Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2016 (9) TMI 545

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... - there is merit in the submissions so made by the Ld A.R. In case of companies, which are having large volume of transactions, it would be practically difficult to bring all the evidences in one go. Hence the ledger account copies are furnished to the tax authorities and normally they are verified on a test check basis. In the instant case, the assessee has furnished copies of invoices and vouchers on a sample basis and it is stated that the assessing officer did not find any defects therein after carrying out examination. Also that the assessee has furnished the reasons for the fall in turnover and increase in manufacturing expenses. The sales relating to manufactured products have fallen from ₹ 233.74 crores to ₹ 210.65 crores, whereas the sales relating to traded goods have gone up from ₹ 14.15 crores to ₹ 35.51 crores. The assessee has stated that the change in the sales product mix coupled with the inflationary increase of prices and expenses have contributed to the increase in manufacturing expenses. When we look at this analysis furnished by the assessee, we do not find any infirmity in it. We notice that the AO has also not commented adversely on .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... disallowance to ₹ 50,000/-. 4. The Ld A.R submitted that the 5% of dividend income shall work out to about ₹ 3,000/- only and not ₹ 50,000/- as computed by Ld CIT(A). 5. We heard Ld D.R. We notice that the Ld CIT(A) has restricted the disallowance to 5% of the dividend income. However he has committed an error in working out the disallowance of 5% of the dividend income. Accordingly we modify the order of passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to 5% of the dividend income. 6. The next issue urged by the assessee relates to disallowance made out of bad debts claim. The assessee had claimed deduction towards bad debts to the tune of ₹ 20,27,182/-. The AO called for details of bad debts. Out of those details, the AO noticed that the assessee has continued to have business transactions with a debtor named M/s Pandesara Industries Ltd against whom the assessee had claimed bad debts of ₹ 55,000/-. Hence the AO took the view that the assessee has failed to establish that the above said debt has become bad and accordingly disallowed the claim of ₹ 55,000/-. The Ld CIT(A) also confirmed the same. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... on. With regard to the increase in interest expenditure, it was submitted that there was actually decrease in interest and finance charges by ₹ 0.74 crores. Further, there was increase in cash discount of ₹ 1.21 crores and there was decrease in the interest income by ₹ 0.70 crores. 11. However, the AO held that the assessee has not furnished any proper evidence to support the explanations given. Accordingly he made ad-hoc disallowance of ₹ 2.00 crore for want of evidences and added the same to the total income. 12. Before Ld CIT(A), the assessee filed detailed explanations and hence the Ld CIT(A) called for a remand report from the AO. In the remand report, the AO reported that the assessee has only furnished ledger account copies and sample copies of bills in support of expenses, i.e., the assessee has not furnished entire bills for verification. Accordingly he recommended that the addition of ₹ 2.00 crores should be sustained. Accordingly, the Ld CIT(A) took the view that the assessee has failed to furnish evidences as required by the AO to his satisfaction and accordingly, the assessee has failed to prove the expenses in terms of requirements .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e Ld A.R also submitted that the evidences in support of expenses run into several volumes and if the AO had insisted on production of entire evidences, the assessee would have made arrangements to transport all of them to the office of the AO. 16. In our view, there is merit in the submissions so made by the Ld A.R. In case of companies, which are having large volume of transactions, it would be practically difficult to bring all the evidences in one go. Hence the ledger account copies are furnished to the tax authorities and normally they are verified on a test check basis. In the instant case, the assessee has furnished copies of invoices and vouchers on a sample basis and it is stated that the assessing officer did not find any defects therein after carrying out examination. 17. We further notice that the assessee has furnished the reasons for the fall in turnover and increase in manufacturing expenses. The sales relating to manufactured products have fallen from ₹ 233.74 crores to ₹ 210.65 crores, whereas the sales relating to traded goods have gone up from ₹ 14.15 crores to ₹ 35.51 crores. The assessee has stated that the change in the sales prod .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... AO did not find fault with them. In our view, any defeciency noticed in the samples given would normally trigger further investigation. According to the assessee, the AO did not find any defect and further, did not ask for furnishing of further evidences. These discussions show that the assessee was willing to co-operate fully with the assessing officer and could not furnish all the volumes of invoices/vouchers due to practical difficulty only. Under these set of facts, in our view, there is no justification in finding fault with the assessee. 21. Further, we notice that the assessing officer has made disallowance of ₹ 2.00 crore on ad-hoc basis. In our view, the assessee has furnished proper explanations through various types of analysis of financial statements and also furnished reasoning for the variation. In our view, those explanations are reasonable and justifiable. As noticed earlier the AO did not find fault with those explanations and also with the sample copies of invoices/vouchers. 22. In view of the foregoing discussions, we are of the view that there is no justification in making disallowance out of various expenses on ad-hoc basis, when the AO has not fou .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates