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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRIPRASANT MAHARISHI & SHRI K. N. CHARY
Date of Hearing 14.10.2019 Date of Pronouncement 30.10.2019 O R D E R PER K. NARSIMHA CHARY–JUDICIAL MEMBER:
Aggrieved by the order dated 02/12/2016 in appeal No. 45/PPT/2011-12 passed by the Learned Commissioner of Income Tax (Appeals)-Karnal ("Ld. CIT(A)") for the Assessment Year 2009-10,the assessee preferred this appeal on the following grounds: “
1. That the order of the Learned CIT(A) is wrong, against facts & unlawful.
2. The LCIT(A) has erred in not cancelling the assessment order made by LAO u/s 144 of the Income Tax Act, 1961.
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That LCIT(A) has wrongly confirmed an addition of Rs.10,48,224/- on account of purchase done by the assessee in March 2008.
That LCIT(A) has wrongly confirmed an addition of Rs.42,50,000/- on account of purchases from ANVI Interiors & Suppliers. 5. That LCIT(A) has wrongly confirmed an addition of Rs.8,62,390/- on account of purchases from Dier& Sons. 6. That LCIT(A) has wrongly confirmed an addition of Rs.31,48304/- on account of purchases done by the assessee up to 31.03.2008. 7. That LCIT(A) has wrongly confirmed addition of Rs.7,99,800/- on account of payment made to Michal J. Maclued. 8. That LCIT(A) has wrongly confirmed addition of Rs.4,73,077/- on account of 10% of Travelling Exp. 9. That LCIT(A) has wrongly confirmed addition of Rs.37,20,349/- on account of preoperative exp. 10. The assessee may be allowed to add or delete any addition in ground of appeal.”
2. Briefly stated facts are that the assessee is the company deriving income from trading in import and export of Handloom goods. For the A.Y. 2009-10, assessee filed its return of income on 30.09.2009 declaring the taxed income at Rs.14,08,590/-. It is recorded by the Learned Assessing Officer that in response to the notice issued by the Revenue u/s 143(2) of the Act, the authorised representative of the assessee attended the proceedings from time to time and filed the requisite information from time to time and filed the requisite information/documents and other details as called for. He further recorded that the books of accounts and vouchers were called for and examined on test check basis and the details submitted by the assessee were examined and discussed. From the record, it does not appear that the Learned Assessing Officer - 3 - M/s. Gargi Overseas vs ACIT Asst.Year–2009-10 found out any discrepancy with reference any particular entry in the books of accounts so as to enable him to reject the books and proceed with the assessment u/s 144 of the Act. However, the Learned AO passed the assessment order u/s 143(3)/144 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) because neither the assessee nor their authorities representative attended before him on 26.12.2011. Learned Assessing Officer assessed the income of the assessee at Rs.1,61,71,864/- by making several additions including additionof : i. Rs.10,48,224/- on the ground that the material purchase in the earlier year cannot be allowed to be used in the subsequent year; ii. Rs.42,50,000/- by disallowing 50% expenditure incurred by M/s. Anvi Interiors & Supplier on the principal that it was incurred during the F.Y. 2007-08; iii. Rs.8,62,390/- by disallowing 50% of purchases made in F.Y. 2007-08 amounting to Rs.17,24,780/- from Dier& Sons; iv. Rs.31,48,304/- by disallowing certain purchases made during the F.Y. 2007-08; v. that Rs.7,99,800/- on account of consultancy charges paid to Michael J. Macleod and payment made to pearl infrastructure; vi. Rs.4,73,077/- by disallowing 10% of travelling expenses of Rs.47,30,767/-; vii. Rs.37,20,349/- by disallowing preliminary expenses; viii. Rs.4,50,000/- on account of non deduction of TDS from Sandeep Travels & Cargo u/s 40(a); ix. and Rs.11,130/- on income interest expenditure.
3. Assessee preferred an appeal before the Learned CIT(A). Learned CIT(A) during the course of first appellate proceeding had called for the remand report from the Learned Assessing Officer. Learned Assessing - 4 - M/s. Gargi Overseas vs ACIT Asst.Year–2009-10 Officerafter verifying the material produced by the assessee and that was available on record, submitted the remand report. In the remand report, Learned Assessing Officer stated that on verification of the evidences produced before him, it was clear that the additions that were made could not be sustainedinasmuch as the expenditure was incurred during the F.Y. 2008-09 and not 2007-08. However, the Learned AO stated that on account of 10% of the travelling expenses to the tune of Rs.4,73,077/- was concerned. There is no material to show that such addition was not justifiable.
4. Learned CIT(A), however, did not agree with the Learned AO in the remand report and held that the expenditure relates to the F.Y. 2007-08 and such discrepancy points out that the assessee had not followed the proper accounting procedure, had not filed the income tax return in the earlier years and, therefore, the assessee is not entitled to carry forward the losses and there is no justification for claiming of purchase in the current year. On this premise, the Learned CIT(A) dismiss the appeal.
5. Aggrieved by the impugned order, the assessee is before us in this appeal. It is submitted by the Learned AR that as indicated by the remand report, all the expenditure relates to the F.Y. 2008-09 but not 2007-08 as was originally held by the Learned AO and no question of carrying out the earlier year losses arises in this matter. It is further submitted by him that without pointing out as to where exactly the Learned Assessing Officer want wrong in the remand report in considering the material relating to the expenditure, it is not for the Learned CIT(A) to upheld the additions made by the Learned AO on a wrong premises.
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Per contra, it is submitted by the Learned DR that in this matter the assessee did not file the income tax return for the A.Y. 2008-09 and therefore, is not upon for them to claim any expenditure of 2008-09 in the A.Y. 2009-10. For this, it is submitted by the Learned AR that during the A.Y. 2008-09 there was no sale done by the assessee and no question of any loss to be carried forward to the next year arise in this matter.
We have gone through the record in the light of the submission made on either side. It is the consistent plea taken by the assessee that during the A.Y. 2008-09 there was no sale done by the assessee and therefore there was no loss to be carried forward for the next year. Further, in the remand report, the Learned AO categorically stated that there was misunderstanding of the principle of accounting and nature of expenditure incurred by the assessee. In respect of the addition of Rs.10,48,224/-, the Learned AO specifically stated that on verification of the purchase invoices dated 11.03.2008, 17.03.2008 and 06.04.2008,the Transport bills indicate delivery of sold goods to Assessee in April 2008. Bank Attested sale Invoice No. 107/08A and related Bill of Lading No. SS/DEL/08/JEB/D00707 dated 09.05.2008. Hence sale is in F.Y. 2008-09, same are on file and that they are to be allowed. The allowability of these expenses is reconsidered accordingly. 8. It was found that the transport bill indicates the delivery of sold goods of the assessee in April 2008, bank attested sale invoice and related bill of lading hence sale is in F.Y. 2008-09. So addition of 50% of disallowance in respect of the expenditure incurred by M/s. Anvi Interiors & Supplier. The Learned AO categorically found that the work sheet - 6 - M/s. Gargi Overseas vs ACIT Asst.Year–2009-10 shows that during the period 01.04.2008 to 31.03.2009 the sub- contractors have done job for 133237 US Dollars.
In respect of the addition of Rs.8,62,390/- it was the finding of the Learned AO that the work done by the Dier& Sons is 37398 US Dollar during the period 01.04.08 to 31.03.09 included in worksheet of Anvi Interiors & Supplies.
Likewise, in respect of the other expenditure except the addition by disallowing 10% of the traveling expenses, Learned AO had given cogent reason for his conclusion that the verification of the record established the addition cannot be sustained.
The reasoning adopted by the Learned CIT(A) is a stereotypical one and is not based on sound appreciation of the material available on record. No reference is made to the material considered by the Ld. AO or to the observations of the Ld. AO on appreciation of such evidence. When the assessee did not incur any loss in the A.Y. 2008-09, no question of carrying forward the same to A.Y. 2009-10 arises. Further, the expenditure is found to have been incurred in the A.Y. 2009-10 but not 2008-09. For this reason, we are of the considered opinion that all the additions except Rs.4,73,077/- are liable to be deleted whereas the addition of Rs.4,73,077/- is to be confirmed. We accordingly confirm the addition of Rs. 4,73,077/- and confirm the rest of the additions made by the Ld. AO.
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In the result, appeal of the assessee is allowed in part. Order pronounced in open court on this the 30th day of October, 2019.