RAJASTHAN EXPLOSIVES & CHEMICALS LTD, NEW DELHI V. JCIT, BHARATPUR

ITA 554/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2122 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Condonation of delay
• Section: 40A(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 554/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S RAJASTHAN EXPLOSIVES & CHEMICALS LTD., 2, FIRST FLOOR, R.K. PURAM MARKET, SECTOR 8, NEW DELHI- 110022. CUKE VS. J.C.I.T., RANGE- BHARATPUR, BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACR 9819 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SALIL KAPOOR & MS. ANANYA KAPOOR. JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/03/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/04/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER DATED 05/08/2013 PASSED BY THE LD. CIT(A), ALWAR FOR THE ASSESSMENT YEAR 2009-10, WHEREIN THE ASSESSEE HAS RAISED FOLLOWING G ROUNDS OF APPEAL:- (1) THAT THE CIT(A) HAS IN VIEW OF THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 1,71,363 MADE BY THE A.O. U/S 4 0A(3). ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 2 (2) THAT THE CIT(A) HAS IN VIEW OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW GROSSLY ERRED IN ISSUING A SHOW CAUSE NOTICE OF ENHANCEMENT U/S 251 TO THE ASSESSEE. THE NOTICE ISSUE IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTI ON. (3) THAT THE CIT(A) HAS IN VIEW OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW GROSSLY ERRED IN ENHANCING THE DISALLOWANCE FROM RS. 72 LAKHS TO RS. 96 LAKHS OF TH E REMUNERATION PAID TO DIRECTORS. (4) THAT THE ENHANCEMENT MADE BY THE CIT(A) IS ILLE GAL AND BAD IN LAW. THE ENHANCEMENT IS MADE ON INCORRECT APPRECIAT ION OF FACTS AND IS BASED ON SURMISES AND CONJECTURES AND GUESSWORK. (5) THAT THE CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 72 LAKHS THAT WAS MADE BY THE A. O. INITIALLY. (6) THAT THE VARIOUS OBSERVATIONS MADE BY THE CIT(A ) IN THE IMPUGNED ORDER AGAINST THE ASSESSEE ARE ILLEGAL, BA D IN LAW AND TOTALLY CONTRARY TO FACTS ON RECORD. (7) THAT THE A.O. AND CIT(A) HAVE GROSSLY ERRED IN LAW AND ON FACTS IN INVOKING SEC. 40A(2)(B) AGAINST THE ASSESSE E. (8) THAT THE CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS. 9,88,940/- ON ACCO UNT OF EXPENSES INCURRED FOR REPAIR AND MAINTENANCE, TRAVE LLING AND MISC EXPENSES. 2. IN THIS APPEAL, THERE IS A DELAY OF 268 DAYS IN FILING THE APPEAL, FOR WHICH, THE ASSESSEE HAS FILED AN APPLICATION FOR CON DONATION OF DELAY IN FILING THE APPEAL. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE OF CONDONATION OF DELAY AND AFTER HEARING THE PARTIES AND LOOKING TO THE FACT THAT THE DELAY ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 3 IN FILING THE APPEAL IS NOT INTENTIONAL AND BEYOND THE CONTROL OF THE ASSESSEE, THEREFORE THE DELAY OF 268 DAYS IN FILING THE APPEAL IS HEREBY CONDONED BY FOLLOWING THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS. (1987) 167 ITR 471 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS U NDER:- MAKING A JUSTICE-ORIENTED APPROACH FROM THIS PERSPE CTIVE, THERE WAS SUFFICIENT CAUSE FOR CONDONING THE DELAY IN THE INS TITUTION OF THE APPEAL. THE FACT THAT IT WAS THE 'STATE' WHICH WAS SEEKING CONDONATION AND NOT A PRIVATE PARTY WAS ALTOGETHER IRRELEVANT. THE DOCTRINE OF EQUALITY BEFORE LAW DEMANDS THAT ALL LITIGANTS, INCLUDING TH E STATE AS A LITIGANT, ARE ACCORDED THE SAME TREATMENT AND THE LAW IS ADMI NISTERED IN AN EVEN-HANDED MANNER. THERE IS NO WARRANT FOR ACCORDI NG A STEP- MOTHERLY TREATMENT WHEN THE 'STATE' IS THE APPLICAN T PRAYING FOR CONDONATION OF DELAY. IN FACT, EXPERIENCE SHOWS THA T ON ACCOUNT OF AN IMPERSONAL MACHINERY (NO ONE IN CHARGE OF THE MATTE R IS DIRECTLY HIT OR HURT BY THE JUDGMENT SOUGHT TO BE SUBJECTED TO APPE AL) AND THE INHERITED BUREAUCRATIC METHODOLOGY IMBUED WITH THE NOTE-MAKING, FILE- PUSHING, AND PASSING-ON-THE-BUCK ETHOS, DELAY ON IT S PART IS LESS DIFFICULT TO UNDERSTAND THOUGH MORE DIFFICULT TO AP PROVE. IN ANY EVENT, THE STATE WHICH REPRESENTS THE COLLECTIVE CAUSE OF THE COMMUNITY, DOES NOT DESERVE A LITIGANT NON GRATA STATUS. THE C OURTS, THEREFORE, HAVE TO BE INFORMED OF THE SPIRIT AND PHILOSOPHY OF THE PROVISION IN THE COURSE OF THE INTERPRETATION OF THE EXPRESSION 'SUF FICIENT CAUSE'. SO ALSO THE SAME APPROACH HAS TO BE EVIDENCED IN ITS A PPLICATION TO MATTERS AT HAND WITH THE END IN VIEW TO DO EVEN-HAN DED JUSTICE ON MERITS IN PREFERENCE TO THE APPROACH WHICH SCUTTLES A DECISION ON MERITS. TURNING TO THE FACTS OF THE MATTER GIVING R ISE TO THE PRESENT APPEAL, WE ARE SATISFIED THAT SUFFICIENT CAUSE EXIS TS FOR THE DELAY. THE ORDER OF THE HIGH COURT DISMISSING THE APPEAL BEFOR E IT AS TIME-BARRED, IS THEREFORE, SET ASIDE. DELAY IS CONDONED. 3. THE 1 ST GROUND OF THE APPEAL IS AGAINST SUSTAINING THE DIS ALLOWANCE OF RS. 1,71,363/- U/S 40A(3) OF THE ACT. THE BRIEF FACT S OF THE CASE ON THIS ISSUE IS THAT THE ASSESSEE HAD MADE CASH PAYMENT OF RS. 6,85,363/- FROM DHOIPUR, DELHI, AND WAIDHAN OFFICE. ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 4 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT( A), WHO AFTER CONSIDERING THE SUBMISSIONS HAS GRANTED PART RELIEF BY HOLDING AS UNDER:- 5.3 I HAVE GONE THROUGH THE ORDER OF A.O. AND SUBM ISSIONS MADE BY THE AR IN THIS REGARD. IT HAS BEEN EXPLAINE D THAT FOLLOWING PAYMENTS:- (I) EX-GRATIA PAYMENT ON 27/10/2008 RS. 3,96,000/ - (II) EX-GRATIA PAYMENT ON 27/10/2008 RS. 1,18,000 /- WERE MADE TO THE EMPLOYEES IN CASH ON THE