M/s Janki Sons, Jalandhar V. The Dy. Commissioner of Income Tax, Jalandhar city

ITA 79/ASR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9553 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 79(ASR)/2016 ASSESSMENT YEAR: 2009-10 M/S. JANKI SONS, G.T. ROAD, JALANDHAR. PAN:AAEFJ8527H VS. DY. CIT RANGE-II, JALANDHAR CITY. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SANDEEP VIJH (CA) RESPONDENT BY: SH. RAHUL DHAWAN (DR) DATE OF HEARING: 29.09.2016 DATE OF PRONOU NCEMENT:18.10.2016 ORDER PER N. K. CHOUDHRY (JM): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), JALANDHAR, DATED 16.11.2015 FOR ASST. YEAR: 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. (I) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING TH E DISALLOWANCE OF RS.5,62,612/- FROM OUT OF FORWARDING & DELIVERY EXP ENSES @ 20% OF THE EXPENSES. THE SUBMISSIONS MADE HAVE NOT BEEN PROPERLY APPRECIATED. WITHOUT PREJUDICE TO THE ABOVE, THE DI SALLOWANCE SUSTAINED IS ESTIMATED & HIGHLY EXCESSIVE. (II) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING TH E DISALLOWANCE OF RS.66,985/- FROM OUT OF STACKING AND STORAGE EXPENS ES, DEMONSTRATION EXPENSES, ENTERTAINMENT EXPENSES AND MISCELLANEOUS EXPENSES AT ESTIMATED RATE OF 10% OF THESE EXPENSES. THE SUBMISSIONS MADE HAVE NOT BEEN PROPER LY APPRECIATED. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS O F TRADING OF ELECTRONIC GOOD. DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE HAD SHOWN SALES TO THE TUNE OF RS.32,28,47,289/- AND G.P OF RS.2,81 ,23,067/- GIVING G.P RATE OF 8.71%, AS COMPARED TO THE G.P AT RS.2,72,46 ,885/- ON SALES OF I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 2 RS.33,86,55,268/- I.E. G.P RATE OF 8.05% SHOWN IN T HE IMMEDIATELY PRECEDING YEAR. THE ASSESSEE HAS FILED ITS RETURN O F INCOME ON 30.09.2009, DECLARING THE TOTAL INCOME OF RS.27,11, 500/-. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE U/S 143( 2) WAS ISSUED ON 23.08.2010 AND SERVED UPON THE ASSESSEE ON 31.08.20 10. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY BY THE ADD. CIT, RANGE-III, JALANDHAR AND FRESH NOTICES U/S. 143(2) AND 142(1), WERE ISSU ED AND SERVED UPON THE ASSESSEE ON 24.06.2011. WHILE COMPLETING THE A SSESSMENT, THE A.O HAS MADE THE FOLLOWING ADDITIONS TO THE RETURNED IN COME OF THE ASSESSEE FIRM. (I) ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF EXPE NSES CLAIMED UNDER THE HEAD FORWARDING & DELIVERY EXP ENSES RS.5,62,612/- (II) ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF EXP ENSES CLAIMED UNDER THE HEAD GIFT & PRESENTS RS.1,55,589/- (III) ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF OTHER UN-VOUCHED EXPENSES RS.66,985/- 4. FEELING AGGRIEVED BY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED THE APPEAL BEFORE T HE LD. CIT(A) AND THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSE E BUT CONFIRMED THE ADDITION OF RS.5,72,612/- ON ACCOUNT OF DISALLOWANC ES OUT OF EXPENSES CLAIMED UNDER THE HEAD FORWARDED AND DELIVERY EXPE NSES AND THE ADDITION OF RS.66,985/- ON ACCOUNT OF DISALLOWANCES OUT OF OTHER UNVOUCHED EXPENSES. 5. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE FILED INSTANT APPEAL ON THE GROUNDS MENTIO NED IN PARA 2 OF THE INSTANT ORDER. I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 3 6. BEFORE US, IT WAS ARGUED BY THE LD. AR OF THE AS SESSEE THAT THE ASSESSEE IS WHOLE SELLER OF ELECTRIC GOODS AND SELL S TO THE DISTRIBUTORS DIRECTLY AND IN THE PREVIOUS YEARS, NO DISALLOWANCE S HAVE BEEN MADE BY THE DEPARTMENT. EVEN OTHERWISE, THE RATIO OF FORWA RDING EXPENSES AS WELL AS STORAGE & STACKING EXPENSES ARE AT THE LOW ER SIDE, IF THE SAME COMPARES WITH THE F.Y.2006-07. IT WAS FURTHER SUBMI TTED THAT ASSESSEE IS MAINTAINING /MAKING REGULAR BILLS AND VOUCHERS AND THROUGH DELIVERIES HAVE BEEN MADE, THROUGH PART TIME LABOURS, HENCE, N O COMPLETE PARTICULARS ARE POSSIBLE TO BE RECORDED. IT WAS FUR THER SUBMITTED BY THE ASSESSEE THAT IT HAS BEEN DOING BUSINESS FOR A VERY LONG TIME AND MAINTAINING VOUCHERS IN SIMILAR FASHION. BEING A DI STRIBUTOR, GOODS ARE SENT TO DEALERS ON ALMOST A DAILY BASIS. THERE IS T HUS NOTHING WRONG IN THESE EXPENSES BEING CLAIMED ON ALMOST A DAILY BASI S. SINCE A LARGE NUMBER OF VOUCHERS PERTAINS TO PAYMENT TO RICKSHAW AND AUTOS AND IT IS LOGICAL THAT THERE WOULD BE NO REGULAR BILLS. THE S IGNATURE ON SOME VOUCHERS WOULD ALSO BE ILLEGIBLE IN VIEW OF THE FAC T THAT THESE ARE SIGNED BY UNEDUCATED CLASS. AN IMPORTANT PARAMETER WOULD B E THE LEVEL OF EXPENSES IN THE PRECEDING YEARS. THE RATIO OF EXPEN SES ALSO IN THE LINE WITH THE PRECEDING YEARS WHEN ASSESSMENT WAS COMPLE TED U/S 143(3) AND THIS IS NOT A SITUATION WHERE EXPENSES HAVE BEE N CLAIMED BUT NO GOODS HAVE BEEN DISPATCHED. THE LD. AR ALSO DRAWN O UR ATTENTION TO THE ORDER PASSED BY CO-ORDINATE BENCH IN ITA NO.74(ASR) /2009 WHEREIN THE CO-ORDINATE BENCH WAS PLEASED TO REDUCE THE DISALLO WANCES IN THE INTEREST OF JUSTICE TO THE TUNE OF 5% ONLY. I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 4 7. ON THE CONTRARY, IT WAS ARGUED BY THE LD. DR THA T IN THE VOUCHERS ETC. NO COMPLETE ADDRESSES HAVE BEEN GIVEN. EVEN IF THE SAME ARE SELF MADE THEN ALSO IT SHOULD CONTAIN COMPLETE DETAILS. EVEN OTHERWISE 60% OF VOUCHERS ARE SELF MADE AND ARE NOT RELIABLE AS O BSERVED BY THE A.O AS WELL AS THE LD. CIT(A), THEREFORE, THE INSTANT APPE AL DOES NOT DESERVE TO ALLOWED. 8. WE HAVE GONE THROUGH THE RECORD AS WELL AS ANA LYZED THE ARGUMENT RAISED BY THE PARTIES AND ALSO TO THE CASE LAWS REL IED UPON BY THE PARTIES AND THE ORDERS PLACED BEFORE US OF THE AUTHORITIES BELOW. WE FEEL IT APPROPRIATE TO REPRODUCE THE CONCLUDING PART OF THE ORDER OF LD. CIT(A). 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSIN G OFFICER AS MADE BY HER IN THE ASSESSMENT ORDER. I H AVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSE E VIDE LETTER DATED 07.11.2015. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE AS WELL AS OTHER MATERIAL PLACED BY THE ASSESSEE ON RECORD. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, IT HAS BEEN NOTICED THAT MAJORITY OF THE EXPENSES CLAIMED BY TH E ASSESSEE UNDER THE HEAD 'FORWARDING AND DELIVERY EXPENSES' ARE SUPPORTED ONLY BY SELF PREPARED VOUCHERS WHICH ARE NOT INDEPENDENTLY VERIFIABLE. ALTHOUGH THE ASSESSEE TRI ED TO JUSTIFY THE EXPENSES CLAIMED UNDER THE HEAD FORWAR DING AND DELIVERY EXPENSES BY PRODUCING FEW BILLS BUT MAJOR ITY OF THE EXPENSES AS POINTED OUT BY THE ASSESSING OFFICER ST ILL REMAINS SUPPORTED BY SELF MADE VOUCHERS WHICH ARE NOT AT AL L VERIFIABLE INDEPENDENTLY. MOREOVER, THE DISALLOWANC E OUT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD FO RWARDING AND DELIVERY EXPENSES IS VERY REASONABLE AND CANNOT BE SAID TO BE EXCESSIVE LOOKING TO THE QUANTUM OF EXPENSES CLAIMED UNDER THIS HEAD WHICH ARE SUPPORTED ONLY THROUGH SE LF MADE VOUCHERS. IN SUCH CIRCUMSTANCES, NO FURTHER RELIEF CAN BE ALLOWED TO THE ASSESSEE UNDER ANY CIRCUMSTANCES AS THE ASSESSING OFFICER MADE A VERY FAIR AND REASONABLE DISALLOWANCE. 5.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CI RCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.5,62,612/- IN TH IS CASE ON ACCOUNT OF DISALLOWANCE OUT OF EXPENSES CLAIMED BY THE ASSESSEE I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 5 UNDER THE HEAD FORWARDING AND DELIVERY EXPENSES . THE ADDITION OF RS.5,62,612/- MADE BY THE ASSESSING OFFICER IN T HIS CASE IS, THEREFORE, UPHELD. IN THE RESULT GROUND NO.1 OF APP EAL TAKEN BY THE ASSESSEE IS DISMISSED. IT IS CLEAR FROM THE ORDER PASSED BY THE LD. CIT( A) THAT THERE ARE SO MANY DISCREPANCIES FOUND IN THE BILLS, VOUCHERS AND NO SUPPORTING MATERIAL WAS PRODUCED IN SUPPORT OF SELF MADE VOUCH ERS AND THE ASSESSING OFFICER WAS UNABLE TO VERIFY INDEPENDENTL Y. EVEN OTHERWISE, THE SUBMISSIONS OF THE ASSESSEE IS NOT TENABLE THAT THE ASSESSEE HAS BEEN DOING THIS BUSINESS FOR A VER Y LONG TIME AND HAS BEEN MAINTAINING VOUCHERS IN SIMILAR FASHION AND IT IS ALSO NOT TENABLE THAT SINCE LARGE NUMBER OF VOUCHERS PERTAIN TO PAYM ENTS TO RICKSHAW, AUTOS, ETC. THEREFORE, IT IS LOGICAL THAT THERE WOU LD BE NO REGULAR BILLS. WE FOUND FORCE IN THE ARGUMENT OF THE LD. DR THAT E VEN OTHERWISE IF THE VOUCHERS ARE SELF MADE BUT IT SHOULD CONTAIN CO MPLETE DETAILS. THE DISALLOWANCES MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(A) ARE REASONABLE AND AT THE LOWER SIDE. HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE ENDS OF JUSTICE, WOULD MEET IF THE DISALLOWANCES CA N BE RESTRICTED TO TUNE OF 10% OF THE EXPENSES AS FAIR AND REASONABLE, CON SIDERING THE FACT THAT AUTHORITIES BELOW FIT IT TO ALLOW 80% OF THE CLAIM. 9. WITH REGARD TO THE GROUND NO.2, IT WAS ARGUED BY THE LD. AR ON ACCOUNT OF CONFIRMATION OF DISALLOWANCES OF RS.66,9 85/- QUO STACKING & STORAGE EXPENSES ETC., AS THEY ENGAGED THE PART TIM E LABOURS AND GENERALLY THE ILLITERATE TEMPORARY LABOURS DOES NOT ISSUE BILLS AND THE SIMILARLY DEMONSTRATION EXPENSES PERTAINS TO THE CO NVEYANCE EXPENSES I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 6 FOR SENDING THE GOODS TO DEALERS TO DEMONSTRATE THE GOODS TO CUSTOMERS AND TO EXPLAIN THEIR FEATURES AND FOOD ITEMS WERE ALSO BEING PURCHASED FROM DHABAS AND THEREFORE, IT WOULD BE DIFFICULT TO GET THE BILLS ETC. THEREFORE, THE AMOUNT OF DISALLOWANCE CAN BE DELETE D. 10. ON THE CONTRARY, IT WAS ARGUED BY THE LD. DR TH AT THE ASSESSEE HAS FAILED TO PRODUCE THE COMPLETE DETAILS OF THE LABOU RS AND EVEN OTHERWISE MAXIMUM VOUCHERS ARE SELF MADE AND UNSUPPORTED BY A NY EVIDENCE AND EVEN OTHERWISE ARE NOT VERIFIABLE, THEREFORE, THE O RDER PASSED BY THE LD. CIT(A) IS QUITE REASONABLE AND LOGICAL AND BASED ON REASONS. 11. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE AND ALSO TO THE MATERIAL AVAILABLE ON RECORD PRODUCED I N THE CONTEXT OF THE GROUND NO.2. WE FEEL IT APPROPRIATE TO REPRODUCE TH E CONCLUDING PART OF THE ORDER PASSED BY LD. CIT(A). 7.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER AS MADE BY HER IN THE ASSESSMENT ORDER. I HAVE ALSO CO NSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE VIDE LETT ER DATED 07.11.2015. I HAVE FURTHER CONSIDERED THE OTHER MAT ERIAL PLACED BY THE ASSESSEE ON RECORD. ON CAREFULLY CONSIDERATION OF THE RIVAL CONTENTIONS, IT HAS BEEN NOTICED THAT MAJORITY OF T HE EXPENSES CLAIMED UNDER THE HEADS STORAGE & STACKING EXPENSE S, DEMONSTRATION EXPENSES, ENTERTAINMENT EXPENSES, AND MISCELLANEOUS EXPENSES ARE SUPPORTED ONLY BY SELF PREPARED VOUCHERS WHICH ARE NOT INDEPENDENTLY VERIFIABLE. MO REOVER, THE DISALLOWANCE OUT OF EXPENSES CLAIMED BY THE ASSESSE E UNDER THE HEADS STORAGE & STACKING EXPENSES DEMONSTRATION EXPENSES, ENTERTAINMENT EXPENSES AND MISCELLANEOUS EXPENSES IS VERY REASONABLE AND CANNOT BE SAID TO BE EXCESSIVE LOOKI NG TO THE QUANTUM OF UN-VOUCHED EXPENSES CLAIMED UNDER THESE HEADS. IN SUCH CIRCUMSTANCES, NO FURTHER RELIEF CAN BE ALLOWE D TO THE ASSESSEE UNDER ANY CIRCUMSTANCES IN VIEW OF THAT TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER IS VERY REASONABLE. 7.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE C IRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.66,985/- IN THIS CASE ON ACCOUNT I TA NO.79(ASR)/2016 AS ST. YEAR: 2009-10 7 OF DISALLOWANCE OUT OF EXPENSES CLAIMED BY THE ASSE SSEE UNDER THE HEADS STORAGE & STACKING EXPENSES, DEMONSTRATION EXPENSES , ENTERTAINMENT EXPENSES AND MISCELLANEOUS EXPENSES ,. THE ADDITION OF RS.66,985/- MADE BY THE ASSESSING OFFIC ER IN THIS CASE IS, THEREFORE, UPHELD. IN THE RESULT GROUND NO.3 OF APPEAL TAKEN BY THE ASSESSEE IS ALSO DISMISSED. FROM THE ORDER ITSELF, IT IS QUITE CLEAR THAT THE D ISALLOWANCES AT THE RATE OF 10% OF THE TOTAL EXPENSES SEEMS TO BE QUITE REASONABLE, LOGICAL AND BASED ON THE REASONS MENTIONED IN THE CONCLUSIO N OF THE ORDER PASSED BY LD. CIT(A). IN OUR OPINION, DISALLOWANCE ON THIS PART DOES NOT REQUIRE DELETION OR ANY CONSIDERATION, HENCE, THE G ROUND NO.2 OF THE ASSESSEE STANDS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON18.10.2016. SD/- S D/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED:18.10.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER