Shivangi Exports Pvt.Ltd., Baroda V. The ACIT,Circle-4, Baroda

ITA 2457/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9858 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 18-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: M K PATEL
• Keywords: Corroborative evidences
• Section: 144

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2457/AHD/2015 [ASSTT/YEAR 2004-2005] SHIVANGI EXPORTS P. LTD. 57/D, MAHESHWARI SOCIETY GORI ROAD, BARODA 390 007. PAN : AACCS 9775 P VS ACIT, CIR.4 BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SHRI VILAS V. SHINDE, DR ! / DATE OF HEARING : 02/12/2015 '#$ ! / DATE OF PRONOUNCEMENT: 13/01/2016 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-2 DATED 20.5.2015 PASSED FOR THE ASSTT.YE AR 2004-05. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT. 3. THIS APPEAL WAS HEARD ALONG QUANTUM APPEAL OF TH E ASSESSEE I.E. ITA NO.1334/AHD/2012. THE QUANTUM APPEAL OF THE AS SESSEE HAS BEEN DISPOSED OF BY THE TRIBUNAL VIDE ORDER DATED 10.12. 2015. THE FACTS ITA NO.2457/AHD/2015 2 LEADING TO THE ADDITIONS HAVE BEEN NARRATED IN DETA IL IN THIS ORDER. THE ORDER OF THE TRIBUNAL READS AS UNDER: 2. THE ASSESSEE HAS TAKEN THREE GROUNDS OF APPEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE, WHEREBY, IT HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.22,55,435/- WHICH IS 50% OF THE INDIRECT EXPENSES INCURRED IN CASH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 1.11.2004 DECLARING A LOSS OF R S.56,80,981/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERV ED UPON THE ASSESSEE. THE AO HAS PASSED EX PARTE ASSESSMENT OR DER UNDER SECTION 144 OF THE INCOME TAX AT. THE LD.AO HAS NO TICED THAT THE ASSESSEE-COMPANY HAS DEBITED EXPENSES OF RS.95,30,3 47/- AS INDIRECT EXPENSES TO THE P&L ACCOUNT. HE NOTED THE DETAILS OF THE EXPENDITURE IN PARAGRAPH-5 OF THE ASSESSMENT ORDER. THE NATURE OF THE EXPENSES ARE ELECTRICITY CHARGES, FACTORY MA INTENANCE, FACTORY DIESEL AND KEROSENE EXPENSES, MACHINERY MAI NTENANCE ETC. THE LD.AO RECORDED AN FINDING THAT IN SCHEDUL E-L, THE ASSESSEE HAS DEBITED INDIRECT EXPENSES OF RS.73,49, 750/-. THEREFORE, HE DIRECTED THE ASSESSEE TO SUBMIT SUPPO RTING DETAILS WITH REGARD TO THESE EXPENDITURES. SINCE THE ASSES SEE FAILED TO SUBMIT THE DETAILS, HE MADE DISALLOWANCE AT 50% OF THE EXPENDITURES AND MADE ADDITION OF RS.36,74,875/-. 4. ON APPEAL, THE LD.CIT(A) HAS RESTRICTED THIS DIS ALLOWANCE TO RS.22,55,435/-. THIS IS THE 50% OF THE EXPENDITURE WHICH WERE INCURRED IN CASH. 5. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT IS PERTINENT TO NOTE THAT THAT SECTION 144 WOULD SUGGEST THAT IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE HIS DISCR ETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. WE ARE CONSCIOUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN PROPOUNDED THAT IN MAKI NG A BEST JUDGMENT ASSESSMENT, THE ASSESSING OFFICER MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUS T MAKE, WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMATE OF THE PROPE R FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO CONSIDERATION, LOCAL KNOWLEDGE, REPUTATION OF THE A SSESSEE ABOUT HIS BUSINESS, THE PREVIOUS HISTORY OF THE ASSESSEE OR THE SIMILARLY ITA NO.2457/AHD/2015 3 SITUATED ASSESSEE. IT IS ALSO PERTINENT TO MENTION THAT JUDGMENT IS A FACULTY TO DECIDE MATTER WITH WISDOM, TRULY AND L EGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY, CAPRIC E OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPL ES OF JUSTICE. THUS, IN A BEST JUDGMENT, EVEN IF, THERE IS AN ELEM ENT OF GUESS WORK, IT SHOULD NOT BE A WILD ONE, BUT SHALL HAVE R EASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. 6. IN THE LIGHT OF THE ABOVE DISCUSSION, IF WE EXAM INE THE IMPUGNED ORDERS, THEN IT WOULD REVEAL THAT EXPENSE DISALLOWED AT 50% IS ON THE HIGHER SIDE. ADMITTEDLY THE ASSESSEE WAS NOT IN A POSITION TO PRODUCE SUPPORTING EVIDENCE, THEN AD HO C DISALLOWANCE ON ACCOUNT OF SUCH FAILURE OUGHT NOT TO BE MADE MOR E THAN 20% OF THE EXPENSES. TAKING INTO CONSIDERATION ALL THE SE ASPECTS, WE CONFIRM THE DISALLOWANCE TO 20% OF THE EXPENDITURE SHOWN IN SCHEDULE L. IN OTHER WORDS, THE DISALLOWANCE WOU LD BE 20% OF RS.73,49,750/-. THESE FIGURES WERE CONSIDERED BY T HE LD.AO WHILE MAKING THE ADDITION AT RS.36,74,875/- BEING 50%. N OW THE DISALLOWANCE WILL BE RS.14,69,950/- I.E. (RS.73,49, 750 X 20%) 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 4. PENALTY HAS BEEN IMPOSED UPON THE ASSESSEE ON TH IS ADHOC DISALLOWANCE OF THE EXPENDITURE. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. NO DOUBT THE ASSESSE E HAS DECLARED A LOSS IN ITS RETURN OF INCOME. THAT LOSS HAS BEEN REDUCE D TO SOME EXTENT ON ACCOUNT OF ADDITIONS MADE BY THE AO OUT OF INDIRECT EXPENDITURE AND BAD DEBT WRITTEN OFF. THUS, ON THE REDUCED LOSS, T HE ASSESSEE CAN BE VISITED WITH PENALTY UNDER EXPLANATION -4 R.W. SECTION 271(1)(C) IN OUR OPINION, DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSE S HAVE BEEN MADE ON AN ESTIMATE BASIS, BECAUSE, THE ASSESSEE FAILED TO SUBSTANTIATE THIS CLAIM WITH SUPPORTING EVIDENCE. THE AO HAS MADE DI SALLOWANCE AT 50% OF THE TOTAL EXPENDITURE DEBITED BY THE ASSESSEE. THE LD.FIRST APPELLATE AUTHORITY FURTHER REDUCED THE DISALLOWANCE TO RS.22 ,55,435/- OUT OF RS.36,74,875/-. THE DISALLOWANCE HAS BEEN CONFIRM ED FROM THE EXPENDITURE WHICH WAS INCURRED IN CASH. THE TRIBUN AL HAS FURTHER ITA NO.2457/AHD/2015 4 REDUCED THE DISALLOWANCE AND CONFIRMED THE DISALLOW ANCE AT 20% OF THE TOTAL EXPENDITURE, MEANING THEREBY, THERE IS A SUBS TANTIAL CHANGE IN QUANTIFICATION OF THE DISALLOWANCE, WHICH INDICATE THAT IT IS ADHOC DISALLOWANCE. UNDER SUCH CIRCUMSTANCES, THE ASSESS EE DOES NOT DESERVE TO BE VISITED PENALTY. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE IMPUGNED PENALTY IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 13 TH JANUARY, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER