M/s. Ganraj Sponge Iron, Jalna V. Income-tax Officer,

ITA 872/PUN/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5078 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: K SRINIVASAN
• Keywords: Tax effect
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.872/PUN/2015 / ASSESSMENT YEAR : 2010-11 M/S. GANRAJ SPONGE IRON, C/O. RAMNIVAS DEVIDATT AGARWAL, HARI KUNJ, PLOT NO.24, 25, GATE NO.1, SADHVI SRI PREETI SUDHAJI NAGAR, MANTHA ROAD, JALNA-431203. PAN : AANFM8492M ....... / APPELLANT / V/S. ITO, WARD-1(3), JALNA. / RESPONDENT . / ITA NO.896/PUN/2015 / ASSESSMENT YEAR : 2010-11 ITO, WARD-1, JALNA. ....... / APPELLANT / V/S. M/S. GANRAJ SPONGE IRON, SHOP NO.23, VISHAL CORNER, AURANGABAD ROAD, JALNA-431203. PAN : AANFM8492M / RESPONDENT ASSESSEE BY : SHRI K. SRINIVASAN REVENUE BY : SHRI S. P. WALIMBE / DATE OF HEARING : 21.11.2019 / DATE OF PRONOUNCEMENT : 22.11.2019 / ORDER PER D. KARUNAKARA RAO, AM: THERE ARE TWO CROSS APPEALS UNDER CONSIDERATION. BOTH THE CROSS APPEALS ARE FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE 2 ITA NO.872/PUN/2015 ITA NO.896/PUN/2015 ORDER OF CIT(A)-1, AURANGABAD DATED 31.03.2015 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.896/PUN/2015 (BY REVENUE) 2. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT IN TERMS OF LATEST CBDT CIRCULAR NO.17/2019 [F.NO.279/MISC.142/2007-ITJ (PT)] DATED 08 TH AUGUST, 2019 READ WITH CIRCULAR NO.3 OF 2018 DATED 11.07.2018. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE IN APPEAL RAISED GROUNDS ASSAILING THE FINDINGS OF CIT(A) IN DELETING THE ADDITIONS. THUS, THE TAX EFFECT ON THE SAID ADDITIONS IS LESS THAN RS.50 LAKHS. 3. THE LD. DR FOR THE REVENUE FAIRLY ADMITTED THAT IN THE PRESENT APPEAL BY THE REVENUE THE TAX EFFECT IS LESS THAN RS.50 LAKHS. 4. BOTH SIDES HEARD. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITIONS. UNDISPUTEDLY, THE TAX EFFECT INVOLVED IN APPEAL IS LESS THAN THE MONETARY LIMIT PRESCRIBED BY THE RECENT CBDT CIRCULAR NO.17/2019 [F.NO.279/MISC.142/2007-ITJ (PT)] DATED 08 TH AUGUST, 2019 READ WITH CIRCULAR NO.3 OF 2018 DATED 11.07.2018 FOR FILING OF APPEALS BEFORE THE TRIBUNAL BY THE DEPARTMENT. THE CBDT VIDE CIRCULAR DATED 08-08-2019 (SUPRA) HAS AMENDED PARA 3 OF CIRCULAR NO.3 OF 2018 DATED 11-07-2018 THEREBY ENHANCING MONETARY LIMIT OF TAX EFFECT 3 ITA NO.872/PUN/2015 ITA NO.896/PUN/2015 FROM RS.20 LAKHS TO RS.50 LAKHS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL. THUS, WITHOUT GOING INTO MERIT OF THE ISSUES RAISED IN THE APPEAL, IN VIEW OF THE CBDT CIRCULAR (SUPRA) THE PRESENT APPEAL OF THE REVENUE IS DISMISSED ON ACCOUNT OF LOW TAX EFFECT. 5. BEFORE PARTING, WE CLARIFY HERE THAT THE REVENUE SHALL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR RESTORATION OF APPEAL, WITH THE REQUISITE MATERIAL TO SHOW THAT THE APPEAL IS PROTECTED BY THE EXCEPTIONS PRESCRIBED IN PARA 10 OF THE CIRCULAR DATED 11-07-2018 AND ITS AMENDMENT DATED 20-08-2018. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.872/PUN/2015 (BY ASSESSEE) 7. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE THE ASSESSING OFFICER DISALLOWED A SUM OF RS.1,40,85,526/- OUT OF THE TRANSPORTATION CHARGES ACCOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE TOTAL TRANSPORTATION CHARGES OF RS.1,62,81,574/- WERE DEBITED IN THE PROFIT AND LOSS ACCOUNT. IN FACT, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT FOR MAKING THE SAID DISALLOWANCE. WHILE MAKING THE DISALLOWANCE, THE ASSESSING OFFICER DID NOT CONSIDER THE DECISIONS TAKEN BY HIS PREDECESSORS IN EARLIER ASSESSMENT YEARS ON THIS ACCOUNT. 4 ITA NO.872/PUN/2015 ITA NO.896/PUN/2015 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) NOTED THAT THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT FOR MAKING SUCH DISALLOWANCES. ON FINDINGS THAT INVOKING SAID PROVISIONS OF THE ACT IS UNSUSTAINABLE IN LAW, THE CIT(A) GAVE A FINDING THAT THE SAID PROVISIONS OF THE ACT DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. THEREFORE, ALTERNATIVELY, THE CIT(A) ADOPTED AD-HOC DISALLOWANCE METHOD AND, FOR WANT OF EVIDENCES, THE CIT(A) RESTRICTED THE DISALLOWANCE 50% OF THE SAID RS.1,40,85,526/-. 8. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THIS ISSUE. 9. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID TRANSPORTATION ACCOUNT WAS THE SUBJECT MATTER OF DEEP SCRUTINY OVER THE YEARS. REFERRING TO THE ASSESSMENT ORDER PLACED AT PAGE 13 OF THE PAPER BOOK, LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER/CIT(A) RESTRICTED THE DISALLOWANCE TO 1% OF THE CLAIMS. IN THAT ASSESSMENT YEAR, THERE WAS CLAIM OF RS.1,65,00,000/- ON ACCOUNT OF TRANSPORTATION CHARGES. 1% OF THE SAME WORKS OUT TO RS.1,65,000/- AND THE SAME WAS DISALLOWED IN THE EARLIER YEAR. NO CASE IS MADE OUT BEFORE US BY THE REVENUE IN SUPPORT OF THE AD-HOC PERCENTAGE OF 50% ADOPTED BY THE CIT(A). THE REASONS FOR NOT FOLLOWING THE AD-HOC PERCENTAGE OF 1% WAS ALSO NOT MADE OUT BEFORE US. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT AS DISCUSSED IN OPEN COURT RESTRICTING THE DISALLOWANCE TO 5% ON AD-HOC BASIS SHOULD BE REASONABLE. ACCORDINGLY, THE ASSESSING 5 ITA NO.872/PUN/2015 ITA NO.896/PUN/2015 OFFICER IS ORDERED. THUS, THE RELEVANT GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 22 ND DAY OF NOVEMBER, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 22 ND NOVEMBER, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-1, AURANGABAD. 4. THE PR.CIT-1, AURANGABAD. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.