN INCURRED BY PAYMENT THROUGH CREDIT CARD. THE BILLS ARE RECEIVED BY THE ASSESSEE WHEN THE BILL IS RAIS ED BY THE CREDIT CARD ISSUING AUTHORITY. IT WAS SUBMITTED THAT THE SAID EXPENSES HAVE BEEN INCURRED FOR THE 3 PURPOSE OF BUSINESS ONLY. THE AO HAD MADE THE DISAL LOWANCE WITHOUT BRINGING ANY MATERIAL ON RECORD. THESE SUBMISSIONS MADE BY THE ASSESSEE WERE FORWARDED TO THE AO FOR COMMENTS. THE AO COMME NTED THAT MOST OF THE EXPENSES INCURRED DID NOT HAVE THE BILLS AMOU NTING TO RS.1,48,121/- INCURRED IN CASH. THE ASSESSEE WAS NOT ABLE TO PROV IDE ANY CONCLUSIVE EVIDENCE THAT THE FOREIGN TRAVEL EXPENSES WERE INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AUTHOR ISED REPRESENTATIVE REJOINED AND SUBMITTED THAT THE AO HAD NOT PROPERLY APPRECIATED THE PRODUCTION OF THE BILLS/VOUCHERS, WHICH WERE ALREAD Y ON RECORD. THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. CIT (A) VIDE PARA 3 AT PAGES 7-8 OF HIS ORDER OBSERVED THAT THE EXPENDITURE AMOUNTING TO RS.2,61,030/- HAD BEEN INCURRED OUT OF FOREIGN CURRENCY WAS THROUGH CREDIT CARD, BUT EXPENDITURE OF RS.1,84,121/- WAS INCURRED IN CASH AND WAS COMPLETELY SUPPORTED BY BI LLS AND VOUCHERS, AS PER ASSESSMENT ORDER. SINCE THE ASSESSEE DID NOT PRODUC E RELEVANT SUPPORTING BILLS AND VOUCHERS FOR THESE EXPENSES AND, THEREFOR E, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE AT RS.29,624/- AND ACCO RDINGLY A RELIEF OF RS.24,736/- WAS ALLOWED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD CLAIMED FOREIGN TRAVELING EXPENSES TO THE EXTENT OF RS.29,624/-, WHICH ARE WI THOUT THE SUPPORT OF ANY BILLS AND VOUCHERS. THOUGH THE MODE OF PAYMENT IS C ASH OR THROUGH CREDIT 4 CAR BUT THE ASSESSEE HAS TO PROVE THAT THE EXPENSE S HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS FOR CLAIMING ANY EXPENDITURE UNDER SECTION 37(1) OF THE ACT. THE ASS ESSEE HAS MADE THE CLAIM OF SUCH EXPENDITURE AND ONUS LIES ON THE ASSESSEE T O PROVE SUCH EXPENSES WHICH HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS WHICH IN THE PRESENT CASE HAS NOT BEEN DIS CHARGED BY THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO BY UPHOLDING THE ADDITION TO THE EXTENT OF RS.29,624/- . THUS, GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 5. IN GROUND NO.2, THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS MADE DISALLOWANCE OF RS.2,87,000/- FOR ALLEGED PURCHASES OF CONSUMABLE TOOLS NOT PROPERLY BOOKED OR STOCKS NOT SHOWN PROPERLY. THE A SSESSEE MADE SUBMISSIONS BEFORE THE LD. CIT(A), WHICH WERE SENT TO THE AO FOR COMMENTS. THE AO IN HIS COMMENTS SUBMITTED THAT THE AO HAD GIVEN DETAILED REASONS FOR MAKING ADDITION IN PARA 6.3 OF THE ASSESSMENT ORDER. FROM THE CONSUMPTION CYCLE OF CONSUMABLE TOOLS, THE AO WORKED OUT THE CONSUMPTION OF TOOLS FOR A PERIOD OF THREE MONTHS T O RS.3.57 LACS AND ACCORDINGLY CALCULATED THE CLOSING STOCK AND MADE T HE ADDITION ACCORDINGLY. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE APPEARING BEFORE THE LD. CIT(A) SUBMITTED THAT THE AO HAS NOT APPRECIATED HI S SUBMISSIONS. 5 5.1. THE LD. CIT(A) VIDE PARA 5 TO 5.2 OF HIS ORDE R OBSERVED THAT THE AO IN HIS COMMENTS HAS NOT COMMENTED ON THE APPELLANT S SUBMISSIONS WITH REGARD TO THE CONTENTION THAT BILLS AMOUNTING TO RS .91,018/- POSTED IN MARCH 2006, WHICH ACTUALLY PERTAINED TO EARLIER PERIOD A S PER THE CERTIFIED COPY OF THE ACCOUNT FURNISHED DURING THE ASSESSMENT PROCEED INGS. THE ASSESSEES CONTENTION IS THAT IT WOULD EXPLAIN THE HIGHER PURC HASE OF TOOLS IN THE LAST QUARTERS TO THAT EXTENT. THE LD. CIT(A) AFTER TAKIN G COGNIZANCE OF WRONG BOOKING OF BILLS TOTALING RS.91,018/- AND OF HIGHER CONSUMPTION OF TOOLS DUE TO INCREASED LEVEL OF SEMI FINISHED GOODS ALLOWED A RELIEF OF RS. 2 LACS OUT OF THE DISALLOWANCE MADE BY THE AO AND ADDITION TO THI S EXTENT WAS DELETED AND THE BALANCE ADDITION OF RS.87,000/- WAS SUSTAINED O N THIS ACCOUNT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. AT THE OUTSET, IT WAS POINTED OUT BY THE LD. COUNSEL FOR T HE ASSESSEE THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO AND EVEN B Y THE LD. CIT(A) HAVING CONCURRENT JURISDICTION. THE OBSERVATION OF THE LD. CIT(A) AT PAGE 10 OF HIS ORDER IN PARA 5.2 THAT THERE WAS SIGNIFICANT INCREA SE IN THE LEVEL OF SEMI- FINISHED GOODS IS ALSO VERIFIABLE FROM THE DETAILS AVAILABLE IN THE ASSESSMENT RECORDS AND WOULD ACCOUNT FOR APPROXIMATELY HIGHER CONSUMPTION OF TOOLS IN THE LAST QUARTER BY AROUND RS.1,00,000/-. THE AO A LSO HAD MADE THE COMPARISONS WHICH WERE NOT CONFRONTED TO THE ASSES SEE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS NOT IN THE INTERE ST OF JUSTICE WHEN THE LD. CIT(A) HAS ACCEPTED THE INCREASE IN THE LEVEL OF SE MI-FINISHED GOODS, NO 6 ESTIMATION OF EVEN RS.87,000/- COULD BE SUSTAINED I N THE FIRST INSTANCE. MOREOVER, THE AO IS NOT JUSTIFIED IN DISREGARDING T HE SUBMISSIONS OF THE ASSESSEE, WHICH ARE WITH DETAILED REASONING SUBMITT ED BEFORE THE LD. CIT(A) AND WERE SENT TO THE AO FOR HIS COMMENTS. IN THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE AO IN THE REMAND PROCEEDINGS HAS NOT APPRECIATED THE SUBMISSIONS OF THE ASSESSEE AND THEREFORE, NO ADDIT ION IS CALLED FOR ONLY ON ESTIMATION BASIS AND THAT TOO WITHOUT INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE LD. CIT(A), THEREFORE, IS NO T JUSTIFIED IN SUSTAINING THE ADDITION OF RS.87,000/-. THE SAME IS DIRECTED T O BE DELETED. HENCE, GROUND NO.2, 2(A), 2(B) & 2(C) OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.503(ASR)/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH MAY, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7TH MAY, 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. LEADER EXPORTS, JALANDHAR. 2. THE ADDITIONAL COMMISSIONER OF INCOME TAX, R-II, JA LANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR TRUE COPY BY ORDER 7 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR