As regards, the purchase of old gold, the assessee had filed the copies of the vouchers which are properly bound and preserved and it is submitted that is the normal practice of the customers to bring old gold and buy new ornaments and in that process, the value of the old gold would be reduced from the entire cost of the new ornaments. It was submitted that in such transactions, there is no cash payment, but it was only an adjustment of old gold ornaments against the purchase of new ornaments.
FULL TEXT OF THE ITAT JUDGMENT
This is Revenue’s appeal for the A.Y 2013-14 against the order of the CIT (A)-2, Hyderabad, dated 19.06.2017.
2. Brief facts of the case are that the assessee company, trading in textiles and jewellery, filed its return of income for the A.Y 2013-14 on 7.9.2013 admitting total income of Rs.7,18,02,940. During the assessment proceedings u/s 143(3) of the Act, the assessee was asked to produce its books of account. The assessee furnished the information as called for.
3 On verification of the same, the AO observed that for the following expenses, bills/vouchers are self-made and are not properly maintained:
|Incentive on sales||Rs.1,07,84,137|
4. Observing that the inflation expenses cannot be ruled out in such kind of expenses, the AO disallowed 10% of the same and brought it to tax.
5. Further, he also noted that during the year, the assessee has purchased old gold from customers at Rs.2,43,14,000 and the same were not supported by any bills/ vouchers, except the slips which does not contain the details of the party from whom the old gold is purchased. He observed that these expenses have been incurred mostly in cash. Holding that the genuineness of the expenses could not be verified from such bills and vouchers, and that the inflation of such expenditure cannot be ruled out, he disallowed 15% of such expenses and brought it to tax.
6. Aggrieved, the assessee preferred an appeal before the CIT (A) who allowed the same and aggrieved by the relief granted by the CIT (A), the Revenue is in appeal before us by raising the following grounds of appeal:
“1. The learned CIT (A) erred both on facts of the case and in law..
2. “In the facts and circumstances of the case, whether the CIT (A) is correct in law in deleting the addition even though the assessee did not produce proper bills and vouchers for the expenditure incurred by cash.
3. In the facts and circumstances of the case, whether the CIT (A) erred in ignoring the fact that the AO has disallowed only 10% expenditure incurred by cash and for which vouchers were not maintained properly”.
7. The learned DR supported the orders of the AO and submitted that the assessee has not filed any bills/vouchers even before the CIT (A) and therefore, the CIT (A) ought to have upheld the disallowance of 10% of the expenditure incurred by the assessee in cash as done by the AO.
8. The learned Counsel for the assessee, on the other hand, supported the orders of the CIT (A) and submitted that the assessee had furnished all the information before the CIT (A), who had called for a remand report from the AO and in the remand report, no adverse comments were made against the evidence so furnished but it was only submitted that the same is not acceptable. He also drew our attention to the chart at Page 1 of the Paper Book, wherein the details of the expenditure incurred by the assessee over the years is given to demonstrate that there is no excess of expenditure claimed during the relevant A.Y to presume that the expenditure was inflated. He submitted that both in the earlier years, as well as, in the subsequent A.Ys, no disallowance of expenditure of any kind was made by the authorities below. In support of the same, the copies of the assessment orders for the AYs 2014-15, 2014-13, 2013-12, 2012-11 and 2009-10 are filed before us.
9.Having regard to the rival contentions and the material on record, we find that the cash payments were mainly towards (i) the generator maintenance; (ii) incentive on sales; and (iii) purchase of old gold from the customers. As far as generator maintenance is concerned, the assessee has explained before the CIT (A), that 90% of the generator maintenance is being maintained through bills/ vouchers of various petrol and diesel bunks and has also produced the copies of the bills/vouchers which are in the bound books filed before the CIT (A). Further, as regards the incentive on sales also, the assessee had furnished the details of the workers who have drawn the sales incentives in cash, in its various branches in the State of A.P, during the financial year under question. As regards, the purchase of old gold, the assessee had filed the copies of the vouchers which are properly bound and preserved and it is submitted that is the normal practice of the customers to bring old gold and buy new ornaments and in that process, the value of the old gold would be reduced from the entire cost of the new ornaments. It was submitted that in such transactions, there is no cash payment, but it was only an adjustment of old gold ornaments against the purchase of new ornaments.
10.We find that the CIT (A) has considered this issue at length and after calling for a remand report from the AO and after verifying the documents filed before him, has concluded that the disallowance of 10% of the cash payments towards the incentives to staff and generator maintenance and also 15% of the payments towards purchase of old gold to be deleted. We find that the assessee has been maintaining the books of account and no disallowance of any expenditure either in the earlier or subsequent A.Ys has been made by the Revenue authorities. The assessee had filed all the details before the CIT (A) and the Revenue has not been able to rebut the findings of the CIT (A) except stating that the assessee has not filed the bills/vouchers before the CIT (A). In view of the same, we do not see any reason to interfere with the orders of the CIT (A).
11.In the result, Revenue’s appeal is dismissed.
Order pronounced in the Open Court on 8th June, 2018.