Nagesh Hosiery Export Ltd, Ludhiana V. ITO, Ward-17(3), New Delhi

ITA 7124/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2744 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 29-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THESE ALL RELATE TO OF LD C
• Keywords: Set aside
• Section: 143(3); 115JB

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 7124/DEL/2019 ASSTT. YEAR 2014-15 NAGESH HOSIERY EXPORT LTD. G.T. ROAD (WEST) VILLAGE BHORA, LUDHIANA PUNJAB PIN 144008 PAN AAACN0537E VS. ITO, WARD -17(3) NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER R.K. PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29 TH JULY, 2019 OF THE LD. CIT(A) 6, DELHI RELATING TO ASSESSMENT YEAR 2014-15. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THESE ALL RELATE TO THE ORDER OF THE LD. CIT(A) IN ASSESSEE BY: SHRI MUNSHI RAM, AR DEPARTMENT BY : SHRI GAURAV DUDEJA, SR. DR DATE OF HEARING 10 /02 /20 2 1 DATE OF PRONOUNCEMENT 18 /02 /2021 2 CONFIRMING THE ADDITION OF RS. 7,52,062/- TOWARDS VARIOUS EXPENSES DISALLOWED BY THE AO. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF HOSIERY ITEMS. IT FILED ITS RETURN OF INCOME ON 31 ST NOVEMBER, 2014 DECLARING NIL INCOME. HOWEVER, THE ASSESSEE HAS PAID TAX U/S 115JB OF THE I.T. ACT ON RS. 10,619/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENSES :- HEAD OF THE EXP. TOTAL EXP. CLAIMED BY THE ASSESSEE BILLS AND VOUCHERS PRODUCED FOR THE EXPENSES BILLS & VOUCHERS NOT PRODUCED DIFFERENCE OF COL. (2-3) 1 2 3 4 5 ADVERTISEMENT RS. 68,756/- RS. 68,756/- RS. 68,756/- GENERAL EXPENSES RS. 3,79,185 RS. 3,79,185/- RS. 3,79,185 MACHINERY REPAIR RS. 1,851/- RS. 1,851/- RS. 1,851/- REBATE AND DISCOUNT RS. 2,76,920/ - RS. 2,76,920/ - RS. 2,76,920/ - (V) POSTAGE & COURIER RS. 1,36,204/ - RS. 1, 24,454/ - RS. 11,750/ - 11,750/ - VI PRINTING & STATIONARY 34,426/ - RS. 30,526/ - RS. 3,900/ - 3,900/ - REPAIR & MAINTENANCE 31,562/ - RS. 21,862/ - RS. 9,700/ - 9,700/- RS. 9,28,904 RS. 1,76,842/- RS.7,52,062/- RS.7,52,062/- 3 4. HE ASKED THE ASSESSEE TO PRODUCE THE BILL AND VOUCHER OF THE EXPENSES. THE ASSESSEE SUBMITTED THE DETAILS AND PRODUCED SOME BILLS AND VOUCHERS. THE AO OBSERVED THAT THE ASSESSEE COULD PRODUCE THE BILLS TO THE TUNE OF RS.1,76,842/-. SINCE THE ASSESSES DID NOT PRODUCE ALL THE BILLS AND VOUCHERS, THE AO MADE ADDITION OF RS. 7,52,062/- I.E. (9,28,904 RS. 1,76,842/-) 4.1 IN APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 4.2 AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE LD. CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS. 7,52,062/- MADE BY THE AO OUT OF THE TOTAL EXPENSES OF RS. 9,28,904/-. HE SUBMITTED THAT THE METHOD OF MAINTENANCE OF BOOKS OF ACCOUNTS OF THE APPELLANT FOR THE ASSESSMENT YEAR UNDER APPEAL IS THE SAME AS DURING THE LAST FOUR DECADES EVER SINCE THE BUSINESS WAS SET UP IN THE YEAR 1981 AND THERE HAS BEEN NO CHANGE AT ALL IN THIS REGARD. THE APPELLANT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS IN THE 4 COURSE OF ITS BUSINESS ACTIVITIES WHICH ARE CORRECT AND COMPLETE IN ALL RESPECTS, AND BARRING THIS DISALLOWANCE, THE SAME HAVE BEEN ACCEPTED AFTER THOROUGH EXAMINATION BY THE LD. ASSESSING OFFICER. IF WE GO BY THE JUDGMENT OF THE AUTHORITIES BELOW, IT WOULD CLEARLY IMPLY THAT THEY HAVE CONSIDERED TOTAL EXPENSES OF RS. 1,76,842/- UNDER SEVEN DIFFERENT HEADS AS REASONABLE AGAINST GROSS REVENUE RECEIPTS (BUSINESS OPERATIONS) OF RS. 1,98,05,868/-. SUCH A FINDING OF FACT IS CERTAINLY NOT ACCEPTABLE UNDER ANY CIRCUMSTANCES AND NOT TANTAMOUNT TO DISPENSATION OF JUSTICE. 6. HE FURTHER SUBMITTED THAT EVER SINCE THE APPELLANT STARTED SUBMITTING ITS RETURNS OF INCOME, NO ADDITION OR DISALLOWANCE OUT OF EXPENSES UNDER THESE HEADS HAS EVER BEEN MADE IN ANY ASSESSMENT YEAR BY ANY OF THE ASSESSING OFFICERS. AT THE SAME TIME, THE EXPENDITURE CLAIMED UNDER THESE HEADS FAVORABLY COMPARES WITH THAT OF THE EARLIER YEARS AND IT HAS BEEN ACCEPTED BY THE DEPARTMENT AS CLAIMED IN THE RETURNS OF INCOME. 5 7. LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COMPARATIVE FIGURES OF THE PRECEDING YEARS WHICH ARE AS UNDER:- YEAR ENDING REVENUE RECEIPTS EXPENSES (7HEADS) % OF EXPENSES 31-03-2010 RS. 2,79,10,657/- RS. 12,58,675/- 4.51 % 31-03-2011 RS. 1,94,45,807/- RS. 2,67,203/- 1.37 % 31-03-2012 RS. 3,86,27,153/- RS. 34,74,939/- 9.00 % 31-03-2013 RS. 3,38,59,706/- RS. 27,29,602/- 8.06 % 31-03-2014 RS. 1,98,05,868/- RS. 9,28,094/- 4.66 % 8. REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013-14, HE SUBMITTED THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT 1961 AND ALL THE EXPENSES CLAIMED IN THE P & L ACCOUNT WERE ACCEPTED BY THE AO. HE SUBMITTED THAT IN THAT YEAR THE PERCENTAGE OF EXPENSES TO SALES WAS 8.06% WHEREAS IN THE CURRENT YEAR THE EXPENSES ARE 4.66% OF THE TOTAL REVENUE RECEIPTS. HE SUBMITTED THAT EVEN IF THE BOOKS OF ACCOUNTS ARE NOT CORRECT AND COMPLETE STILL THE EXPENSES AS CLAIMED VIS A VIS THE GROSS RECEIPTS FROM BUSINESS OPERATIONS ARE SO REASONABLE THAT THE SAME CANNOT BE VIEWED AS EXCESSIVE OR UNJUSTIFIED UNDER ANY 6 CIRCUMSTANCES. REFERRING TO THE CASE OF THE TRIBUNAL IN THE CASE OF THE SISTER CONCERN NAMELY NAGESH KNITWEARS PVT. LTD. HE SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2012-13 VIDE ORDER DATED 20 TH SEPTEMBER, 2019 ALMOST ON IDENTICAL CIRCUMSTANCES HAS DELETED THE DISALLOWANCE MADE BY THE AO AND UPHELD BY THE LD. CIT(A). HE ACCORDINGLY , SUBMITTED THAT THE ADDITION SO MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) SHOULD BE DELETED. 9. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND LD. CIT(A). 10. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME INCLUDING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN CASE OF ONE OF THE SISTER CONCERN NAMELY NAGESH KNITWEARS PVT. LTD. (SUPRA). I FIND THE AO IN THE INSTANT CASE MADE DISALLOWANCE OF RS. 7,52,062/- OUT OF TOTAL EXPENSES OF RS. 9,28,094/- DEBITED TO THE P & L ACCOUNT ON ACCOUNT OF EXPENSES UNDER SEVEN DIFFERENT HEADS I.E ADVERTISEMENT, GENERAL EXPENSES, MACHINERY REPAIR, POSTAGE & COURIER, PRINTING & STATIONERY, GENERAL REPAIR 7 & MAINTENANCE AND REBATE & DISCOUNT ON THE GROUND THAT BILLS AND VOUCHERS TO THIS EXTENT WERE NOT PRODUCED. I FIND THE LD. CIT(A) UPHELD THE ACTION OF THE AO. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE METHOD OF MAINTENANCE OF BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR IS THE SAME AS DURING THE LAST FOUR DECADES EVER SINCE THE BUSINESS WAS SET UP IN THE YEAR 1981 AND THERE WAS NO CHANGE AT ALL IN THIS REGARD. IT IS ALSO HIS SUBMISSION THAT THE EXPENSES CLAIMED DURING THE YEAR IS IN CONSONANCE WITH THE TURNOVER OF THE ASSESSEE AND IS MUCH LESS THAN THE EXPENSES CLAIMED FOR ASSESSMENT YEAR 2013-14 AND THE AO FOR THE ASSESSMENT YEAR 2013-14 HAS ACCEPTED SUCH EXPENSES IN THE ORDER PASSED U/S 143(3) OF THE ACT. I FIND SOME FORCE IN THE ABOVE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS IN THE COURSE OF ITS BUSINESS ACTIVITIES AND THE SAME HAS NOT BEEN REJECTED AND NO OTHER ADDITIONS HAVE BEEN MADE BY THE AO BARRING THIS DISALLOWANCE. FROM THE DETAILS FILED BY THE ASSESSEE, I FIND THAT NO ADDITION OR DISALLOWANCE OUT OF EXPENSES UNDER THIS HEAD HAS EVER BEEN MADE IN ANY OF THE ASSESSMENT YEARS BY THE AO. I FIND THE ASSESSMENT ORDER FOR 8 THE ASSESSMENT YEAR 2013-14 WAS FRAMED U/S 143(3) OF THE I.T. ACT AND THE AO HAS ACCEPTED EXPENSES OF RS. 27,29,602/- ON THE TOTAL REVENUE RECEIPTS OF RS. 3,38,59,706/- WHICH IS 8.06% OF THE EXPENSES. FOR THE IMPUGNED ASSESSMENT YEAR, THE TOTAL EXPENSES SO CLAIMED COMES TO RS. 9,28,094/- ON A TOTAL REVENUE RECEIPTS OF RS. 1,98,05,868/- WHICH COMES TO 4.66% OF THE TOTAL EXPENSES. I, THEREFORE, FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THE EXPENSES SO DEBITED IN THE PROFIT AND LOSS ACCOUNT AS REASONABLE. FURTHER, THE COORDINATE BENCH OF THE TRIBUNAL UNDER IDENTICAL CIRCUMSTANCES IN ONE OF THE SISTER CONCERNS NAMELY NAGESH KNITWEARS PVT. LTD. HAS DELETED SUCH DISALLOWANCE OF EXPENSES. SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO AND NO OTHER DISALLOWANCE EXCEPT THESE EXPENSES HAS BEEN MADE AND CONSIDERING THE FACT THAT THE EXPENSES SO CLAIMED BY THE ASSESSEE APPEARS TO BE REASONABLE, AS COMPARED TO SUCH EXPENSES IN THE PRECEDING ASSESSMENT YEAR WHICH HAS UNDER GONE SCRUTINY BY THE AO AND THE ORDER PASSED U/S 143(3) AS NO ADDITION HAS BEEN MADE, THEREFORE, I DO NOT FIND ANY REASON ON THE PART OF THE LOWER AUTHORITIES TO MAKE SUCH HUGE ADDITION BY DISALLOWING 9 THE EXPENSES. ACCORDINGLY, I SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2021. SD/- (R.K. PANDA) ACCOUNTANT MEMBER DATED: 18/02/2021 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI