JCIT, Muzaffarnagar V. The Ganga Kisan Sahkari Chinni Mills Ltd., Muzaffarnagar

ITA 5455/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86499 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: S K ARORA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM ITA NO.5455/DEL/2011 ASSESSMENT YEAR : 2008-09 J CIT, RANGE-2, MUZAFFARNAGAR. VS. THE GANGA KISAN SAHKARI CHINNI MILLS LTD., MORNA, MUZAFFARNAGAR. PAN: AAAJT0456F ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI S.K. ARORA, CA DEPARTMENT BY : S HRI J.P. CHANDRAKAR, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE EMANATES FROM THE ORDER PASSED BY THE CIT(A) ON 10.8.2011 IN RELATION TO THE ASSES SMENT YEAR 2008- 09. 2. THE FIRST GROUND IS AGAINST THE ALLOWING OF RELI EF OF `23 LAC OUT OF DISALLOWANCE OF `25 LAC. BRIEFLY STATED, THE FA CTS OF THIS GROUND ARE THAT THE ASSESSEE SOCIETY CLAIMED DEDUCTION FOR A SUM OF ITA NO.5455/DEL/2011 2 `97.93 LAC UNDER THE HEAD MANUFACTURING MATERIAL AND CHEMICALS EXPENSES. THE AO NOTICED THAT IN THE IMMEDIATELY P RECEDING YEAR, THE EXPENSES UNDER THIS HEAD WERE TO THE TUNE OF `4 8.90 LAC. IN VIEW OF ALMOST 100% INCREASE IN SUCH EXPENSES, THE ASSES SEE WAS CALLED UPON TO JUSTIFY THE DEDUCTION. THE ASSESSEE STATED THAT DUE TO INCREASE IN THE RATE OF MATERIAL USED IN THE MANUFA CTURING PROCESS, THE EXPENSES HAVE GONE UP. IN THE ABSENCE OF PROPE R EXPLANATION GIVEN BY THE ASSESSEE, THE AO MADE AN AD HOC DISALLOWANCE OF `25 LAC. THE LD. CIT(A), ON PERUSAL OF THE DETAILS OF EXPENSES, RESTRICTED THE ADDITION TO `2 LAC, AGAINST WHICH THE REVENUE H AS COME UP IN APPEAL BEFORE US. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH E AO HAS MADE AN AD HOC DISALLOWANCE OF `25 LAC BY SIMPLY NOTICING THAT TH E EXPENSES UNDER THIS HEAD INCREASED BY 100% IN COMPARISON WIT H THE PRECEDING YEAR. THE ASSESSEES EXPLANATION ABOUT T HE INCREASE IN THE MATERIAL COST WAS NOT CONTROVERTED BY THE AO. S IMPLY BECAUSE A PARTICULAR EXPENSE HAS INCREASED UPWARDS, CANNOT IN ITSELF BE A REASON TO CALL FOR ANY DISALLOWANCE. CONSIDERING TH E TOTALITY OF FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE FIND THAT THE LD. CIT(A) ITA NO.5455/DEL/2011 3 WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO `2 LAC ON ACCOUNT OF NON-AVAILABILITY OF SOME PETTY VOUCHERS. THIS GROUN D IS NOT ALLOWED. 4. THE ONLY OTHER GROUND IS AGAINST THE ALLOWING OF A RELIEF OF `9,37,495/- OUT OF DISALLOWANCE OF `25 LAC UNDER TH E HEAD REPAIRS AND MAINTENANCE OF PLANT AND MACHINERY. THE AO OB SERVED THAT THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF `1.56 C RORE UNDER THIS HEAD. SUCH EXPENDITURE WAS FOUND TO BE ON A HIGHER SIDE IN COMPARISON WITH THE EXPENDITURE OF `1.04 CRORE INCU RRED IN THE PRECEDING YEAR. THE ASSESSEE, IN RESPONSE TO THE C LAIM FOR DEDUCTION SUBMITTED THAT THE SCRAP GENERATED AS A R ESULT OF REPAIRS AND MAINTENANCE WAS NOT ACCOUNTED FOR, WHICH EVENT TAKES PLACE IN 3-4 YEARS. NOT CONVINCED, THE AO MADE A DISALLOWAN CE OF `25 LAC. THE LD. CIT(A) REDUCED THE DISALLOWANCE TO `15,62,5 05/-. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS AGAIN NOTICED TH AT THE AO HAS MADE AN AD HOC DISALLOWANCE BY SIMPLY CONSIDERING HIGHER EXPENDITURE ON ACCOUNT OF REPAIR OF PLANT AND MACHI NERY. IT IS QUITE NATURAL THAT WITH THE INCREASE IN THE AGE OF ASSETS , THE REPAIR COSTS ALSO INCREASE. WE FIND WEIGHT IN THE VIEWPOINT OF T HE LD. CIT(A) THAT THE ASSESSEES METHOD OF RECORDING SCRAP IN THE YEA R OF SALE WAS ITA NO.5455/DEL/2011 4 NOT APPROPRIATE. IN OUR CONSIDERED OPINION, THE LD . CIT(A) WAS JUSTIFIED IN CONSIDERING THE VALUE OF SCRAP AT 10% OF TOTAL EXPENSES UNDER THIS HEAD, WHICH COMES TO `15.62 LAC, THEREB Y ALLOWING A RELIEF OF `9.37 LAC. THIS GROUND IS NOT ALLOWED. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.201 5. SD/- SD/- [ A.T. VARKEY ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 14 TH JANUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.