VARUN EXPORTS, MUMBAI V. A.C.I.T. RG.16(1), MUMBAI

ITA 6919/MUM/2012

• Counselvise Citation: 691919914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: V P KOTHARI
• Keywords: Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI . . , , # BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER /.ITA NO. 6919/MUM/2012 / ASSESSMENT YEAR: 2009-10 M/S. VARUN EXPORTS, MEHTA KOTHARI & CO. CHARTERED ACCOUNTANTS, A/2, HIRA ANAND, 17, SWASTIK SOCIETY, ROAD NO.2, JVPD SCHEME, VILE PARLE (WEST), MUMBAI - 400 056 PAN: AAAFV 1261E / VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 6(1), MUMBAI. ( ' / APPELLANT) ( ()' / RESPONDENT) * / ASSESSEE BY : SHRI V.P. KOTHARI, A.R. - / REVENUE BY : SHRI R.K. SAHU, D.R. / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE LD. CIT(A)], MUMBAI DATED 30.08.2012 RELEVANT TO ASSESS MENT YEAR 2009-10. THE APPEAL OF THE ASSESSEE IS BARRED BY 12 DAYS OF LIMI TATION PERIOD. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY E XPLAINING THE REASONS FOR THE ABOVE SAID DELAY OF 12 DAYS IN PREFERRING THE PRESE NT APPEAL. - . / DATE OF HEARING : 03.06.2014 - . / DATE OF PRONOUNCEMENT : 27.06.2014 ITA NO. 6919/MUM/2012 M/S. VARUN EXPORTS 2 IN VIEW OF THE EXPLANATION FOR DELAY GIVEN BY THE A SSESSEE AND ALSO CONSIDERING THE SHORTNESS OF THE DELAY PERIOD, THE DELAY IN PRE FERRING THE PRESENT APPEAL IS HEREBY CONDONED AND THE APPEAL IS HEARD ON MERITS. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE APPELLANT RESPECTFULLY SUBMIT THAT THE DEL AY OF 12 DAYS IN FILING OF THIS APPEAL MAY PLEASE BE CONDONED AND THE APPEAL M AY BE ADMITTED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.5 ,63,792/- BEING 20% OUT OF THE TRAVELLING EXPENSES AMOUNTING TO RS.28,1 8,958/- WITHOUT PROPERLY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWING OF RS.79,412 /- BEING 10% OUT OF THE SUNDRY EXPENSES AMOUNTING TO RS.7,94,116/- WITH OUT PROPERLY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. ASSESSEE, A PARTNERSHIP FIRM, HAS BEEN CARRYING ON TRADE OF JEWELLERY AND ORNAMENTS. FOR THE YEAR UNDER CONSIDERATION, ASSESS EE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.9,58,46,796/-. THE ASS ESSING OFFICER DISALLOWED 20% OF THE EXPENSES CLAIMED IN RESPECT OF TELEPHONE EXPENSES, PRINTING AND STATIONERY EXPENSES, SUNDRY EXPENSES, TRAVELING EXP ENSES AND SALES PROMOTION EXPENSES ON THE GROUND THAT MOST OF THESE EXPENSES HAD BEEN INCURRED ON THE BASIS OF SELF MADE VOUCHERS AND COMPLETE VERIFICATI ON WAS NOT POSSIBLE AND FURTHER THAT THERE WAS A POSSIBILITY OF PERSONAL EL EMENT INVOLVED IN INCURRING THESE EXPENSES. THE ASSESSEE PREFERRED APPEAL BEFOR E THE CIT(A). 3. BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE AR OF THE ASSESSEE THAT THE ASSESSEE FIRM WAS IN THE BUSINESS OF SPECIALIZED DE SIGNER JEWELLERY CATERING TO THE NEEDS OF HIGH NET WORTH INDIVIDUALS VISITING TH E SHOWROOM. SHRI VIREN BHAGAT, ONE OF THE PARTNERS OF THE ASSESSEE FIRM HA S BEEN STATED TO BE ONE OF THE WORLDS RENOWNED JEWELLERY DESIGNER AND THE ASSESSE E FIRM PARTICIPATED IN VARIOUS JEWELLERY EXHIBITIONS HELD IN FOREIGN COUNT RIES TO INCREASE THE EXPORT SALES. IT WAS FURTHER EXPLAINED THAT ASSESSEE RECOR DED A TURNOVER OF RS.12.65 ITA NO. 6919/MUM/2012 M/S. VARUN EXPORTS 3 CRORES, RS.13.81 CRORES AND RS.30.13 CRORES IN FINA NCIAL YEARS RELEVANT TO THE A.YS 2007-08, 2008-09 AND THE CURRENT A.Y. 2009-10 RESPECTIVELY. FOR THE YEAR UNDER CONSIDERATION THE GROSS PROFIT AND THE NET PR OFIT MARGINS WERE AT 25% AND 20% OF THE SALES RESPECTIVELY. THUS THE DIRECT EXPE NSES WERE HARDLY 5% OF THE SALES WHICH WERE REASONABLE AS PER THE NATURE OF BU SINESS OF THE ASSESSEE. 4. THE LD. CIT(A) OBSERVED THAT CONSIDERING THE VOL UME OF THE ASSESSEES BUSINESS AND THE INCREASE IN SALES BY RS.17 CRORES DURING THE YEAR, THE PRINTING AND STATIONARY EXPENSES AND SALES PROMOTION EXPENSE S CLAIMED AT RS.1,04,628/- AND RS.1,44,859/- RESPECTIVELY WERE REASONABLE AND DID NOT CALL FOR ANY DISALLOWANCE. HOWEVER, REGARDING THE SUNDRY EXPENSE S, HE NOTED THAT THE INCREASE IN THIS EXPENDITURE WAS MAINLY ON ACCOUNT OF PHOTO SHOOT EXPENSES AND WATER PROOFING CHARGES FOR THE WORK CARRIED OUT IN ONE OF THE SHOPS. HE FURTHER OBSERVED THAT OUT OF THE FOREIGN TRAVEL EXPENSES CL AIMED AT RS.28,18,958/-, AN AMOUNT OF RS.9,0,645/- WAS SPENT ON FOREIGN TRAVEL. IT WAS EXPLAINED BEFORE HIM THAT THE SAID EXPENSES WERE MAINLY INCURRED FOR PUR CHASE OF AIR TICKETS AND FOREIGN EXCHANGE. BUT THE LD. CIT(A) OBSERVED THAT THE CLAIM OF HOTEL AND STAY EXPENSES OF FOREIGN TRAVEL WAS ON HIGHER SIDE IN R ESPECT OF FOREIGN TRIPS TO HONGKONG AND SWITZERLAND. HE FURTHER OBSERVED THAT IN RESPECT OF ABOVE EXPENSES, THE ELEMENT OF PERSONAL USE COULD NOT BE RULED OUT. THEREFORE, HE DISALLOWED 10% OF TELEPHONE AND SUNDRY EXPENSES AND 20% OF TRAVELING EXPENSES. THE ASSESSEE IS THEREFORE IN APPEAL BEFOR E US IN RELATION TO SUSTAINING OF DISALLOWANCE UP THE EXTENT OF 10% OF SUNDRY EXPE NSES AND 20% OF TRAVELLING EXPENSES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE REC ORDS. IT MAY BE NOTICED FROM THE ORDER OF THE LD. CIT(A) THAT THOUGH HE OBSERVED THAT THE CLAIM OF THE VARIOUS EXPENSES BY THE ASSESSEE W AS REASONABLE CONSIDERING THE NATURE AND VOLUME OF BUSINESS OF THE ASSESSEE, BUT, HE CONFIRMED 20% ITA NO. 6919/MUM/2012 M/S. VARUN EXPORTS 4 DISALLOWANCE IN RELATION TO THE TRAVELLING EXPENSES AND 10% IN RELATION TO THE SUNDRY EXPENSES OBSERVING THAT ELEMENT OF PERSONAL USE COULD NOT BE RULED OUT. IN OUR VIEW THE DISALLOWANCE OF 20% ON AD-HOC BASIS OUT OF THE CLAIM OF TRAVELLING EXPENSES WAS ON HIGHER SIDE CONSIDERING THE DETAILS OF EXPENSES SUBMITTED BY THE ASSESSEE AND THE ANNUAL TURNOVER O F RS.30.13 CRORES OF THE BUSINESS FOR THE CURRENT ASSESSMENT YEAR. IN OVER ALL VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE UNDER T HIS HEAD IS ORDERED TO BE REDUCED TO 5% OF THE EXPENSES CLAIMED. HOWEVER, SO FAR THE SECOND GROUND RELATING TO THE D ISALLOWANCE @ 10% OUT OF THE CLAIM OF SUNDRY EXPENSES IS CONCERNED, THE LD. CIT (A) HIMSELF HAS NOTED IN THE IMPUGNED ORDER THAT THE INCREASE IN THIS EXPEND ITURE WAS MAINLY ON ACCOUNT OF PHOTO SHOOT EXPENSES AND WATER PROOFING CHARGES FOR THE WORK CARRIED OUT IN ONE OF THE SHOPS. CONSIDERING THE NATURE OF BUSINES S OF DESIGNER JEWELLERY AND MAINTENANCE OF SHOWROOM FOR THE SAID PURPOSE, THE S AID EXPENDITURE WAS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND DOES NO T CALL FOR ANY DISALLOWANCE. ACCORDINGLY THE DISALLOWANCE ON ACCOUNT OF SUNDRY E XPENSES IS HEREBY ORDERED TO BE DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. - 1 27.06.2014 - ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2014. SD/- SD/- ( R.C.SHARMA) (SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI, 1 /DATED: 27.06.2014. . ./P.S. *A.K.PATEL COPY TO: ' /THE APPELLANT ()' / THE RESPONDENT ITA NO. 6919/MUM/2012 M/S. VARUN EXPORTS 5 2 3 /THE CIT, CONCERNED, MUMBAI 2 3 / THE CIT(A) CONCERNED, MUMBAI 4 ( /THE DR F BENCH / GUARD FILE. )4 ( //TRUE COPY// / BY ORDER / DY/ASSTT. REGISTRAR, , / ITAT, MUMBAI.