M/s Drolia Minerals industries Pvt. Ltd, Ranchi V. The Addidtional Commissioner of I.T, Ranchi

ITA 53/RAN/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3855 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHA SINGH MARR
• Keywords: TDS
• Section: 40A(3); 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 53/RAN/2016 ASSESSMENT YEAR: 2011-12 M/S. DROLIA MINERALS INDUSTRIES PVT. LTD.....APPELLANT DROLIA HOUSE, KANKE ROAD, RANCHI 834 008. [PAN: AAACD 4034 E] ACIT, RANGE - 1...................................................................................................................RESPONDENT RANCHI. APPEARANCES BY: SHRI DEVESH PODDAR, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SMT. NISHA SINGH MARR, JCIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : NOVEMBER 04, 2019 DATE OF PRONOUNCING THE ORDER : NOVEMBER 08, 2019 ORDER PER MS. MADHUMITA ROY, JM THE INSTANT APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.12.2015 PASSED BY THE LD. CIT(A) RANCHI ARISING OUT OF THE ORDER DATED 26.03.2014 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) BY THE ACIT, RANGE - 1, RANCHI FOR THE A.Y. 2011-12 WITH THE FOLLOWING GROUNDS: I. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS. 1,65,103/- OUT OF BUSINESS PROMOTION EXPENSES. II. FOR THAT LD. CIT(A) WAS NOT JUSTIFIED FOR MAKING A DISALLOWANCE OF RS. 3,42,409/- OUT OF STAFF SALARY, WAGES, STAFF WELFARE EXPENSES AND OFFICE EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS FOR BUSINESS PURPOSE. III. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING A DISALLOWANCE OF RS. 2,05,699/- UNDER THE HEAD FUEL EXPENSES DISALLOWED U/S 40A(3) OF THE ACT, 1961. THE EXPENSES WERE INCURRED ON RETAIL PURCHASE OF THE FUEL 2 I.T.A. NOS. 53/RAN/2016 ASSESSMENT YEAR: 2011-12 M/S. DROLIA MINERALS INDUSTRIES PVT. LTD. IN ODD HOURS DUE TO NEED OF BUSINESS. OTHERWISE, OPERATION OF THE PLANT COULD HAVE BEEN STOPPED. IV. FOR THAT EXPENSES INCURRED FOR BUSINESS PROMOTION, STAFF SALARY, WAGES, STAFF WELFARE EXPENSES AND OFFICE EXPENSES ARE FULLY VERIFIABLE, INCIDENTAL TO BUSINESS. AS SUCH, NO DISALLOWANCE WAS CALLED FOR. THE LD. AO DISALLOWED EXPENSES IN ORDER TO IMPOSE FINANCIAL DISCIPLINE. DISALLOWANCE IS UNCALLED FOR. V. FOR THAT INTEREST U/S 234A AND 234B SHOULD BE CHARGED ON THE RETURNED INCOME AND NOT ON THE ASSESSED INCOME FOLLOWING THE DECISION OF HONBLE JHARKHAND HIGH COURT. LD. CIT(A) WAS NOT JUSTIFIED IN NOT FOLLOWING THE DECISION OF HONBLE JHARKHAND HIGH COURT WHICH IS BINDING IN NATURE. 2. THE CONFIRMATION OF DISALLOWANCE OF RS. 1,65,103/- OUT OF THE BUSINESS PROMOTION EXPENSES HAS BEEN CHALLENGED BEFORE US. AS IT APPEARS FROM THE RECORDS THAT EXPENDITURE INCURRED AS PAYMENT MADE TO TAJ BENGAL KOLKATA, ITC GRAND, ITC MARATHA MUMBAI, ATLANTA VISIT, LAS VEGAS VISIT, HOTEL SAHARA MUMBAI ETC. WAS NOT FOUND TO BE INCURRED AS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES AS OBSERVED BY THE LD. AO AND THE ENTIRE AMOUNT OF RS. 1,65,103/- WAS DISALLOWED WHICH WAS IN TURN CONFIRMED BY THE FIRST APPELLATE AUTHORITY, HENCE THE APPEAL BEFORE US. AT THE TIME OF HEARING THE LD. AR COULD NOT SUCCESSFULLY REBUT FOR DISALLOWANCE MADE TO THE FULL EXTENT AND HENCE THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A). WE, HOWEVER, FIND PARTIAL MERIT IN THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF BUSINESS PROMOTION EXPENDITURE INCURRED IN INDIA AT DIFFERENT PLACES, THE ASSESSEE COULD NOT HOWEVER JUSTIFY EXPENDITURE INCURRED ABROAD EXCEPT FOR SOME VAGUE REPLIES. THUS, IN THE BALANCE OF THINGS, WE RESTRICT THE DISALLOWANCE TO 50% OF RS. 1,65,103/- AS BUSINESS PROMOTION EXPENDITURE DISALLOWED. 3 I.T.A. NOS. 53/RAN/2016 ASSESSMENT YEAR: 2011-12 M/S. DROLIA MINERALS INDUSTRIES PVT. LTD. 3. HEARD PARTIES AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. IN THE ABSENCE OF COGENT DOCUMENT SHOWING THE EXPENSES RELATE TO THE BUSINESS, IT IS NEITHER POSSIBLE TO ALLOW OR DISALLOW THE ENTIRE EXPENSES SO CLAIMED BY THE ASSESSEE. THE BENEFIT OF DOUBT IS, TO CERTAIN EXTENT AGAINST THE ASSESSEE HENCE WE PROPOSE TO ALLOW 50% OF THE SAME WHICH WAS ALSO AGREED UPON BY THE LD. AR AT THE TIME OF HEARING OF THE INSTANT APPEAL. HENCE, WE ALLOW 50% OF IT ON ESTIMATE BASIS. THIS GROUND OF APPEAL PREFERRED BY THE ASSESSEE IS, THUS, PARTLY ALLOWED. 4. THE DISALLOWANCE OF RS. 3,42,409/- OUT OF STAFF SALARY, WAGES, STAFF WELFARE EXPENSES AND OTHER OFFICE EXPENSES HAS BEEN CHALLENGED BEFORE US. DURING THE COURSE OF ASSESSMENT PROCEEDINGS UPON PERUSAL OF SCHEDULE T FORMING PART OF P & L A/C. IT WAS FOUND THAT THE ASSESSEE INCURRED EXPENDITURE TO THE TUNE OF RS. 10,62,035/- UNDER THE HEAD STAFF SALARY, RS. 18,26,573/- UNDER THE HEAD WAGES (NON CONTRACT), RS. 2,00,382/- UNDER THE HEAD STAFF WELFARE EXPENSES, RS. 3,35,102/- UNDER THE HEAD OFFICE EXPENSES, IN TOTAL RS. 34,24,092/- OUT OF WHICH MOST OF THE EXPENSES WERE ALSO FOUND TO BE INCURRED IN CASH AS APPEARED IN THE LEDGERS. SOME BILLS AND VOUCHERS PERTAINING TO THESE EXPENSES PRODUCED BY THE AUTHORISED REPRESENTATIVE FOUND TO BE SELF- MADE INTERNAL VOUCHERS AS OBSERVED BY THE LD. AO. HE, THEREFORE, DISALLOWED 10% OF THE SAID EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS, IN TURN, CONFIRMED BY THE FIRST APPELLATE AUTHORITY, HENCE THE INSTANT APPEAL BEFORE US. 4 I.T.A. NOS. 53/RAN/2016 ASSESSMENT YEAR: 2011-12 M/S. DROLIA MINERALS INDUSTRIES PVT. LTD. 5. THE CASE OF THE ASSESSEE IS THIS THAT THE EXPENSES INCURRED ARE DULY VERIFIABLE; COMPLETE DETAILS HAS BEEN MAINTAINED AND THUS DISALLOWING ON ESTIMATE BASIS IS NOT CALLED FOR. THE CASE OF THE REVENUE IS THIS, THAT SUCH EXPENSES TOWARDS SALARY SHOULD NOT BE MADE BY CASH ONLY AND IF THAT BE SO THE MUSTER DETAILS SHOULD HAVE BEEN PRODUCED BEFORE THE AUTHORITIES BELOW. FURTHER THAT THE SLIPS MUST BEAR THE SIGNATURE OF THOSE PERSONS RECEIVED PAYMENTS. IN THE ABSENCE OF IT 10% OF SUCH EXPENDITURE HAS BEEN DISALLOWED. THE REVENUE ALSO COULD NOT JUSTIFYING THEIR STAND IN ITS PROPER PERSPECTIVE. THUS, TAKING INTO CONSIDERATION THE ENTIRE ASPECT OF THE MATTER, WE PROPOSE TO DISALLOW 5% OF THE SAID EXPENSES. THIS GROUND OF APPEAL PREFERRED BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 6. THE CONFIRMATION OF DISALLOWANCE OF RS. 2,05,699/- UNDER THE HEAD FUEL EXPENSES U/S 40A(3) OF THE ACT HAS BEEN CHALLENGED BEFORE US. THE SAID EXPENSES WERE INCURRED ON RETAIL PURCHASE OF FUEL FROM THE PETROL PUMP DIRECTLY FOR WHICH TDS COULD NOT BE PAID AS THE CASE MADE OUT BY THE ASSESSEE. DUE TO URGENT NEED OF FUEL FOR THE MANUFACTURING UNIT WITHOUT WHICH THE PLANT WOULD STOP FUNCTIONING THE FUEL WAS PURCHASED IN CASH AS ALSO SUBMITTED BY THE LD. AR DURING HEARING OF THE MATTER WHICH ACCORDING TO US SEEMS TO BE GENUINE AND WE DO NOT FIND ANY JUSTIFICATION OF ADDITION MADE THEREUNDER. WE DO NOT FIND ANY JUSTIFICATION U/S 40A(3). THUS WE HEREBY DELETE THE SAME. 7. THIS RECORDS RELATED TO THE INTEREST U/S 234A & 234B OF THE ACT. WE DIRECT THE LD. AO TO LEVY INTEREST IN TERMS OF THE ORDER PASSED BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF AJAY PRAKASH VERMA VS 5 I.T.A. NOS. 53/RAN/2016 ASSESSMENT YEAR: 2011-12 M/S. DROLIA MINERALS INDUSTRIES PVT. LTD. ITA, TA NO. 38 OF2010. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 NOVEMBER, 2018. SD/- SD/- ( PRADIP KUMAR KEDIA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/11/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. DROLIA MINERALS INDUSTRIES PVT. LTD. 2. ACIT, RANGE 1, RANCHI. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, RANCHI