M/s. Saxsons Biotech Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6891/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2021 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K TIWARI
• Keywords: Gift; Period of limitation; Condonation of delay
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NO.6891/DEL./2014 ASSESSMENT YEAR 2008-2009 M/S. SAXSONS BIOTECH PVT. LTD., 804-806, VISHAL TOWER, 10, DISTRICT CENTER, JANAKPURI, NEW DELHI. PIN 110 058. PAN AABCS7161C VS THE DCIT, CIRCLE-7(1), C.R. BUILDING, ITO, NEW DELHI 110 058.. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAJESH MAHNA, ADVOCATE. FOR REVENUE : SHRI K. TIWARI, SR.D.R. DATE OF HEARING : 23.08.2018 DATE OF PRONOUNCEMENT : 07.09.2018 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-X, DELHI, DATED 24.09.2014, FOR THE A.Y. 2008-2009, CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961, ON DISALLOWANCE OF EXPENDITURE OF RS.3,94,699/- UNDER THE HEAD BUSINESS PROMOTION. 2 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. 2. THIS APPEAL IS TIME BARRED BY 09 DAYS. THE ASSESSEE IN THE APPLICATION FOR CONDONATION OF DELAY EXPLAINED THAT DUE TO ILLNESS OF THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY, THE IMPUGNED ORDER COULD NOT BE SENT TO THE CONCERNED ADVOCATE FOR FILING THE APPEAL, WHICH IS SUPPORTED BY MEDICAL CERTIFICATE. THE ASSESSEE-COMPANY, THEREFORE, PRAYED THAT THE NOMINAL DELAY IN FILING THE APPEAL MAY BE CONDONED. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXPLANATION OF ASSESSEE-COMPANY, WE ARE SATISFIED THAT ASSESSEE-COMPANY WAS PREVENTED BY SUFFICIENT CAUSE IN NOT FILING THE APPEAL WITHIN THE PERIOD OF LIMITATION. THE NOMINAL DELAY IN FILING THE APPEAL IS, THEREFORE, CONDONED. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE-COMPANY WAS ENGAGED IN EXPORTS OF PROCUREMENT OF MEDICINES, RADIOACTIVE ISOTOPES, NUCLEAR PHARMACEUTICALS AND CAPITAL EQUIPMENTS FROM FOREIGN PRINCIPALS AND SELLS THEM TO HOSPITALS AND CHEMISTS ALL OVER INDIA. BESIDES THIS SELLING OF AND ARRANGING MEDICAL FACILITY, THE 3 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. ASSESSEE-COMPANY IS ALSO RECEIVING COMMISSION INCOME FROM FOREIGN PRINCIPALS ON ACCOUNT OF SALES OF THEIR MEDICINES, NUCLEAR PHARMACEUTICALS AND MEDICAL EQUIPMENTS ETC. ON BEHALF OF FOREIGN PRINCIPALS IN INDIA. THE A.O. ASKED THE ASSESSEE-COMPANY TO FILE DETAILS OF THE EXPENSES I.E., BUSINESS PROMOTION, SERVICE CHARGES PAID, CLEARING AND FORWARDING AND TRAVELLING EXPENSES. THE A.O. FOUND FROM THE DETAILS FURNISHED BY THE ASSESSEE-COMPANY THAT THERE ARE PAYMENTS EXCEEDING CASH PAYMENT OF RS.20,000/- ON SEVERAL OCCASIONS. THE A.O. ALSO NOTED THAT THERE ARE SELF-MADE VOUCHERS MADE FOR EXPENSES. THE A.O. REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE I.T. ACT, 1961. THE A.O. DISALLOWED 25% OF THE EXPENDITURE OUT OF THE ABOVE EXPENSES AND MADE DISALLOWANCE OF RS.57,58,187/-. 5. THE ASSESSEE-COMPANY CHALLENGED THE ADDITION BEFORE LD. CIT(A). THE DETAILED WRITTEN SUBMISSIONS ARE NOTED IN THE APPELLATE ORDER. THE LD. CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE-COMPANY THAT THERE WERE NO 4 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. JUSTIFICATION TO REJECT THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE I.T. ACT. THE LD. CIT(A) ALSO DELETED THE DISALLOWANCE OF EXPENSES OUT OF SERVICE CHARGES PAID AND CLEARING AND FORWARDING EXPENSES. THE LD. CIT(A) AS REGARDS THE TRAVELLING EXPENSES, DISALLOWED 5% OF THE TOTAL EXPENSES AGAINST 25% OF THE DISALLOWANCE MADE BY THE A.O. AND RESTRICTED THE DISALLOWANCE TO RS.1,10,800/-. THE LD. CIT(A), HOWEVER, CONFIRMED THE DISALLOWANCE OF 25% OF EXPENSES OUT OF BUSINESS PROMOTION AND CONFIRMED THE ADDITION OF RS.3,94,696/-. 6. THE A.O. INITIATED THE PENALTY PROCEEDINGS ON BOTH THE ABOVE ADDITIONS AND LEVIED THE PENALTY VIDE SEPARATE ORDER. THE LD. CIT(A) DELETED THE PENALTY WITH REGARD TO ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF TRAVELLING EXPENSES. HOWEVER, LD. CIT(A), CONFIRMED THE LEVY OF PENALTY ON ACCOUNT OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES IN A SUM OF RS.3,94,696/-. THE ASSESSEE-COMPANY IS IN APPEAL TO 5 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. CHALLENGE THE LEVY OF PENALTY ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED COPIES OF THE ASSESSMENT ORDER AND APPELLATE ORDER. HE HAS SUBMITTED THAT THE ADDITION IS MADE ON ESTIMATE BASIS, THEREFORE, NO PENALTY IS LEVIABLE ON ACCOUNT OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES. 8. THE LD. D.R. ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT PENALTY IS NOT LEVIABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A.O. NOTED IN THE ASSESSMENT ORDER THAT THERE ARE PAYMENTS MADE IN CASH WHICH EXCEEDED RS.20,000/-. THE A.O. REJECTED THE BOOKS OF ACCOUNT, BUT, LD. CIT(A) SET ASIDE THE ORDER OF THE A.O. AS REGARDS REJECTION OF 6 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. THE BOOKS OF ACCOUNT. THE ASSESSEE-COMPANY SUBMITTED BEFORE LD. CIT(A) ON QUANTUM ADDITION THAT ASSESSEE-COMPANY IS IN BUSINESS OF MEDICAL ISOTOPES AND OTHER LIFE SAVING DRUGS. THE ASSESSEE-COMPANY HAS TO INCUR EXPENSES ON PROMOTION OF BUSINESS AS PART OF GENERAL TRADE PRACTICE. THE EXPENSE HAVE BEEN REGULARLY INCURRED AND WHICH HAVE BEEN ALLOWED IN EARLIER YEARS. THE EXPENSES ARE INCURRED ON CONFERENCES AND MEETINGS FOR THE PURPOSE OF TRADE. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARE MAKING REGULAR VISITS TO THESE HOSPITALS, NURSING HOMES AND OTHER PLACES TO GIVE BOOST TO THE BUSINESS OF THE ASSESSEE-COMPANY. THE EXPENSES ARE INCURRED ON FOOD, TEA ETC., FOR WHICH, NECESSARY DOCUMENTARY EVIDENCES ARE AVAILABLE ON RECORD. THE CASH PAYMENTS ARE MADE IN 73.13% AND REST OF 26.87% EXPENSES ARE INCURRED THROUGH BANKING CHANNEL. THE LD. CIT(A), THEREFORE, NOTED THAT CASH PAYMENT HAVE BEEN MADE BY ASSESSEE-COMPANY AND THERE ARE CERTAIN EXPENSES INCURRED TO SHOW OCCASIONAL GIFTS TO THE DOCTORS AND OTHER STAFF IN VARIOUS HOSPITALS. THERE ARE BILLS TO SHOW PURCHASE OF LAPTOP, FOR WHICH, NO RATIONALE HAVE BEEN EXPLAINED. THE LD. 7 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. CIT(A) ALSO NOTED THAT THREE EXPENSES OF RS.15,000/-, RS.11,500/- AND RS.18,800/- ARE INCURRED TO FOLLOW-UP THE TENDER IN ARMED FORCES MEDICAL MATERIAL SUPPLY DEPOT. THE LD. CIT(A) APPLYING THE EXPLANATION-1 TO SECTION 37 OF THE I.T. ACT, CONFIRMED THE ADDITION. THESE FACTS WILL CLEARLY SHOW THAT THE AUTHORITIES BELOW HAVE ACCEPTED THAT MAJORITY OF THE EXPENSES ARE INCURRED FOR THE PURPOSE OF BUSINESS. THE EXPENSES ARE INCURRED IN CASH AS WELL AS THROUGH BANKING CHANNEL. CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE- COMPANY, THE EXPENDITURE INCURRED BY ASSESSEE-COMPANY APPEARS TO BE INCURRED FOR THE PURPOSE OF BUSINESS PROMOTION. THE LD. CIT(A), ON VERIFICATION OF THE BILLS AND VOUCHERS FOUND THERE ARE SOME OCCASIONAL GIFTS TO THE DOCTORS AND STAFF OF THE HOSPITALS AND THAT SOME LAPTOP IS PURCHASED AND THAT LEDGER SHOWS APPROXIMATELY RS.45,300/- HAVE BEEN SPENT FOR FOLLOW- UP OF TENDER IN ARMED FORCES MEDICAL MATERIAL SUPPLY DEPOT. IT IS NOT POINTED OUT OR ANY SPECIFIC FINDING HAVE BEEN GIVEN THAT WHILE INCURRING THESE EXPENSES AS TO WHAT OFFENCE IS COMMITTED BY THE ASSESSEE-COMPANY AND WHAT IS THE 8 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. PROHIBITION BY ANY LAW WHICH MAY NOT ALLOW THE ASSESSEE- COMPANY TO INCUR THESE EXPENDITURE. THEREFORE, EXPLANATION-1 TO SECTION 37 OF THE I.T. ACT MAY NOT APPLY IN THE CASE OF THE ASSESSEE-COMPANY. MAY BE THAT LEDGER ACCOUNT SHOWS THAT AMOUNT OF RS.45,300/- HAVE BEEN SPENT BY ASSESSEE-COMPANY FOR FOLLOW-UP OF TENDER BUT IT DID NOT SHOW THAT ANY ILLEGAL AMOUNT HAVE BEEN PAID FOR TAKING THE TENDER. AS AGAINST THE DISALLOWANCE OF RS.3,94,699/-, THE AMOUNT OF RS.45,300/- IS VERY SMALL. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IT IS A CASE OF DISALLOWANCE OF PART OF THE EXPENSES WHICH HAVE BEEN INCURRED CONSISTENTLY BY ASSESSEE-COMPANY IN EARLIER YEARS AS WELL. THEREFORE, IT IS NOT A FIT CASE FOR LEVY OF THE PENALTY. IT IS WELL SETTLED LAW THAT LEVY OF PENALTY IS NOT AUTOMATIC IN EACH AND EVERY CASE. IT DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE DISALLOWANCE OF PART OF THE EXPENSES WITHOUT BRINGING SPECIFIC MATERIAL AGAINST THE ASSESSEE-COMPANY ON RECORD, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS BY THE ASSESSEE-COMPANY. WE, 9 ITA.NO.6891/DEL./2014 M/S. SAXSONS BIOTECH PVT. LTD., NEW DELHI. THEREFORE, DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 07 TH SEPTEMBER, 2018 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT G BENCH 6. GUARD FILE // BY ORDER // ASST. REGISTRAR : ITAT DELHI BENCHES : DELHI.