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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 04.06.2025 for the AY 2022-23.
Ground No.1 to are not pressed and therefore dismissed as not pressed.
The issue raised in ground no.4 is against the order of ld. CIT (A) confirming the addition of ₹25,55,776/- as made by the ld. AO on account of unsubstantiated work-in-Progress (WIP).
3.1. During the course of assessment proceedings, the ld. AO observed from the note-9, which is in regard to the property/ plant 3.2. In the appellate proceedings, the ld. CIT (A) simply affirmed the order of the ld. AO on the ground that the assessee has not furnished the supporting evidences.
3.3. After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO observed from the note no.9, which is as regards property, plant and equipment and related amortization that assessee has incurred as capital WIP of ₹2,55,89,774 as on 31.03.2022. The ld. AO has disallowed 10% of the total capital work in progress by overlooking the assessee plea that it was never charged the said amount to the Profit and Loss account and there were the expenses incurred on capital account. Accordingly, we don’t find any basis for disallowance out of such capital WIP when this is not charged to profit and loss account. Moreover, no disallowance can be made on the basis to presumption and surmises. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 4 is allowed.
The issue raised in ground no.6 is against sustaining the disallowance of ₹63,16,231/- on account of unsubstantial expenses.
5.1. During the course of assessment proceedings, the ld. AO called upon the assessee to furnish the details of expenses claimed under various head of income. The total of these expenses other than the foreign exchange loss comes to 6,36,02,311/-. According to the ld. AO, there was huge increase in these expenses during the year. The assessee sought time to reply the said query vide letter dated 12.03.2024, however, assessment order was passed on 18.03.2024 holding that the assessee did not furnish the details and consequently the adhoc disallowance of 10% was made which worked out to ₹63,60,231/-.
5.2. The ld. CIT (A) in the appellate proceedings simply affirmed the ld. Assessing Officer 5.3. After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO has made the disallowance at 10% of the total expenses under various heads on the ground that there was huge increase of expenses during the year and the assessee has not furnished any details/ evidences qua these expenses. Whereas as a matter of fact the assessee requested the ld. AO vide letter dated 12.03.2024, to allow some time to reply to the said query. However, the ld. AO passed the assessment order on 18.03.2024. We note that these expenses incurred by the assessee are on account of insurance of ₹10,93,252/-, legal and professional charges of ₹57,11,025/-, Rent of ₹62,39,101/-, selling expenses of ₹2,53,45,188/-. We note that the ld. AO has made a disallowance on estimated basis by simply stating
The issue raised in ground no.7, is against the addition of ₹7,40,51,268/- made by the ld. AO on estimation basis.
6.1. During the course of assessment proceedings, the ld. AO called upon the assessee to furnish the details of purchases made during the year with PAN and amounts partywise. In reply, the assessee submitted the consolidated purchase register containing names of the parties from whom the purchases were made. The ld. AO thereafter issued show cause notice dated 07.03.2024, giving the show cause to the assessee as to why the substantial purchases made from the suppliers who are non-filers should not be added to the income of the assessee. The ld. AO issued notices u/s 133(6)of the Act to all 41 parties, however, only from three parties responses were received in which there were some differences in their amounts. The ld. AO extracted the details of these parties and their responses at page no.8 and 9 of the assessment order. Accordingly, the assessee was called upon to furnish the documents with supporting documents. The assessee was given only 5 days’ time to reply to the show cause 6.2. Aggrieved assessee preferred the appeal before the ld. CIT (A), who simply confirmed the order of the ld. Assessing Officer.
6.3. After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO has made an addition of ₹7,29,48,478/- at the rate of 12% of the total purchases from 17 parties, who according to the ld. AO were non-filer of the returns. In our opinion, non-filing of return by the suppliers is not within the control of the assessee and if the said suppliers have not filed the returns of income , the department can proceed against these suppliers. In this case, we note that the assessee has given a complete detail along with the evidences before the ld. AO and the ld. AO issued notice u/s 133(6) of the Act to all 41 parties out of which only 3 responded. In our opinion, the addition cannot be made merely on the ground that the parties have not responded to the notice u/s 133(6) of the Act. Moreover, the disallowance made is on adhoc basis by applying a percentage of 12.5% on the total purchases from 17 parties. In our opinion,if the ld. AO was not relying the books of account then the ld. AO should invoke the provisions of Section 145(3) of the Act and only then the estimate disallowance of expenses or estimate the income, however, that was not done. Therefore, we are
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 16.09.2025.