GOLDEN TIME WATCHES (I) PVT. LTD.,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-2(1)(1), AHMEDABAD

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ITA 2832/AHD/2016Status: DisposedITAT Ahmedabad24 June 2019AY 2012-135 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the AO for de novo decision, directing the AO to provide the assessee with copies of replies received from suppliers and to consider any further materials produced by the assessee.

What were the facts?

The assessee claimed business promotion expenses for executive diaries. The AO disallowed the expenses as the suppliers' responses to notices were unsatisfactory or non-existent, and the nature of goods supplied was disputed.

What were the issues?

Whether the disallowance of business promotion expenses was justified without providing the assessee with the AO's collected evidence and an opportunity to rebut it.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SHRI MAHAVIR PRASAD&SHRI AMARJIT SINGH

For Appellant: Shri Lalit P. Jain, Sr. DR

आदेश/O R D E R

PER AMARJIT SINGH - AM: The appeal filed by the assessee for A.Y. 2012-13, arise from order of the CIT(A)-2, Ahmedabad dated 19.05.2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.

2.

In this case return of income declaring income of Rs. 15,75,868/- was filed on 28.09.2012. Subsequently the case was selected under scrutiny by issuing notice u/s. 143(2) of the Act on 07.08.2012. The assessee company is running retail business in wrist watches, clocks, jewellery and accessories. During the year

ITA NO. 2832/AHD/2016 A.Y. 2012-13

under consideration, the assessee company has reported turnover of Rs. 11,47,96,433/- and net profit of Rs. 14,71,136/-.

During the course of assessment the AO noticed that assessee has debited a sum of Rs. 13,60,298/- as business promotion expenses under the head selling and distribution expenses. Out of these expenses the AO noticed that assessee has claimed expenses incurred towards purchase of executive diaries from M/s. Kush Trading Company to the amount of Rs. 7,49,931/- and from M/s. Amisha Enterprises to the amount of Rs. 4,20,167/- for distributing to its customers. In this regard, the assessee company has submitted three purchase bills of M/s. Kush Trading Co. whereas no purchase bill was submitted in respect of purchases made from M/s. Amisha Enterprises. To prove the genuineness of such expenses the AO has issued notices u/s. 133(6) of the Act both to M/s. Kush Trading Company and M/s. Amisha Trading Company. In response to notices u/s. 133(6) of the Act M/s. Kush Trading Company responded that they had sold cotton cloth to the assessee to the amount of Rs. 4,20,168/- only. In respect of M/s. Amisha Enterprises the AO has not received any reply in respect of the notice u/s. 133(6) of the Act issued to such party. After considering the fact that M/s. Kush Trading Company had not sold any diaries but sold cotton cloths to the assessee for the amount of Rs. 4,20,168/- and not receiving any reply from M/s. Amisha Enterprises, the AO has disallowed the claim of expenses of Rs. 11,71,430/- claimed under the head business promotion expenses and added to the total income of the assessee.

3.

Aggrieved assessee has filed before the Ld. CIT(A) who has dismissed the appeal of the assessee and confirmed the disallowance made by the AO.

During the course of appellate proceeding before us the Ld. Counsel has submitted Paper Book containing information and copies of submission furnished before the AO and Ld. CIT(A) during the course of assessment and appellate proceeding. The Ld. Counsel has contended that assessee purchases diaries,

ITA NO. 2832/AHD/2016 A.Y. 2012-13

calendars, pens etc. and distribute the same to the customer to promote its business. He has further contended that AO has not provided any copy of reply furnished by M/s. Kush Trading Company in response to notice u/s. 133(6) issued by the AO and hence no cognizant of such reply could have been taken by the AO since that tantamount to violations of principles of natural justice. He has further contended that as regard M/s. Amisha Enterprises AO, the CIT(A) has failed to appreciate that it is quite possible that the said party might have shifted to some other place since transaction took place with them in F.Y. 2011-12 whereas enquiry was carried out in the year 2015 and assessee did not have any control over such situation.

4.

On the other hand the Ld. DR vehemently contended that assessee has failed to substantiate the genuineness of the expenditure and it is clearly established from the finding of AO and CIT(A) that claim of the expenditure in respect of business promotion in respect of aforesaid two parties was not genuine.

5.

We have heard both the sides and perused the material on record carefully. The Ld. Counsel has also referred the judicial pronouncement pertaining to Ganesh Industries vs. ITO vide ITA Nos. 93 & 814/Ahd/2011 and Nehal Hasmukhrai Gandhi vs. DCIT vide ITA No. 2578/Ahd/2017.

We have gone through the material on record and noticed that facts of the above cited judicial pronouncement are pertained to bogus purchases made in high quantum in the goods traded whereas, the case of the assessee is different as the issue is pertained to the claim of non-trading item of business and promotion expenditure during the year under consideration. During the year under consideration the total sales of the assessee was shown at Rs.11,47,96,433/- and total purchases was shown at Rs. 10,04,37,745/-. There was dispute regarding genuineness of indirect expenditure of Rs. 11,70,430/- affecting the net profit

ITA NO. 2832/AHD/2016 A.Y. 2012-13

during the year under consideration. After perusal of material on record we observe that the AO has neither categorically explained the contents of three copies of purchase bills issued by M/s. Kush Trading Company nor provided any copy of reply furnished by M/s. Kush Trading Company to the assessee. The AO has not specified whether or not the other party M/s. Amisha Enterprises was available at the given address. In respect of purchases made from M/s. Amisha Enterprises it is not clearly mentioned in the assessment order whether the said party was available at the given address or not. In the light of the aforesaid facts and circumstances we restore this matter to the file of the AO for deciding denovo after providing access to the assessee of the information collected from both the parties and after considering the opposite materials to be produced by the assessee. Accordingly, this matter is restored to the file of the AO for deciding a fresh as directed above after providing adequate opportunity to the assessee. Thereafter, this ground of appeal of the assessee is allowed for statistical purpose.

6.

Second Ground of Appeal of the assessee in confirming the addition of Rs. 27,94,869/- against the order of CIT(A) on account of estimated gross profit. It is noticed that assessee has incorrectly filed this ground of appeal as the Ld. CIT(A) has vide Para No. 5.8 of his order has already deleted such addition. Therefore, this ground of appeal of the assessee is infructuous and dismissed.

7.

Third Ground of appeal of the assessee is of general in nature against the action of the lower authority in not following the principles of natural justice. This ground of appeal is not required any adjudication as we have restored the issue in appeal to the file of the AO for decided afresh after providing adequate opportunity to the assessee.

ITA NO. 2832/AHD/2016 A.Y. 2012-13

8.

Ground No. 4 regarding not levying of interest u/s. 234A/B/C/D of the Act has no merit as charging of interest under above sections are mandatory as per the provision of law. Therefore, this ground of appeal of the assessee is dismissed.

9.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

This Order pronounced in Open Court on 24/06/2019

Sd/- Sd/- (MAHAVIR PRASAD) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 24/06/2019 TANMAY TRUE COPY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4.आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध,आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file.

By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण,अहमदाबाद ।

1.Date of dictation on 13.06.2019 2.Date on which the typed draft is placed before the Dictating Member 14.06.2019 3.Date on which the approved draft comes to the Sr.P.S./P.S. 17.06.2019 4.Date on which the fair order is placed before the Dictating Member for Pronouncement 17.06.2019 5.Date on which the fair order comes back to the Sr.P.S./P.S 24.06.2019 6.Date on which the file goes to the Bench Clerk 24.06.2019 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Despatch of the Order………

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