ITAT MUMBAI BENCH `H’ MUMBAI,
ACIT Vs. ABC Bearings Ltd.,
ITA No. 6430/Mum/2007,
July 16, 2010
O R D E R
Per T.R.SOOD, AM:
In this appeal, the revenue has raised the following three grounds:.
1. Whether on the facts and in the circumstances of the case, the Ld. CIT[A] is justified in deleting the disallowance of Rs.3.88 crores even though the assessee failed to produce relevant account books, bills and vouchers before the AO.
2.Whether on the facts and in the circumstances of the case, the Ld. CIT[A] is justified in deleting the disallowance of Rs.87,05,400/- even though the AO had given a finding that the said debt had not become bad during the relevant accounting year. In support of this ground, reliance is placed upon Madras High Court decision in the case of South India Surgical (153 Taxman 491) and Gujarat High Court decision in the case of Dhall Enterprises (207 ITR 729).
3. Whether on the facts and in the circumstances of the case, the Ld. CIT[A] is justified in deleting the disallowance of long term capital loss of Rs.37,04,987/- made by the AO and holding that conversion of UTI-64 units into UTI 6.75% Tax Free Bonds amounts to transfer within the meaning of Section 2[47] of the I.T.Act. In this connection it is submitted that definition of transfer u/s.2[47][iv] covers only conversion of asset into stock in trade of business which is not the case here.
2. Ground No.1: After hearing both the parties, we find that during assessment proceedings AO noticed that assessee had debited “manufacturing expenses” in profit & loss account amounting to Rs.7763.41 lakhs. Assessee was specifically asked to give details of these expenses and produce books of accounts and bills and vouchers for verification of these expenses. In response to the same, assessee filed only groupings of profit & loss account giving head-wise expenditures. Assessee was again asked to produce books of accounts, bills and vouchers. However, no compliance was made. In this background, AO observed that the burden was on the assessee to prove that expenses have been incurred for the purpose of business and since no documentary evidence was filed, an adhoc disallowance of 5% amounting to Rs.3.88 crores was made to the income of the ass.
3. Before the CIT(A), it was mainly submitted that no such addition has been made in past and the books of accounts were duly audited. It was further submitted that accounting records were being maintained at three locations, viz., Bharoch plant, Lonavala Plant and Mumbai office. The accounting records run into 175 to 200 box files containing details in respect of payments and receipt vouchers [approximately no.3000], cash and bank payment vouchers [approximately no.10,000], general vouchers [approximately no.88], expenses vouchers [approximately no.13000], goods receipt vouchers [approximately no.11000] as well as invoices [approximately no.1500] etc. Therefore, it was not practicable and rather than very difficult to produce such voluminous records which were being maintained at three different offices. The ld. CIT(A) accepted the submissions and deleted the addition vide para 6.3 of his order, which is as under:
“6.3 I have considered the submissions of the AR and in my view the AO is not justified in disallowing 5% of the expenditure debited to P&L a/c simply on the ground that they are not for the business. The AR has already made his point that the expenses are only for the business and not personal in nature. All these expenses are duly audited by Commissioner of Income Tax (Appeals) and they have not pointed out any expenditure which is not related to the business. Hence the disallowance is unwarranted and need to be deleted. I agree with the view of the AR that the disallowance of 5% of the total manufacturing and other expenses are not warranted unless it is proved that any of the expenditure are not for the business of the assessee. The AO is directed to delete this addition. This ground of appeal is allowed.”
4. Before us, the Ld.DR submitted that the AO had specifically asked to produce bills and vouchers for verification as well as books of accounts which were not submitted before the AO or even before the CIT(A), still, CIT(A) has allowed the relief. He argued that the onus is always on the assessee to prove the expenditure for which assessee was duty bound to produce the books of accounts and other supporting documents, which it failed to do so. Merely because, accounts were audited, assessee cannot shy away from producing records.
5. On the other hand, the Ld.counsel of the assessee reiterated the submissions made before the CIT(A). She argued that in past no such additions have been made. Since the additions have been made on an adhoc basis, the same are not sustainable. She also emphasized that assessee was having voluminous records and, therefore, it was not possible to produce the same. She also pointed out that notice to produce books of accounts and bills and vouchers was given only on 26-10-006 and assessment has been finalized on 18-12-2006 and, thus, very little time was given to produce these voluminous records. While concluding, she submitted that if Bench is of the opinion that such records still need to be produced, then an opportunity may be given for the same.
6. We have considered the rival submissions carefully and agree with the submissions of the Ld.DR that once the AO wanted to verify the expenses, assessee was duty bound to produce the books of accounts and other bills and vouchers for his verification. Merely because, records are voluminous, that cannot be a reason for non production of such records before the Assessing Authority. However, we find merit in the submissions of the Ld.counsel of the assessee that very little time was given to produce these records and, therefore, in the interests of justices, we set aside the order of the ld. CIT(A) and remit the matter back to the file of the AO with a direction to give sufficient opportunity to the assessee to produce books of accounts and bills and vouchers and then decide the issue accordingly. Assessee is also directed to produce all books of accounts and relevant supporting evidence for verification of the AO.
7. Ground No.2: After hearing both the parties, we find that during the assessment proceedings AO noticed that the assessee has made a claim of bad debts amounting to Rs.72,07,735/-. In response to the notice, the assessee submitted as under:
“From Provision
