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2017 (6) TMI 1263 - AT - Income TaxOperating expenses disallowance @ 10% - Held that - As held earlier in this order that when an assessee does not fully honour the lawful authority of Revenue, or when lawful requirements prescribed by Revenue authorities are not fully complied with, the assessee cannot claim a lenient view as a matter of right, and the assessee must face its consequence as per law and further that the nature, extent and severity of the consequences will depend on the facts, circumstances and statutory provisions. In view of the statutory provisions, therefore, we set aside the appellate orders of the CIT(A) and the assessment orders of the AO in the case of both the aforesaid assessee and for both assessment years 2008-09 and 2009-10; and the matters are restored to the file of the AO with the direction to make denovo assessments as per law, after making further verification/inquiry/investigation, etc. in accordance with law. Depreciation of crates - plastic crates under the head Bottles and Shells eligible for depreciation @ 50%. - Held that - As find from the perusal of orders of the AO and CIT(A) that the above-mentioned points as well as the bottling process have not been fully considered by them. We are of the view that the aforesaid points as well as bottling process need to be first considered at lower level as it requires clear understanding of factual aspects having regard to bottling process, marketing, and related business aspects. In any case, set aside the appellate orders passed by CIT(A) and assessment orders passed by the AO for both the aforesaid assessee for both A.Y. 2008-09 and 2009-10 and we have already restored the matters to the file of the AO for denovo assessment. We hereby direct the AO to reexamine the matter regarding rate of depreciation on crates, during the proceedings for making denovo assessments and to pass fresh order as per law on this matter in the denovo assessment orders.
Issues Involved:
1. Ad-hoc disallowance of administrative and operating expenditures. 2. Deletion of additions related to purchases from related parties. 3. Disallowance of unverified expenses in fixed assets. 4. Disallowance of depreciation on plastic crates. Detailed Analysis: 1. Ad-hoc Disallowance of Administrative and Operating Expenditures: The primary issue was the ad-hoc disallowance of 10% of the total administrative expenditure, amounting to ?2,90,86,700, by the Assessing Officer (AO), which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO claimed the expenses were unverified, unreasonable, and excessive. The Tribunal noted that the assessee failed to produce books of accounts during the assessment proceedings due to turmoil and political unrest in Telangana. Despite this, the AO completed the assessment under section 143(3) instead of section 144, which is more beneficial to the assessee. The Tribunal set aside the appellate order of the CIT(A) and the assessment order, directing the AO to make a denovo assessment after providing the assessee an opportunity to comply with statutory requirements. 2. Deletion of Additions Related to Purchases from Related Parties: The AO made an addition of ?10,61,30,515 due to "unverified purchases" from related parties, which was deleted by the CIT(A). The AO had reasoned that the purchase cost per case was highly inflated compared to the manufacturing cost. The Tribunal, however, did not express an opinion on the merits and quantum of the addition but directed the AO to reassess the matter in a denovo assessment after necessary verification. 3. Disallowance of Unverified Expenses in Fixed Assets: The AO disallowed ?2,45,00,000 out of unverified expenses in fixed assets and ?36,75,000 out of depreciation due to the non-production of books of accounts and supporting documents. The CIT(A) had deleted these disallowances. The Tribunal set aside the orders of the CIT(A) and the AO, directing a denovo assessment to allow the AO to verify the claims properly. 4. Disallowance of Depreciation on Plastic Crates: The AO allowed depreciation on plastic crates at 15%, treating them as plant and machinery, instead of 50% claimed by the assessee under the "containers made of glass or plastic used as refills" category. The CIT(A) had directed the AO to allow depreciation at 50%. The Tribunal noted that the bottling process and the nature of crates as integrated assets were not fully considered by the lower authorities. The Tribunal directed the AO to reexamine the matter during the denovo assessment and pass a fresh order based on a clear understanding of the factual aspects. Conclusion: The Tribunal set aside the appellate orders and the assessment orders for the relevant assessment years and directed the AO to conduct denovo assessments, providing the assessee an opportunity to comply with statutory requirements. The Tribunal did not express any opinion on the merits and quantum of the additions but emphasized the need for proper verification and inquiry by the AO. All ten appeals were partly allowed for statistical purposes.
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