Electromech engineers, Pune V. ITO Ward 8(1), Pune

ITA 826/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49764 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 10-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C M NAIK
• Assessee Lawyers: VIPIN K GUJRATHI
• Keywords: Business income; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM. I.T.A. NO. 826/PN/2009 : A.Y. 2003-04 ELECTROMECH ENGINEERS 16/3 F-11 BLOCK, MIDC, PIMPRI, PUNE-411 018 PAN AAAFE 4473 B .. APPELLANT VS. I.T.O. WARD 8(1) PUNE .. RESPOND ENT APPELLANT BY: SHRI VIPIN K. GUJRATHI RESPONDENT BY: SHRI C.M. NAIK ORDER PER SHAILNDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-III PUNE DATED 30-3-2009 FO R A.Y. 2003-04 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONOURABLE CIT(A)-III PUNE ERRED IN CONFIRMING THE ADDITION OF RS. 75,400/- ON ACCOUNT OF DISALLOWANCE OF SITE EXPENSES. THE APPELLANT PRAYS THAT THE ADDITION MAY PLEASE BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A)-III PUNE ERRED I N CONFIRMING THE ADDITION OF RS. 6,00,002/- OUT OF TH E INTERNATIONAL MARKETING EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APPELLANT PRAYS THAT THE ADDITION MAY PLEASE BE DELETED. ITA NO. 826/PN/2009 ELECTROMECH ENGINEERS A.Y. 2003- 04 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CARRIES ON BUSINESS OF MANUFACTURING CRANES HOIST. DURING THE YEAR UNDER CONSIDERATION, RETURN SHOWING INCOME OF RS. 9,67,252/- WAS FILED AGAINST WHICH ASSESSMENT U/S 143(3) OF THE ACT HAS BEEN COMPLETED BY THE ASSESSING OFFICER AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCES, AT TOTAL INCOME OF RS. 28,44,494/-. 3. GROUND NO. 1 RELATES TO CONFIRMATION OF ADDITION OF RS. 75,400/- ON ACCOUNT OF DISALLOWANCE OF SITE EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF RS. 1,50,400/- OUT OF RS. 7,52,930/- ON ACCOUNT OF SITE EXPENSES, ON THE GROUND THAT ALL THE EXPENSES WERE INCURRED IN CASH AND MOST OF THE VOUCHERS WERE SELF MADE. ON APPEAL, IT WAS CONTENDED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE DISALLOWANCE HAS BEEN MA DE ON ADHOC BASIS WITHOUT ANY COMPARISON WITH THE EXPENSES INCURRED IN EARLIER YEARS. IT WAS ALSO CONTENDED THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED BY ABOUT 50% OVER THE LAST YEARS TURNOVE R. THEREFORE, THERE WAS INCREASE IN SITE EXPENSES. HOW EVER, CONSIDERING THE VARIOUS SUBMISSIONS PUT FORTH BY TH E ITA NO. 826/PN/2009 ELECTROMECH ENGINEERS A.Y. 2003- 04 3 ASSESSEE, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 75,000/-. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THERE IS NO DENIAL OF THE FAC T THAT THE SITE EXPENSES DEBITED BY THE ASSESSEE IN THE PR OFIT AND LOSS ACCOUNT ARE NOT ADEQUATELY VERIFIABLE IN ABSENCE OF PROPER SUPPORTING. THE ORDER OF THE CIT (A) ON THIS ISSUE IS THEREFORE, UPHELD. 5. GROUND NO. 2 PERTAINS TO CONFIRMATION OF ADDITIO N OF RS. 6,00,002/- OUT OF INTERNATIONAL MARKETING EXPEN SES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE STARTED EXPORT BUSINESS IN THE MIDDLE-EAST. THE EX PORT TURNOVER WAS MADE TO THE EXTENT OF RS. 54.56 LAKHS OUT OF WHICH DIRECT EXPORTS WERE OF RS. 34.97 LAKHS AND MERCHANT EXPORTS WERE OF RS. 19.59 LAKHS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DE BITED AN AMOUNT OF RS. 13,60,142/- TOWARDS INTERNATIONAL MARKETING. THE ASSESSEE EXPLAINED THE OBLIGATIONS BETWEEN THE FOREIGN COMPANY AND THE ASSESSEE- COMPANY. FROM THE PERUSAL OF THE SUBMISSIONS MADE B Y THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT T HE ITA NO. 826/PN/2009 ELECTROMECH ENGINEERS A.Y. 2003- 04 4 FOREIGN COMPANY WAS SUPPOSED TO TAKE ALL RESPONSIBILITIES IN RESPECT OF SALES OF PRODUCT, ADVERTISING, SALES PROMOTION ACTIVITIES AND OTHER CONNECTED ACTIVITIES IN RESPECT OF SALE OF PRODUCT OF THE ASSESSEE. EVEN THE COMMISSION PAYABLE BY THE ASSES SEE WAS FIXED. THE ASSESSING OFFICER CONCLUDED THAT TH ERE WAS NO BASIS FOR THE ASSESSEE TO CLAIM THE EXPENSES OF RS. 13.60 LAKHS IN CONNECTION WITH INTERNATIONAL MARKETING AS THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO PROVE THAT THE EXPENSES INCURRED WERE F OR THE PURPOSES OF BUSINESS TO SUBSTANTIATE ITS CLAIM BY PRODUCING ANY VOUCHERS/BILLS. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM OF EXPENDITURE OF RS. 13.60 LAKHS. ON APPEAL, IT WAS SUBMITTED THAT THE VOUCHERS/BILLS IN RESPECT OF EXP ENSES INCURRED WERE LYING WITH A PERSON WHO WAS IN CHARGE OF INTERNATIONAL MARKETING IN DUBAI. THE ASSESSMENT W AS COMPLETED ON 16-3-2006 AND THE REQUISITE DETAILS CO ULD BE FURNISHED BY THE ASSESSEE ONLY 20-3-2006 BEFORE THE ASSESSING OFFICER AS THE SAME WERE IN TRANSIT WHEN CALLED FOR BY THE ASSESSING OFFICER. THE ASSESSEE FURNISHED THE REQUISITE DETAILS BEFORE THE CIT(A) D URING THE COURSE OF APPELLATE PROCEEDINGS AND PLEADED FOR ADMISSION OF ADDITIONAL EVIDENCE IN VIEW OF RULE ITA NO. 826/PN/2009 ELECTROMECH ENGINEERS A.Y. 2003- 04 5 46A(1)(B) AND (C) OF THE INCOME-TAX RULES 1962. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSIN G OFFICER. THE ASSESSING OFFICER FILED HIS REMAND RE PORT VIDE LETTER DATED 14-11-2008. AFTER TAKING INTO CONSIDERATION THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, THE CIT(A) CONCLUDED THAT THE ASSESSEE COULD NOT ESTABLISH WITH DOCUMENTARY EVIDE NCE THAT THE ENTIRE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSES OF ITS BUSINESS. THE CIT(A) THEREFORE, RESTRICTED THE DISALLOWANCE TO RS. 6,00,002/- AS AG AINST RS. 13,60,142/- CLAIMED BY THE ASSESSEE. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) WAS JUS TIFIED IN RESTRICTING THE DISALLOWANCE TO RS. 6,00,002/- O UT OF RS. 13,60,142/- IN VIEW OF THE FACT THAT THE ASSESS EE HAS FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE IN RESPE CT OF THE AMOUNT SUSTAINED BY THE CIT(A). IT IS NOT DENI ED THAT THE ASSESSEE HAS SENT THE AMOUNT TO DUBAI THRO UGH BANK OUTWARD REMITTANCES TO THE ACCOUNT OF A PERSON WHO IS IN CHARGE OF INTERNATIONAL MARKETING AND WHO HAS SENT THE STATEMENT OF ACCOUNTS RELATING TO THIS EXPENDITURE BUT THE ASSESSEE HAS FAILED TO PROVE TH AT THE EXPENDITURE OF RS. 6,00,002/- HAS BEEN INCURRED WHO LLY ITA NO. 826/PN/2009 ELECTROMECH ENGINEERS A.Y. 2003- 04 6 AND SOLELY FOR THE PURPOSES OF ITS BUSINESS SO AS T O QUALIFY FOR DEDUCTION FROM THE BUSINESS INCOME OF T HE ASSESSEE. IN THIS VIEW OF THE MATTER, WE UPHOLD TH E ORDER OF THE CIT(A) ON THIS ISSUE AS WELL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MAY 2011. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE: DATED: 11 TH MAY, 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A) III PUNE 4. THE CIT, - V PUNE 5. THE D.R, A BENCH, PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE