The ACIT, 5(1), Indore V. M/s Agrawal Coal Corporaton Pvt. Ltd., Indore

ITA 368/IND/2010

• Counselvise Citation: 36822714 RSA 2010
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.368/IND/2010 A.Y. 2007-08 ACIT-5(1), INDORE APPELLANT VS M/S. AGRAWAL COAL CORPORATION PVT. LTD., AGRAWAL HOUSE, 5, YESHWANT COLONY, INDORE PAN- AACCA 8468 K RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR MITRA, SR. DR RESPONDENT BY : SHRI AJAY TULSIYAN, CA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 15.3.2010 ON THE GROUND TH AT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .14,00,000/- OUT OF THE TOTAL ADDITION OF RS.36,30,503/- MADE BY THE 2 ASSESSING OFFICER ON ACCOUNT OF COLLIERY AND GODOWN EXPENSES. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I PRADEEP KUAMR MITRA, LD. SR. DR FOR THE REVENUE AND SHRI AJAY TULSIYAN, LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT DURING ASSESSMENT PROCEEDINGS, IT WAS OBSERVED FROM THE P & L ACCOUNT THAT CERTAIN EXPENSES INCREASED DISPROPORTIONATELY AS CO MPARED TO SALES, FOR WHICH, OUR ATTENTION WAS INVITED TO PARA 9.1 OF THE ASSESSMENT ORDER BY FURTHER SUBMITTING THAT THERE W AS INCREASE OF EXPENSES UPTO 170%. SOME OF THE EXPENSES WERE AR GUED TO BE NON-VERIFIABLE OF CERTAIN PARTIES OR THE PERSONS TO WHOM THE ASSESSEE MADE PAYMENTS OF THE COLLIERY AND GODOWN EXPENSES, THEREFORE, THE DISALLOWANCE, SO MADE, WAS ARGUED TO BE JUSTIFIED. ON THE OTHER HAND, THE LD. COUNSEL FO R THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY SU BMITTING THAT THE REASON OF INCREASE IN THE EXPENSES WAS DUL Y EXPLAINED BY THE ASSESSEE FOR WHICH OUR ATTENTION WAS INVITED TO PAGE 5 PARA 4.2 OF THE ORDER OF THE LD. CIT(A). 3 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSES SEE DECLARED TOTAL INCOME OF RS.7,33,43,580/- IN ITS RETURN FILE D ON 29.10.2007. NOTICES WERE ISSUED TO THE ASSESSEE ALO NG WITH QUESTIONNAIRE TO WHICH THE ASSESSEE PRODUCED THE BO OKS OF ACCOUNTS I.E. CASH BOOK AND LEDGER AND THE SAME WER E EXAMINED ON TEST-CHECK BASIS. THE SOLE GROUND IN TH E APPEAL PERTAINS TO DISALLOWANCE OF RS.14 LACS MADE OUT OF COLLIERY AND GODOWN EXPENSES OF RS.36,30,503/-. THE EXPLANATION FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS, IS AVAI LABLE AT PAGES 22 & 23 OF THE PAPER BOOK, WHEREIN, IT WAS CL AIMED THAT THERE WERE NEW TYPES OF PROCUREMENT SOURCES OF COAL DEVELOPED DURING THE YEAR AND THE ASSESSEE COMPANY CONCENTRATED ON PROCUREMENT OF INDIAN COAL. THE ASS ESSEE ALSO CLAIMED TO HAVE STARTED SCREENING PLANT AT MAGDALLA (SURAT) AND DUE TO THESE PECULIAR FACTS IN THE IMPUGNED YEAR, T HE COLLIERY AND GODOWN EXPENSES WERE NOT COMPARABLE. WE HAVE AL SO PERUSED THE OBSERVATIONS MADE BY THE LD. ASSESSING OFFICER AS 4 CONTAINED IN PARA 9 OF THE ASSESSMENT ORDER WHEREIN THERE ARE GENERAL REMARKS AND NO DEFECTS WITH REFERENCE TO SP ECIFIC VOUCHERS WERE POINTED OUT AND THE COMPARISON OF EXP ENSES HAS BEEN MADE WITH REFERENCE TO SALES. HOWEVER, ON APPEAL, THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE AS SESSEE, WHICH ARE AVAILABLE AT PAGES 27 TO 29 OF THE PAPER BOOK AND CONCLUDED AS UNDER: 4.2 COMING TO THE NEXT ISSUE OF DISALLOWANCE OF COLLIERY AND GODOWN EXPENSES AT RS.14 LAKHS, THE APPELLANT IN DETAILED WRITTEN SUBMISSIONS FILED WHICH WERE ALSO SUBMITTED BEFORE ASSESSING OFFICER HAS EMPHASIZED THAT INCREASE IN COLLIERY EXPENDITURE WAS FOR THE REASON THAT THE APPELLANT COMPANY STARTED PROCURING INDIAN COAL FROM SOUTH EASTERN COAL LTD. (SECL) AND MAHANADI COAL LTD. (MCL) WHICH WAS NOT FREE FROM STONES ETC, AND HENCE WORKERS HAD TO BE PAID FOR PICKING STONES ETC., AND MAJOR PORTION OF SUCH EXPENSES WERE ATTRIBUTABLE TO ROURKELA BRANCH. SIMILARLY, IT HAS BEEN EXPLAINED THAT THE MAIN REASON FOR INCREASE IN GODOWN EXPENSES WAS THAT A NEW COAL DEPOT WAS HIRED AT SURAT WHICH HAD TO BE DEVELOPED FOR LOADING AND UNLOADING FUNCTIONS TO BE SMOOTHLY PERFORMED, WHICH NECESSITATED CONSTRUCTION OF TEMPORARY ROAD, FENCING AND EVEN ARRANGEMENT FOR LIGHTING AND SECURITY. IT IS FURTHER EMPHASIZED THAT THE APPELLANT STARTED SCREENING PLANT AT NAGDALA, SURAT 5 WHICH RESULTED IN INCREASED OF SUCH EXPENSES AND SUCH FACT HAVE BEEN IGNORED BY THE ASSESSING OFFICER AND HE HAS MADE SUCH DISALLOWANCES BY JUST COMPARING INCREASE IN THE PERCENTAGE OF EXPENSES CLAIMED. IT WAS ALSO EMPHASIZED THAT HERE WAS NEARLY THREE- FOLD INCREASE IN THE PROFIT FROM RS.333 LAKHS TO RS.1018 LAKHS AS PER P & L A/C AND FROM MERELY RS.94.34 LAKHS, RETURNED INCOME HAS INCREASED TO RS.733.44 LAKHS AND ON THE FACE OF SUCH MULTI0FOLD INCREASE IN PROFIT, SUCH DISALLOWANCES WERE TOTALLY UNCALLED FOR MERELY BASED ON COMPARATIVE INCREASE VIS-- VIS EARLIER YEARS. IT WAS ALSO EMPHASIZED THAT ALL THE EXPENSES WERE PROPERLY INCURRED AND ACCOUNTED FOR AND IT BEING A CASE OF COMPANY, WHERE EXPENSES ARE INCURRED AFTER PROPER AUTHORIZATION AND ACCOUNTS WERE SUBJECT TO AUDIT, NO ADHOC DISALLOWANCES WAS CALLED FOR SPECIALLY KEEPING IN VIEW THE CONDUCT OF THE ASSESSEE IN PAYING MUCH HIGHER TAXES COMPARED TO EARLIER YEAR. WE FURTHER FIND THAT THE MAIN EMPHASIS OF THE DEPAR TMENT IS ON INCREASE IN PERCENTAGE OF EXPENSES AS THESE WERE NE ARLY THREEFOLD IN THE PROFIT FROM RS.333 LACS TO RS.1018 LACS (AS PER BOOKS OF ACCOUNTS) WHEREAS THE SUBMISSION OF THE AS SESSEE IS THAT THE IMPUGNED EXPENSES WERE INCURRED AFTER PROP ER AUTHORIZATION AND THE ACCOUNTS WERE SUBJECTED TO AU DIT, THEREFORE, NO DISALLOWANCE IS CALLED FOR. IN VIEW O F THESE FACTS, 6 WE DIRECT THE LD. ASSESSING OFFICER TO MAKE 10% ADH OC DISALLOWANCE TO MEET THE END OF JUSTICE SO THAT NO GRIEVANCE IS CAUSED TO EITHER SIDE BECAUSE THE LD. CIT(A) HAS NO T CONTROVERTED THE FINDING OF SELF-PREPARED VOUCHERS OR SOME OF THE EXPENSES AND FOR WANT OF THESE EXPENSES, THESE COULD NOT BE VERIFIED ALONG WITH THE PERSONS TO WHOM THESE PA YMENTS WERE MADE ON ACCOUNT OF IMPUGNED EXPENSES. AT THE S AME TIME, SOME PAYMENTS WERE ALSO MADE IN CASH, CONSEQU ENTLY, THIS APPEAL OF THE REVENUE IS PARTLY ALLOWED IN TER MS AS INDICATED ABOVE. FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 1.6.2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1.6.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!