Syndicate Jewellers Private Limited, Kolkata V. ITO, Ward - 8(4), Kolkata, Kolkata

ITA 957/KOL/2010

• Counselvise Citation: 95723514 RSA 2010
• Duration Of Justice: 5 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: S D VERMA
• Keywords: Business income

Judgement Text

I.T.A. NO. 957/KOL./2010 ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 957/KOL/ 2010 ASSESSMENT YEAR : 2004-2005 SYNDICATE JEWELLERS PVT. LIMITED, ................. .....................APPELLANT 22, CAMAC STREET, BLOCK-A, 1 ST FLOOR, KOLKATA-700 017 [PAN : AAGCS 6917 B] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-8(4), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI S.D. VERMA, ADVOCATE , FOR THE ASSESSEE SHRI KALYAN NATH, JCIT, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 17, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 20, 2015 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA DATED 17.02.2010 FOR THE ASSESSMENT YEAR 2004-05. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL INVOLVING THE ISSUE RELATING TO THE ADDITION MADE BY THE ASSESSIN G OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) BY WAY OF DISALLO WANCE OF RS.2,27,475/- ON ACCOUNT OF ASSESSEES CLAIM FOR EX PENSES INCURRED ON REPAIRS AND RENOVATION OF SHOWROOM TREATING THE SAM E AS CAPITAL IN NATURE, HAS NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE I.T.A. NO. 957/KOL./2010 ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 4 TIME OF HEARING BEFORE US. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 3. THE ISSUE INVOLVED IN GROUND NO. 2 RELATES TO TH E DISALLOWANCE OF RS.4,53,533/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DISCOUNT ALLOWED BY THE ASSESSEE TO VARIOUS CUSTOMERS. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF TRADING IN JEWELLERY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 01.11.2004 D ECLARING A LOSS OF RS.1,81,69,142/-. IN THE SAID RETURN, A SUM OF RS.. 4,61,883/- WAS DEBITED BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT ON ACC OUNT OF DISCOUNT ALLOWED. SINCE THE EXPENDITURE CLAIMED BY THE ASSES SEE ON ACCOUNT OF DISCOUNT ALLOWED IN THE IMMEDIATELY PRECEDING YEAR WAS ONLY RS.2,089/-, THE ASSESSING OFFICER REQUIRED IT TO EXPLAIN THE SU BSTANTIAL INCREASE IN THE AMOUNT OF DISCOUNT ALLOWED DURING THE YEAR UNDER CO NSIDERATION. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT DISCOUNT ON S ALES WAS ALLOWED AT THE PURE DISCRETION OF THE MANAGEMENT AND SINCE THE RE WAS SUBSTANTIAL INCREASE IN THE SALES MADE TO INDEPENDENT CUSTOMERS , THE AMOUNT OF DISCOUNT ALLOWED WAS ON THE HIGHER SIDE. THIS EXPLA NATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM, NO CONVINCING REASON WAS GIVEN BY THE ASSESSEE FOR ALL OWING DISCOUNT TO THE CUSTOMERS AND THERE WAS ALSO NO DOCUMENTARY EVIDENC E FILED BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR DISCOUNT ALLOWED. HE, THEREFORE, ALLOWED THE CLAIM OF THE ASSESSEE FOR DI SCOUNT TO THE EXTENT OF RS.8,350/- ON PRO-RATA BASIS TAKING THE PERCENTAGE OF DISCOUNT ALLOWED ON SALES IN THE IMMEDIATELY PRECEDING YEAR AS BASIS AN D DISALLOWED THE BALANCE AMOUNT OF RS.4,53,533/-. 5. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF DISCOUNT WAS CHALLENGED BY THE ASSEESSEE IN THE APP EAL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEE DINGS BEFORE THE LD. I.T.A. NO. 957/KOL./2010 ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 4 CIT(APPEALS), IT WAS SUBMITTED THAT SUBSTANTIAL POR TION OF TOTAL SALES OF RS.4.03 CRORES MADE DURING THE YEAR UNDER CONSIDERA TION WAS TO INDEPENDENT CUSTOMERS AND DISCOUNT IN RESPECT OF SU CH SALES WAS ALLOWED TO THESE INDEPENDENT CUSTOMERS ON MAKING CHARGES. T HIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT(AP PEALS) IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE I N SUPPORT AND HE PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE A SSESSING OFFICER ON THIS ISSUE. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE COPY OF LETTER DATED 0 7.12.2006 FILED BEFORE THE ASSESSING OFFICER (PAGE 18 OF THE PAPER BOOK) T O SHOW THAT ALL THE RELEVANT DETAILS OF SALES MADE TO THE THIRD PARTIES OR INDEPENDENT CUSTOMERS DURING THE YEAR UNDER CONSIDERATION WERE FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. HE HAS CONTENDED THAT THE SAID DETAILS WERE SUFFICIENT TO SHOW THAT THERE WAS SUBSTANTIAL INCREASE IN THE SALE OF JEWELLERY MADE BY THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION TO INDEPENDENT CUSTOMERS AND TH IS SUBSTANTIAL INCREASE WAS MAINLY ATTRIBUTED TO THE DISCOUNT ALLO WED BY THE MANAGEMENT OF THE ASSESSEE-COMPANY TO THESE INDEPEN DENT CUSTOMERS ON MAKING CHARGES. LD. D.R., ON THE OTHER HAND, HAS CO NTENDED THAT MAKING CHARGES IN CASE OF JEWELLERY BUSINESS ARE GENERALLY VERY NOMINAL AND, THEREFORE, THE DISCOUNT CLAIMED TO BE ALLOWED BY TH E ASSEESSEE ON SUCH SERVICE CHARGES IS HIGHLY EXCESSIVE. HOWEVER, AS CL ARIFIED BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE PROFIT & LOSS ACC OUNT OF THE ASSESSEE- COMPANY PLACED AT PAGE NO. 25 OF THE PAPER BOOK, TH E MAKING CHARGES RECEIVED BY THE ASSESSEE-COMPANY DURING THE YEAR UN DER CONSIDERATION WERE RS.77.64 LAKHS AND, THEREFORE, THE DISCOUNT AL LOWED WAS ONLY ABOUT 6% OF THE TOTAL MAKING CHARGES, WHICH, BY NO STRETC H OF IMAGINATION, CAN BE SAID TO BE EXCESSIVE OR UNREASONABLE. KEEPING IN VIEW ALL THESE RELEVANT FACTS AND FIGURES OF THE ASSESSEES CASE A ND THE SUBSTANTIAL INCREASE ACHIEVED BY THE ASSESSEE IN SALES MADE TO THE INDEPENDENT I.T.A. NO. 957/KOL./2010 ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 4 CUSTOMERS DURING THE YEAR UNDER CONSIDERATION AS A RESULT OF DISCOUNT ALLOWED IN RESPECT OF MAKING CHARGES, WE ARE OF THE VIEW THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ON DISCOUNT ALL OWED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND THE SAME BEING FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON THIS ISSUE IS NOT SUSTAINABLE. WE, THEREFORE, DELET E THE SAID DISALLOWANCE AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 20, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 20 TH DAY OF NOVEMBER, 2015 COPIES TO : (1) SYNDICATE JEWELLERS PVT. LIMITED, 22, CAMAC STREET, BLOCK-A, 1 ST FLOOR, KOLKATA-700 017 (2) INCOME TAX OFFICER, WARD-8(4), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, KO LKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.