ACIT, Lucknow v. IITC ORGANIC INDIA PVT LTD, Lucknow

ITA 213/LKW/2011 | 2005-2006
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 21323714 RSA 2011
Assessee PAN AAACI5675E
Bench Lucknow
Appeal Number ITA 213/LKW/2011
Duration Of Justice 2 month(s) 20 day(s)
Appellant ACIT, Lucknow
Respondent IITC ORGANIC INDIA PVT LTD, Lucknow
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 15-07-2011
Assessment Year 2005-2006
Appeal Filed On 25-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A LUCKNOW BEFORE HONBLE SHRI H.L. KARWA AND HONBLE SHRI N.K. SAINI ITA NO.213/LKW/2011 ASSESSMENT YEAR:2005-06 ACIT RANGE 3 LUCKNOW V. M/S IITC ORGANIC INDIA PVT. LTD. A-306 INDIRA NAGAR LUCKNOW PAN:AAACI5675E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. VIVEK GUPTA D.R. RESPONDENT BY: SHRI. AMIT SHUKLA ADVOCATE O R D E R PER N.K. SAINI: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 21.1.2011 OF THE LD. CIT(A) I LUCKNOW FOR ASSESSMENT YEAR 2005-06. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.9 31 403/- OUT OF PAYMENT MADE TOWARDS THE MANUFACTURING EXPENSES OF RS.2 46 326/- TRAVELING EXPENSES RS.2 69 117/- CONVEYANCE EXPENSES OF RS.40 873/- AND SELLING EXPENSES OF RS.3 75 087/- RESPECTIVELY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF MADE BY THE A.O. RS.8 40 110/- ON ACCOUNT OF MISC. EXPENDITURE BEING WRITTEN OFF ALTHOUGH THERE WAS REASON ASSIGNED BY THE A.O. FOR MAKING SUCH DISALLOWANCE. :-2-: 3. APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEAL AS STATED ABOVE AS AND WHEN NEED OF DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE BENCH. 2. THE APPEAL FILED BY THE REVENUE IS DELAYED BY 10 DAYS AND THE DEPARTMENT HAS FILED AN APPLICATION DATED 25.4.2011 REQUESTING FOR CONDONATION OF DELAY IN FILING THE APPEAL WHICH READS AS UNDER:- OFFICE OF THE ASSTT. COMISSIONER OF INCOME TAX RANGE-3 LUCKNOW. DATED: 25.04.2011 TO THE ASSTT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL 5 TH FLOOR PIC-UP BHAWAN GOMTI NAGAR LUCKNOW. SIR SUB: REQUEST FOR CANDONATION OF DELAY IN FILING SECOND APPEAL IN THE CASE OF IITC ORGANIC INDIA PVT. LTD. A-306 INDRA NAGAR LUCKNOW - A.Y. 2005-06 - REGARDING WITH DUE RESPECT THE UNDERSIGNED IS REQUESTING YOUR HONOUR TO KINDLY CONDONE FOR FILING OF SECOND APPEAL IN THE ABOVE CASE. IN FACT IT IS IMPORTANT TO MENTION HERE THAT UPTO 13.04.2011 THE JURISDICTION OVER THE ABOVE CASE WAS DECIDED IN THE EVENING THAT ABOVE SAID CASE PERTAINS TO RANGE-III OF LUCKNOW. BUT DUE TO NON-AVAILABILITY OF RECORDS THE SECOND APPEAL COULD NOT BE PREPARED IN TIME AS THE SECOND APPEAL WAS DUE TO BE FILED BY 15.04.2011 AS ON 14.04.2011 WAS DECLARED GAZETTED HOLIDAY. ON 15.04.2011 THE UNDERSIGNED WAS ON CASUAL LEAVE THEREFORE THE AUTHORIZATION FOR FILING OF SECOND APPEAL FROM LD. COMMISSIONER OF INCOME-TAX-I LUCKNOW COULD NOT BE OBTAINED. ON 16.04.2011 & 17.04.2011 THERE WAS WEEKLY HOLIDAY. ON 18.4.2011 THE AUTHORIZATION FOR OBTAINING SECOND APPEAL WAS SENT TO THE CIT-I LUCKNOW ACCORDINGLY THE AUTHORIZATION FOR FILING OF SECOND APPEAL IN THE ABOVE CASE HAS BEEN GIVEN :-3-: ON 21.04.2011 AT 5.30 P.M. IN VIEW OF THE ABOVE CIRCUMSTANCES THE SECOND APPEAL IN THE ABOVE CASE COULD NOT BE FILED IN TIME. IT IS ALSO PERTINENT TO MENTION HERE THAT THE RELEVANT RECORDS IN THE ABOVE CASE IS NOT AVAILABLE IN THE OFFICE OF THE UNDERSIGNED TILL TODAY. ULTIMATELY A SKELETON FOLDER IS PREPARED FOR FILING OF SECOND APPEAL AND THE SAME ARE BEING SENT TO YOU FOR YOUR KIND PERUSAL. THEREFORE YOUR HONOUR IS REQUESTED TO KINDLY CONDONE THE DELAY FOR 10 DAYS FOR FILING OF SECOND APPEAL IN THE ABOVE CASE AND OBLIGE. YOURS FAITHFULLY SD/- (RAJESH KUMAR YADAV) ASSTT. COMMISSIONER OF INCOME TAX RANGE-3 LUCKNOW. 3. DURING THE COURSE OF HEARING THE LD. D.R. REITERATED THE SUBMISSIONS AS MADE IN THE APPLICATION DATED 25.4.2011 FOR DELAY IN FILING THE APPEAL. THE LD. COUNSEL FOR THE ASSESSEE DID NOT CONTROVERT THE ABOVE CONTENTIONS OF THE LD. D.R. WE THEREFORE CONSIDERING THE SUBMISSIONS OF THE LD. D.R. CONDONE THE DELAY IN FILING THE APPEAL AND ACCORDINGLY THE APPEAL IS ADMITTED FOR HEARING. 4. AS REGARDS TO THE FIRST GROUND AGITATED BY THE DEPARTMENT THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF AYURVEDIC MEDICINES AND HERBAL INFUSIONS FOR WHICH THE HERBS WERE PROCURED FROM THE FOREST OF MADHYA PRADESH BUNDELKHAND (U.P) AND FARMERS OF U.P. AND RAJASTHAN. THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2005 DECLARING A NET LOSS OF ` 9 36 33 248. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF ` 4926 520 ` 26 91 170 AND ` 4 08 730 UNDER THE HEADS MANUFACTURING EXPENSES TRAVELLING EXPENSES AND CONVEYANCE EXPENSES RESPECTIVELY. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE DEBITED ` 24 03 020 AND ` 7 04 800 UNDER THE HEADS REPAIRS & MAINTENANCE AND VEHICLE RUNNING EXPENSES RESPECTIVELY. THE :-4-: ASSESSING OFFICER DISALLOWED 5% OF THE MANUFACTURING EXPENSES AND 10% EACH OF TRAVELLING EXPENSES CONVEYANCE EXPENSES REPAIRS & MAINTENANCE AND VEHICLE RUNNING EXPENSES BY STATING THAT THE EXPENSES INCURRED WERE NOT FULLY VOUCHED AND VERIFIABLE SO IT WAS DIFFICULT TO ASCERTAIN WHETHER THOSE EXPENSES WERE FOR BUSINESS PURPOSES. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT ALL THE CLAIMS WERE BACKED BY BILLS AND VOUCHERS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER AND THAT THE EXPENSES WERE INCURRED FOR THE PURPOSES OF THE BUSINESS ONLY. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER WITHOUT SPECIFYING THE EXTENT TO WHICH THE CLAIMS WERE NOT VOUCHED HAD OBSERVED THAT SOME OF THE CLAIMS WERE NOT FULLY VOUCHED. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD NOT SPELT OUT THE DEFICIENCIES IN THE VOUCHERS WHICH RENDERED THEM AS NON-VERIFIABLE AND ANY EXERCISE UNDERTAKEN FOR VERIFICATION SO AS TO REACH THIS CONCLUSION WAS ALSO INDICATED. THE LD. CIT(A) POINTED OUT THAT THE PERCENTAGE BASED DISALLOWANCE SUGGESTED THAT THE EXTENT TO WHICH THE CLAIM WAS ALLOWED WAS SUPPORTED BY SUCH BILLS AND VOUCHERS AS WERE VERIFIABLE. ACCORDING TO HIM THE DISALLOWANCES WERE MADE ON AD HOC BASIS IN A ROUTINE MANNER WITHOUT BRINGING ANY COGENT FACT AND REASON. THEREFORE THE DISALLOWANCES BEING AD HOC IN NATURE AND NOT BASED ON ANY CONCRETE FACTS WERE DIRECTED TO BE DELETED. 7. NOW THE DEPARTMENT IS IN APPEAL. 8. THE LD. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIALS ON RECORD IT APPEARS THAT THE ASSESSING OFFICER DISALLOWED THE EXPENSES WITHOUT BRINGING ON RECORD THAT THOSE EXPENSES WERE NOT INCURRED FOR THE PURPOSES OF BUSINESS. HE DISALLOWED THE EXPENSES ON AD HOC BASIS BUT NO SPECIFIC INSTANCE WAS POINTED OUT TO SUBSTANTIATE THAT THE EXPENSES WERE NOT RELATED TO THE :-5-: BUSINESS OF THE ASSESSEE. IT APPEARS THAT THE DISALLOWANCES HAVE BEEN MADE BY THE ASSESSING OFFICER ONLY ON THE BASIS OF SURMISES AND CONJECTURES WHICH IS NOT TENABLE IN THE EYES OF LAW. WE THEREFORE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHO DELETED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. ACCORDINGLY WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. HENCE GROUND NO. 1 IS DISMISSED. 10. THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MISCELLANEOUS EXPENSES BEING WRITTEN OFF. 11. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER NOTICED THAT UNDER SCHEDULE 15 OF THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD WRITTEN OFF MISCELLANEOUS EXPENDITURE SUCH AS BUSINESS DEVELOPMENT AND DEFERRED REVENUE EXPENDITURE WHICH WERE NOT PERTAINING TO THE RELEVANT ASSESSMENT YEAR. HE THEREFORE ADDED ` 1 94 210 AND ` 6 45 900 TOTALING TO ` 8 40 110 WHILE DISALLOWING THE BUSINESS DEVELOPMENT AND DEFERRED REVENUE EXPENDITURE WRITTEN OFF. 12. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE CLAIM WAS IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE ICAI AND AS ACCEPTED BY THE DEPARTMENT. IT WAS STATED THAT THE CLAIM WAS A PRIOR PERIOD EXPENDITURE BUT REPRESENTED THE EXPENSES INITIALLY CAPITALIZED AND CLAIMED OVER A PERIOD OF TIME LOOKING TO THE ENDURING BENEFIT ARISING FROM THE EXPENDITURE. THE LD. CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT THESE HAVE BEEN MADE WITHOUT PROPERLY APPRECIATING THE ISSUE AND WITHOUT BRINGING OUT THE RELEVANT FACTS. 13. NOW THE DEPARTMENT IS IN APPEAL. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT APPEARS THAT THE ASSESSEE CLAIMED EXPENDITURE IN QUESTION IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). THE CONTENTION OF THE ASSESSEE THAT THOSE EXPENSES WERE NOT PRIOR PERIOD EXPENDITURES BUT REPRESENTED EXPENSES INITIALLY CAPITALIZED AND CLAIMED OVER A PERIOD OF TIME :-6-: LOOKING TO THE ENDURING BENEFIT ARISING FROM THOSE EXPENDITURE HAS NOT BEEN REBUTTED. WE THEREFORE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. HENCE GROUND NO. 2 IS DISMISSED. 15. IN THE RESULT APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 15.7.2011) SD/- SD/- [H. L. KARWA] [ N. K. SAINI] VICE PRESIDENT ACCOUNTANT MEMBER DATED:15.7.2011 JJ:1307 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR