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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SHRI H. S. SIDHU
This appeal is filed by assessee against the Order dated 21.10.2014 passed by the Ld. CIT(A), Muzaffarnagar relating to Assessment Year 2011-12.
The grounds raised by the assessee in the appeal read as under:-
l. That the order U/s 143(3) passed by the AO is illegal, bad in law and without jurisdiction.
2. That, in view of the facts and circumstances of the case the CIT(A) has. erred on facts and in law in upholding the assessment order passed by the AO and also in upholding the additions made by the AO.
3. That in view of the facts and circumstances of the case the AO/ CIT (A) has erred on facts and in law in making! upholding the addition ofRs.13,54,195.00 made on account Loss Due to Shortage of goods.
4. That in view of the facts and circumstances of the case the AO/ (CIT (A) has erred on facts and in law in making! upholding the) addition/ disallowance of Rs.2,34,206.00 made on account EPF & ESIC under section 43B of the Act.
5. That in view of the facts and circumstances of the case the AO/CIT (A) has erred on facts and in 'law in making! upholding the addition of Rs.1,62,193.00 made on account o.f the violation of the section 40A(3) of the Income Tax. Act, 1961.
6. That, the CIT (A) has failed to appreciate the facts that the appellant has discharged its burden of proof as required under the law and the additions are totally illegal, bad in law and based on guesswork and surmises and conjectures.
7. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record.
8. That the explanation given evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made.
That the impugned Assessment Order passed by the Assessing Officer and order passed by CIT(A) are against the principles of natural justice and the same has been passed without affording reasonable adequate opportunity of being heard.
The appellant craves leave to add, amend, alter and or modify the grounds of appeal of the said appeal.
All of the above grounds of appeal are without prejudice and are mutually exclusive to each other.
The brief facts of the case are that assessee is a company and derives income from manufacturing of M.S. Bar. Return of income declaring NIL income was filed on 29.9.2011, which was processed u/s. 143(1) of the Income Tax Act, 1961. The case was selected manually for scrutiny. The statutory notice under section 143(2) of the Act dated 27.9.2012 was served upon the assessee.
Subsequently, notices u/s. 142(1) of the Act alongwith questionnaire dated 26.8.2013 was issued. In compliance to the statutory notices issued and served, the A.R. of the assessee attended the proceedings from time to time and submitted necessary details, information and explanation alongwith books of accounts. During the course of assessment proceedings, AO observed from the profit and loss account that the assessee has claimed expense of Rs. 13,54,195/- under the head “Loss due to Shortage of Goods”. The assessee was asked to furnish details of loss due to shortage of goods. In response, the assessee vide written submission dated 14.3.2014 stated that the loss at Rs. 13,54,185/- in the profit and loss account were due to shortage of goods as observed, because of physical verification of the Finished Goods. The loss was actual loss suffered due to mishandling of finished goods by the staff and loss suffered was beyond the control of Management and therefore is of allowable in nature due to business activities. The AO did not accept the assessee’s contention as the assessee has neither given any justification nor submitted any documentary evidences regarding the aforesaid expenses.
Hence, amount of Rs. 13,54,195/- was disallowed and added back to the income of the assessee. AO further observed that as the assessee was required to deposit the employer’s contribution by due date for furnishing the return of income under section 139(1), which has not been done therefore, the same is not allowed as expenses from the income. Accordingly, addition of Rs. 2,34,266/- was disallowed and added to the income of the assessee. AO further observed that on perusal of purchase of coal account it was found that the assessee made cash payment of Rs. 1,62,193/-, therefore, the assessee was asked vide order sheet entry dated 10.2.2014 to justify the payment in view of provisions of section 40A(3) of the Act. In reply, the assessee submitted that the assessee company has paid freight above Rs. 35,000/- cash only to four truck owners, who were from Guwahati. In the exceptional facts and circumstances, the assessee company has paid freight expenses to such parties, because they were insisting for cash payment only and they were not having bank accounts. The provision of section 40A(3) are not applicable, in the fact and circumstances of the case. No adverse inference can be taken against the assessee on this issue. However, this contention of the Assessee was acceptable to the AO to justify the said cash payment made, hence, he disallowed Rs. 1,62,193/- within the meaning of provisions of section 40A(3) of the Act and added to the income of the assessee, by assessing the income of the assessee at Rs. 34,82,230/- vide order dated 29.3.2014 passed u/s. 143(3) of the Act.
Against the assessment order dated 29.3.2014, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 21.10.2014 has partly allowed the appeal of the assessee and confirmed the additions in dispute. Aggrieved with the impugned order the Assessee is in appeal before the Tribunal.
Ld. Counsel of the assessee stated that lower authorities have wrongly made the additions in dispute, because the assessee has discharged its burden of proof as required under the law and the additions are totally illegal, bad in law and based on guesswork and surmises and conjectures. He further stated that lower authorities passed their respective orders against the principles of natural justice and the same has been passed without affording reasonable and adequate opportunity of being heard.
On the contrary, Ld. DR heavily relied upon the orders of the revenue authorities and stated that both the lower authorities have passed a well reasoned order, which does not need any interference. Hence, the appeal of the assessee may be dismissed.
I have heard the rival contentions and perused the orders of the authorities below.
7.1 Apropos ground relating to addition of Rs. 13,54,195/- made on account of Loss Due to Shortage of Goods is concerned, I find that assessee has not furnished any details and evidence to establish that the loss due to shortage of goods was genuine. Once the assessee has debited loss due to shortage of goods, the onus clearly shifted upon the assessee to establish the genuineness of the same, which was not discharged by the assessee. Further no basis of determining loss due to shortage of goods has been furnished by the assessee, therefore, the addition of Rs.2,34,266/- was rightly confirmed by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the finding of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Assessee.
7.2 Apropos ground relating to addition of Rs. 2,34,266/- on made on account of EPF and ESIC under Section 43B of the Act is concerned, I find that assessee has not furnished copies of challans regarding payments made in respect of employer’s contribution to Provident Fund and ESIC aggregating to Rs. 2,34,266/-. Thus it cannot be verified whether such payments were actually made before filing of return of income. Hence, the addition of Rs.2,34,266/- was rightly confirmed by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the finding of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Assessee.
7.3 Apropos ground relating to addition of Rs. 1,62,193/- made on account of violation of Section 40A(3) of the Act is concerned, I find that section 40A(3) of the Act stipulates that “where the assessee any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed of such expenditure.” . However, in this case the assessee has not furnished any evidence to establish that the truck drivers insisted on cash payments. Further no evidence has been furnished to the effect that the banking facilities were not available. It is a matter of fact on record that the assessee has made freight payments exceeding Rs. 20,000/- aggregating to Rs. 1,62,193/- and has not been able to explain under which clause of Rule 6DD of the I.T. Rules, 1962 its case was covered so as to avoid the rigours of section 40A(3). Thus, in the absence of the same, the addition of Rs.1,62,193/- was rightly confirmed by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the finding of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the assessee.
In the result, the Appeal filed by the assessee stands dismissed.
Order pronounced on 06/06/2018.