OCCASION OF DIWALI. IT IS STATED THAT EACH EMPLOYEE WAS PAID RS. 2000/- IN CASH. A COPY OF THE VOUCHER SHOWING SUCH PAYMENTS TO EACH EMPLOYEE HAS ALSO BEEN ENCLOSED WITH THE SUBMISSIONS. FURTHER, IT IS STATED THAT THE REMAINI NG PAYMENTS OF RS. 1,71,363/- (6,85,363 - 5,14,000) HA VE BEEN MADE TO THE EMPLOYEES FOR VARIOUS EXPENSES AS REIMBURSEMENT. HOWEVER, NO SUCH EVIDENCE COULD BE PRODUCED IN THE PROCEEDINGS. FURTHER, NO EVIDENCE I N SUPPORT OF THE CIRCUMSTANCES WHICH NECESSITATED MAK ING SUCH PAYMENTS IN CASH WAS PRODUCED EITHER BEFORE THE A.O. OR DURING THE COURSE OF PRESENT PROCEEDINGS. S INCE, EACH OF SUCH EXPENDITURE AS DETAILED ABOVE (INCLUDE D IN THE AMOUNT OF RS. 1,71,363/-) EXCEED RS. 20,000, ACCORDINGLY, I CONFIRM THE DISALLOWANCE OF RS. 1,71, 363/- MADE ON ACCOUNT OF PAYMENTS MADE IN CASH, IN VIOLAT ION OF THE PROVISIONS OF SECTION 40A(3) OF IT ACT. THE APPEL LANT WOULD THUS GET A RELIEF OF RS. 5,14,000 ON THIS ACCO UNT. ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 5 5. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. ONLY AMOUNT SUSTAINED WAS RS. 1,71,363/- FOR THE REASON THAT THESE AMOUNTS WERE PAID TO THE EMPLOYEES AS REIMBURSEMENT OF THE VARIOUS EXPENSES. HOWEVER, NO EVIDENCES WERE FILED IN THIS REGARD BEFORE THE ASSES SING OFFICER AS WELL AS BEFORE THE LD. CIT(A). THE LD. CIT(A) ALSO OBSERVED TH AT NO EVIDENCE IN SUPPORT OF THE CIRCUMSTANCES, WHICH NECESSITATED MA KING SUCH PAYMENTS IN CASH WAS FILED. BEFORE US ALSO, NO EVIDENCE WITH REGA RD TO NECESSITY FOR MAKING CASH PAYMENT TO THE EMPLOYEES WERE FILED. THE REFORE, IN ABSENCE OF ANY SUPPORTING DOCUMENT IN SUPPORT OF THE CLAIM OF THE ASSESSEE THAT THESE WERE REIMBURSEMENT OF THE EXPENSES TO THE EMPL OYEES AND CIRCUMSTANCES NECESSITATED SUCH PAYMENT IN CASH, TH E ADDITION SUSTAINED. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), THEREFORE, THE SAME IS HEREBY CONFIRMED. THE APPEAL OF THE ASSESSE E ON THIS GROUND IS DISMISSED. 6. GROUNDS NO. 2 TO 7 OF THE APPEAL ARE INTERLINED AND WITH REGARD TO THE DISALLOWANCES MADE BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSE SSEE COMPANY HAS PAID REMUNERATION OF RS. 60 LACS EACH TO MS. MANISHA SOL ANKI AND MR. YUVRAJ SOLANKI DURING THE YEAR. THEY ARE DAUGHTER AND SON O F SHRI K.S. SOLANKI, MANAGING DIRECTOR. THE ASSESSING OFFICER NOTED THAT NO SUCH REMUNERATION ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 6 WAS PAID IN THE PRECEDING YEAR. THE ASSESSEE WAS ASKED TO SUBMIT DOCUMENTARY EVIDENCE REGARDING THEIR EDUCATIONAL AN D PROFESSIONAL QUALIFICATIONS, WORK EXPERIENCE IN THIS LINE OF BUSI NESS, BUSINESS EXIGENCY AND BENEFIT ACCRUED TO THE ASSESSEE COMPANY FROM TH ESE PERSONS. THE ASSESSEE SUBMITS THAT MR. YUVRAJ SONALKI HAS GOT TH E DIPLOMA SUPPLEMENT