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2019 (5) TMI 416 - AT - Income TaxDisallowance of expenditure of transportation and handling charges for fresh fruit bunches for the A.Y. 2013-14 and disallowed 80% of the expenditure for the A.Y.2014-15 which indicates that FFB expenditure - HELD THAT:- Nature of expenditure incurred by the assessee is that of loading, unloading charges at collection centers, transportation expenses from collection center to manufacturing unit, further loading and unloading charges from manufacturing centre to the empty bunches clearance centre and the identical expenditure of transportation from manufacturing unit to dumping location and unloading charges at the dumping location. These activities are necessary for any manufacturing of palm oil. Expenditure incurred relating to the FFBs appears to be inevitable and the business cannot run without incurring such expenses. From going through the P&L account, it reveals that the assessee did not debit any other expenditure relating to the collection of fresh fruit bunches and clearance of empty bunches under any other head and there is no dispute on this issue. The assessee has adopted the method of contractual payments instead of factual and actual expenditure and the modus operandi adopted by the assessee for booking the above expenditure is not in order as rightly observed by the Ld.CIT(A). After going through the note, we agree with the observation of the Ld.CIT(A) that without carrying on the above activities and incurring the expenditure, the company cannot run it’s basic operations and make finished product. It is basic requirement for the company to collect the fresh fruit bunches of palm from collection centers to the manufacturing unit and clear the empty bunches as per the pollution control norms. The AO did not make any personal inspection to estimate the probable / reasonable expenditure to be incurred on said activities of the company. AO also did not reject the books of accounts when he suspected the genuineness of expenditure. The assessee has submitted the comparative chart of the expenditure incurred in the earlier years and on comparative study, the expenditure allowed by the CIT(A) appears to be reasonable. Though the identical expenditure was debited in the earlier years, the AO did not make any disallowance. DR or the AO did not place any evidence to show that the process explained by the assessee in the note is faulty or the expenditure allowed by the CIT(A) is unreasonable and or excessive. Therefore, considering the facts and merits of the case, we are of the considered opinion that disallowance of expenditure to the extent of 30% appears to be reasonable. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue as well as the assessee. Addition was made on agreed basis - ground regarding that the assessee had agreed for the disallowance of expenditure - HELD THAT:- In assessment the assessee had agreed for the disallowance due to paucity of time and subject to not to initiate the penalty proceedings. The assessing officer did not accept the conditional offer made by the assessee and proceeded to complete the assessment and initiated the penalty proceedings u/s 271(1)(c). Once the AO rejects the conditional offer, the same loses its character of binding nature and is no longer valid. Hence the revenue’s appeal on this ground untenable, hence, dismissed.
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