TaxTMI 
TaxTMI 
2011 (6) TMI 457
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....facture and sale of Indian made Foreign Liquor, under an agreement with M/s Jagjit Industries Ltd., (JIL in short). For the assessment year under consideration, it has filed the return of income on 18-11-2006 showing income of Rs.43,85,595/-. During scrutiny of the return the assessing officer noticed that during the previous year, the assessee has made sales of Rs.87.35 crores and the entire sales were made to AP Beverage Corporation Limited (APBCL), which in turn sold the same to retail shops in the state of Andhra Pradesh. He found that in the Profit and loss account, the assessee has claimed an amount of Rs.3,14,49,710/- towards 'selling expenses'. He has asked the assessee to furnish the details of such expenses. From such details furnished by the assessee, he noticed that the entire expenditure was incurred at Delhi and such claim pertains to purchase of cloth for banners and purchase of Air bags etc. In respect of such claim of expenditure, the assessee has filed copies of invoices from different parties. The details of expenses claimed by the assessee in respect of 20 parties of Delhi, including the amount claimed towards provision for such expenses, are given by the assess....
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....to such query from the assessing officer, the assessee has submitted that the transactions shown in those invoices are genuine and it was submitted that that the statement given by the said auditor of M/s Makemashi Enterprises Ltd., is not reliable and the reports furnished by the ITI in respect of 5 parties including Meenakshi Cloth Merchant are not reliable. It has furnished ledger accounts, confirmations in respect of 13 parties including M/s Hari Om Fabrics and M/s Bharat Textiles. After stating that the ITI has made enquiries from persons who have no connection with the persons, who supplied goods, the assessee has asked the assessing officer to allow an opportunity to cross examine those persons, referred to in the ITI's report. However, the assessing officer rejected such contention of the assessee and he noted that when the entire marketing in the case of the assessee was looked after by other concerns and the assessee has separately incurred marketing expenses of Rs.7.81 crores, the claim of such huge expenditure towards sales promotion is not genuine and by stating that the request of the assessee to cross examine those persons referred to in the ITI's report, is a device....
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.... Rs.2,83,70,014/- and Rs.3,80,388/- made to the returned income, the assessing officer completed the assessment on a total income of Rs.3,31,36,000/- vide order dated 31-12-2008 passed under section 143(3) of the Act. Aggrieved by the order of the assessing officer, the assessee went in appeal before the CIT (A). On appeal, the CIT (A) by elaborately discussing the points at issue, deleted the disallowance to the tune of Rs.4,99,848 and confirmed the balance disallowance of Rs.2,78,70,166/-. Further aggrieved, the assessee is in appeal before us. 5. The learned counsel for the assessee submitted before us by way of written submissions that having regard to the facts and circumstances of the case it was submitted that Authorities below have used the information gathered behind, in denial of natural justice and therefore the assessment order requires to be vacated and cancelled. The assessee manufactures Indian Made Foreign Liquor (IMFL) under the Brands owned by M/s Jagatjit Industries Ltd New Delhi. With a view to boost sale of liquor and sustain severe competition from other popular brands manufactured by other big liquor companies namely Mc Dowell & Co., United Beverage....
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....rtising the brands manufactured by it with various retail outlets/shops, besides displaying banners at various retail outlets, bars and restaurants at prominent and other places in the State to attract consumers and photographs of retail shops where above publicity material displaying products/logo of the liquor brands manufactured by the assessee company were filed before the Assessing Officer. While voluminous details were called from the company from time to time, without losing time, the assessee company furnished the details and filed various documents and rendered at most co-operation in the assessment proceedings and records bare the testimony and in support of purchase of cloth and other material, purchase orders, bills rendered by various parties/creditors along with their addresses, identity, PAN No's, confirmations, transport receipts/challans, stock registers containing receipts and issues of material to various retail outlets through marketing staff was furnished. It is further submitted that the payments were made against purchase of material through account payee cheques, and as required by the Assessing Officer, Bank Certificates for clearance of such cheques, in fa....
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....upon enquiry they have confirmed the supply of material and the Assessing Officer accepted the correctness of the transactions of the above firm and allowed the expenditure Rs.20,65,496/-. In the case of supply of materials by an another party M/s. Bradburry Spinning Mills, the Assessing Officer partly accepted the correctness of the transactions based upon filing of their confirmation with PAN No. and the remaining part was allowed by the CIT(A) in appeal proceedings. In the case of other remaining 5 parties though the suppliers had similarly filed confirmations with their PAN Numbers and other documents more fully mentioned in para 6 supra, the Assessing Officer did not consider them and disallowed the expenditure. The Inspector since made some local enquiries with third parties nothing to do with persons who had supplied the material. A specific request was made to the Assessing Officer to arrange the said parties for our cross-examination. Using the above, one sided enquiry report against the assessee company, without providing an opportunity to cross-examine them is highly illegal, unreasonable and unjustified. Lower authorities dislodged the evidence filed on record, arbitrar....
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....er seems to have justified the above addition by relying upon the decisions cited by him which have no relevance to the facts of the case. Further the Assessing Officer himself admitted that the decisions relied upon by him are rendered in the contest of cash credit additions under section 68 of the Income Tax Act. 9. In the case of the assessee, the issue is allowance of business expenditure expended, wholly and exclusively for the purpose of business and incurred under commercial expediency. Further having collected the information behind and used the same against the assessee, the lower authorities are not correct in holding that right to cross-examination is not available to the assessee and such right is available to the assessee in penalty and in criminal proceedings. It is stated that under law the assessee has a vested right to cross- examine persons whose statements are relied upon and used against the assessee and denial of right of the assessee for cross-examination would amount to impairment of natural justice rendering the assessment order nullity and the lower authorities are under misconception that the aggregate value of publicity material Rs.75,75,883/- w....
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....ing expenditure aggregating to Rs.4.63 crores, as against Rs.3.14 crores in the assessment year under consideration, was allowed upon scrutiny assessment under section 143(3) read with section 144 A of the Act dated 31.12.2008 and it may be noted that the Brand owners M/s Jagatjit Industries Limited had sent glass tumblers at their cost for free distribution, in respect of which the assessee paid transport charges Rs.51,286. However transport bills have been rendered in the name of Jagatjit Industries Limited and payments were made by the assessee company through cheques. Further Jagatjit Industries Limited has conducted Sales Training Workshop at Hyderabad in Kakatiya Sheraton and Viceroy Hotels, in respect of which Rs.82,708/- was paid by the assessee company through account payee cheques, where the bills were rendered in the name of Jagatjit Industries Limited. The assessee submitted both the expenses since related to the assessee company for promotion of sales payments made by the assessee company are allowable under law. In the above facts and circumstances, it is submitted by the learned counsel for the assessee that in the matter of allowance of expenditure, failure of servi....
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....lways on the assessee as held by the Hon'ble AP High Court in the case of Transport Corporation of India reported in 256 ITR 701. 12. The assessing officer did not make a sweeping addition. In two cases, viz. (1) M/s Gangaram Ramnath, and (2) Bradberry Spinning & Weaving Mills, involving an expenditure claim of Rs.20.65 lakhs and Rs.26.8 lakhs respectively, addition was not made having regard to details available. Similarly, CIT (Appeals), in the case of M/s Premium International, deleted addition to the tune of Rs.4.99 lakhs which represented the amount confirmed by the other party out of the total claim of Rs.9.49 lakhs made by the assessee. 13. On the subject of providing opportunity for cross examination by the assessee, it is seen that the enquiries are conducted by ITO (Inv) at Delhi and not the Assessing Officer at Hyderabad. The Assessing Officer had asked the ITO who conducted the enquiry to examine such persons as the assessee may produce. It is seen from para 8.4 on page 19-21 of the order of CIT (Appeals) that in June 2009 the ITO at Delhi asked for production of 15 parties. The assessee could produce only 3 parties. The ITO also issued summons under....
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....PAN, ledger account copies produced, fact of cheque payments, etc. The addition upheld by the CIT (Appeals) therefore deserves to be sustained. 16. The learned counsel for the assessee submitted that, in rejoinder, the assessee has procured advertisement material from Delhi and was entirely used in Andhra Pradesh evidencing that the material was used by the assessee in Andhra Pradesh. The assessee has administrative office at Delhi as evident from the letter head of the assessee and therefore publicity material was purchased at Delhi through known sources and got the banners, danglers, air bags, T-boards stitched at Delhi," to ensure material quality and competitive rates". Purchases made from parties, in whom neither the assessee company is interested nor directors of the assessee company related to them. Entire expenditure was incurred under business/ commercial expediency. In reply to para 4 of the revenue's contention, the learned counsel for the assessee states, extent of quantity of cloth required was purchased for stitching banners, along with danglers, air bags and other materials for delivery to 7460 retail outlets shops located in entire Andhra Pradesh for di....
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....ies were filed on record. It is submitted that M/s. Shiva Enterprises and M/s. Technet Info Systems (P) Ltd., have confirmed the transaction and supply of goods in response to notice issued u/s 133(6) of the Income Tax Act. M/s. S.M. Advertising has closed its business due to sealing by Municipal Corporation of Delhi which is confirmed by the report of the Income Tax Inspector. Parties not produced, summons not replied or summons returned are not conclusive factors for drawing adverse inference. The department, apart from issuing notices under section 131 of the Act, did not pursue the matter further. It is submitted that the assessee company had received and used material well before the closure of the year. Further the department accepted, in the scrutiny assessment, similar expenditure Rs.4.63 crores pertained to 28 parties in the assessment year 2007-08 wherein many material suppliers are common. 18. We have considered the rival submission and perused the material available on record. We find that, as a general rule, principle of resi judicata or estoppel is not applicable to the income tax proceedings. An assessment of the particular year is final and binding in relation to....