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Income Tax Appellate Tribunal, DELHI
Before: SHRI R.S. SYAL
Per R.S.Syal, Vice President :
This appeal by the assessee arises out of the order passed by the Ld.
CIT(A) on 23.02.2015 in relation to the assessment year 2010-11. It is a recalled matter inasmuch as the earlier ex parte order passed by the Tribunal was subsequently recalled vide order dated 15.09.2017 in M.A No. 376/Del/2017.
The first ground is against the confirmation of the addition of Rs.1,00,000/- out of Processing charges.
Briefly stated the facts of the case are that the assessee is engaged in the business of freezing of meat. Turnover of Rs.3.58 crore was declared for the year under consideration. The Assessing Officer observed that profit at the rate of 4.78% shown by the assessee for this year was lower than that of the preceding year’s profit rate of 5%. He found that the assessee claimed Processing charges (labour) at Rs. 28,40,590/-. Some vouchers were not properly maintained. He, therefore, made an ad hoc addition of Rs.1,00,000/-. The Ld. CIT(A) sustained the same, against which the assessee has come up in appeal before the Tribunal
Having heard both the sides and perused the relevant material on record, it is found that the ratio of Processing charges to turnover for the year under consideration is 7.93% as against the similar ratio of 10.79% for the preceding year. This shows that the assessee relatively incurred lower amount of Processing charges. In the given circumstances, I am
satisfied that the ad hoc addition sustained in the impugned order deserves to be and is hereby deleted. This ground is allowed.
The second ground is against the confirmation of addition of Rs.50,000/- out of Packing labour charges of Rs.10,45,583/-. The Assessing Officer disallowed Rs.50,000/- on ad hoc basis, which addition stood confirmed in the first appellate order.
Having regard to the facts of the instant ground, I am satisfied that the ad hoc addition so made and sustained deserves to be deleted for a very insignificant increase (0.60%) in the ratio of such an expense to turnover. This ground is allowed.
Ground no. 3 is against confirmation of addition of Rs.97,685/-. The facts apropos this ground are that the assessee declared Work in progress amounting to Rs.64,75,874/- in its balance sheet. During the course of assessment proceedings, the assessee stated that a term loan of Rs. 46,00,000/- was arranged which was utilized for capital work in progress, on which interest of Rs.97,685/- was paid. The Assessing Officer disallowed such expenditure by treating it as a part of capital expenditure.
No relief was allowed in the first again.
Having heard both the sides and perused the relevant material on record it is seen as an admitted position that interest of Rs.97,685/- relates to term loan specifically taken for capital work in progress reflected in the balance sheet, which assets were not been put to use during the year.
Proviso to section 36(1)(iii) inserted with effect from 01.04.2004 provides that no deduction of interest for any period beginning with the date of borrowing of capital till the asset is first put to use, can be allowed as deduction. The facts of the instant ground are fully covered by the proviso to section 36(1)(iii). I, therefore, uphold the sustenance of addition to the extent. This ground fails.
The last ground is against the addition of Rs.22,00,000/- made by the Assessing Officer U/s. 68 of the Act. Facts of this ground are that the assessee declared to have received an unsecured loan of Rs.22,00,000/- from its director, Shri Aleem Ahmed. It was received through two cheques of Rs.12,00,000/- and Rs.10,00,000/- on 27.08.2009 and 28.12.2009 respectively. On perusal of the necessary details called for by the Assessing Officer, he noticed that Shri Aleem Ahmed deposited cash in bank account immediately before issuing cheques in favour of the assessee company. In the absence of the assessee giving any justifiable reason to explain the source of such deposit in the bank account by Shri Aleem Ahmed, the Assessing Officer made an addition of Rs.22,00,000/-.
The Ld. CIT(A) sustained such an addition by observing that the assessee could not substantiate its version that Shri Aleem Ahmed received the money against the sale of some property etc. as no confirmation was filed.
The assessee is aggrieved against the addition.
Having heard both the sides and perused the relevant material on record, it is seen that the assessee has been taking vacillating stands in support of the source of money in the hands of Shri Aleem Ahmed which was deposited in bank account from which cheques were issued in favour of the assessee. The Ld. AR explained that proceedings u/s. 263 were taken against Shri Aleem Ahmed on the ground that a sum of Rs.70,00,000/- and odd deposited in his bank account was his unexplained income. He placed on record a copy of the assessment order passed in the hands of Shri Aleem Ahmed pursuant to the order U/s. 263 of the Act. It was explained that the appeal of Shri Aleem Ahmed against the order passed u/s 263 is pending before the Tribunal. It was put forth that Shri
Aleem Ahmed has sufficient explanation to support the cash deposits made in his bank account including the amount of Rs.22,00,000/-, which has been added in the hands of the assessee. In the given circumstances, I am of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set aside and the matter is restored to the file of AO. I order accordingly and direct him to decide this issue afresh in the light of the explanation which the assessee proposes to tender.
In the result the appeal is partly allowed.
(Order Pronounced in the Open Court on 20/06/2018)