M/s Drolia Electrosteels Pvt. Ltd, Ranchi V. DCIT, Ranchi

ITA 54/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8820 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDAN DAS
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.54/RAN/2016 ( / ASSESSMENT YEAR: 2011-12) M/S DROLIA ELECTROSTEEL PVT. LTD. DROLIA HOUSE, KANKE ROAD, RANCH- 834008 VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AAACD 5584 H (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI CHANDAN DAS, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 05/04/2019 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PER TAINING TO ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-RANCHI, WHICH IN TURN ARISES OUT OF AN ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: I. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CON FIRMING ADDITION OF RS. 9,08,743/-, DISALLOWED OUT OF EXPENSES CLAIMED UNDE R THE HEAD IRON ORE CRUSHING CHARGES. THE DISALLOWANCE IS ILLEGAL AND INCORRECT. M/S DROLIA ELECTROSTEEL PVT. LTD . ITA NO.54/RAN/2016 ASSESSMENT YEAR: 2011-12 P PP PA AA AG GG GE EE E | || | 2 22 2 II. FOR THAT THE DISALLOWANCE OF RS. 3,30,802/- BEI NG 10% OF IRON ORE HANDLING CHARGES CONFIRMED BY LD. CIT(A) WAS ILLEG AL, UNJUSTIFIED AND ARBITRARY. III. FOR THAT DISALLOWANCE OF 10% OUT OF TRAVELLING EXPENSES AT RS. 76,025/- IS ILLEGAL, UNJUSTIFIED AND ARBITRARY. IV. FOR THAT ALL THE EXPENSES INCURRED ARE VERIFIA BLE. NO DISALLOWANCE WAS MADE IN PAST OUT OF IRON ORE CRUSHING CHARGES AND I RON ORE HANDLING CHARGES. THE EXPENSES CLAIMED UNDER ALL THE THREE H EADS, COMPARED WELL WITH PAST RECORDS. AS SUCH, SAME SHOULD HAVE BEEN A LLOWED IN FULL. V. FOR THAT OTHER GROUNDS IN DETAIL WILL BE ARGUED AT THE TIME OF HEARING. 3. GROUND NO. 1 RELATES TO THE ADDITION OF RS. 9,08 ,743/- DISALLOWED OUT OF EXPENSES CLAIMED UNDER THE HEAD IRON ORE CRUSHING CHARGES. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPONGE IRON AND MILD S TEEL BILLETS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOME OF RS. 19,91,19,385/-. THE CASE WAS PROCESSED U/S 143(1) OF THE ACT. LATER ON THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U/S 143(2) WAS ISS UED ON 01/08/2012 WHICH WAS DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOT ICES, THE LD. COUNSEL FOR THE ASSESSEE FILED DETAILS AND THE CASE WAS DISCUSSED. 5. WE NOTE THAT THE ASSESSING OFFICER HAD MADE ADDI TION BASED ON ESTIMATE I.E. AD HOC ADDITION. ON APPEAL THE LD. CIT(A) CONFIRMED TH E ADDITION. THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED THE ISSUE THAT DISALLOWANCE OF RS. 9,08,743/- OUT OF IRON ORE CRU SING CHARGES WAS UNJUSTIFIED, ILLEGAL AND INCORRECT. THE LD. ASSESSING OFFICERS OBSERVATION THAT COGENT EVIDENCE WAS NOT PRODUCED WHICH WAS NOT CORRECT. FACTUALLY E NTIRE EXPENDITURE WAS IN NATURE OF LABOUR EXPENSES. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE EXPENSES WERE PAID TO LABOURERS AND WERE SUBJEC T TO PAYMENT OF ESI AND P.F. THE LD. ASSESSING OFFICER HAS NOT DOUBTED THESE EXP ENSES BUT BASED ON SURMISES DISALLOWED 10% OF EXPENSES. THE LD. DR ON THE OTHER HAND HAS STATED THAT THE DISALLOWANCE WAS MADE AS THE ASSESSEE DID NOT PRODU CE EVIDENCE FOR VERIFICATION M/S DROLIA ELECTROSTEEL PVT. LTD . ITA NO.54/RAN/2016 ASSESSMENT YEAR: 2011-12 P PP PA AA AG GG GE EE E | || | 3 33 3 OF THESE EXPENSES AND THEREFORE THE ASSESSEES CLAI M THAT THE ENTIRE EXPENSES WERE FOR BUSINESS PURPOSE WERE NOT ESTABLISHED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT IT IS TRUE THAT THE LD. ASSESSING OFFI CER DID NOT DOUBT EXPENSES ON ESI OR PF, BUT THE ASSESSEE AT THE APPELLANT STAGE TOO HAS NOT BEEN ABLE TO ADDUCE ANY EVIDENCE TO COUNTER THE STATEMENT OF THE LD. ASSESS ING OFFICER THAT THESE DETAILS WERE PRODUCED BEFORE THE LD. ASSESSING OFFICER FOR VERIFICATION. SINCE THE ASSESSING OFFICER HAS NOTE DOUBTED THE GENUINENESS OF THE EXPENSES, THEREFORE TO MEET THE END OF JUSTICE WE REDUCE AD HOC DISALLOWAN CE TO 5% FROM 10%. 7. GROUND NO. 2 RELATES TO DISALLOWANCE OF RS. 3,30 ,802/- BEING 10% OF IRON ORE HANDLING CHARGES BY LD. CIT(A). AT THE OUTSET ITS ELF THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED THE ISSUE THAT DISALLOWANCE OF RS. 3,30,802/- OUT OF IRON ORE HANDLING CHARGES WAS UNJUSTIFIED, ILLEGAL AND INCO RRECT. 8. GROUND NO. 3 RELATES TO DISALLOWANCE OF RS. 76,0 25/- OUT OF TRAVELLING EXPENSES. AT THE OUTSET THE LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT DISALLOWANCE OF RS. 76,025/- OUT OF TRAVELLING EXP ENSES WAS NOT JUSTIFIED. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WERE I NCURRED FOR THE PURPOSE OF BUSINESS. THE LD. DR ON THE OTHER HAND, HAS STATED THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AS THE ASSESSEE DID NOT PRO DUCE BILLS FOR VERIFICATION OF THESE EXPENSES AND THEREFORE THE APPELLANTS CLAIM THAT THE ENTIRE EXPENSES WERE FOR BUSINESS PURPOSE WERE NOT ESTABLISHED. NOT BEIN G SATISFIED WITH THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICE R. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. CIT(A) HAS CONFIRMED THE AD HO C DISALLOWANCE ON ACCOUNT OF IRON ORE HANDLING CHARGES AT RS. 3,30,802/- AND TR AVELLING EXPENSES AT RS. 76,075/- , AS THE ASSESSEE HAS NOT PRODUCED THE RELEVANT BIL LS / VOUCHERS. WE NOTE THAT M/S DROLIA ELECTROSTEEL PVT. LTD . ITA NO.54/RAN/2016 ASSESSMENT YEAR: 2011-12 P PP PA AA AG GG GE EE E | || | 4 44 4 CONSIDERING THE SIZE OF THE BUSINESS OF THE ASSESSE E AND TURNOVER OF THE ASSESSEE THE AD HOC ADDITION MADE BY THE LD. CIT(A) @ 10% IS HIG HER SIDE, THEREFORE WE RESTRICT AD HOC DISALLOWANCE TO 5% IN RESPECT OF IR ON ORE HANDLING CHARGES AND TRAVELLING EXPENSES. TO CONCLUDE, WE NOTE THAT GROU ND NOS. 1, 2 AND 3 RAISED BY THE ASSESSEE RELATE TO AD HOC DISALLOWANCE @ 10%. THE A D HOC DISALLOWANCE IS RESTRICTED TO 5% IN ALL GROUNDS, AS PER DISCUSSION MADE (SUPRA). 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 05.04 .2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE:05/04/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S DROLIA ELECTROSTEEL PVT. LTD. 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH