TMI Blog2018 (6) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... mental ground is dismissed Disallowance of Expenses - HELD THAT:- On a careful consideration of the same, we find that admittedly the disallowances have been made and been sustained by the AO and the CIT(A) respectively without any cogent reason. The books of account have been produced. Evidences supporting the claim are available on record. In the absence of any rebuttal on the same, the AO or for that matter, the tax authorities are not justified to enter into the terrain for determining the reasonableness of the expenditure. The legal position on the said aspect is well settled. Respectfully following the precedent, ground No. 2 of the assessee is allowed. - Ms. Diva Singh, Judicial Member And Ms. Annapurna Gupta, Accountant Member For the Department : Shri Ashish Gupta, CIT-DR For the Assessee : Shri Sandeep Sapra And Shri Kamal Khanna ORDER By these cross appeals, both the Revenue and the assessee assail the correctness of the order dated 06.03.2017 of ld. CIT(Appeals) Karnal pertaining to 2009-10 assessment year on the following grounds respectively : Ground of Revenue (ITA 836/CHD/2017) Whether on the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 436.908 139.520 416.229 68,011.619 89,838.630 61,341.919 37,776.747 69,240.607 90,903.726 61,736.239 38,864.490 67,843.926 89,674.738 61,408.051 38,609.690 1,396.681 1,228.988 628.188 254.800 3,433.603 -- 71,445.22 89,838.63 61,341.92 37,776.75 278.129 1 4,891.305 72.845 5,294.274 21.568 4,056.311 71.5573 3,052.084 5,169.434 5,367.119 4,077.879 3,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the finished good have been produced out of the books. The sale thereof also to be considered out of the books the expenses relating thereto considered already debited to the Trading, P L account. Whole of the sale value of Rs. 256084653/- is deemed the income. 3. The assessee carried the issues in appeal before the CIT(A) who considering the submissions deleted the addition vide para 4.4 of his order holding as under : 4.4 Findings ;- After going through the facts and submissions as well as various judicial pronouncements on this issue, this Ground is being finalized after making the following observations :- a) On the basis of the facts available, it appears that the AO has come to the conclusion that the sales of finished goods made by the appellant during the year to its subsidiary company M/s Jai Suspension Ltd. to the extent of 3433.603 metric tones was not correct. The AO has argued that these semi-finished goods could not have been produced during the year under consideration Accordingly the AO concluded that no scrap was related to production of these semi-finished goods. However the AO has not out on the basis of any evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was unaccounted sale of these finished goods made by the appellant during the relevant A.Y. d) The AR of the appellant has very strongly argued that the appellant was a reputed listed company with al statutory books of accounts, supporting bills and vouchers and the AO has neither rejected the books of accounts nor brought any evidences on record before concluding that there was unaccounted manufacturing and sale of finished goods. The arguments have been carefully considered and it is clear that there is no evidence available with the AO to conclude that there was any unaccounted manufacturing of finished .goods and the AO also did not any evidence to establish that there was unaccounted sale of finished goods The books of accounts of the appellant has also not been rejected by the AO and therefore the addition based upon the assumption that there was excess scrap generated during the year, which the basis of unaccounted finished goods as well as unaccounted sales by the appellant, does not appear to have any justification. The AR has elaborately explained that the sale of semi-finished goods made during the year was well-documented and there was no excess scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has passed a reasoned speaking order which on facts has not been assailed by the Revenue. Accordingly, it was his submission that the impugned order may be upheld. 7. We have heard the rival submissions and perused the material on record. On going through the peculiar facts and circumstances as have been set out in the earlier part of this order, we find that no justification whatsoever has been given by the AO as to why the value of semi finished goods sold to its sister concern should not be considered in the total production of the yr for the purpose of determining the percentage of scrap generated. There is no material on record on the basis of which the suspicion of the AO can be supported that over and above the semi finished goods, the assessee produced finished goods, we note that the CIT(A) has given a categoric finding that the AO has neither rejected books of account nor brought out any evidences to support the suspicion that there was unaccounted manufacturing and sale of finished goods nor has AO made out any case that there were unaccounted sales. Accordingly, the addition having been made on suspicion in peculiar facts, we find, has correctly been deleted by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he head Discount and Rebates the Assessee has debited amount Rs 173.30 Lacs under the head Discounts given to various parties. The assessee's gross turnover during the year decreased to Rs.51378.17 Lacs from Rs. 54119.34 Lacs shown in the immediate preceding year. Considering the decrease in gross turnover, the corresponding increase in discount and rebate is not-comparable. The assessee could not explain satisfactorily such heavy increase in this expenditure. In order to cover any leakage on account of inadmissible expenses. 10% of the Discounts are disallowed i.e. a sum of Rs. 17.33 lacs is disallowed and added to the assessees income. 12.1 Heavily relying upon the written submissions and the precedent cited, it was his submission that the addition may be deleted. Inviting attention to the impugned order, it was submitted that ignoring the written submissions of the assessee, the CIT(A) confirmed the same in a mechanical manner at page 20 of his order. Reading from the written submissions filed in the Court, which also contained copies of decisions of different Courts and the view taken by the ITAT in assessee's own case in the immediately preceding assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. DR argued that while the turnover is increased by 67% the rebates and discounts have increased by 330% hence the disallowance which is in excess to the turnover needs to be disallowed. 13. We have gone through the record placed before us and submissions of both the representatives. 14. There were no findings by the Assessing Officer as to the discrepancy in books of accounts or any other material showing that these expenses debited or not genuine or not verifiable. From the submissions it could be found that the increase in the rebates was due to restructuring of the business of the assessee and the department cannot determine as to what should be the percentage of rebates and discount to be allowed in the absence of any material, investigation, evidence or proof about the non-admissibility of the expenses hence the ad-hoc disallowance of 10% made by the Assessing Officer is hereby directed to be deleted. 12.3. It is further submitted by the ld. AR that in the year under consideration, the rebate to sales (in the Replacement Market Division) on which discount has been offered, has reduced to 4.95% as opposed to 5.07% in the immediately preceding assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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