M/S. KISAN SAHKARI CHINNI MILLS LTD. NANAUTA,NEW DELHI vs. DCIT, UTTAR PRADESH

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ITA 4485/DEL/2016Status: DisposedITAT Delhi20 September 2021AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made by the Assessing Officer was based on an estimation without proper findings or basis, making it unsustainable. The CIT(A)'s observation regarding the necessity of District Magistrate's approval for scrap sale was also noted.

What were the facts?

The Assessing Officer made an addition on account of repair and maintenance expenses, disallowing 10% of the total expenses on an estimated basis, considering it as scrap generated and not accounted for. The assessee argued that scrap is sold with the approval of the District Magistrate after accumulation.

What were the issues?

Whether the disallowance of repair and maintenance expenses on an estimated basis for unrecorded scrap is justified. Whether the procedure for sale of scrap requires specific approvals.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Before: MS SUCHITRA KAMBLE & SH. PRASHANT MAHARISHI

For Respondent: Ms. Anima Barnwal, Sr. DR
Hearing: 13.09.2021

Heard together (2 matters)

I.T.A. No.4485/DEL/2016
I.T.A. No.4606/DEL/2016

Read from the judgment's own cause title. This page is filed under one of them.

ORDER PER SUCHITRA KAMBLE, JM Thee two appeals are filed by the assessee against the order dated 21.06.2016 & 27.06.2016 passed by CIT (A) - Muzaffarnagar for assessment year 2012-13.

2.

The grounds of appeal are as under:-

(A.Y 2012-13) 1. The Ld.CIT(A) has erred in confirming the disallowance of RS. 27,24,675/- as against addition of Rs.32,28,723/- made by Assessing Officer on account of Repair and Maintenance of Plant and Machinery on estimate basis. 2. The order of the Ld.CIT(A) is against law and facts of the case.” (A.Y 2012-13)

“1. The Ld.CIT(A) has erred in confirming the disallowance of RS. 27,24,675/- as against addition of Rs.32,28,723/- made by Assessing Officer on account of Repair and Maintenance of Plant and Machinery on estimate basis. 2. The order of the Ld.CIT(A) is against law and facts of the case.”

3.

Both the appeals are on identical issue, therefore, we are taking up the appeal being . The return of income was filed on 27-09- 2012 at the loss of Rs.57,48,86,686/-. The same has been assessed u/s 143(1). Later on notices u/s 143(2) on 07.08.2013 and u/s 142(1). The Assessing Officer has disallowed Rs. 3,22,8,723/- being 10% of total expenses on Repair and maintenance amounting to Rs. 32287236 on estimate basis being scrap generated and not shown as a part of stock or sale.

4.

Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT (A) partly allowed the appeal of the assessee.

5.

The Ld. AR submitted that the District Magistrate of the area is a Chairman of the society and any scrap can be sold with his approval and by tenders. Since scrap is generated in small quantity hence the same is accumulated and sold after two or three years by following the procedure laid down and as per the approval of District Magistrate.

6.

The Ld. DR relied upon the assessment order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the Assessing Officer has disallowed these expenses only on the basis of estimated value of scrap at 10% without any proper finding and on proper basis. The addition is merely on a presumption basis. Therefore, the same is not sustainable in eyes of law. The CIT(A) also has observed that the District Magistrate’s approval/sanction is necessary for making sale of scrap. Thus, the Assessing Officer as well as the CIT(A) was not correct in making the said addition on account of repair and maintenance of plant and machinery. The appeal of the assessee being is allowed.

8.

As regards to the facts are identical to that of Ld. DR. Hence, appeal being ITA No. 4606/Del/2016 is allowed.

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