UNI DESIGN JEWELLERY INDIA PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE 1(2), MUMBAI

These are the appeals filed by the assessee against the order of CIT(A)-48, Mumbai dated 28/02/2018 for A.Y.2007-08, 2010-11 and 2011-12 in the matter of order passed u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961. (A.Y.2007-08) 2. In the A.Y.2007-08, assessee is aggrieved for disallowance of Rs.43,634/- u/s.14A.

We have heard rival contentions and carefully gone through the orders of the authorities below and found from record that during the year under consideration, assessee was not having any exempt income, therefore, in view of the decision of Delhi High Court in the case of Chem Invest Ltd., reported in 278 ITR 33, no disallowance u/s.14A can be made. Accordingly, we do not find any merit for the disallowance so made by AO when there is no exempt income. Accordingly, we direct the AO to delete the disallowance.

In the result appeal of the assessee in is allowed. ITA No.2421/Mum/2018 & 2420/Mum/2018 (A.Y.2010-11 & 2011-12) 5. In the A.Y.2010-11 and 2011-12, the assessee is aggrieved for adhoc disallowance of 15% out of miscellaneous expenses and travelling expenses. It was argued by ld. AR that AO has made adhoc disallowance without pointing out as to whether these expenditure were non-genuine or were incurred for the personal purposes. He placed on record the order of the Co-ordinate Bench in the case of sister concern M/s. Kanksha Manufacturing LLP in ITA No.6931/Mum/2016 dated 28/09/2018 and contended that no disallowance is warranted on adhoc basis, without pointing out unverifiable expenses. Reliance was also placed on the decision of ITAT Mumbai Bench in case of S.B.Billimoria & Co., 125 ITD 122 (MUM).

On the other hand, ld. DR contended that since the assessee failed to substantiate the expenditure so incurred, the AO was perfectly justified in disallowing 15% of such expenses.

We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that assessee M/s. Uni Design Jewellery India Pvt.Ltd. is a company engaged in the business of manufacturing of Diamond studded Gold and platinum Jewellery. For the AY 2011-12 under consideration, the assessee filed it’s return of income on 05/08/2011 declaring total income of Rs.3,94,56,830/- under normal provisions of the Income Tax Act, 1961. During the course of assessment, the AO has made disallowance of adhoc expenditure to the tune of 15% by alleging that some of the expenditure are unverifiable, however, the AO has not been pointed out as to which the expenses were unverifiable. Under similar facts and circumstances, Tribunal in the case of group concern namely Kanksha Manufacturing LLP in dated 28/09/2018 deleted the adhoc disallowance of 15% by observing as under:- “6. We have heard the rival contentions and gone through the facts and circumstances of the case, we find from the facts of the case that this is adhoc disallowance made by AO and further estimation on adhoc basis by CIT(A). There is no defect pointed out in the books of accounts or in particular voucher as was mentioned by the Assessing Officer. Hence, by making general observation no adhoc disallowance can be made. We find merit in the arguments of the learned Counsel for the assessee and in the given particular facts and circumstances as noted above, we delete the disallowance and allow the appeal of the assessee.”