HANDA PRODUCTS,HYDERABAD vs. INCOME TAX OFFICER, WARD-7(1), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad Benches, ‘B’ Bench, Hyderabad Before Smt. P. Madhavi Devi, Judicial Member AND Shri S. Rifaur Rahman, Accountant Member ITA No. 564/Hyd./2018 A.Y: 2014-15 M/s Hansa Products Income Tax Officer 22-2-354, Hussaini Mohalla Vs Ward 7(1) Yawar Manzil Hyderabad Hyderabad. PAN: AABFH9788B (Appellant) (Respondent) For Assessee : Shri D.V.Anjaneyulu, AR For Revenue : Sh. M.H. Naik, DR Date of Hearing: 22.07.2019 Date of Pronouncement: 31/7/2019 O R D E R PER P. MADHAVI DEVI, J.M. This is assessee’s appeal for A.Y. 2014-15 against the order of CIT(A)-8, Hyderabad dated 27th Feb., 2018. 2. Brief facts of the case are that the assessee is a firm engaged in the business of manufacture of leather products. It filed its return of income for the A.Y. 2014-15 electronically on 12.11.2014 admitting total income of Rs.58,46,820/-. The same was processed u/s 143(1) of the Act on 28.07.2015. 2.1. There was a survey u/s 133A of the I.T. Act, 1961 in the business premises of the assessee on 21.01.2014 and therefore, the case falls under compulsory scrutiny and accordingly notice u/s 143(2) of the Act was issued and served on the assessee. The assessee was asked to furnish the books of accounts, purchase and sale bills and vouchers for expenses. The assessee submitted some of the bills, but the A.O.

ITA No.564/Hyd./2018 AY: 2014-15 Hansa Products, Hyd. observing that the assessee has not furnished all the relevant details, completed the assessment u/s 144 of the Act by rejecting the books of accounts and estimating net profit at 20% of the gross sales. Further, the assessee had admitted a sum of Rs.6 lakhs during the course of survey and accordingly offered the same also in the return of income filed by it. The A.O. accordingly assessed total income at Rs.8,26,132/- and brought it to tax. 3. Aggrieved, assessee preferred appeal before the CIT(A) who granted partial relief to the assessee. The CIT(A) also held that estimation of income at 20% of gross receipts is on the higher side. However, he observed that the assessee has made payments without TDS and, therefore, disallowance u/s 40(a)(ia) is called for. He also observed that the assessee has incurred expenditure of Rs.2,68,500/ towards the partner’s son’s marriage whereas it was claimed as welfare expenditure for employees. He, therefore, directed that the disallowance of interest payments to NBFCs without TDS of Rs.11,92,544/- is to be disallowed u/s 40(a)(ia); the claim of Rs.1,96,850/- out of total staff welfare expenses of Rs.2,68,500/- is to be disallowed as not incurred for business purposes; and 25% of car maintenance expenses to be disallowed for personal use by partners. 4. Against this order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal. “1. The order of the CIT(A) is erroneous in law, contrary to the facts and probabilities of the case also against the principles of equity and natural justice.

ITA No.564/Hyd./2018 AY: 2014-15 Hansa Products, Hyd. 3. The CIT[A] sustaining the addition of Rs.2,68,500/- represents staff welfare measures for employees of the firm in the occasion of partner's son’s marriage by saying AR fairly admitted that it pertains to gifts, though such mission never made either in writing or oral. Therefore the addition shall be deleted.

ITA No.564/Hyd./2018 AY: 2014-15 Hansa Products, Hyd. 9. We find that a sum of Rs.2,68,500/- was incurred by assessee towards marriage of partner’s son and, therefore, it cannot be said to have been incurred for purpose of business. Therefore it has rightly been disallowed.

ITA No.564/Hyd./2018 AY: 2014-15 Hansa Products, Hyd.