2011 (8) TMI 509 - HC - Income Tax

Addition - bogus claim of various expenses - genuineness of transaction - the entire issue is based on the evidence on record - The Tribunal having appreciated the evidence and given its findings on such evidence hence no question of law arises - The Tribunal being the final fact finding authority its conclusion on facts would not be open to question before us unless of course such conclusions suffer from perversity - Thus the Tribunal has given its findings on the basis of the evidence on record - No perversity is pointed out - Decided in favour of assessee. Inflated/bogus expenses - Assessee has provided all the relevant details to prove the genuineness of expenses and therefore merely because some of the details could not be furnished or the accounts were not reconciled because of mistake of other party the addition could not be warranted. It is also observed that the clearing and forwarding expenses are quite fair and reasonable as compared to previous year. The profit margin is also fair as compared to previous year as well as in comparable cases - Therefore looking to the totality of facts the addition is deleted. Disallowance of 17, 45, 865/- Provision for expenses - expenses are provided on the last date as the debit notes were issued only in the month of April 2004. Therefore merely the debit notes issued in subsequent year the expenses cannot be disallowed -The liability is in praesenti though it will be discharged at a future date - It does not make any difference if the future date on which the liability shall have to be discharged in not certain - Therefore respectfully following the decision of the Hon ble Supreme Court in the case of Bharat Earth Movers 2000 (8) TMI 4 - SUPREME Court the addition made by AO is deleted. Exemption u/s 10A - Evidence clearly proves that the goods were produced at special economic zone and the same were also exported outside India and the assessee had earned the receipts in foreign currency - Decided in favour of assessee.

Issues Involved:

1. Bogus claim of various expenses amounting to Rs. 1,45,82,065/-
2. Inflated/bogus expenses amounting to Rs. 18,37,241/-
3. Disallowance of capital expenses amounting to Rs. 17,45,865/-
4. Provision for expenses amounting to Rs. 11,75,534/-
5. Disallowance of exemption amounting to Rs. 28,59,527/-

Detailed Analysis:

1. Bogus Claim of Various Expenses (Rs. 1,45,82,065/-):

The Revenue contended that the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] had sufficient evidence to deem the expenses as non-genuine, citing a report from the stamp revenue authority. However, the Tribunal found that the AO was not justified in rejecting the assessee's books of accounts. The Tribunal noted that the assessee showed receipts of Rs. 37.97 crores and a net profit of Rs. 168.90 lacs, translating to a profit ratio of 4.45%. Including depreciation, the profit before depreciation was 14.31%. The Tribunal emphasized that the assessee's profit margin was higher than others in the same business line and that the AO's assessment was arbitrary. Only 4 out of 37 parties were issued notices, and only one cheque per party was verified, which the Tribunal found insufficient for proving malafide. Consequently, the Tribunal's findings were based on a detailed appreciation of evidence, and no question of law arose.

2. Inflated/Bogus Expenses (Rs. 18,37,241/-):

The Tribunal observed that the AO made additions based on incomplete details from 19 parties. The assessee provided detailed reconciliations, including bills, payment details, and TDS certificates. For instance, in the case of Dhiraj M. Vaghela, the AO mistakenly considered the wrong name, and the correct details were provided. In the case of Tarun Shipping Services, the proprietor's death prevented confirmation letters, but other substantial evidence was provided. The Tribunal concluded that the assessee had provided all relevant details to prove the genuineness of expenses, and the addition was deleted. The Tribunal's decision was based on a comprehensive evaluation of evidence, raising no question of law.

3. Disallowance of Capital Expenses (Rs. 17,45,865/-):

The issue revolved around the assessee's claim of repairs to dumpers as revenue expenditure. The AO treated it as capital expenditure. The Tribunal, referencing the Supreme Court's decision in Commissioner of Income Tax vs. Saravana Spinning Mills P. Ltd., allowed the claim under Section 31 of the Income Tax Act, 1961, as current repairs. The Tribunal noted that the repairs were to preserve and maintain existing assets, not to create new ones. The Tribunal's decision was aligned with legal precedents, and no question of law arose.

4. Provision for Expenses (Rs. 11,75,534/-):

The Tribunal noted that the services were provided in the relevant financial year, though debit notes were issued later. The assessee had made advance payments, and the liability was certain and quantifiable. Citing the Supreme Court's ruling in Bharat Earth Movers, the Tribunal allowed the deduction, stating that the liability was not contingent but present. The Tribunal's decision was based on established legal principles, and no question of law arose.

5. Disallowance of Exemption (Rs. 28,59,527/-):

The Tribunal found that the assessee's food processing unit at Kandla SEZ engaged in various processes to meet export standards. The Tribunal referenced the Supreme Court's definition of "production" in India Cine Agencies, concluding that the assessee's activities qualified as production. The Tribunal also verified that the assessee earned in foreign currency, fulfilling Section 10A requirements. The Tribunal's decision was based on substantial evidence, and no question of law arose.

Conclusion:

The Tribunal's conclusions across all issues were based on a detailed appreciation of evidence and legal precedents. The High Court found no infirmities or questions of law in the Tribunal's findings and thus dismissed the appeal.

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