2015 (6) TMI 516 - AT - Income Tax

Unexplained expenditure u/s.69C - statement u/s.108 of the Customs Act was recorded wherein about undervaluation resorted by the assessee in respect of 22 consignments - CIT(A) deleted addition - Held that - The adjudication by the custom authority has not been done therefore the only basis to rely on the statement made before the DRI should not be the only ground for confirming the addition. Both the parties have agreed that the finding of the custom authorities would have bearing on the present case. Therefore the respective representatives of the parties agreed that the issue be restored to the file of AO for deciding the issue after the outcome of the adjudication by the Custom Authority. In view of the submissions made by the respective representative of the parties we hereby restore this issue to the file of the AO to decide the issue after the adjudication order is passed by the custom authority. - Decided in favour of revenue for statistical purposes. Disallowance of freight and clearing and forwarding expenses u/s.40(a)(ia) - non-deduction of TDS - Held that - Undisputedly the ld.CIT(A) has not doubted the submission of the assessee that payment so made does not contain income/profit element. Despite that he proceeded to confirm the addition. Under the identical facts in the AY 2007-08 however he restricted the disallowance to the extent of service charges paid to the CHA. Therefore in the year under consideration also disallowance ought to have been restricted to service charge. The impugned disallowance is therefore restricted to the extent of service charges. The AO is hereby directed to recompute the disallowance in the light of above direction. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on plant and machinery - Held that - During the course of hearing a query was raised by the Bench whether the plant and machinery was operated and used for manufacturing at any point of time in near future. The answer was negative ld.counsel for the assessee could not place any material on record suggesting that the plant and machinery were used. Under these facts we do not see any reason to interfere with the order of the ld.CIT(A) the same is hereby upheld. - Decided against assessee.

Summary

Issues Involved:
Appeals by Revenue and cross-objections by Assessee against orders of CIT(A) for AYs 2006-07 & 2007-08 regarding unexplained expenditure, non-deduction of tax, disallowance of depreciation, and clearing and forwarding expenses.

Analysis:

Issue 1: Unexplained Expenditure for AY 2006-07
The Revenue appealed against the deletion of addition of Rs. 39,37,338 under section 69C. The AO made the addition during scrutiny assessment, but the CIT(A) partly allowed the appeal. The Tribunal noted that the finding of custom authorities would impact the case. The issue was restored to the AO pending adjudication by custom authorities, and the AO was directed to reexamine the issue post-adjudication. The Revenue's appeal was allowed for statistical purposes.

Issue 2: Disallowance of Expenses for AY 2006-07
Assessee's cross-objection challenged the disallowance of freight and clearing expenses of Rs. 5,59,273 under section 40(a)(ia). The Tribunal found that the disallowance should be limited to service charges, not the entire amount. The AO was directed to recompute the disallowance accordingly. The cross-objection was partly allowed for statistical purposes.

Issue 3: Disallowance of Depreciation for AY 2006-07
Assessee's cross-objection contested the disallowance of depreciation on plant and machinery. The Tribunal upheld the disallowance as the assets were not used during the year. The cross-objection was dismissed.

Issue 4: Unexplained Expenditure for AY 2007-08
The Revenue appealed against the deletion of addition of Rs. 63,79,100 under section 69C. Following the reasoning from the previous year, the Tribunal set aside the CIT(A) order, allowing the Revenue's appeal for statistical purposes.

Issue 5: Disallowance of Expenses for AY 2007-08
Assessee's cross-objection challenged the disallowance of clearing and forwarding expenses under section 40(a)(ia). The Tribunal upheld the disallowance, consistent with the previous year. The cross-objection was dismissed.

In conclusion, the appeals by Revenue were allowed for statistical purposes, cross-objection for AY 2006-07 was partly allowed, and cross-objection for AY 2007-08 was dismissed. The Tribunal emphasized the importance of proper adjudication by custom authorities and directed the AO to reexamine certain disallowances based on the findings. The judgment was pronounced in 2015 at Ahmedabad.