2021 (1) TMI 236 - AT - Income Tax

Addition of burning losses during the process of manufacture of ingots - assessee stated that during the year the burning loss in their plant was to the extent of 5.81% which is accurate and as per consumption and production of the finished goods - HELD THAT - As find considerable cogency in the contention of assessee that there is no standard % of burning loss in furnace it only depends furnace to furnace and only one kind of scrap cannot be used, they used different kind of scrap which has different % burning loss. As noted that all the purchases are recorded in the books of accounts and details of sponge Iron used along with the documentary evidence which were filed before the authorities below, which have not been properly appreciated. It was also noted that during the year the burning loss in the assessee s plant was to the extent of 5.81% which is accurate and as per consumption and production of the finished goods. The addition in dispute is not tenable. Even otherwise, as per settled law, the addition made by the AO was on estimate basis, which is not sustainable, hence, the same is deleted as such. Disallowance of unsecured loan raised - assessee submitted that assessee has taken unsecured loan from Bimla Devi by account payee cheque in routine course of business. Smt. Bimla Devi is the relative of the directors of the company - HELD THAT - As find considerable cogency in the contention of the assessee, that the loan from Smt. Bimla Devi has been received through NEFT though proper banking channel; Mrs. Bimla Devi is an income tax assesee, who is relative of the Director of the Company. As noted that the cash and bank statement of Bimla Devi for the year 2013-14 alongwith its ITR, computation of income and balance sheet was filed before the authorities below. In this case, as per settled law, the genuineness of the transaction has been established for which assessee is not required to prove source of source and the onus is on the revenue to prove that the transaction is not genuine, which they have failed to prove. Hence, delete the addition in dispute Addition on account of cartage outward for alleged inflated expenses - HELD THAT - We find considerable cogency in the contention of the assessee, submitted that during the year the assessee had paid ₹ 1182164/- as carriage outward for carriage of finished goods and dispatched goods to different locations and paid freight to the transporters. All the payments have been duly supported by the biliti. Copy of all the bilties as a proof of payment were filed. Merely because of comparison with last year the AO has disallowed the carriage outward expenses. All the expenses are properly supported by the evidence of payment. There was a expenditure debited in the profit Loss account Vehicle running maintenance account which has been decreased from ₹ 2453172 to ₹ 548165, however, the AO has not considered the decrease in the related expenses the expenses of carriage outward is directly related with the expenses vehicle upkeep and maintenance. In view of above, the addition made by the AO is not tenable, hence, the same is deleted as such. Assessee appeal allowed.

Summary

Issues:
1. Addition of ?5,41,426 on account of burning losses during the process of manufacture of ingots.
2. Addition of ?3,50,000 on account of loan from Smt. Bimla Devi alleging an accommodation entry.
3. Addition of ?10,00,000 made by the Assessing Officer out of cartage outward for alleged inflated expenses claimed.

Issue 1: Burning Losses
The Assessee appealed against the addition of ?5,41,426 for burning losses during ingot manufacture. The Assessee argued that burning loss varies based on materials used and production processes. The Counsel highlighted that the burning loss percentage was accurate and supported by production data. The Tribunal noted the absence of a standard burning loss percentage and accepted the Assessee's explanation. The Tribunal ruled the addition was based on estimation and deleted it.

Issue 2: Loan from Smt. Bimla Devi
Regarding the addition of ?3,50,000 for an alleged accommodation entry from Smt. Bimla Devi, the Assessee contended that the loan was genuine, received via NEFT, and supported by financial documents. The Tribunal acknowledged the loan's legitimacy, given the proper banking channel usage and documentation provided. The Tribunal emphasized the revenue's failure to prove otherwise and deleted the addition.

Issue 3: Cartage Outward Expenses
The Assessee challenged the ?10,00,000 addition for inflated cartage outward expenses. The Assessee demonstrated proper payment evidence for carriage of goods. Despite a decrease in related expenses, the Assessing Officer disallowed the claim. The Tribunal agreed with the Assessee, noting the valid expenses supported by evidence. The Tribunal found the disallowance base invalid and unsupported, leading to the deletion of the addition.

In conclusion, the Tribunal allowed the Assessee's appeal, emphasizing the lack of substantiation for the additions made by the Assessing Officer. The decision was pronounced on 07.01.2021.