Prag C.Boghani, Kolkata V. I.T.O Wd - 35(1),kolkata, Kolkata

ITA 929/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4934 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 10-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Assessee Lawyers: S SADHU; MALAY DHAR
• Keywords: Gift; Business income; Bad and doubtful debts; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.929/KOL/2013 ASSESSMENT YEAR: 2008-09 PARAG C. BOGHANI VS. INCOME-TAX OFFICER, WD-35( 1), KOLKATA (PAN: ADQPB1742D) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 10.05.2016 DATE OF PRONOUNCEMENT: 13.05.2016 FOR THE APPELLANT: S/SHRI MALAY DHAR & S. SADHU, A DVOCATES FOR THE RESPONDENT: SHRI SANJAY MUKHERJEE, JCIT, SR. DR ORDER PER SHRI BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA VIDE APPEAL NO. 242/CIT(A)-XX/WD-35(1)/2010-11/KOL DATED 15.02.2013. ASSESSMENT WAS FRAMED BY ITO, WD-35(1)/ KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008- 09 VIDE HIS ORDER DATED 27.12.2010. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. AO IS JUSTIFIED IN DISALLOWING A SUM OF RS.4,89,356/- TOWARDS BAD D EBTS AND ADVANCES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT OF TIMBER AND PVC FLEX AND SELLING THEM. THE ASSES SEE MADE CERTAIN ADVANCE PAYMENTS IN THE NORMAL COURSE OF HIS BUSINESS TO VARIOUS SUP PLIERS AND C&F AGENTS AND COULD NOT RECEIVE THE MATERIALS AND SERVICES IN FULL, FROM T HE SAID PARTIES AND ACCORDINGLY, CHOSE TO WRITE OFF THOSE BAD ADVANCES AND CLAIMED THE SAME A S DEDUCTION IN THE RETURN OF INCOME. BEFORE THE LD. AO THE ASSESSEE PROVIDED THE BREAKUP OF HIS CLAIM OF BAD DEBTS AND ADVANCES OF RS.4,89,356/- AS BELOW: JAF FZE (DUBAI) RS. 1,32,040/- O. V. IMPEX (DELHI) RS. 2,08,505/- SHROFF SHIPPING AGENCY PVT. LTD. RS. 35,468/ - TOTAL ADVANCE FOR MATERIALS AND SERVICES : RS. 3, 76,013/- + BAJAJ GLASS CENTRE (BAD DEBTS WRITTEN OFF) RS. 1,13,343/- TOTAL : RS. 4,89,356/- 2 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 THE LD. AO OBSERVED THAT ASSESSEE COULD NOT ESTABLI SH AS TO HOW THE AFORESAID DEBTS AND ADVANCES HAD BECOME BAD. HENCE, HE PROCEEDED TO DI SALLOW THE ENTIRE CLAIM OF RS.4,89,356/- IN THE ASSESSMENT WHICH WAS UPHELD BY THE LD. CIT(A) ON FIRST APPEAL. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US ON THE F OLLOWING GROUNDS: 1. FOR THAT THE LEARNED COMMISSIONER OF INCOME-T AX (APPEALS) ERRED IN LAW IN UPHOLDING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.4,89, 356/- CLAIMED BY THE APPELLANT U/S. 36(L)(VII) OF THE SAID ACT ON MISCONCEPTION OF FACT S AS WELL AS LAW AND WITHOUT TAKING INTO CONSIDERATION OF THE FACT THAT THE DEBTS WERE WRITT EN OFF AS IRRECOVERABLE IN THE BOOKS AND REFLECTED TO PROFIT AND LOSS ACCOUNTS. 2. FOR THAT IN VIEW OF THE FACT THAT A PART OF THE DEBTS ARISEN OUT OF INCIDENT TO THE TRADE WHICH CAUSED REDUCTION OF CIRCULATING FUND BECAME B AD AND WAS NOT RECEIVABLE, THE CLAIM OF THE APPELLANT AS BAD DEBT OUT OF SUCH SUM OUGHT TO HAVE BEEN ALLOWED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN CONSIDERATI ON OF THE ARGUMENTS ADDUCED TO HIM. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT THE BREAKUP OF THE CLAIM OF BAD DEBTS AND ADVANCES IS ENCLOSED IN PAGES 27 AND 28 OF THE PAPER BOOK TOGETHER WITH SUPPORTING EVIDENCES FROM PAGES 29 TO 36 OF THE PAP ER BOOK. FROM THE SAME IT COULD BE SAFELY CONCLUDED THAT IN RESPECT OF FIRST THREE PAR TIES AS STATED SUPRA, THE ASSESSEE HAD PAID TRADE ADVANCES TO VARIOUS SUPPLIERS AND SERVIC E PROVIDERS DURING THE NORMAL COURSE OF HIS BUSINESS WHICH COULD NOT BE RECEIVED BACK EI THER IN CASH OR IN KIND BY SUPPLY OF MATERIALS IN FULL AND HENCE, THE SAME ARE ALLOWABLE AS DEDUCTION U/S. 28 OF THE ACT ON WRITE OFF OF THE SAME. WE FIND THAT THE EFFORTS TA KEN BY THE ASSESSEE TO RECOVER THE SAME WERE IN VAIN AND HENCE, THE ARGUMENT OF THE LD. AR THAT THE ASSESSEE HAD NO OTHER OPTION BUT TO WRITE OFF THE SAME AS BAD ADVANCES IN THE RETURN OF INCOME IS TO BE ACCEPTED. WE ALSO PLACE RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF OUR CONCLUSION: I) CIT VS. MYSORE SUGAR CO. REPORTED IN (1962) 46 ITR 649 (SC) - IN THIS CASE, THE FACTS BEFORE THE HONBLE APEX COURT AND DECISION RE NDERED THEREON IS GIVEN BELOW:- FACTS: THE ASSESSEE WAS A SUGAR COMPANY. THE ASSES SEE PURCHASED SUGARCANE FROM THE SUGARCANE GROWERS AND CRUSHED THEM IN ITS FACTO RY TO PREPARE SUGAR. AS A PART OF ITS BUSINESS OPERATIONS. IT ENTERED INTO AGREEMENTS WITH THE SUGARCANE GROWERS, AND ADVANCED THEM SUGARCANE SEEDLINGS, FERTILIZERS AND ALSO CASH. THE SUGARCANE GROWERS ENTERED INTO A WRITTEN AGREEMENT BY WHICH THEY AGR EED TO SELL SUGARCANE EXCLUSIVELY TO THE ASSESSEE AT CURRENT MARKET RATES AND TO HAVE TH E ADVANCES ADJUSTED TOWARDS THE PRICE OF SUGARCANE, AGREEING TO PAY INTEREST IN THE MEANTIME. FOR THIS PURPOSE, AN ACCOUNT OF EACH SUGARCANE GROWERS WAS OPENED BY THE ASSESSEE-COMPANY. A CROP OF 3 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 SUGARCANE TOOK ABOUT 18 MONTHS TO MATURE, AND THES E AGREEMENTS TOOK PLACE AT THE HARVEST SEASON EACH YEAR, IN PREPARATION FOR THE N EXT CROP. IN THE YEAR 1948-49, DUE TO DROUGHT, THE ASSESSEE COMPANY COULD NOT WORK ITS SUGAR MILLS AND THE SUGARCANE GROWERS COULD NOT GRO W OR DELIVER THE SUGARCANE. THE ADVANCES MADE IN 1948-49 THUS REMAINED UNRECOVERED, BECAUSE THEY COULD ONLY BE RECOVERED BY THE SUPPLY OF SUGARCANE TO THE ASSESSE E-COMPANY. THE MYSORE GOVERNMENT REALISING THE HARDSHIP APPOINTED A COMMI TTEE TO INVESTIGATE THE MATTER AND TO MAKE A REPORT AND RECOMMENDATIONS. THE COMMI TTEE RECOMMENDED THAT THE ASSESSEE-COMPANY SHOULD EX GRATIA FORGO SOME OF IT S DUES, AND IN THE YEAR OF ACCOUNT ENDING 30-6-1952, THE COMPANY WAIVED ITS RIGHTS IN RESPECT OF RS.2,87,422. THE COMPANY CLAIMED THIS AS A DEDUCTION UNDER SECTION 1 0(2)(XV) OF 1922 ACT. THE ITO DECLINED TO MAKE THE DEDUCTION, BECAUSE, IN HIS OPI NION, THIS WAS NEITHER A TRADE DEBT NOR EVEN A BAD DEBT BUT AN EX GRATIA PAYMENT ALMOST LIKE A GIFT. AN APPEAL TO THE AAC ALSO FAILED. THE APPELLATE TRIBUNAL UPHELD THE DISA LLOWANCE. ON REFERENCE THE HIGH COURT HELD THAT THE EXPENDITURE WAS NOT IN THE NATU RE OF A CAPITAL EXPENDITURE, AND WAS DEDUCTIBLE AS A REVENUE EXPENDITURE. HELD: TO FIND OUT WHETHER AN EXPENDITURE IS ON THE CAPITAL ACCOUNT OR ON REVENUE, ONE MUST CONSIDER THE EXPENDITURE IN RELAT ION TO THE BUSINESS. SINCE ALL PAYMENTS REDUCE CAPITAL IN THE ULTIMATE ANALYSIS, ONE IS OPT TO CONSIDER A LOSS AS AMOUNTING TO A LOSS OF BUSINESS. BUT THIS IS NOT TR UE OF ALL LOSSES, BECAUSE LOSSES IN THE RUNNING OF THE BUSINESS CANNOT BE SAID TO BE OF CAP ITAL. THE QUESTIONS TO CONSIDER IN THIS CONNECTION ARE: FOR WHAT PURPOSE WAS THE MONEY LAID OUT? WAS IT TO ACQUIRE AN ASSET OF AN ENDURING NATURE FOR THE BENEFIT OF THE BUSINESS, OR WAS IT AN OUTGOING IN THE DOING OF THE BUSINESS? IF MONEY BE LOST IN THE FIRST CIRCUMSTANCES, IT IS A LOSS OF CAPITAL, BUT IF LOST IN THE SECOND CIRCUMSTANCE, IT IS A REVENUE LOSS. IN THE FIRST, IT BEARS THE CHARACTER OF AN INVESTMENT, BUT IN THE SECOND, TO USE A COMMONLY UNDERSTOOD PHRASE, IT BEARS THE CHARACTER OF CURRENT EXPENSES. IN INSTANT CASE THE AMOUNT WAS AN ADVANCE AGAINST PRICE OF ONE CROP. THE OPPIGEDARS WERE TO GET THE ASSISTANCE NOT AS AN IN VESTMENT BY THE ASSESSEE-COMPANY IN ITS AGRICULTURE, BUT ONLY AS AN ADVANCE PAYMENT OF PRICE. THE AMOUNT, SO FAR AS THE ASSESSEE-COMPANY WAS CONCERNED, REPRESENTED THE CUR RENT EXPENDITURE TOWARDS THE PURCHASE OF SUGARCANE, AND IT MADE NO DIFFERENCE TH AT THE SUGARCANE THUS PURCHASED WAS GROWN BY THE OPPIGEDARS WITH THE SEEDLINGS, FER TILIZER AND MONEY TAKEN ON ACCOUNT FROM THE ASSESSEE-COMPANY. IN SO FAR AS THE ASSESSEE-COMPANY WAS CONCERNED, IT WAS DOING NO MORE THAN MAKING A FORWARD ARRANG EMENT FOR THE NEXT YEARS CROP AND PAYING AN AMOUNT IN ADVANCE OUT OF THE PRICE, S O THAT THE GROWING OF THE CROP MIGHT NOT SUFFER DUE TO WANT OF FUNDS IN THE HANDS OF THE GROWERS. THERE WAS HARDLY ANY ELEMENT OF INVESTMENT WHICH CONTEMPLATED MORE THAN PAYMENT OF ADVANCE PRICE. THE RESULTING LOSS TO THE ASSESSEE-COMPANY WAS JUST AS MUCH A LOSS ON THE REVENUE SIDE AS WOULD HAVE BEEN, IF IT HAD PAID FOR THE READY CR OP WHICH WAS NOT DELIVERED. HENCE, THE DECISION OF THE HIGH COURT WAS RIGHT. THE APPEAL WAS DISMISSED. 4 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 II) DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F HARSHAD J. CHOKSI VS. CIT REPORTED IN (2012) 25 TAXMAN.COM 567 (BOM) - IN THIS CASE THE QUESTION RAISED BEFORE THE HONBLE BOMBAY HIGH COURT AND THE DECISION RENDERED THEREON IS REPRODUCED BELOW:- QUESTIONS: WHETHER IF AN AMOUNT IS HELD TO BE NOT DEDUCTIBLE AS A BAD DEBT IN VIEW OF NON- COMPLIANCE OF THE CONDITION PRECEDENT AS PROVIDED U NDER SECTION 36(2), COULD THE SAME BE CONSIDERED AS AN ALLOWABLE BUSINESS LOSS? WHETHER, THEREFORE, THE AMOUNT OF RS. 44.98 LAK HS COULD BE CONSIDERED AS AN ALLOWABLE BUSINESS LOSS? HELD: SECTION 28 IMPOSES A CHARGE ON THE PROFITS OR GAINS OF BUSINESS OR PROFESSION. THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS OR PROFES SION' IS TO BE UNDERSTOOD IN ITS ORDINARY COMMERCIAL MEANING AND THE SAME DOES NOT MEAN TOTAL RECEIPTS. WHAT HAS TO BROUGHT TO TAX IS THE NET AMOUNT EARNED BY CARRYING ON A PROFE SSION OR A BUSINESS WHICH NECESSARILY REQUIRES DEDUCTING EXPENSES AND LOSSES INCURRED IN CARRYING ON BUSINESS OR PROFESSION. THE SUPREME COURT IN THE CASE OF BADRIDAS DAGA V. CIT [1958] 34 ITR 10 HAS HELD THAT IN ASSESSING THE AMOUNT OF PROFITS AND GAINS LIABLE TO TAX, ONE MUST NECESSARILY HAVE REGARD TO THE ACCEPTED COMMERCIAL PRACTICE THAT DED UCTION OF SUCH EXPENSES AND LOSSES IS TO BE ALLOWED, IF IT ARISES IN CARRYING ON BUSINESS AND IS INCIDENTAL TO IT. [PARA 10] ON THE BASIS OF THE AFORESAID DECISION, IT CAN BE C ONCLUDED THAT EVEN IF THE DEDUCTION IS NOT ALLOWABLE AS BAD DEBTS, THE TRIBUNAL OUGHT TO H AVE CONSIDERED THE ASSESSEE'S CLAIM FOR DEDUCTION AS BUSINESS LOSS. THIS IS PARTICULARLY SO , AS THERE IS NO BAR IN CLAIMING A LOSS AS A BUSINESS LOSS, IF THE SAME IS INCIDENTAL TO CARRY ING ON OF A BUSINESS. THE FACT THAT CONDITION OF BAD DEBTS WERE NOT SATISFIED BY THE AS SESSEE WOULD NOT PREVENT HIM FROM CLAIMING DEDUCTION AS A BUSINESS LOSS INCURRED IN T HE COURSE OF CARRYING ON BUSINESS AS SHARE BROKER. [PARA 11] IN FACT, THE BOMBAY HIGH COURT IN THE CASE OF CIT V. R.B. RUNGTA & CO. [1963] 50 ITR 233 UPHELD THE FINDING OF THE TRIBUNAL THAT THE LOSS C OULD BE ALLOWED ON GENERAL PRINCIPLES GOVERNING COMPUTATION OF PROFITS UNDER S ECTION 10 OF THE INDIAN INCOME-TAX ACT, 1922, WHICH IS SIMILAR/IDENTICAL TO SECTION 28 OF THE 1961 ACT. THE REVENUE IN THAT CASE URGED THAT THE ASSESSEE HAVING CLAIMED DEDUCTI ON AS A BAD DEBT THE BENEFIT OF THE GENERAL PRINCIPLE OF LAW THAT ALL EXPENDITURE INCUR RED IN CARRYING ON THE BUSINESS MUST BE DEDUCTED TO ARRIVE AT A PROFIT CANNOT BE EXTENDED. THIS SUBMISSION WAS NEGATIVED BY THE COURT AND IT WAS HELD THAT EVEN WHERE THE DEBT IS N OT HELD TO BE ALLOWABLE AS BAD DEBTS YET THE SAME WOULD BE ALLOWABLE AS A DEDUCTION AS A REVENUE LOSS IN COMPUTING PROFITS OF THE BUSINESS UNDER SECTION 10(1) OF THE INDIAN INCO ME-TAX ACT, 1922. [PARA 12] THEREFORE, THE AMOUNT OF RS. 44.98 LAKHS, WHICH WAS HELD TO BE NOT DEDUCTIBLE AS BAD DEBTS IN VIEW OF THE PROVISIONS OF SECTION 36(2), C OULD BE CONSIDERED AS AN ALLOWABLE BUSINESS LOSS. [PARA 13] RESPECTFULLY FOLLOWING THE AFORESAID DECISION AND I N VIEW OF THE AFORESAID FINDINGS, WE HAVE NO HESITATION IN DIRECTING THE LD. AO TO ALLOW THE CLAIM OF DEDUCTION TOWARDS BAD ADVANCES IN RESPECT OF FIRST THREE PARTIES MENTIONE D SUPRA. 5 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 5. APROPOS, THE CLAIM OF BAD DEBTS IN RESPECT OF DE BTS DUE FROM BAJAJ GLASS CENTRE AMOUNTING TO RS.1,13,343/-, WE FIND THAT ASSESSEE H AD ACTUALLY SOLD MATERIALS WORTH RS.4,13,343/- VIDE BILL NO. PE/0607/0032 DATED 13.0 7.2006 AND HAD RECEIVED ONLY RS. 3 LACS AGAINST THE SAME AND THE PARTY HAD WITHHELD TH E BALANCE DUE TO INFERIOR QUALITY OF MATERIAL SUPPLIED. UNDER THESE CIRCUMSTANCES, THE ASSESSEE CHOSE TO WRITE OFF THE BALANCE SUM OF RS.1,13,343/- IN HIS BOOKS AS IRRECO VERABLE AND CLAIMED THE SAME AS BAD DEBT IN THE RETURN OF INCOME. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD DULY OFFERED THE SALE MADE TO SAID PARTY AS INCOME IN THE RETURN OF INCOME OF EARLIER YEAR. WE FIND THAT ASSESSEE IS DULY ENTITLED FOR THE SAME AS DEDUCTION U/S. 36(1)(VII) OF THE ACT READ WITH SECTION 36(2) OF THE ACT. ACCORDINGLY, GROUND NOS. 1 AND 2 RAISED BY ASSESSEE ARE ALLOWED. 6. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE AO IS JUSTIFIED IN DISALLOWING THE C&F CHARGES OF RS.9,23,328/- BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT READ WITH SECTION 194C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT OF TIMBER AND PVC FLEX AND SELLING THEM. FOR THE P URPOSE OF HIS BUSINESS, THE ASSESSEE HAD TO ENGAGE THE SERVICES OF DURA INTERNATIONAL SE RVICES AS HIS CLEARING AGENT. THE SAID C&F AGENT INCURRED EXPENSES ON BEHALF OF THE ASSESS EE WHILE CLEARING THE GOODS FOR WHICH BILLS WERE RAISED ON THE ASSESSEE AND THE SAI D C&F AGENT ALSO RAISED SEPARATE BILLS FOR HIS SERVICE CHARGES ON THE ASSESSEE. THE LD. A O OBSERVED THAT SINCE BOTH THE SERVICES WERE RENDERED BY THE SAME PARTY TAX HAS TO BE DEDUCTED U/S. 194C OF THE ACT ON THE GROSS AMOUNT PAID TO THE SAID C&F AGENT BY THE ASSESSEE. ACCORDINGLY, HE OBSERVED THAT THE ASSESSEE HAS TO DEDUCT TAX AT SOURCE EVEN ON THE REIMBURSEMENT PORTION PAID TO THE SAID C&F AGENT AND MADE DISALLOWANCE U/S. 40(A) (IA) OF THE ACT, WHICH WAS UPHELD BY THE LD. CIT(A). AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US ON THE FOLLOWING GROUND: 3. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN C ONFIRMING THE DISALLOWANCE OF RS.9,23,328/- BEING THE EXPENDITURE INCURRED BY THE APPELLANT AND THE PAYMENT MADE TO THE CLEARING AGENT AS REIMBURSEMENT OF EXPENSES WHI CH WERE DISALLOWED BY THE LD. AO IN APPLICATION OF THE PROVISIONS OF SECTIONS 40(A)(IA) AND 194C OF THE SAID ACT WRONGFULLY AND INCORRECTLY. 6 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. AR DREW OUR ATTENTION TO PAGE 37 OF THE PAPER BOOK, WHICH CONTAINS THE DETAILS OF ENTIRE REIMBURSEMENT OF EXPENSES TOG ETHER WITH ITS SUPPORTING BILLS PLACED AT PAGED 38 TO 83 OF THE PAPER BOOK. THE LD. DR AR GUED THAT IT IS NOT CLEAR FROM THE BILLS AS TO WHAT IS THE ELEMENT OF SERVICE CHARGES RAISED BY THE C&F AGENT AND ACCORDINGLY, HE PRAYED FOR SETTING ASIDE OF THE ISSUE FOR VERIFI CATION BY THE LEARNED AO AND ALSO FAIRLY AGREED THAT NO TDS WOULD BE APPLICABLE ON TH E REIMBURSEMENT PORTION. THE LD. AR ARGUED THAT NO PROFIT ELEMENT WAS LOADED BY THE C&F AGENT WHILE SEEKING REIMBURSEMENT OF EXPENSES AND PLACED RELIANCE ON TH E CIRCULAR NO. 715 DATED 08.08.1995 AND DECISIONS OF COORDINATE BENCH IN AHM EDABAD TRIBUNAL IN ITA NO. 562/AHD/2011 DATED 30.01.2015 AND DECISION OF THE K OLKATA TRIBUNAL IN ITA NO. 654/KOL/2010 DATED 19.10.2012. WE FIND THAT FROM T HE PERUSAL OF THE BILLS SUBMITTED BY THE ASSESSEE IN HIS PAPER BOOK AND FROM THE PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, THERE IS NO CLEAR FINDING GIVEN WITH R EGARD TO THE FACT AS TO WHETHER PROFIT ELEMENT HAS BEEN LOADED BY C&F AGENT IN HIS BILLS S EEKING REIMBURSEMENT OF EXPENSES. WE FIND THAT THIS FINDING IS VERY CRUCIAL TO DECIDE THE IMPUGNED ISSUE BEFORE US. WE HOLD THAT NO TAX NEEDS TO BE DEDUCTED U/S. 194C OF THE ACT FOR THE REIMBURSEMENT PORTION. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF JUSTICE AND FAIR PLAY TO SET ASIDE THIS ISSUE TO THE FILE OF THE LD. AO TO GIVE A CLEAR FINDING FROM THE VERIFICATION OF THE BILLS AS TO WHETHER ANY PROFIT ELEMENT IS LOADED BY THE C&F AGENT WHILE SEEKING REIMBURSEMENT OF EXP ENSES FROM THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO ADDUCE ADEQUATE COOPER ATION AND PRODUCE EVIDENCES IN SUPPORT OF HIS CONTENTIONS. ACCORDINGLY, GROUND NO . 3 RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER DISALLOWANCE OF SALES PROMOTION EXPENSES IN THE SUM OF RS.2,86,466/ - COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE LD. AO CALLED FOR THE DETAILS OF SALES PROMOTION EXPENSES AND IN RESPONSE TO THAT THE ASSESSEE PRODUCED PURCHASE BILLS OF MATERIAL PURCHASED WHICH WERE DISTRIBUTED TO VARIOUS CUSTOMERS FOR THE PURPOSE OF INCREASING THE TURNOVE R OF THE ASSESSEE. THE LD. AO, HOWEVER, NOT CONVINCED SOUGHT TO DISALLOW 10% OF TH E TOTAL SALES PROMOTION EXPENSES AND MADE DISALLOWANCE OF RS.2,86,466/- IN THE ASSES SMENT ON ESTIMATED BASIS WHICH 7 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 WAS UPHELD BY THE LD. CIT(A) ON FIRST APPEAL. AGGR IEVED, ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: 4. FOR THAT HAVING REGARD TO THE FACTS THAT THE E XPENDITURE OF RS.2,86,466/- CLAIMED BY THE APPELLANT AS SALES PROMOTION EXPENSES FOR THE P URPOSE OF BUSINESS WHOLLY AND EXCLUSIVELY, THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF THE SAME WITHOUT TAKING INTO CONSIDERATION OF THE ARGUMENTS PLACED B EFORE HIM. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD INCURRED THIS EXPENDI TURE IN THE NORMAL COURSE OF BUSINESS TOWARDS SALES PROMOTION AND HE HAD ALSO PRODUCED PU RCHASE BILLS FOR THE MATERIAL WHICH WERE IN TURN GIFTED TO VARIOUS PARTIES FOR INCREASI NG THE TURNOVER OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE TURNOVER AND NET PROFIT OF THE ASSESSEE DURING THE YEAR HAD INCREASED SUBSTANTIALLY, WHICH IS EVIDENT FROM THE CHART REPR ODUCED HEREINBELOW: ASST. YEAR TURNOVER RS. SALES PROMOTION EXPENSES RS. GROSS PROFIT RS. NET PROFIT RS. 2008-09 2007-08 2006-07 4,12,87,062 48,85,581 34,64,170 28,64,661 28,080 NIL 1,07,24,064 11,33,967 8,36,261 10,46,120 2,82,547 2,59,186 11. THE LD. DR ARGUED THAT ASSESSEE HAD NOT PROVED THE BUSINESS NEXUS OF INCURRING THESE EXPENSES. WE FIND THAT INCURRENCE OF THESE EXPENSES BY THE ASSESSEE ARE IN THE NORMAL COURSE OF BUSINESS AND ADEQUATE EVIDENCES WE RE ALSO SUBMITTED IN THIS REGARD. IN ANY CASE, THERE CANNOT BE ANY ADDITION MADE BY THE LOWER AUTHORITIES ON ESTIMATED BASIS WITHOUT BRINGING ANY MATERIAL ON RECORD FOR JUSTIFY ING THE SAID ADDITION. ACCORDINGLY, WE ALLOW THE GROUND NO. 4 RAISED BY THE ASSESSEE. 12. GROUND NOS. 5 AND 6 ARE NOT PRESSED BY THE LD. AR AT THE TIME OF HEARING, THE SAME IS RECKONED AS A STATEMENT FROM THE BAR. HENCE GROUND NOS. 5 & 6 RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 13. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. 14. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.05. 2016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 13TH MAY, 2016 JD.(SR.P.S.) 8 ITA NO.929/K/2013 SHRI PARAG C. BOGHANI AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI PARAG C. BOGHANI, C/O M/S. PARAG ENTERPRISE, 8, AMARTOLLA STREET, KOLKATA-700 001. 2 RESPONDENT ITO, WD-35(1), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .