ACIT, New Delhi v. M/s Richa Knitwears,, New Delhi

ITA 3428/DEL/2009 | 2005-2006
Pronouncement Date: 28-10-2010 | Result: Dismissed

Appeal Details

RSA Number 342820114 RSA 2009
Assessee PAN AAAFR0101P
Bench Delhi
Appeal Number ITA 3428/DEL/2009
Duration Of Justice 1 year(s) 2 month(s) 23 day(s)
Appellant ACIT, New Delhi
Respondent M/s Richa Knitwears,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 28-10-2010
Date Of Final Hearing 28-10-2010
Next Hearing Date 28-10-2010
Assessment Year 2005-2006
Appeal Filed On 04-08-2009
Judgment Text
ITA NO. 3428/DEL/2009 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 3428/DEL/2009 A.Y. : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-27(1) ROOM NO. 218 D-BLOCK VIKAS BHAVAN NEW DELHI VS. M/S RICHA KNITWEARS 2/2 WHS KIRTI NAGAR NEW DELHI (PAN/GIR NO. AAAFR0101P) (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : DR. S. NARAYANAN ADV. DEPARTMENT BY : SH. H.K. LAL SR. D.R. ORDER PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 04.5.2 009 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 8 21 381/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FOREIGN TRAVEL EXP ENSES. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING READYMADE GARMENTS. DURING THE YEAR ASSESSEE HAS MADE SALES OF ` 66 45 86 104/- AND HAS SHOWN GROSS PROFIT OF ` 5 89 84 861/-. ON EXAMINING THE FOREIGN TRAVELLI NG DETAILS ASSESSING OFFICER FOUND THAT ASSESSEE HAS BOUGHT THE FOREI GN EXCHANGE OF ` ITA NO. 3428/DEL/2009 A.Y. 2005-06 2 41 06 906/-. ASSESSING OFFICER OBSERVED THAT ASSE SSEE HAS BEEN UNABLE TO GIVE ANY DOCUMENTARY EVIDENCE IN RESPECT OF THE UTILIZATION OF THE FOREIGN EXCHANGE PURCHASES. ASSESSEE SUB MITTED BILLS OF FOREIGN EXCHANGE PURCHASED. ASSESSING OFFICER F OUND THAT ON EXAMINATION OF THE DETAILS OF UTILIZATION OF FOREIGN EXCHANGE PURCHASED THE SAME WAS NOT FOUND FULLY SUPPORTED BY RELEVANT BILLS / VOUCHERS. IN VIEW OF THE SAID DISCUSSION HE DISALLOWED 20% ON E STIMATE BASIS AMOUNTING TO ` 821381/-. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE ELABORATELY AND ALSO REFERRED THE TRIBUNALS DECISION IN ASSESSEES OWN CASE OF EARLI ER YEAR. LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED AS UN DER:- ADVERTING BACK TO THE FACTS OF THE CASE IT IS OBS ERVED THAT THE APPELLANT HAS NOT MAINTAINED THE BILLS AND VOUC HERS FOR THE EXPENSES MADE OUT OF FOREIGN EXCHANGE. THE ASSES SING OFFICER HAS DISALLOWED ` 821381/- FOR NOT BEING IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT IS A MATTE OF RECORD THAT THE PERCENTAGE OF THE EXPENDITU RE MADE ON FOREIGN TRAVELLING ARE MUCH LESSER THAN THE PERCENTAGE OF IMMEDIATE PRECEDING YEAR. THE COUNSEL OF THE APPELLANT HAS SUBMITTED THAT MOST OF THE FOREIGN EXCH ANGE IS SPENT ON EXPENSES FOR WHICH NO BILLS OR VOUCHERS COULD HAVE PRACTICALLY BEEN PROCURED AND MAINTAINED. THE CONCERNED PERSONS WHO UNDERTOOK THE FOREIGN TRAVEL PREPARED THE SELF MADE VOUCHERS FOR SUCH EXPENSES. THE APPELLANT HAS JUSTIFIED THE EXPENSES BY A COMPARATIV E CHART. THESE EXPENSES HAVE BEEN INCURRED IN THE COUNTRIES WHERE ITA NO. 3428/DEL/2009 A.Y. 2005-06 3 THE APPELLANT IS HAVING A BUSINESS CONNECTION. T HE ASSESSING OFFICER HAS NEITHER MADE A CASE THAT THE FOREIGN EXCHANGE HAS BEEN UTILIZED FOR PERSONAL EXPENSES AN D NOR HAS QUANTIFIED SUCH EXPENDITURE. THE PERCENTAGE OF THE AMOUNT SPENT ON THE FOREIGN TRAVELLING IN THE YEAR U NDER CONSIDERATION IS 1.13% OF THE TOTAL TURNOVER WHICH IS LESS THAN THE PERCENTAGE OF 1.77% SPENT IN THE IMMEDIAT E PRECEDING YEAR. THE PERCENTAGE OF EXPENDITURE INCU RRED ON FOREIGN TRAVELLING IN THE PRECEDING YEAR WAS CONSI DERED APPROPRIATE BY THE HONBLE ITAT VIDE ITS ORDER IN I TA NO. 1684/DELHI/08 REPRODUCED ABOVE. THEREFORE THE ADHOC ADDITION OF ` 821381/- MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S DELETED THE ADDITION AFTER CONSIDERING THE TRIBUNAL DECISIONS IN THE ASSESSEES OWN CASE IN ITA NO. 1684/DEL/2008 FOR A.Y. 2004-05. IN THIS ORDER DATED 31.3.2009 THE TRIBUNAL HAS CONCLUDED AS UNDER:- WE HAVE CAREFULLY GONE THROUGH THE RECORDS AND CONSIDERED THE RIVAL SUBMISSIONS. THE ASSESSEE HAS A LARGE EXPORT TURN OVER NEARLY TO THE EXTENT OF ` 53 CRORE S DURING THE YEAR IN QUESTION. IN A.Y. 2002-03 SUCH TURN OV ER WAS ONLY ` 31 CRORES AND THE EXPENDITURE INCURRED IN T HAT YEAR WHICH WAS CLAIMED AND ALLOWED BY THE DEPARTMENT WAS 2.19%. IN OUR VIEW THE CLAIM OF THE EXPENDITURE IS NOT UNREASONABLE HAVING REGARD TO THE BUSINESS REQUIRE MENT. ITA NO. 3428/DEL/2009 A.Y. 2005-06 4 NOW THE QUESTION IS WHETHER THESE CAN BE ALLOWED W HEN THE ASSESSEE HAS NOT PRODUCED CERTAIN VOUCHERS IN R ELATING TO THE HOTEL AND OTHER EXPENSES OR THE DETAILS AS REGARDS THE FOREIGN EXCHANGE UTILIZATION. THE ASSESSEE HA S JUSTIFIED THE EXPENSES BY A COMPARATIVE CHART AND THE REVENUE DOES NOT SERIOUSLY DOUBT THE EXISTENCE OF THE BUSINESS CONNECTION WITH THE PLACE WHICH THE EMPLOYEES AND PARTNERS HAVE VISITED. THE EXPENDITURES CLEARLY AR E FOR THE PURPOSE OF BUSINESS. ONCE THERE IS A BUSINESS NEXUS THE DEPARTMENT OUGHT TO HAVE ACCEPTED REASONABLE EXPEN SES INCURRED IN RELATION THERETO. IN THE CASE OF CONTI NENTAL CARRIERS (P) LTD. (SUPRA) AN IDENTICAL ISSUE CAME UP BEFORE THE ITAT AND THE TRIBUNAL HAS ACCEPTED MUCH L ARGER PERCENTAGE OF SUCH EXPENDITURE. ALTHOUGH IT CANNOT BE STATED THAT THE TWO CASES HAVE IDENTICAL FACTS BUT AT LEAST THE DEFECTS POINTED OUT IN BOTH THESE CASES ARE ALMO ST IDENTICAL IN NATURE. IN OUR VIEW THE ASSESSEE HAS A LARGE EXPORT TURN OVER AND HAS ALSO LARGE PURCHASES OF RAW MATERIAL FROM THE COUNTRIES WHEREIN TRAVEL TO THESE COUNTRIES ARE DISPUTED BY THE REVENUE. IN OUR VIEW THE CLAIM OF THE ASSESSEE IS REASONABLE AND SHOULD HAVE BEEN ACCEPTED. THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APP EALS) ON THE ISSUE IN QUESTION IS THEREFORE DELETED. 6.1 WE FIND THAT FACTS OF THE PRESENT CASE ARE SIMI LAR TO THE ONE DISCUSSED BY THE TRIBUNAL IN THE AFORESAID ORDER. MOREOVER THE ASSESSING OFFICER HAS MADE ONLY AN ESTIMATED DISALL OWANCE OF 20% AND IN LIGHT OF THE DISCUSSION ABOVE THE SAME CANNO T BE SUSTAINED. ITA NO. 3428/DEL/2009 A.Y. 2005-06 5 HENCE FOLLOWING THE TRIBUNAL DECISION AS ABOVE W E DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/10/2010 UP ON CONCLUSION OF HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 28/10/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES