Income Tax Appellate Tribunal - Delhi
Fena Ltd.,, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "C" NEW DELHI)
BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN
ITA No. 3966/Del/2001
Assessment Year: 1998-99
Deputy Commissioner of IT, vs. M/s. Fena Limited,
Circle 11(1), 237 Okhla Industrial Area,
New Delhi. Phase-I, New Delhi.
(PAN: Nil)
(Appellant) (Respondent)
Appellant by: Shri RIS Gill, CIT(DR)
Respondent by: S/Sh. Raj Kumar & Samer Rohtagi, CAs
ORDER
PER RAJPAL YADAV: JUDICIAL MEMBER The revenue is in appeal before us against the order of Learned CIT(Appeals) dated 13.08.2001 passed for assessment year 1998-99. In the first ground of appeal, revenue has pleaded that Learned CIT(Appeals) has erred in deleting the addition of Rs.2,53,965.
2. The brief facts of the case are that the assessee company was incorporated as a private limited company in the year 1986 under the name and style of M/s. Syndet & Chemicals Ind. Pvt. Ltd. on 9th May 1997. It has changed its name to M/s. Fena Limited. A search and seizure operation was conducted at the business premises of the assessee on 3rd of September, 1997 and a block assessment under sec. 158BC was passed on 27.9.1999. The 2 assessee has filed the return for assessment year 1998-99 on 30th November 1998 declaring a total income of Rs.273,78,895. During the course of assessment proceedings, learned Assessing Officer has observed that in the block assessment inquiries were made regarding the advertisement expenses booked by the assessee in the name of Spark Advertiser. The Assessing Officer has noted that expenses of Rs.25,39,322 have been debited by the assessee from financial year 1990-91 up to 01.04.1997 to 3rd of September, 1997. These were the amounts raised by M/s. Spark Advertiser under different bills in the different years. Assessing Officer on an analysis of these bills and other evidence, arrived at a conclusion that these were treated as bogus in the block assessment order. The period from 4th of September 1997 up to 31.3.1998, is involved in the present appeal because period prior to 3rd of September, 1997 has been considered by the Assessing Officer in the block assessment. On the basis of his outcome in the block assessment, he worked out the expenses incurred on advertisement through M/s. Spark Advertiser for the period 4th September, 1997 up to 31.3.1998 and worked out such expenses at Rs.2,53,965. Assessing Officer has made the addition of this amount.
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3. On appeal, Learned CIT(Appeals) has deleted the addition on the ground that the total addition made in the block assessment for a sum of Rs.25,39,322 has been deleted.
4. The learned counsel for the assessee pointed out that the issue in dispute is squarely covered by the order of the ITAT passed in IT(S.S)A No.136/Del/2001 and C.O. No. 71/Del/2002 for the block period starting from 01.04.1987 and ending on 3rd September, 1997. He pointed out that the addition in the present assessment year is being made by the Assessing Officer on an estimate basis pertaining to that amount which could not be included in the block assessment. Now, in the block assessment, the main addition stands deleted and the ITAT upheld the order of the Learned CIT(Appeals). He drew our attention towards page 68 of the paper book where discussion made by the ITAT in paragraph 3.2 is available. Learned DR was unable to controvert the contentions of the learned counsel for the assessee.
5. We have duly considered the rival contentions and gone through the record carefully. The observations of the ITAT read as under: 4
"3.2 We have considered the facts of the case and rival submissions. We find that the assessment order does not refer to any seized material in respect of M/s. Spark Advertisers. It is stated that enquiries were made regarding advertisement expenditure booked in the name of M/s. Spark Advertisers. Thus, the amount stood debited in the books and in respect thereof no incriminating document was stated to be found in the course of search. In such a case, no undisclosed income can be computed, as held in the case of Ravi Kant (supra). Relying on that decision, it is held that the A.O. erred in computing undisclosed income in respect of expenditure incurred on advertisement through M/s. Spark Advertisers. Thus, ground No.3 is also dismissed".
6. From the perusal of the assessment order, it reveals that the Assessing Officer has not made any independent discussion rather he made reference to the block assessment and how he made the addition of this small amount of Rs.2,53,965 which pertains to the period from 4th September, 1997 to 31.3.1998. Thus, in our opinion, the issue is squarely covered in favour of the assessee and no interference is called for in the order of the Learned CIT(Appeals). Therefore, first ground of appeal is rejected.
7. In the next ground of appeal, grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the addition of Rs,92,82,843. The learned counsel for the assessee at the very outset submitted that this issue is also 5 covered in favour of the assessee by the order of the ITAT passed in the block period because the Assessing Officer has made the addition for the period from 4th September 1997n to 31.3.1998 in this assessment year. The main addition made by the Assessing Officer in the block period has already been deleted. He also pointed out that a similar addition was made in assessment year 2001-02 which has also been deleted by the ITAT in ITA No.4218/Del/2004. The order of the ITAT has been upheld by the Hon'ble Delhi High Court in ITA No.24 of 2009. He placed on record both these orders. On the other hand, Learned DR relied upon the order of the Assessing Officer.
8. We have duly considered the rival contentions and gone through the record carefully. The brief facts of the case are that according to the Assessing Officer, during the course of search, certain papers were seized from the main office of Fena Group which revealed that Fena Ltd. was defecto manager and controller of affairs of Utkarsh Udyog Samiti. The Utkarsh Udyog Samiti had purchased acid slurry from Kaniskh Chemicals Pvt. Ltd., a sister concern. Assessing Officer has observed that Utkarsh Udyog Samiti had inflated its purchases by showing such bogus purchases from sister concern and consequently purchases of the assessee had been 6 inflated. He made an addition of Rs.92,82,843 for the period pertaining to 4.9.1997 up 31.3.1998. ITAT has considered this issue in the block assessment where it has deleted an addition of Rs.38,97,725 and Rs.1,10,11,670 for assessment years 1997-98 and 1998-99. The discussion of the ITAT reads as under:
"4.2 We have considered the facts of the case and submissions made before us. From the order of the Tribunal in the case of the Utkarsh (supra), it is seen that the disallowance of purchases in that case from Kanishka Chemicals (P) Ltd. was deleted. Consequenlty, it can be said that the Utkarsh had produced the goods, which were sold to the assessee. Thus, the additions made by the A.O. cannot be sustained in the light of the order in the case of the Utkarsh. Thus, this ground is also dismissed".
9. On an analysis of the ITAT's order in IT(S.S) A No.136/Del/2001 and C.O. No.71/Del/2002, order passed in ITA No.4218/Del/04 and the judgment of the Hon'ble Delhi High Court in ITA No. 24 of 2009 passed in the case of the assessee for assessment year 2001-02, we are of the opinion that similar additions have been made by the Assessing Officer in other assessment years by treating the purchases by Utkarsh Udyog Samiti alleged to be on behalf of the assessee as bogus. In these orders, the purchases have been treated as genuine and additions made have been deleted. In the present appeal, only a part period is being involved i.e. 4th September 1997 up to 7 31.3.1998, the additions prior to 4th September 1997 even in this assessment year on similar ground has been deleted by the Learned CIT(Appeals) and the order has been upheld by the ITAT. Considering all the aspects, we do not find any merit in this ground of appeal raised by the revenue. It is rejected.
10. In the next ground of appeal, grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the addition of Rs.98,255. With the assistance of learned representatives, we have gone through the record carefully. It emerges out from the record that assessee has made a payment to Okhla, Phase-I & II, Industries CETP Society for installation of common affluent treatment plant as directed by the Hon'ble Supreme Court. It had claimed deduction u/s. 35AC of the Act. However, later on, changed the base of its claim and contended that it be allowed as a revenue expenditure because the expenditure had been incurred as per the directions of the Hon'ble Supreme Court. It is an amount paid to a society as contribution for installation of pollution control plant. The plant would be held by the society and, therefore, expenses deserves to be allowed as a revenue expenditure. Learned CIT(Appeals) has considered the claim of assessee and allowed the deduction.
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11. Before us, Learned DR has relied upon the order of the Assessing Officer. On the other hand, learned counsel for the assessee relied upon the order of the Learned CIT(Appeals). On due consideration of the facts and circumstances, we find that the Assessing Officer has denied the claim on the ground that necessary certificate under sec. 35AC of the Act has not been filed. Learned CIT(Appeals) has allowed the claim under sec. 37(1) of the Act. Considering the payment made by the assessee as a contribution and the circumstances under which it was made, we are of the view that it is an expenditure incurred by the assessee in connection with the business otherwise its business could not be run. Learned CIT(Appeals) has rightly allowed the deduction and no interference is called for in his order.
12. In the result, the appeal of the revenue is dismissed.
Decision pronounced in the open court on 04.05.2012 Sd/- Sd/-
( K.D. RANJAN ) ( RAJPAL YADAV )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 04/05/2012
Mohan Lal
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Copy forwarded to:
1) Appellant
2) Respondent
3) CIT
4) CIT(Appeals)
5) DR:ITAT
ASSISTANT REGISTRAR