M/s Deepak Spinners Ltd., Kolkata v. ACIT, Range-11/Kolkata, Kolkata

ITA 2094/KOL/2013 | 2004-2005
Pronouncement Date: 04-10-2016

Appeal Details

RSA Number 209423514 RSA 2013
Assessee PAN AABCD0387R
Bench Kolkata
Appeal Number ITA 2094/KOL/2013
Duration Of Justice 3 year(s) 2 month(s) 24 day(s)
Appellant M/s Deepak Spinners Ltd., Kolkata
Respondent ACIT, Range-11/Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 04-10-2016
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 04-10-2016
Date Of Final Hearing 20-09-2016
Next Hearing Date 20-09-2016
Assessment Year 2004-2005
Appeal Filed On 10-07-2013
Judgment Text
I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH KOLKATA BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY JUDICIAL MEMBER I.T.A. NO. 2094 /KOL/ 2013 ASSESSMENT YEAR: 2004-2005 M/S. DEEPAK SPINNERS LIMITED ...................... .............................APPELLANT 16 HARE STREET KOLKATA-700 001 [PAN: AABCD 0387 R] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX .............. .....................RESPONDENT CIRCLE-11 KOLKATA AAYAKAR BHAWAN P-7 CHOWRINGHEE SQUARE KOLKATA-700 069 APPEARANCES BY: SHRI S. JHAJHARIA A.R. FOR THE ASSESSEE SHRI SALLONG YADEN ADDL. CIT D.R. FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 20 201 6 DATE OF PRONOUNCING THE ORDER : OCTOBER 04 2016 O R D E R PER SHRI P.M. JAGTAP A.M .: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XII KOLKATA D ATED 14.03.2013 AND THE GROUNDS RAISED THEREIN BY THE ASSESSEE READ AS UNDER:- 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF SALES PROMOTION EXPENSE OF RS.3 61 000/- MADE IN ASSESSMENT (OUT OF TOTAL SUM OF RS. 21 80 5 53/- CLAIMED AND DEBITED IN P&L A/C ) PURELY ON ESTIMATE AND MER ELY ON ASSUMPTION AND PRESUMPTION WITHOUT BASIS AND WITHOU T PROPERLY CONSIDERING AND APPRECIATING THE FACTS THA T THE A/CS REGULARLY MAINTAINED WERE FULLY AUDITED AND EXPENSE S WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE EXPENSES INCURRED WERE NEITHER PERSONAL NOR CAP ITAL IN NATURE NOR ANY GIFT MADE TO ANYBODY. I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 6 THE ACTIONS OF THE A.O & LD. CIT(A) WERE WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LAW. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF FREIGHT & HANDLING CHARGE EXPEN SE OF RS. 10 00 000/- MADE IN ASSESSMENT (OUT OF TOTAL SUM OF RS. 5 29 21 590/- CLAIMED AND DEBITED IN P&L A/C.) PURE LY ON ESTIMATE AND MERELY ON ASSUMPTION AND PRESUMPTION W ITHOUT BASIS AND WITHOUT PROPERLY CONSIDERING AND APPRECIA TING THE FACTS THAT THE A/CS. REGULARLY MAINTAINED WERE FULL Y AUDITED AND THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS AND THE EXPENSES INCURRED WERE NEITHER PERSONAL NOR CAPITAL IN NATURE. THE ACTIONS OF THE A.O & LD. CIT(A) WERE WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LAW. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF GENERAL / MISC. EXPENSE OF RS.2 00 000/- MADE IN ASSESSMENT (OUT OF TOTAL SUM OF RS.83 77 45 1/- CLAIMED AND DEBITED IN P&L A/C) PURELY ON ESTIMATE AND MERE LY ON ASSUMPTION AND PRESUMPTION WITHOUT BASIS AND WITHOU T PROPERLY CONSIDERING AND APPRECIATING THE FACTS THA T THE A/CS REGULARLY MAINTAINED WERE FULLY AUDITED AND THE EXP ENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE EXPENSES INCURRED WERE NEITHER PERSONAL NOR CAP ITAL IN NATURE. THE ACTIONS OF THE A.O & LD. CIT(A) WERE WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LAW. 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE AD HOC ARBITRARY AND ESTIMATED DISALLOWANCE OF THE AFORESAID EXPENSES UNDER THREE HEADS AGGREGATED TO RS.15 61 000/- (RS.3 61 000/- + RS.10 00 000/- + RS .2 00 000/-) WITHOUT SPECIFYING OR POINTING OUT EVEN A SINGLE IT EM OF EXPENSE UNDER ANY OF THOSE THREE HEADS AS DISALLOWABLE AND FURTHERMORE WITHOUT EVEN PRIOR REJECTION OF THE AUDITED ACCOUNT S U/S 145 OF THE ACT AND ALSO WITHOUT CONSIDERING THE FACT THAT NO SUCH DISALLOWANCE WAS MADE IN ASSESSMENT U/S 143(3) FOR THE A.Y 2003-04 PASSED BY THE SAME A.O ON THE SAME DATE. THE ACTIONS OF THE A.O & LD. CIT(A) WERE WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LAW. 5. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN ISSUING A SIMPLE DIRECTION TO THE A.O TO VERIFY THE CLAIM OF THE DEDUCTIONS I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 6 U/S 80LA AND U/S 801B OF THE ACT AND ALLOW THEM AS PER LAW / PROVISIONS OF I. TAX INSTEAD OF ISSUING A SPECIFIC DIRECTION TO THE A.O TO ALLOW ( OVER AND ABOVE THE DEDUCTIONS U/S 80 IA & 801B ALREADY ALLOWED IN THE ASSESSMENT AS PER THE APPELL ANT'S CLAIM IN THE RETURN) FURTHER DEDUCTIONS U/S 801A AND U/S 801B IN RESPECT OF THE TWO INDUSTRIAL UNDERTAKING UNITS ADM ISSIBLE TO THE APPELLANT BECAUSE OF ENHANCEMENT OF THE PROFIT /INCOME OF THOSE TWO UNITS BY WAY OF DISALLOWANCE OF THE AFORE SAID EXPENSES OF RS.15 61 000/- MADE IN ASSESSMENT. THE ACTION OF THE LD. CIT(A) IN ISSUING A WRONG DIR ECTION WAS WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LA W. 6. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN ISSUING A SIMPLE DIRECTION TO THE A.O TO RE-CALCULATE THE TOT AL INCOME U/S 115JB AS PER THE PROVISIONS OF THE I. TAX ACT INSTE AD OF STRAIGHTWAY ALLOWING THE ADMISSIBLE DEDUCTIONS OF ( I) THE DEFERRED TAX OF RS. 1 65 52 699/- EXPLAINED WITH SU PPORTING VARIOUS JUDICIAL DECISIONS AND (II) THE EXPORT PROF IT OF RS.94 17 305/- U/S 80HHC OF THE ACT FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT U/S 115JB WHEN DEDUCTION U/S 80HHC HAS BEEN SEPARATELY ALLOWED BY HIM AS AN ADMI SSIBLE DEDUCTION WHILE COMPUTING THE TOTAL INCOME UNDER TH E NORMAL PROVISIONS OF THE ACT IN GROUND NO. 2 OF THE GROUND S OF APPEAL FOR BOTH THE A.YS 2003-04 & 2004-05. THE ACTION OF THE LD. CIT(A) IN REFERRING THE MATTE R TO THE A.O WAS WHOLLY UNREASONABLE UNCALLED FOR AND BAD IN LA W. 7. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PUT ADDITIONAL GROUNDS AND / OR TO ALTER / AMEND /MODIFY THE PRESE NT GROUNDS BEFORE OR AT THE TIME OF HEARING. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE ISSUE INVOLVED IN GROUND NO. 1 RELATING TO THE DISALLOWANCE OF RS.3 6 1 000/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) OUT OF SALES PROMOTION EXPENSES THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF SYNTHETIC BLENDED YARN ETC. THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION WAS FILED BY IT ON 28.10.2004 DECLARING TOTAL INCOM E OF RS.65 23 380/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SA ID RETURN OF INCOME A SUM OF RS.21 80 553/- WAS DEBITED BY THE ASSESSEE O N ACCOUNT OF SALES PROMOTION EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 6 CLAIM OF THE ASSESSEE FOR SALES PROMOTION EXPENSES WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION HE FOUND THAT THE EXPENDITURE OF RS.3 61 000/- INCURRED BY THE ASSESSEE ON OFFERI NG GIFTS TO THE COMPANYS GUESTS HAD NO RELATION WITH THE BUSINESS OF THE ASSESSEE. HE THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE FOR SALES PROMOTION EXPENSES TO THE EXTENT OF RS.3 61 000/-. ON APPEAL THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSI NG OFFICER AS THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW ANY NEXUS BETWEEN THE GIFTS CLAIMED TO BE GIVEN TO ITS CUSTOMERS AND ITS BUSINESS OF PRODUCTION OF SYNTHETIC YARN. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE RELEVANT GIFTS WERE GIVEN BY THE ASSESSEE TO ITS CUSTOMERS AND THIS POSITION WAS NOT DISPUTED EVEN BY THE ASSESSING OFFICER. ON A QUERY RAISED BY THE BENCH IN THIS REG ARD HE HAS SUBMITTED THAT THE LIST OF CUSTOMERS TO WHOM THE GIFTS HAD BE EN GIVEN WAS MAINTAINED BY THE ASSESSEE. IT IS HOWEVER OBSERVE D THAT THERE IS NO REFERENCE TO ANY SUCH LIST EITHER IN THE A.O.S ORD ER OR LD. CIT(A)S ORDER. THERE IS ALSO NOTHING BROUGHT ON RECORD TO SHOW THA T SUCH LIST WAS FILED BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(APPEALS). THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO NOT BEEN ABLE TO EXPLAIN AS TO WHETHER SUCH GIFTS HAVE BEEN GIVEN BY THE ASSESSEE IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEAR IN ORDER TO SHOW THAT THERE IS A CUSTOM FOLLOWED BY THE ASSESSEE TO GIVE SUCH G IFTS TO THE VISITORS OF THE FACTORY REGULARLY. KEEPING IN VIEW ALL THESE FA CTS OF THE CASE WE FIND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE EXPENSES IN QUESTION INCURRED ON DISTRIBUTION OF GIFTS ARE INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND THIS BEING SO WE F IND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMING T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE. THE SAME IS THEREFORE UPHELD DISMISSING GROUND NO. 1 OF THE ASSESSEES APPEAL. 3. AS REGARDS THE ISSUES INVOLVED IN GROUNDS NO. 2 & 3 RELATING TO THE DISALLOWANCE OF RS.10 00 000/- AND RS.2 00 000/- MA DE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) OUT O F FREIGHT AND OTHER I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 5 OF 6 HANDLING EXPENSES AND GENERAL/MISCELLANEOUS EXPENSE S IT IS OBSERVED THAT BOTH THESE DISALLOWANCES WERE MADE BY THE ASSE SSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) FOR WANT OF COMPL ETE DETAILS. A PERUSAL OF THEIR RESPECTIVE ORDERS HOWEVER SHOWS THAT IT IS NOT SPECIFICALLY POINTED OUT THEREIN AS TO WHAT DETAILS IN THIS REGA RD WERE CALLED FOR BY THEM WHICH THE ASSESSEE FAILED TO FURNISH. IN THIS REGARD THE LD. COUNSEL FOR THE ASSESSEE HAS FURNISHED THE DETAILS OF ENTIR E EXPENSES CLAIMED UNDER THE RELEVANT TWO HEADS AND HAS URGED THAT THE ISSUES MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR G IVING AN OPPORTUNITY TO THE ASSESSEE TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR THE SAID EXPENSES AS NO SUCH OPPORTUNITY WAS SPECIFICALLY AFFORDED TO THE ASSESSEE EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(APPEALS). W E FIND MERIT IN THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE AND SINCE THE LD. D.R. HAS ALSO NOT RAISED ANY OBJECTION IN THIS REGARD WE RE STORE BOTH THE ISSUES RELATING TO THE DISALLOWANCE MADE OUT OF FREIGHT AN D OTHER HANDLING EXPENSES AND MISCELLANEOUS EXPENSES TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING A PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUPPORT AND SUBSTANT IATE ITS CLAIM FOR THE SAID EXPENSES. GROUNDS NO. 2 & 3 ARE ACCORDINGLY TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. 4. THE ISSUE RAISED IN GROUND NO. 4 BY THE ASSESSEE IS NOTHING BUT REPETITION OF THE ISSUES RAISED IN GROUNDS NO. 2 & 3. THE SAME THEREFORE DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION AS AGR EED EVEN BY THE LD. COUNSEL FOR THE ASSESSEE. 5. THE ISSUE RAISED IN GROUND NO. 5 RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80-IA AND 80-IB IN RESPECT OF PROFITS OF THE ELIGIBLE UNDERTAKINGS AS ENHANCED BY ADDITION IF A NY FINALLY SUSTAINED ON ACCOUNT OF DISALLOWANCE OF EXPENSES IS CONSEQUENTIA L IN NATURE AND THE ASSESSING OFFICER ACCORDINGLY IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 5 IS ACCORDI NGLY TREATED AS ALLOWED. I.T.A. NO. 2094/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 6 OF 6 6. GROUND NO. 6 RAISED BY THE ASSESSEE IN ITS APPEA L IS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 04 2 016. SD/- SD/- (K. NARASIMHA CHARY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA THE 4 TH DAY OF OCTOBER 2016 COPIES TO : (1) M/S. DEEPAK SPINNERS LIMITED 16 HARE STREET KOLKATA-700 001 (2) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-11 KOLKATA AAYAKAR BHAWAN P-7 CHOWRINGHEE SQUARE KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XII KOLK ATA; (4) COMMISSIONER OF INCOME TAX- (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES KOLKATA LAHA/SR. P.S.