M/s Sunder lal Moolchand Jain Tobacconist P Ltd, v. The ACIT 5 (1),

ITA 311/IND/2008 | misc
Pronouncement Date: 04-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 31122714 RSA 2008
Bench Indore
Appeal Number ITA 311/IND/2008
Duration Of Justice 1 year(s) 9 month(s) 27 day(s)
Appellant M/s Sunder lal Moolchand Jain Tobacconist P Ltd,
Respondent The ACIT 5 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 04-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 04-05-2010
Date Of Final Hearing 26-04-2010
Next Hearing Date 26-04-2010
Assessment Year misc
Appeal Filed On 08-07-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO.311/IND/2008 A.YS. 2004-05 M/S SUNDERLAL MOOLCHAND JAIN TOBACCONIST PVT. LTD. INDORE PAN AAECS-7779-P APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 5(1) INDORE RESPONDENT APPELLANT BY : SHRI S.S.SOLANKI RESPONDENT BY : SMT. APARNA KARAN SR. DR O R D E R PER JOGINDER SINGH JM THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 17 TH MARCH 2008. THE FIRST GROUND RAISED IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.1 58 043/- BY RELYING ON THE OBSERVA TION OF THE ASSESSING OFFICER THEREFORE THE ADDITION SO CONFIRMED IS IL LEGAL WRONG THEREFORE REQUIRES TO BE DELETED. 2 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHRI S.S. SOLANKI LD. COUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE DIR ECTORS ARE RUNNING THE OFFICE FROM THE HOUSE ONLY THEREFORE THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. ON THE OTHER HAND THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE STRONGLY DEFENDED THE I MPUGNED ORDER BY CONTENDING THAT NO DETAILS AT ANY STAGE FOR CLAIMIN G SUCH EXPENSES WERE FILED BY THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. IT IS SEEN THAT THE ASS ESSEE DEBITED A SUM OF RS. 3 16 086/- UNDER THE HEAD HOUSE EXPENSES BY C LAIMING THAT SOME OF THE DIRECTORS ARE MORE THAN 80 YEARS OF AGE AND ARE RUNNING THE OFFICE FROM THE OFFICE ITSELF. WE HAVE FOUND THAT THIS ISS UE HAS BEEN DELIBERATED UPON IN THE ASSESSMENT ORDER AS WELL AS IN THE IMPU GNED ORDER IN A JUSTIFIABLE MANNER AND SINCE NECESSARY DETAILS WERE NOT FURNISHED BY THE ASSESSEE AT ANY STAGE SUBSTANTIATING THAT ANY BUSI NESS WAS DONE BY THE SOCALLED DIRECTORS FROM THE HOUSE THEREFORE T HERE IS NO JUSTIFICATION IN THE CLAIM OF THE ASSESSEE. NO DOCUMENTARY EVIDE NCE WAS FURNISHED BY THE ASSESSEE AT ANY STAGE TO THE EFFECT THAT THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. MERE CLAIM WILL NO T BE ENOUGH. EVEN OTHERWISE 50% OF THE TOTAL CLAIM WAS ALLOWED THER EFORE THERE IS NO MERIT IN THIS GROUND OF THE ASSESSEE CONSEQUENTLY DISMISSED. 3 4. THE NEXT GROUND RAISED IS THAT THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE AD HOC DISALLOWANCE OF RS.2 LACS OUT OF SALES PROMOTION EXPENSES BY ALLEGI NG THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH BY INDEPENDENT EVIDE NCE REGARDING THE GENUINENESS OF CLAIM OF THE IMPUGNED EXPENSES. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT NECESSARY EVIDENC E INCLUDING PHOTOGRAPHS OF THE EVENTS WERE PRODUCED THEREFORE NO MORE INDEPENDENT EVIDENCE IS REQUIRED. THE AD HOC DISAL LOWANCE SO MADE WAS ARGUED TO BE ILLEGAL AND WRONG. ON THE OTHER H AND LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE STRONGLY DEFENDED THE I MPUGNED ORDER BY CONTENDING THAT NECESSARY EVIDENCES WERE NOT FURNIS HED BY THE ASSESSEE CONSEQUENTLY THE DISALLOWANCE WAS RIGHTLY MADE. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL S UBMISSIONS WE HAVE FOUND THAT THE ASSESSEE DEBITED A SUM OF RS.1 01 11 644/- UNDER THE HEAD SALE PROMOTION EXPENSES COMPRISING OF PU RCHASE OF ADVERTISEMENT MATERIAL SUCH AS PRINT INAMI COUPON SAMPLE POUCH STICKER PRINTS STEREO TAPE RECORDER TO THE TUNE OF RS.33 63 538/- PRINTING PAPER CHARGES AND RS. 67 38 106/- FOR INAM I UPHAR YOJANA. THESE EXPENSES WERE CLAIMED AS SALES PROMOTION EXPE NSES. DURING ASSESSMENT STAGE THE ASSESSEE WAS ASKED TO SUBSTAN TIATE THE GENUINENESS OF THIS CLAIM AND WAS ALSO ASKED TO FUR NISH THE DETAILS OF RECIPIENTS OF GIFTS. AS PER THE ASSESSEE NO SUCH DETAILS WERE AVAILABLE 4 AND IT WAS CLAIMED THAT ONLY THE LIST OF DEALERS T HROUGH WHOM THE SALES WERE EFFECTED WAS AVAILABLE. THERE WAS NO EVIDENC E THAT THE TOTAL GIFT ITEMS AS CLAIMED WERE PASSED ON TO THE WINNERS ON THE BASIS OF SUCH COUPONS. EVEN THE DETAILS OF COUPONS AND PACKETS W ERE ALSO NOT FURNISHED TO THE SATISFACTION OF THE ASSESSING OFFI CER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A W ELL REASONED ORDER AS THERE WAS NO CONFIRMATION OF FACTUAL POSIT ION BY THE ASSESSEE AND HOW THE GIFTS WERE DELIVERED. IN THE ABSENCE O F SUCH DETAILS THE AMOUNT OF RS 2 LACS WAS RIGHTLY DISALLOWED CONSEQU ENTLY THERE IS NO MERIT IN THIS GROUND OF THE ASSESSEE THEREFORE DI SMISSED. 5. THE LAST GROUND RAISED IS THAT THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) ERRED IN MAINTAINING THE ADDITION OF RS.3 37 047/- BY SIMPLY FOLLOWING THE ASSESSMENT ORDER. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE WAS THAT FIFO METHOD WAS ADOPTED BY THE ASSESSEE AND VALUATION WAS MADE ON COST BASIS OR WHICHEVER W AS LESS. IT WAS CLAIMED THAT THE OVERALL GROSS PROFIT RATE IS SCIEN TIFIC. RELIANCE WAS PLACED UPON THE DECISION IN ITA NO. 245/IND/2009 (M /S UNITED ENTERPRISES V. ACIT; ORDER DATED 30.6.2009). WE HAVE PERUSED THE RECORD AND CONSIDERED THE ARGU MENTS ADVANCED BY THE ASSESSEE. THE IMPUGNED ADDITION WA S MADE ON THE PLEA THAT THE CLOSING STOCK WAS UNDER-VALUED. A GR OSS PROFIT RATE OF 11% WAS ESTIMATED ON THE SALE PRICE AND CALCULATED THE ESTIMATED COST 5 DIFFERENCE. THE STAND OF THE ASSESSEE IS THAT ITEM WISE GROSS PROFIT ALWAYS DIFFERS AS SOME OF THE ITEMS ARE SOLD AT PRE MIUM RATE AND SOMETIMES SOME ARE SOLD AT A LESSER RATE. THE ASSE SSEE HAS MADE THE STOCK RECORDS VALUEWISE AND QUANTITYWISE THEREFOR E NO ADDITION CAN BE MADE ON THE BASIS OF ESTIMATION BY VALUATING THE IN DIVIDUAL ITEM OF STOCK. THE ASSESSEE PRODUCED VARIOUS BRANDS OF BIDIES AND ALSO SUPPLIES REQUIRED MATERIAL TO VARIOUS PARTIES FOR PRODUCTION OF BIDI ON JOB WORK BASIS. THE JOB WORK BIDI WAS TERMED AS PURCHASE BID I. HOWEVER THE ASSESSEE INCURRED EXPENSES ON EXCISE DUTY PAYMENTS AS WELL. A GROSS PROFIT OF 11% WAS EARNED BY THE ASSESSEE. THE LEARN ED ASSESSING OFFICER HAS NOT MENTIONED ANYWHERE HOW THE UNDERVAL UATION OF CLOSING STOCK HAS BEEN MADE BY THE ASSESSEE. WE HAVE ALSO PERUSED THE COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT (P AGES 24 AND 25 OF THE PAPER BOOK) WHEREIN THE NET PROFIT FOR THE ASSESSM ENT YEAR 2004-05 IS RS. 22 89 856/- RS. 9 33 115/- FOR THE ASSESSMENT YEAR 2003-04 AND RS.8 83 110/- FOR THE ASSESSMENT YEAR 2002-03. IT C AN BE SAID THAT THERE IS AN INCREASING TREND BECAUSE THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION IS HIGHER THAN EARLIER TWO YEARS. RE GULAR BOOKS OF ACCOUNTS ARE MAINTAINED WITH QUANTITATIVE DETAILS. IN VIEW OF THESE FACTS THERE IS FORCE IN THE CONTENTION OF THE ASSESSEE BE CAUSE THE OVERALL GROSS PROFIT RATE IS MORE SCIENTIFIC. THE VALUATION IS ON COST BASIS OR MARKET PRICE WHICHEVER IS LESS. THE BASIS ON WHICH THE LEARNED 6 COMMISSIONER OF INCOME TAX (APPEALS) AFFIRMED THE A SSESSMENT ORDER IS THAT GROSS PROFIT OF EACH AND EVERY ITEM DIFFERS . WE ARE NOT IN AGREEMENT WITH SUCH OBSERVATION BECAUSE IF THE ITEM S ARE DIFFERENT NATURALLY THE GROSS PROFIT MAY ALSO DIFFER AS IT DE PENDS ON THE QUALITY DEMAND AND SUPPLY ETC. EVEN THE ASSESSEE SUBMITTED ITS WORKING TO THE EFFECT HOW THE VALUATION OF CLOSING STOCK WAS ARRIV ED AT BECAUSE THE ASSESSEE IS A MANUFACTURER AS WELL AS A TRADER. TH E ASSESSEE ALSO SUPPLIED THE REQUIRED MATERIAL TO VARIOUS PARTIES F OR PRODUCTION OF BIDI ON JOB WORK. IN VIEW OF THESE FACTS THIS GROUND OF TH E ASSESSEE DESERVES TO BE ALLOWED. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH MAY 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MAY 4TH 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DBN/