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Assistant Commissioner of Income Tax Versus M/s Standard Alloys (I) Pvt. Ltd.

2016 (3) TMI 858 - ITAT JAIPUR

Addition U/s 40A(2)(b) - interest in excess of 3.25% more than the bank rate - expenses had increased substantially compared to preceding year - Held that:- The assessee had explained the reasons for increase in the expenses under all the heads and also produced the relevant bill vouchers at the time of assessment proceedings. The ld Assessing Officer had not found any non-genuine payment under these heads, no specific discrepancy has pointed out in the bills and vouchers maintained by the asses .....

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ght out on record any material to substantiate his addition. - Decided in favour of assessee - ITA No. 339/JP/2014 - Dated:- 8-1-2016 - T. R. Meena, AM And Laliet Kumar, JM For the Appellant : Shri Kailash Mangal (JCIT) For the Respondent : Shri Ajay Somani (CA) ORDER Per T R Meena, AM This is an appeal filed by the revenue against the order dated 13/02/2014 of the learned C.I.T.(A), Ajmer for A.Y. 2010-11. The respective grounds of appeal are reproduced as under:- "In view of the facts and .....

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; 15,545/-. The assessee company is engaged in the business of manufacturing of casting, alloys and mechanical spares. The assessee filed its return on 07/08/2010 declaring total income of ₹ 20,49,550/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that the assessee had paid interest of ₹ 4,78,314/-@ 15% on deposits to the persons covered U/s 40A(2)(b) and paid interest to the bank @ 11.75% on cash credit loan. Thus the interest in excess of 3.25% .....

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nsidered the contentions of the appellant as well as assessment order. It is seen that the assessee has pointed out that the loans from the persons covered u/s 40A(ii)(b) were unsecured loans which are not comparable with secured loans taken from the bank. Further, for the bank loans, there are incidental charges viz. processing fees, insurance charges etc. and interest is levied by the bank on monthly basis which leads to higher rate of interest than interest rate of 11.75% mentioned by the AO. .....

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funds. The borrowings were unsecured whereas bank borrowings were secured. The rate of interest paid to the family members were on annual basis. However, in case of bank, it was paid on the basis of monthly interest rate. There were other hide charges in the name of service also to be paid to the bank, therefore, there is no difference between rate of interest paid to the relatives. Accordingly, he prayed to uphold the order of the ld CIT(A). 5. We have heard the rival contentions of both the pa .....

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ds at ₹ 42,10,861/-. The ld Assessing Officer observed that the assessee had debited various expenses in the P&L account i.e. power and fuel expense, travelling expenses and salaries and wages. As per the Assessing Officer these expenses had increased substantially compared to preceding year, therefore, he gave reasonable opportunity of being heard, which was availed by the assessee vide letter dated 29/11/2012. The assessee's reply has been reproduced by the Assessing Officer at p .....

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herefore, there is no correlation between the production and expenses claimed by the assessee. Some of the expenses were incurred in cash, which was not verifiable, therefore, he disallowed ₹ 19,38,303 under the head power and fuel expenses. 6.1 Similarly, the ld Assessing Officer also sought the explanation for increasing the expenses under the head travelling expenses. The assessee's reply has been reproduced by the Assessing Officer on page 7 and 8 of the assessment order. After con .....

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it was ₹ 4,71,323/-, therefore, there was an increase by 35.81% whereas the sales has reduced by 7.8% compared to preceding year. Thus, he disallowed the expenses under this head at ₹ 1,68,494/-. 6.2 There was also increase in the salary and wages compared to preceding year. The Assessing Officer provided opportunity to the assessee. The assessee's reply has been reproduced on page 9 of the assessment order. After considering the assessee's reply, the Assessing Officer analys .....

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eport of three persons without any identity out of seven new employees. He also verified the signature on joining report and salary register and noticed substantial difference in the signature. He found salary paid unreasonable. Therefore, he disallowed salary of ₹ 21,03,764/-. Thus, total disallowance under three heads were made at ₹ 42,10,861/-. 7. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had allowed the appeal .....

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tariff rate during the year under consideration. The diesel price also increased by 14.75%. This was the reason to increase in fuel expenses. The ld Assessing Officer had not found any bogus expenses, therefore, it is allowable U/s 37 of the Act. 7.1 Further he held that the assessee had explained that travelling expenses of ₹ 6,18,669/- were incurred for the actual fare, daily allowances, hotel bills, local conveyance, toll taxes and miscellaneous expenses and the bills and vouchers for .....

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the salary of the Director increased by 18 lacs and other employees by ₹ 3,03,764/-. The assessee had produced attendance register, salary register, resume of Director, joining report and resume of new appointees, forwarding letter to the banker for making salary payment to the employees etc. Though the assessee had not produced 58 employees, however, all the relevant details regarding their application form alongwith name and addresses of the employees were available. Regarding mismatch o .....

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o justification for increase in the various expenses with reference to decline of sale. These evidences were not produced before the Assessing Officer, therefore order of the Assessing Officer may please be confirmed. 9. At the outset, the ld AR of the assessee has vehemently supported the order of the ld CIT(A) and argued that the company is a manufacturer having excise license and is also a registered sales tax dealer. The goods were supplied to the big cement company but there was decline in .....

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eding year. The AR has drawn our attention on comparative chart of reduction in prices. The price of furnace oil increased from 18,300/- per M.T. to ₹ 28,548/- per M.T. of same grade and maximum purchase price paid during the year ₹ 30,832/- per M.T. Regarding increase in the travelling expenses, he argued that there was a recession, therefore, the company tried to explore new customer, satisfy customers and perform after sales services added efforts are needed to boost the sale. The .....

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