Arun Trading Company, Kolkata V. I.T.O Wd - 30(2),kolkata., Kolkata

ITA 741/KOL/2013

• Counselvise Citation: 74123514 RSA 2013
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS JCIT JCIT LD
• Assessee Lawyers: RAJENDRA KUMAR DUGG AR CA LD
• Keywords: Wrong claim
• Section: 143(3); 133(6)

Judgement Text

ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 741/KOL/2013 A.Y : 2009-10 M/S. ARUN TRADING COMPANY VS. I.T.O WARD 30(2), KOLKATA PAN: AAEFA 9386P (APPELLANT) (RE SPONDENT) FOR THE APPELLANT: SHRI RAJENDRA KUMAR DUGG AR, CA, LD.AR FOR THE RESPONDENT: SMT. RANU BISWAS, JCIT. JCIT, LD. SR.DR DATE OF HEARING: 27-11 -2015 DATE OF PRONOUNCEMENT: 27 -11- 2015 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED CIT(A), XIV, KOL IN APPEAL NO. 731/CIT(A)-XIV/KOL/11-12 D ATED 01-01-2013 FOR THE ASSESSMENT YEAR 2009-10 AGAINST THE ORDER OF ASSES SMENT FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE FOREIGN TRAVEL EXPENSES AMOUNTING TO RS.4,69,734/- COULD BE DISALLOWED AS NOT INCURRED FOR THE PURPOSE OF BUSIN ESS. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE IS AN EXPORTER OF FABRICS AND EMBROIDERED FABRICS AND IS IN THE BUSINESS OF EXPO RTING THEM TO SEVERAL COUNTRIES IN ASIA AND EUROPE. THE ASSESSEE VISITS VARIOUS COUNT RIES ABROAD ON REGULAR BASIS AS FRESH DESIGNS EMERGE AND NEW TRENDS APPEAR EVERY FE W MONTHS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD.AO FOUND THAT THE AS SESSEE HAD DEBITED A SUM OF RS.11,11,466/- TOWARDS FOREIGN TRAVEL EXPENSES IN I TS P & L ACCOUNT. ON REQUISITION, ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 2 THE ASSESSEE FURNISHED STATEMENT GIVING DETAILS OF COUNTRY VISITED, PERIOD OF STAY, EXPENSES INCURRED AND PURPOSE OF VISIT. THE LD. AO OBSERVED THAT IN RESPECT OF TRAVEL EXPENSES TO THE TUNE OF RS. 4,69,734/- IN CONNECTIO N WITH FOREIGN TOUR TO UAE, SRI LANKA, SAUDI ARABIA, THE ASSESSEE COULD NOT PRODUCE THE EVIDENCES RELATING TO BUSINESS EXPEDIENCY. HENCE, HE HELD THAT THIS IS PERSONAL I N NATURE AND ACCORDINGLY, DISALLOWED THE SAME, WHICH WAS ALSO CONFIRMED BY THE LD.CIT(A) ON 1 ST APPEAL. AGGRIEVED, THE ASSESEE IS IN APPEAL BEFORE US ON THE FOLLOWING GRO UND:- 1. FOR THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALL OWING A SUM OF RS 4,69,734/- OUT OF TRAVEL EXPENSES INCURRED BY THE ASSESSEE ALTHOUGH THE ENTIRE EXPENSE BEING FULLY VERIFIABLE WAS INCU RRED FOR THE PURPOSE OF BUSINESS AND FOR WHICH RELEVANT EVIDENCE WAS PRODUCED DURING ASSESSMENT; 2.2. THE LEARNED AR ARGUED THAT IN LINE WITH THE B USINESS IN WHICH THE ASSESSEE IS ENGAGED THE ASSESSEE IS BOUND TO MAKE FREQUENT VIS ITS TO ABROAD. HE STATED THAT THE LD.AO WANTED TO SEE THE INVITATION LETTERS FROM THE BUYERS IN RESPECT OF ASSESSEES VISITS TO SAUDI ARABIA AND UAE. IN RESPONSE TO THIS, THE ASSESSEE STATED THAT ASSESSEE HAD TRAVELLED TO THESE COUNTRIES ON BUSINESS VISA AND N OT ON TOURIST VISA. THE LD.AR FOR THE ASSESSEE FURTHER STATED THAT BUSINESS VISA WAS GRAN TED BY THE EMBASSY ONLY AFTER THE EMBASSY HAD SATISFIED ITSELF THAT THE VISIT IS BEI NG MADE BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. HE FURTHER ARGUED THAT MORE THAN 50% O F THE SALES HAS BEEN MADE BY THE ASSESSEE TO THESE COUNTIES I.E SAUDI ARABIA AND UA E RELATING TO