DCIT, Sangrur V. M/s Satyam Home Furnishing Pvt. Ltd., Barnala

ITA 1360/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9987 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 02-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Earning of tax free income; Commercial expediency; Rule 8D
• Section: 14A; 44AB; 13; 22; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' # $ % &' , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.912/CHD/2018 / ASSESSMENT YEAR : 2012-13 THE D.C.I.T, CIRCLE, SANGRUR. M/S SATYAM HOME FURNISHING PVT. LTD., MANSA ROAD, DHAULA, BARNALA. ./ PAN NO.AABCJ8398J / APPELLANT / RESPONDENT & ./ ITA NO.1360/CHD/2018 / ASSESSMENT YEAR : 2015-16 THE D.C.I.T, CIRCLE, SANGRUR. M/S SATYAM HOME FURNISHING PRIVATE LIMITED, LITLE TEXTILE PARK, BARNALA. ./ PAN NO.AABCJ8398J / APPELLANT / RESPONDENT /ASSESSEE BY : SHRI ASHWANI KUMAR, CA ! / REVENUE BY : SHRI MANJIT SINGH, CIT.DR ' # $ /DATE OF HEARING : 08.05.2019 %&'( $ /DATE OF PRONOUNCEMENT: 23.05.2019 ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 2 /ORDER PER BENCH: THE CAPTIONED APPEALS RELATE TO THE SAME ASSESSEE AND HAVE BEEN FILED BY THE REVENUE AGAINST THE SEPA RATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (AP PEALS), PATIALA [(IN SHORT CIT(A)] U/S 250(6) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 25.4. 2018 AND 28.8.2018, AND RELATING TO ASSESSMENT YEAR 2012-13 AND 2015-16 RESPECTIVELY. IT WAS COMMON GROUND THAT THE ISSUE INVOLVED IN BO TH THE APPEALS WAS IDENTICAL. THESE WERE THEREFORE HEA RD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON CONSOLIDATED ORDER. WE SHALL FIRST BE TAKING UP THE APPEAL OF THE REVEN UE IN ITA NO.912/CHD/2018, RELATING TO ASSESSMENT YEAR 20 12-13 ITA NO.912/CHD/2018: A.Y 2012-13 2. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER : 1. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.14,11,682/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST BEARING LOAN ON ONE HAND AND HA S GIVEN INTEREST FREE ADVANCES TO VARIOUS PERSONS BY INVOKING THE PROVISIONS OF SECTION 36(L)(III) OF TH E INCOME TAX ACT,1961. ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 3 3. THE ISSUE INVOLVED IN THE ABOVE GROUND RELATES T O DISALLOWANCE OF INTEREST EXPENSES, MADE U/S 36(1)( III) OF THE ACT. 4. THE FACTS RELATING TO THE ISSUE ARE THAT THE ASS ESSING OFFICER NOTED THAT THE ASSESSEE HAD RAISED INTEREST BEARING LOANS FROM BANK AND OTHER PARTIES WHEREAS ON THE OT HER HAND IT HAD GIVEN INTEREST FREE ADVANCES. THE ASSES SEE WAS ASKED TO SHOW CAUSE AS TO WHY PROPORTIONATE DISALLO WANCE IN RESPECT OF INTEREST PAID TO BANKS AND OTHERS MAY NO T BE MADE. THE ASSESSEE CONTENDED THAT THE PARTIES REFER RED TO IN THE SHOW CAUSE NOTICE WERE ITS REGULAR CUSTOMERS AN D WHO HAD ALSO BEEN CHARGED INTEREST FOR LATE PAYMENTS. H E FURTHER AVERRED THAT THEY WERE NOT LINKED/RELATED TO THE AS SESSEE COMPANY IN ANY WAY NOR COVERED UNDER THE DEFINITION OF SISTER/ASSOCIATE CONCERN. THE ASSESSEE FURTHER AVER RED THAT THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT M/S ABHISHEK INDUSTRIES, 286 ITR 1 WAS NOT APPLICAB LE. THE ASSESSING OFFICER HOWEVER DID NOT FIND THE CONTENTI ON OF THE ASSESSEE TENABLE AND BY APPLYING THE RATIO OF ABHIS HEK INDUSTRIES (SUPRA) DISALLOWED A SUM OF RS. 14,11,68 2/- U/S 36(L)(III) AS PER WORKING GIVEN IN THE ASSESSMENT O RDER. ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 4 5. BEFORE THE LD.CIT(A) THE ASSESSEE CONTENDED THAT THE PARTIES TO WHOM PURPORTEDLY INTEREST FREE ADVANCES HAD BEEN GIVEN BY THE ASSESSEE WERE IN FACT REGULAR CUSTOMER S OF THE ASSESSEE COMPANY AND BALANCE OUTSTANDING REPRESENTE D THE DEBTORS OF THE COMPANY FROM WHOM THE COMPANY HAD EV EN CHARGED INTEREST ON ACCOUNT OF LATE PAYMENTS WHEREV ER APPLICABLE. THE LD.CIT(A) ON APPRECIATING THE CONTE NTIONS OF THE ASSESSEE DELETED THE DISALLOWANCE SO MADE HOLDI NG THAT THE AMOUNTS REPRESENTING DEBTORS BALANCE WERE CLEAR LY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND, THEREF ORE, NO DISALLOWANCE OF INTEREST WAS WARRANTED. RELIANCE WA S PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT(CENTRAL), LUDHIANA. T HE RELEVANT FINDINGS OF THE CIT(A) AT PARA 4.2 OF HIS ORDER ARE AS UNDER: 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT, FACTS OF THE CASE AND THE REASONING GIVEN BY THE AS SESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFI CER'S FINDINGS ARE ENTIRELY BASED ON HIS CONCLUSION THAT THE APPELLANT GAVE INTEREST FREE LOANS ON THE ONE HAND AND WHEREAS IT HAS RAISED INTEREST BEARING LOANS FROM T HE BANK AND OTHER PARTIES. THEREAFTER, APPLYING THE RATIO O F ABHISHEK INDUSTRIES (SUPRA) THE IMPUGNED DISALLOWANCE WAS MA DE. THE LD. AO HAS NOT EXAMINED OR ADDRESSED AT ALL THE ASPECT OF COMMERCIAL EXPEDIENCY. THE CONTENTION OF THE APPELLANT IS THAT THE PARTIES INVOLVED ARE REGULAR CUSTOMERS HAVING DEBIT BALANCES AT THE END OF THE YEAR HAS NO T BEEN QUESTIONED OR REBUTTED BY THE ASSESSING OFFICER. TH E APPELLANT HAS ALSO SUBMITTED THE COPIES OF ACCOUNT O R THESE ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 5 PARTIES BEFORE THE ASSESSING OFFICER AND PHOTOCOPY OF THE SAME WAS ALSO PRODUCED DURING THE APPELLATE PROCEED INGS. IN MY CONSIDERED VIEW THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN HERO CYCLES (P.) LTD. VS. CIT (CENTRAL), LUDHIANA IS CLEARLY APPLICABLE ON THE ST ATED FACTS OF THE CASE. THE RELEVANT PORTION OF THE DECISION READ S AS UNDER: A PERUSAL OF THE ORDER PASSED BY THE HIGH COURT WO ULD REVEAL THAT THE HIGH COURT HAS NOT AT ALL DISCUSSED THE FACTS WHICH WERE ESTABLISHED ON RECORD PERTAINING TO THE INTEREST FREE ADVANCE GIVEN TO SUBSIDIARY COMPANY AS WELL AS LOAN S GIVEN TO ITS OWN DIRECTORS AT INTEREST AT THE RATE OF 10 PER CENT. [PARA 9] ON THE OTHER HAND, THE HIGH COURT HAS SIMPLY QUOTED FROM ITS OWN JUDGMENT IN THE CASE OF CIT V. ABHISHE K INDUSTRIES LTD. [2006] 286 ITR 1/156 TAXMAN 257 (PU NI & HAR.) . ON THAT BASIS, IT HAS HELD THAT WHEN LOANS WERE T AKEN FROM THE BANKS AT WHICH INTEREST WAS PAID FOR THE P URPOSES OF BUSINESS, THE INTEREST THEREON COULD NOT BE CLAIMED AS BUSINESS EXPENDITURE. SUCH AN APPROACH IS CLEARLY FAULTY IN LAW AND CANNOT BE COUNTENANCED. [PARA 10] ONCE IT IS ESTABLISHED THAT THERE IS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) , THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-C HAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRE CTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EX PENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT AND THAT THE REVENUE AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE I AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM TH EIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. [PARA 13] IN THE INSTANT CASE, IT IS MANIFEST THAT THE ADVANC E TO SUBSIDIARY COMPANY BECAME IMPERATIVE AS A BUSINESS EXPEDIENCY IN VIEW OF THE UNDERTAKING GIVEN TO THE FINANCIAL INSTITUTIONS BY THE ASSESSEE TO THE EFFECT THAT IT WOULD PROVIDE ADDITIONAL MARGIN TO SUBSIDIARY COMPANY TO MEET THE WORKING CAPITAL FOR MEETING ANY CASH LOSES. [PARA 14] INSOFAR AS THE LOANS TO DIRECTORS WERE CONCERNED, I T COULD NOT BE DISPUTED BY THE REVENUE THAT THE ASSES SEE HAD A CREDIT BALANCE IN THE BANK ACCOUNT WHEN THE SAID AD VANCE OF RS. 34 LAKHS WAS GIVEN. REMARKABLY, AS OBSERVED BY THE ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 6 COMMISSIONER (APPEALS) IN HIS ORDER, THE COMPANY HA D RESERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AND , THEREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILISE THO SE FUNDS FORGIVING ADVANCE TO ITS DIRECTORS. [PARA 16] ON THE BASIS OF AFORESAID DISCUSSION, THE PRESENT A PPEAL IS ALLOWED, THEREBY SETTING ASIDE THE ORDER OF THE HIGH COURT AND RESTORING THAT OF THE TRIBUNAL. THUS, RESPECTFULLY RELYING ON THE JUDGMENT OF THE H ON'BLE SUPREME COURT IN THE CASE MENTIONED ABOVE, THE ADDI TION MADE BY THE ASSESSING OFFICER ON THIS COUNT IS DIRECTED TO BE DELETED. 6. BEFORE US THE LD. DR RELIED UPON THE ORDER OF TH E A.O. WHILE THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THE FACT THAT THE INTEREST FREE ADVANCES WERE IN FACT D EBTORS BALANCES, WHICH AROSE DURING THE COURSE OF BUSINESS OF THE ASSESSEE ON ACCOUNT OF SALES MADE TO THE SAID PARTI ES, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE LD.CIT(A) ,WE HOLD, HAS THEREFORE RIGHTLY HELD THAT THEM TO BE BY WAY OF COMMERCIAL EXPEDIENCE, AND THUS CALLING FOR NO DISA LLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. IN VIEW OF THE ABOVE, GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDER : ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 7 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.19,85,209/- ON ACCOUNT OF DISALLOWANCE U/S 14A O 'F THE INCOME TAX ACT, 1961. 9. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO DISALLOWANCE OF INTEREST INCURRED FOR THE PURPOSE O F EARNING EXEMPT INCOME AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. 10. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A.O. HAD OBSERVED THAT THE ASSESSEE COMPANY HAD MADE INVESTM ENT OF RS.61,94,000/-IN SHARES, THE DIVIDEND INCOME FROM W HICH, IS EXEMPT FROM TAX. AT THE SAME TIME, THE ASSESSEE HAD PAID INTEREST ON BORROWED FUNDS. THE A.O., BY RESORTING TO PROVISIONS OF SECTION 14A OF THE ACT, 1961 READ WIT H RULE 8D OF THE INCOME TAX RULES, 1962, DISALLOWED PROPORTIO NATE EXPENDITURE OF INTEREST OF RS. 19,85,209/- CLAIMED BY THE ASSESSEE. BEFORE DOING SO, THE A.O. HELD THAT THE R ATIOS OF THE CASE LAWS CITED BY THE ASSESSEE WERE NOT APPLIC ABLE IN THE CASE OF THE ASSESSEE BEING DISTINGUISHABLE ON F ACTS. THE A.O. ALSO RELIED ON CIRCULAR NO.5/2014 DATED 11.02 .2014 OF THE CBDT IN THIS REGARD. 11. BEFORE THE LD.CIT(A), THE ASSESSEE CONTENDED TH AT THE IMPUGNED INVESTMENTS HAD BEEN MADE OUT OF ITS OWN I NTEREST FREE FUNDS, BEING SHARE CAPITAL AND OTHER INTEREST FREE FUNDS, ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 8 THE DETAILS OF WHICH WERE PLACED BEFORE HIM AND THA T THE A.O. HAD NOT IDENTIFIED ANY ITEM OF EXPENDITURE WHI CH COULD HAVE BEEN INCURRED FOR EARNING OF EXEMPT INCOME AND FURTHER THAT SINCE THE ASSESSEE HAS NOT EARNED EXEMPT INCOM E DURING THE YEAR, NO DISALLOWANCE U/S 14A OF THE ACT WAS WARRANTED. THE LD.CIT(A) FOUND THAT THE ISSUE IN TH E IMPUGNED YEAR WAS IDENTICAL TO THAT IN THE PRECEDIN G YEARS IN THE CASE OF THE ASSESSEE ITSELF I.E. ASSESSMENT YEARS 2011- 12, 2013-14 AND 2014-15 WHICH HAD BEEN DECIDED IN F AVOUR OF THE ASSESSEE RELYING ON THE JUDGMENT OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT, FARID ABAD VS. LAKHANI MARKETING, 49 TAXMAN.COM 257 (P&H) FOR THE PROPOSITION THAT WHERE NO EXEMPT INCOME IS EARNED, NO DISALLOWANCE OF EXPENSE U/S 14A OF THE ACT CAN BE M ADE AND FOR THE PROPOSITION THAT FOR THE PURPOSES OF DISAL LOWANCE THE A.O. HAD TO ESTABLISH THE NEXUS BETWEEN THE INV ESTED FUNDS AND INTEREST BEARING FUNDS. FOLLOWING THE SAI D DECISION THE LD.CIT(A) DELETED THE DISALLOWANCE MAD E U/S 14A OF THE ACT HOLDING AS UNDER; I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT COMPANY, THE FACTS OF THE CASE; THE CASES LAWS RELI ED UPON BY THE APPELLANT AND THE DECISION OF MY LD PREDECESSOR ON THE SAME ISSUE. DURING THE ASSESSMENT YEAR IN APPEAL, T HE APPELLANT SUBMITTED THE SAME THREE ARGUMENTS:- ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 9 I. AO HAS NOT IDENTIFIED ANY ITEM OF EXPENDITURE WH ICH COULD HAVE BEEN INCURRED FOR EARNING OF EXEMPT INCO ME. II. THE IMPUGNED INVESTMENTS HAVE BEEN MADE OUT OF THE SHARE CAPITAL AND INTEREST-FREE FUNDS AVAILABLE WIT H IT AND NOT OUT OF INTEREST-BEARING FUNDS. THE YEAR WIS E AVAILABILITY OF FUNDS AND THE INVESTMENTS IN SHARES TOO, IS PLACED ON RECORD. III. THIRDLY, THE APPELLANT DOES NOT HAVE ANY EXEM PT INCOME DURING THE AY IN APPEAL. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE AO H AS NOT ASSAILED THE SUBMISSIONS OF THE APPELLANT ON FA CTS IN THIS AY AS WELL. IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. V CIT I N ITA NO. 687/2009 DATED 18.11.2011, WHICH HAS BEEN RELIED UP ON BY LD PREDECESSOR, AND IN VIEW OF OTHER JUDGMENTS C ITED SUPRA AND ALSO IN VIEW OF THE HON'BLE JURISDICTIONA L PUNJAB AND HARYANA HIGH COURT'S JUDGMENT IN CIT FARIDABAD VERSUS LAKHANI MARKETING (CITED SUPRA) (WHICH HOLDS THAT THE RECEIPT OF EXEMPT INCOME FOR THE CONCERNED ASSESSME NT YEAR IS A SINA-QUA-NON FOR THE INVOCATION OF SEC. 14A) AND FOR THE SAKE OF JUDICIAL DISCIPLINE AND CONSISTENCY RESPECTFULLY FOLLOWING MY PREDECESSOR I HOLD THAT THE PROVISIONS OF SEC. 1 4A OF THE IT. ACT HAVE NO APPLICABILITY IN THE CASE OF THE AP PELLANT. CONSEQUENTLY, RULE 8D CANNOT BE TRIGGERED TO COMPUT E THE QUANTUM OF DISALLOWANCE. THEREFORE, THE DISALLOWANC E MADE BY THE AO U/S 14A OF THE I.T. ACT, 1961 READ WITH RULE 8D OF THE I.T. RULES, 1962 IS DIRECTED TO BE DELETED. 12. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE A.O., WHILE THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE ORDER OF THE CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). THE FAC T THAT NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE DURING THE YEAR, IS AN UNDISPUTED FACT. IN THE LIGHT OF THE SAID FA CT, THE ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 10 ISSUE, WE FIND ,STANDS SQUARELY COVERED BY THE DECI SION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F LAKHANI MARKETING (SUPRA) WHEREIN IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME, NO DISALLOWANCE U/S 1 4A OF THE ACT IS WARRANTED. IN VIEW OF THE AFORESAID FACT AND PROPOSITION OF LAW ALONE THE DISALLOWANCE U/S 14A OF THE ACT MADE BY T HE A.O., WE HOLD, IS NOT SUSTAINABLE. THE ORDER OF THE LD.CI T(A) DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT I S, THEREFORE, UPHELD. THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 14. GROUND OF APPEAL NO.3 RAISED BY THE REVENUE REA DS AS UNDER: 3. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.64,20,139/- ON ACCOUNT OF WASTAGE/SCRAP. 15. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSMENT ORDER MADE AN ADDITION OF RS.64,29,139/- ON ACCOUNT OF ALLEGED LOW GENERATION OF WASTAGE/SCRAP AS A PERCENTAGE OF SALE. THE ASSESSEE HAD SHOWN WASTAGE OF 0.087% OF THE TOTAL SALE, WHILE AS PER THE AO THE A PPROPRIATE PERCENTAGE WAS 0.75%. THE LD.CIT(A) DELETED THE DISALLOWANCE ON FINDING THAT THE FACTS INVOLVED IN THE ISSUE ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 11 WERE IDENTICAL TO THAT IN ASSESSEES OWN CASE FOR A SSESSMENT YEARS 2011-12,2013-14 AND 2014-15 AND WHICH HAD BEE N ADJUDICATED BY HIM IN FAVOUR OF THE ASSESSEE. THE R ELEVANT FINDINGS OF THE CIT(A) AT PARA 6.2 OF HIS ORDER ARE AS UNDER: 6.2 IN THE APPELLANT'S OWN CASE FOR AY 2011-12, 20 13-14, 2014-15 ON EXACTLY THE SAME FACTS; MY LD. PREDECESS OR HAS VIDE APPEAL ORDERS NO.20/IT/CIT (A)/PTA/14-15, NO.336/IT/CU (A)/PTA15-16245 AND 10388/IT/CIT (A)/P TA /16-17 HAS DECIDED THE ISSUE IN THE APPELLANT'S FAV OUR. THE OPERATIVE PART OF THE ORDERL0388/IT/CIT (A)/PTA /16 -17 REPRODUCED AS UNDER: I HAVE CONSIDERED THE SUBMISSION MADE AS ALSO FACTS OF THE CASE AND OBSERVATION OF THE ASSESSING OFFICER IN ASSESSMENT ORDER. DURING THE ASSESSMENT PROCEEDINGS , THE APPELLANT HAS EXPLAINED TO THE ASSESSING OFFICER TH AT IT HAS DULY MAINTAINED DAY TO DAY QUANTITATIVE RECORD FOR THE GENERATION AND SALE OF VISIBLE WASTE. THE SALE OF V ISIBLE WASTE IS 0.114% OF THE TURNOVER, THE ASSESSING OFFICER CO NSIDERS IT LOW. NO SPECIFIC REASON HAS BEEN GIVEN BY THE ASSES SING OFFICER FOR HOLDING SO. THE BOOKS OF ACCOUNT ARE DU LY AUDITED U/S 44AB OF THE I. T. ACT, 1961. AS NOTED BY THE AS SESSING OFFICER IN THE ASSESSMENT ORDER 'THE REQUISITE INFORMATION/DETAILS AS CALLED FOR FROM TIME TO TIME HAVE BEEN FURNISHED WHICH ARE PLACED ON RECORDS. THE BOOKS OF ACCOUNT ALONG WITH RELEVANT DOCUMENTS WERE PRODUCED WHICH W ERE EXAMINED ON TEST CHECK BASIS'. NO DEFECT, WHATSOEVE R, HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BO OKS. FURTHER, NO RATIONALE OR THE BASIS FOR HOLDING THE WASTE GENERATION AND ITS SALE @ 0.75% OF THE TOTAL TURNOV ER HAS BEEN SPELT OUT BY THE ASSESSING OFFICER. ON CONSIDE RATION OF THE FACTS AS STATED ABOVE, I AM OF THE VIEW THAT TH E ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HEAD SALE O F WASTE IS IMPERMISSIBLE BEING SPECULATIVE AND BEREFT OF AN Y BASIS. THE SAME CANNOT BE SUPPORTED AND IS DIRECTED TO BE DELETED. FOR THE SAKE OF JUDICIAL DISCIPLINE AND CONSISTENCY , I RESPECTFULLY FOLLOW THE ORDER O MY PREDECESSOR ON THIS GROUND OF APPEAL AND THE ADDITION OF RS. 64,20,139/- ON ACCOUNT OF ALLEG ED LOW GENERATION OF WASTAGE/SCRAP IS DIRECTED TO BE DELET ED. ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 12 16. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE A.O., WHILE THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE ORDER OF THE CIT(A). THE LD. COUNSEL FOR ASSESSEE FURTHER PO INTED OUT THAT IDENTICAL ISSUE HAD BEEN DEALT WITH BY THE I.T .A.T. IN THE CASE OF ACIT VS. M/S LOTUS PROCESSOR PVT. LTD. IN ITA NO.6/CHD/2017 DATED 2.7.2018 WHEREIN THE I.T.A.T. H AD UPHELD THE ORDER OF THE CIT(A), DELETING THE IDENT ICAL ADDITION MADE ON ACCOUNT OF LOW WASTAGE GENERATED, AGREEING WITH THE FINDINGS OF THE LD.CIT(A) THAT TH E A.O. HAD MADE THE ADDITION PURELY ON ASSUMPTION AND ESTIMATI ON BASIS DESPITE THE FACT THAT THE BOOKS OF ACCOUNT WE RE DULY AUDITED AND THE A.O. HAD NOT POINTED OUT ANY DEFECT IN THE SAME AND FURTHER THERE WAS NO RATIONALE OR BASIS FO R THE A.O. TO ESTIMATE THE WASTAGE AS PERCENTAGE OF TOTAL TURNOVER. OUR ATTENTION WAS DRAWN TO THE FINDINGS OF THE I.T. A.T. AT PARA 9 OF ITS ORDER: 9. THERE IS ANOTHER GROUND TAKEN BY THE REVENUE AGITATING THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 55,11,651/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GENERATION OF WASTAGE/SCARP DURING THE MANUFACTURING PROCESS. THE ASSESSING OFFICER OBSERVED THAT IN THE LINE OF THE TRADE BUSI NESS OF THE ASSESSEE, A LOT OF WASTAGE AND SCRAP IS GENERATED, WHEREAS THE ASSESSEE HAD SHOWN HIS WASTAGE AT A VARY LAW RATE OF 0.065%. HE, THEREFORE , SHOW CAUSED THE ASSESSEE AS TO WHY GENERATION OF SCRAP/WASTAGE BE NOT TAKEN AT 0.75% OF THE TOTAL TURNOVER. THE ASSESSEE IN THIS RESPECT EXPLAINED THE PROCESS, WHICH IS CARRIED OUT IN THE BUSINESS PROCE SS ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 13 OF DYEING OF FABRICS AND SUBMITTED THAT THOUGH THE TOTAL WASTAGE OF THE SCRAP IN THE PROCESS COMES O UT TO ABOUT 6 TO 7% OF THE MATERIAL CONSUMED, HOWEVER, THE SAID WASTAGE GENERATED DURING THE PROCESS DID N OT CARRY ANY MARKETABLE VALUE. THAT DURING THE YEAR, THE VISIBLE WASTAGE WHICH HAD SOME MARKETABLE VALUE, WAS ONLY 0.305% OF THE RAW MATERIAL AGAINST WHICH THE RECEIPT OF RS. 52,135/- WAS GENERATED AND THAT THE ASSESSEE HAD DULY ACCOUNTED FOR THE SAID AMOUNT IN ITS BOOKS OF ACCOUNT. THE LD. ASSESSING OFFICER, HOWEVER, DID NOT AGREE WITH THE ABOVE CONTENTION AND ESTIMATED THE WASTAGE @ 7.5% OF THE TOTAL TURNO VER AT RS. 60,36,786/- AFTER DEDUCTING THE VALUE OF THE WASTAGE DECLARED BY THE ASSESSEE. HE MADE THE ADDITION OF RS. 55,11,651/-. 17. WE HAVE HEARD THE RIVAL CONTENTIONS. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETIN G THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF SCRAP GEN ERATED BY THE ASSESSEE. WE HAVE GONE THROUGH THE ORDER OF THE A.O. AND WE FIND THAT THERE IS NO BASIS IN THE FINDINGS OF THE A.O. THAT THE SCRAP OR WASTAGE GENERATED BY THE ASSESSEE @ 0.087% OF THE TOTAL TURNOVER WAS AT A LOWER SIDE. T HE A.O. HAD MERELY STATED THAT IN THIS TYPE OF MANUFACTURIN G OR TRADING ACTIVITY, A LOT OF WASTAGE IS GENERATED WIT HOUT GIVING ANY BASIS FOR THIS CONCLUSION. FURTHER WE FIND THAT THE A.O. HAD ESTIMATED THE NORMAL SCRAP GENERATED IN THE BUS INESS OF THE ASSESSEE AT 0.75% OF THE TOTAL TURNOVER WITHOUT ANY BASIS BY SIMPLY STATING THAT IN THE NATURE OF BUSIN ESS CARRIED OUT BY THE ASSESSEE THE SCRAP GENERATED IS 0.75% OF THE TOTAL TURNOVER. FURTHER WE FIND THAT THE ASSESS EE HAD ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 14 SUBMITTED THAT IT MAINTAINED DAY-TO-DAY QUANTITATIV E RECORDS OF GENERATION AND SALES OF VISIBLE WASTE. IN VIEW OF THE SAME, WE AGREE WITH THE LD.CIT(A) THAT THE A.O. HAD MADE ADDITION MERELY ON THE BASIS OF ESTIMATIONS AND ASSUMPTIONS. WE, THEREFORE, UPHOLD THE ORDER OF THE LD.CIT(A) IN DELETING THE ADDITION SO MADE. GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED . IN EFFECT, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1360/CHD/2018: 18. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), PATIALA HAS ERRED IN DELETING THE ADDIT ION OF RS.5,65,843/- ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOM E TAX RULES, 1962. 19. IT WAS COMMON GROUND THAT THE FACTS AND ISSUE R AISED IN THE ABOVE GROUND WERE IDENTICAL TO THAT RAISED I N GROUND NO.2 OF THE REVENUES APPEAL IN ITA NO.912/CHD/201 8 DEALT WITH BY US ABOVE. OUR DECISION RENDERED THEREIN AT PARA 7 WILL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. FO LLOWING THE SAME GROUND NO.1 RAISED BY THE REVENUE IS DISMI SSED. 20. GROUND NO.2 RAISED BY THE REVENUE READS AS UND ER: ITA NOS.912 & 1360/CHD/2018 A.YS. 2012-13 & 2015-16 15 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), PATIALA HAS ERRED IN DELETING THE AD DITION OF RS.65,32,124/- ON ACCOUNT OF WASTAGE/SCRAP ACCOUNT. 21. IT WAS COMMON GROUND THAT THE FACTS AND ISSUE R AISED IN THE ABOVE GROUND WERE IDENTICAL TO THAT RAISED I N GROUND NO.3 OF THE REVENUES APPEAL IN ITA NO.912/CHD/201 8 DEALT WITH BY US ABOVE. OUR DECISION RENDERED THEREIN AT PARA 17 WILL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. FO LLOWING THE SAME GROUND NO.2 RAISED BY THE REVENUE IS DISMI SSED. IN EFFECT, THE APPEAL OF THE REVENUE IS DISMISSED . 22. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % &' (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER ( / ACCOUNTANT MEMBER *# /DATED: 22 ND MAY, 2019 * ' * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR