Coastal Energy Private Limited Vs ACIT (ITAT Chennai)
ITAT Chennai held that assessee is needs to establish the expenditure which is unreasonably high. Thus, additional evidence filed for expense pertaining to ‘shortage and quality cuts’ needs complete verification. Accordingly, matter remanded back to AO.
Facts- AO noted a new entry with alarming proportions is debited under the head ‘shortages and quality cut’. On verification of details furnished by the assessee, AO noted that under the head of expenditure includes shortages of Rs. 38,00,774/-, shortages account of Rs. 35,72,178/- and finally quality cut and liquidated damages of Rs. 7,99,26,147/-. AO noted that such losses were only 0.113% of the turnover in the immediately preceding year and the same had risen to 1.19% during this year. AO, after considering the submissions of the assessee, disallowed the claim of expenditure of Rs. 7 crores and added to the total income of the assessee.
DRP confirmed the disallowance and accordingly, AO passed the final assessment order by disallowing the expenditure claimed by the assessee. On being aggrieved, the assessee is in appeal before the Tribunal.
Conclusion- Held that the assessee was required to establish that the expenditure which is unreasonably high had actually been incurred and documentation provided in the assessment proceedings but, the same is not sufficient, requires to provide the records and correspondence establishing each and every cost cut made by the customers, the copies of ledger folio of accounts included in shortages were provided before the ASSESSING OFFICER on 28-11-2011 supporting evidence, was not complete. Even such documentation restricted to transactions of lesser value and it was repeatedly emphasized by the Assessing Officer to provide the complete documentation on this issue but, the assessee provided only a portion of the details and the entire records pertaining to this shortage account were not submitted.
