M/s. Shilp Gravures, Ahmedabad v. The ACIT., Circle-6,, Ahmedabad

ITA 1298/AHD/2007 | 2003-2004
Pronouncement Date: 12-03-2010 | Result: Dismissed

Appeal Details

RSA Number 129820514 RSA 2007
Assessee PAN AAKFS5782M
Bench Ahmedabad
Appeal Number ITA 1298/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 13 day(s)
Appellant M/s. Shilp Gravures, Ahmedabad
Respondent The ACIT., Circle-6,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 12-03-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 12-03-2010
Date Of Final Hearing 10-03-2010
Next Hearing Date 10-03-2010
Assessment Year 2003-2004
Appeal Filed On 30-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 1298/AHD./2007 ASSESSMENT YEAR : 2003-2004 M/S. SHILP GRAVURES AHMEDABAD -VS.- ASSISTANT COMMISSIONER OF INCOME TAX (PAN : AAKFS 5782 M) CIRCLE-6 AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N. DIVETIA RESPONDENT BY : SHRI M.C. PANDIT SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 12.01.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XII AHMEDABAD FOR (I) ENHANCING FROM THE DISALLOWANCE OF CLAIM OF SPECIAL DISCOUNT EXPENSES OF RS.15 000/- MADE BY THE A.O. TO RS.3 75 095/- AND (II) CONFIRMING THE DISALLOWANCE OF RS.20 000/- OUT OF TELEPHONE TRAVELLING EXPENSES ETC. FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN MANUFACTURING AND JOB WORK IN ENGRAVED COPPER ROLLE RS USED IN FLEXIBLE PACKAGING INDUSTRY. FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETU RN OF INCOME DECLARING TOTAL INCOME OF RS.41 77 520/-. THE ASSESSING OFFICER FRAMED THE AS SESSMENT UNDER SECTION 143(3) ON 28.02.2006 WHEREIN INTER ALIA HE MADE THE ADDITI ON OF RS.15 000/- OUT OF SPECIAL DISCOUNT EXPENSES CLAIMED AMOUNTING TO RS.3 75 095/-. THE SA ID LUMPSUM DISALLOWANCE WAS MADE FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER WHI CH ARE AS UNDER :- DURING THE YEAR THE ASSESSEE HAS DEBITED DISCOUNT EXPENSES OF RS.3 75 095/- IN THE PROFIT & LOSS ACCOUNT. ON VERI FICATION OF COMPARATIVE CHART IT IS SEEN THAT THE ASSESSEE HAS DEBITED SPEC IAL DISCOUNT EXPENSES OF RS.3 75 095/- FOR THE FIRST TIME. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF DISCOUNT GIVEN TO THE PARTIES. THE ASSES SEE VIDE HIS SUBMISSION HAS GIVEN ONLY THE LEDGER ACCOUNT ALONGWITH JOURNAL VOUCHER WHEREIN NAME OF 5 PARTIES TO WHOM THE SPECIAL DISCOUNT HAS BEEN GIVEN. THE 2 ITA NO. 1298/AHD/2007 ASSESSEE HAS NOT GIVEN ANY REASONS OR PURPOSE FOR W HICH THE DISCOUNT HAS BEEN GIVEN TO THE PARTIES. THE ASSESSEE HAS DEBITED THIS EXPENSE FOR THE FIRST TIME AND THE REASONS FOR SUCH EXPENDITURE ARE NOT OFFERED BY THE ASSESSEE. IN ABSENCE OF THE REASONS/ JUSTIFICATION A LUMP SUM ADDITION OF RS.15 000/- IS MADE AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 2.1. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED A LUMP SUM AMOUNT OF RS.20 000/- OUT OF TELEPHONE EXPENSES OF RS.2 50 52 3/- TRAVELLING AND CONVEYANCE AMOUNTING TO RS.2 40 966/- GENERAL EXPENSES OF RS.73 711/- AND VEHICLE EXPENSES OF RS.2 27 760/-. 3. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFICER TO DISALLOW RS.3 75 095/- INSTEAD OF RS.15 000/- DISALLOWED BY THE A.O. THE DETAILED REASONS GIVEN IN THE IMPUGNED ORD ER CONTAINED IN PARA 2.3. ON PAGES 6-8 WHICH ARE AS UNDER :- 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE SUBM ISSION MADE BY THE LD. COUNSEL FOR THE APPELLANT AND CASE LAWS RELIED UPON BY THE LD. COUNSEL FOR THE APPELLANT. IN THIS CASE IT IS THE ADMITTED FAC T BY THE APPELLANT THAT THE SPECIAL DISCOUNT EXPENSES TO THE TUNE OF RS.3 75 09 5/- HAVE BEEN CLAIMED FOR THE FIRST TIME. AS PER EXPLANATION OFFERED BY T HE APPELLANT THE SPECIAL DISCOUNT CLAIMED TO HAVE BEEN GIVEN TO THE FIVE PAR TIES IS NOT BASED ON ANY SPECIFIC SCHEME OR POLICY AND NO ANY SPECIFIC B ASIS HAS BEEN EXPLAINED BY THE APPELLANT WHILE CLAIMING THE SAME- THE APPELLANT HAS MAINLY FOCUSED ITS EXPLANATION TO JUSTIFY THE CLAIM OF EXPENSES STATING THAT THERE IS COMPETITIVE MARKET AND THE SPECIAL DISCOUN T HAS BEEN ALLOWED TO DEVELOP THE BUSINESS RELATION WITH THE CUSTOMERS AN D THAT THE BUSINESS OF THE APPELLANT HAS INCREASED WITH INCREASE IN SALE. ON BOTH COUNTS THE EXPLANATION OFFERED BY THE APPELLANT IS NOT ACCEPTA BLE AT AIL BECAUSE SINCE THERE IS NO ANY WRITTEN AGREEMENT WITH THE PA RTIES TO WHOM THE SPECIAL DISCOUNT HAS BEEN ALLOWED AND ALSO SINCE TH ERE IS NO ANY SPECIFIC WRITTEN SCHEME OR POLICY TO SUPPORT THE CLAIM OF TH E APPELLANT THE CONTENTION OF THE APPELLANT IS NOT TENABLE. AS REGA RDS INCREASE IN SALES IT MAY BE POSSIBLE DURING ROUTINE BUSINESS AND ALSO TO SOME EXTENT ON ACCOUNT OF INCREASE IN VALUE OF GOODS ALSO. DURIN G THE COURSE OF BUSINESS EVEN IF THERE IS SOME INCREASE IN SALE TH AT HAS NOT BEEN PROVED TO BE ON ACCOUNT OF SPECIAL DISCOUNT ALLOWED WITHOU T ANY ADVERTISEMENT OF ANY SUCH SCHEME AND EXPENDITURE CLAIMED ONLY ON 31.03 2003 I.E. THE LAST DAY OF THE YEAR. FROM THE COPY OF GENERAL LE DGER OF THE PARTIES TO WHOM THE DISCOUNT HAVE BEEN GIVEN IT IS VERY CLEAR THAT ALL ACCOUNTS THE SPECIAL DISCOUNT HAS BEEN ACCOUNTED ONLY ON 31 ST MARCH 2003. THE SPECIFIC DETAILS AND BASIS FOR CALCULATING SUCH DIS COUNT IS NOT AVAILABLE ON RECORD AND ALSO IT COULD NOT BE EXPLAINED AT ALL BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. IT IS ALSO CLE AR THAT NO WITHDRAWALS OF SUCH AMOUNT HAVE BEEN MADE BY THE PARTIES TO WHO M THE SPECIAL 3 ITA NO. 1298/AHD/2007 DISCOUNT HAS BEEN GIVEN DURING THE YEAR. THERE IS A LSO NO ANY ENTRY TO SUPPORT THAT ANY ADVANCES ETC. WAS GIVEN TO THE PA RTIES TOWARDS SPECIAL DISCOUNT SCHEME. THE LOGICAL CLAIM OF SPECIAL DISCO UNT CAN ONLY BE MADE WHEN SOMETHING ADDITIONAL AND IN SPECIFIC TERMS IS BROUGHT TO SUBSTANTIATE THE CLAIM. IN THIS CASE NO ANY SUCH E VIDENCE HAS BEEN BROUGHT TO PROVE THAT THE SPECIAL DISCOUNT HAS BEEN ALLOWED ONLY TO FIVE PARTIES FOR ANY BUSINESS PURPOSE. UNLESS THERE IS A SCHEME IN WRITING SUCH TYPE OF CLAIM OF APPELLANT APPEARS TO BE THE E FFORT TO MAKE ADJUSTMENT OF PROFITS. IN VIEW OF ABOVE DISCUSSION THE CLAIM OF SPECIAL DISCOUNT MADE FOR THE FIRST TIME HAS NOT BEEN FOUND TO BE ACCEPTABLE AND THEREFORE ALL THE CONTENTIONS PUT FORTH BY THE APPE LLANT TO MAKE SUCH CLAIM ARE HEREBY REJECTED. AS SUCH THE WHOLE OF THE CLAIM OF RS.3 75 095/- IS DISALLOWED AND THE INCOME OF THE APPELLANT IS EN HANCED TO THE EXTENT OF RS.3 60 095/- ACCORDINGLY. THEREFORE A.O. IS DIREC TED TO DISALLOW RS.3 75 095/- INSTEAD OF RS.15 000/-DISALLOWED BY T HE A.O. SINCE THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF I NCOME AND CONCEALED THE INCOME TO THE EXTENT OF RS.3 75 095/- THE PENA LTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE INITIATED ACCORDINGLY . 3.1. IN THE IMPUGNED ORDER ALSO THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) CONFIRMED THE SAID LUMP SUM DISALLOWANCE OF RS.20 0 00/- MADE BY THE ASSESSING OFFICER OUT OF TELEPHONE EXPENSES OF RS.2 50 523/- TRAVELLING AND CONVEYANCE AMOUNTING TO RS.2 40 966/- GENERAL EXPENSES OF RS.73 711/- AND VEHICLE EXPENSE S OF RS.2 27 760/-. 4. AGGRIEVED BY THIS ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF BOTH THE AFORESAID ADDITIONS THE ASSESSEE IS IN AP PEAL BEFORE US. 5. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE SH RI S.N. DIVETIA APPEARED BEFORE US AND CONTENDED THAT ENHANCEMENT OF DISALLOWANCE TO RS.3 75 095/- FROM RS.15 000/- MADE BY THE A.O. IS WHOLLY ILLEGAL UNLAWFUL AND AGAINST THE PR INCIPLE OF NATURAL JUSTICE. HE SUBMITTED THAT THERE WAS NO NECESSITY ON THE PART OF LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) TO EXERCISE HIS POWER UNDER SECTION 255(1) BECAUSE THE ASSESSIN G OFFICER MADE A LUMP SUM DISALLOWANCE OF RS.15 000/-. WITH PREJUDICE TO THIS THE LD. COUNSE L OF THE ASSESSEE SUBMITTED THAT IN THE IMPUGNED ORDER THE CIT(A) MERELY DISALLOWED THE SPECIAL DIS COUNT EXPENSES MERELY FOR WANT OF SPECIFIC WRITTEN AGREEMENT/ SCHEME OR POLICY ETC. THE LD. C OUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT NET PROFIT DECLARED IN THE ASSESSMENT YEAR UNDER AP PEAL IS 11.30% AS AGAINST 11.73% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AND 10.30 % DECLARED IN THE ASSESSMENT YEAR 2001-02. THERE IS A SMALL FALL IN THE NET PROFIT RATE THERE FORE THERE IS NO JUSTIFICATION WHATSOEVER FOR 4 ITA NO. 1298/AHD/2007 MAKING THIS DISALLOWANCE. HE FURTHER SUBMITTED THAT THIS SPECIAL DISCOUNT WAS GIVEN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS THEREFORE THE SAME IS ALLOWABLE. 5.1. WITH REGARD TO DISALLOWANCE OF RS.20 000/- OUT OF TELEPHONE TRAVELLING AND CONVEYANCE GENERAL EXPENSES AND VEHICLE EXPENSES ETC. THE LD . COUNSEL OF THE ASSESSEE SUBMITTED THAT DISALLOWANCE IS EXCESSIVE AND THEREFORE THE SAME B E REDUCED. 6. ON THE OTHER HAND SHRI M.C. PANDIT SR. D.R. AP PEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). HE SUBMITTED THAT THE POWER OF LD. CIT(A) IS CO-TERMIN US WITH THAT OF ASSESSING OFFICER. IN THIS CASE THE ASSESSING OFFICER MADE A LUMP SUM DISALLOWANCE OF RS.15 000/- OUT OF SPECIAL DISCOUNT EXPENSES OF RS.3 75 095/- AND ON APPEAL THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) FOUND THAT THE ASSESSING OFFICER OUGHT TO HAVE DISA LLOWED THE ENTIRE SPECIAL DISCOUNT. FOR MAKING THE ENHANCEMENT THE LD. LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) HAS FOLLOWED THE PROCEDURE PRESCRIBED IN THE RELEVANT PROVISION OF THE INCOME TAX ACT 1961 ISSUED A SHOW- CAUSE NOTICE CONSIDERED THE REPLY OF THE ASSESSEE AND THEREAFTER ON BEING SATISFIED DISALLOWED THE ENTIRE SPECIAL DISCOUNT OF RS.3 75 095/-. WITH REGARD TO DISALLOWANCE OF RS.20 000/- OUT OF TELEPHONE EXPENSES OF RS.2 50 523/- TRAVELLING AND CONVEYANCE AMOUNTING TO RS.2 40 966/- GENERAL EXPENSES OF RS.73 711/- AND VEHICLE EXPENSE S OF RS.2 27 760/- THE LD. D.R. SUBMITTED THAT POSSIBILITY OF PERSONAL USER OF TELEPHONE VEH ICLES ETC. CANNOT BE RULED OUT. THE DISALLOWANCE OF RS.20 000/- OUT OF VARIOUS EXPENSES IS NEITHER E XCESSIVE NOR UNREASONABLE THEREFORE THE SAME BE UPHELD. 7. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE POWER OF LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) IS CO-TERMINUS WITH THAT OF ASSESSING OFFICER AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- KANPUR COAL SYNDICATE [53 ITR 335 (SC)]. IN THE INSTANT CASE THE ASSESSING OFFICER MADE A LUMP SUM DISALLOWANCE OF RS.15 000/- WITHOUT MAKING PROPER ENQUIRY. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER GIVING SHOW-CAUSE NOTICE TO THE ASSESSEE AFTER CONSIDERING THE REPLY OF THE ASSESSEE ENHANCED THE DISALLOWANCE TO RS.3 75 095/-. LOOKING TO THE PECULIAR FACTS AND SU BMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WE ARE CONVINC ED THAT THE LEARNED COMMISSIONER OF 5 ITA NO. 1298/AHD/2007 INCOME TAX(APPEALS) HAS GIVEN COGENT REASON FOR ENH ANCING THE DISALLOWANCE FROM RS.15 000/- MADE BY THE ASSESSING OFFICER TO RS.3 75 095/-. WE THEREFORE DECLINE TO INTERFERE. 7.1. COMING TO THE OTHER DISALLOWANCE OF RS.20 000/ - IN RESPECT OF TELEPHONE TRAVELLING & CONVEYANCE GENERAL EXPENSES AND VEHICLE EXPENSES ETC. WE FOUND THAT THIS LUMP SUM DISALLOWANCE OF RS.20 000/- WAS MADE OUT OF TELEPHO NE EXPENSES OF RS.2 50 523/- TRAVELLING AND CONVEYANCE AMOUNTING TO RS.2 40 966/- GENERAL EXPE NSES OF RS.73 711/- AND VEHICLE EXPENSES OF RS.2 27 760/- WHICH IS NEITHER EXCESSIVE NOR RE ASONABLE. THEREFORE WE DECLINE TO INTERFERE WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TA X(APPEALS) AND REJECT THIS GROUND OF APPEAL OF ASSESSEE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 12.03.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 / 03 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.