ARVIND KUMAR vs. INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH

Facts

The assessee, Arvind Kumar, engaged in agro-based industry and manufacturing of bio-fuel briquettes ('Siddhi Bio-tech Industries') and dealing in sanitary items ('Hindustan Sanitary Plaza'), filed returns for assessment year 2014-15. The Assessing Officer (AO) issued a demand notice for Rs. 8,75,830/-. The AO made an addition of Rs. 14,62,636/- for a discrepancy in closing stock and disallowed 1/4th of expenses claimed (Rs. 11,75,190/-). The CIT(A) partly allowed the appeal, dismissing the addition on stock but restricting the expense disallowance to Rs. 4,70,000/-. The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeal. The assessee is now appealing the ITAT's order dated 12.02.2019.

Held

The High Court held that the Tribunal had rightly dismissed the assessee's appeals. Regarding the first issue, the Court found that the assessee had not produced any document to show that the closing stock of Rs. 14,62,636/- was ever shown before the AO. Furthermore, the Tribunal correctly held that the income from the sanitary business of Hindustan Sanitary Plaza was not derived from manufacturing activity, which is a prerequisite for deduction under Section 80JJA. Therefore, the claim for deduction under Section 80JJA was not tenable. Regarding the second issue, the Tribunal had rightly upheld the disallowance of Rs. 4,70,000/- as 1/10th of the expenses claimed were not substantiated by the assessee, with no vouchers produced for a significant portion of the expenditure. The Court concluded that the assessee had not led any cogent evidence and no substantial question of law arose.

Key Issues

1. Whether the Tribunal erred in upholding the addition of Rs. 14,62,636/- on account of undisclosed closing stock, thereby denying the assessee the benefit of automatic deduction under Section 80JJA, contrary to CBDT Circular No. 37/2016? Assessee's contention: The assessee argued that the addition was made on account of non-disclosure of closing stock and that an automatic deduction under Section 80JJA should have been allowed, citing CBDT Circular No. 37/2016. Revenue's contention: The revenue argued that the addition was rightly made as the closing stock was not disclosed in the income tax return, and the income from sanitary items was not derived from manufacturing activity covered under Section 80JJA. 2. Whether the Tribunal erred in sustaining the addition of Rs. 4,70,000/- on account of disallowance of expenses?