2016 (11) TMI 1154 - AT - Income Tax

Addition on account of the income of the Goa unit assessed on the basis of the figure of the Murud unit - Held that - The Assessing Officer has admitted Gross Profit of 39% in Goa Resorts and 72% in Murud for the A.Y.2006-07 made u/s.143(3) of the Act. No plausible reasons have been placed on record by the Assessing Officer to which it can be assumed that in which circumstances the Gross Profit of Goa unit is not acceptable. All figures which have been mentioned in the assessment order speaks about the less profit of the Goa unit. In view of the said figures mentioned above, we are of the view that the Assessing Officer has wrongly assessed the gross / net profit of the Goa unit by comparing the profit of Murud unit. In view of the above said specific facts and circumstances, we are of the view that end of the justice would meet if the disallowance to be reduced to the extent of 50% of the above addition to the tune of ₹ 15,45,186/- Accordingly, we allow the same and the Assessing Officer is hereby directed to reduced the addition to the extent of 50% of the amount of ₹ 15,45,186/-. Accordingly, this issue has been partly allowed in favour of the assessee. Disallowance u/s.14A - Held that - Assessing Officer did not go through the correctness of the claim. No satisfaction of any kind was recorded by the Assessing Officer. The assessee has shown the common expenses to all head of income. The provision of section 14A read with Rule 8D of the Act is applicable, therefore the CIT(A) has directed the Assessing Officer to re-compute the expenditure incurred to earn the exempt income in view of the provision contain in section 14A read with Rule 8D of the Act. We found no ground to interfere with the finding of the CIT(A), therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which does not require to be interfere with at this appellate stage.

Summary

Issues:
1. Addition on account of low gross profit and estimation of sales.
2. Disallowance under section 14A of the Income Tax Act.

Issue No.1:
The assessee challenged the addition of ?15,45,186 made by the Assessing Officer on the Goa unit's income based on the Murud unit's figures. The Assessing Officer claimed the sales were suppressed at Goa by comparing the sales ratios of both units. The assessee argued that the accounts were not comparable, citing differences in profit ratios and audit scrutiny. The Tribunal found the AO wrongly assessed the Goa unit's profit by comparing it with Murud. Considering specific facts, the Tribunal directed a 50% reduction in the addition, partly allowing the issue in favor of the assessee.

Issue No.2:
The assessee disputed the disallowance under section 14A of the Act. The CIT(A) upheld the disallowance, citing common expenses and the applicability of Rule 8D. The Tribunal noted the AO's failure to verify the claim's correctness and upheld the CIT(A)'s decision. The Tribunal found no reason to interfere with the CIT(A)'s judgment, deciding the issue in favor of the revenue against the assessee.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, reducing the addition in the first issue and upholding the disallowance under section 14A in the second issue. The judgment provided detailed analysis and reasoning for each issue, ensuring a fair and just decision based on the facts presented during the proceedings.