Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (8) TMI 127 - ITAT LUCKNOW

2015 (8) TMI 127 - ITAT LUCKNOW - TMI - Disallowance of commission - Held that:- Such ad hoc disallowance without any basis is not justified and hence, we hold that no disallowance is called for out of these expenses claimed by the assessee under the head commission expenses because no basis has been indicated by the Assessing Officer in the assessment order for making this disallowance and the same was made by making a general observation that complete supporting evidence was not brought on rec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ance under the head commission payment in both the years. - Decided in favour of assessee.

Disallowance of telephone expenses - Held that:- As per the judgment of Sayaji Iron and Engg. Co. (2001 (7) TMI 70 - GUJARAT High Court), even if there is personal use of telephone and vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e assessee and turnover of assessment year 2003-2004 and assessment year 2001-2002, the increase in expenditure in assessment year 2003-04 over and above the expenditure of assessment year 2001-2002 is excess about 30% but since the expenses of assessment year 2001-02 itself are excessive and we feel that the disallowance of 30% out of expenses in assessment year 2001-2002 is not excessive, the disallowance of 30% in assessment year 2003-2004 is also reasonable because in assessment year 2003-20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that:- We find force in the submissions of Learned A.R. of the assessee because as per this judgment of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. (supra), even if there is personal use of vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Therefore, by respectfully following this judgment of Hon'ble Guja .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s also worth noting that the expenses under this head were incurred in cash as noted by the Assessing Officer. When we compare the turnover of assessment year 2003-04 with that of assessment year 2001-02, we find that the increase in turnover is about 200% and the increase in consumption of consumables stock in assessment year 2003-04 as compared to assessment year 2001-02 is about 75%. Hence, it is seen that the increase in expenses in the assessment year 2003-04 is not abnormal even if the sam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s of assessment year 2001-02 is about 150% when the turnover increase in assessment year 2003-04 as compared to assessment year 20001-02 is about 200%. - Decided partly in favour of assessee.

Disallowance of unabsorbed depreciation - Held that:- When we go through the order of learned CIT(A) for assessment year 2001-02, we find that the issue regarding unabsorbed depreciation is not arising out of order of CIT(A) in that year because the ground raised by the assessee before CIT(A) was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Disallowance of depreciation on machinery - Held that:- It is noted by learned CIT(A) for assessment year 2003-04 that the Assessing Officer has disallowed the claim of depreciation on the basis that the assessee could not produce the bill being the cost of new addition to plant & machinery. The said bill was not produced before learned CIT(A) also and the same is also not produced before us and therefore, we do not find any reason to interfere in the order of learned CIT(A) on this issue. - Dec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the assessee for the same two assessment years. All these appeals and Cross Objections were heard together and are being disposed of by this common order for the sake of convenience. 2. At the very outset, it was submitted by Learned A.R. of the assessee that the tax effect in the Revenue s appeal i.e. I.T.A. No.515/Lkw/2013 for assessment year 2001-02 is less than ₹ 4 lacs and therefore, this appeal of the Revenue is not maintainable because of low tax effect as per instructions of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

02 and both the Cross Objections of the assessee are dismissed. 5. It was admittedly agreed by both the sides that the issues raised by the assessee in its both the appeals for assessment year 2001-02 and 2003-04 are identical and the facts are also identical. Regarding the appeal of the Revenue for assessment year 2003-04 also, it was agreed by both the sides that these issues raised by the Revenue are inter connected with the appeal of the assessee for the same year. 6. Ground No. 1 of the app .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e disallowance to the extent of ₹ 1,00,000/- made on account of commission. Ground No. 1 of Revenue for assessment year 2003-04 The Ld. C1T(A) has erred in law and on facts in restricting the disallowance made by the AO of ₹ 2,00,000/- out of commission expenses to ₹ 1,00,000/- without appreciating the facts that most of the disallowances were made on account of cash payment for which no records were maintained by the assessee company. 7. It was submitted by Learned A.R. of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

R. of the Revenue supported the assessment order in both the years. 9. We have considered the rival submissions. We find that it is noted by the Assessing Officer in the assessment order for assessment year 2001-02 that the assessee has claimed an expenditure of ₹ 14.40 lacs under the head commission as against such expenses of ₹ 6.08 lac in the immediately preceding year. The Assessing Officer asked the assessee to justify its claim. The Assessing Officer s objection is that the ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expenses claimed by the assessee under the head commission expenses because no basis has been indicated by the Assessing Officer in the assessment order for making this disallowance and the same was made by making a general observation that complete supporting evidence was not brought on record without indicating even one particular evidence, which was asked for by the Assessing Officer and could not be produced by the assessee. Similarly, in assessment year 2003-04 also, the Assessing Officer .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee in both the assessment years are as under: Ground No. 2 for assessment year 2001-02 is as under: That the learned CIT(A) has erred in confirming the disallowance to the extent of ₹ 47,345.85 made on account of telephone expenses. Ground No. 2 for assessment year 2003-04 is as under: That the learned CIT(A) has erred in confirming the disallowance to the extent of ₹ 67,338.53 made on account of telephone expenses. Connected ground in Revenue s appeal being ground No. 2 is as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s covered in favour of the assessee by the judgment of Hon'ble Gujarat High Court rendered in the case of Sayaji Iron and Engg. Co. vs. CIT [2002] 253 ITR 749 (Guj). 12. We have considered the rival submissions. We find that as per the judgment of Hon'ble Gujarat High Court rendered in the case of Sayaji Iron and Engg. Co. (supra), even if there is personal use of telephone and vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ad telephone expenses. Ground No. 2 of the assessee in both the years is allowed and ground No. 2 of the Revenue is rejected. 13. Ground No. 3 in assessee s appeal for assessment year 2001-2002 is as under: That the learned CIT(A) has erred in confirming the disallowance to the extent of ₹ 4,97,064.75 made on account of freight & cartage (outward). 14. Ground No. 3 in assessee s appeal for assessment year 2003-2004 is as under: That the learned CIT(A) has erred in confirming the disall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f cash payment for which no records were maintained by the assessee company. 16. Learned D.R. of the Revenue supported the assessment order in both the years whereas it is submitted by Learned A.R. of the assessee that no specific defect has been pointed out by the Assessing Officer in the assessment order or by learned CIT(A) in his order and therefore, the entire disallowance should be deleted. 17. We have considered the rival submissions. We find that in the assessment order for assessment ye .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 9,94,120/- in assessment year 2001- 2002. When the assessee carried the matter in appeal before CIT(A), he held that instead of 30%, disallowance of 15% will meet the ends of justice. 17.1 Similarly in assessment year 2003-04, it is noted by the Assessing Officer that the assessee s claim of expenditure is of ₹ 108.19 lacs under the head freight & cartage outward as against ₹ 33.14 lacs in assessment year 2001-02 and ₹ 101.97 lacs in assessment year 2002-03. Sin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t year 2003-04. The turnover of the assessee in assessment year 2000-2001 was ₹ 3828.50 lacs, which has increased to ₹ 5701.36 lacs in assessment year 2001-2002 and ₹ 9292.52 lacs in assessment year 2002-03 and ₹ 16978.54 lacs in assessment year 2003-04. Hence, it is seen that the increase in turnover in assessment year 2001-02 as compared to assessment year 2000-2001 was around 50% but the expenditure under the head freight and cartage outward has increased to ₹ 33 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ery much abnormal and such increased expenses are incurred in cash and the assessee could not explain this abnormal increase in the expenses, the disallowance made by the Assessing Officer to the extent of 30% of the expenses is not excessive in the facts of the present case in assessment year 2001-2002. Similarly, in assessment year 2003-04 also, the increase in expenses, as compared to assessment year 2001-2002 is 326% whereas the turnover of assessment year 2003-04 is ₹ 16978.55 lac as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of expenses in assessment year 2001-2002 is not excessive, the disallowance of 30% in assessment year 2003-2004 is also reasonable because in assessment year 2003-2004 also, it is noted by the Assessing Officer that freight & cartage outward payment of ₹ 51.57 lac have been made in cash, which was not verifiable as per the Assessing Officer in Para 7 of the assessment order for that year. Hence, in both the years, we find that the disallowance made by the Assessing Officer of 30% of e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o the extent of ₹ 1,89,042.30 made on account of vehicle running & maintenance 19. Ground No. 4 in assessee s appeal for assessment year 2003-2004 is as under: That the learned CIT(A) has erred in confirming the disallowance to the extent of ₹ 1,05,130.00 made on account of vehicle running & maintenance 20. Ground No. 4 in Revenue s appeal for assessment year 2003-2004 is as under: The Ld. CIT(A) has erred in law and on facts in restricting the disallowance made by the AO of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case of Sayaji Iron and Engg. Co. (supra). 22. We have considered the rival submissions. We find force in the submissions of Learned A.R. of the assessee because as per this judgment of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. (supra), even if there is personal use of vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

: That the learned CIT(A) has erred in confirming the disallowance to the extent of ₹ 1,14,31,332.00 made on account of consumable stores. 25. Ground No. 4 in Revenue s appeal for assessment year 2003-2004 is as under: The Ld. CIT(A) has erred in law and on facts in restricting the disallowance made by the AO of ₹ 2,28,62,664/- out of consumable stores expenses to 5% of the total expenses without giving any reasons for restricting the disallowances and not appreciating the facts brou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er has made following observations in the assessment order for assessment year 2001-02 before making disallowance of ₹ 1,31,60,083/- in that year: From the profit & loss account it was found that assessee has claimed an expenditure amounting to ₹ 13,16,00,830/- under the head consumables stores" as against ₹ 5,79,67,751/- claimed in the immediate preceding period. Assessee was required to furnish the details in respect of the same as also its nature. Vide written submi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der this head. The expenses claimed under this head were also found to have incurred in cash. These facts clearly suggest that the expenses claimed under this head were not open to verification completely and the claim could not substantiated with supporting vouchers completely. Accordingly, keeping in view the totality of the facts and circumstances of the case including the fact that assessee 10% of the expenses claimed under this head will be disallowed which will take care of the portion of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

against ₹ 13,16,00,830/- and ₹ 14,85,54,841/- in the A.Y. 2001 02 & 2002-03 respectively. The assessee was required to furnish the details in respect of the same as also its nature. Vide written submission dated ............... the assessee submitted that its production has increased to 50710.266 MT from 26587.050 MT and 29144.420 MT declared in A.Y. 2001 02 & 2002-03 respectively. The expenditure on consumables in the A.Y. 2001-02 & 2002-03 shown was ₹ 13.16,00,830 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

duction this year as compared to preceding years has gone down reasonably. The assessee company has further stated that almost all the expenses are vouched and almost all the payments have been made by cheques. The above contentions/submissions of the assessee have been examined with reference to books of account produced during the course of hearing. During the course of scrutiny of this claim, the assessee failed to produce supporting evidence i.e. bills and vouchers in respect of various purc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aining unsubstantiated. The disallowance works out to ₹ 2,28,62,664/- is added to the income of the assessee. 30. When the assessee carried the matter in appeal before the CIT(A) in assessment year 2001-02, he confirmed the entire disallowance of ₹ 1,31,60,083/- by making following observations in Para 6.2 and 6.2.1 of his order, which are reproduced below for the sake of ready reference:- 6.2 Decision I have considered the facts and circumstances of the case. The fact remains that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se of the assessee. Further, in the next year i.e. 2002-03, the total turnover has increased to ₹ 92.93 crores as against Current Year's turnover (including trading) of ₹ 57.00 crores; whereas the consumables have increased to only ₹ 14.86 Crores (in A.Y. 2002-03) from ₹ 13.16 crores in the current year. This also shows that everything is not hunky-dory with the amount of expenditure shown to have been incurred on consumables in the current year. 6.2.1 To claim an exp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in fixed/almost fixed proportion to produce the final product(s). In this case, during the current year, there has been a minor increase in production of iron & steel products from about 23,500 MT to 26,587 MT, whereas the consumables have increased by 100% which is not only inexplicable but against all the' principle of Chemical Science. The assessee has not helped the matter by keeping mum on such disproportionate increase in consumption of consumables. The plea that out of total purc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wance of 5% will meet the ends of justice because there is no disproportionate jump in the consumption of consumables in assessment year 2003-04. Hence, we make out a chart of turnover in assessment year 2000-2001 to assessment year 2003-04 as well as consumption of stores in these years, which is as under: Assessment year Turnover Consumption of consumable stock - 2000-01 3828.50 lac 579.68 lac 2001-02 5701.37 lac 1316.01 lac 2002-03 9292.53 lac 1485.55 lac 2003-04 16978.55 lac 2286.27 lac Henc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment year 2001-02, the relevant portion of which has been reproduced above. When we compare the turnover of assessment year 2003-04 with that of assessment year 2001-02, we find that the increase in turnover is about 200% and the increase in consumption of consumables stock in assessment year 2003-04 as compared to assessment year 2001-02 is about 75%. Even if we reduce the expenses of assessment year 2001-02 by 30% being disallowance made by the Assessing Officer in that year, the consump .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

year 2001-02 after considering 30% disallowance in that year. Therefore, in our considered opinion, the disallowance in assessment year 2001-02 made by the Assessing Officer and confirmed by learned CIT(A) to the extent of 30% in that year is proper and reasonable but no disallowance in assessment year 2003-04 is called for in the facts of the present case in view of the fact that the increase in expenses under this head in assessment year 2003-04 as compared to the reduced expenses of assessmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IT(A) has erred in confirming the disallowance of ₹ 1,10,332/- made on account of previous period items. 33. Learned A.R. of the assessee submitted that this ground is not pressed. Accordingly, this ground of the assessee is rejected as not pressed. 34. Ground No. 7 in assessee s appeal for assessment year 2001-2002 is as under: The learned Assessing Officer has erred in not deciding the allowance of unabsorbed depreciation amounting to ₹ 31,86,056/-. 35. It was submitted by Learned .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation of ₹ 3186.56 lac is not arising out of order of CIT(A) in that year because the ground raised by the assessee before CIT(A) was regarding disallowance out of commission, out of telephone expenses, out of freight cartage outward, out of vehicle running expenses, out of consumable stores and out of previous years expenses and this issue has been raised by the assessee before us by way of normal grounds and not by way of additional ground and therefore, this ground of the assessee does .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version