Uday Edible Products Ltd., Delhi V. DCIT Circle-27(1), New Delhi

ITA 5222/DEL/2019

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6903 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-03-2024
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 6; 144; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI Before Sh. Kul Bharat, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 5222/Del/2019 : Asstt. Year : 2007-08 Uday Edible Products Ltd., KD-20, Pitampura, New Delhi-110034 Vs. DCIT, Circle-27(1), New Delhi (APPELLANT) (RESPONDENT) PAN No. AABCK6441P Assessee by : Sh. Ashwani Kumar, CA Revenue by : Ms. Sapna Bhatia, CIT-DR Date of Hearing: 11.03.2024 Date of Pronouncement: 30.05.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-16, New Delhi dated 29.03.2019. 2. Following grounds have been raised by the assessee: “1. On t h e f ac ts an d c i rcu m stan c es of t h e c a s e, th e ord er pas s ed b y t h e l earn ed CI T( A) i s b ad b oth in th e ey e of l aw and on fac t s. 2. On th e fa ct s an d ci rcu m st an c es o f t he ca s e, t h e l e a rn ed CI T( A) h as erred b ot h on fa ct s an d in l aw in p as si n g t h e ord er wit h out provi d i ng t h e ad eq u at e opp ort un i ty of b ein g h ea rd in gr oss vi ol a t i on of p ri ncip l e of n atu ra l j u st i c e. 3. On th e fa ct s an d ci rcu m st an c es o f t he ca s e, t h e l e a rn ed CI T( A) ha s erred b ot h on fa ct s an d i n l a w in rej ect in g t h e b ook s of th e a ss es see i n voki ng p r ovi si on of s ec ti on 14 5(3) of th e In co m e Ta x A ct . 4. (i ) On t h e fa ct s and ci rcu ms tan c es of th e c as e, th e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of R s . 3,50 ,75, 638 / - m a d e b y A O on a cc ou n t of fin an ci al exp en s es b y t h e a ss ess ee. ITA No. 5222/Del/2019 Uday Edible Products Ltd. 2 ( ii) Th at t h e d i sal l ow an c e ha s b een c on f irm ed rej ect in g th e expl a n ati on an d d oc um ent s su b m it t ed b y th e a s sess ee. ( iii ) Th at t h e d i sall ow an ce h as b een c on fi rm ed d espi t e th e f act th at th es e exp en s es h a v e b een in cu rred s ol el y an d exc l u si v el y f or th e pu rp o se of b usin es s ac ti v it i es. 5. ( 1) On th e fa ct s an d ci rcu m stan c es of th e ca s e, t h e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of Rs . 50, 73,548 / - m ad e b y A O on a c c oun t of man u fa ct u rin g , ad m i ni st rat i v e an d s ell i n g ex p en s es . ( ii) Th at th e s aid di sal lo wan c e h a s b een confi rm ed d e spi t e th e fa ct t h at th e sam e h as b een m ad e a rbi tra ri ly at th e a d -h oc ra t e of 10 % of t h e t ot a l exp en s es a m ou n ti ng t o R s. 5, 33 ,75 ,070/- wit h out t h ere b ein g any ba si s f or t h e s a m e. ( i) Th at t h e di sa l l o wan c e h a s been c onfi rm ed d espi t e th e fact th at th es e exp en s es h a v e b een in cu rred s ol el y an d exc l u si v el y f or th e pu rp o se of b usin es s ac ti v it i es. 6. ( 1) On th e fa ct s an d ci rcu m stan c es of th e ca s e, t h e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of R s . 21 ,99 ,6 56/ - m a de b y A O on a cc ou nt exp en s es p ay abl e at th e y ea r end . ( ii) That th e d i s a l lowan c e h as b een c on fi rm ed a rb i t rari l y ig no ri n g th e fa ct t h at su ch li ab i li t y havin g b een a cc ru ed and bei ng pa ya b l e t o t h e c on cern ed p ers on t h e sa m e can n ot b e di s all ow ed m erel y b ecau s e th e p a ym en t has n ot b een mad e t o su ch p a rt y. 7. ( 1) On th e fa ct s an d ci rcu m stan c es of th e ca s e, t h e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of R s . 19 ,89 .5 51/ - m a de b y A O on a cc ou nt c om m is si on a nd b rok era g e in v okin g t he p rov i si on of secti on 40( a) (ia) of th e In c om e Ta x Act , 19 61 . ( ii) That t h e di sal l ow an c e h a s b een c onf ir m ed i g n orin g th e pr ovi s o t o s ect i on 40( a)( i a) wh ereb y d edu ct ee h a vin g in clu di ng th e i nc om e i n it s retu rn of i n com e t h e as s ess ee can n o t b e tr ea t ed a s a s sess ee in d efau l t an d h en c e n o di sal l owa n ce can be m ad e u nd er s ect i on 40( a)( i a) of th e Act . 8. (i ) On t h e fa ct s and ci rcu ms tan c es of th e c as e, th e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e o f R s. 6 ,50 ,0 38/ - m a d e by A O on a c c ou nt pr of es si on al ch a rg es i nv ok i ng th e pro vi si on of s ect ion 40(a )( ia) of th e I nc om e Ta x A ct , 1961 . ( ii) That t h e di sal l ow an c e h a s b een c onf ir m ed i g n orin g th e pr ovi s o t o s ect i on 40( a)( i a) wh ereb y d edu ct ee h a vin g in clu di ng th e i nc om e i n it s retu rn of i n com e t h e as s ess ee can n o t b e ITA No. 5222/Del/2019 Uday Edible Products Ltd. 3 tr ea t ed a s a s sess ee in d efau l t an d h en c e n o di sal l owa n ce can be m ad e u nd er s ect i on 40( a)( i a) of th e Act . 9. (i ) On t h e fa ct s and ci rcu ms tan c es of th e c as e, th e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of R s . 5,00 ,05, 297/ - m ad e b y A O on ac c ou nt pu rcha ses ma d e by t he a s s es s ee. ( ii) That t h e di sal l owan ce h a s b een c on fi rm ed d esp it e t h e fa ct th at th e sam e h as b een mad e on es ti m a ti on ba si s wi th ou t t h ere bei ng any b as is for t h e sam e. 10. ( i) On th e fa ct s and ci rcum st an c es o f t h e ca s e, th e l ea rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e di s all ow an c e of R s . 82 ,17 ,4 16/ - m a de b y A O on a cc ou nt dep reci at i on c lai m ed b y th e ass es s ee ( ii) Th at t h e d i sal l ow an c e ha s b een c on f irm ed rej ect in g th e expl a n ati on an d d oc um ent s su b m it t ed b y th e a s sess ee 11. On th e fa ct s a n d ci rcu m st an ces of th e c a s e, t h e l e a rn ed CI T( A) h a s erred b oth on f a ct s an d i n la w in c on fi rm in g th e ab ov e d i sall owan c es b y i nd u lgi ng in s urm is es wi th ou t b ri n gi ng on an y di rect evi d en c e ag ain st th e as sess ee, on l y on t h e b as is of p resu mp ti on an d as sum pt i on .” 3. The company was engaged in the business of extracting, manufacturing, producing, processing, crushing, purchasing, selling, exporting, importing of all kinds of edible oil, hydrogenated edible, vegetable vanaspati refined oil margarine and bakery shortening etc. This appeal is preferred against the order dated 31-03-2016 framed by the AO under section 143(3)/254 of the Income tax Act, 1961. History of the case Particulars Date Amount/Additions/Outcome Original return filed 27.10.2007 Nil (Loss of Rs.8,43,46,100/-) Assessment order passed under section 143(3)/144 29.12.2009 Rs. 1,88,65,040/- Remand Report 28.11.2011 Commissioner of Income Tax (Appeals) passed order u/s 250 31.07.2012 Appeal partly allowed Order passed by the Hon’ble ITAT in ITA No. 5600/DEL/2012 14.03.2014 Set aside to the file of Assessing Officer ITA No. 5222/Del/2019 Uday Edible Products Ltd. 4 Assessment order passed under section 143(3)/254 31.03.2016 Rs. 1,88,65,040/- Commissioner of Income Tax (Appeals) passed order u/s 250 29.03.2019 Appeal dismissed Details of additions sustained Particulars Amount 10% of Manufacturing, Administration, selling and other expenses 50,73,548/- Financial Expenses 3,50,75,638/- Expenses Payable 21,99,656/- Commission + Brokerage 19,89,551/- Professional Charges 6,50,038/- Purchases - 5% of Total Purchases 5,00,05,297/- Depreciation 82,17,416/- Total 10,32,11,144/- 4. The Co-ordinate Bench of ITAT vide order dated 14.03.2014 in ITA No. 5600/Del/2012 has restored the entire Assessment Order for adjudication de-novo. The Assessing Officer has given opportunities on 11 occasions and the assessee failed to appear and file required details. Hence, in the absence of details the order has been passed u/s 144 of the Income Tax Act, 1961 making disallowances on account of manufacturing expenses, administrative expenses, selling expenses and others expenses. 5. Aggrieved, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) sustained all the additions made. 6. Aggrieved, the assessee filed appeal before the Tribunal. 7. Heard the arguments of both the parties and perused the material available on record. 8. Ground No. 1 is general in nature. ITA No. 5222/Del/2019 Uday Edible Products Ltd. 5 9. The ld. Counsel for the assessee fairly submitted that Ground No. 2, 4, 5, 6 and 7 are not being pressed as the case is very old and relevant information are not available with the assessee company. Ground No. 3: Disallowance -Financial Expenses -Rs. 3,50,75,638/-: 10. Examined the record before us and the paper book. 11. This ground taken by the assessee is against disallowance of interest and other financial charges paid to bank without appreciating the information available on record. The ld. AR submitted that during the course of assessment proceedings copies of the ledgers, bank statement, and various details were furnished. The assessee could not produce other documents and records as asked by the AO due to the fact that factory was under the possession of the bank and other records were lost for which FIR was lodged in the police station Bhiwadi (Rajasthan). The Assessing Officer did not appreciate that interest and other financial charges were paid to State Bank of India. 12. However, it is a fact on record that the relevant details and bank statement were filed during the assessment proceedings. 13. From the attached details, it is clear that the Appellant paid interest, financial expenses to State Bank of India, Overseas Branch, Parliament Street, New Delhi. These details are available in the bank statement of State Bank of India for ITA No. 5222/Del/2019 Uday Edible Products Ltd. 6 F.Y. 2006-07 submitted at page 27 to 213 of the paper book which was available before the revenue authorities. Since, the payment pertain to interest and other financial expenditure as can be examined from the bank statement of SBI, we hold that the disallowance made by the AO is not justified and therefore, liable to be deleted. Grounds No. 8 Disallowance - Depreciation - Rs. 82,17,416/-: 14. This ground taken by the assessee is against disallowance of depreciation claimed by the assessee. Depreciation is an allowance and not an expense. Audited Balance Sheet and Tax Audit Report were furnished during the course of assessment proceedings. Tax audit report reveals claim of the depreciation as certified by the auditor. Even, the AO could have verified the claim of depreciation from the last year's records but he did not prefer do so. The depreciation which was allowed by the revenue authorities in the earlier years on the fixed assets has to be allowed in the current year. No depreciation is allowed on the additions made to the fixed assets, if any, during the year, owing to the absence of basic details. 15. In view of above, claim of depreciation of the assessee is justified. Ground No. 9 16. Non allowability of credit for brought forward losses/unabsorbed depreciation. It is evident from the various returns filed by the assessee that the company shown brought ITA No. 5222/Del/2019 Uday Edible Products Ltd. 7 forward losses/depreciation from year to year. While calculating tax demand, the AO is directed to allow credit of the same as per the provisions of Income tax Act. 17. To conclude, Particulars Amount Result 10% of Manufacturing, Administration, selling and other expenses 50,73,548/- Confirmed Financial Expenses 3,50,75,638/- Deleted Expenses Payable 21,99,656/- Confirmed Commission + Brokerage 19,89,551/- Confirmed Professional Charges 6,50,038/- Confirmed Purchases - 5% of Total Purchases 5,00,05,297/- Confirmed Depreciation 82,17,416/- Deleted Total 10,32,11,144/- 18. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 30/05/2024. Sd/- Sd/- (Kul Bharat) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 30/05/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR