DCIT, CHENNAI V. M/s. Metal & Scrap Traders Pvt. Ltd., CHENNAI

ITA 2935/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4120 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: V RA VICHANDRAN
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ... , , $ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 2935/MDS/2016 / ASSESSMENT YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(1), CHENNAI. VS. M/S. METAL & SCRAP TRADERS PVT. LTD., NO. A-4, SIDCO INDUSTRIAL ESTATE, KODUNGAIYUR, CHENNAI 600 118. [PAN: AACCM 0313K] ( / APPELLANT) ( / RESPONDENT) & ' / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT *+& ' / RESPONDENT BY : SHRI V. RAVI CHANDRAN, CA ' /DATE OF HEARING : 27.06.2017 ' /DATE OF PRONOUNCEMENT : 11.07.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI IN ITA NO. 28/2015-16 DATED 11.08.2016. :-2-: I.T.A. N0. 2935/MDS/2016 2. METAL & SCRAP TRADERS PVT. LTD, THE ASSESSEE, IS CARRYING ON THE BUSINESS OF TRADING IN ALL KINDS OF FERROUS SCRAP. IN THE ASSESSMENT MADE FOR THE ASSESSMENT YEAR 2012-13, THE ASSESSING OFFICER FOUND THAT CERTAIN EXPENDITURE VIZ., REPAIRS AND MAINTENANCE, FREIGHT INWARD, DISCOUNT AND OTHER EXPENSES WERE VERY HIGH WHEN COMPARED WITH SALES AD MITTED DURING THE YEAR VIS-A-VIS THE EARLIER YEARS. CONSIDERING THE BUSIN ESS , NATURE OF EXPENSES AND THE INCREASE IN TURNOVER, HE DISALLOWED 50% OF SUCH EXPENSES AT RS. 32.07 LAKHS. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEF ORE THE CIT (A)-8, CHENNAI. THE CIT(A) HELD THE ADDITION TO THE ADMITTED INCOME CANNOT BE MADE ON ESTIMATE BASIS, BASED ON ASSUMPTIONS AND PRESUMPTIO NS ESPECIALLY IN A CASE WHERE REGULAR BOOKS OF ACCOUNTS HAVE BEEN MAINTAINE D, WHICH WERE AUDITED IN ACCORDANCE WITH LAW. THE ASSESSING OFFICERS VI EW THAT THE EXPENDITURE INCURRED SHOULD BE IN PROPORTION TO THE SALES TURNO VER HAS NO BASIS IN THE ABSENCE OF REQUISITE EVIDENCE AND HENCE, THE CIT (A ) DID NOT SUSTAIN THE DISALLOWANCE MADE BY THE AO. 3. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH TH E FOLLOWING GROUNDS: 2.1 THE CIT(A) ERRED IN NOT APPRECIATING THE FIND INGS OF THE AO THAT AS COMPARED WITH THE EXPENDITURE CLAIMED IN TH E PRECEDING ASSESSMENT YEAR, THE EXPENSES WITH REGARD TO REPAIR S & MAINTENANCE, FREIGHT INWARD, DISCOUNT AND OTHER EXPENSES ARE ON THE HIGHER SIDE AND THEREFORE 50% OF THE EXPENSES CLAIMED WERE DISALLOW ED BY THE AO. 2.2 THE CIT(A) FAILED TO TAKE NOT THAT IT IS SETTLE D LAW THAT ENTRY OR ABSENCE THEREOF IN BOOKS OF ACCOUNT IS NOT CONCL USIVE EITHER FOR :-3-: I.T.A. N0. 2935/MDS/2016 TREATING THE AMOUNT AS INCOME OR ALLOWABILITY OR OT HERWISE OF THE EXPENDITURE. THUS, ONLY ON THE BASIS OF ENTRY IN T HE BOOKS OF ACCOUNT THE CLAIM OF EXPENDITURE IS NOT ALLOWABLE AND HENCE THE CIT(A) ERRED IN HOLDING THAT ADDITIONS TO ADMITTED INCOME CANNOT BE MADE ON ESTIMATE BASIS BASED ON ASSUMPTIONS ESPECIALLY IN A CASE WHE RE REGULAR BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. 2.3 HAVING REGARD TO THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF EMPEE DISTILLERIES LTD VS. ACIT (2010) 324 ITR 82 (MAD) WHEREIN DISALLOWANCE @10% ON THE EXCESS CLAIM ON PU RCHASE PRICE HAS BEEN UPHELD, THE CIT(A) OUGHT TO HAVE UPHELD THE IM PUGNED DISALLOWANCE ON THE CLAIM ON EXPENSES MADE BY THE A O. 4. THE DR PRESENTED THE CASE ON THE LINES OF THE AS SESSING OFFICER AND ON THE GROUNDS OF THE APPEAL. PER CONTRA, THE AR SUBM ITTED A RATIO ANALYSIS OF ON CERTAIN ASPECTS , THE RELEVANT PORTION IS EXTRACTED AS UNDER: AY 2011-12 AY 2012-13 SALES 1,056,623,207 1,435,684,652 GROSS PROFIT% 8.73% 9.14% NET PROFIT % 0.95% 1.13% OTHER EXPENSES % 5.12% 4.61% AND SUBMITTED THAT DURING THE ASSESSMENT YEAR, THE GP HAS INCREASED, THE NET PROFIT HAS INCREASED. HOWEVER, OTHER EXPENSES HAS FALLEN FROM 5.12% TO 4.61%. INSPITE OF IT, THE AO PICKED UP CERTAIN ITE MS WHICH ARE GROUPED UNDER OTHER EXPENSES AND DISALLOWED. THE AR FURTHER SOUGH T OUR ATTENTION TO PARA 2 OF THE ASSESSMENT ORDER WHICH IS EXTRACTED AS UNDER : :-4-: I.T.A. N0. 2935/MDS/2016 2. IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE S AUTHORIZED REPRESENTATIVE SHRI. RAJA RAM MORE, FCA APPEARED AN D PRODUCED REPLY TO THE QUESTIONNAIRE THE DETAILS OF AIR, BOOKS OF A CCOUNT, REPLY TO QUESTIONNAIRE, RETURN OF INCOME FOR AY 2012-13 AND 2011-12, FINANCIALS, ANNUAL AUDITOR AND TAX AUDIT REPORTS, CREDITORS & D EBTORS DETAILS, COPY OF DIRECTORS RETURNS, TDS DEDUCTED AND PAID CHALLAN S, 26AS, INVOICE BILLS FOR ADDITION TO FIXED ASSETS, 43B PAYMENTS, SECURED AND UNSECURED LOAN CREDITORS CONFIRMATION, SECURITY CHARGES, STATUTORY PAYABLES, IMMOVABLE PROPERTIES DETAILS WITH COPY OF PURCHASE DEED, TDS CHART FOR TDS DEDUCTED, DETAILS OF CLOSING STOCK, BRS AND OTHER N ECESSARY DETAILS THAT WERE CALLED FOR ON VARIOUS DATES AND THE SAME WERE PERUSED. THE ASSESSEES AUTHORIZED REPRESENTATIVE WAS HEARD FROM TIME TO TIME. AND SUBMITTED THAT THE ASSESSING OFFICER HAVING VER IFIED EACH AND EVERY ITEM MENTIONED ABOVE COULD NOT FIND ANY FAULT WITH ANY O F THEM. HOWEVER, HE HAS CHOSEN TO CHERRY-PICK THE IMPUGNED ITEMS AND DISALL OWED THEM ARBITRARILY ON ASSUMPTIONS AND PRESUMPTIONS. THEREAFTER, HE SUPPO RTED THE DECISION OF THE CIT (A). 5. WE HEARD THE RIVAL CONTENTIONS AND FIND MERITS I N THE SUBMISSIONS OF THE AR. THE ASSESSING OFFICER HAVING EXAMINED EACH AND EVERY ITEM MENTIONED IN HIS ORDER, CANNOT DISALLOW CERTAIN ITEMS MERELY ON SUSPICION AS POINTED OUT BY THE AR, THAT TOO WHEN THE GP AND NP HAS GONE UP AND OTHER EXPENSES HAS GONE DOWN. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. THE CS IT(A) OBSERVATION THAT THE ASSESSING OFFICERS VIEW THAT THE EXPENDITURE INCURRED SHOULD BE IN PRO PORTION TO THE SALES :-5-: I.T.A. N0. 2935/MDS/2016 TURNOVER HAS NO BASIS IN THE ABSENCE OF REQUISITE E VIDENCE IS JUSTIFIED AND HENCE, THE ORDER OF THE CIT (A) DOES NOT REQUIRE AN Y INTERFERENCE. THE REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON TUESDAY, THE 11 TH DAY OF JULY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 11 TH JULY, 2017 JPV ' *23 43 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 * /DR 6. 8 /GF