ACIT-CENTRAL-CIRCLE-2(3),, NAGPUR vs. GUPTA DOMESTIC FUELS (NAGPUR) LTD.,, NAGPUR

The Revenue in appeal has raised 6 grounds of appeal. All the grounds are related to single issue of disallowance of expenditure Rs.1,63,64,142/- under various heads.

The brief facts of the case as emanating from records are : The assessee company is engaged in the business of trading of coal and steel.

Shri Rajesh Loya appearing on behalf of the assessee submitted that disallowance of expenditures were made by the Assessing Officer merely on surmises and conjectures. The Assessing Officer failed to take cognizance of various documentary evidences produced by the assessee. The Commissioner of Income Tax (Appeals) after appreciating the documents on record and facts of the case has deleted the entire addition. The ld. AR further contended that the books of account of assessee are subject to audit and the Assessing Officer has not rejected the same before making disallowance of expenditure. The ld. AR further pointed that the disallowance on account of interest charges was made in the case of assessee’s group concern. The same was deleted by the Commissioner of Income Tax (Appeals). The Department carried the matter in appeal before the Tribunal in ITA No. 223/NAG/2013 for assessment year 2008-09. The Tribunal vide order dated 22-05-2015 upheld the findings of Commissioner of Income Tax (Appeals) and deleted the addition.

On the other hand Shri U.U. Kasar representing the Department vehemently defended the assessment order and prayed for reversing the findings of Commissioner of Income Tax (Appeals).

Both sides heard. Orders of the authorities below perused. The Revenue is in appeal against deleting of various expenditures aggregating to Rs.1,63,64,142/-. The Assessing Officer made addition raising doubt over the genuineness of expenditures as well as the quantum of expenditure. In First Appellate Proceedings the Commissioner of Income Tax (Appeals) deleted the addition by observing as under : “In my considered view, the AO has failed to discharge the onus upon him to conclusively prove that the expenditure incurred are bogus. The AO in Page 4 para 4.4 of the Assessment Order agreed that the expenses claimed had to be restricted to only those expenses which were related to non delivery transaction or paper transactions and in Para 4.5 further held that it is reasonable to allow only those expenses which are genuinely incurred to carry out such paper transactions. Thus the AO agrees that the expenses are allowable. However, he failed to bring on record any infirmity in the individual head of expenditure which had been considered for disallowance. I find that the assessee has paid interest to banks on the LC transaction and finance facility. Similarly, the bank charges and commission have been paid for LC discounting. The interest paid to others is also for securing funds for the purpose of business. It is nowhere established by the AD that the funds have been utilised for personal purposes or non business activity. The genuineness of the expenditure cannot be doubted as the payments are made to bank and other parties. The manufacturing expenses like factory expenses, electricity charges etc. have been incurred to carry out manufacturing activity and the AO erred in disallowing the expenditure merely construing the manufacturing activity as paper transaction. No defect has been pointed out in any of such expenditure. The AO has disallowed professional and legal charges, travelling expenses, consultancy charges and selling expenses only on the basis that such expenses are not required without going into the details of such expenditure, and whether they have been actually incurred or not. The expenditure has been disallowed by the AO summarily without proper verifications. I find that the other expenses in the Profit and Loss Account which are also of similar nature have been allowed as deduction. Since it is held that the assessee had carried out the regular business activity on which profit is earned, the expenditure incurred for such transaction or for facilitating the business have to be allowed. I find that the assessee has incurred

The ld. DR has not been able to controvert the findings of First Appellate Authority. In the absence of any contrary material, we find no reason to interfere with the reasoned findings of Commissioner of Income Tax (Appeals). The same are upheld, accordingly and the appeal of Revenue is dismissed being devoid of any merit.

In the result, the appeal of Revenue is dismissed.

Since, we have dismissed the appeal of Revenue, the cross objections filed by the assessee have become infructuous and are dismissed as such.

To sum up, the appeal of Revenue, as well as cross objections by the assessee are dismissed. Order pronounced on Friday, the 29th day of March, 2019.