2019 (9) TMI 763 - AT - Income Tax

Maintainability of appeal - low tax effect - monetary limit - HELD THAT - There is no dispute as to the applicability of the Circular No. 17 of 2019, on pending appeals and, thus, tax effect involved in the appeal being less than the prescribed monetary limit of ₹ 50 Lakhs, the Department was required to withdraw this appeal or not pressed if not falling under exclusion provided in para 10 of circular No. 3/2018 as amended on 20/08/2018. Accordingly, the appeal of the Revenue is dismissed as infructuous with liberty to file application for recall, if found to be covered by the exceptions provided in Circular No.3/2018 as amended on 20/08/2018. Addition towards Chilling Charge - assessee procured milk from villagers and before processing in its factory, the milk was sent for chilling process - whether expenses are genuine and incurred wholly and exclusively for the purpose of the business of the assessee? - HELD THAT - Assessee neither could substantiate the variation in chilling charges from ₹ 0.10 to ₹ 0.25 along with any supporting evidences nor could rebut the finding of the CIT(A). Explanation furnished by the appellant appear to be lame excuses in order to somehow justify the increase. Apart from giving such vague and unsubstantiated excuses, the appellant has not brought any material on record to justify the increase. Assessee could not justify as why huge sums of cash payments have been made to the industrial units engaged in chilling process. - Decided against assessee Disallowance for depreciation on Tetra Pack machine - as per DR this machine was received on 03/10/2005 and, therefore, it was put to use by the assessee for less than 180 days and, thus, assessee was entitled for half of the depreciation admissible for the entire year - HELD THAT - On being specifically asked by the Bench to the assessee to submit any evidence of machinery put to use or ready to put to use before 30th September, 2005, he expressed his inability in producing any such evidence. - Decided against assessee Disallowance on account of repair and maintenance of machinery, generator running and maintenance and miscellaneous expenses - HELD THAT - Assessee failed to rebut the finding of the Ld. CIT(A) regarding the self made vouchers made by the assessee which were not found to be verifiable. In absence of any scope of verification by the Assessing Officer of the relevant expenses claimed, a lump sum disallowance made by the Assessing Officer cannot be treated as unreasonable. Accordingly, we uphold the finding of the CIT(A) on the issue confirming addition - Decided against assessee.

Summary

Issues Involved:

1. Disallowance of ?31,05,390/- on account of chilling charges.
2. Addition of ?1,00,00,000/- under section 68 on account of share application money.
3. Disallowance of ?38,00,000/- on account of chilling charges for AY 2006-07.
4. Disallowance of ?1,02,232/- for depreciation on Tetra Pack machine.
5. Disallowance of ?2,50,000/- on account of repair and maintenance expenses.

Issue-wise Detailed Analysis:

1. Disallowance of ?31,05,390/- on account of chilling charges:

The Revenue's appeal against the deletion of the disallowance of ?31,05,390/- made on chilling charges was dismissed. The Tribunal noted that the tax effect involved was below the prescribed monetary limit of ?50 Lakhs for filing appeals before the ITAT, as per CBDT Circular No. 17 of 2019. The Tribunal confirmed that the circular applied to pending appeals, referencing the Ahmedabad Bench's decision and a CBDT letter dated 20th August 2019, which clarified the circular's applicability to all pending appeals. Consequently, the appeal was dismissed as infructuous with liberty to file for recall if covered by exceptions in Circular No. 3/2018 as amended on 20/08/2018.

2. Addition of ?1,00,00,000/- under section 68 on account of share application money:

The Revenue's appeal also included the deletion of an addition of ?1,00,00,000/- made by the AO under section 68 due to unverified share application money. However, as the tax effect was below the prescribed limit, the appeal was dismissed for the same reasons as the chilling charges disallowance.

3. Disallowance of ?38,00,000/- on account of chilling charges for AY 2006-07:

The assessee's appeal against the disallowance of ?38,00,000/- for chilling charges was dismissed. The Tribunal noted that the assessee failed to provide evidence to justify the increase in chilling charges from the previous year. The assessee's explanation of increased milk quantity and varying chilling rates due to multiple factors was not substantiated with evidence. The Tribunal upheld the CIT(A)'s finding that the chilling expenses were not incurred wholly and exclusively for business purposes, noting the significant cash payments and self-generated vouchers as unjustified.

4. Disallowance of ?1,02,232/- for depreciation on Tetra Pack machine:

The assessee's appeal against the disallowance of ?1,02,232/- for depreciation on a Tetra Pack machine was dismissed. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence to prove the machine was put to use before 30th September 2005. The assessee's inability to provide such evidence led to the conclusion that the machine was used for less than 180 days, justifying only half the allowable depreciation.

5. Disallowance of ?2,50,000/- on account of repair and maintenance expenses:

The assessee's appeal against the disallowance of ?2,50,000/- for repair and maintenance expenses was dismissed. The Tribunal agreed with the CIT(A) that the disallowance was justified due to unverifiable self-made vouchers. The CIT(A) noted that the disallowance was a small percentage (about 1%) of the total claimed expenses, making it reasonable in the absence of verifiable third-party bills.

Summary:

Both the appeals of the Revenue and the assessee were dismissed. The Tribunal upheld the CIT(A)'s findings on all issues, emphasizing the importance of verifiable evidence and adherence to prescribed monetary limits for appeals. The order was pronounced in the open court on 3rd September 2019.