DCIT Circle-17 (1), v. Vestargaard Frandsen (India) (P) Ltd,

ITA 1437/DEL/2008 | 2004-2005
Pronouncement Date: 12-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 143720114 RSA 2008
Assessee PAN ASGOT2000P
Bench Delhi
Appeal Number ITA 1437/DEL/2008
Duration Of Justice 1 year(s) 9 month(s) 26 day(s)
Appellant DCIT Circle-17 (1),
Respondent Vestargaard Frandsen (India) (P) Ltd,
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 12-02-2010
Date Of Final Hearing 03-02-2010
Next Hearing Date 03-02-2010
Assessment Year 2004-2005
Appeal Filed On 16-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI R.P.TOLANI AND SHRI A.K.GARODIA ITA NO.1437/DEL/2008 ASSESSMENT YEAR : 2004-05 DY. COMMISSIONER OF INCOME TAX CIRCLE 17(1) NEW DELHI. VS. M/S VESTARGAARD FRENDSEN (INDIA) PVT. LTD. 302 RECTANGLE-1 BEHIND MARRIOTT HOTEL SAKET NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B. KISHORE SR. D.R. RESPONDENT BY : SHRI SALIL AGGARWAL ADVOCATE ORDER PER A.K.GARODIA AM: THIS IS AN APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XIX NEW DELHI DATED 04/12/2008 FOR ASSESSMENT YEAR 2004-05. 2. GROUNDS OF APPEAL AS PER REVISED GROUNDS OF APPE AL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2 00 000/- ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4 27 800/- ON ACCOUNT OF COMMISSION AND RS.47 250/- ON ACCOUNT OF BROKERAGE OF OFFICE SPACE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.55 000/- ON 2 ACCOUNT OF BAD DEBTS WRITTEN OFF BY ADMITTING FRESH EVIDENCE WITHOUT CONFRONTING THE A.O.. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.23 160/- ON ACCOUNT OF SALES TAX BY ADMITTING FRESH EVIDENCE WI THOUT CONFRONTING THE A.O. 3. REGARDING GROUND NO.1 OF THE APPEAL THE FACTS A RE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED QUANTITATIVE DETAILS OF FABRICATION CHARGES. IT IS NOTED BY THE ASSESSING O FFICER THAT AS PER THESE DETAILS THE ASSESSEE COMPANY HAS GOT 2000 PIECES O F NETS FABRICATED FROM M/S CD ENTERPRISES. IT IS FURTHER NOTED BY THE ASSE SSING OFFICER THAT ON GOING THROUGH THE DETAILS OF SALES AND CLOSING STOC K IT WAS NOTICED THAT NEITHER THE ABOVE QUANTITY OF NETS WERE SOLD NOR TH EY WERE SHOWN IN THE LIST OF CLOSING STOCK AS ON 31/3/2004. THE ASSESSING OFF ICER ASKED THE ASSESSEE TO EXPLAIN THE REASONS. IT IS NOTED BY THE ASSESSIN G OFFICER THAT THE LD. A.R. OF THE ASSESSEE SHRI PRADEEP TAYAL HAS IN ALL FAIRN ESS ACCEPTED THIS DISCREPANCY VIDE ORDER SHEET ENTRY DATED 26/12/2006 . THE ASSESSING OFFICER MADE ADDITION OF THIS AMOUNT OF RS. 2 LACS. BEING A GGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OF FICER HAS MADE APPARENT MISTAKE IN EXAMINING THE EVIDENCE ON RECORD AND HAS DRAWN ERRONEOUS CONCLUSION ON FACT. IT WAS ALSO SUBMITTED THAT THE LD. A.R. OF THE ASSESSEE HAS ACCEPTED THE DISCREPANCY BEFORE THE ASSESSING OFFIC ER UNDER WRONG IMPRESSION OF THE FACTS. IT IS SUBMITTED THAT THE F ACTS ARE THAT 2000 PIECES OF NETS WERE NEITHER FABRICATED NOR MANUFACTURED. IT I S ALSO EXPLAINED THAT THE ASSESSEE HAS IMPORTED THESE NETS AND SOLD THEM IN I NDIAN MARKET AND DUE TO MISHANDLING BY THE TRANSPORTER 2000 PIECES WERE DA MAGED AND THE SAME 3 WERE GOT REPAIRED BY M/S C.D.ENTERPRISES AND SINCE THESE NETS WERE ALREADY IN THE STOCK OF THE ASSESSEE IT WAS NOT REQUIRED T O INCLUDE THE SAME AGAIN IN THE CLOSING STOCK AND HENCE THE ADDITION MADE BY T HE ASSESSING OFFICER IS NOT JUSTIFIED. HE ALSO POINTED OUT THAT TO M/S C.D. ENTERPRISES A PAYMENT OF RS.17 000/- WAS MADE ON ACCOUNT OF REPAIRING OF OLD 2000 TORN NETS @ RS.8.50 PER NET. THE LD. CIT(A) DELETED THIS ADDITI ON AND NOW THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. D.R. OF THE REVENUE SUPPORTED THE ASSESS MENT ORDER WHEREAS THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF T HE STATEMENT OF THE LD. A.R. OF THE ASSESSEE SHRI PRADEEP TAYAL AS PER WHIC H HE HAS ADMITTED BEFORE THE ASSESSING OFFICER THAT THERE WAS DISCREPANCY IN THE STOCK. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT THESE 2000 NETS WERE NOT FABRICATED BY THE ASSESSEE FROM M/S C.D.ENTERPRISES BUT IN FACT THES E 2000 NETS WERE REPAIRED BY M/S C.D.ENTERPRISES FOR REPAIRING CHARGES OF RS. 17 000/-. AS AGAINST THIS SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(A) W E FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE BASIS OF QUANT ITATIVE DETAILS OF FABRICATION CHARGES. IF THESE NETS WERE NOT FABRICA TED AND ONLY REPAIRED THEN HOW THIS QUANTITY OF 2000 NETS APPEARED IN THE DET AILS OF FABRICATION CHARGES. IT IS NOT THE CASE OF THE ASSESSEE THAT PAYMENT OF REPAIRING CHARGES WERE WRONGLY INCLUDED IN THE DETAILS OF FABRICATION CHAR GES. IT MAY BE THAT 2000 NETS WERE GOT REPAIRED BY THE ASSESSEE ALSO AND STI LL IT MAY BE A FACT THAT THERE WAS FABRICATION OF 2000 NETS ALSO. THIS ASPEC T WAS NOT EXAMINED BY THE LD. CIT(A) AND HENCE WE FEEL THAT HIS ISSUE SHOULD GO BACK TO THE FILE OF ASSESSING OFFICER FOR EXAMINING THIS ASPECT AS TO W HETHER THE REPAIRING 4 CHARGES WERE WRONGLY DEBITED TO FABRICATION CHARGES . IF THAT IS THE FACT THEN NO ADDITION IS CALLED FOR BUT IF REPAIRING CHARGES ARE PAID SEPARATELY AND FABRICATION CHARGES ARE PAID SEPARATELY THEN THE AS SESSEE HAS TO EXPLAIN AS TO WHAT HAPPENED TO THOSE NETS WHICH WERE FABRICATED BY THE ASSESSEE BECAUSE THE SAME SHOULD EITHER BE INCLUDED IN SALES OR IN C LOSING STOCK. WITH THESE OBSERVATIONS WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF ASSESSING O FFICER FOR A FRESH DECISION IN THE LIGHT OF THE ABOVE DISCUSSION. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.1 OF THE REVENUE S TANDS ALLOWED FOR STATISTICAL PURPOSES. 6. THE FACTS REGARDING GROUND NO.2 ARE THAT IT IS N OTED BY THE ASSESSING OFFICER ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT T HE ASSESSEE HAS MADE PAYMENT OF COMMISSION OF RS.4 27 800/- TO M/S VISHA L AGENCIES. IT WAS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THAT SUCH CO MMISSION WAS PAID @ 2% ON SALE TO RITES LTD. FOR RS.213.90 LACS. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT FURNISH CONFIRMATION FROM THE PAYEE. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT ON PERUSAL OF THE COPY OF LEDGER ACCOUNT IT IS NOTED THAT COMMISSION HAS BEEN PAID TO M/S VISHAL AGENCIES @ 2% ON TOTAL SALES OF RS. 213.90 LACS MAD E TO RITES LTD. WHEREAS AS PER THE ASSESSEES LETTER DATED 18/12/20 06 VIDE POINT NO.6 THE ASSESSEE CLAIMED TO HAVE MADE TOTAL SALES OF RS. 19 529628/- TO RITES LTD. DURING THE YEAR UNDER CONSIDERATION. BECAUSE OF THI S THE ASSESSING OFFICER HAS TREATED THE COMMISSION PAYMENT AS BOGUS AND MAD E ADDITION FOR THE SAME. BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT ON 21/12/2006 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE CONFIRMATION FROM VISHAL 5 AGENCIES ON 26/12/2006 AND DUE TO PAUCITY OF TIME THE SAME COULD NOT BE FURNISHED. THE LD. CIT(A) DELETED THE DISALLOWANCE AND NOW THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. D.R. OF THE REVENUE SUPPORTED THE ASSESS MENT ORDER WHEREAS THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THE DISALLOWANCES MADE ON ACCOUNT OF COMMISSION WAS DEL ETED BY THE LD. CIT(A) BY MAKING THE FOLLOWING OBSERVATIONS: I HAVE GONE THROUGH THE ORDER OF THE A.O. AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE BASIC DETAILS REGA RDING PAYMENT OF COMMISSION TO VISHAL AGENCIES AND PAYMEN T OF BROKERAGE FOR TAKING A COMMERCIAL PREMISE ON LEASE PAID TO SURYA ASSOCIATES WERE FILED BEFORE THE A.O. TO DENY THE CLAIM MADE FOR THESE EXPENSES THE A.O. SHOULD HAVE MADE FURTHER ENQUIRIES. ON A CLOSE PERUSAL OF THE DETAILS FILED BEFORE ME I.E.COPY OF INCOME-TAX RETURN BANK STATEMENT DETA ILS OF TAX DEDUCTGED AT SOURCE BOTH THE TRANSACTIONS APPEAR T O BE GENUINE BUSINESS TRANSACTIONS AND ARE TO BE ALLOWED. IN VIE W OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE FO R BOTH THE DISALLOWANCES TO THE TUNE OF RS.4 75 050/- IS DELET ED. 9. FROM THE ABOVE FINDINGS OF THE LD. CIT(A) WE FI ND THAT THE DISPUTE WAS REGARDING TOTAL COMMISSION PAYMENT OF RS. 4 75 050/- WHICH INCLUDED COMMISSION PAYMENT OF RS.47 250/- ON ACCOUNT OF BRO KERAGE FOR OFFICE SPACE AND COMMISSION PAYMENT OF RS. 4 27 800/- PAID TO M/S VISHAL AGENCIES. BOTH THE DISALLOWANCES HAVE BEEN DELETED BY THE LD. CIT(A) BY OBSERVING THAT TO DENY THE CLAIM MADE FOR THESE EXP ENSES THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIES. WHEN TH E LD. CIT(A) SAYS THAT THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQU IRIES WE FIND NO BASIS FOR DELETING THE DISALLOWANCE BY THE LD. CIT(A). TH IS IS THE CLAIM OF THE 6 ASSESSEE FIRM THAT CONFIRMATION COULD NOT BE FURNIS HED BEFORE THE ASSESSING OFFICER DUE TO PAUCITY OF TIME. IF THAT IS A FACT T HEN THE CONFIRMATION SHOULD HAVE BEEN FURNISHED BEFORE BEFORE THE LD. CIT(A) OR BEFORE US BUT THAT WAS NOT DONE. REGARDING THE DISCREPANCY IN THE AMOUNT OF SALE TO M/S RITES LTD. ALSO THERE IS NO EXPLANATION OFFERED BY THE A SSESSEE BEFORE THE LD. CIT(A) OR BEFORE US. WE THEREFORE FEEL THAT THIS ISSUE SHOULD ALSO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DE CISION AND THE ASSESSEE SHOULD FURNISH THE CONFIRMATION FROM M/S VISHAL AGE NCIES AND SHOULD ALSO EXPLAIN THE DISCREPANCY IN THE AMOUNT OF SALES TO M /S RITES LTD.. NECESSARY AGREEMENT AND CORRESPONDENCE IN CONNECTION WITH COM MISSION SHOULD ALSO BE PRODUCED BEFORE THE ASSESSING OFFICER AND THEREA FTER THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTE R PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.2 OF THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 10. REGARDING GROUND NO.3 THE FACTS ARE THAT DURIN G THIS YEAR THE ASSESSEE COMPANY HAS CLAIMED BAD DEBTS TO THE TUNE OF RS.1 13 007/-. THE ASSESSING OFFICER NOTED THAT IT INCLUDED TWO AMOUNT S OF RS. 25 000/- AND RS.30 000/- WHICH WERE ON ACCOUNT OF ADVANCE GIVEN FOR THE INTERIOR WORK OF THE OFFICE BUT THE CONTRACT GOT CANCELLED AND MO NEY COULD NOT BE RECOVERED BACK. FOR THESE TWO AMOUNTS THE ASSESSIN G OFFICER REJECTED THE CLAIM OF THE ASSESSEE REGARDING BAD DEBTS ON THE BA SIS THAT THE PROVISIONS OF SEC. 36(2) ARE NOT COMPLIED WITH. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND BEFORE T HE LD. CIT(A) IT WAS THE CLAIM OF THE ASSESSEE THAT THESE TWO AMOUNTS ARE NO T ALLOWABLE AS BAD DEBTS BUT SHOULD BE ALLOWED AS BUSINESS LOSS. THE LD. CIT (A) HAS ACCEPTED THIS CLAIM OF THE ASSESSEE AND NOW THE REVENUE IS IN AP PEAL BEFORE US. 7 11. THE LD. D.R. OF THE REVENUE HAS SUPPORTED THE A SSESSMENT ORDER WHEREAS THE LD. COUNSEL OF THE ASSESSEE HAS SUPPORT ED THE ORDER OF THE LD. CIT(A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT IN THE FACTS OF THE PRESENT CASE THE LD. CIT(A) HAS RIGHTLY ACC EPTED THE CLAIM OF THE ASSESSEE THAT THESE TWO AMOUNTS ARE ALLOWABLE AS BU SINESS LOSS AND WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CI T(A) ON THIS ISSUE. GROUND NO.3 OF THE REVENUE IS REJECTED. 13. REGARDING GROUND NO.4 THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE 3 AND 4 OF THE ASSESSMENT ORDER THA T DURING THIS YEAR THE ASSESSEE COMPANY HAS CLAIMED A SUM OF RS.23 160/- A S SALES-TAX IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER ASKED THE A SSESSEE TO FURNISH A COPY OF SALES-TAX ASSESSMENT ORDER AS PER WHICH THE ADDITIONAL DEMAND OF SALES-TAX WAS RAISED. BUT THE ASSESSEE COMPANY DID NOT FURNISH THE COPY OF SALES-TAX ASSESSMENT ORDER. THE ASSESSING OFFICER D ISALLOWED THIS CLAIM OF THE ASSESSEE. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THIS DISALLOWANCE ON THE BASIS THAT ON PERUSAL OF SALES-TAX ORDER THE ADDITIONAL PAYMENT MADE TO THE TUNE OF RS.23160/- IS TO BE ALLOWED. NOW THE REVENUE IS I N APPEAL BEFORE US. 14. THE LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHE REAS THE LD.COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER FOR THE REASON THAT COPY OF SALES TAX ASSESSMENT ORDER WAS NOT FURNISHED BY THE ASSESSEE BEFORE HIM. THE 8 LD. CIT(A) HAS DELETED THE DISALLOWANCE ON THE BASI S OF SALES TAX ASSESSMENT ORDER. SINCE THE SALES TAX ASSESSMENT ORDER WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER WE RESTORE THIS MATTER BACK TO T HE FILE OF ASSESSING OFFICER FOR A FRESH DECISION. THE ASSESSEE SHOULD F URNISH A COPY OF THE SALES TAX ASSESSMENT ORDER BEFORE THE ASSESSING OFFICER A ND THEREAFTER THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PE R LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . GROUND NO.4 IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH FEBRUAR Y 2010. SD/- SD/- (R.P.TOLANI) (A.K.GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12.02.2010. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT DEPUTY REGISTRAR