Income Tax Appellate Tribunal - Kolkata
Arti & Sons, Kolkata vs Department Of Income Tax on 22 September, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "ǒव" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय एवं/and ौी, ौी लेखा सी.डȣ.राव सदःय)
[Before Sri Mahavir Singh, JM & Shri C. D. Rao, AM]
आयकर अपील संÉया / I.T.A No. 2083/Kol/2010
िनधॉरण वषॅ/Assessment Year : 2004-05
Assistant Commissioner of Income-tax, Vs. M/s. Arti & Son
Circle-56, Kolkata. (PAN-AAEFA 6622 J)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
For the Appellant: Shri S. K. Roy
For the Respondent: Shri D. K. De Sarkar
Date of hearing: 22.09.2011
Date of pronouncement: 22.09.2011
आदे श/ORDER
Per Mahavir Singh, JM ( महावीर िसंह, Ûयायीक सदःय)
सदःय This appeal by revenue is arising out of order of CIT(A)-XXXVI, Kolkata in Appeal No.322/CIT(A)-XXXVI/Kol/R-56./06-07 dated 17.09.2010. Assessment was framed by Jt. CIT, Range-56, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2004-05 vide his order dated 28.12.2006.
2. The first issue in this appeal of revenue is against the order of CIT(A) in restricting the disallowance at Rs.12,14,227/- out of the total disallowance made by Assessing Officer at Rs.24,28,854/- in respect to bonus and incentive expended by the assessee. For this, revenue has raised following ground no.1:
"1. Ld. CIT(A) has erred in law and fact when he restricted the disallowance of Rs.24,28,854/- in respect of Bonus & Incentive to Rs. 12,14,427/- because A.O made this addition after making proper & factual comparison of this expense with expenses in this head in previous years. A.O indicated that the net profit of assessee was decreased from .23% of total turnover to .13% in this year due to increase in this expense. A.O also pointed that the expense in this head is increased from .91% of to l.30% of total receiving which is not justifiable, even in view of the stiff competition, as alleged. Considering the fact that assessee was not able to produce supporting evidences and proper explanation for its claim. The disallowance of Rs.24,20,854/- made by the A.O w.r.t. Bonus & Incentive is totally justifiable. A.O allowed the expense in this head 1.20% of turnover which is very much reasonable when compared with pervious year ratio of 0.91%."
3. The brief facts are that assessee is a distributor of different State Lottery tickets and assessment was framed u/s. 143(3) of the Act and during the course of assessment proceedings Assessing Officer disallowed incentive and bonus expenditure by comparing gross profit rate of assessee's business with earlier years, which worked out to 0.53% i.e. low comparing with 2 ITA 2083/K/2010 Arti & Son A.Y. 04-05 Assessment Year 2003-04 @ 0.60%. Similarly, net profit was also worked out at 0.13% comparing to earlier years' net profit at 0.23%. Accordingly, he disallowed the claim of bonus and incentives. Aggrieved, assessee preferred appeal before CIT(A), who restricted the disallowance at Rs.12,14,427/- by holding that net profit for the year under consideration is only about 50% of what it was for earlier assessment years and accordingly, he restricted the disallowance at 50%, which according to him is fair and reasonable. Aggrieved, revenue came in appeal before us.
4. We have heard rival submissions and gone through facts and circumstances of the case. We find that assessee before the lower authorities and even now before us stated that G. P. rate for the relevant assessment year 2004-05 was reduced as compared to last year but equal to assessment year 2002-03. It is also a fact that many new competitors of the assessee i.e. 23 new players entered into the market but despite that sale increased as compared to previous year. We find that assessee could not produce reasonable explanation for reduction in net profit ratio at 0.13% as comparing to net profit ratio of 0.23% in assessment year 2003-04. We find that the CIT(A) has gone into reasons and restricted the disallowance at Rs.12,14,427/-. On query from the Bench, the Ld. Counsel for the assessee fairly stated that he is not in appeal against confirmation of disallowance. In view of this fact, we find that CIT(A) has decided the issue as under:
"However, the gross profit and net profit, as can be seen from the above table extracted from the assessment order, are substantially less compared to the earlier assessment years. In fact, net profit for the year is only 0.13% of the turnover while the net profit for the assessment year 2003-04 was 0.23% where as the net profit for the assessment year 2002-03 @ 0.26%. In fact the net profit for year under consideration is only about 50% of what it was for the earlier assessment years. The appellant did not explain as to why the net profit was so much less for the assessment year 2004-05. The explanation of the appellant, as above, extracted from the written submissions of the A/R, was very general and it did not specifically pertain to the Asst. Year 2004-05. However, disallowance at Rs.24,28,854/- which works out to 0.8% of the total claim is considered excessive. Considering of the above facts, I am of the view that disallowance of Rs.12,14,427/-, i.e. 50% of the amount disallowed by the Assessing Officer, is fair and reasonable. Accordingly, the AO is directed to restrict the disallowance at Rs.12,14,427/-."
Hence, we are of the view that no interference, in the given facts and circumstances, is required in the order of CIT(A). This ground of revenue's appeal is dismissed.
5. The next issue in revenue's appeal is against the order of CIT(A) in restricting the disallowance of Rs.1,60,062/- in respect of gift made to customers. For this, revenue has raised following ground No.2:
2. Ld. CIT(A) has erred in law and fact when he restricted the disallowance of Rs.1,60,062/- in respect of Gift made to customers to Rs.80,031/- considering the fact that CIT(A) himself accepted that assessee was not able to substantiate its claim with proper 3 ITA 2083/K/2010 Arti & Son A.Y. 04-05 bills and vouchers. In the absence of supporting evidences the disallowance made by the A.O is fully justifiable."
6. We have heard rival submissions and gone through facts and circumstances of the case. Brief facts of the case are that during the assessment proceedings, Assessing Officer noted that assesee debited in its P&L Account, a sum of Rs.1,60,062/- on account of gifts. Assessing Officer disallowed the above expenditure since the assessee was unable to substantiate that the expenditure incurred was wholly for the purpose of business. In appeal, CIT(A) directed the AO to restrict the disallowance to Rs.80,031/- by observing that assessee was not able to substantiate the claim with proper bills and vouchers. Aggrieved, revenue is now in appeal before us. Before us, Ld. DR submitted that CIT(A) restricted the disallowance to Rs.80,031/-, which is unjustifiable considering the fact that CIT(A) himself observed that assessee was not able to substantiate its claim with proper bills and vouchers. In absence of supporting evidences the disallowance made by Assessing Officer is fully justifiable and the same may be upheld. On the other hand, Ld. Counsel for the assessee relied on the order of CIT(A) and urged before the bench to confirm the same. We find that while restricting the disallowance, CIT(A) has held as under:
"I have carefully considered the above. I find that the above amount was incurred towards purchases of Mementos given to the dealers during the conference. I am, therefore, of the view that the above expenditure is connected with appellant's business. However, the appellant was not able to substantiate the claim with proper bills and vouchers. Considering the above, disallowance of 50% of the expenses claimed under the head is fair and reasonable. Accordingly, the A.O. is directed to restrict the disallowance to Rs.80,031/-."
Since revenue did not rebut the aforesaid finding of CIT(A) by producing any cogent evidence/material at the time of hearing before us, we do not find any infirmity in the order of CIT(A) and the same is hereby upheld. This ground of appeal of the revenue is dismissed.
7. The next issue in revenue's appeal is against the order of CIT(A) in deleting the disallowance on account of travelling expenses, freight and carriage expenses and printing and stationery expenses. For this, revenue has raised following ground No.3:
"3. Ld. CIT(A) has erred in law and fact when he deleted the disallowance made by A.O with respect to travelling expenses of Rs.20,000/-, with respect to Freight & carriage expenses of Rs. 15000/-and with respect to Printing & stationery expenses of Rs.20,000/- as A.O. made these addition on the basis of fact that assessee furnished self made vouchers in support of its claim and part of these expenses have the probability of being personal in nature. In absence of proper supporting the estimation made by the A.O is fully justifiable."
8. We have heard rival submissions and gone through facts and circumstances of the case. Brief facts of the case are that Assessing Officer made the disallowances on account of travelling expenses, freight and carriage expenses and printing and stationery expenses on the 4 ITA 2083/K/2010 Arti & Son A.Y. 04-05 basis of fact that assessee furnished self made vouchers in support of its claim and part of these expenses have the probability of being personal in nature. In appeal, CIT(A) deleted the additions on account of travelling expenses of Rs.20,000/-, freight and carriage expenses of Rs.15,000/- and printing and stationery of Rs.20,000/- since Assessing Officer made the disallowance on ad-hoc basis without giving any reasons. Aggrieved, revenue is now in appeal before us. We find that before us Ld. DR could not be able to specifically point out any instance of personal expenses and Assessing Officer has made the disallowances on ad-hoc basis without giving any specific reason. Hence, we do not find any infirmity in the order of CIT(A) in deleting the additions so made by Assessing Officer. This ground of revenue's appeal is also dismissed.
9. In the result, appeal of the revenue is dismissed.
10. Order pronounced in open court.
Sd/- Sd/-
सी.डȣ
सी डȣ.राव
डȣ राव लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(C. D. Rao) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated : 22nd September, 2011
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - ACIT, Circle-56, Kolkata.
2 ू×यथȸ/ Respondent, M/s. Arti & Sons, 167/4, Lenin Sarani, 2nd floor,
Kolkata-72..
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/CIT, Kolkata
5. वभािगय ूितनीधी / DR, Kolkata Benches, Kolkata
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
सहायक पंजीकार/Asstt. Registrar.