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Facts
The assessee, a tea company, faced disallowances by the AO for various business expenses (arrear wages, holiday pay, cost of bought leaf), depreciation, and a deduction claimed under Section 80IE, leading to a significant demand. The CIT(A) confirmed most of these additions/disallowances, prompting the assessee to appeal before the tribunal.
Held
The Income Tax Appellate Tribunal (ITAT) set aside the orders of both the AO and CIT(A), remanding the entire appeal back to the AO for fresh adjudication. The ITAT found that the lower authorities failed to properly verify documentary evidence submitted by the assessee regarding the expenses, capital additions, and the Section 80IE deduction claim from a revised return.
Key Issues
The primary legal issues involved the genuineness and admissibility of various business expenses, the correctness of depreciation disallowance, and the eligibility for deduction under Section 80IE when claimed in a revised return of income.
Sections Cited
14A, 80IE, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Pradip Kumar Choubey&Shri Rakesh Mishra]
Date of Hearing / सुनवाई 22.04.2025 क� �त�थ Date of Pronouncement/ 08.05.2025 आदेश उ�घोषणा क� �त�थ For the assessee / Shri Sanjay Bhattacharya, AR �नधा�रती क� ओर से For the revenue / राज�व Smt. Roma Choudhary, JCIT Sr. D.R क� ओर से ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeal)- NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 13.07.2023 for AY 2013-14.
Brief facts of the case of the assessee are that the assessee is engaged in the business of growing, manufacturing and sale of tea besides the same the assessee had also income from house property and also from other sources. The assessee filed return Assessment Year: 2013-14 Baghmari Tea Company Ltd. of income and also filed revised return of income showing the revised total income of Rs. 13,98,830/-. As per revised return of income the composite income from the tea business had been Rs. 70,48,612/-, the AO in his computation considered the composite income at Rs. 72,12,337/-. The AO disallowed the following expenses while computing the business income: i) Repairs & Maintenance Rs. 3,53,446/- ii) Miscellaneous Expenses Rs. 5,10,792/- iii) Travelling Expenses Rs. 2,22,800/- iv) Arrear Wages Rs. 4,71, 052/- v) Holiday Pay Rs. 9,13,629/- vi) Puja & Entertainment Expenses Rs. 45,843/- vii) Games & Sports Expenses Rs. 12,935/- viii) Cinema Show Expenses Rs. 26,000/- ix) Provident Fund Advance Rs. 1,77,122/- x) Cost of Bought Leaf Rs. 14,25,923/-
Rs. 41,59,542/-
The A.O. disallowed a sum of Rs. 94,889 u/s 14A read with rule 8D. Disallowed depreciation including Additional depreciation of an aggregate sum of Rs. 13,79,300/- The claim of the assessee for education u/s 80IE in relation to the substantial Expansion of its undertaking during the year for a sum of rs.29,83,170/-was also not allowed. A.O raised a demand of Rs.20,18,900/-.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed as the ld. CIT(A)
Assessment Year: 2013-14 Baghmari Tea Company Ltd. allowed the appeal of the assessee on addition on account of composite income from tea business at Rs. 72,12,337/- in respect of Rs. 70,48,612/- but dismissed on the other additions/grounds.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. A.R challenges the very impugned order as well as the order of AO by submitting that there was no proper verification done by the AO in the course of assessment proceedings. The Ld. Counsel submitted that there was sufficient documentary evidences before the AO such as - copy of certificate issued by the Garden Manager certifying the put to use new plant and machineries, copies of auditors report and audited statement of accounts, details of addition to plant and machinery and copies of invoices for purchase of plant and machineries, but the Ld. AO did not appreciate the same in true perspective. The prayer is to remand back the appeal of the assessee to the file of AO for proper verification and adjudication afresh. The Ld. Counsel submits that so far, the addition u/s 80IE is concerned the assessee has filed revised return of income within time specified u/s 139(1) by claiming the deduction u/s 80IE but that has not been considered by the AO nor by the Ld. CIT(A) only on this ground that in the original return of income the assessee did not claim for the same. The prayer of the Ld. Counsel of the assessee is that addition made u/s 80IE shall be allowed by considering the revised return of income which has been filed by the assessee within due date.
Contrary to that, the Ld. D.R supports the impugned order.
Upon hearing the submission of the Counsel of the respective parties, on perusal of the record, we find that the following grounds have been taken by the assessee in this appeal:
i) That the Ld. CIT(A)-NFAC, Delhi was wrong in confirming the disallowance of Rs. 4,71,052/- being the Arrear Wages. ii) That the Ld. CIT(A)-NFAC, Delhi was wrong in confirming the disallowance of Rs. 9,13,629/- being the Holiday Pay.
Assessment Year: 2013-14 Baghmari Tea Company Ltd. iii) That the Ld. CIT(A)-NFAC, Delhi was wrong in confirming the disallowance of Rs. 14,25,923/- being the cost of Bought Leaf. iv) That the Ld. CIT(A)-NFAC, Delhi was wrong in confirming the disallowance of Rs. 13,79,300/- being the Depreciation in relation to the Addition of Plant and Machinery during the year. v) That the Ld. CIT(A)-NFAC, Delhi was wrong in confirming the disallowance of Rs. 29,83,170/- being the claim for deduction u/s 80IE. vi) That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal before or at the hearing of the appeal. We took up ground-wise discussion as the submission of the assessee is that there was no proper verification by the AO and his prayer is to remit back the appeal of the assessee to the file of AO.
7. Ground No. 1 and 2:
We have perused the order of AO on the above grounds and find that the AO in its order has held as under:
“As mentioned herein before, the assessee-company debited the profit and loss account of its business, to a gross expenditure of Rs. 9,86,13,994/- under the broad head, ‘operating and other expenses’. The expenditure under this broad head consists of expenses under various sub-heads which include, inter alia, (i) ‘arrear wages’ of Rs. 4,71,052/- ii) holiday pay of Rs. 9,13,629/-. Prima facie it seemed to be the expenditures relating to earlier previous year(s). Therefore, the A.R of the assessee was requested in this respect why these expenses would not be considered to be inadmissible and accordingly disallowed as these expenditures were not related for the relevant assessment year under consideration. But the AR of the assessee could not offer any coherent explanation on this issue. In view of this fact, I disallow the entire amount of both the expenditures in question and accordingly add back the same to the net profit of the assessee’s business for taxation.” The Ld. CIT(A) has confirmed the addition by holding that the submission of the assessee that both the expenses were finally settled during FY 2012-13 is not accompanied by any evidence.
The assessee has filed following papers before us:
i) Copy of Memorandum of Settlement on Interim Wages increase for daily rated workers.
Assessment Year: 2013-14 Baghmari Tea Company Ltd. ii) Copies of Computation and Revised Computation of Total income. iii) Copies of Auditor’s Report and Audited Statement of Accounts for the year ended on 31.03.2013. iv) Details of additions to Plant and Machineries during the Financial year 2012-13. v) Copies of invoices for purchases of plant and machineries and related Transportation Bills for the FY 2012-13. vi) Copy of Certificate issued by the Garden Manager certifying the put to use of the New Plant and Machineries. vii) Copy of Audit Report u/s 80IE in Form no. 10CCB.
In the paper book, we find that the assessee has filed copy of certificate issued by the garden manager certifying to put to use new plant and machineries. Keeping in view the submission made by the assessee and going over the order passed by the lower authorities, we are restoring the appeal of the assessee to the file of AO to decide the above issue afresh after proper verification and going over the documents submitted by the assessee.
Ground No. 3 and 4:
For adjudication of the above grounds, we have gone through the order passed by the AO and find that the AO has held that the assessee did not file anything with regard to the genuineness of purchase nor he brought any explanation during the assessment proceedings. The Ld. CIT(A) has also affirmed the order of AO by holding that the AO doubted the genuineness of the purchases as the assessee has not done anything in the computation of income. The submission of the Ld. A.R before us is that this fact has to be reverified by the AO by restoring the appeal of the assessee before the AO. Keeping in view, the documents filed by the assessee as discussed above as well as considering the submission of the assesssee, we are inclined to restore the appeal of the assessee before the AO with a direction to decide the aforesaid issue afresh after hearing the assessee and after proper verification of the documents.
Ground no. 5:
Assessment Year: 2013-14 Baghmari Tea Company Ltd. This issue has been raised by the AR by submitting that the Ld. CIT(A) has confirmed the order of AO only on this ground that the no deduction u/s 80IE shall be allowed unless assessee furnishes a return of income on or before the due date specified u/s 139(1) of the Act. Further deduction u/s 80IE was not claimed in the same return. The return was revised on 31.03.2014 beyond the date specified. It has further been held by the Ld. CIT(A) that even prescribed audited report in form 10CCB dated 17.09.2014 which is beyond the specified in section 139(1). The submission of counsel of the assessee is that he filed revised return of income within the prescribed period so the AO has to consider the revised return of income wherein the assessee has claimed deduction u/s 80IE of the Act. Keeping in view of the submission made we are in this view that when assessee has made claim in the revised return of income filed within specified date, AO should consider it, accordingly we restore the appeal of the assessee on this ground also before the AO to consider the revised return of income and pass a afresh order as per law.
In view of the discussion made above the order passed by the AO confirmed by the CIT(A) are here by set aside, the appeal of the assessee is remitted back to the file of AO to decide afresh as discussed above
In the result, the appeal filed by the assessee is allowed for statistical purpose. Order is pronounced in the open court on 8th May, 2025