WHICH INVITATION WAS BEING SOUGHT BY THE LD.AO. THE LD.AR ARGUED THAT A SSESSEE HAS BEEN DEALING WITH THESE CUSTOMERS FOR THE LAST 10 YEARS AND STATED TH AT THE CUSTOM OF THE TRADE IS TO VISIT THE BUYER TO GENERATE HIS INTEREST IN THE PRODUCT T HE SELLER HAS TO OFFER. TRIPS FOR THIS PURPOSE HAVE TO BE MADE MORE THAN ONCE IN A YEAR B ECAUSE NEW DESIGNS AND FABRICS HAVE TO BE EXHIBITED TO THE CUSTOMER. ACCORDINGLY, HE PRAYED FOR ALLOWANCE OF THE SAID EXPENDITURE ON THE GROUND OF BUSINESS EXPEDIENCY. IN RESPONSE TO THIS, THE LD. DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHOR ITIES. ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 3 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE. WE FIND FROM THE PAPER BOOK THAT THE ASSESSEE HAD GIVEN COMPLETE DETAILS OF FOR EIGN TRAVEL I.E. DETAILS OF COUNTRIES VISITED, PERIOD OF STAY, COPY OF PASSPORT, EXPENSES INCURRED, FOREIGN CURRENCY DRAWN, PURPOSE OF VISIT , TRAVEL AGENTS INVOICE FOR AIR TICKETS, TRAVEL AGENTS SERVICE BILLS FOR VISA COST ETC. AS PER REGULATIONS OF RBI. WE ALSO F IND THAT THE ASSESSEE HAD EXPORTED MORE THAN 50% OF ITS SALES TO THESE COUNTRIES AND SINCE THE ASSESSEE IS ENGAGED IN THE FASHION INDUSTRY, IT IS IMPERATIVE THAT THE ASSESS EE HAD TO VISIT ABROAD TO KEEP ABREAST LATEST FASHION TRENDS AND MARKET DEPTH TO UNDERSTA ND THE CUSTOMERS NEEDS AND TO OFFER LATEST DESIGNS TO THE CUSTOMERS AND ALSO LOOK FOR NEW CUSTOMERS. THE REVENUE HAD NOT CONTROVERTED THE ARGUMENTS OF THE LEARNED AR THAT M ORE THAN 50% OF TURNOVER IS EXPORTED TO THESE COUNTRIES BY THE ASSESSEE. WE FEE L THAT VISITING THE CUSTOMERS IN THESE COUNTRIES IS ESSENTIAL IN LINE WITH THE FASHION IND USTRY IN WHICH ASSESSEE IS ENGAGED AND ALSO TO KNOW THE LATEST TRENDS, DESIGNS AND WISH LI ST OF THE CUSTOMERS. WE FIND THAT THE FOREIGN TRAVEL EXPENSES OF RS. 4.69.734/- HAS BEEN DISALLOWED BY THE REVENUE ONLY ON FLIMSY GROUNDS. WE FIND THAT BUSINESS EXPEDIENCY OF THE FOREIGN TRAVEL IS PROVED BEYOND DOUBT AND ACCORDINGLY, EXPENDITURE INCURRED THEREON WAS SQUARELY COVERED ALLOWABLE AS DEDUCTION IN THE ASSESSMENT. HENCE, THE GROUND NO. 1 RAISED BY THE ASSESSEE IS ALLOWED. 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.3,60 ,887/- TOWARDS EMBROIDERY CHARGES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE CLAIMED A SUM OF RS.13,12,925/- UNDER THE HEAD EMBROIDERY CHARGES IN ITS P & L ACCOUNT. THE BREAKUP OF THE SAME IS AS BELOW:- EMBROIDERY CHARGES : RS. 13,10,373/- LESS: REALIZED FROM RENKA INDUSTRIAL CORPRN RS. 3,58,335/- ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 4 TOTAL: RS. 9,52,038/- ADD: FURNISHING & MAKING CHARGES GROUPED UNDER EMBROIDERY EXPENSES RS. 3,60,887/ - TOTAL: RS.13,12,925/- 3.2 ACCORDING TO THE LD.AO, THE EMBROIDERY CHARG ES WERE ONLY TO THE EXTENT OF RS.9,52,038/- AND RS.3,60,887/- AS CLAIMED BY THE A SSESSEE BEFORE HIM IS EXCESSIVE AND BOGUS CLAIM. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE SAME WHICH WAS ALSO UPHELD BY THE LD. CIT(A) ON 1 ST APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEF ORE US ON THE FOLLOWING GROUND:- 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW A S WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE A SUM OF RS.3 ,60,887/- OUT OF THE EMBROIDERY CHARGES PAID BY THE ASSESSEE THOUGH THE EXPENSES WERE GENUINELY INCURRED AND FULLY VERIFIABLE FOR WH ICH RELEVANT EVIDENCE WAS PRODUCED DURING ASSESSMENT; 3.3. THE LEARNED AR ARGUED THAT TOTAL DETAILS OF EMBROIDERY CHARGES WERE DULY FILED BEFORE THE LD.AO VIDE LETTER DATED 08/11/2011 , WHICH INCLUDES FURNISHING & MAKING CHARGES OF RS. 3,60,887/- INCLUDED UNDER TH E HEAD EMBROIDERY CHARGES. THE ENTIRE ADDITION WAS MADE BY THE AO WITHOUT UND ERSTANDING THE GROUPING OF EXPENDITURE MADE BY THE ASSESSEE IN ITS P & L ACCOU NT. VIDE SAID LETTER DATED 08-11- 2011 (PAGE 19 OF THE PAPER BOOK) THE ASSESSEE HAD A LSO FURNISHED THE ENTIRE BREAKUP OF RS.13,12,925/- TOWARDS EMBROIDERY CHARGES (RS.9, 52,038) AND FURNISHING & MAKING CHARGES (RS.3,60,887) CONTAINING THE NAME OF THE PARTIES, QUANTITY DETAILS AND PAYMENTS MADE THEREON. HE, THEREFORE, PLEADED B EFORE US THAT NO ADDITION NEED TO BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN RESPONSE TO THIS, THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHOR ITIES. 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILS OF PAPER BOOK FILED BY THE ASSESSEE. WE FIND FROM THE PAPER BOOK THAT THE ASSESSEE HAD CLEARLY GIVEN THE ENTIRE DETAILS ON EMBROIDERY ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 5 CHARGES & FURNISHING & MAKING CHARGES SEPARATEL Y TOGETHER WITH THE NAME OF THE PARTIES AND AMOUNTS INCURRED WITH QUANTITY DETAILS ETC. BEFORE THE LD.AO VIDE SAID LETTER DATED 08/11/2011, WHICH IS PART OF THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US. WE FIND THAT THE ENTIRE ADDITION HAS BEEN MADE DUE TO WRONG UNDERSTANDING OF THE FACTS. HENCE, WE HAVE NO HESITATION TO DELETE THE IMPUGNED ADDITION AS MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A). ACCORDINGLY, THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 4. THE THIRD ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 1,30,63 5/- ON ACCOUNT OF UNVERIFIED SUNDRY CREDITORS. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE LD.AO SOUGHT TO VERIFY THE CONCERNED SUNDRY CREDITOR FOR EMBROIDERY CHARGES TO THE TUNE OF RS. 1,30,635/- AND CALLED FOR INFORMATION U/S 133(6) OF THE ACT. THE SAID NOTICE RETURNED UNSERVED AND COULD NOT BE SERVED AND ACCORDINGLY THE LD.AO TREAT ED THE SAID SUNDRY CREDITOR AS NON- EXISTENT AND ADDED THE SAME TO THE INCOME OF THE A SSESSEE. THIS ACTION OF THE LD.AO WAS ALSO CONFIRMED BY THE LD.CIT(A) ON 1 ST APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN ADDING RS.1,30 ,635/- BEING AMOUNT PAID AS EMBROIDERY CHARGES TO THE INCOME OF THE ASSESSEE AS NON-EXISTENT LIABILITY MERELY BECAUSE NOTICES U/S. 133(6) OF THE INCOME TAX ACT, 1961, SENT TO THESE PARTIES WERE RE TURNED WITH THE REMARK NOT KNOWN NOTWITHSTANDING THE ASSESSEES EXPLANATION REGARDING STATUS OF THESE PARTIES AND THE FACT THAT PAYMENTS FOR ALL THE BILLS WERE MADE BY A/C PAYEE CHEQUES AND THE EM BROIDERED FABRIC WORK WAS EXPORTED BY THE ASSESSEE; PAYMENTS BEING GENUINE AND HAVING BEEN INCURRED FOR THE PURPOSE OF BUSINESS, O UGHT TO BE ALLOWED; 4.1. THE LEARNED AR ARGUED THAT THE AMOUNT PAID T O THE CONCERNED SUNDRY CREDITOR TOWARDS EMBROIDERY CHARGES WERE BY A/C PAYEE CHEQUE S. THE EXPENSES WERE INCURRED ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 6 GENUINELY. THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ADDITION MADE BY THE AO. HE FURTHER ARGUED THAT THE LD.AO ADDED THE SAME AS NOT ICES WERE RETURNED WITH THE REMARK NOT KNOWN. HE ARGUED THAT THE ASSESSEE COULD ON LY GIVE THE ADDRESS OF THE SUNDRY CREDITOR WHICH IS IN HIS POSSESSION. HE FURTHER AR GUED THAT THE LEARNED AO HAD NOT DISTURBED THE TRADING RESULTS OF THE ASSESSEE. H E, THEREFORE, PLEADED BEFORE US THAT NO ADDITION NEED TO BE MADE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. IN RESPONSE TO THIS, THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LO WER AUTHORITIES. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILS OF PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAD MADE PAYMENTS TO THE CONCERNED SUNDRY CREDITOR FOR EMBROIDERY CHARGES BY A/C PAYEE CHEQUES. WE FIND THAT THE LD.AO ADD ED THE SAME AS NOTICES WERE RETURNED WITH THE REMARK NOT KNOWN. WE HOLD THA T MERELY BECAUSE THE NOTICE U/S 133(6) OF THE ACT COULD NOT BE SERVED ON THE CONCER NED SUNDRY CREDITOR, THE LD.AO CANNOT AUTOMATICALLY TREAT THE SAID CREDITOR AS NON -EXISTENT AND BOGUS. HE HAS TO ENQUIRE WHETHER THE INCURRENCE OF EMBROIDERY CHARGE S ARE GENUINE IN NATURE. IT IS NOT IN DISPUTE THAT THE TRADING RESULTS OF THE ASSESSEE AFTER CONSIDERING THE SUBJECT MENTIONED EMBROIDERY CHARGES HAVE BEEN ACCEPTED BY THE REVENUE AND HENCE THERE IS NO SCOPE FOR MAKING SEPARATE ADDITION TOWARDS SUNDR Y CREDITORS BEING NON-EXISTENT. WE ALSO FIND LOT OF FORCE IN THE ARGUMENTS OF THE L EARNED AR THAT NOTICES U/S 133(6) OF THE ACT WERE SENT TO SEVERAL PARTIES BY THE LEARNED AO AND OUT OF THAT, THE NOTICES WERE RETURNED ONLY IN RESPECT OF M/S BHARAT FABRICS AND MR.VINAY KUMAAR JALDHARI AND THOSE JOB WORKERS WERE OF MEAGER MEANS AND THEI R CONTINUANCE IN THE BUSINESS AT ONE PLACE DEPENDED UPON WHETHER THEY WERE ABLE TO G ET ENOUGH BUSINESS OR NOT. THE LEARNED AR FURTHER ARGUED BEFORE US THAT THESE JOB WORKERS ARE ARTISANS AND IF THEY FIND A LUCRATIVE EMPLOYMENT OR BETTER JOB WORK ELSE WHERE, THEY CHANGE THEIR PLACE OF WORK. WE ALSO FIND FROM THE SUBMISSIONS OF THE LEA RNED AR THAT THE ASSESSEE HAD ENGAGED THESE JOB WORKERS FOR EMBROIDERY WORK IN 20 08-09 AND LOST TOUCH WITH THEM AFTER THEY HAD MOVED OUT OF THEIR KNOWN ADDRESS. WE FIND NOTHING PREVENTED THE LD. ITA NO. 741/KOL/2013-C-AM M/S. ARUN TRADING COMPANY 7 AO FROM MAKING FURTHER ENQUIRIES WITH THE BANKS AS THE PAYMENTS WERE ADMITTEDLY MADE TO THE CONCERNED JOB WORKERS BY ACCOUNT PAYEE CHEQUES. IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION TO DELETE THE IMPUGNED ADDITI ON AS MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A). ACCORDINGLY, THE GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 5. IN RESPECT OF GROUND NOS.4 & 5 OF ASSESSEES APP EAL, THE LD.AR OF THE ASSESSEE HAS NOT PRESSED DURING THE COURSE OF HEARING WHICH IS TAKEN AS A STATEMENT FROM THE BAR. HENCE THE SAME ARE DISMISSED AS NOT PRESSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 27-11-2 015 1. . THE APPELLANT: M/S. ARUN TRADING COMPANY, SETHIA H OUSE, 117 SOUTHERN AVENUE, KOL-29. 2 THE RESPONDENT-INCOME-TAX OFFICER, WARD 30(2), KOL 3 / THE CIT, 4.THE CIT(A) 5 . DR, KOLKATA BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 27 /11/2015 COPY OF THE ORDER FORWARDED TO:-