The ITO, Ward-8(1), Ahmedabad V. Saujanya Network Pvt.Ltd., Ahmedabad

ITA 976/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76756 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Condonation of delay

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 [ASSTT.YEAR : 2007-2008] ITO, WARD-8(1) AHMEDABAD. /VS. SAUJANYA NETWORK PVT LTD. 4/B, RUPALI SOCIETY B/H. ISHWAR BHAVAN NAVRANGPURA, AHMEDABAD. PAN : AAGCS 2360 E ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI P.L. KUREEL, SR.DR 4& 1 2 )/ ASSESSEE BY : NONE 5 1 &(*/ DATE OF HEARING : 8 TH MAY, 2014 678 1 &(*/ DATE OF PRONOUNCEMENT : 06-06-2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE REVENUE AND THE CO BY THE ASSESSEE FOR THE ASSTT.YEAR 2007- 2008 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING D ISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -2- 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. ON EARLIER OCCASIONS ALSO, NONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE TRIBUNAL. ACCORDINGLY, THE NOTICE OF HEARING HAS B EEN SERVED THROUGH INCOME TAX DEPARTMENT, AND THE EVIDENCE THEREOF HAS BEEN FILED BY THE DEPARTMENT WITH THE TRIBUNAL. IN THESE FACTS, WE P ROCEED TO DECIDE THE PRESENT APPEALS EX PARTE QUA THE ASSESSEE ON MERITS AFTER HEARING THE LEARNED DR. ITA NO.976/AHD/2011 (REVENUES APPEAL): 3. THE GROUND NO.1 OF THE REVENUE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6,12,700/- MADE BY THE AO IN RESPECT OF COMMISSION EXPENSE. 4. THE LEARNED DR SUBMITTED THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE ENTIRE COMMISSION EXPENSES OF RS .21.43 LAKHS. HE SUBMITTED THAT THE SALES HAVE BEEN DECLINED AT 29% AND THE COMMISSION EXPENSE HAS INCREASED BY ABOUT 10% DURING THE YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. HE SUBMITTED THAT THE ASSESSEE WAS ASKED BY THE AO TO PROVIDE DETAILS OF THE PERSONS TO WHOM TH E COMMISSION WAS PAID AND TO JUSTIFY THE INCREASE IN COMMISSION EXPENSE. THE ASSESSEE COULD NOT PROVIDE THE ADDRESS OF THE PERSONS, EXCEPT WITH REG ARD TO THE FEW PERSONS AND COULD NOT FILE CONFIRMATIONS OF THE PERSONS TO WHOM THE COMMISSION WAS CLAIMED TO HAVE BEEN PAID OR EVEN THEIR ADDRESS ES. 5. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE HAS FURNISHED LIST OF NAMES OF PERSONS TO WHOM IT HAS CLAIMED TO HAVE PAID COMMISSION, BUT COULD NOT FILE THEIR COMPLETE ADDRESS (EXCEPT I N A FEW CASES) AND ALSO ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -3- COULD NOT FILE CONFIRMATIONS OF THE PAYEES OF THE C OMMISSION AND THEIR ADDRESSES. WE FIND THAT THE CIT(A) HAS DELETED THE ENTIRE ADDITION OF RS.6,12,700/- ON THE PLEA THAT THE PAYMENT OF COMMI SSION WAS PAID THROUGH ACCOUNT PAYEE CHEQUES AND THE ASSESSEE HAS ALSO DEDUCTED TDS AS PER THE PROVISIONS OF LAW. CONSIDERING THE ENTIRE FACTUAL MATRIX OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE COULD NO T PROVE THE GENUINENESS OF THE PAYMENT OF THE ENTIRE COMMISSION EXPENSES BY IT. HOWEVER, WE ARE OF THE VIEW THAT ENDS OF JUSTICE SHALL BE MET, IF T HE DISALLOWANCE OUT OF COMMISSION EXPENSES IS RESTRICTED TO RS.3,00,000/- AS AGAINST THE RS.6,12,700/- MADE BY THE AO AND DELETED BY THE CIT (A), AND ACCORDINGLY, THE GROUND NO.1 OF THE REVENUE IS PART LY ALLOWED. 6. THE GROUNDS NO.2 AND 3 OF THE REVENUE IS AS UNDE R: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,49,336/- MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY U/S.41(1) OF THE ACT, IN RESPECT OF UNPRO VED CREDITORS. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE OF RS.98,725 IN RESPECT OF UNPROVED CR EDITORS FOR EXPENSES. 7. THE LEARNED DR HAS REFERRED TO RELEVANT PORTIONS OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE RE LIED ON THE ORDER OF THE AO. 8. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE OPENING AND CLOSING BALANCE OF THE PARTY IN QUESTION WERE SAME AND THER E IS NO EVIDENCE BROUGHT ON RECORD THAT THE ASSESSEE HAS DERIVED ANY BENEFIT IN CASH OR IN ANY OTHER MANNER WHATSOEVER. THE CIT(A) HAS FOLLOW ED THE DECISION OF THE MUMBAI TRIBUNAL IN DSA ENGINEERS (BOMBAY) VS. I TO, (2009) 30 ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -4- SOT 31, WHEREIN HELD THAT WHEN THE ASSESSEE CONTINU ES TO REFLECT OR RECORD THE LIABILITIES AS STILL PAYABLE TO THE CREDITORS A ND DECIDES NOT TO WRITE THEM OFF UNILATERALLY, THE AO HAS HIGHER LEVELS OF RESPO NSIBILITY, AND HENCE HAS TO ESTABLISH WITH EVIDENCE THAT THE SAID BOOK ENTRI ES WERE WRONG OR NOT BONA FIDE . THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A ) ON THIS ISSUE, THE GROUNDS NO.2 AND 3 OF THE REVENUE ARE DISMISSED . 9. THE GROUND NO.4 OF THE REVENUE IS AS UNDER: 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.20,762/- ON ACCOUNT OF INTEREST EXPENSES. 10. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. 11. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED D R AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE WAS HAVING SUFFICIENT INT EREST FREE FUNDS AVAILABLE IN THE FORM OF SUNDRY CREDITORS ETC., AND THEREFORE , NO CASE OF DISALLOWANCE OUT OF INTEREST PAYMENT COULD BE MADE OUT BY THE DE PARTMENT, AND ACCORDINGLY, THE GROUND NO.4 OF THE REVENUE IS DISM ISSED. 12. THE GROUND NO.5 OF THE REVENUE IS AS UNDER: 5. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,17,705/- ON ACCOUNT OF MEETING EXPENSES. 13. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNED DR AND PER USED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE EXPENDITURE WA S INCURRED FOR ORGANIZING MEETINGS ON REGULAR INTERVALS OF ALL THE MARKETING PERSONNEL SITUATED AT DIFFERENT LOCATIONS TO CO-ORDINATE ITS BUSINESS OF THE ASSESSEE. SOMETIME, THE PERSONS COMING FROM VARIOUS CITIES, T OWNS, DISTRICTS ETC. ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -5- COULD NOT FURNISH VOUCHERS ON TIME, AND THEREFORE, THE ASSESSEE-COMPANY HAS INCURRED THE SAID EXPENDITURE ON CASH BASIS IN THE YEAR IN WHICH THE VOUCHERS WERE RECEIVED AND PAYMENTS WERE MADE, AND THEREFORE, THE CIT(A) HAS RIGHTLY HELD THAT SUCH EXPENSES HAVING C RYSTALLIZED DURING THE YEAR ARE ALLOWABLE. THE DECISION OF THE CIT(A) ON THIS ISSUE IS CORRECT AND THE GROUND NO.5 OF THE REVENUE IS DISMISSED. 14. THE GROUND NO.6 OF THE REVENUE IS AS UNDER: 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,73,817/- OUT OF TOTAL DISALLOW ANCE OF RS.2,18,817/- ON ACCOUNT OF CONVEYANCE EXPENSES. 15. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE CONVEYANCE EXPENSES OF RS.2.18 LAKHS AS AGAINST NIL IN THE PRECEDING YEAR. HE SUBMITTED THAT THE AO HAS RECORDED STATEMENT OF FOUR EMPLOYEES OUT OF WHICH T HREE HAVE DENIED HAVING ANY SUCH CONVEYANCE AMOUNT, AND THEREFORE, T HE ADDITION WAS MADE. WE FIND THAT THE CIT(A) HAS DELETED THE ADDI TION OF RS.1,73,817/- AND HAS CONFIRMED ADDITION OF RS.45,000/- ONLY OUT OF THE TOTAL CONVEYANCE EXPENSES. THE CIT(A) HAS OBSERVED THAT EXCEPT TWO PAYMENTS IN CASH ALL THE PAYMENTS HAVE BEEN MADE BY CHEQUES, WHICH FACT WAS NOT DISPUTED BY THE DEPARTMENT. REGARDING THREE PERSONS, OUT OF TO TAL FIVE PERSONS, TO WHOM CONVEYANCE EXPENSES WAS CONCERNED, THE CIT(A) HAS RECORDED THAT THE STAND OF THE THREE PERSONS WAS QUITE NATURAL, S INCE THEY WERE USING COMPANYS VEHICLE FOR THE BUSINESS DEVELOPMENT AND OTHER WORK OF THE ASSESSEE-COMPANY, FOR WHICH THE PETROL EXPENSES WER E PAID DIRECTLY BY THE COMPANY, AND THEREAFTER THE SAID EXPENSES WERE BIFU RCATED AMONGST THE PERSONS WHO USED THESE VEHICLES AND WERE DEBITED AS CONVEYANCE EXPENSES BY THE ACCOUNTANT OF THE ASSESSEE. WE FIND THAT TH IS WAY OF THE ACCOUNTING ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -6- IS UNUSUAL AND DOES NOT INSPIRE CONFIDENCE WITH REG ARD TO THE GENUINENESS OF THE ENTIRE CONVEYANCE EXPENSES CLAIMED BY THE AS SESSEE. THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXP ENSES CLAIMED BY IT. IN THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT TH E ENDS OF JUSTICE SHALL BE MET, IF THE DISALLOWANCE OUT OF CONVEYANCE EXPENSES IS RESTRICTED TO RS.1,00,000/- AS AGAINST THE DISALLOWANCE OF RS.45, 000/- SUSTAINED BY THE CIT(A), AND ACCORDINGLY, THE GROUND NO.6 OF THE REV ENUE IS PARTLY ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. CO NO.170/AHD/2011 (ASSESSEES CO) 17. THERE IS A DELAY OF 41 DAYS IN FILING THE CO WI TH THE TRIBUNAL. THE ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE REAS ONS FOR DELAY IN FILING THE CO BEFORE THE TRIBUNAL. THE LEARNED DR HAS OPPOSED THE CONTENTS OF THE AFFIDAVIT FILED BY THE ASSESSEE. WE HAVE CONSIDERE D THE ISSUE REGARDING THE ISSUE OF CONDONATION OF DELAY. IN THE FACTS AND CI RCUMSTANCES OF THE CASE. AND IN VIEW OF THE CONTENTS OF THE AFFIDAVIT OF THE DIRECTOR OF THE ASSESSEE- COMPANY, WE ARE OF THE VIEW THAT IT IS A FIT CASE F OR CONDONATION OF DELAY IN FILING THE PRESENT CO WITH THE TRIBUNAL, AND WE CON DONE THE DELAY ACCORDINGLY. 18. THE GROUNDS NO.1 AND 2 OF THE CO OF THE ASSESSE E ARE AS UNDER: 1. THAT ON FACTS, AND IN LAW, THE LD.CIT(A) HAS GR IEVOUSLY ERRED IN CONFIRMATION THE ADDITION OF RS.46,335/- MADE TWO W ARDS DIFFERENCE IN VALUATION OF CLOSING STOCK. 2. THAT IN ALTERNATE, AND WITHOUT PREJUDICE TO ABOV E GROUND, IF ADDITION IS CONFIRMED, THE SAME MAYBE ALLOWED AS VA LUE OF OPENING STOCK OF NEXT YEAR. ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -7- 19. THE ASSESSEE HAS IN ITS CO HAS REQUESTED THAT T HE ADDITION OF RS.46,335/- MADE TOWARDS DIFFERENCE IN VALUATION OF CLOSING STOCK IF CONFIRMED, THE SAME BE ALLOWED AS VALUE OF OPENING STOCK OF NEXT YEAR. THE LEARNED DR HAS OPPOSED THE SUBMISSION OF THE AS SESSEE. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR. WE FIND THAT THE ALTERNATE REQUEST OF THE ASSESSEE IS REASONABLE, AND ACCORDIN GLY, THE ADDITION TOWARDS DIFFERENCE IN VALUATION OF CLOSING STOCK OF RS.46,3 35/- BE ALLOWED AS VALUE OF OPENING STOCK OF NEXT YEAR. WE DIRECT ACCORDING LY. 20. THE GROUND NO.3 OF THE CO OF THE ASSESSEE IS AS UNDER: 3. THAT ON FACTS AND IN LAW, THE LD.CIT(A) HAS GRI EVOUSLY ERRED IN CONFIRMING THE ADDITION OF RS.24,000/- MADE OUT OF SALARY EXPENSES. 21. WE HAVE HEARD THE LEARNED DR. WE FIND THAT THE CIT(A) HAS PASSED A REASONABLE ORDER ON THIS ISSUE, AND THERE IS NO M ERIT IN THE GROUND OF THE CO OF THE ASSESSEE. WE FIND THAT THE CIT(A) HAS RE CORDED THAT NO EVIDENCE WAS PLACED BEFORE HIM BY THE ASSESSEE IN S UPPORT OF ITS ARGUMENT AND ACCORDINGLY, THE DISALLOWANCE WAS CONFIRMED. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, T HE GROUND NO.3 OF THE CO OF THE ASSESSEE IS DISMISSED. 22. THE GROUND NO.4 OF THE CO IS AS UNDER: 4. THAT ON FACTS AND IN LAW, THE LD.CIT(A) HAS GRI EVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF CONVEYANCE EXPENSES TO THE EXTENT OF RS.45,000/- OUT OF TOTAL DISALLOWANCE OF RS.2,18,81 7/- 23. THE LEARNED DR HAS SUBMITTED THAT THE ISSUE IN THIS GROUND OF THE CO IS COVERED WITH THE GROUND NO.6 IN THE REVENUES AP PEAL BEFORE THE TRIBUNAL. WE HAVE CONSIDERED SUBMISSIONS OF THE LE ARNED DR. IN VIEW OF ITA NO.976/AHD/2011 WITH CO NO.170/AHD/2011 -8- OUR DECISION IN THE FOREGOING PARAS OF THIS ORDER W HILE DISPOSING OF THE APPEAL OF THE REVENUE, WE HOLD THAT THERE IS NO MER IT IN THE GROUND NO.4 OF THE CO OF THE ASSESSEE, WHICH IS ACCORDINGLY DISMIS SED. 24. IN THE RESULT, APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD