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Facts
The Assessing Officer made additions of Rs. 22,29,122/- for miscellaneous expenses and an ad-hoc 25% addition of Rs. 2,20,40,560/- for sundry creditors, alleging lack of documentation or verification. The National Faceless Appeal Centre (CIT(A)) deleted both additions, finding that the assessee had provided documentation and that the underlying purchases for sundry creditors were not doubted. The Revenue filed an appeal before the ITAT challenging these deletions.
Held
The Tribunal confirmed the CIT(A)'s decision, holding that the AO had made the disallowances for miscellaneous expenses and sundry creditors without proper basis. It noted that the assessee had submitted details for expenses and that the sundry creditors arose from genuine purchases not questioned by the AO. Consequently, the Revenue's appeal was dismissed, and the assessee's supportive cross-objection was deemed infructuous.
Key Issues
Whether the CIT(A) erred in deleting the addition for miscellaneous expenses due to alleged non-submission of bills/vouchers; Whether the CIT(A) erred in deleting the ad-hoc addition for sundry creditors.
Sections Cited
143(3), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in CO No. 30/Del/2024 for AY 2015-16, arise out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. ITBA/NFAC/S/250/2023-24/1053942989/1 dated 26.06.2023 against the CO No. 30/Del/2024 Clarcor India Pvt. Ltd order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 21.12.2018 by the Assessing Officer, ACIT, Circle-6(1), New Delhi (hereinafter referred to as „ld. AO‟).
At the outset, we find that the registry had sent a defect notice stating that the cross objection has been preferred by the assessee with a delay of 230 days. In response thereto, the assessee had duly clarified that the fact of even revenue preferring an appeal was made known to the assessee through Email from Tribunal only on 29.1.2024 mentioning the next date of hearing of revenue‟s appeal as 16.4.2024. The registered office address of the assessee company had changed and accordingly the authorized representative was deputed to Tribunal on 21.2.2024 with request letter for providing Grounds of Appeal of Revenue. This was received on 21.2.2024 and within 30 days, cross objection was preferred by the assessee. In view of the above explanation, we hold that there was no delay at all in filing cross objection before this tribunal and hence the same is hereby admitted and taken up for adjudication.
The revenue has raised the following grounds of appeal before us:-
“1. Whether Ld. CIT(A) has erred on the facts and circumstances of the case by deleting the addition of Rs. 22,29, 122/- on account of Misc. Expenses, where the bills and vouchers for the said expense was not submitted by the 2. Whether Ld. CIT(A) has erred on the facts and circumstances of the case by deleting the addition of Rs. 2,29,40,560/- on account of Sundry Creditors, where the details were not submitted by the assessee by the given time, because of which AO could not verify the same.
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” Page | 2
CO No. 30/Del/2024 Clarcor India Pvt. Ltd
We have heard the rival submissions and perused the materials available on record. The assessee company is engaged in the manufacturing of filtration systems and packaging materials. The return of income for the Asst Year 2016-17 was electronically filed by the assessee company on 7.7.2016 declaring loss of Rs 5,98,18,272/-. The ld. AO noticed that assessee had debited Miscellaneous Expenses under the head „Other Expenses‟ to the tune of Rs 22,29,122/-. The assessee was asked to produce the bills and evidences for the same by the ld. AO, which was not complied with by the assessee. Hence the entire miscellaneous expenses of Rs 22,29,122/- stood disallowed by the ld AO in the assessment proceedings. The ld NFAC appreciated the fact that assessee had filed online response on 20.12.2018 but however due to some technical glitch on department‟s portal, the same could not be uploaded and that the ld. AO was duly appraised of this technical fault in the assessment proceedings itself by the assessee. Accordingly, the details were filed by the assessee by email on 21.12.2018, which has been acknowledged by the ld. AO himself in the assessment order. No further clarifications were sought for by the ld. AO and disallowance of miscellaneous expenses were directly made by the ld. AO. The ld. NFAC gave a categorical finding that since the details were filed by the assessee together with sample invoices and those were not found to be bogus by the ld. AO. Accordingly, the ld. NFAC deleted the disallowance of miscellaneous expenses. We find from the above that the disallowance was made by the ld. AO without any basis. Hence we hold that the ld. NFAC had rightly deleted the said disallowance, which does not warrant any interference. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
CO No. 30/Del/2024 Clarcor India Pvt. Ltd
The ld. AO observed that during the year the sundry creditors for purchases had increased by Rs 9,17,62,242/- for which details were called for. The ld. AO observed that confirmation from creditors were not filed and hence proceeded to add 25% of Rs 9,17,62,242/- and made an addition of Rs 2,20,40,560/- in the assessment. It was submitted that the ld. AO vide notice u/s 142(1) of the Act dated 3.12.2018 directed the assessee to furnish details of creditors as per the specified format along with copy of ledgers. These were duly furnished by the assessee vide submissions dated 21.12.2018 in email. It was submitted that confirmation from creditors were never called for by the ld. AO. This fact was duly appreciated by the ld. NFAC. Further the ld. NFAC had categorically observed that the ld. AO had not doubted the sales against such purchases and when such sales are not doubted, the purchases cannot be disallowed. Since these creditors emanate out of undoubted purchases, no addition could be made thereon. We find that this categorical observation made by the ld. NFAC had not been controverted by the revenue before us with contrary evidences. Further we find that there is no case at all for making adhoc addition of 25% of increased sundry creditors during the year when no defects were found in the books of accounts or in the details filed by the assessee. The books of accounts were not rejected by the ld. AO. It is not in dispute that the sundry creditors in the instant issue arises out of purchases. When purchases had been accepted by the ld. AO as genuine, no addition could be made for the corresponding credit entry for sundry creditors for purchases. Hence we hold that the addition has been rightly deleted by the ld. NFAC. Accordingly, the Ground No. 2 raised by the revenue is dismissed.
CO No. 30/Del/2024 Clarcor India Pvt. Ltd
The Ground No. 3 raised by the revenue is general in nature and does not require any specific adjudication.
The Cross Objection preferred by the assessee is only supportive of order of ld NFAC and hence dismissed as infructuous.
In the result, the appeal of the revenue is dismissed and Cross Objection of the assessee is dismissed as infructuous.
Order pronounced in the open court on 09/07/2024.