TEKFAB ENGINEERS, MUMBAI V. DCIT, CIRCLE 3, , THANE

ITA 2131/MUM/2023

AI Insights

M/s. Tekfab Engineers appealed against the order of the National Faceless Appeal Centre (NFAC), which confirmed the addition of liquidated damages amounting to Rs.14,94,626 to the assessee's income for the assessment year 2013-14. The primary contention was that the liquidated damages were incorrectly added as the assessee provided sufficient details to substantiate their claim. The Assessing Officer (AO) initially disallowed the claim due to lack of clarity on the year of sales affected and the reasons for the delay in delivery of materials. The Tribunal found that the AO did not adequately examine the details provided by the assessee, including the purchase orders which contained clauses on liquidated damages. Consequently, the Tribunal remanded the case back to the AO for a detailed examination of these documents and a fair decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299164 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 08-06-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND Ms. PADMAVATHY. S, ACCOUNTANT MEMBER ITA No.2131/Mum/2023 Assessment Year: 2013-14 M/s.Tekfab Engineers, D-6/16, Road No.34, Wagle Industrial Estate, Mumbai-400 604. Maharashtra. v. The DCIT, Circle-3, Thane. [PAN: AABFT 6966 H] (Appellant) (Respondent) Appellant by : Shri Sanjiv Brahme, CA & Shri Jayant Bhatt, CA Respondent by : Shri P.D.Chougule, Sr.AR Date of Hearing : 26.09.2023 Date of Pronouncement : 27.09.2023 O R D E R PER KULDIP SINGH, JM: The appellant, M/s.Tekfab Engineers, (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 20.04.2023 passed by National Faceless Appeal Centre (NFAC) [Commissioner of Income Tax (Appeals), Delhi], qua the assessment year 2013-14 on the ground, inter alia that - (i) The CIT Appeal of National Faceless Appeal Centre has erred in confirming the order of DCIT. (ii) The CIT Appeal National Faceless Appeal Centre has erred in confirming the addition of liquidated damages (LD) of Rs.14,94,626/- as debited in Profit & Loss A/c for the year under appeal. ITA No.2131/Mum/2023 :: 2 :: (iii) The CIT Appeal National Faceless Appeal Centre has erred in confirming the initiation of Penalty Proceedings u/s.271(l)(c) when there was neither concealment nor furnishing of inaccurate particulars. (iv) The Appellant craves leave to add, alter, amend, and modify aforesaid ground/s of Appeal at or any time before the hearing as they may be advised from time to time. 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: the assessee’s firm is an engineering industry manufacturing engineering goods having facilities for fabrication using welding and gas cutting. Assessee’s firm’s clients are Apollo Tyres, Balakrishna Industries, MRF Tyres, etc. During the scrutiny proceedings, the AO noticed that the assessee has claimed liquidated damages of Rs.14,94,626/- during the year under consideration. For which, the assessee was called upon to furnish the details. Assessee filed details. Declining the contention raised by the assessee, the AO proceeded to hold that from the perusal of the assessee’s reply, it has come on record that there is no clarity in regard to the year in which sales were affected. Then, assessee submitted further details. The AO by disagreeing with the submissions made by the assessee proceeded to hold that the assessee has not furnished the reasons for delay in delivery of materials to prove whether the delay was due to the fault of the assessee or it was on account of fault of its clients. So, the AO after disallowing the claim of the assessee for liquidated damages made addition thereof to the total income of the assessee, and thereby, framed the assessment u/s.143(3) of the Act. 3. The assessee carried the matter before the Ld.CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling ITA No.2131/Mum/2023 :: 3 :: aggrieved with the impugned order of the ld.CIT(A), the assessee has come up before the Tribunal by way of filing present appeal. 4. We have heard the Ld. Authorized Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 5. Undisputedly, assessee being an engineering industry manufacturing goods is catering to Apollo Tyres and Balakrishna Industries, MRF Tyres, etc. It is also not in dispute that during the year under consideration, assessee’s turnover was Rs.44.17 Crs. on which, assessee has shown gross profit of Rs.34.20 lakhs @ 14.61% as against corresponding gross profit of the previous year of @14.58 % on turnover of Rs.45.33 Crs. 6. In the back drop of the aforesaid undisputed fact when we examined the claim of the assessee to the tune of Rs.14,94,626/- on account of liquidated damages, both the AO as well as the ld.CIT(A), decided the issue against the assessee on the ground that there is no clarity to determine the liquidated damages as to in which year sales were affected. Then, assessee filed the details before the AO as under: ITA No.2131/Mum/2023 :: 4 :: 7. Even after furnishing these details, the AO proceeded to decide the issue against the assessee on the ground that liquidated damages is allowable only in the year in which the damages are deducted by the clients. The assessee has not produced any documentary evidence to prove that the delay in delivery of materials is caused due to reasons attributed to the assessee only. 8. The ld.AR for the assessee stated that from Purchase Order placed by the different parties with the assessee, the details sought for by the AO is decipherable and drew our attention towards the Purchase Order filed by the different parties regarding year under consideration available from Page Nos.1- 21. However, in the Purchase Order, Annexure-1 is annexed in which clause as to liquidated damages has been agreed upon between the parties to the contract. From the Purchase Order, the AO could have easily decided the issue as to which of the year liquidated damages are pertaining to and it can also be worked out as to whether the delay was attributed to the assessee or to the parties on the other hand. However, all these facts are required to be examined and verified by the AO to reach the logical conclusion. Under these circumstances, we are of the considered view that for factual examination and verification, the issue is required to be re-examined by the AO after providing opportunity of being heard to the assessee. 9. In view of what has been discussed above, impugned order passed by the ld.CIT(A) is set aside and case is remanded back to the AO to decide afresh in light of observation made hereinabove by examining the fresh evidence, necessary to decide the issue in controversy by providing opportunity of being heard to the assessee. ITA No.2131/Mum/2023 :: 5 :: 10. Resultantly, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on the 27 th of September, 2023, in Mumbai. Sd/- (PADMAVATHY. S) ACCOUNTANT MEMBER Sd/- (KULDIP SINGH) JUDICIAL MEMBER Mumbai, Dated: 27 th September, 2023. TLN, Sr.PS (on Tour) Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The DR, ITAT, Mumbai 5. Guard File // True Copy // By Order Dy./Asst. Registrar, ITAT, Mumbai