Associated Dyestuff Pvt.Ltd., Ahmedabad V. The DY.CIT.,Circle-1, Ahmedabad

ITA 538/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50501 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH , BENCH A, AHMEDABAD BEFORE SHRI D.K.TYAGI, J.M. AND SHRI R.C.SHARMA, A. M. PAN NO. : AACCA4885C I.T.A.NO. 538/AHD/2011 A.Y. : 2004-05 ASSOCIATED DYESTUFF PVT.LTD., DCIT, CIRCLE 1, PLOT NO. A-1/5, GIDC ESTATE, VS AHMEDABAD PHASE I, NR. SHAH TEXTILE, VATVA, AHMEDABAD APPELLANT RESPONDENT APPELLANT BY : MS.URVASHI SHODHAN, A.R. RESPONDENT BY : SHRI S.K. MEENA, SR. DR DATE OF HEARING : 5.8.2011 DATE OF PRONOUNCEMENT : 26.8.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 12.1.2011 FOR THE ASSESSMENT YEAR 2 004-05, IN THE MATTER OF ORDER PASSED U/S 143(3) READ WITH SEC TION 254 OF THE INCOME-TAX ACT, 1961. -: 2: - 2 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR DISAL LOWING SALES PROMOTION EXPENSES OF RS. 6,67,650/-. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING, TRADING AND EXPORT OF DYE S, INTERMEDIATES. THE ASSESSEE HAS CLAIMED SALES PROMO TION EXPENDITURE OF RS. 6,67,650/-, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT FRAMED U/S 143( 3) DATED 28.12.2006. IN THE FIRST ROUND, THE DISALLOWANCE WA S CONFIRMED BY THE LD. CIT(A) IN VIEW OF FURTHER APPEAL FILED B Y THE ASSESSEE BEFORE THE TRIBUNAL, THE MATTER WAS RESTORED BACK T O THE FILE OF AO WITH THE FOLLOWING DIRECTIONS :- NOW THE DOCUMENTS FILED BEFORE US IN ASSESSEES PAPER BOOK (P.B.) WHERE THE ASSESSEE HAS FILED THE RELEVANT DETAILS LIKE BANKS STATEMENT, LIST OF CUSTOMERS INVOICES/DELIVERY CHALLANS OF M/S. PADMAVATI TRADING & M/S. SAHEBA AGENCY. SINCE THESE DOCUMENTS ARE FILED FOR THE FIRST TIME BEFORE US AND WE ARE NOT IN A POSITION TO INVESTIGATE THE -: 3: - 3 GENUINENESS OF THESE DOCUMENTS, HENCE, THIS ISSUE NEEDS RE-VERIFICATION AT THE LEVEL OF THE AO. 4. DURING THE SETS-ASIDE PROCEEDINGS, THE AO AGAIN CONFIRMED THE DISALLOWANCE BY OBSERVING NO DETAIL A S TO HOW TRANSPORTATION OF GIFTED ARTICLE WAS TAKEN PLACE, H AS BEEN BROUGHT ON RECORD. BY THE IMPUGNED ORDER, THE LD. C IT(A) CONFIRMED THE ACTION OF AO BY OBSERVING THAT THE PA RTIES, WHO HAD ISSUED BILLS TO THE ASSESSEE, DO NOT EXIST AT T HE GIVEN ADDRESS AND ASSESSEE ALSO COULD NOT PRODUCE THESE P ARTIES BEFORE THE AO. AGAINST THIS ORDER OF CIT(A), THE AS SESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DIRECTION OF THE TRIBUNAL WHILE RESTORING THE MATTE R BACK TO THE FILE OF AO WHEREIN TRIBUNAL HAD DIRECTED THE AO TO EXAMINE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF THE C LAIM OF EXPENDITURE FOR THE FIRST TIME BEFORE THE TRIBUNAL. AS PER THIS DIRECTION, THE AO IS DUTY BOUND TO EXAMINE VARIOUS DOCUMENTS FILED BY THE ASSESSEE TO SUPPORT GENUINENESS OF CLA IM OF EXPENDITURE INCURRED ON SALES PROMOTION. FROM THE R ECORD, WE -: 4: - 4 FOUND THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURIN G, TRADING OF DYES AND INTERMEDIATES. THE EXPENDITURE WERE INCURRED BY THE ASSESSEE FOR PROMOTION OF ITS BUSIN ESS. THE ASSESSEE HAS PURCHASED GIFT ARTICLES FROM M/S. SAHE BA AGENCY AND M/S. PADMAVATI TRADING COMPANY DURING THE PERIO D JANUARY TO MARCH, 2004. THESE GIFT ARTICLES WERE PU RCHASED FOR THE PURPOSE OF APPRECIATION OF SALES PERFORMANCE OF VARIOUS PARTIES IN SOUTH INDIA. THE EXPENDITURE WERE INCURR ED ON ABOUT 44 PARTIES, WHO WERE GIVEN THE GIFT ARTICLES, AS ADVISED BY M/S. SHANTI MOHAN AGENCY, ERODE, WHO WAS THE MAI N DEALER OF THE COMPANY IN SOUTH INDIA. M/S. SHANTI M OHAN AGENCY DISTRIBUTED THESE ARTICLES ON BEHALF OF THE ASSESSEE TO ITS VARIOUS SUB DEALERS. DURING THE COURSE OF SET-A SIDE PROCEEDINGS, THE AO HAS AGAIN TRIED TO FIND OUT THE SUPPLIER OF GIFT ARTICLES, BUT THE SAME WERE NOT FOUND NOR THE ASSESSEE COULD PRODUCE THEM FOR AOS VERIFICATION, ACCORDING LY, AO AGAIN DISALLOWED THE SALES PROMOTION EXPENSES. FROM THE RECORD, WE FOUND THAT BEFORE THE AO, THE ASSESSEE H AS FURNISHED INVOICES OF SUCH PARTIES ALONGWITH DELIVE RY CHALLANS TO SHOW THAT BOTH THE PARTIES ARE HAVING GUJARAT SA LES TAX -: 5: - 5 AND CENTRAL SALES TAX REGISTRATION NUMBERS. THEIR A DDRESSES AND TELEPHONE NUMBERS, MOBILE NUMBERS WERE ALSO MEN TIONED ON THE INVOICES. THE ASSESSEE HAD MADE PAYMENT TO T HESE PARTIES BY ACCOUNT PAYEE CHEQUES DURING APRIL AND M AY, 2004, WHICH ARE DULY REFLECTED IN THE ASSESSEES BANK STA TEMENT AS SUBMITTED BEFORE THE LOWER AUTHORITIES. IN ADDITION TO THESE DOCUMENTS, THE ASSESSEE HAS ALSO FURNISHED FOUR CER TIFICATES DATED 29.12.2006 FROM THE BANK OF BARODA, CONFIRMING/CERTIFYING THE CHEQUES NUMBERS, DATE OF PAYMENT PAYEES NAMES AND THE CHEQUES AMOUNT. THE SUPPLIER OF THE GIFT ARTICLES WERE NOT HAVING REGULAR CONTACT WITH THE ASSESSEE AS THEY WERE NOT ENGAGED IN THE SIMILAR BUSINESS AS THAT OF THE ASSESSEE. AS THE ASSESSEE HAS MADE THE PAYMENT ONLY AFTER PROCUREMENT OF THE GIFT ARTICLES, HE CANNOT BE SUPP OSED TO KEEP TRACK ON THESE PARTIES THEREAFTER. WHATEVER TH E INFORMATION THE ASSESSEE WAS HAVING REGARDING WHERE ABOUTS, TELEPHONE NUMBERS, MOBILE NUMBERS ETC. OF THESE SUP PLIERS, THE SAME HAVE BEEN DULY FURNISHED BEFORE THE LOWER AUTHORITIES. THE AO WAS HAVING SUFFICIENT POWER TO ISSUE SUMMONS AND COULD HAVE GATHERED INDEPENDENT EVIDENC E TO -: 6: - 6 SUPPORT ITS CONCLUSION THAT THERE WAS NO GENUINE PU RCHASES. HOWEVER, THE AO HAS NOT ISSUED ANY SUMMONS TO THESE PARTIES. WE ALSO FOUND THAT M/S. SHANTI MOHAN AGEN CY, ERODE, THE AUTHORIZED DEALER OF THE COMPANY, HAS AL SO CONFIRMED IN THEIR LETTER THAT GIFT ARTICLES UNDER QUESTION WERE DISTRIBUTED BY THEM ON BEHALF OF THE ASSESSEE. IT W AS ALSO CONFIRMED THAT THE TRANSPORTATION OF ALL THE GIFT A RTICLES WERE ARRANGED BY THEM FROM AHMEDABAD AND DELIVERY OF SUC H ARTICLES WERE TAKEN DIRECTLY FROM M/S. PADMAVATI TR ADING COMPANY AND SAHEBA AGENCY, AHMEDABAD BETWEEN JANUAR Y, 2004, TO MARCH, 2004. ALL THESE EVIDENCES CLEARLY S UPPORT THE CASE OF THE ASSESSEE THAT FOR THE PURPOSE OF ITS BU SINESS, THE ASSESSEE HAS INCURRED EXPENDITURE ON SALES PROMOTIO N, MERELY BECAUSE THE PARTIES WHO HAVE SUPPLIED THE GIFT ARTI CLES WERE NOT FOUND AT THEIR GIVEN ADDRESSES AFTER 2 -3 YEARS OF THE SUPPLY, THE ASSESSEE CANNOT BE BLAMED THAT THERE WA S NO PURCHASES OF GIFT ARTICLES. FURTHERMORE, SINCE THE TRANSPORTATION OF ALL THESE ARTICLES FROM AHMEDABAD TO ERODE WAS ARRANGED BY M/S. SHANTI MOHAN AGENCY AND DELIVE RY OF SUCH GIFT ARTICLES WERE TAKEN BY THEM DIRECTLY FROM PADMAVATI -: 7: - 7 TRADING AGENCY AND SAHEBA AGENCY AS CONFIRMED BY SH ANTI MOHAN AGENCY, THERE IS NO REASON TO DOUBT THAT GOOD S WERE NOT TRANSPORTED FROM AHMEDABAD TO ERODE. THE ASSESS EE HAS ALSO FILED DETAILS OF CUSTOMERS OF M/S. SHANTI MOHA N AGENCY TO WHOM GIFTS WERE DISTRIBUTED. EVEN KEEPING IN VIEW T HE TOTAL TURNOVER OF THE ASSESSEE AND THE NET INCOME OF RS. 58.70 LAKHS OFFERED IN THE RETURN OF INCOME, THE EXPENDITURE OF RS. 6,67,650/- ON SALES PROMOTION CANNOT BE SAID TO BE EXCESSIVE OR UNREASONABLE. AFTER GOING THROUGH THE VARIOUS DO CUMENTARY EVIDENCES PLACED ON RECORD, WE ARE OF THE CONSIDERE D VIEW THAT EXPENDITURE WERE GENUINELY INCURRED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS. THERE WAS NO REASON TO DISA LLOW THE SAME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011. SD/- SD/- (D.K. TYAGI) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH AUGUST, 2011.