ITO, Ludhiana V. M/s M.B. Exports Ltd., Ludhiana

ITA 792/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6537 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: KANIKA GUPTA; SSH ASHWANI KUMAR ADITYA KUMAR
• Keywords: Additional evidence

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 792/CHD/2016 ASSESSMENT YEAR: 2011-12 THE ITO, VS. M/S M.B. EXPORTS LTD., WARD-4(3), LUDHIANA 2426, ST. NO.16, GILL ROAD, LUDHIANA PAN NO. AACCM0825E & C.NO. 39/CHD/2017 (IN ITA NO. 792/CHD/2016) ASSESSMENT YEAR: 2011-12 M/S M.B. EXPORTS LTD., VS. THE ITO, WARD -4(3), 2426, ST. NO.16, GILL ROAD, LUDHIANA LUDHIANA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : S/SH. ASHWANI KUMAR. ADITYA KUMAR & MS. KANIKA GUPTA DATE OF HEARING : 05.12.2017 DATE OF PRONOUNCEMENT : 12.12.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL BY THE REVENUE AND THE CORRESPON DING CROSS OBJECTIONS BY THE ASSESSEE HAVE BEEN PREFERRED AGAI NST THE ORDER OF THE 2 COMMISSIONER OF INCOME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)], LUDHIANA DATED 31.03.2016. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A)HAS ERRED IN GIVING RELIEF TO THE ASSESSEE BY DELETING THE ADDITION OF RS.1,39,92,517/- MADE BY AO BY REJECTIN G THE BOOKS OF A/C AND APPLICATION OF G.P.@ 17.73% INSTEAD OF 13.07% DECLA RED BY ASSESSEE. 2. THE LEARNED CIT (A) HAS ERRED IN IGNORING THE FA CT THAT THE ASSESSEE WAS AFFORDED VARIOUS OPPORTUNITIES TO PROD UCE THE BOOKS OF ACCOUNT AND YET THE ASSESSEE COMPANY FAILED TO PROD UCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER DURING THE COU RSE OF ASSTT. PROCEEDINGS. 3. THE LEARNED CIT (A) HAS ERRED ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE IN ACCEPTING THE ADDITIONAL EVIDENCES A DDUCED BY THE ASSESSEE DURING THE APPELLANT PROCEEDINGS AS THE AS SESSEE ITSELF HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNTS DURING THE COURSE OF ASSTT. PROCEEDINGS. 4. THE LEARNED CIT (A) HAS ERRED IN IGNORING THE FA CT THAT THE ASSESSEE WAS HAVING AMPLE TIME TO RESOLVE ITS ISSUES WITH ON E OF ITS DIRECTOR, WITH WHOM THE BOOKS OF ACCOUNT WERE ALLEGEDLY LYING, RIG HT FROM THE DATE OF ISSUANCE OF NOTICE U/S 143(2) TILL THE DATE OF COMP LETION OF ASSESSMENT. 5. THE LEARNED CIT (A) HAS ERRED IN IGNORING THE FA CT THAT THE ASSESSEE COMPANY HAS NOT TAKEN ANY STEP TO OBTAIN THE BOOKS OF ACCOUNT FROM THE DIRECTOR AND EVEN THE LEGAL NOTICE TO GET THE BOOKS OF ACCOUNT BACK WAS ISSUED 2 MONTHS AFTER THE COMPLETION OF ASSESSMENT. 6. IT IS PRAYED THAT THE ORDER OF LEARNED CIT (A) B E SET ASIDE AND THAT OF THE AO BE RESTORED. 3. A PERUSAL OF THE ABOVE GROUNDS OF APPEAL REVEALS THAT THE REVENUE IS MAINLY AGGRIEVED BY THE ACTION OF THE CIT(A) IN ADM ITTING THE ADDITIONAL 3 EVIDENCES PRODUCED BY THE ASSESSEE IN THE APPELLATE PROCEEDING BEFORE HIM. THE UNDISPUTED FACTS OF THE CASE ARE THAT BEFORE AD MITTING THE ADDITIONAL EVIDENCES THE CIT(A) CALLED FOR THE REMAND REPORT F ROM THE ASSESSING OFFICER IN RESPECT OF THE EVIDENCES FURNISHED BY TH E ASSESSEE. THE ASSESSING OFFICER HAD GIVEN A LENGTHY AND DETAILED REMAND REPORT RUNNING INTO 42 PAGES AFTER CONSIDERING THE RELEVANT DOCUME NTS AND EVIDENCES. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT OF T HE ASSESSING OFFICER, FOUND MERITS IN THE CONTENTIONS RAISED BY THE ASSES SEE IN THE LIGHT OF EVINCES SO PRODUCED BY THE ASSESSEE. THE LD. CIT(A) WHILE DELETING THE IMPUGNED ADDITIONS HAS GIVEN PROPER OPPORTUNITY TO THE ASSESSING OFFICER TO REBUT THE CLAIM OF THE ASSESSEE AND HAS DULY CO NSIDERED THE REMAND REPORT FROM THE ASSESSING OFFICER BASED ON WHICH TH E ADDITIONS WERE ORDERED TO BE DELETED. 4. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE AFORESAID ORDER OF THE LD. CIT(A). THERE IS NO MER IT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. C.O. NO. 39/CHD/2017 5. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJE CTIONS:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL)-2, LUDHIANA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE:- A) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE DIS ALLOWANCE OF INTEREST EXPENSES FOR RS.2,59,369/- OUT OF TOTAL DISALLOWANCE OF RS.7,89,592/- U/S 36(1) (III) ON T HE INTEREST FREE ADVANCES GIVEN TO THE DIRECTORS BY TREATING TH EM TO BE FOR NON-BUSINESS PURPOSE. B) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE DIS ALLOWANCE OF RS.4,67,686/- @1/5 U OF CAR EXPENSES RS. 23,38,431/- ON ACCOUNT OF PERSONAL USE BY THE DIRECTORS AND THEIR FAMILY 4 MEMBERS, ON ADHOC BASIS, IRRESPECTIVE OF THE FACT T HAT THE ASSESSEE IS A COMPANY AND IN ANY CASE THE DISALLOWA NCE, IF TO BE SUSTAINED, SHOULD NOT HAVE EXCEEDED THE PERQUISI TE VALUE OF MOTOR CARS FOR RS.1,58,400/- IN RESPECT OF A LL THE FOUR DIRECTORS. C) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE DIS ALLOWANCE FOR RS.1,50,000/- OUT OF DISALLOWANCE OF RS.3,00,00 0/- MADE ON ACCOUNT OF UNVOUCHED EXPENSES ON ADHOC BASIS AND WI THOUT ANY JUSTIFICATION. 2. THAT THE ABOVE SAID ORDER IS BAD IN LAW & CONTRA RY TO THE FACTS OF CASE. 6. THE FIRST CROSS OBJECTION IS RELATING TO DISALLO WANCE OF INTEREST EXPENSES U/S 36(1)(III) OF THE ACT ON ACCOUNT OF IN TEREST FREE ADVANCES GIVEN TO THE DIRECTORS. THE LD. AR OF THE ASSESSEE HAS DEMONSTRATED BEFORE US THAT THE OWNED SHARE CAPITAL OF THE ASSES SEE WAS RS. 3.79 CRORES AS ON 31.3.2011 WHEREAS THE LOANS ADVANCED TO PART NERS WERE AT RS. 62 LACS. HE, THEREFORE, WHILE RELYING UPON THE DECISIO N OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KAPSONS ASSOCIATES [2016] 381 ITR 204(P&H), HAS SU BMITTED THAT PRESUMPTION WOULD ARISE THAT THE ADVANCES WERE MADE BY THE ASSESSEE FROM ITS OWN FUNDS. WE FIND MERIT IN THE ABOVE CONTENTI ON OF THE ASSESSEE. WE, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE LOWE R AUTHORITIES MADE U/S 36(1)(III) OF THE ACT. 7. THE SECOND CROSS OBJECTION IS RELATING TO THE DI SALLOWANCE OUT OF CAR EXPENSES. THE LD. CIT(A) HAS RESTRICTED THE DISALLO WANCE TO 1/5 TH OF THE CAR EXPENSES ON ACCOUNT OF PERUSAL USE BY THE DIRECTORS AND THEIR FAMILY MEMBERS. WE FIND THE ABOVE DISALLOWANCE TO BE REASO NABLE, HENCE, NO INTERFERENCE IS CALLED FOR IN THE ABOVE DISALLOWANC E. 5 8. THE THIRD CROSS OBJECTION IS RELATING TO SUSTAIN ING PARTLY OF THE DISALLOWANCE OF RS. 1,50,000/- OUT OF DISALLOWANCE OF RS. 3 LACS MADE ON ACCOUNT OF UNVOUCHED EXPENSES ON ADHOC BASIS. NO SP ECIFIC ARGUMENTS HAVE BEEN ADDRESSED IN THIS RESPECT. WE, THEREFORE , DO NOT FIND ANY REASON TO INTERFERE IN THE ABOVE STATED DISALLOWANCE. 9. IN VIEW OF THE ABOVE, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2017. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :12.12.2017 RKK COPY TO: 2. THE APPELLANT 3. THE RESPONDENT 4. THE CIT 5. THE CIT(A) 6. THE DR