ACIT, Circle - 56, Kolkata, Kolkata v. M/s. Arti & Sons, Kolkata

ITA 2083/KOL/2010 | 2004-2005
Pronouncement Date: 22-09-2011 | Result: Dismissed

Appeal Details

RSA Number 208323514 RSA 2010
Assessee PAN AAEFA6622J
Bench Kolkata
Appeal Number ITA 2083/KOL/2010
Duration Of Justice 10 month(s) 3 day(s)
Appellant ACIT, Circle - 56, Kolkata, Kolkata
Respondent M/s. Arti & Sons, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 22-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-09-2011
Date Of Final Hearing 04-07-2011
Next Hearing Date 04-07-2011
Assessment Year 2004-2005
Appeal Filed On 19-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE /AND ! . '# . ) [BEFORE SRI MAHAVIR SINGH JM & SHRI C. D. RAO AM] $ $ $ $ / I.T.A NO. 2083/KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2004-05 ASSISTANT COMMISSIONER OF INCOME-TAX VS. M/S. ART I & SON CIRCLE-56 KOLKATA. (PAN-AAEFA 6622 J) (*+ /APPELLANT ) ( -*+/ RESPONDENT ) FOR THE APPELLANT: SHRI S. K. ROY FOR THE RESPONDENT: SHRI D. K. DE SARKAR DATE OF HEARING: 22.09.2011 DATE OF PRONOUNCEMENT: 22.09.2011 . / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXXVI KOLKATA IN APPEAL NO.322/CIT(A)-XXXVI/KOL/R-56./06-07 DATED 17.09.201 0. ASSESSMENT WAS FRAMED BY JT. CIT RANGE-56 KOLKATA U/S. 143(3) OF THE INCOME TA X ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORD ER DATED 28.12.2006. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AG AINST THE ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE AT RS.12 14 227/- OUT OF THE TOTAL DIS ALLOWANCE MADE BY ASSESSING OFFICER AT RS.24 28 854/- IN RESPECT TO BONUS AND INCENTIVE EX PENDED BY THE ASSESSEE. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. LD. CIT(A) HAS ERRED IN LAW AND FACT WHEN HE RE STRICTED THE DISALLOWANCE OF RS.24 28 854/- IN RESPECT OF BONUS & INCENTIVE TO R S. 12 14 427/- BECAUSE A.O MADE THIS ADDITION AFTER MAKING PROPER & FACTUAL COMPARISON O F THIS EXPENSE WITH EXPENSES IN THIS HEAD IN PREVIOUS YEARS. A.O INDICATED THAT THE NET PROFIT OF ASSESSEE WAS DECREASED FROM .23% OF TOTAL TURNOVER TO .13% IN THIS YEAR DUE TO INCREASE IN THIS EXPENSE. A.O ALSO POINTED THAT THE EXPENSE IN THIS HEAD IS INCREASED FROM .91% OF TO L.30% OF TOTAL RECEIVING WHICH IS NOT JUSTIFIABLE EVEN IN VIEW OF THE STIFF COMPETITION AS ALLEGED. CONSIDERING THE FACT THAT ASSESSEE WAS NOT ABLE TO PRODUCE SUPPORTI NG EVIDENCES AND PROPER EXPLANATION FOR ITS CLAIM. THE DISALLOWANCE OF RS.24 20 854/- M ADE BY THE A.O W.R.T. BONUS & INCENTIVE IS TOTALLY JUSTIFIABLE. A.O ALLOWED THE E XPENSE IN THIS HEAD 1.20% OF TURNOVER WHICH IS VERY MUCH REASONABLE WHEN COMPARED WITH PE RVIOUS YEAR RATIO OF 0.91%. 3. THE BRIEF FACTS ARE THAT ASSESSEE IS A DISTRIBUT OR OF DIFFERENT STATE LOTTERY TICKETS AND ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AND DU RING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER DISALLOWED INCENTIVE AND BONUS EX PENDITURE BY COMPARING GROSS PROFIT RATE OF ASSESSEES BUSINESS WITH EARLIER YEARS WHICH WO RKED OUT TO 0.53% I.E. LOW COMPARING WITH 2 ITA 2083/K/2010 ARTI & SON A.Y. 04-05 ASSESSMENT YEAR 2003-04 @ 0.60%. SIMILARLY NET PR OFIT WAS ALSO WORKED OUT AT 0.13% COMPARING TO EARLIER YEARS NET PROFIT AT 0.23%. A CCORDINGLY HE DISALLOWED THE CLAIM OF BONUS AND INCENTIVES. AGGRIEVED ASSESSEE PREFERRED APPE AL BEFORE CIT(A) WHO RESTRICTED THE DISALLOWANCE AT RS.12 14 427/- BY HOLDING THAT NET PROFIT FOR THE YEAR UNDER CONSIDERATION IS ONLY ABOUT 50% OF WHAT IT WAS FOR EARLIER ASSESSMEN T YEARS AND ACCORDINGLY HE RESTRICTED THE DISALLOWANCE AT 50% WHICH ACCORDING TO HIM IS FAIR AND REASONABLE. AGGRIEVED REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE BEFORE THE LOWER AUTHORITIES AND EVEN NOW BEFORE US STATED THAT G. P. RATE FOR THE RELEVANT ASSESSMENT YEAR 2004-05 WAS REDUCE D AS COMPARED TO LAST YEAR BUT EQUAL TO ASSESSMENT YEAR 2002-03. IT IS ALSO A FACT THAT MA NY NEW COMPETITORS OF THE ASSESSEE I.E. 23 NEW PLAYERS ENTERED INTO THE MARKET BUT DESPITE THA T SALE INCREASED AS COMPARED TO PREVIOUS YEAR. WE FIND THAT ASSESSEE COULD NOT PRODUCE REASO NABLE EXPLANATION FOR REDUCTION IN NET PROFIT RATIO AT 0.13% AS COMPARING TO NET PROFIT RATIO OF 0.23% IN ASSESSMENT YEAR 2003-04. WE FIND THAT THE CIT(A) HAS GONE INTO REASONS AND RESTRICTE D THE DISALLOWANCE AT RS.12 14 427/-. ON QUERY FROM THE BENCH THE LD. COUNSEL FOR THE ASSES SEE FAIRLY STATED THAT HE IS NOT IN APPEAL AGAINST CONFIRMATION OF DISALLOWANCE. IN VIEW OF T HIS FACT WE FIND THAT CIT(A) HAS DECIDED THE ISSUE AS UNDER: HOWEVER THE GROSS PROFIT AND NET PROFIT AS CAN B E SEEN FROM THE ABOVE TABLE EXTRACTED FROM THE ASSESSMENT ORDER ARE SUBSTANTIA LLY LESS COMPARED TO THE EARLIER ASSESSMENT YEARS. IN FACT NET PROFIT FOR THE YEAR IS ONLY 0.13% OF THE TURNOVER WHILE THE NET PROFIT FOR THE ASSESSMENT YEAR 2003-04 WAS 0.23 % WHERE AS THE NET PROFIT FOR THE ASSESSMENT YEAR 2002-03 @ 0.26%. IN FACT THE NET PR OFIT FOR YEAR UNDER CONSIDERATION IS ONLY ABOUT 50% OF WHAT IT WAS FOR THE EARLIER AS SESSMENT YEARS. THE APPELLANT DID NOT EXPLAIN AS TO WHY THE NET PROFIT WAS SO MUCH LESS F OR THE ASSESSMENT YEAR 2004-05. THE EXPLANATION OF THE APPELLANT AS ABOVE EXTRACTED F ROM THE WRITTEN SUBMISSIONS OF THE A/R WAS VERY GENERAL AND IT DID NOT SPECIFICALLY P ERTAIN TO THE ASST. YEAR 2004-05. HOWEVER DISALLOWANCE AT RS.24 28 854/- WHICH WORKS OUT TO 0.8% OF THE TOTAL CLAIM IS CONSIDERED EXCESSIVE. CONSIDERING OF THE ABOVE FACT S I AM OF THE VIEW THAT DISALLOWANCE OF RS.12 14 427/- I.E. 50% OF THE AMO UNT DISALLOWED BY THE ASSESSING OFFICER IS FAIR AND REASONABLE. ACCORDINGLY THE A O IS DIRECTED TO RESTRICT THE DISALLOWANCE AT RS.12 14 427/-. HENCE WE ARE OF THE VIEW THAT NO INTERFERENCE IN THE GIVEN FACTS AND CIRCUMSTANCES IS REQUIRED IN THE ORDER OF CIT(A). THIS GROUND OF REVENUES AP PEAL IS DISMISSED. 5. THE NEXT ISSUE IN REVENUES APPEAL IS AGAINST TH E ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE OF RS.1 60 062/- IN RESPECT OF GIFT MA DE TO CUSTOMERS. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. LD. CIT(A) HAS ERRED IN LAW AND FACT WHEN HE RES TRICTED THE DISALLOWANCE OF RS.1 60 062/- IN RESPECT OF GIFT MADE TO CUSTOMERS TO RS.80 031/- CONSIDERING THE FACT THAT CIT(A) HIMSELF ACCEPTED THAT ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM WITH PROPER 3 ITA 2083/K/2010 ARTI & SON A.Y. 04-05 BILLS AND VOUCHERS. IN THE ABSENCE OF SUPPORTING EV IDENCES THE DISALLOWANCE MADE BY THE A.O IS FULLY JUSTIFIABLE. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSM ENT PROCEEDINGS ASSESSING OFFICER NOTED THAT ASSESEE DEBITED IN ITS P&L ACCOUNT A SUM OF RS.1 6 0 062/- ON ACCOUNT OF GIFTS. ASSESSING OFFICER DISALLOWED THE ABOVE EXPENDITURE SINCE THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THAT THE EXPENDITURE INCURRED WAS WHOLLY FOR THE PURPOSE OF BUSINESS. IN APPEAL CIT(A) DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO RS.80 031/- BY OBSERVING THAT ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE CLAIM WITH PROPER BILLS AND VOUCHE RS. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US LD. DR SUBMITTED THAT CIT(A) RESTRICTED THE DISALLOWANCE TO RS.80 031/- WHICH IS UNJUSTIFIABLE CONSIDERING THE FACT THAT CI T(A) HIMSELF OBSERVED THAT ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM WITH PROPER BILLS AN D VOUCHERS. IN ABSENCE OF SUPPORTING EVIDENCES THE DISALLOWANCE MADE BY ASSESSING OFFICE R IS FULLY JUSTIFIABLE AND THE SAME MAY BE UPHELD. ON THE OTHER HAND LD. COUNSEL FOR THE ASS ESSEE RELIED ON THE ORDER OF CIT(A) AND URGED BEFORE THE BENCH TO CONFIRM THE SAME. WE FIN D THAT WHILE RESTRICTING THE DISALLOWANCE CIT(A) HAS HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE. I FIND THAT THE ABOVE AMOUNT WAS INCURRED TOWARDS PURCHASES OF MEMENTOS GIVEN TO THE DEALERS DURING THE CONFERENCE. I AM THEREFORE OF THE VIEW THAT THE ABOVE EXPENDITURE I S CONNECTED WITH APPELLANTS BUSINESS. HOWEVER THE APPELLANT WAS NOT ABLE TO SUBSTANTIATE THE CLAIM WITH PROPER BILLS AND VOUCHERS. CONSIDERING THE ABOVE DISALLOWANCE OF 5 0% OF THE EXPENSES CLAIMED UNDER THE HEAD IS FAIR AND REASONABLE. ACCORDINGLY THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO RS.80 031/-. SINCE REVENUE DID NOT REBUT THE AFORESAID FINDING O F CIT(A) BY PRODUCING ANY COGENT EVIDENCE/MATERIAL AT THE TIME OF HEARING BEFORE US WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. THE NEXT ISSUE IN REVENUES APPEAL IS AGAINST TH E ORDER OF CIT(A) IN DELETING THE DISALLOWANCE ON ACCOUNT OF TRAVELLING EXPENSES FRE IGHT AND CARRIAGE EXPENSES AND PRINTING AND STATIONERY EXPENSES. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.3: 3. LD. CIT(A) HAS ERRED IN LAW AND FACT WHEN HE D ELETED THE DISALLOWANCE MADE BY A.O WITH RESPECT TO TRAVELLING EXPENSES OF RS.20 000/- WITH RESPECT TO FREIGHT & CARRIAGE EXPENSES OF RS. 15000/-AND WITH RESPECT TO PRINTING & STATIONERY EX PENSES OF RS.20 000/- AS A.O. MADE THESE ADDITION ON THE BASIS OF FACT THAT ASSESSEE FURNISH ED SELF MADE VOUCHERS IN SUPPORT OF ITS CLAIM AND PART OF THESE EXPENSES HAVE THE PROBABILITY OF BEING PERSONAL IN NATURE. IN ABSENCE OF PROPER SUPPORTING THE ESTIMATION MADE BY THE A.O IS FULLY JUSTIFIABLE. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER MADE THE DISALLOWANCES ON ACCOUNT OF TRAVELLING EXPENSES FREIGHT AND CARRIAGE EXPENSES AND PRINTING AND STATIONERY EXPENSES ON THE 4 ITA 2083/K/2010 ARTI & SON A.Y. 04-05 BASIS OF FACT THAT ASSESSEE FURNISHED SELF MADE VOU CHERS IN SUPPORT OF ITS CLAIM AND PART OF THESE EXPENSES HAVE THE PROBABILITY OF BEING PERSONAL IN NATURE. IN APPEAL CIT(A) DELETED THE ADDITIONS ON ACCOUNT OF TRAVELLING EXPENSES OF RS.2 0 000/- FREIGHT AND CARRIAGE EXPENSES OF RS.15 000/- AND PRINTING AND STATIONERY OF RS.20 00 0/- SINCE ASSESSING OFFICER MADE THE DISALLOWANCE ON AD-HOC BASIS WITHOUT GIVING ANY REA SONS. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE US. WE FIND THAT BEFORE US LD. DR COULD NOT BE ABLE TO SPECIFICALLY POINT OUT ANY INSTANCE OF PERSONAL EXPENSES AND ASSESSING OFFICER HAS MADE THE DISALLOWANCES ON AD-HOC BASIS WITHOUT GIVING ANY SPECIFIC REASON. HENCE W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE ADDITIONS SO MADE BY ASSESSI NG OFFICER. THIS GROUND OF REVENUES APPEAL IS ALSO DISMISSED. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. 10. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . '# '#'# '# . ! (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 22ND SEPTEMBER 2011 /0 %12 3 JD.(SR.P.S.) . 4 5 '6- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT ACIT CIRCLE-56 KOLKATA. 2 -*+ / RESPONDENT M/S. ARTI & SONS 167/4 LENIN SARANI 2 ND FLOOR KOLKATA-72.. 3 . .% ( )/ THE CIT(A) KOLKATA 4. .% / CIT KOLKATA 5 . => % / DR KOLKATA BENCHES KOLKATA - / TRUE COPY .%?/ BY ORDER 2 /ASSTT. REGISTRAR .