TaxTMI 
TaxTMI 
2014 (5) TMI 38
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....ccount of inadmissible expenditure when the cheques issued by the assessee during the period and been deposited in the bank account of M/s. Ratna Enterprises and on the day of deposit, withdrawal of equal amount had been made. Further, the said party has neither issued cheque payment to any persons/party nor had it received any cheques from other party other than the assessee which shows that the so called payments made to M/s. Ratna Enterprises were a device to reduce its taxable income. 3. The appellant craves to amend or add any one or more grounds of appeal." 2. In ITA No.306(Asr/2013, the sole ground raised by the revenue is as under: "1. On the facts and circumstances whether the ld. CIT(A) was right in deleting the addition made by treating the expenditure as sale promotion on protective basis when the decision of the Ld. CIT(A) on quantum addition have been filed challenged before the Hon'ble ITAT, Amritsar." 3. First of all, we take up appeal of the Revenue in ITA No.207(Asr)/2013 where the brief facts as per AO's order at pages 2 to 10 are reproduced for the sake of convenience as under: "The assessee firm is trading in sale and purchase of Edible Oil, Refi....
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....Advertisement & Publicity 27.07.2005 2573 97,860.93 25. Advertisement & Publicity 30.07.2005 2577 87,257.81 26. Advertisement & Publicity 01.08.2005 2581 78,257,81 27. Advertisement & Publicity 03.08.2005 2584 27,718.59 28. Advertisement & Publicity 08.08.2005 2586 18,000.00 29. Advertisement & Publicity 24.08.2005 2590 57,206.25 30. Advertisement & Publicity 25.08.2005 2592 48,480.46 31 Advertisement & Publicity 26.08.2005 2593 72,154.68 32. Advertisement & Publicity 29.08.2005 2596 75,206.25 33. Advertisement & Publicity 30.08.2005 2597 45,703.12 34. Advertisement & Publicity 31.08.2005 2600 1,12,886.71 35. Advertisement & Publicity 3.9.2005 2601 63.149.62 36 Advertisement & Publicity 5.9.2005 2606 66,199.50 37. Advertisement & Publicity 6.9.2005 2607 49,649.62 38 Advertisement & Publicity 9.9.2005 2612 27,000.00 39. Advertisement & Publicity 15.9.2005 2616 69,099.75 40. Advertisement & Publicity 16.9.2005 2617 30,093.75 41. Advertisement & Publicity 22.9.2005 2618 66,375.00 42. Advertisement & Publicity 24.9.2005 2621 10,140.62 43. Advertisement & Publicity 29.09.200....
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....757 35,606.26 Total 46,09,004.88 The said copy of account further reveals that the assessee has made payments to the said party on different dates amounting to Rs.53,50,000 and thus at the close of the year i.e. on 31.03.2006 the assessee has shown debit balance of Rs.5,52,179.12. The payments have been made from two bank accounts maintained by the assessee with The Jammu and Kashmir Bank Ltd. Residency Road, Jammu A/c No. 0076CD1999 and The J & K Bank, Gangyal A/c No.1455 and the amounts have been credited in A/c No.0076CD2084 in the name of M/s. Rama Enterprises, with The K & K Bank Ltd. Residency Road, Jammu. 2.2. After going through the information filed by the assessee and the information obtained from the banks, vide this office letter dated 08.12.2008, the assessee was asked to explain as under: "After test check of the information filed by you, it has been observed that you have shown debit balance of Rs.5,52,179.12 against the name of M/s. Ratna Enterprises, Ware House, Jammu as on 31.03.2006 whereas there was credit balance of Rs.1,88,816/- as on 1.4.2005. Your bank accounts maintained with J & K Bank Ltd. Gangyal Branch and Residencey Road Branch sho....
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....quently, a letter dated 08.12.2008 alongwith notices u/s 143(2/142(1) were issued and case was fixed for hearing on 12.12.2008 and you were required to furnish the following information:- "After test check of the information filed by you, it has been observed that you have shown debit balance of Rs.5,52,179.12 against the name of M/s. Ratna Enterprises, Ware House, Jammu as on 31.03.2006 whereas there was credit balance of Rs.1,88,816/- as on 1.4.2005. Your bank accounts maintained with J & K Bank Ltd. Gangyal Branch and Residencey Road Branch show that during the year you have made total payment of Rs.53,50,000/- on different dates through cheques. The copy of account as existing in your books of account shows that the said party has raised bills on different dates on account of 'advertisement and publicity'. You are required to furnish the following information on this account: v. Please furnish the complete name and address of the party; in case of Proprietorship, please provide the name and complete address of the Proprietor; vi. Nature of the business carried out by the said concern alongwith its PAN number and particulars of ward/circle where same is being assessed. ....
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....hotocopies of few purchase bills, to show that the assessee has purchased washing soap from the said concern. It has also been stated in the said letter that the nature of the account 'Head advertisement & Publicity' basically is not 'advertisement or publicity' but it is account of combo sales of washing soap with packing of edible oils. It has further been claimed in the letter that the combo sale price of edilble oils included the realization of washing soap cost and thus the cost realization of washing soap has been credited to the said account head and stated that all the purchases of washing soap are properly accounted for in the books of account and all the payments had been made to the party through account payees cheques. During the course of discussion with the counsel of the assessee, he produced some purchase bills, which he stated to be original bills raised by M/s. Ratna Enterprises on account of sale of soap to the assessee and further stated that tehse bills are accounted for in the books of account in support of which he again filed a copy of account as existing in his accounts. However, no books of account were produced to verify the contention of the assessee. ....
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....e sales are to retailers and no direct sale to customers have been made. Therefore, apparently it is made up after thought story with clear intention to twist the issue. Had there been any such scheme, it should have been meant for retailers who have made huge purchases from the assessee or at least they should have some knowledge about such scheme. But the assessee, has failed to produce any such evidence in as much as even the books of account, purchase and sale vouchers and other misc. vouchers, therefore, it is difficult to believe the story. 2.6. This fact is further strengthened by the fact that the assessee firm has floated only one Scheme which was valid from 20.12.2005 to 31.01.2006 and the said scheme provided as under: "Jumbo family is here with a grand Bonaza Introductory for our valued customers for Taj Mahal Bakery, Powerman Soya Been refined oil and VIP Mustard Oil Grade-1. 1) i) On purchase and delivery of 300 boxes of Taj Mahal Bakery: One Mobile Phone worth Rs.2800/- ii) On purchase and delivery of 500 boxes of Taj Mahal Bakery : Any one item i.e. Mobile Phone or Room Heater worth Rs.5000/- iii) On purchase and delivery of 750 boxes of Taj Mahal Bak....
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....nd through this account transferred the money to the account of M/s. Ratna Enterprises, which has been opened with The J & K Bank Ltd. Residency Road, Jammu. This further gets strengthened from the fact that after going through the copy of account of M/s. Ratna Enterprises, it is observed that bills which are mostly in seriatim, have been issued in favour of the assessee. Copy of bank account of M/s. Ratna Enterprises also shows that opening balance as on 1.4.2005 has been shown at Rs.302.60 and the closing balance in the account as on 31.3.2006 is Rs.236.60. During the period only the cheques issued by the assessee firm have been deposited in the said account and on the day of deposit, withdrawals of the equal amount have been made. The cheques through which the withdrawals have been made are also mostly in seriatim which shows that neither M/s. Ratna Enterprises has issued any cheque payment to any other person/party nor has it received any cheques from some other party than the assessee. Copies of some of the cheques issued by the assessee have been obtained from the bank alongwith copies of the pay-in-slips. The details of which are given hereunder: S.No. Cheque No. Date ....
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....ed by it i.e. 'Advertisement & Publicity having mistakenly been made, proves beyond doubt that the expenditure claimed by the assessee is not genuine. Moreover, keeping in view the paucity of the time and non cooperation on the part of the assessee and also the fact that best judgment assessment is being framed, I am left with no alternative but to hold that the claim of the assessee being unjustified, the same is rejected. Accordingly, it would result in a disallowance of Rs.46,09,004.88 being inadmissible expenditure having been debited by the assessee to reduce its profitability. This will also cover any other discrepancy in the trading results which could not be verified in the absence of books of account. As the assessee has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271(1)(c) of the Income tax Act, 1961 are also initiated separately." 3. The Ld. CIT(A) deleted the additions for the reasons mentioned in his order and the relevant findings at pages 7-8 of the order are reproduced as under: "There is no denial by the AO that free gift scheme was in place. The then pamphlet of free gift of soap with Jumbo brand Mustard Oil of differen....
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.... is made without going into detail facts of the case. In view of the above observations, I find that the additions are not based on material evidence but a guess work. Hence, it cannot be sustained and thus deleted." 5. The Ld. DR relied upon the order of the AO and argued that the assessee has debited bogus expenditure for the reasons that the bills which were issued by M/s. Ratna Enterprises are mostly in seriatum. Copy of bank account of M/s. Ratna Enterprises shows that cheques issued by the assessee firm and deposited in the said account of M/s. Ratna Enterprises have been withdrawn on equal amount on the day of deposit itself. The cheques through which the withdrawal have been made are also mostly in seriatum which shows that neither M/s. Ratna Enterprises has issued any cheque to any other person nor it has received any cheque from other parties that the assessee. Perusal of these cheques and pay-in-slips reveal that person who has prepared the cheques and the person who has deposited these cheques as per pay-in-slips in the account of M/s. Ratna Enterprises is one and the same person as is evident from the hand-writing on these documents and the date of deposit and date ....
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....particulars is not enough, as held by the Hon'ble Calcutta High Court in the case of CIT vs. Precision Finance Pvt. Ltd. reported in 208 ITR 465 and Hon'ble Supreme Court, in the case of Kachwala Gems vs. JCIT reported in 288 ITR 10. In the facts and circumstances, the ld. CIT(A) is not justified in accepting the technical rule of evidence and ignoring the circumstances, as mentioned hereinabove in AO's order. Accordingly, the order of the ld. CIT(A) is directed to be reversed and that of the AO is restored. Thus, both the grounds of the Revenue are allowed. In the result, the appeal of the Revenue is allowed. 7, Now, we take up the appeal of the Revenue in ITA No.306(Asr)/2013. The brief facts as per AO's order are reproduced for the sake of convenience as under: "While going through the Schedule-2 for value of fringe benefit it is observed that under the head sales promotion the assessee has shown only expenditure of Rs.2,31,247/- and Rs.2,31,271/-. However, during the course of assessment proceedings under the Income tax Act, it has been noticed that in addition to these expenditures made on sale promotion, the assessee has also debited an expenditure of Rs.46,09,004/- in ....