ACIT 29(1), MUMBAI vs. ANAND M SHETTY, MUMBAI

The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by Assessing Officer on account of suppression of sales. For this Revenue has raised the following ground No.1: -

1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition on account of suppression of sales of Rs.1,85,73,300/-. The CIT(A) ought to have considered the factors outlined in the assessment order which were based on scientific reasoning for making the addition of the suppressed sales.

Briefly stated facts are that the Assessing Officer during the course of assessment proceeding made addition of suppression of sales of undisclosed production based on the qualification details of opening and closing work-in-progress. Therefore, the Assessing Officer made addition of ₹1,35,73,300/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the addition after taking a remand report form the Assessing Officer vide Para 3.4 as under: -

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the Assessing Officer during the remand proceedings accepted that out of the total difference of 1,27,634/- kg, closing stock of 74,087/-kg was not considered and thereby suppressed production of 36,605 kg was there and the balance difference was reconciled. It means that the Assessing Officer vide his remand report dated 05.09.2014 admitted that out of the total addition of Rs.1,85,73,300/- the addition should remain at ₹53,26,760/-. The relevant remand report of the Assessing Officer read as under: -

Now, short point before us is the difference of suppressed production of 36,605 kg on account of weight of LAC bottles whether it is to be taken as 70 ml or 100 ml or 200 ml. Another difference on account of wastage in term of evaporation, rejection etc. This issue, both sides agreed, can be remanded back to the file of the Assessing Officer because the CIT(A) has not given any specific finding how this difference is to be reconciled. We noted that the CIT(A), in the above reproduced Para 3.4 of CIT(A)’s order, does not made clear how this difference of 36,605 kgs is reconciled. Hence, in the interest of justice, we remand the issue of suppressed production of 36,605/- to the file of the Assessing Officer denovo. The Assessing Officer uninfluenced by the findings of the CIT(A) or

The next issue in this appeal of Revenue is against the order of CIT(A) restricting the disallowance of interest at ₹11,07,470/- as against the disallowance made by the Assessing Officer at ₹62,20,320/- by invoking the provisions of section 14A of the Act. For this, Revenue has raised the following ground No. 2 and 3: - “2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance u/s 14A of Rs.62,20,320/-. The CIT(A) did not appreciate the facts that the assessee had utilized the borrowed fund in a mixed manner for earning the exempt income as well as non-exempt income.

Briefly stated facts are that the Assessing Officer made disallowance on interest expenses in view of the provisions of section 14A of the Act amounting to ₹11,07,470/-. The

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the Revenue has not disputed the investment and availability of interest free funds and also not contested that interest free funds available with the assessee is not more. Once, the interest free funds available with the assessee for investing in the shares is more than the investment, no disallowance under section 14A of the Act can be made by the Assessing Officer in view of the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd.(2014) 366 ITR 505 (Bom). Hence, we find no infirmity in the order of CIT(A) and this issue of Revenue’s appeal is dismissed.

The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by Assessing Officer on account of suppression of Hotel sales receipts. For this, Revenue has raised the following ground No.4: -

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the Assessing Officer during the course of assessment proceedings made suppression of sales of food at ₹59,24,885/-. The assessee before Assessing Officer as well as before CIT(A) claimed that there is some portion of free food served either as complementary or as a part of the liquor sale. Hence, according to assessee this aspect is to be considered. Further, the assessee contended that there are cash sales which were not considered by the Assessing Officer and assessee has disclosed the same in the books of account. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the addition vide Para 5.5 as under: -

We noted that the Assessing Officer has estimated the suppressed sale at ₹59,24,885/-, but considered the portion of free food served either as complementary or as a part of liquor sale. Further, we noted that the Assessing Officer has not considered the cash sales and discounts also. We noted that the CIT(A) estimated the suppressed sale at the base 2.5 times of the food purchased at ₹11,16,355/-. Now, before us the Sr. Departmental Representative could not point out any infirmity