The ACIT, Circle-12, Ahmedabad V. M/s. Ambica Foundary, Ahmedabad

ITA 2415/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89638 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: M K PATEL

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO.2415/AHD/2010 / ASSESSMENT YEAR: 2007-2008 ACIT, CIR.12 AHMEDABAD. VS M/S.AMBICA FOUNDARY 101, JAY KHODIYAR ESTATES RAMOL ROAD, NR.SINDHWAI TEMPLE CTM, AMRAIWADI, AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI DINESH SINGH, SR.DR ASSESSEE(S) BY : SHRI M.K. PATEL / DATE OF HEARING : 15/06/2015 / DATE OF PRONOUNCEMENT: 19/06/2015 $%/ O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A )-XX, AHMEDABAD DATED 14.5.2010. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I S THAT THE CIT(A) ERRED IN DELETING ADDITION OF RS.1,12,36,305 /- MADE BY THE AO ON ACCOUNT OF UNPROVED AND UNVERIFIABLE EXPENSES , WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND MAT ERIAL BROUGHT ON RECORD BY THE AO. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF C. I. CASTING, ITA NO.2415/AHD/2010 2 MOULDING PARTS AND JOB WORK. THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION HAD SHOWN SALES OF RS.3,76,70,648/- A ND HAS DECLARED GROSS PROFIT OF RS.25,75,650/- AND NET PRO FIT OF RS.8,28,918/-. THE AO, FROM THE BALANCE SHEET OF T HE ASSESSEE FOUND THAT THE ASSESSEE HAS MADE PROVISION FOR UNPA ID EXPENSES. THE AO OBSERVED THAT DUE TO THIS PROVISION, THE INC OME OF THE ASSESSEE WAS REDUCED. ACCORDING TO THE AO, ALMOST ENTIRE EXPENDITURE DEBITED TO THE TRADING AND PROFIT & LOS S ACCOUNT IS APPEARING AS OUTSTANDING EXPENSES IN THE BALANCE SH EET. THEREFORE, HE HELD THAT ONLY EXPENSES SHOWN FOR ELE CTRIC POWER, ESIC, FBT, TELEPHONE, SALES TAX, TDS AND TAX ON CONT RACTOR WERE REASONABLE, AND THEREFORE, HE MADE DISALLOWANCE OF RS.1,12,36,305/- OUT OF TOTAL EXPENSES SHOWN IN THE BALANCE SHEET AS OUTSTANDING PAYMENT. 4. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE B Y OBSERVING THAT THE EXPENSES IN QUESTION, PART OF WHICH REMAIN ED UNPAID AND APPEARING IN THE BALANCE SHEET AS PROVISION RELATE TO THE BUSINESS OF THE ASSESSEE AND LIABILITY ON ACCOUNT OF SUCH EX PENDITURE HAD ACCRUED AND ARISEN DURING THE YEAR UNDER APPEAL, AN D THE EXPENDITURE BEING GENUINE AND NOT OF CAPITAL IN NAT URE ARE FULLY ALLOWABLE. THEREFORE, DISALLOWANCE MADE BY THE AO CANNOT BE SUSTAINED. 5. BEING AGGRIEVED BY THIS ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. DR RELIED ON THE ORDER OF THE AO, WHEREAS, THE A R OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND SUBM ITTED THAT THE ITA NO.2415/AHD/2010 3 EXPENSES WHICH WERE SHOWN AS OUTSTANDING AND PAYABL E HAS BEEN PAID IN THE SUBSEQUENT YEAR BY THE ASSESSEE. 7. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT IN THE INSTANT CASE, THE AO FOUND THAT THE ASSESSEE HAS SHOWN LIABILITY FOR THE EXPENDITURE IN THE BALANCE SHEET AT RS.1,13,02,141/-. ACCORDING TO THE AO, TH ESE LIABILITIES ARE SHOWN TO REDUCE THE PROFIT BY THE ASSESSEE. HE , THEREFORE HELD THAT ONLY THE LIABILITY ON ACCOUNT OF ELECTRIC POWER, ESIC, FBT, TELEPHONE, SALES TAX, TDS AND TAX ON CONTRACTOR WER E REASONABLE, AND THEREFORE, DISALLOWED OF THE BALANCE AMOUNT OF RS.1,12,36,305/- BY HOLDING IT TO BE UNPROVED, UN-G ENUINE AND BOGUS SHAM EXPENDITURE. 8. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE B Y HOLDING THAT THE LIABILITY SHOWN FOR THE EXPENSES IN THE BA LANCE SHEET WAS RELATED TO THE BUSINESS OF THE ASSESSEE, AND THE LI ABILITY ON ACCOUNT OF SUCH EXPENSES HAD ACCRUED AND ARISEN DUR ING THE YEAR UNDER APPEAL, AND THE EXPENSE WERE GENUINE, AND NOT OF CAPITAL IN NATURE, AND THEREFORE, FULLY ALLOWABLE. NO MATERIA L HAS BEEN BROUGHT ON RECORD BY THE DR TO CONTROVERT THE FINDI NGS OF THE CIT(A). NO MATERIAL HAS ALSO BEEN BROUGHT ON RECOR D BY THE DR TO SHOW THAT THE LIABILITY SHOWN BY THE ASSESSEE IN TH E BALANCE SHEET IS BOGUS. SIMPLY BECAUSE OUTSTANDING LIABILITY AT THE END OF THE YEAR IS COMPARATIVELY HIGHER, CONSIDERING THE AMOUN T OF EXPENDITURE INCURRED DURING THE YEAR, DOES NOT EMPO WER THE AO TO DISALLOW THE ACTUAL OUTSTANDING LIABILITY UNLESS IT IS FOUND THAT THE LIABILITY SHOWN WAS NOT GENUINE. IN THE ABSENCE OF ANY SUCH MATERIAL BEING BROUGHT ON RECORD, WE FIND NO GOOD A ND JUSTIFIABLE ITA NO.2415/AHD/2010 4 REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), W HICH IS HEREBY CONFIRMED, AND THE GROUND OF THE APPEAL OF THE REVE NUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 19 TH JUNE, 2015 AT AHMEDABAD. SD/- SD/- (S.S. GODARA) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 19 /06/2015 $% & ''() *$)' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A)-III 5. $%& '' , / DR, ITAT, 6. &)* + / GUARD FILE. $% + / BY ORDER, ,/ - ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD