DCIT, Bangalore V. M/s Wep Peripherals Pvt. Ltd., Bangalore

ITA 876/BANG/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5243 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 27-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B K MANJUNATH
• Assessee Lawyers: R N PARBHAT CITIIIDR
• Keywords: Gift; Opportunity of being heard; Principle of natural justice
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.558/BANG/2014 ASSESSMENT YEAR : 2005-06 WEP PERIPHERALS LTD., II FLOOR, BASAPPA COMPLEX, 40/1A, LAVELLE ROAD, BANGALORE 560 001. PAN: AAACW 3103F VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 12, BANGALORE. APPELLANT RESPONDENT ITA NO.876/BANG/2014 ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(5), BANGALORE. VS. WEP PERIPHERALS LTD., II FLOOR, BASAPPA COMPLEX, 40/1A, LAVELLE ROAD, BANGALORE 560 001. PAN: AAACW 3103F APPELLANT RESPONDENT APPELLANT BY : SHRI B.K. MANJUNATH, CA RESPONDENT BY : SHRI R.N. PARBHAT, CIT-III(DR) DATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 31.07.2017 ITA NO.558 & 876/BANG/2014 PAGE 2 OF 6 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE CROSS APPEALS ARE PREFERRED BY THE ASSESS EE AS WELL AS REVENUE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- ASSESSEES APPEAL 1. THAT THE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE APPELLANT IS AGAINST THE LAW, FACTS, CI RCUMSTANCES, NATURAL JUSTICE, EQUITY, WITHOUT JURISDICTION, BAD IN LAW AND ALL OTHER KNOWN PRINCIPLES OF LAW. 2. THAT THE TOTAL INCOME AND THE TOTAL TAX LIABILI TY COMPUTED IS HEREBY DISPUTED. 3. THE LEARNED AO / CIT(A) ERRED IN ARBITRARILY DI SALLOWING EXPENDITURE INCURRED ON THE WELFARE OF THE STAFF TO TALING TO RS. 17,03,848/- WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS ES OF THE BUSINESS. 4. THE LEARNED AO/CIT(A) ERRED IN ARBITRARILY DISA LLOWING TRAVELLING EXPENSES TO THE EXTENT OF RS. 20,00,000/ - WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS. 5. THE LEARNED AO/CIT(A) ERRED IN DISALLOWING ADVERTISEMENT AND SALES PROMOTION EXPENSES INCURRED ON BUSINESS MEETING/ SEMINAR TO THE EXTENT OF RS.9,00,693/ - WI THOUT APPRECIATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS. 6. THE LEARNED AO/CIT(A) ERRED IN DISALLOWING ADVERTISEMENT AND SALES PROMOTION EXPENSES INCURRED ON MARKETING RESEARCH TO THE EXTENT OF RS.3,86,167/- W ITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS. ITA NO.558 & 876/BANG/2014 PAGE 3 OF 6 7. THE LEARNED AO/CIT(A) ERRED IN MAKING ADHOC DISALLOWANCE OF MISCELLANEOUS EXPENSES TO THE EXTEN T OF RS. 5,00,000/- AND IN DOING SO NO SUSTAINABLE OR TENABL E REASONS HAVE BEEN GIVEN FOR MAKING THE DISALLOWANCE. 8. THE ABOVE DISALLOWANCES HAVE BEEN MADE ON ESTIM ATION AND ADHOC BASIS BY THE AO AND THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCES WITHOUT GIVING SUSTAINABLE AND TE NABLE REASONS AND OVERLOOKING THE DETAILS AND INFORMATION FURNISH ED BY THE APPELLANT. 9. THAT THE NEED FOR AND THE BUSINESS EXPEDIENCY F OR INCURRING OF EXPENDITURE HAS TO BE DECIDED BY THE A PPELLANT AND NOT BY THE AO/CIT(A). 10. THE APPELLANT DENIES THE LIABILITIES FOR INTERE ST U/ S. 234B AND 234C. FURTHER PRAYS THAT THE INTEREST IF ANY SH OULD BE LEVIED ONLY ON RETURNED INCOME. 11. NO OPPORTUNITY HAS BEEN GIVEN BEFORE LEVY OF I NTEREST U/ S 234B & C OF THE ACT. 12. WITHOUT PREJUDICE TO THE APPELLANT'S RIGHT OF SEEKING WAIVER BEFORE APPROPRIATE AUTHORITY THE APPELLANT B EGS FOR CONSEQUENTIAL RELIEF IN THE LEVY OF INTEREST U/S. 2 34B & 234C. 13. FOR THE ABOVE AND OTHER GROUNDS AND REASONS WH ICH MAY BE SUBMITTED DURING THE COURSE OF HEARING OF THIS A PPEAL, THE ASSESSEE REQUESTS THAT THE APPEAL BE ALLOWED AS PRA YED AND JUSTICE BE RENDERED. REVENUES APPEAL 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN ALLOWING THE CLAIM OF PROV ISION FOR WARRANTY EXPENSES OF RS.7,52,000 WITHOUT APPRECIATI NG THE FACT THAT THE SAME IS NOT ADMISSIBLE AS BUSINESS EXPENSE AS HELD BY THE AO. ITA NO.558 & 876/BANG/2014 PAGE 4 OF 6 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN ALLOWING THE STAFF WELFARE (LUNCH) EXPENSES OF RS 8,20,500 WITHOUT APPRECIATING THE FA CT THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THAT THE SAME H AS BEEN INCURRED FOR BUSINESS PURPOSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANC ES ON ACCOUNT OF BUSINESS MEETING EXPENSES; LUNCH, STAFF PICNIC, GIFTS ETC EXPENSES; ADVERTISEMENT & SALES PROMOTION EXPENSES; MARKETING RESEARCH EXPENSES TO 25% OF THE EXPENSES CLAIMED, BY HOLDING THAT THE RESPECTIVE DISALLOWANCES MADE BY T HE AO ARE UNREASONABLE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBMIT ANY EVIDENCE BEFORE THE AO OR AT APPELLATE PROCEEDING TO PROVE GENUINENESS OF THE RE SPECTIVE EXPENDITURES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN ALLOWING THE EXPENDITURE OF RS 10,00,000 CLAIMED BY THE ASSESSEE AS ADVERTISEMEN & PUBLICITY EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE SAME WITH ANY COGENT EVIDENCE BEFO RE THE AO TO PROVE THAT THE SAME WAS FOR BUSINESS PURPOSES. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF CIT(A) I N SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT BEFORE THE A O, THOUGH ASSESSEE HAS FILED ENORMOUS EVIDENCE IN SUPPORT OF HIS CLAIM, BU T THE SAME WAS NOT EXAMINED BY THE AO AND HE MADE DISALLOWANCES UNDER DIFFERENT HEADS, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(AP PEALS). THOUGH ITA NO.558 & 876/BANG/2014 PAGE 5 OF 6 ASSESSEE HAS EMPHATICALLY ARGUED BEFORE THE CIT(APP EALS) THAT AO HAS NOT EXAMINED THE DETAILED DOCUMENTS FURNISHED BEFOR E HIM IN SUPPORT OF ITS VARIOUS CLAIMS, BUT THE CIT(APPEALS) DID NOT LOOK I NTO THE DOCUMENTS. HE, HOWEVER, GRANTED PART RELIEF TO THE ASSESSEE ON DIF FERENT ISSUES AND THE REVENUE IS IN APPEAL AGAINST THE RELIEF GRANTED TO THE ASSESSEE BEFORE THE TRIBUNAL. THE ADDITION CONFIRMED BY THE CIT(APPEA LS) IS ALSO CHALLENGED BY THE ASSESSEE BEFORE US THROUGH ITS APPEAL. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS SUBMITTED THAT SINCE THE LOWER AUTHORITIES HAVE NOT ADJUDICATED THE ISSUES IN THE LIGHT OF ENORMOUS EVIDENCE FILED BY THE ASSE SSEE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO TO READJUDICATE THE ISSUES AFRESH. 4. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED THA T IF THE ENTIRE MATTER GOES BACK TO THE AO FOR READJUDICATION, HE HAS NO O BJECTION. 5. DURING THE COURSE OF HEARING, BOTH THE PARTIES H AVE AGREED THAT LET THE MATTER BE SENT BACK TO ASSESSING OFFICER FOR AS SESSMENT DE NOVO IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE. ACCORDING LY, WE SET ASIDE THE ORDER OF CIT(APPEALS) AND RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO READJUDICATE THE ISSUES AFRESH AND FRAME THE ASSESS MENT DE NOVO IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE, AFTER AFFO RDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.558 & 876/BANG/2014 PAGE 6 OF 6 6. IN THE RESULT, THE APPEAL OF ASSESSEE AS WELL AS REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JULY, 2017. SD/- SD/- ( JASON P. BOAZ ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 31 ST JULY 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE. .