TMI Blog2014 (5) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ther before the AO or before the CIT(A) or Tribunal – the payment through cheques by the party is not sacrosanct and furnishing the particulars is not enough – Relying upon CIT vs. Precision Finance Pvt. Ltd. [1993 (6) TMI 17 - CALCUTTA High Court] and Kachwala Gems vs. JCIT [2006 (12) TMI 83 - SUPREME COURT] – the CIT(A) is not justified in accepting the technical rule of evidence and ignoring the circumstances – thus, the order of the CIT(A) set aside – Decided in favuor of Revenue. Deletion of expenses on sale promotion – Held that:- Since the additions have been deleted in quantum appeal by the CIT(A), and now the quantum appeal decided by the CIT(A) in favour of the assessee has been reversed by the order of even date – the order of the CIT(A) will not survive – the CIT(A) has not decided the issue on merits – thus, the matter is remitted back to the CIT(A) for Adjudication – Decided in favour of Assessee. - I.T.A. Nos.207 & 306(Asr)/2013 - - - Dated:- 28-2-2014 - Sh. H. S. Sidhu And Sh. B. P. Jain,JJ. For the Appellant : Sh. Mahavir Singh, DR For the Respondent : Sh. R. L. Gupta, Advocate ORDER Per Bench ; These two appeals of the Revenue aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionnaire the assessee has filed a copy of account as existing in its books of account in the name of M/s. Ratna Enterprises, Ware House, Jammu for the period from 1.4.2005 to 31.3.2006 and a perusal of the said copy of account reveals that opening credit balance has been shown at Rs.1,88,816/- and during the period from 4.6.2005 to 6.1.2006 the assessee has received various bills from the said party, amounting to RS.46,09,004.88 whose details are given hereunder:- S. No. Particulars Date Bill No. Amount in Rs. 1. Advertisement Publicity 04.06.2005 2501 49,000.50 2. Advertisement Publicity 06.06.2005 2502 24,500.25 3. Advertisement Publicity 07.06.2005 2502 24,500.25 4. Advertisement Publicity 08.06.2005 2504 36,000.00 5. Advertisement Publicity 09.06.2005 2505 60,249.37 6. Advertisement Publicity 18.06.2005 2506 96,399.00 7. Advertisement Publicity 19.06.2005 2507 58,500. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 29.09.2005 2622 78,468.75 44. Advertisement Publicity 01.10.2005 2627 66,375.00 45. Advertisement Publicity 07.10.2005 2635 31,050.00 46. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72. Advertisement Publicity 10.12.2005 2719 63,646.88 73 Advertisement Publicity 12.12.2005 2723 53,071.88 74 Advertisement Publicity 13.12.2005 2724 54,281.25 75 Advertisement Publicity 16.12.2005 2727 66,375.00 76 Advertisement Publicity 16.12.2005 2729 10,546.88 77 Advertisement Publicity 21.12.2005 2734 36,787.50 78. Advertisement Publicity 24.12.2005 2736 56,981.25 79 Advertisement Publicity 30.12.2005 2741 60,328.13 80 Advertisement Publicity 3.1.2006 2748 42,806.25 81 Advertisement Publicity 5.1.2006 2752 30,093.75 82 Advertisement Publicity 6.1.2006 2757 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 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the above assessment year and also the information as per the above letter. The said letter along with notices was duly served upon the assessee on 10.12.2008. However, on the said date of hearing, none attended the proceedings nor any request for adjournment of the case was filed nor the information as asked for was filed by the assessee. Inspite of the fact that the case was going barred by limitation, still to be more reasonable, another show cause notice was issued to the assessee on 19.12.2008 alongwith notices u/s 143(20 and the assessee was asked to furnish the following information and also produce the books of account on the date of hearing which was fixed for 26.12.2008. In the said letter the assessee was asked to furnish the following: Please refer to the above. On the last date of hearing i.e. 03.11.2008, Shri Rattan Lal Gupta, Advocate, alongwith Sh. Vijay Mengi, Accountant attended and filed the information. The case was adjourned to 12.11.2008 but on the said date of hearing, none has attended. Subsequently, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnment purchase Rs. 1,50,30,320.34 In this regard, you are required to furnish the information in the following format: i. Serial No. ii. Name and complete address of the party from whom purchases made. iii. Total value of the purchases iv. Total payments made during the year v. Balance outstanding as on 31.3.2006 vi. Particulars of the purchases made. A notice u/s 143(20/142(1) is also enclosed for compliance. 2.4. Again the assessee failed to comply with the terms of the said notices and nobody attended the proceedings. However, Sh. Rattan Lal Gupta, Advocate, counsel of the assessee filed reply to the above letter at 5.30 A.M. and the same has been taken on record. In the said letter the assessee intimated the address of M/s. Ratna Enterprises as Ware House, Jammu but unable to provide the name of the Proprietor or confirm whether the concern is a Proprietorship concern or a Partnership firm. He further intimated that the concern is dealing in washing soap, edible oils, ghee etc. He also filed photocopies 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to provide the details of such schemes. As per the Partnership deed it has been stated that the partnership concern shall carry on the business of sale and purchase of edible oil which is duly reflected by the auditors in their audit report on Form No.3CD. When the assessee was confronted to explain the nature of advertisement and publicity which the assessee firm has undertaken and for which the assessee firm has made huge payments, it changed its stand and stated that the nature of the account head advertisement and publicity basically is not advertisement or publicity but it is account of combo sales of washing soap with packing of edible oils and is inclusive of the sale price of edible oils. When the assessee was asked to identify the parties to whom such sales have been made he was unable to provide the details. Even he could not provide the particulars of the parties to whom such sales have been made. As is evident from the facts of the case, the assessee has shown total turnover of Rs.77.39 crores and entire 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out, he realized that in case he supported the same, then the department would call for explanation as to whether TDS has been deducted on the said payments and as to why the same has not been charged to Fringe Benefit Tax. It would have been very embracing for the assessee to support this version as depicted in its books of account. Therefore, it was caught between devil and the deep sea and thus unable to support its own theory. If for argument sake, we buy the argument of the assessee that it is mistake, but mistake cannot be repeated every time which is evident from the fact that while making postings in the account of M/s. Ratna Enterprises as maintained by the assessee scores of entries have been made and had it been a mistake it would have come to the knowledge of the assessee keeping in view the quantum of huge payments made. Even the auditors have not pointed it out. This clearly shows the intentions of the assessee that this account has been created to sniff out money from the firm and by creating such account and 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled legal position, as enunciated by various High Courts and Supreme Court is that the obligation is on the assessee to furnish reasonably acceptable explanation regarding the entries made in its books of account. 2.8. Under such circumstances when the assessee has failed to produce the books of account and given reasonable explanation to justify the nature of its claim, how it qualifies for deduction and how whatsoever evidence is brought on record does substantiate the theory purtforth by it, a prudent man face with such a situation will weigh the various probability to find whether the preponderance is in favour of existence of the of the particular facts. The liability to explain the nature of the entry is undoubtedly upon the assessee as the fact is within its knowledge but when it fails to disclosed the same or tries to camouflage the same, it cannot be said that the assessee has discharged its onus. The evidence like the seriatim posting of bills, entries in the bank accounts of M/s. Ratna Enterprises showing the debit and credit entries therein and the opening and closing balances in the said account and also the version of the assessee that the existing narration in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of M/s. Ratna Enterprises Ware House Jammu. 4. M/s. Ratna Enterprises has raised bills of washing soap in the name of appellant and original copy of which were produced before the AO. However, mistakenly these purchases were wrongly debited by the accountant under the head advertisement and publicity under the impression that the sales promotion item of free gifts is synonymous with advertisement and publicity. 5. The appellant vide letter dated 26.12.2008 has given complete information about M/s. Ratna Enterprises i.e. address the nature of business, the original bills and relation with the appellant firm. 6. The AO has not established any relation of M/s. Ratna Enterprises with the appellant company. The appellant provided to the AO complete address of M/s. Ratna Enterprises along with copy of VAT registration, TIN No. and Annual VAT return. The AO has not established that the transactions with M/s. Ratna are sham and bogus and the money paid by the appellant has come back to them in any form. 7. The AO has made this addition on erroneous presumption that when the appellant was dealing in trading of Vanaspati Ghee, Edible Oil and Mustard cake etc. how then can be ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, relied upon the submissions made before the ld. CIT(A) and the order of the ld. CIT(A). 7. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact, as is evident from the order of the AO and the arguments made by the Ld. DR that most of the bills issued by M/s. Ratna Enterprises are in seriatim, cheques issued by the assessee firm which were deposited in the said account of M/s. Ratna Enterprises, were withdrawn of equal amount on the same date, cheques and pay-in-slips have been prepared by one and same person in one hand-writing. The Ld. counsel for the assessee has not rebutted these allegations and facts on record and no material rebutting the said findings of the AO have been brought on record before the ld. CIT(A) and even before us. 7.1. As regards the claim of the assessee that the distribution of gifts were made free of cost, no identity of the customers have been placed on record, either before the AO or before the ld. CIT(A) or even before us. Therefore, in the facts and circumstances, obtaining bills from parties, in the facts and circumstances, as mentioned hereinabove and payment through cheques by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case. The Ld. counsel for the assessee before the ld. CIT(A) has submitted the definition of sales promotion and the decision of the Hon ble Delhi Court in the case of T T Motors Ltd. vs. ACIT, in Income Tax appeal No.899 of 2010 decided on 24.01.2012 and requested that the said provisions of FBT are not applicable on the assessee, whereas the ld. CIT(A) has deleted the additions. Since the additions have been deleted in quantum appeal by the Ld. CIT(A), but now the quantum appeal decided by the ld. CIT(A) in favour of the assessee has been reversed by our order of even date and therefore, this order of the ld. CIT(A) will not survive. But at the same time, the ld. CIT(A) has not decided the issue on merits. Therefore, it will be in the interest of justice, if the matter is set aside to the ld. CIT(A), who will decide the issue on merits, keeping into consideration the submissions made by the assessee before the ld. CIT(A) and our order in quantum appeal in ITA No.207(Asr)/2013 of even date, but by affording adequate opportunity of being heard to the assessee. Thus, the ground of the assessee is allowed for statistical purposes. 12. In the result, the appeal of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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