ACIT Vs M/s. Modi Rubber Limited (ITAT Delhi)
Disallowance had been made on ad-hoc basis without pointing out any defects in assessee books or vouchers maintained for impugned expenses, and, the same was not, therefore, sustainable.
FULL TEXT OF THE ITAT JUDGMENT
This appeal has been filed by the Revenue against the order dated 20/01/2014 passed by the Ld. Commissioner of Income-tax (Appeals)-V, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, raising following grounds:
1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified the disallowance of expenses of Rs.21,90,000/- out of total expenses of Rs.73,77,381/- made by the A.O. u/s 37(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”)?
2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.7,02,261/- made by the A.O. u/s 40(a)(ia) as the assessee failed to deduct TDS which it was liable to deduct as per the provisions of section 1 94C/194I of the IT Act?
3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in restricting the disallowance u/s 14A to Rs.90,103/- out of Rs.3,00,11,791/- i.e. giving relief of Rs.2,99,21,688/- to the assessee when Rule 8D was clearly applicable?
4. The order of the Ld. CIT(A) is erroneous and is not tenable on the fact and in law.
5. That the order of the Learned CIT(A) is erroneous and is not tenable on facts and in law.
6. That the grounds of appeal are without prejudiced to each other.
2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacture, sale and trading of automotive tyres and tubes and flaps. For the year under consideration i.e. assessment year 2009-10, the assessee filed return of income on 30/09/2009, declaring nil income. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short the ‘Act’) was issued and complied with. The scrutiny assessment under section 143(3) of the Act was completed on 19/12/2011 after making certain additions/disallowances. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal. Aggrieved with the relief allowed to the assessee, the Revenue is in appeal before the Tribunal, raising the grounds as reproduced above.
3. In ground No. 1, the Revenue has challenged disallowance of 21,90,000/- out of various expenses like, conveyance, travelling, foreign travelling, telephone and electricity etc.
3.1 Before us, the Ld. DR relied on the order of the Assessing Officer and submitted that in view of the excessive claim of the expenses, the Ld. Assessing Officer was justified in disallowing expenses.
3.2 On the contrary, the Ld. counsel of the assessee relying on the finding of the Ld. CIT(A), submitted that the expenses have been disallowed on ad-hoc basis without pointing out any defects in the books of account or vouchers of those expenses, which is not permitted in law. He further referred to the order of Tribunal in the case of the assessee for assessment year 2008-09, which is placed on page 82 -105 of the paper book filed by the assessee and submitted that identical expenses disallowed in assessment year 2008-09, have been deleted by the Tribunal .
3.3 We have heard the rival submissions and perused the relevant material on record. The Assessing Officer has computed the disallowance on percentile basis. For ready reference, the chart of disallowance of expenses reproduced by the Assessing Officer in the assessment order is extracted as under:
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