The DCIT, , Circle-4, Ahmedabad V. M/s. Marvel Agrex Ltd., Ahmedabad

ITA 415/AHD/2016

AI Insights

The case involves multiple appeals and cross objections related to the assessment year 1997-98 concerning M/s. Marvel Agrex Ltd., a company declared sick by BIFR. The primary issues revolved around the deletion of various additions and disallowances made by the Assessing Officer, which were later contested in the CIT(A) and subsequently in the ITAT. The Department challenged the CIT(A)'s decisions on grounds including the admission of additional evidence and the deletion of disallowances related to unexplained investments, lease rent payments, and various other expenses. The Tribunal's decision involved a detailed examination of the CIT(A)'s orders and the evidence (or lack thereof) provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131416 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 14-06-2023
• Assessment Year: 1997-1998
• Appeal Filed On: 21-02-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Depreciation; Opportunity of being heard; Additional evidence; Corroborative evidences; Capital expenditure; TDS; Set aside
• Section: 271(1)(c); 144; 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e ACIT, Circle-2 (1 )(2), Ah medabad (Appellant) Vs M/s. Marvel Agrex Ltd. 21/24 7 Yo geshwar Ap art men ts, Op p. Gh atlodia Police Station, Naranpura, Ah med abad-3800 61 PAN: AAA CM99 04C (Resp ondent) M/s. Marvel Ag rex Ltd. 21/247 Yog eshwar Apartments, Opp . Ghatlodia Police Station, Naran pura, Ah medabad -3 80061 PAN: AAACM990 4C (Appellant) Vs The JT. CIT (Asst), S. R. -2 , Ah med abad (Resp ondent) ITA No. 3656/Ahd/2015 Assessment Year 1997-98 Cross Objection No. 36/Ahd/2016 (In ITA No. 3656/Ahd/2015) Assessment Year 1997-98 I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 2 Th e DCIT, Circle-4 , Ah medabad (Appellant) Vs M/s. Marvel Agrex Ltd. 21/24 7 Yo geshwar Ap art men ts, Op p. Gh atlodia Police Station, Naranpura, Ah med abad-3800 61 PAN: AAA CM99 04C (Resp ondent) Asses see b y : Shri S. N. Div etia, A. R. & Shri Sa mir Vora, A. R. Revenue by : Shri M. Anand Kumar, Sr. D. R. Date of hearing : 15-06 -2 023 Date of pronouncement : 12-07 -2 023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Department and Cross Objection filed by the assessee against the order u/s. 250 of the Act. Further, the Department is also in appeal before us against order passed setting aside levy of penalty, by ld. CIT(A) for A.Y. 1997-98 vide order dated 1-12-2015. 2. Since common issues are involved in all appeals/cross objections under consideration, all three cases are being taken up together. ITA No. 415/Ahd/2016 Assessment Year 1997-98 I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 3 We shall first take up Department’s appeal for assessment year 1997- 98. 3. The Department has raised the following grounds of appeal:- “1. The Ld. CIT(A) has erred in admitting additional evidence, without subjecting it to the test of Rule 46A. 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.22,49,990/- as unexplained investment in capital assets, without properly appreciating the facts of the case and the material brought on record. 3. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.16,97,925/- made by the AO on account of without properly appreciating the facts of the case and the material brought on record. 4. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.15,09,258/- made by the AO on account of provision of various expenses, without properly appreciating the facts of the case and the material brought on record. 5. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.23,83,022/- made by the AO on account of interest payments, without properly appreciating the facts of the case and the material brought on record. 6. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.50,44,504/- on account of stock difference, without properly appreciating the facts of the case and the material brought on record. 7. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,15,75,698/- made by the AO on account of interest payment, without properly appreciating the facts of the case and the material-brought on record. 8. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 9. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.” I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 4 Ground No. 1 (Ld. CIT(A) erred in admitting additional evidence under Rule 46A) 4. The brief background of the case is that the assessee company was declared as a sick company by BIFR. Order u/s. 144 of the Act was passed by the Assessing Officer, against which appeal was filed by the assessee before the ld. CIT(A). The ld. CIT(A) dismissed the appeal of the assessee ex-parte and in appeal against the aforesaid order passed by ld. CIT(A) before ITAT, the ITAT Ahmedabad set aside the matter to the file of CIT(A) with a direction to decide the issue de-novo, after giving reasonable opportunity of being heard to the assessee. It was in the light of these facts, that ld. CIT(A) allowed the assessee to admit additional evidence under Rule 46A of the Income Tax Rules. 5. Vide Ground no. 1, the Department has challenged the action of the ld. ld. CIT(A) in allowing the assessee to place on record additional evidence as per Rule 46A of the Income Tax Rules. However, looking into the facts of the instant case, we are of the considered view that ld. CIT(A) has not erred in facts and in law in allowing the assessee to file additional evidence in support of its case, specially keeping in light the fact that ITAT had remanded the matter back to file of the ld. CIT(A) for fresh hearing, with a direction to give the assessee due opportunity of hearing. 6. In the result, ground no. 1 of Department’s appeal is dismissed. Ground No. 2 (Ld. CIT(A) erred in deleting the addition of Rs. 22,49,990/- as unexplained investment in capital assets) I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 5 7. The brief facts of the case are that the Assessing Officer made addition of Rs. 22,49,990/- on account of unexplained investment in capital assets on the ground that the assessee has not been able to prove that investments in the said asset have in fact been made and source thereof has also not been explained. 8. In appeal, ld. CIT(A) allowed the appeal of the assessee primarily on the ground that the Assessing Officer has not found any defects in the books of accounts and in the assessee’s books, auditors have not mentioned any adverse comment in the audit report. 9. Before us, the ld. Departmental Representative submitted that from the perusal of the order passed by ld. CIT(A), it is evident that there is no basis for allowing the appeal of the assessee with respect to this ground of appeal. In response, the counsel for the assessee relied upon the observations made by the ld. CIT(A) in the appellate order. 10. Before deciding the issue, it would be useful to produce the relevant extracts of the order passed by ld. CIT(A) for reference. “9.2.1 Regarding the addition of Rs. 22,49,990/- as unexplained investment in capital assets, the correct figure is Rs.11,78,831/- and not Rs.22,49,990/- as mentioned by the AO. These assets have been shown in regular books of accounts of the appellant and as no defect was found in regular books of accounts which were audited & certified by the auditor, additions of unexplained investment into capital assets shown in regular books are not found justified. Therefore, this addition is deleted.” I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 6 11. On going through the contents of the order passed by ld. CIT(A), it is evident that ld. CIT(A) has not given any basis for affording relief to the assessee. The only reasoning given by the ld. CIT(A) is that the assets have been shown in the regular books of account and no defect is found in such books, which were duly audited and certified by the auditors. However, it is observed that no books of accounts were submitted by the assessee during the course of assessment proceedings and therefore the Assessing Officer did not get opportunity to examine the same and therefore there was no question of rejecting the same as well. Further, the Assessing Officer made a specific observations that no documentary evidence regarding the investment of Rs. 22.49 lakhs was furnished during the course of assessment proceedings, and further source of such investment also remained unexplained. Accordingly, looking into the facts of the case, since the ld. CIT(A) has given no basis whatsoever for affording relief to the assessee with respect to this ground of appeal, the order passed by ld. CIT(A) with respect to this ground of appeal is directed to be set aside. 12. In the result, ground no. 2 of Department’s appeal is allowed. Ground No. 3 (Ld. CIT(A) erred in deleting disallowance of Rs. 16,97,925/- on account of payment of lease rent) 13. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer made disallowance on payment of lease rent amounting to Rs. 16,97,297/- on the ground that the assessee has not been able to prove with evidence that this expenditure has in fact been incurred in the first place. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 7 14. In appeal, the ld. CIT(A) allowed the appeal of the assessee on the ground that the assessee has furnished copies of lease deeds, where complete names, addresses and other details of lease transactions are appearing. The Assessing Officer has not been able to find out any defect in such lease agreements or in assessee’s claim regarding genuineness of the transactions. 15. We observe that even before us, the assessee has not furnished any bank statement reflecting that the aforesaid payment was made to the lessor. Though, copies of lease deeds have been furnished and cheque details have also been furnished on plain paper, and it has been further submitted that all payments towards lease rents were paid through banking channels, however, the assessee has not been able to produce copies of bank statement evidencing that the payments have in fact been made to the lessor. Since the assessee has not been able to furnish copy of bank statement to substantiate that lease payments have been made to the lessor, the addition is liable to be sustained. 16. In the result, ground no. 3 of the Department’s appeal is allowed. Ground No. 4 (Ld. CIT(A) erred in deleting the disallowance of Rs. 15,09,258/- on account of provision for various expenses) 17. The brief facts in relation to this ground of appeal are that the assessee had made provision for various expenses amounting go Rs. 15,64,126/- and the Assessing Officer had disallowed the entire provision of Rs. 15,64,126/- in the assessment order. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 8 18. In appeal, the ld. CIT(A) substantially allowed the appeal of the assessee and gave relief to the assessee to the extent of Rs. 15,09,258/-. 19. Before us, the Department submitted that no documentary evidence has been submitted by the assessee and accordingly, the ld. CIT(A) erred in affording relief to the assessee with respect to various provisions. In response, the counsel for the assessee placed reliance on the observations made by the ld. CIT(A) in appellate order. 20. On going through the records of the case, we observe that out of the aforesaid provisions for expenses, a sum of Rs. 3,73,736/- is the opening balance for the current year, being a provision made in respect of unpaid expenses of the earlier year. While allowing the appeal of the assessee, the ld. CIT(A) has observed as under:- “12.2.3 The contention of learned AR is accepted since under the Income Tax Act Total Income is worked out for a particular year. The computation of Total Income has to be made by taking Net Profit or loss of I.T.A.Y. 1997-98 i.e. F.Y. 1996-97 and making disallowance of expenses of F.Y. 1996-97 above. Hence opening balance? of provisions for expense cannot be disallowed. Assessee gets relief to that extent.” 21. In our view, so far as opening balance of provision of Rs. 3,73,736/- is concerned, the ld. CIT(A) has not erred in allowing the appeal with respect to this issue. Further, with respect to unpaid PF totaling to Rs. 1,49,900/-, the ld. CIT(A) observed that since the assessee has already disallowed the aforesaid sum in the return of income, it would amount to double addition if the aforesaid said sum is again disallowed by the Assessing Officer. Accordingly, the ld. CIT(A) gave relief to the assessee I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 9 with respect to unpaid PF totaling to Rs. 1,49,900/-. We are of the considered view that the ld. CIT(A) on appreciation of facts has not erred in facts and in law in allowing the appeal of the assessee on this issue as well. 22. However, with respect to provision for unpaid power bills of factory for March, 1997 amounting to Rs. 9,88,622/-, the ld. CIT(A) has given relief to the assessee simply on the ground that the Assessing Officer has not found any defects in the books of accounts and similarly auditors have also not pointed out any anomaly. The ld. CIT(A) made the following observations while passing the order:- “12.2.5 The unpaid power bills of factory for March 1997 of power expense of Rs.91,29,369/- (Schedule 17 of audited accounts). Hence the same cannot be disallowed once the learned A.O. has not found any defects in books of account and similarly auditors have also not pointed out any anomalies. The addition is deleted and the assessee gets relief of Rs.9,88,622/-.” 23. On going though the records of the case, we observe that the aforesaid amount was disallowed by the Assessing Officer on specific ground that no documentary evidence has been filed by the assessee in support of the claim. Further, from perusal of the order passed by ld. CIT(A), it is observed that ld. CIT(A) has not given any basis whatsoever for allowing the assessee’s appeal with respect to provision for power expenses amounting to Rs. 9,88,622/-. Accordingly, in the light of the above facts, the relief allowed by the CIT(A) with respect to unpaid power bills is directed to be set aside, since the assessee has failed to produce any evidence to substantiate the claim. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 10 24. In the result, ground no. 4 of Department’s appeal is partly allowed. Ground No. 5 (Ld. CIT(A) erred in deleting disallowance of Rs. 23,83,022/- on account of interest payments) 25. The brief facts relating to this ground of appeal are that during the course of assessment, the Assessing Officer called for details of interest payment made by the assessee to various parties. The assessee furnished break up of the said interest payment showing the name of three parties. However, the complete address of the parties was not furnished by the assessee. Further, the assessee also did not furnish any evidence in respect of interest payment made to the aforesaid three parties. Accordingly, the Assessing Officer made disallowance of Rs. 28,83,022/- in respect of interest expenses claimed by the assessee. 26. In appeal, the ld. CIT(A) allowed the appeal of the assessee with the following observations:- “14.2 I have carefully considered submission of the appellant as well as the observation of the A.O. From the audited Balance sheet, Schedule 3 (Page No. 122 of Paper Book) it is seen that assessee has taken secured loans from a company as V well as Hire Purchase loans totaling to Rs. 1,79,98,605/- on which interest payment is Rs. 23,83,012/- which works out to Rs. 13.24% which is not an abnormal rate of interest. Further as pointed out hereinabove no defect is pointed out by assessing officers in books of account. Further the assessing officer has not given any adverse finding on the borrowings made by assessee. When borrowings have been found genuine by the AO, interest debited at normal market rates is on allowable expenditure. As a result the addition is deleted and assessee gets relief of Rs.23,83,022/-.” I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 11 27. Before us, the Departmental Representative submitted that there is no basis for giving relief by the ld. CIT(A) to the assessee. The relief has been given by the ld. CIT(A) to the assessee only on the basis that there was no defects which is pointed out by the Assessing Officer in the books of accounts. However, the assessee has not filed any documentary evidence regarding the payment of interest made to the aforesaid parties and further no details regarding whether TDS has been deducted by the assessee at the time of making interest payment was furnished before the Assessing Officer/or before ld. CIT(A). In response, the ld. counsel for the assessee placed reliance on the observations made by the ld. CIT(A) in the appellate order. 28. On going through the facts of the instant ground, we observe that ld. CIT(A) has not given any basis whatsoever for affording relief to the assessee. The assessee had not filed any documentary evidence giving details of communication address of the parties to whom interest was paid nor were any details filed as evidence to show actual payment of interest to the aforesaid three parties. Accordingly, looking into the instant facts of the case, the relief granted by the ld. CIT(A) to the assessee with respect to this ground of appeal is directed to be set aside. 29. In the result, ground no. 5 of Department’s appeal is allowed. Ground No. 6 (ld. CIT(A) erred in deleting disallowance of Rs. 50,44,504/- on account of stock difference) I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 12 30. The brief facts in relation to this ground of appeal are that during the course of assessment, the assessee was asked to explain its stock difference amounting to Rs. 50,44,504/- debited to the profit and loss account. However, in absence of any reply by the assessee, the Assessing Officer made an addition of the aforesaid amount and added the same to the total income of the assessee. 31. In appeal, the counsel for the assessee submitted that the assessee has prepared its profit and loss account in horizontal format. Under this format, as per the accepted norms of disclosure, the opening and closing stock is netted out and the difference is shown as “increase/decrease in stock” in the profit and loss account. Accordingly, there is no difference in stock in actual terms. The ld. CIT(A) accepted the arguments of the assessee and allowed the appeal of the assessee with the following observations:- “18.1.2 I have considered the submissions of learned A.R. I agree with the contentions made on behalf of assessee. The assessing officer has confused himself by taking the heading of schedule 20 of audited accounts. (Page 128 of Paper book) i.e. "STOCK DIFERETIAL" literally. However he missed the point explained by learned A.R. that in vertical method of presentation of Balance Sheet and P & L A/c. is different than Horizontal method of presentation. In Horizontal method the opening stock is shown on debits side of P & L A/c. and closing stock is shown on credit side of P & ; L A/c. The difference between Closing stock of and opening stock gets thus represented in gross profit. However in vertical method the difference between closing stock and opening stock is nettled out and shown as difference in stocks at one place only in P & L A/c. as shown by the assessee in its P & L A/c. (Page 120 of paper book). Hence addition is deleted and assessee gets relief of Rs. 50,44,504/-.” 32. On going through the records of the case, we observe that the ld. CIT(A) has simply accepted the assessee’s verbal explanation regarding there being no difference in stock due to horizontal method of accounting I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 13 being forwarded by the assessee. However, no further independent enquiry was made by ld. CIT(A). Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to carry out the necessary verification to ascertain whether there is any difference in stock or whether owing to the horizontal method of presentation followed by the assessee, there is no difference in actual terms, as asserted by the assessee. 33. In the result, this ground is set aside to the file of Assessing Officer for carrying out the necessary verification. 34. In the result, the ground no. 6 of Department’s appeal is allowed for statistical purposes. Ground No. 6 (CIT(A) erred in deleting the disallowance of Rs. 1,15,75,698/- made by the Assessing Officer on account of interest payment) 35. The brief facts relating to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee had claimed bank interest expenses amounting to Rs. 1,15,75,698/-. However, the Assessing Officer added the above sum on the ground that the assessee gave no explanation for obtaining the loan or the utilization of aforesaid fund. 36. In appeal, the assessee submitted that it had paid interest to banks on various credit facilities as per copes of bank statement submitted to the Assessing Officer during the course of assessment proceedings. It was I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 14 submitted that these bank accounts are not new loans and that they are continuing from earlier years. Further, it was submitted that the Assessing Officer has not made any adverse observation to the effect that the bank loans taken by the assessee are non-genuine. Accordingly, the assessee is eligible for deduction of bank interest expenses. Accordingly, the CIT(A) allowed the appeal of the assessee with respect to this ground of appeal with the following observations:- “19.2 I have carefully considered submission of the appellant as well as the observation of the A.O. From the audited Balance sheet schedule 3 (Page No. 122 of Paper Book) it is seen that assessee has taken secured loans from State Bank of India amounting to Rs.5,84,15,153/- upon which interest payment is Rs. 1,15,75,698/-. Further as pointed out hereinabove, no defect is pointed out by assessing officers in books of account. As a result the addition is deleted and assessee gets relief of Rs. 1,15,75,698/-.” 37. On going through the records, it is observed that the assessee had taken loan from Bank of India amounting to Rs. 5.84 crores on which interest was paid by the assessee. There is no specific allegation regarding the genuineness of loan taken or that and further the ld. CIT(A) made a specific observations that this loan had been taken from earlier years. However, we observe that while as per the assessee, he has furnished a bank statement to prove payment of interest, however, the contents thereof are not legible (pages 106-110 of paper book). Accordingly, the matter is being restored to the file of Assessing Officer only with the limited purpose to verify from the bank statement, whether interest has in fact been paid as stated by the assessee. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 15 38. In the result, ground no. 7 of Department’s appeal is allowed for statistical purposes. 39. The other grounds of department’s appeal are general in nature and do not require any specific adjudication. Now we shall take up the assessee’s Cross Objection 40. The assessee has raised the following grounds in the cross objection:- “1. The Ld. CIT(A) has grievously erred in law or in facts in confirming the following disallowances/additions : (i) Depreciation Rs. 1,14,211 (ii) Out of prior period items Rs. 54,868 (iii) Foreign exchange Fluctuation loss Rs. 28,31,241 (iv) Insurance claim w/o Rs. 13,10,590 (v) C/F expenses Rs. 11,94,298 (vi) Liquidated Damages Rs.7,91,427 (vii) Misc. expenses Rs. 36,67,514 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have confirmed the aforesaid disallowances.” With respect to disallowances/additions confirmed by ld. CIT(A) Ground No. (i) 1,14,211/- I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 16 41. The brief facts with respect to this ground of cross objection is that during the course of assessment, the Assessing Officer observed that the assessee has not been able to prove with evidence details of addition in respect of fixed assets as claimed and accordingly the Assessing Officer disallowed claim of depreciation amounting to Rs. 1,14,211/- and added the same to the total income of the assessee 42. In appeal, the ld. CIT(A) confirmed the addition on the ground that assessee could not prove the use of these assets for business purpose. 43. Before us, the counsel or the assessee invited our attention to pages 20-24 of the paper book giving details of addition to fixed assets. The counsel for the assessee submitted that primarily depreciation has been claimed on purchase of new vehicle during the impugned assessment year. Accordingly, it was submitted that ld. CIT(A) erred in confirming the addition without appreciating the facts placed on record. 44. On going through the details placed on record, we are of the considered view that the assessee is eligible for claim of depreciation in respect of new vehicle purchased during the year under consideration. The details of additions to fixed assets, along with supporting evidence have also been placed on record before us. 45. In the result, ground no. 1(i) of assessee’s cross objection is allowed. Ground No. 1(ii) Disallowance out of prior period item (n Rs. 54,868/-) I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 17 46. The brief facts of this ground of appeal are that the assessee made provision with respect to unpaid telephone bills (Rs. 20,652/-), unpaid electricity bill (Rs. 30,216/-) and unpaid hire charges (Rs.30,000/-) which were disallowed by the Assessing Officer on the ground that the aforesaid unpaid telephone bills, electricity bills, and hire charges have not shown as debited to the profit and loss account. The above additions were also upheld by the ld. CIT(A) on the ground that the corresponding debits in Profit and Loss accounts or in Schedules to the profit and loss account have not been brought to his notice by the counsel for the assessee. Accordingly, additions totaling to Rs. 54,868/- were confirmed by ld. CIT(A) 47. Before us, the counsel for the assessee submitted that the provisions have been made by the assessee for year end unpaid telephone bills, hire charges and power bills pertaining to previous year. He drew our attention to page 98 of the paper book giving a break up of bills of provisions for expenses. 48. On going through the records of the case, we observe that the above provisions have been made on account of year end unpaid expenses as on 31 st March, 1997. The details of expenses have been summed up at page 98 of the paper book. 48.1 Accordingly, given the facts of the case, ground no. 1(iii) of assessee’s cross objection is allowed. Ground No. 1(iii) (Disallowance of foreign exchange fluctuation loss) I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 18 49. The brief facts in relation to this ground of cross objection are that the assessee had debited foreign exchange fluctuation amounting to Rs. 28,31,341/-. During the course of assessment proceedings, the assessee was asked to furnish the details of foreign exchange fluctuation. The Assessing Officer observed that in absence of any documentary evidence furnished by the assessee against claim of foreign exchange fluctuation, the aforesaid amount of Rs. 28,31,341/- was liable to be added to the income of the assessee. 50. In appeal, the ld. CIT(A) upheld the disallowance on the ground that the assessee has not been able to substantiate the contentions from audited accounts. Further, the assessee has also not furnished details of contract for purchase from the foreign party to substantiate the genuineness of the claim. 51. Before us, the counsel for the assessee submitted that the aforesaid foreign exchange fluctuation loss was in respect of bank guarantee furnished by the assessee in respect of purchase contract with a Singapore party. The assessee drew our attention to page 99 of the paper book in which details of foreign fluctuation have been explained. 52. On going through the records of the case, we observe that the assessee has not furnished any supporting details viz. copy of bank guarantee, copy of purchase contract with Singapore party etc. to substantiate the claim of foreign exchange to substantiate the genuineness of the claim. This fact has also been correctly observed by the ld. CIT(A) while upholding the addition. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 19 Accordingly, we find no infirmity in the order of ld. CIT(A) so as to call for any interference. 53. In the result, ground no. 1 (iii) of assessee’s cross objection is dismissed. Ground No. 1 (iv) insurance claim ( 13,10,590/-) 54. The brief facts in relation to this ground of cross objection are that the during the course of assessment, the assessee was requested to furnish details of insurance claim written off, amounting to Rs. 13,10,590/-. However in absence of any details filed by the assessee, the above amount was added to the total income of the assessee. 55. In appeal, the ld. CIT(A) confirmed the addition on the ground that the assessee has not been able to file any details in respect of insurance claim written off and also whether such insurance claim has been offered as income in any earlier years. 56. Before us, the counsel for the assessee submitted that the aforesaid insurance claim written off, was the excess insurance claim written off from Oriental Insurance Company for the losses of Soya Abstraction written off upon settlement of claim with the insurance company. The counsel for the assessee submitted that since the excess claim written off was a business loss, there was no requirement/condition that the same should have been I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 20 offered as income of the assessee in any earlier year. Accordingly, given the facts of the case, the ld. CIT(A) erred in not upholding the addition. 57. On going through the records, we are in agreement with the argument of the counsel for the assessee that for insurance clam to be written off there is no requirement that the same should have been offered as income in any earlier year. However, it is also observed that the assessee has filed no details/documents/evidence to substantiate that the above write off was due to settlement entered with Oriental Insurance Company for losses of Soya extraction. In absence of any documents/evidence in support of the write off, cross objection 1(iv) of assessee’s cross objection is dismissed. 57.1 In the result, cross objection 1(iv) of assessee’s cross objection is dismissed. Ground No. 1(v) ( clearing and forwarding expenses ( 11,94,298/-). 58. The brief facts in relation to this ground of cross objection is that the Assessing Officer made an addition of Rs. 11,94,298/- with respect to clearing and forwarding expenses on the ground that despite several opportunities, assessee did not furnish any details with respect to the above claim 59. In appeal, the ld. CIT(A) confirmed the addition, however, no reason whatsoever has been given in the order as to on what basis the aforesaid I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 21 addition was confirmed. Notably, there is no discussion with respect to clearing and forwarding expenses in the order passed by ld. CIT(A) 60. On going through the case records, we observe that that the assessee has not furnished any documentary evidence with respect to clearing and forwarding charges. Though, we observe that the ld. CIT(A) did not pass speaking order while confirming the addition, but the assessee has also not filed any supporting whatsoever either before the Assessing Officer or before ld. CIT(A) and also before the Assessing Officer in remand proceedings to support the genuineness of the aforesaid claim. 61. Accordingly, ground no. 1(v) of assessee’s cross objection is dismissed. Ground No. 1(vi) liquidity damages (Rs. 7,91,427/-) 62. The brief facts relating to this ground of cross objection are that during the course of assessment proceedings, the Assessing Officer requested the assessee to furnish details of liquidity damages amounting to Rs. 7,91,427/-. In absence of any details having been furnished by the assessee, the Assessing Officer added the aforesaid amount as income of the assessee. 63. In appeal, the ld. CIT(A) confirmed the addition on the ground that assessee has been unable to demonstrate that the liquidity damages are not a capital expenditure and are not on account of purchase of any capital asset. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 22 64. Before us, the counsel for the assessee drew our attention to page 105 of the paper book and submitted that the liquidity damages were claimed on account of shortages and quality difference in the material supplied to M/s. P & G Godrej Ltd., due to moisture loss etc. Accordingly, it was submitted that same is not on capital account and such damages have been incurred purely as part of business operation of the assessee. 65. On going through the case records, we observe that apart from the explanation furnished by the assessee that the liquidity damages are on revenue account since they pertain to shortage and quality difference on material supplied, the assessee has not furnished any other supporting evidence such as correspondences exchanged with M/s. P & G Godrej Ltd. for final settlement of invoice, invoices for goods supplied to M/s P & G Godrej Ltd. and further no confirmation of the party was also placed on record at any stage before the Revenue Authorities as well as before us. 66. Accordingly, in absence of any supporting evidence whatsoever, we are of the considered view that the ld. CIT(A) has not erred in facts and in law in confirming the aforesaid addition. 67. In the result, ground no. 1(vi) of assessee’s cross objection is dismissed. Ground No. 1(vii) Miscellaneous Expenses (Rs. 36,67,514/-) I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 23 68. The brief facts in relation to this ground of cross objection is that the Assessing Officer disallowed miscellaneous expenses amounting to Rs. 36,67,514/- for want of details and non-compliance on part of the assessee. The ld. CIT(A) also confirmed the aforesaid additions, however, no reasons whatsoever have been furnished for sustaining the disallowance made by the Assessing Officer. 69. Before us, the counsel for the assessee drew our attention to page 127 of the paper book and submitted that the Assessing Officer has disallowed the entire claim of miscellaneous expenditure cannot be disallowed and it cannot be accepted that the assessee will not incur any miscellaneous expenditure during the course of its business. 70. On going through the records of the case, we observe that no details of miscellaneous expenditure have been furnished by the assessee at any stage before the Revenue Authorities. No details with respect to miscellaneous expenditure (breakup of miscellaneous expenses or any supporting documents) were furnished either before the Assessing Officer or before ld. CIT(A) during the course of appellate proceedings. Therefore, the Revenue Authorities did never got an opportunity to examine the nature and/or genuineness of the aforesaid claim, and further no details with respect to miscellaneous expenditure have also been furnished before us as well. Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to enable the assessee to file necessary details with respect to miscellaneous expenditure incurred by the assessee along with supporting documents in support of its claim. I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 24 71. In the result, ground no. 1(vii) of assessee’s cross objection is allowed for statistical purposes. ITA No. 415/Ahd/2016 filed the Department 72. This appeal filed by the Department against the deletion of levy of penalty u/s. 271(1)(c) of the Act on the ground that since appeal of the assessee has been allowed in quantum proceedings, penalty u/s. 271(1)(c) is not liable to sustained. 73. The Department has taken the following grounds of appeal “1. The Ld.CIT(A) has erred in law and on facts in deleting the penalty levied by the AO of Rs.1,57,96,275/- u/s.271(l)(c) of the Act, without properly appreciating the facts of the case and the material brought on record. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.” 74. We observe that the Assessing Officer had imposed penalty on the assessee on both counts i.e. concealment of income and furnishing inaccurate particulars of income. However, since in the preceding I.T.A Nos. 3656/Ahd/2015, 415/Ahd/2016 & CO No. 36/Ahd/2016 A.Y. 1997-98 Page No. ACIT vs. M/s. Marvel Agrex Ltd. 25 paragraphs, we have partly allowed the appeal of the Department in respect of several grounds and also dismissed some of the cross objections filed by the assessee, for reasons mentioned in the preceding paragraphs, accordingly, penalty levied u/s. 271(1)(c) of the Act with respect to the aforesaid additions are also directed to be sustained. 75. In the result, the appeal of the Department is partly allowed. 76. In the combined result, both the appeals of the Department and Cross Objection filed by the assessee are partly allowed for statistical purposes. Order pronounced in the open court on 12-07-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/07/2023 (TRUE COPY) आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद