The ACIT,(OSD)-I,Range-4, Ahmedabad V. M.H. Mills and Industries Ltd., Ahmedabad

ITA 224/AHD/2012

• Counselvise Citation: 22420514 RSA 2012
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER ITA S NO . 224 /AHD/ 20 12 A. Y .20 0 7 - 08 THE ACIT, (OSD) - I, RANGE - 4, AHMEDABAD. VS MH MILLS AND INDUSTRIES LTD. SARASPUR ROAD, SARASPUR, AHMEDABAD. PAN:AAACM 9900G (APPELLANT) (RESPONDENT) REVENUE BY : S HRI M.K. SINGH, SR. D.R. , ASSESSEE(S) BY : SHRI SUNIL H. TALATI , A.R. / DATE OF HEARING : 21 / 0 5 /201 5 / DATE OF PRONOUNCEMENT: 19 / 0 6 /201 5 / O R D E R PER S.S. GODARA , JUDICIAL MEMBER THIS REVENUE S APPEAL FOR A.Y. 200 7 - 0 8 , ARISE S FROM ORDER OF C IT(A) - XX DATED 30.11.2011 PASSED I N CASE NO .CIT(A)/XX/91/10 - 11 RESTRICTING ADDITION OF INCREASE IN GENERAL EXPENSES FROM RS.1,00,34,775/ - TO THAT OF RS.56,88,277/ - IN PROCEEDINGS UNDER SECTION 143(3 ) OF THE INCOME TAX ACT , 1961, IN SHORT THE ACT . 2. FAC TS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSEE MANUFACTURES AND TRADE S IN CLOTH. THE ASSESSING OFFICER IN THE ITA NO. 224 /AHD/20 1 2 MH MILLS AND INDUSTRIES LTD. FOR A.Y. 200 7 - 0 8 - 2 - COURSE OF SCRUTINY NOTICED IT TO HAVE INCREASED GENERAL EXPENDITURE FROM RS.1,84,06,611/ - IN THE PRECEDING ASSESSMENT YEAR TO RS.2,84,41,386/ - IN THE IMPUGNED ASSESSMENT YEAR. HE TREATED THE DIFFERENTIAL SUM OF RS.1,00,34,775/ - AS EXCESS EXPENDITURE AND MADE THE IMPUGNED DISALLOWANCE FOR WANT OF ASSESSEE S EXPLANATION. 3. THE CIT(A) HAS PARTLEY ACCEPTED THE ASSESSEE S CONTENTIONS AS UNDER: 4 . THE THIRD GROUND OF APPEAL IS DIRECTED AGAINST THE DI SALLOWANCE OF RS. 1,00 ,34,775/ - OUT OF GENERAL EXPENSES. THE RELEVANT PARAS OF THE WRITTEN SUBMISSIONS ARE REPRODUCED HEREUNDER : - ' THE ID. A.O. MADE THIS DISALLOWANCE ON THE GROUND THAT EXPENSES OF THE YEAR UNDER CONSIDERATION IS RS.2,84,41,386 / - AS COMPARE TO LAST YEAR OF RS.1,84,06,611 / - AND THERE BEEN INCREASE OF RS.1,00,34,775 / - AND HENCE DISALLOWED. AGAIN IT IS SUBMITTED THAT ADHOC DISALLOWANCE BASED ONLAST YEAR EXPENSES IS TOTALLY OUT OF LEGALITY, ESPECIALLY WHEN NO DEFECTS AND BOOKS OF ACCOUNTS ARE POINTED OUT AND BOOKS ARE SUBJECT TO VARIOUS AUDIT. WITH REGARDS THE INCREASE IN GENERAL EXPENSES, IT IS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION AN EXCEPTIONAL AMOUNT OF RS.1,54,55,339 / - WAS INCURRED AS PROCESSIONAL FEES OUT OF WHICH A SUM OF RS.97.60 LACS WAS PAID TO ARCIL AND RS.38.85 LACS PAID TO STRESSED ASSETS STABILIZATION (SAS - IDBI) TOWARDS FEES FOR DEBT RESTRUCTURING. YOUR APPELLANT ASSESSES IS A 122 YEAR OLD MILL AND DUE TO HUGE LOSS ES, THERE WAS A ACUTE PROBLEM OF WORKING CAPITAL AND ULTIMATELY LEADING TO OPERATIONAL INEFFICIENCIES, AND TO RESCUE, COMPLETE DEBT RESTRUCTURING WAS CONDUCTED BY ARCIL & SASF (IDBI) AND IN REGARD TO SAME THIS FEES OF RS. 96.60 LACS AND 38.85 LACS WAS PAID , WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSINESS. THE COPY OF LEDGER ACCOUNTS ENCLOSED ALONG WITH OUR APPLICATION FOR ADMITTING ADDITIONAL EVIDENCES AT VIDE EXHIBIT D AT PAGE 15 TO 16, IN SUPPORT OF THE FACT THAT EXPENSES ARE ACTUALLY INCURRED BY THE ASSES SES THOUGH ARE EXCEPTIONALLY MORE COMPARED TO EARLIER YEAR. ITA NO. 224 /AHD/20 1 2 MH MILLS AND INDUSTRIES LTD. FOR A.Y. 200 7 - 0 8 - 3 - 4.1. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE DISALLOWANCE WAS MADE ON THE GROUND THAT THERE WAS SUBSTANTIAL INCREASE IN THE EXPENDITURE COMPARED TO THE PRECEDING YEAR. APPELLANT CONTENDS IT TO BE ON ACCOUNT OF THE SUBSTANTIAL PROFESSIONAL FEES PAID DURING THE YEAR. HOWEVER, IT IS SEEN THAT NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING APPE LLATE PROCEEDINGS, VOUCHERS IN SUPPORT OF THE EXPENSES COULD BE PRODUCED BY THE APPELLANT. APPELLANT'S BOOKS OF ACCOUNTS ARE AUDITED U/S.44AB. THEREFORE, I CONSIDER IT REASONABLE TO DISALLOW 20%. OF THE TOTAL EXPENSES INCURRED UNDER THE HEAD OF RS. 2,84,41 ,386/ - , WHICH WORKS OUT TO RS. 56,88,277/ - . THUS DISALLOWANCE OF RS.56,88,277/ - IS UPHELD AND BALANCE DISALLOWANCE OF RS.43,46,498/ - IS DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE CASE FILE. THE ASSE SSING OFFICER HAS TREATED THE ENTIRE DIFFERENTIAL AMOUNT OF RS.1,00,34,775/ - AS EXCESS EXPENDITURE AS COMPARED T O PRECEDING ASSESSMENT YEAR. THE CIT(A) QUOTES ASSESSEE S FAILURE IN PRODUCING THE NECESSARY VOUCHERS FOR DISALLOWING 20% OF THE TOTAL EXPENDITUR E COMING TO RS.56,88,277/ - . THERE IS NO DISPUTE THAT THE ASSESSEE S BOOKS ARE DULY AUDITED U/S.44AB OF THE ACT. THERE IS FURTHER NO ISSUE THAT IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS PAID RESTR U CT UR ING FEES TO ARCIL TO THE TUNE OF RS.50 LACS, SIMIL AR SUM OF RS.47,60,503/ - AND IDENTICAL CHARGES TO THE IDBI BANK AS STATED HEREINABOVE. THE ASSESSEE S LEDGER ACCOUNT OF LEGAL AND PROFESSIONAL FEES FORMING PAGES 25 TO 26 OF THE PAPER BOOK DEMONSTRATE S THE SAME. CORRESPONDING ENTRIES ARE ALSO THERE IN ITS F INANCIAL STATEMENTS FORMING PART OF THE CASE RECORD. PAGE 13 THEREOF CATEGORIZES THE ENTIRE EXPENDITURE OF RS.2,84,41,386/ - AS GENERAL ITA NO. 224 /AHD/20 1 2 MH MILLS AND INDUSTRIES LTD. FOR A.Y. 200 7 - 0 8 - 4 - EXPENDITURE. IT TRANSPIRES FROM THE CASE FILE THAT ASSESSEE S PREMISES HAS BEEN SEALED BY THE LABOUR AUTHORITIES VIDE ORD ER DATED 15.10.2009 AS PER BIFR DIRECTIONS. THE REVENUE FAILS TO REBUT ALL THIS OVERWHELMING FACTUAL EVIDENCE. IN THESE CIRCUMSTANCES , WE OBSERVE THAT THE CIT(A) HAS PROCEEDED TO DISALLOW 20% OF THE GROSS EXPENDITURE AMOUNT INSTEAD OF THE IMPUGNED DISALLOW ANCE ONLY BY TAKING INTO CONSIDERATION THE ABOVESAID PECULIAR FACTS OF THE CASE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS ACCORDINGLY. 5. THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE JUNE , 201 5 AT AHMEDABAD . S D/ - SD/ - ( G.D. AGRAWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 19 / 06 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CI T(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDAB AD