M/s. Mak Pump Industries, Ahmedabad V. The Income tax Officer,Ward-3(4), Ahmedabad

ITA 69/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73043 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: M K PATEL
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 69 /AHD/2011 (ASSESSMENT Y EAR: 2007-08) M/S. MAK PUMP INDUSTRIES PLOT NO. 65, PHASE-I, GIDC, NARODA, AHMEDABAD V/S THE I.T.O. WARD 3(4), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAIFM3936D APPELLANT BY : SHRI M.K. PATEL RESPONDENT BY : SHRI J.P. JHANGID, SR. D.R. ( )/ ORDER DATE OF HEARING : 26-02-2014 DATE OF PRONOUNCEMENT : 07 -03-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-XVI, AHMEDABAD DATED 08.11.2010. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND TRADING OF SUBMERSIBLE PUMPS AND COMPONENTS. AS SESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 29.10.2007 ITA NO 69/AH D/2011 . A.Y. 2007 - 08 2 DECLARING TOTAL INCOME OF RS. 5,36,612/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 18.12.2009 AND THE TOTAL INCOME WA S DETERMINED AT RS. 8,27,910/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSE E CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 8.11.2010 DI SMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GR OUNDS:- 1. THAT ON FACTS AND IN LAW THE LEARNED CIT(A) HAS GRI EVOUSLY ERRED IN HOLDING THAT THE TURNOVER DISCOUNT OF RS. 1,71,349/- AND SERVICE DISCOUNT OF RS. 1,19,944/- IS NOT ALLOWABLE AND THAT IT PERTAINED TO EARLIER ASSESSMENT YEAR. 2. THAT ON FACTS AND IN LAW, IT OUGHT TO HAVE BEEN HEL D THAT THE TURNOVER DISCOUNT AND SERVICE DISCOUNT ARE LEGITIMATE BUSINESS EXPENDITURE AND TH E SAME IS ALLOWABLE AS IT HAD CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. 4. THOUGH 2 DIFFERENT GROUNDS HAVE BEEN RAISED BY ASSE SSEE BUT THE SINCE BOTH THE GROUNDS ARE INTERCONNECTED THEREFORE BOTH THE GROUNDS ARE CONSIDERED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USING THE LEDGER ACCOUNTS OF JAI BALAJI SUBMERSIBLE (HARYANA), A.O. NOTICED THAT ASSESSEE HAD GRANTED TURNOVER DISCOUNT OF RS. 1,71,349/- AND SERVICE DISCOUNT OF RS. 1,19,944/- TO IT. A.O. ALSO NOTICED THAT THOUGH THE TURNOVER DISCOUNT AND SERVICE DISCOUNT WAS GRANTED DURING FINANCIAL Y EAR 06-07 BUT WAS ON THE BASIS OF PERFORMANCE OF PARTY DURING EARLIER FI NANCIAL YEAR I.E. 05-06. HE WAS THEREFORE OF THE VIEW THAT THE EXPENSES DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION MORE SO WHEN THE ACCOUNT OF THE PARTY WAS CREDITED WITH TURNOVER DISCOUNT AND SERVICE DISCOUNT ON THE FIRST DAY OF THE FINANCIAL YEAR 06-07. A.O. ALSO ASKED THE ASSESSEE TO FURNISH ITA NO 69/AH D/2011 . A.Y. 2007 - 08 3 DOCUMENTARY EVIDENCES IN RESPECT OF SCHEME OF TURNO VER DISCOUNT AND SERVICE TURNOVER ALLOWED TO JAI BALAJI SUBMERSIBLE AS WELL AS THE DETAILS OF OTHER PARTY TO WHOM SUCH DISCOUNT WAS GIVEN DURI NG F.Y. 05-06 & 06- 07. THE ASSESSEE WAS THEREFORE ASKED TO JUSTIFY IT S CLAIM OF EXPENDITURE. A.O HAS NOTED THAT INSTEAD OF GIVING THE DETAILS AL ONG WITH THE EVIDENCES TO PROVE THE GENUINENESS OF THE DISCOUNT, THE ASSES SEE HAD MERELY FILED AN AFFIDAVIT OF ITS PARTNER TO SUBSTANTIATE THE CLA IM. A.O. ALSO NOTICED THAT DURING THE FINANCIAL YEAR 05-06 ANOTHER PURCHASER N AMELY MAK PUMP INDUSTRIES (LUDHIANA), THOUGH HAD MADE PURCHASES OF AMOUNT IN EXCESS OF RS. 1 CRORE AS AGAINST THE PURCHASE OF RS. 35 LA C BY JAI BALAJI SUBMERSIBLE (HARYANA), BUT NO TURNOVER DISCOUNT OR SERVICE DISCOUNT WAS ALLOWED TO MAK PUMP INDUSTRIES (LUDHIANA). HE T HEREFORE CONSIDERED THE CLAIM IN RESPECT OF TURNOVER DISCOUN T AND SERVICE DISCOUNT AS THE NON GENUINE EXPENDITURE. AS AS ALT ERNATE, HE CONSIDERED THE DISCOUNT TO BE PRIOR PERIOD EXPENSES AND THEREF ORE ALSO THE SAME COULD NOT BE ALLOWED FOR THE YEAR UNDER CONSIDERATI ON. HE ACCORDINGLY DISALLOWED THE TURNOVER DISCOUNT AND SERVICE DISCOU NT AGGREGATING TO RS. 2,91,293/-(RS. 1,71,349 + RS. 1,19,944). AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) U PHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 4.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND OBSERVATION OF THE AO. I AGREE WITH BOTH THE CONDITIONS IN RESPECT OF WHICH THE AO HAS DISALLOWED THE CLAIM. IT IS VERY CLEAR THAT THE CLA IM PERTAINS TO THE EARLIER YEAR AND NOT TO THE CURRENT YEAR. THE APPELLANT ITSELF HAS CREDITED THE DISCOU NT ON THE VERY FIRST DAY OF THE CURRENT YEAR I.E. 01/0 4/2006, WHICH SHOWS THAT THE STORY OF THE PARTY EAR LIER AGREEING TO RETURN THE GOODS AND LATER ON AGREEING NOT TO RETURN THE GOODS IS BOGUS BECAUSE IF IT WAS SO, THE DISCOUNT COULD NOT HAVE BEEN DECIDED ON THE VERY NEXT DAY. THE EXPENDITURE IS CLEARLY IN RESPE CT OF EARLIER YEAR AND NOT FOR THE CURRENT YEAR. 4.2 SECONDLY, EVEN ON MERIT, IT IS VERY CLEAR THAT THE APPELLANT HAS FAILED TO BRING ANY DOCUMENT TO S HOW THAT THE PARTY WAS ELIGIBLE FOR TURNOVER DISCOUNT A ND SERVICE DISCOUNT. ON THE OTHER HAND THE OTHER PARTY WHOSE SALES WERE FOR MORE THAN 25 LACS HAS NO T BEEN GIVEN THE DISCOUNT. EVEN THOUGH ITS SALES WERE THREE TIMES MORE THE SALES OF BALAJI. THE PIEC E OF PAPER STATING TO BE THE TERMS AND CONDITIONS DOES NOT INSPIRE ANY CONFIDENCE AT ALL AS IT IS A C OMPUTER PRINTOUT, BEARING NO MARK OF GENUINENESS. EVEN THE STAMP OF BALAJI IS NOT PRINTED. THE NAME O F BALAJI IS NOT PRINTED. THE APPELLANT HAS FAILED T O SHOW HOW MESSRS. MAK PUMP INDUSTRIES FAILED TO QUAL IFIES FOR THE DISCOUNT, WHEREAS MESSRS. BALAJI ITA NO 69/AH D/2011 . A.Y. 2007 - 08 4 SUCCEEDED IN ANY CASE, THE APPELLANT HAS FAILED TO SHOW ANY EVIDENCE THAT GIVING THE DISCOUNT WAS AS PER THE AGREEMENT. HENCE, EVEN ON MERIT, THE DISALL OWANCE MADE BY THE AO IS CORRECT. THE DISALLOWANCE IS CONFIRMED, THE GROUNDS OF APPEAL AR E DISMISSED. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 7. BEFORE US, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O. AND CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE POLICY OF CREDITING THE TURNOVER DISC OUNT AND SERVICE DISCOUNT IN THE MONTH OF APRIL OF SUCCEEDING YEAR A ND IT IS CALCULATED ON THE BASIS OF THE TOTAL SALES, SALES RETURN, PROMPT PAYMENT ETC MADE IN THE IMMEDIATE PRECEDING FINANCIAL YEAR. HE THEREFORE SU BMITTED THAT THE EXPENSES CRYSTALLIZED DURING THE YEAR UNDER CONSIDE RATION AND THEREFORE IT WAS ALLOWABLE. HE FURTHER SUBMITTED THAT THE ASSESS EE WAS HAVING TAXABLE INCOME EVEN IN THE EARLIER YEARS AND IN THE YEAR UN DER CONSIDERATION AND THEREFORE ANY MOTIVE TO EVADE THE TAX CANNOT BE ATT RIBUTED TO THE ASSESSEE. HE THEREFORE SUBMITTED THAT THE EXPENSES BE ALLOWED IN THE YEAR UNDER CONSIDERATION. IN THE ALTERNATE HE SUBMI TTED THAT IF THE EXPENSES IS CONSIDERED TO BE PERTAINING TO PREVIOUS YEAR, NECESSARY DIRECTIONS MAY BE GIVEN FOR ALLOWING THE SAME IN TH E PREVIOUS YEAR. HE ALSO PLACED RELIANCE ON THE DECISION OF SAURASHTRA CEMENT AND CHEMICALS INDUSTRIES LTD. VS. CIT (1995) 213 ITR 523. AND THE DECISION IN THE CASE OF PERFECT EQUIPMENT VS. DCIT (2003) 85 ITD 50 (AHM EDABAD) . THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF A.O. AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ALLOWABILITY OF TU RNOVER DISCOUNT AND ITA NO 69/AH D/2011 . A.Y. 2007 - 08 5 SERVICE DISCOUNT. IT IS AN UNDISPUTED FACT THAT TH E TURNOVER DISCOUNT AND SERVICE DISCOUNT WHICH HAS BEEN OFFERED TO JAI BALA JI SUBMERSIBLE (HARYANA) WAS WITH RESPECT TO THE SALES MADE TO THE M IN FINANCIAL YEAR 05-06. IT IS ALSO A FACT THAT THE ENTRY FOR CREDIT OF TURNOVER DISCOUNT AND SERVICE DISCOUNT HAVE BEEN PASSED ON THE FIRST DAY OF FINANCIAL YEAR I.E. ON 1.04.2006 I.E. IN F.Y. 06-07. WHILE DISALLOWING THE EXPENSES, A.O HAS NOTED THAT ASSESSEE DID NOT FURNISH ANY DOCUMEN TARY EVIDENCE IN RESPECT OF TURNOVER DISCOUNT AND SERVICE DISCOUNT O R DETAILS OF OTHER PARTIES TO WHOM SUCH DISCOUNTS WERE GIVEN DURING TH E FINANCIAL YEARS 05- 06 & 06-07. A.O. HAVE ALSO NOTED THAT DURING FINAN CIAL YEAR 05-06 THOUGH THE SALES TO ANOTHER PARTY M/S. MAK PUMP IN DUSTRIES (LUDHIANA) WAS TO THE EXTENT OF RS. 1 CRORE AND FAR MORE THAN THAT OF JAI BALAJI, BUT NO TURNOVER DISCOUNT OR SERVICE DISCOUNT WAS OFFERE D TO IT. CIT(A) WHILE UPHOLDING THE ORDER OF A.O. HAS GIVEN A FINDING THA T THE CLAIM PERTAINS TO EARLIER YEAR AND NOT TO THE CURRENT YEAR. CIT(A) H AS ALSO HELD THAT THE TERMS AND CONDITIONS SUBMITTED BY THE ASSESSEE DOES NOT INSPIRE ANY CONFIDENCE AND HAS NO MARK OF GENUINENESS. HE HAS A LSO NOTED THAT ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW AS TO HOW MAK PUMP INDUSTRIES FAILED TO QUALIFY FOR DISCOUNT WHER EAS M/S JAI BALAJI SUCCEEDED IN GETTING DISCOUNT. BEFORE US, THE LD. A .R. COULD NOT BRING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF A. O. AND CIT(A). EVEN BEFORE US, THE ASSESSEE HAS NOT PRODUCED ANY EVIDEN CE TO SHOW THAT THE DISCOUNTS WHICH WERE ALLOWED TO JAI BALAJI WAS ALSO ALLOWED TO OTHER PARTIES IN THE PAST OR IN SUBSEQUENT YEARS. BEFORE US, THE LD. A.R. HAS ALSO RAISED ON ALTERNATE PLEA THAT IF THE EXPENSES PERTA IN TO PREVIOUS YEAR, THE A.O. BE DIRECTED TO ALLOW IT IN THE PREVIOUS YEAR A ND FOR WHICH HE RELIED ON THE DECISION IN THE CASE OF PERFECT EQUIPMENTS ( SUPRA). HOWEVER WE ITA NO 69/AH D/2011 . A.Y. 2007 - 08 6 FIND THAT IN THE DECISIONS RELIED BY THE LD. A.R, I T WAS NOT THE CASE WHERE THE EXPENDITURE WAS HELD TO BE NON GENUINE. HOWEVER IN THE PRESENT CASE, A.O. AND CIT(A) HAS HELD THE EXPENSES TO BE NON GEN UINE AND WE ARE THEREFORE OF THE VIEW THAT THE DECISIONS RELIED BY THE A.R ARE DISTINGUISHABLE ON FACTS AND CANNOT BE APPLIED TO T HE PRESENT CASE. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO I NTERFERE WITH THE ORDER OF CIT(A) AND THUS THESE GROUNDS OF ASSESSEE ARE DI SMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 07 -03 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD