Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 4498 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-10-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2013-2014
Appeal Filed On
29-01-2020
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE HONBLE SHRI VIKAS AWASTHY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO. 679 /MUM/20 20 ( / ASSESSMENT YEAR : 2013 - 14 ) M/S LOTUS ORNAMENTS PVT. LTD. UNIT NO. 78, SDF - III, SEEPZ SEZ, ANDHERI(E), MUMBAI - 400 096 / VS. ACIT 10(2 )(1) AAYKAR BHAVAN M. K. ROAD M UMBAI - 400 020 ./ ./ PAN/GIR NO . A AACL - 9830 - C ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI GAURAV BANSAL LD. AR REVENUE BY : SHRI BRAJENDRA KUMAR LD. DR / DA TE OF HEARING : 28 /09 /2021 / DATE OF PRONOUNCEMENT : 01/10/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2013 - 14 ARISES OUT OF THE ORDER OF LEARNED COMMISSIONER OF INCOME - TA X (APPEALS) - 10 , MUMBAI [CIT(A)], DATED 11/12 /2019 IN THE MATTER OF ASSESSMENT FRAMED BY LEARNED ASSESSING OFFICER (AO) U/S 143(3) ON 25/03/2016. THE IMPUGNED ORDER HAS CONFIRMED DISALLOWANCE U/S 14A AS WELL AS ADHOC DISALLOWANCE OF LABOUR / ASSORTMENT CHAR GES AS MADE BY LD. AO IN THE ASSESSMENT ORDER. GROUND NO.1 HAS NOT BEEN PRESSED 2 BEFORE US AND THEREFORE, THE SAME STAND DISMISSED AS BEING NOT PRESSED. IN GROUND NO.2, THE ASSESSEE HAS CONTESTED THE CONFIRMATION OF 10% ADHOC DISALLOWANCE OF LABOUR / ASSORT MENT CHARGES. 2. THE ASSESSEE, VIDE LETTER DATED 15/09/2021, HAS FILED AN ADDITIONAL GROUND CHALLENGING THE DISALLOWANCE MADE U/S 14A. SINCE THE SAME ARISES OUT OF THE ASSESSMENT ORDER, IT IS ADMITTED IN TERM OF THE DECISION OF HONBLE APEX COURT IN NATIO NAL THERMAL POWER CORPORATION LTD. V/S CIT ( 1998 ; 229 ITR 383 ). THE ASSESSEE SEEKS DELETION OF DISALLOWANCE U/S 14A IN TERMS OF THE DECISION OF HONBLE APEX COURT IN PR. CIT V/S OIL INDUSTRY DEVELOPMENT BOARD (2019; 103 TAXMANN.COM 326) AS WELL AS CIT V/S CHETTINAD LOGISTICS (P) LTD. (2018; 95 TAXMANN.COM 250) ON THE GROUND THAT NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE DURING THE YEAR. 3 . HAVING HEARD RIVAL SUBMISSIONS AND AFTER CAREFUL CONSIDERATION OF MATERIAL ON RECORD, OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. DISALLOWANCES U/S 14A 4 .1 THE ASSESSEE OFFERED SUO - MOTO DISALLOWANCE U/S 14A FOR RS.0 . 63 LACS IN THE COMPUTATION OF INCOME AGAINST INVESTMENTS MADE BY THE ASSESSEE. HOWEVER, LD. AO COMPUTED ADDI TIONAL DISALLOWANCE OF INTEREST U/R 8D(2)(II) FOR RS.4.60 LACS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. THE ASSESSEE DID NOT CONTEST THIS ISSUE DURING APPELL ATE PROCEEDINGS. HOWEVER, THE ASSESSEE HAS ASSAILED THE DISALLOWANCE BEFORE US. 4 .2 UPON PERUSAL OF ASSESSEES FINANCIAL STATEMENTS, IT COULD BE GATHERED THAT ASSESSEES OWN FUNDS IN THE SHAPE OF SHARE CAPITAL AND 3 FREE RESERVES FAR EXCEEDS THE INVESTMENT M ADE BY THE ASSESSEE AND THEREFORE, A PRESUMPTION WOULD RUN IN ASSESSEES FAVOR THAT THE INVESTMENTS WERE FUNDED OUT OF OWN FUNDS. SECONDLY, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. THEREFORE, THE ADDITIONAL INTEREST DISALLOWANCE IS NO T SUSTAINABLE IN LAW AS PER THE CITED JUDICIAL PRONOUNCEMENTS. THEREFORE, BY DELETING THE DISALLOWANCE OF RS.4.60 LACS, WE ALLOW THIS GROUND OF APPEAL. ADHOC DISALLOWANCE OF LABOR / ASSORTMENT CHARGES 5 . 1 THE ASSESSEE CLAIMED ASSORTMENT / LABOUR CHARGES FO R RS.777.80 LACS. UPON PERUSAL OF SAMPLE SUPPORTING BILLS, VOUCHERS ETC. , IT WAS NOTED BY LD. AO THAT THE NATURE AND PARTICULARS COULD NOT BE VERIFIED, FEW DOCUMENTS WERE NOT AFFIXED WITH REVENUE STAMPS AND IN SOME CASES, THE PAYEES COULD NOT BE VERIFIED. ACCORDINGLY, LD. AO ESTIMATED AN ADHOC DISALLOWANCE OF 10% AGAINST THE SAME. THE LD. CIT(A) CONFIRMED THE SAME SINCE THE ASSESSEE DID NOT APPEA R DURING APPELLATE PROCEEDINGS. 5.2 THE LD. AR ASSAILED THE DISALLOWANCE BY SUBMITTING THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED AND THE ADHOC DISALLOWANCE THUS MADE WOULD NOT BE SUSTAINABLE IN LAW AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN PCIT V/S R.G. BUILDWELL ENGINEERS LTD. (99 TAXMANN.COM 283; SLP DISMISSED WHICH IS REPORTED AT 259 TAXMAN 370) . THE LD. AR SUBMITTED THAT THE NATURE OF EXPENDITURE WAS DULY EXPLAINED BEFORE LD. AO AND LEDGERS WERE PRODUCED ALONG WITH VOUCHERS. N O SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE DOCUMENTS FURNISHED BY THE ASSESSEE . THE LD. AR ALSO SUBMITTED THAT SIMILAR E XPENDITURE WAS INCURRED IN AYS 2012 - 13 & 2014 - 15 WHEREIN NO DISALLOWANCE HAS BEEN MADE BY LD. AO IN SCRUTINY ASSESSMENT PROCEEDINGS U/ S 143(3). THE COPIES OF THE ORDERS HAVE BEEN PLACED ON 4 RECORD. LASTLY, IT IS THE SUBMISSION OF LD. AR THAT ASSESSEES BOOK S OF ACCOUNT S WERE DULY AUDITED UNDER THE COMPANIES ACT, 2013 A S WELL AS UNDER INCOME TAX ACT AND NO A DVERSE FINDING S HAVE BEEN REPORTED BY THE AUDITOR S. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE FACTS OF THE CASE JUSTIFY THE DISALLOWANCE. 5.3 AFTE R GOING THROUGH MATERIAL FACTS, IT COULD BE GATHERED THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY LD. AO. THE BOOKS WERE DULY AUDITED UNDER THE COMPANIES ACT AS WELL AS UNDER INCOME TAX ACT AND NO ADVERSE FINDINGS HAVE BEEN RENDERED BY AUDITORS, IN THIS REGARD. EXCEPT FOR GENERAL OBSERVATIONS, NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY LD. AO IN SAMPLE DOCUMENTS PRODUCED BY THE ASSESSEE. SIMILAR EXPENDITURE INCURRED BY THE ASSESSEE IN AYS 2012 - 13 & 2014 - 15 HAS BEEN ACCEPTED. THE COMPLETE DETAILS O F THE EXPENDITURE ALONG WITH RELEVANT LEDGERS W ERE FURNISHED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS (PAGE NOS. 18 TO 133 OF PAPER BOOK) . THERE IS NO DISPUTE ABOUT GENUINENESS AND ADMISSIBILITY OF CLAIM OF EXPENSES . REGARDING THE OBSERVATION OF LD. A O THAT THERE WAS DRASTIC INCREASE IN SUCH EXPENSES DURING T HE Y EAR, THE SAME STOOD EXPLAINED BY ASSESSEES RE P LY DATED 19/01/2016 WHEREIN IT WAS SUBMITTED THAT THE EXPENDITURE INCREASE D DUE TO CHANGE IN MANUFACTURING PATTERN OF THE ASSESSEE WHICH WAS NECES SITATED DUE TO CUSTOMERS REQUIREMENTS SINCE THE ASSESSEE DIVERSIFIED INTO SMALL PIECES FOR WHICH HIGHER LABOUR CHARGES WERE PAID BY THE ASSESSEE. THE NET PROFIT REFLECTED BY THE ASSESSEE IS 2.43% WHICH IS QUITE SIMILAR TO NET PROFIT OF 2.48% REFLECTED IN T HE EARLIER YEAR. THUS, IN TERMS OF THE CITED DECISION OF HONBLE DELHI HIGH COURT AND CONSIDERING THE FACTS OF THE CASE, WE ARE INCLINED TO DELETE THE ADHOC DISALLOWANCE AS MADE BY LD. AO. THIS GROUND STAND ALLOWED. 5 6. THE APPEAL STAND PARTLY ALLOWED IN TE RMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 1 ST OCTOBER, 2021. SD/ - SD/ - ( VIKAS AWASTHY ) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 01/10/2021 SR.PS, DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.
