The ACIT- 3(1), Indore v. M/s Sanghi Bros. (Indore) Pvt. Ltd., Indore

ITA 294/IND/2013 | 2003-2004
Pronouncement Date: 22-10-2013 | Result: Dismissed

Appeal Details

RSA Number 29422714 RSA 2013
Assessee PAN AHCBS8086N
Bench Indore
Appeal Number ITA 294/IND/2013
Duration Of Justice 5 month(s) 8 day(s)
Appellant The ACIT- 3(1), Indore
Respondent M/s Sanghi Bros. (Indore) Pvt. Ltd., Indore
Appeal Type Income Tax Appeal
Pronouncement Date 22-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 22-10-2013
Assessment Year 2003-2004
Appeal Filed On 14-05-2013
Judgment Text
1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.294/IND/2013 A.Y. 2003-04 ACIT-3(1) INDORE :: APPELLANT VS M/S. SANGHI BROS. (INDORE) P. LTD. INDORE PAN AAHCBS 8086 N :: RESPONDENT REVENUE BY SHRI R.A. VERMA ASSESSEE BY SHRI S.N. AGRAWAL & SHRI PANKAJ MOGRA DATE OF HEARING 22.10.2013 DATE OF PRONOUNCEMENT 22.10.2013 O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 15.2.2013 OF THE LD. FIRST APPELLATE AUTHORITY INDORE . 2 2. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO DELETING THE ADDITION OF RS.2 62 223/- MADE ON ACCOUN T OF REMUNERATION PAID TO SMT. GEETA SANGHI DIRECTOR. THE CRUX OF ARGUMENTS ADVANCED BY THE LD. SR. DR SHRI R.A. VERM A IS THAT MRS. GEETA SANGHI WAS NEVER PRODUCED FOR EXAMINATION BEFORE THE ASSESSING OFFICER AND THE NATURE OF SERVICES CLAIMED TO BE RENDERED BY HER WERE NOT SU PPORTED BY ANY DOCUMENTARY EVIDENCE. IT WAS ALSO PLEADED THAT EACH YEAR IS INDEPENDENT THEREFORE ACCEPTANCE OF SUCH CLAIM IN PRECEDING AND SUCCEEDING YEARS HAS NO RELEVANCE . ON THE OTHER HAND SHRI S.N. AGRAWAL ALONG WITH SHRI PANKAJ MOGRA LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE ORDER OF THE LD. CIT(A) BY SUBMITTING THAT SMT. GEETA SANGHI IS ACTUALLY INVOLVED IN DAY-TO-DAY AFFAIRS OF TH E ASSESSEE COMPANY AND SUCH CLAIM HAS BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER AND SUCCEEDING YEARS. 3 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT SMT. GEETA SANGHI WAS PROVIDED SALARY OF RS.2 62 223/- I N THE CAPACITY OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. THE LD. ASSESSING OFFICER INVOKED THE PROVI SIONS OF SEC. 40(A)(2)(B) OF THE ACT BY OBSERVING THAT THE SERVICES RENDERED BY HER COULD NOT BE EXPLAINED BY THE ASSESSE E. ON APPEAL THE LD. CIT(A) DELETED THE ADDITION WHICH IS U NDER CHALLENGE BEFORE THIS TRIBUNAL. IF THE OBSERVATIONS M ADE IN THE ASSESSMENT ORDER CONCLUSION DRAWN IN THE IMPUGN ED ORDER AND THE ASSERTION MADE BY THE LD. RESPECTIVE COU NSEL ARE KEPT IN JUXTAPOSITION AND ANALYSED WE FIND THAT THE DISALLOWANCE ON ACCOUNT OF SALARY WAS MADE BY THE ASSESSING OFFICER ON THE REASON THAT SHE WAS NOT PRODU CED BEFORE HIM DURING ASSESSMENT PROCEEDINGS. HOWEVER F ACT REMAINS THAT RIGHT FROM AY 2000-01 AND 2005-06 THE CLAIM OF SALARY WAS ALLOWED BY THE DEPARTMENT ITSELF THA T 4 TOO BY FRAMING ASSESSMENT U/S 143(3) OF THE ACT AS I S EVIDENT FROM MATERIAL AVAILABLE ON RECORD. HOWEVER FOR THE IMPUGNED AY SUCH CLAIM HAS BEEN DISALLOWED MERELY ON THE GROUND THAT MRS. GEETA SANGHI WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. IT HAS NOWHERE BEEN ALL EGED IN THE ASSESSMENT ORDER THAT SHE HAS NOT RENDERED ANY SERV ICE TO THE ASSESSEE COMPANY. IT IS NOT WORTHY THAT IN THE IMMEDIATE EARLIER AY (2002-03) THE SALARY PAID TO HER WAS ACCEPTED BY THE DEPARTMENT VIDE ORDER DATED 28.3.2005 AND IN IMMEDIATE SUCCEEDING YEAR I.E. 2004-05 ALSO THE SALARY PAID TO HER WAS ACCEPTED BY THE ASSESSING OFFICER VIDE ORDER DATED 14.12.2006 FRAMED U/S 143(3) OF THE ACT. BOTH THE ASSESSMENT ORDERS ARE AVAILABLE AT PAGES 57 TO 66 AND 67 TO 72 RESPECTIVELY OF THE PAPER BOOK. NO MATE RIAL HAS BEEN PLACED ON RECORD BY THE ASSESSING OFFICER WH ILE TAKING A U TURN FOR THE AY UNDER APPEAL. IT IS ALSO ADMI TTED THAT EACH YEAR IS INDEPENDENT BUT AT THE SAME TIME IT I S 5 NOT THE CASE OF THE REVENUE THAT NO SERVICE WAS ACTUALLY RENDERED BY HER. THE DISALLOWANCE OF CLAIMED SALARY MERE LY ON THE GROUND THAT SHE DID NOT APPEAR BEFORE THE ASSES SING OFFICER CANNOT BE A GOOD GROUND FOR MAKING DISALLOWANCE . IT IS FURTHER NOTED THAT THE ISSUE OF SALARY EVEN TRAVELLE D TO THE TRIBUNAL WHEREIN VIDE ORDER DATED 19.6.2009 IDENTICALLY THE APPEAL OF THE REVENUE WAS DISMISSED IN THE CASE OF ACIT VS. M/S. SANGHI FINANCE & INVESTMENT LTD. (ITA NO.9/IND/2008) SALARY PAID TO SMT. GEETA SANGHI AND MISS RAGINI SANGHI. NO CONTRARY DECISION WAS BROUGHT T O OUR NOTICE. THE STAND OF THE LD. CIT(A) IS THEREFOR E AFFIRMED. 3. THE NEXT GROUND PERTAINS TO DELETING THE ADHOC DISALLOWANCES/ADDITIONS MADE ON ACCOUNT OF TELEPHONE EXPENSES (RS.2 22 365) VEHICLE EXPENSES (RS.2 26 5 52) VEHICLE MAINTENANCE EXPENSES (RS.4 09 413) DEPRECIATI ON ON CARS & JEEPS (RS.98 534) MISCELLANEOUS EXPENSES 6 (RS.9 64 016) ENTERTAINMENT EXPENDITURE (RS.2 91 44 9) ADVERTISEMENT EXPENSES (RS.67 460) STAFF WELFARE EXPE NSES (RS.48 460) CONVEYANCE EXPENSES (RS.39 510) SALES PROMOTION EXPENSES (RS.8 234) AND RS.3 780 ON ACCOUNT OF CLUB FEE. THE CRUX OF ARGUMENT ON BEHALF OF THE REVEN UE IS THAT NECESSARY DETAILS OF SUCH EXPENSES WAS NOT PRODUC ED BY THE ASSESSEE THEREFORE LUMP SUM DISALLOWANCE WAS RIGHTLY MADE. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT IT IS A CASE OF A COMPANY THEREFORE NO ADHOC DISALLOWANCE IS WARRANTED. IT WAS ALS O PLEADED THAT NECESSARY DETAILS OF THE EXPENDITURE SO CLAIMED WERE DULY FURNISHED BEFORE THE AUTHORITIES. MR. AGRAWAL FURTHER CONTENDED THAT ASSESSEE IS A PROFESSION ALLY MANAGED COMPANY AND WITHOUT REJECTING THE ACCOUNTS OR PINPOINTING ANY SPECIFIC DEFECTS NO ADHOC DISALLOWANCE IS PERMISSIBLE. 7 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE SUMMARISING HEREUNDER THE CLAIM MAD E BY THE ASSESSEE AND DISALLOWANCE MADE BY THE ASSESSING OFFICER: S.NO. PARTICULARS AMOUNT CLAIMED (RS.) DISALLOWANCE MADE BY THE ASSESSING OFFICER (RS.) 1 TELEPHON E EXPENSES 22 23 651 2 22 365 2 TRAVELLING EXPENSES 22 65 525 2 26 552 3 VEHICLE RUNNING & MAINTENANCE EXPENSES 40 94 134 4 09 413 4 DEPRECIATION ON CAR & JEEP 9 85 349 98 534 5 MISC. EXPENSES 9 64 016 96 400 6 ENTERTAINMENT EXPENSES 2 91 449 2 91 449 7 ADVERTISEMENT EXPENSES 6 74 591 67 460 8 STAFF WELFARE EXPENSES 4 85 587 48 460 9 CONVEYANCE EXPENSES 3 95 103 39 510 10 SALES PROMOTION EXPENSES 82 336 8 234 11 CLUB FEE 3 780 3 780 IF THE AFORESAID FIGURES ARE ANALYSED BROADLY THE LD. ASSESSING OFFICER MADE LUMP SUM DISALLOWANCE @10% EXCEPT THE CLUB FEE AND ENTERTAINMENT EXPENSES WHICH WERE DISALLOWED FULLY. THE UNCONTROVERTED FACTS ARE THAT IT IS A CASE OF A COMPANY AND THE BOOKS OF ACCOUNTS OF THE 8 ASSESSEE COMPANY ARE AUDITED ONE. IDENTICALLY THE MATTE R TRAVELLED TO THE TRIBUNAL FOR EARLIER AY WHEREIN THE T RIBUNAL DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. CIT(A) ALSO FOR EARLIER YEAR ACCEPTED THE CLAIM OF THE ASSESSEE AND FOR AY 2002-03 SUCH ADHOC DISALLOWANCES WERE DELETED. LIKEWI SE THE DISALLOWANCE ON ACCOUNT OF CLUB MEMBERSHIP FEE FO R AY 2001-02 AND 2002-03 WAS ALSO ALLOWED. THE ASSESSEE HAS FURNISHED PHOTOCOPIES OF SUCH ORDERS INCLUDING ASSES SMENT ORDERS CIT(A) AND OF THE TRIBUNAL IN THE PAPER BOOK. THE TRIBUNAL FOR AY 2002-03 VIDE ORDER DATED 8.2.2012 (PAG ES 111 TO 122 OF THE PAPER BOOK) DISMISSED THE APPEAL OF THE REVENUE BY FOLLOWING THE EARLIER ORDERS AND OTHER JU DICIAL PRONOUNCEMENTS. NO CONTRARY DECISION/FACT WAS BROUGHT TO OUR NOTICE. WE ALSO NOTE THAT THE CLAIMED EXPENDITURE WAS INCURRED WHOLLY & EXCLUSIVELY FOR BUSINESS PURPOSES AND THERE IS NO ELEMENT OF INDIVIDUAL EXPENSES FOR NON-B USINESS PURPOSES. THE EXPRESSION FOR THE BUSINESS PURPOSE AS 9 PROVIDED IN SEC. 37 OF THE ACT IS WIDER IN SCOPE TH AN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFIT. THE PURPOSE MUST BE TO KEEP THE TRADE GOING ON AS HAS BEEN HELD BY THE HON'BLE APEX COURT IN HAZI AZIZ & ABDUL SATUR BROS. V S. CIT (1961) 41 ITR 350 (SC) AND CIT VS. SHAHI BAG ENTREPRENEURS; 215 ITR 810 (GUJ). SO FAR AS THE EXPENDITURE ON PROVIDING FACILITIES TO EMPLOYEES IS CONCERNED KEEPING IN VIEW THE BUSINESS THE DECISI ON IN MYSORE KIRLOSKAR LTD. VS. CIT; 166 ITR 836 (KAR) CAN B E QUOTED. WE ARE AWARE THAT FOR CLAIMING SUCH EXPENSES CONNECTION BETWEEN THE EXPENDITURE SO CLAIMED AND THE OBJECT MUST BE REAL AND NOT ILLUSORY. AT THE SAME TIME THE COMMERCIAL EXPEDIENCY MUST BE DECIDED FROM THE VIEW POINT OF A BUSINESSMAN. PERSONAL EXPENSES INCLUDE EXPENSES ON THE PERSON OF THE ASSESSEE OR TO SATISFY HIS PERSONAL NEEDS SUCH AS FOOD AND CLOTHES ETC. SINCE IT IS A CASE OF COMPANY NO ADHOC DISALLOWANCE IS PERMISSIBLE 10 UNLESS AND UNTIL CONTRARY FACTS ARE BROUGHT ON RECORD. TRAVELLING EXPENSES INCURRED FOR BUSINESS PURPOSES AR E DEFINITELY ALLOWABLE EXPENDITURE (114 ITR 335-BOMBAY) . SO FAR AS CLUB FEE IS CONCERNED IT IS ALSO AN ALLOWABLE EXPENDITURE AS WAS HELD IN CIT VS. SUNDARAM IND. LTD.; 240 ITR 335 (MAD) AND CIT VS. SAMTEL COLOR LTD.; 180 TAXMAN 82 (DEL) AND ROYAL WESTERN INDIA TURF LTD.; 78 I TR 548 (BOMBAY). SO FAR AS STAFF WELFARE EXPENSES ARE CONCERNED IT IS ALSO ALLOWABLE AS WAS HELD IN CIT VS. MACHINERY MANUFACTURING CORPORATION LTD.; 198 ITR 559 (CAL) CIT VS. HAYWARD WALDIA REFINERY LTD; 209 ITR 159 (CAL). IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMEN TS WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. CIT(A) ON THIS ISSUE ALSO. FINALLY THE APPEAL OF THE REVENUE IS DISMISSED. 11 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES AT THE CONCLUSION OF THE HEARING ON 22.10.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23.10.2013 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE !VYS!