RAJENA AGRO PRODUCTS PVT. LTD.,,PATAN vs. THE DY.CIT, PATAN CIRCLE,, PATAN

The assessee has raised following grounds of appeal:- “1. The learned CIT (A) is unjustified & erred in law by confirming addition of Rs.10,41,320/- made by AO, as excess Vat refund received. Addition is contrary to material available on record & made without affording opportunity of being heard. The receipt was never in the nature of income & apparently erroneous.

The learned CIT (A) is unjustified & erred in law by confirming disallowance of Rs.6,82,511/- out of various expenses made by AO in adhoc/lumpsum & arbitrary manner without giving any adverse findings, [i.e. Labour charge Re. 1.00 lakh, Machine repair maintenance Re. 1.00 lakh, foreign travel Re. 0.50 lakh, outward freight Re. 3.85 lakhs & building repair Re. 0.48 lakh]. The books of accounts of company are audited.”

The fact in brief is that return of income declaring income of Rs. 58,08,013/- was filed on 29th Nov, 2014. The case was selected under scrutiny assessment. The assessment u/s. 143(3) of the act was completed on 22nd December, 2016. The remaining facts of the case are discussed while adjudicating the aforesaid two grounds of appeal as under:-

During the course of assessment, the assessing officer noticed that the assessee has shown Vat payable for assessment year 2013-14 outstanding at Rs. 79,78,941/-. The assessing officer has issued show cause notice to the assessee to explain why the same should not be disallowed and added to the total income of the assessee. The assessee responded that amount of Rs. 79,78,941/- was Vat refund received and the same has also been reflected in the bank statement. On perusal of the asset side of the balance share, the assessing officer has noticed that Vat tax refund was Rs. 69,37,621/-, however, the assessee has actually received refund to the amount of Rs. 79,78,941/-. In view of the above, the assessing officer observed that assessee has made wrong accounting entry of Vat tax refund, therefore, the difference of Rs. 10,41,320/- was added to the total income of the assessee as the amount of concealed Vat income.

The assessee has preferred appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.

We have heard the rival contentions on this issue. With the assistance of ld. representatives, we have gone through the material on record and it is noticed that assessee company has credited the Vat refund of Rs. 79,78,941/- to the Vat payable account (F.Y. 2013-14) instead of adjusting the same against the duties and taxes (F.Y. 2013-14 Account) outstanding balance of Rs. 2,86,63,940/-. After adjusting the Vat refund received of Rs. 79,78,941/- credited outstanding balance in the receivable account shall be Rs. 20,68,999/-. Considering the forgoing facts, the addition is deleted and the appeal of the assessee is allowed on this issue.

During the course of assessment, the assessee was requested to furnish bills and vouchers in support of expenses incurred. In spite of giving repeated opportunities, the assessee has failed to produce bill/voucher for verification of the expenses. Consequently, the assessing officer has made disallowance out of the various expenses as under:- Expenses Claimed Proposed Disallowance Labour Charge Rs. 36,12,932/- Rs. 1 ,00,000/- Machinery repair and Rs. 10,94,508/- Rs. 1 ,00,000/- Maintenance Foreign Travelling Rs. 1 ,42,000/- Rs. 50,000/- Outward Freight Total exp. Rs. Rs. 3,84,954/ - @ 10% 8,66,66,982/-, out of which Cash Rs. 38,49,538/- Building repair Rs. 4,75,564/- Rs. 95,1 13 @ 20%

In the result, the appeal of the assessee is partly allowed.