M/s Benara Automotive Pvt. Ltd., Kanpur V. Astt. Commissioner of Income Tax, Kanpur

ITA 547/LKW/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4703 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.547/LKW/2015 ASSESSMENT YEAR 2010-11 ACIT, CENTRAL CIRCLE-I, KANPUR VS M/S BENARA AUTOMOTIVE PVT. LTD., 15/21, CIVIL LINES, KANPUR PAN AA BCB 2211 N (RESPONDENT) (APPELLANT) SHRI ASHISH JAISWAL, ADVOCATE APPELLANT BY SHRI AMIT NIGAM, DR RESPONDENT BY 03/02/2016 DATE OF HEARING 19/02/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF LD. CIT (A)-IV, KANPUR DATED 29.05.2015 FOR THE AY 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (AJ HAS ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 20% OF THE EXPENDITURE. 2. BECAUSE ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS ERRED IN CONFIRMING THE AD-HOC DISALLOWANCE S MADE BY THE ASSESSING OFFICER ARE GENERAL WITHOUT POINTI NG OUT ANY SPECIFIC DEFECT OR COGENT BASIS FOR DISALLOWANCE. 3. BECAUSE ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER TO THE EXTENT OF 20% ARE BASED ON AD-HOC BA SIS AND ARE BAD-IN-LAW AND EXCESSIVE. 2 4. BECAUSE ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. ASSESSING OFFICER WHILE MAKING DISALLOWANCE HAS NOT PROVIDED PROPER OPPORTUNITY TO THE APPELLANT. 5. THAT THE APPELLANT CRAVES LEAVE TO WITHDRAW, INT RODUCE OR MODIFY ANY GROUND OF APPEAL AS AND WHEN NEED FOR DO ING SO ARISES. 3. IT WAS SUBMITTED LD. AR OF THE ASSESSEE THAT THE ASSESSING OFFICER HIMSELF HAS NOTED ON PAGE 2 OF THE ASSESSMENT ORDER THAT TU RNOVER, GROSS PROFIT AS WELL AS NET PROFIT OF THE ASSESSEE HAS INCREASED AND ALS O THE BOOKS OF ACCOUNT HAVE BEEN AUDITED AND THEREFORE, TRADING RESULTS OF THE ASSESSEE ARE BEING ACCEPTED. HE FURTHER SUBMITTED THAT AFTER NOTING THESE FACTS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADHOC DISALLOWANCE OF 25% OF VA RIOUS EXPENSES UNDER THE HEADS ADVERTISEMENT AND PUBLICITY, REBATE AND DISCO UNT, CONVEYANCE AND TRAVELLING, SALARY AND TESTING EXPENSES WHICH HAS B EEN PARTLY UPHELD BY LD. CIT(A) TO THE EXTENT OF 20% AS AGAINST DISALLOWANCE MADE BY THE ASSESSING OFFICER OF 25%. HE ALSO SUBMITTED THAT EVEN IF IT I S FELT THAT SOME DISALLOWANCE IS TO BE MADE THEN ALSO, DISALLOWANCE OF 20% IS EXCESS IVE AND IT SHOULD BE MADE REASONABLE. 4. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AU THORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT THE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY ARE AVAILABLE IN T HE PAPER BOOK AND IN PARTICULAR, WE FIND THAT THE DETAILS OF VARIOUS EXP ENSES OUT OF WHICH SOME DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER AN D WERE PARTLY CONFIRMED BY THE LD. CIT(A) ARE AVAILABLE ON PAGE 50 OF THE PAPE R BOOK ALONG WITH THE FIGURES OF EXPENDITURE IN THE PRECEDING YEAR. FROM THE SAME , WE FIND THAT UNDER THE HEAD SALARY AND WAGES, EXPENSES IN THE PRESENT YEAR IS RS.44.70 LAKH AS AGAINST RS.40.12 LAKH IN THE PRECEDING YEAR. IN OUR CONSIDE RED OPINION, THIS MUCH INCREASE IN EXPENSES UNDER THE HEAD SALARY AND WAGE S IS QUITE REASONABLE WHICH IS ON ACCOUNT OF INFLATION AND NORMAL INCREMENTS AN D THEREFORE, NO DISALLOWANCE 3 OUT OF THE SAME IS JUSTIFIED IN THE ABSENCE OF ANY ADVERSE MATERIAL HAVING BEEN BROUGHT ON RECORD. SIMILARLY THE EXPENSES UNDER THE HEAD CONVEYANCE AND TRAVELLING IS RS.7.32 LAKH IN THE PRESENT YEAR AS A GAINST RS.6.02 LAKH IN THE PRECEDING YEAR. AS PER THE P & L ACCOUNT AVAILABLE ON PAGE 46 OF THE PAPER BOOK, THE SALE IN THE PRESENT YEAR HAS GONE UP TO R S.682.63 LAKH AS AGAINST RS.618.39 LAKH IN THE PRESENT YEAR. HENCE, THE INCR EASE IN SALES IS ABOUT 10% AND THE INCREASE IN EXPENDITURE UNDER THE HEAD CONV EYANCE AND TRAVELLING EXPENSES IS AROUND 20%. IT HAS TO BE ACCEPTED THAT WHEN THE TURNOVER INCREASES, THERE MAY BE SOME INCREASE IN THE EXPENS ES UNDER THE HEAD TRAVELLING AND CONVEYANCE ALSO BUT STILL WE FEEL TH AT SINCE THE INCREASE IN SALES IS ONLY AROUND 10% AND THE INCREASE IN THE EXPENSES UN DER THE HEAD CONVEYANCE AND TRAVELLING IS AROUND 20%, CONFIRMING DISALLOWAN CE OF 10% UNDER THIS HEAD WILL MEET THE ENDS OF JUSTICE. REGARDING THE EXPENS ES UNDER THE HEAD ADVERTISEMENT AND PUBLICITY, WE FIND THAT THE SAME HAS INCREASED TO RS.9.24 LAKH IN THE PRESENT YEAR AS AGAINST RS.5.76 LAKH IN THE PRECEDING YEAR. THE INCREASE IN THE EXPENDITURE UNDER THIS HEAD QUITE I S SUBSTANTIAL BUT IT HAS TO BE ACCEPTED THAT ANY EXPENDITURE INCURRED UNDER THE HE AD ADVERTISEMENT AND PUBLICITY MAY NOT RESULT IN THE INCREASE IN TURNOVE R IN THE SAME YEAR. BUT STILL THIS IS A SETTLED POSITION OF LAW THAT THE EXPENSES UNDER THE HEAD ADVERTISEMENT AND PUBLICITY IS REVENUE EXPENDITURE AND THE SAME I S ALLOWABLE IN THE YEAR IN WHICH IT IS INCURRED EVEN IF THE RESULT THEREOF IS AVAILABLE IN SUBSEQUENT YEAR. THEREFORE, ON THIS REASONING ALONE THAT THE INCREAS E IN THE EXPENDITURE UNDER THE HEAD ADVERTISEMENT AND PUBLICITY IS NOT RESULTI NG IN CORRESPONDING INCREASE IN TURNOVER, DISALLOWANCE IS NOT JUSTIFIED. HOWEVER , IF THIS IS AN ALLEGATION OF THE ASSESSING OFFICER SUPPORTED BY COGENT MATERIAL ON R ECORD THAT THE EXPENSES UNDER THIS HEAD ARE BOGUS OR CAPITAL IN NATURE THEN DISALLOWANCE MAY BE MADE. BUT IN THE PRESENT CASE, THERE IS NO SUCH ALLEGATIO N OF THE ASSESSING OFFICER THAT THE EXPENSES ARE BOGUS OR CAPITAL IN NATURE. HENCE, IN OUR CONSIDERED OPINION, NO DISALLOWANCE UNDER THIS HEAD IS CALLED FOR IN TH E ABSENCE OF ANY SUCH ALLEGATION OF THE ASSESSING OFFICER SUPPORTED BY CO GENT MATERIAL THAT THE 4 EXPENSES ARE BOGUS OR CAPITAL IN NATURE. SIMILARLY, THE EXPENSES UNDER THE HEAD REBATE AND DISCOUNT IS RS.17.42 LAKH IN THE PRESENT YEAR AS AGAINST RS.11.76 LAKH IN THE PRECEDING YEAR. UNDER THIS HEAD ALSO, T HE INCREASE IN EXPENDITURE IS SUBSTANTIAL BUT AGAIN, ASSESSING OFFICER HAS NOT BR OUGHT ANY ADVERSE MATERIAL ON RECORD TO SHOW THAT ANY BOGUS EXPENSES HAS BEEN CLA IMED UNDER THIS HEAD. WE ALSO FIND THAT ALTHOUGH THE INCREASE IN EXPENDITURE UNDER THIS HEAD IS ABOUT 50% BUT STILL DISALLOWACE MADE BY THE ASSESSING OFF ICER AND CONFIRMED BY THE LD. CIT(A) IS ONLY 20%. HENCE IT IS SEEN THAT EVEN THE LOWER AUTHORITIES HAS ACCEPTED THAT THE INCREASE IN THIS EXPENDITURE MAY BE THERE. CONSIDERING THE FACTS IN ITS ENTIRETY, WE FEEL THAT 10% DISALLOWANC E UNDER THIS HEAD WILL MEET THE ENDS OF JUSTICE. WE HOLD ACCORDINGLY. THE ASSESSING OFFICER IS DIRECTED TO MAKE DISALLOWANCE OF 10% UNDER THE HEAD REBATE AND DISCO UNT AND CONVEYANCE AND TRAVELLING EXPENSES AND NO DISALLOWANCE SHOULD BE M ADE UNDER THE REMAINING HEADS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19/02/2016 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGIS TRAR