IN BACHELOR OF ARTS WITH LEVEL 6 BACHELOR DEGREE FRO M DE MONTFORT UNIVERSITY WITH VAST KNOWLEDGE AND EXPERIENCE IN DIFF ERENT MODULES RELATING TO ACCOUNTING, ANALYSIS, ECONOMICS, FINANC IAL MARKETS AND SERVICES STRATEGIC AND BRAND MANAGEMENT AND MANY OTHER RESEA RCH ISSUES AND ANALYSIS. MS. MANISHA SOLANKI IS THE DEGREE HOLDING IN BACHELOR OF SCIENCE FROM THE FAMOUS AND RENOWNED UNIVERSITY OF THE GEOR GE WASHINGTON UNIVERSITY, WASHINGTON, WITH THE VAST KNOWLEDGE OF A BOVE MODULES, COMPANY HAS GAINED GROWTH IN TERMS OF VOLUMES, WORK S TRATEGY AND DEVELOPED MANAGERIAL STRATEGY. THE DOCUMENTARY EVIDE NCES AND CERTIFICATES WERE SUBMITTED BEFORE THE AUTHORITIES B ELOW AND THE ASSESSEE PLEADED THAT THE DIRECTORS REMUNERATION PAID TOTAL ING TO RS. 1.20 CRORES WERE JUSTIFIED IN VIEW OF THE HIGH DEGREE OF FOREIGN QUALIFICATION AND EXPERIENCE. IT WAS ALSO SUBMITTED THAT IN THE PRECED ING YEAR, MS. MANISHA SOLANKI AND MR. YUVRAJ SOLANKI WERE NOT DIRECTOR OF THE COMPANY, THEREFORE, REMUNERATION WERE NOT PAID. IT WAS FURTHER SUBMITTED THAT THE COMPARATIVE FIGURE OF TOTAL TURNOVER OF THE ASSESSE E COMPANY, WHICH WAS ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 7 RS. 53.91 CRORES IN FINANCIAL YEAR 2008-09 WHILE IT WAS 45.68 CRORES IN FINANCIAL YEAR 2007-08. THE ASSESSING OFFICER DISALL OWED THE AMOUNT OF RS. 72 LACS. THE LD. CIT(A) ENHANCED IT TO RS. 96.00 LACS . 7. WE HAVE HEARD BOTH THE SIDES ON THESE ISSUES. TH E ASSESSEE COMPANY IN ITS BOARD MEETING ON 03/10/2008 RESOLVED THAT THE COMPANY SHALL PAY MANAGERIAL REMUNERATION AMOUNTING TO RS. 1.20 CRORES TO THE FOLLOWING DIRECTORS FOR FINANCIAL YEAR 2008-09 IN TH E MANNER GIVEN BELOW: SL. NO. NAME OF DIRECTORS MODE OF PAYMENT AMOUNT (IN RS.) 1. MANISHA SOLANKI BY WAY OF SALARY AND ALLOWANCES 60,00,000/ - 2. YUVRAJ SINGH SOLANKI BY WAY OF SALARY AND ALLOWANCES 60,00,000/ - TOTAL 1,20,00,000/ - THUS, THE REMUNERATION WAS FOR THE FINANCIAL YEAR 200 8-09, THEREFORE, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS MISU NDERSTOOD THIS PAYMENT OF REMUNERATION TO THE DIRECTORS TOWARDS THE MONTHLY SALARY. THE AMOUNT WAS PAID AND NECESSARY TDS WAS DEDUCTED. NECESSARY INF ORMATION IN THE FORM NO. 32 UNDER THE COMPANIES ACT, 1956 WAS FILED DECLARING SUCH REMUNERATION PAID TO THE DIRECTORS FILED WITH THE RO C. BOTH THESE DIRECTORS HAVE SHOWN THESE AMOUNTS IN THEIR RETURN OF INCOME. NECESSARY EVIDENCE IN THIS REGARD IN THE FORM OF ITR PLACED AT PAGE NO. 23 AND 25 OF THE PAPER BOOK. THE DETAILS OF QUALIFICATIONS OF BOTH THE DIRE CTORS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW. THE NECESSARY BOARD RES OLUTION WAS ALSO FILED ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 8 BEFORE THE AUTHORITIES BELOW. THE DETAILS OF PAYMENTS ALONGWITH TDS WERE ALSO FILED. THE COMPANY WAS A PROFIT MAKING COMPANY, THE DIRECTORS HAVE DECLARED THE AMOUNT IN THEIR RESPECTIVE RETURN OF I NCOME. SUCH REMUNERATION PAYMENTS MADE IN THE SUBSEQUENT YEARS STAND ACCEPTED BY THE REVENUE AUTHORITIES, THEREFORE, IN OUR CONSIDER ED VIEW, THERE WAS NO JUSTIFICATION IN DISALLOWANCE AND FURTHER ENHANCING SUCH DISALLOWANCE BY THE ASSESSING OFFICER AND THE LD. CIT(A) RESPECTIVELY. TH EREFORE, WE DIRECT TO DELETE THE SAME. 8. GROUND NO. 8 OF THE APPEAL IS AGAINST SUSTAINING THE DISALLOWANCE OF EXPENSES OF RS. 9,88,940/- WITH REGARD TO REPAIR AND MAINTENANCE, TRAVELLING AND MISC. EXPENSES.. THE ASSESSING OFFIC ER MADE AD HOC DISALLOWANCE OF RS. 19,77,880/- BEING 10% OF THE EXP ENSES INCURRED ON REPAIR AND MAINTENANCE EXPENSES, TRAVELLING AND MIS C. EXPENSES. THE LD. CIT(A) HAS REDUCED THIS AD HOC DISALLOWANCES TO 5% OF THE TOTAL EXPENSES. 9. BEFORE US, IT WAS PLEADED THAT THESE ALLOWANCES WER E MADE COMPLETELY ON AD HOC BASIS, NO SPECIFIC DEFECTS WERE POINTED OUT IN THE BOOKS OF ACCOUNT. HE FURTHER SUBMITTED THAT THE ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLIN G OF EXPLOSIVES AND THESE EXPENSES HAVE BEEN INCURRED ON REPAIR AND MAI NTENANCE FOR ITS PLANT AND MACHINERY, BUILDING AND FACTORY, ELECTRICAL, TR AVELLING AND CONVEYANCE ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 9 EXPENSES OF THE STAFFS, FUELS FOR VEHICLES AND HIRI NG OF THE VEHICLES WERE ALSO MADE FOR THE BUSINESS REQUIREMENT OF THE ASSES SEE COMPANY. THE MISC. EXPENSES DEBITED WERE ALSO INCLUDED AUDIT FEE, CONSULTANCY CHARGES, LEGAL CHARGES, PROFESSIONAL FEE, BUSINESS PROMOTION EXPENSES ETC. THEREFORE, ALL THE EXPENSES DEBITED IN THE BOOKS OF ACCOUNT WER E TOTALLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE COMPANY. 10. AFTER HEARING BOTH THE SIDES, WE FIND THAT THIS DISALLOWANCE HAS BEEN MADE COMPLETELY ON AD HOC BASIS AND PURELY ON GUESS WORK. NO SPECIFIC DEFECTS WERE POINTED OUT IN THE EXPENSES CLAIMED UND ER THIS HEAD AND NOR IT WAS ESTABLISHED THAT PART OF THE EXPENSES DEBITED WERE NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, IN ABSENCE OF ANY DEFECTS AND FINDING THAT EXPENSES WERE NOT INCURRED FOR THE BUSINESS PURPOSES, SUCH AD HOC DISALLOWANCE IS NOT DISALLOWED. ACCORDING LY, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/04/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH APRIL, 2017 *RANJAN ITA 554/JP/2014_ RAJASTHAN EXPLOSIVES & CHEMICALS LTD. VS JCIT 10 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S RAJASTHAN EXPLOSIVES & CHEMICALS LTD., NEW DELHI. 2. IZR;FKHZ @ THE RESPONDENT- THE JCIT, RANGE- BHARATPUR, BHARATPU R. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 554/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR