M/S. JEEWAN MOTORS P. LTD., Bhopal V. THE JCIT- RANGE-2, Bhopal

ITA 511/IND/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3005 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.511/IND/2015 ASSESSMENT YEAR: 2010-11 M/S JEEWAN MOTORS P. LTD. 7-A ASHOKA GARDEN, RAISEN ROAD, BHOPAL / VS. JCIT - RANGE - 2 BHOPAL ( APPELLANT ) ( REVENUE ) P.A. NO. AAACJ4030L APPELLANT BY SHRI HITESH CHIMNANI, CA RESPONDENT BY SHRI RAJIV JAIN, SR. DR DATE OF HEARING: 10.07.2018 DATE OF PRONOUNCEMENT: 17.08.2018 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE, DAT ED 16.09.2014 PERTAINING TO THE A.Y. 2010-11. THE ASSESSEE HAS RA ISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.24,01,617/- ON ACCOUNT OF PRIOR PERIOD EXPENSES UNDER THE FOLLOWING SUBHEADS: JEEWAN MOTORS 2 S.NO. PARTICULARS OF EXPENSES CRYSTALLIZED IN THE YEAR DISALLOWANCE CONFIRMED BY LD. CIT(A) 1.1 ADVERTISEMENT AND PUBLICITY 19,20,125/- 1.2 LABOUR CHARGES 3,66,760/- 1.3 TRAVELING EXPENSES 15,919/- 1.4 OFFICE EXPENSES 15,000/- 1.5 STAFF TRAINING EXPENSES 62,600/- 1.6 TELEPHONE EXPENSES 19,166/- 1.7 SECURITY 2,047/- TOTAL 24,01,617/- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.67,020/- ON ACCOUNT OF RECEIPTS REFLECTED IN 26A S STATEMENT BUT ALLEGEDLY NOT ACCOUNTED FOR. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN PART-CONFIRMING AD-HOC DISALLOWANCES OF RS.3,24,027/- AS MADE BY THE LD. A O ON THE FOLLOWING COUNTS- S.NO. PARTICULARS OF EXPENSES DISALLOWANCE CONFIRMED BY LD. CIT(A) 3.1 CONVEYANCE EXPENSES 46,763/- 3.2 CUSTOMER ENTERTAINMENT 18,326/- 3.3 OTHER EXPENSES 63,191/- 3.4 SALES PROMOTION EXPENSES 2,100/- 3.5 STAFF WELFARE EXPENSES 27,836/- 3.6 TELEPHONE EXPENSES 79,766/- 3.7 TRAVELING EXPENSES 22,410/- 3.8 DEPRECIATION ON MOTOR CAR 63,635/- TOTAL 3,24,027/- 3. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) JEEWAN MOTORS 3 OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS T HE ACT) WAS FRAMED VIDE ORDER DATED 28.03.2013 WHILE FRAMING TH E ASSESSMENT, THE ASSESSING OFFICER MADE VARIOUS DISALLOWANCES AD DED THE SAME TO THE INCOME OF THE ASSESSEE. THE ADDITIONS WERE MADE ON ACCOUNT OF DISALLOWANCE OF TRAVELING EXPENSES, PRIOR PERIOD EX PENSES, DISALLOWANCE ON ACCOUNT OF INTEREST, NON DEDUCTION OF TAX ETC. 4. AGGRIEVED BY THIS ORDER THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSION S PARTLY ALLOWED THE APPEAL. THEREBY THE LD. CIT(A) CONFIRMED BY PRI OR PERIOD EXPENSES AND OTHER AD-HOC DISALLOWANCES. 5. AGGRIEVED BY THIS THE ASSESSEE IS IN PRESENT APP EAL BEFORE THIS TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. 6. GROUND NO.1 IS AGAINST CONFIRMATION OF ADDITION IN RESPECT OF PRIOR PERIOD EXPENSE AMOUNTING TO RS.24,01,617/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT OUT OF PRIOR PERIOD EXPENSES OF RS.24,01,617/-. A SUM OF RS.19,2 0,125/- WAS INCURRED ON ADVERTISEMENT AND PUBLICITY. HE SUBMITT ED THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DE ALERSHIP (SALE AND SERVICE) OF MARUTI EICHER FOR VEHICLES AND SPAR E PARTS. THE LD. COUNSEL SUBMITTED THAT THE EXPENDITURE WAS INCURRED FOR ADVERTISING BRAND NAME OF MARUTI. HE SUBMITTED THAT IT WAS UNDE RSTANDING WITH THE MANUFACTURER AND DEALER, ASSESSEE WOULD I NCUR THESE EXPENSES. THE LD. COUNSEL SUBMITTED THAT THESE EXPE NDITURE HOWEVER INCURRED IN EARLIER YEARS CRYSTALIZED IN TH E YEAR UNDER APPEAL. THE EXPENDITURE WAS ESSENTIALLY INCURRED F OR BUSINESS JEEWAN MOTORS 4 PURPOSE. THE AUTHORITIES BELOW WERE NOT JUSTIFIED I N REJECTING THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT UNDER THE FACTS OF THE PRESENT CASE PRIOR PERIOD EXPENSES ABOUT TO HAVE AL LOWED. THE LD. COUNSEL FURTHER SUBMITTED THAT AN AGREEMENT TO THIS EFFECT PERTAINED TO THE SUBSEQUENT YEARS IS AVAILABLE, HOWEVER THE A GREEMENT RELATED TO YEAR UNDER APPEAL IS NOT AVAILABLE. 7. THE LD. DR OPPOSES THE SUBMISSION AND STATED THA T ONUS IS ONLY ON THE ASSESSEE TO PROVE THAT THIS EXPENDITURE WAS MADE FOR BUSINESS PURPOSE UNDER A CONTRACT WITH THE MANUFACT URER. HE SUBMITTED THAT THERE IS NO EVIDENCE ON RECORD SU GGESTING THAT THE EXPENDITURE WAS INCURRED UNDER ANY COMMERC IAL EXPEDIENCY. THEREFORE, HE SUBMITTED THAT THERE IS N O REASON TO INTERFERE IN THE FINDING OF THE LD. CIT(A). 8. WE HAVE HEARD RIVAL CONTENTION PERUSED MATERIAL ON RECORD. ADMITTEDLY BEFORE THE LD. CIT(A), THERE IS NO EVIDE NCE TO SUPPORT THESE EXPENSES, EVEN THE AO HAS GIVEN A FINDING OF FACT THAT THE ASSESSEE HAD FURNISHED A COPY OF EXTRACT ACCOUNT OF ATUL PUBLICITY PVT. LTD. IN ITS BOOKS OF ACCOUNTS THAT SHOWED OPE NING DEBIT BALANCE OF RS.8,26,295/- AND THE TRANSACTIONS ARE R ECORDED FROM THE MONTH OF APRIL 2009. IT CLEARLY SHOWED THE SAID EXPENSES WERE DEBITED ON VARIOUS DATES PRIOR TO DATE OF AUDIT/DAT E OF FILING OF RETURN OF INCOME FOR EARLIER FINANCIAL YEAR 2008-09 TO WHICH THE SAID EXPENSES IS RELATED. IT IS FURTHER POINTED OUT THAT AUDITOR HIMSELF HAS POINTED OUT THAT THE SAID EXPENSES PERTAINS TO EARLIER YEAR AND THEREFORE, CANNOT BE ALLOWED AS EXPENDITURE FOR THE YEAR UNDER CONSIDERATION. THIS CONTENTION OF THE ASSESSEE THAT ASSESSEE HAD JEEWAN MOTORS 5 FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING DURING THE YEAR, IT HAS CLAIMED PRIOR PERIOD EXPENSES PERTAINING TO EARLIER ASSESSMENT YEARS ON THE BASIS OF CRYSTALLIZATION. THE ASSESSEE COMPANY HAD INCURRED SOME EXPENSES IN PRIOR ASSESSMENT YEARS WH ICH WAS CRYSTALIZED DURING THE CURRENT YEAR. IT IS STATED T HAT ALL THE EXPENSES WERE PROPERLY ACCOUNTED DURING THE YEAR UNDER CONSI DERATION. NONE OF THE EXPENSES AS SHOWN PRIOR PERIOD EXPENSES WERE ACCOUNTED IN ANY OF THE PREVIOUS ASSESSMENT YEARS. THERE IS NO D ISPUTE THAT PRIOR PERIOD EXPENSES ARE ALLOWABLE IF THE SAME ARE CRYST ALIZED DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF CLAIMIN G THESE EXPENSES. THE ASSESSEE HAS TO DEMONSTRATE THAT SUCH EXPENSES WERE RELATED TO BUSINESS OF THE ASSESSEE AND CRYSTA LIZED IN THE YEAR UNDER APPEAL. THE ASSESSEE HAS NOT FILED ANY AGREEM ENT UNDER WHICH SUCH EXPENDITURE WAS TO BE BORNE BY THE ASSES SEE. ADMITTEDLY, THE EXPENDITURE WAS INCURRED FOR THE AD VERTISEMENT OF MARUTI CAR SUCH ADVERTISEMENT IS NOT FOR THE ASSESS EE COMPANY BUT THE ASSESSEE IS ONLY DEALER. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT ONE OF THE UNDERSTANDINGS IN T HE DEALERSHIP CONTRACT WAS THAT THE ASSESSEE DEALER WOULD INCUR E XPENDITURE FOR ADVERTISEMENT OF THE MARUTI BRAND, NO SUCH CONTRACT IS PLACED ON RECORD. IT IS ALSO STATED THAT THE PAYMENTS TO THE M/S ATUL ADVERTISEMENT CO. IS MADE THROUGH BANKING CHANNELS AND DUE TAXES HAVE BEEN EFFECTED ON PAYMENT OF SUCH AMOUNT. EVEN, IF IT IS ASSUMED THAT THESE ARE BUSINESS EXPENDITURE INCURRE D BY THE ASSESSEE ON BEHALF OF THE MANUFACTURER AND BORNE BY IT THE ASSESSEE WAS REQUIRED TO DEMONSTRATE THAT WHEN SUCH EXPENDIT URE WAS JEEWAN MOTORS 6 CRYSTALIZED AND REASON FOR CLAIMING IN THE YEAR UND ER APPEAL. THE ASSESSE HAD MADE A BALD STATEMENT THAT THESE EXPENS ES ARE CRYSTALIZED IN THE YEAR UNDER APPEAL. WE ARE OF THE OPINION THAT ON THE BASIS OF SUCH BALD STATEMENT EXPENSES RELATED T O EARLIER YEAR CANNOT BE ALLOWED. HENCE WE DO NOT SEE ANY MERIT IN THESE GROUNDS OF THE ASSESSEE. GROUND NO.1 OF THE ASSESSEE IS DIS MISSED. 9. GROUND NO.2 IS AGAINST CONFIRMING THE DISALLOWAN CE OF RS.67,020/- ON ACCOUNT OF RECEIPTS REFLECTED IN 26A S STATEMENT BUT ALLEGEDLY NOT ACCOUNTED FOR. LD. DR OPPOSES THE SUBMISSIONS OF THE ASSESSEE. 10. WE HAVE HEARD RIVAL CONTENTION PERUSED MATERIAL ON RECORD. WE FIND THAT THE DIFFERENCE IS ON ACCOUNT OF DIFFERENT METHOD AS ADOPTED BY THE PAYER AND PAYEE. THEREFORE, WE DIRECT THE AO TO DELETE THE DISALLOWANCE. GROUND NO.2 OF THE ASSESSEE IS ALLOWE D. 11. GROUND NO.3 IS AGAINST IN RESPECT OF AD-HOC DIS ALLOWANCES TOTALLING TO RS.3,24,027/- IN RESPECT OF VARIOUS EX PENSES. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISS IONS AS MADE IN THE SYNOPSIS. IT IS STATED THAT THE EXPENSES HAVE B EEN DISALLOWED ON AD HOC BASIS. THERE IS NO MATERIAL WHICH SUGGESTS T HAT THE EXPENSES ARE NOT GENUINE. ON THE CONTRARY LD. DR SUPPORTED THE ORDER OF THE A UTHORITIES BELOW. 12. WE HAVE HEARD RIVAL CONTENTION PERUSED MATERIAL ON RECORD. WE FIND THAT THE EXPENSES HAVE BEEN DISALLOWED ON AD H OC BASIS WITHOUT ON THE BASIS OF ANY MATERIAL EVIDENCES. UND ER THESE FACTS WE ARE UNABLE TO CONFIRM THE SAME. THEREFORE, WE DI RECT THE AO TO JEEWAN MOTORS 7 DELETE THE DISALLOWANCE. GROUND NO.3 OF THE ASSESSE ES APPEAL IS ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17 .08.2 018. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : / 08/2018 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE