U.P.Coperative Processing & Cold Storage Ltd, Lucknow v. ACIT, Lucknow

ITA 228/LKW/2011 | 2007-2008
Pronouncement Date: 14-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 22823714 RSA 2011
Assessee PAN AAACU3507F
Bench Lucknow
Appeal Number ITA 228/LKW/2011
Duration Of Justice 2 month(s) 15 day(s)
Appellant U.P.Coperative Processing & Cold Storage Ltd, Lucknow
Respondent ACIT, Lucknow
Appeal Type Income Tax Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 14-07-2011
Assessment Year 2007-2008
Appeal Filed On 29-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A - BENCH LUCKNOW. BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI ACCOUNTANT MEMBER I.T.A.NO.228(LKW.)/2011 A.Y.: 2007-08 U.P.CO-OPERATIVE PROCESSING VS. THE ACIT RANGE-2 & COLD STORAGE FEDERATION LTD. LUCKNOW. 19-A VIDHAN SABHA MARG LUCKNOW. PAN AAACU3507F (APPELLANT) (RESPONDENT) I.T.A.NO.274(LKW.)/2011 A.Y.: 2007-08 THE ACIT RANGE-2 VS. U.P.CO-OPERATIVE PROCESSING & LUCKNOW. COLD STORAGE FEDERATION LTD. 19-A VIDHAN SABHA MARG LUCKNOW. PAN AAACU3507F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT SHUKLA ADVOCATE DEPARTMENT BY : SHRI V.V.SINGH LD.SR.D.R. O R D E R PER H.L.KARWA VICE PRESIDENT THESE TWO APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-I LUCKNOW DATED 21.2.2011 RELATING TO THE ASSESSMENT YEAR 2007-08. 2 2. GROUNDS NO.1 AND 2 OF THE ASSESSEES APPEAL- I.T.A.NO.228(LKW)/2011 READ AS UNDER: 1) BECAUSE THE LEARNED CIT(A)-I LUCKNOW ERRED IN LAW AS WELL AS IN FACTS IN RESTRICTING THE DISALLOWANCE UNDER THE HEAD COOPERATIVE WEEK EXPENSES AT 10% THE DISALLOWANCE OF RS.1 06 360 UNDER THIS HEAD IS UNJUST ACTION AT THE PART OF LEARNED CIT(A)-I LUCKNOW AS THE ASSESSEE'S BOOKS OF ACCOUNTS AS PRODUCED BEFORE THE AO HAVE BEEN ACCEPTED AS GENUINE BOOKS OF ACCOUNTS AND SUPPORTING BILLS AND VOUCHERS WERE ALSO FURNISHED BY THE ASSESSSEE BEFORE THE AUTHORITIES BELOW. 2) BECAUSE THE DISALLOWANCE OF RS.2 23 427 AS CONFIRMED BY THE LEARNED CIT(A) OUT OF THE EXPENSES UNDER THE HEADS BEVERAGE TO STAFF BUSINESS PROMOTION EXPENSES MISC. EXPENSES AND AGM EXPENSES IS AN UNJUST AND UNDESIRED ACT AT HIS PART AS THE TOTAL EXPENSES UNDER THE AFORESAID EXPENSES WERE RELATED TO THE BUSINESS ONLY AND THE RESTRICTION OF DISALLOWANCE AT 10% BY THE LEARNED CIT(A) IS TOTALLY BASED ON ESTIMATE ONLY. THE DEDUCTION AS CLAIMED UNDER THE AFORESAID HEADS DESERVES TO BE ALLOWED. 3. GROUND NO.1 OF REVENUES APPEAL READ AS UNDER : THE LD. CIT(A) HAS ERRED IN KM AND ON FACTS IN ALLOWING RELIEF OF RS.1 06 360 AND RS.2 23 427 OUT OF DISALLOWANCES OF RS.2 12 721 AND RS.4 46 853/- OUT OF EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF COOPERATIVE WEEK EXPENSES AND VARIOUS MISCELLANEOUS EXPENSES WITHOUT APPRECIATING THE FACT THAT THE EXPENSES CLAIMED WERE FOUND UNVERIFIABLE. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS CO- OPERATIVE SOCIETY WHICH IS REGISTERED WITH THE REGISTRAR OF FIRMS AND SOCIETIES. THE SOCIETY CAME INTO EXISTENCE IN THE YEAR 1974 AND STARTED FUNCTIONING FROM THE YEAR 1981. THE SOCIETY WAS CONSTRUCTING AND RUNNING COLD STORAGES IN ALL OVER UTTAR PRADESH AT THE DIRECTION OF U.P. GOVERNMENT TILL 1994. THEREAFTER THE ASSESSEE-SOCIETY STARTED CIVIL WORK RELATED TO 3 GOVERNMENT BUILDINGS. THE U.P. GOVERNMENT HAS ITS SHARE CAPITAL IN THE SOCIETY AND THE MANAGING DIRECTOR OF THIS SOCIETY IS ALWAYS APPOINTED BY U.P. GOVERNMENT. IN THE YEAR UNDER CONSIDERATION EIGHTEEN CONSTRUCTION UNITS SPREAD OVER IN THE VARIOUS DISTRICTS OF U.P. WERE FUNCTIONING. THE AO HAS NOTED IN THE ASSESSMENT ORDER VIDE PARA 4 THAT THE ASSESSEE HAS CLAIMED EXPENSES UNDER THE HEAD CO-OPERATIVE WEEK EXPENSES AT RS.5 56 212 AND CO-OPERATIVES SAMMELAN AT RS.5 07 396 IN THE PROFIT AND LOSS ACCOUNT. ACCORDING TO THE AO THESE EXPENSES MAINLY RELATE TO TENT HOUSE SWEETS SNACKS TEA SOUND SYSTEM ETC. HE FURTHER OBSERVED THAT THERE IS NO SEPARATE DATA AVAILABLE FOR EXPENSES UNDER THESE SUB-HEADS. BESIDES MOST OF THE PETTY VOUCHERS ARE HAND-MADE CLAIMS. ACCORDING TO THE AO THESE EXPENSES ARE NOT FULLY VERIFIABLE AND HE THEREFORE DISALLOWED 20% OF THE EXPENSES WHICH CAME TO RS.2 12 721. 4.1 THE AO ALSO MADE DISALLOWANCE OF RS.4 46 853 UNDER THE HEAD MISCELLANEOUS EXPENSES. IN PARA 7 OF THE ORDER THE AO HAS MENTIONED THAT THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENSES IN THE PROFIT AND LOSS ACCOUNT. RS. (I) BEVERAGES TO STAFF/BUSINESS PROMOTION 5 29 447 (II) MISC. EXPENSES 10 14 498 (III) AGM EXPENSES 2 42 399 (IV) GIFT IN AGM 3 86 174 (V) EMPLOYEE WELFARE ACCOUNT 61 749 22 34 267 4.2 THE AO REQUIRED THE ASSESSEE TO FURNISH DETAILS OF ABOVE EXPENSES AND THEIR RELATIONSHIP WITH THE BUSINESS. THE ASSESSEE FILED A COPY OF MISCELLANEOUS EXPENSES ACCOUNT. HOWEVER THE AO FOUND THAT MOST OF 4 VOUCHERS WERE HAND-MADE PETTY CLAIMS MADE BY THE EMPLOYEES. HE FURTHER OBSERVED THAT THE EXPENSES RELATING TO OTHER HEADS WERE ALSO NOT VERIFIABLE. UNDER THE CIRCUMSTANCES A DISALLOWANCE OF 20% WAS MADE FOR THE REASON THAT MOST OF THE EXPENSES WERE UNVOUCHED/UNVERIFIABLE. 5. ON APPEAL THE LD.CIT(A) RESTRICTED THE DISALLOWANCE UNDER THE HEAD COOPERATIVE WEEK EXPENSES AT 10%. SIMILARLY THE LD. CIT(A) RESTRICTED THE DISALLOWANCE AT 10% UNDER THE HEAD MISCELLANEOUS EXPENSES. 6. NOW THE ASSESSEE IS IN APPEAL AGAINST THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) UNDER BOTH THE ABOVE HEADS AND THE REVENUE IS IN APPEAL AGAINST THE RELIEF GIVEN BY THE LD. CIT(A) UNDER THE ABOVE HEADS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI AMIT SHUKLA ADVOCATE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TOTAL EXPENSES AS CLAIMED UNDER THE HEAD CO-OPERATIVE WEEK EXPENSES AND CO-OPERATIVES SAMMELAN EXPENSES ARE TOTALLY RELATED WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE MISCELLANEOUS EXPENSES CLAIMED BY THE ASSESSEE ALSO RELATED TO BUSINESS ACTIVITIES OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT NO DISALLOWANCE SHOULD HAVE BEEN MADE UNDER THE ABOVE HEADS. ON THE OTHER HAND SHRI V.V.SINGH LD.SR.D.R. SUBMITTED THAT THE AO WAS JUSTIFIED IN DISALLOWING 20% UNDER THE HEAD CO-OPERATIVE EXPENSES AND CO- OPERATIVES SAMMELAN EXPENSES. HE FURTHER SUBMITTED THAT THE AO HAS CATEGORICALLY OBSERVED THAT THESE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT FULLY VERIFIABLE. THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS REGARDING THESE EXPENSES. SHRI V.V.SINGH LD.SR.D.R. ALSO SUBMITTED THAT THE AO WAS 5 FULLY JUSTIFIED IN DISALLOWING 20% OF EXPENSES CLAIMED UNDER THE HEAD (MISCELLANEOUS EXPENSES). HE THEREFORE SUBMITTED THAT THE DISALLOWANCE OF 20% UNDER THE ABOVE HEADS MAY BE RESTORED. IN OUR VIEW SOME DISALLOWANCE DESERVES TO BE MADE UNDER THE ABOVE HEADS BECAUSE THE ASSESSEE FAILED TO SUBSTANTIATE THE CLAIM IN ITS ENTIRETY WHICH FACT IS CLEAR FROM THE FINDINGS OF THE AO. HOWEVER AT THE SAME TIME WE FIND THAT THE DISALLOWANCE SUSTAINED BY THE LD.CIT(A) IS ON HIGHER SIDE. IN THE INTEREST OF JUSTICE AND FAIRPLAY WE THINK IT PROPER TO REDUCE THE DISALLOWANCE TO 5% UNDER THE HEAD CO-OPERATIVE WEEK EXPENSES AND CO-OPERATIVES SAMMELAN EXPENSES. SIMILARLY WE REDUCE THE DISALLOWANCE TO 5% AS AGAINST 10% SUSTAINED BY THE LD.CIT(A) UNDER THE HEAD MISCELLANEOUS EXPENSES. IN VIEW OF THE ABOVE WE ALLOW GROUNDS NO.1 AND 2 OF THE ASSESSEES APPEAL PARTLY AND DISMISS GROUND NO.1 OF THE REVENUES APPEAL. THE AO IS DIRECTED TO WORK OUT THE DISALLOWANCE AS MENTIONED HEREINABOVE. 8. GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2 13 321 MADE ON ACCOUNT OF PENAL INTEREST PAID ON EPF. 9. THE AO HAS DISCUSSED THIS ISSUE IN PARA 6 OF THE ASSESSMENT ORDER. HE HAS OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF EPF DEDUCTIONS AND THE DATE ON WHICH THE DEDUCTED EPF WAS DEPOSITED. IN RESPONSE A CHART WAS FILED WHICH SHOWED MONTH-WISE DEDUCTIONS AND DEPOSITS. ACCORDING TO THE AO TOTAL DEDUCTION FROM APRIL 2006 TO MARCH 2007 WAS RS.60 01 593 AND THE AMOUNT DEPOSITED WAS RS.62 14 914. THE AO OBSERVED THAT THE DIFFERENCE 6 OF RS.2 13 321 RELATED TO PENAL INTEREST. HE THEREFORE DISALLOWED A SUM OF RS.2 13 321. 10. ON APPEAL THE LD. CIT(A) UPHELD THE ACTION OF THE AO FOR THE REASONS STATED IN PARA 5 OF THE IMPUGNED ORDER. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIALS AVAILABLE ON RECORD. IT SEEMS THAT THE AO HAS MADE THE ADDITION PRESUMING THAT THE AMOUNT OF RS.2 13 321 REPRESENTED PENAL INTEREST ON EPF. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE AMOUNT OF RS.2 13 321 CONSTITUTED PENAL INTEREST AND HOW THIS FIGURE WAS ARRIVED AT BY THE AO. THE LD. CIT(A) HAS CATEGORICALLY OBSERVED THAT AFTER PERUSING THE DETAILS OF EPF PAYMENTS THERE WAS NOTHING TO SUGGEST THAT AN AMOUNT OF RS.2 13 321 CONSTITUTED PENAL INTEREST. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE THINK IT PROPER TO SET ASIDE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER CALLING FOR THE DETAILS FROM THE ASSESSEE. THE AO SHOULD PASS A SPEAKING ORDER. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT I.T.A.NO.228(LKW)/2011 (ASSESSES APPEAL) IS ALLOWED PARTLY WHILE REVENUES APPEAL I.E. I.T.A.NO.274(LKW)/2011 IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.7.2011. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT JULY 14TH 2011. 7 COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R. ITAT LUCKNOW. SRIVASTAVA.