2023 (5) TMI 319 - HC - Income Tax

Deduction u/s 80JJA - discrepancy in the stock - HELD THAT - While filing return of income in respect of manufacturing items, deduction qua the stock of Hindustan Sanitary Plaza could not be given under Section 80JJA of the Act. Tribunal has rightly rejected the claim of the appellant on this ground as well as on the ground of non-disclosure of the closing stock. Disallowance of expenses - Tribunal has observed that the AO has disallowed 25% of the expenses claimed under the heads consumables, power/fuel, packing, freight, miscellaneous, telephone, conveyance, travelling etc. as no vouchers were produced for expenditure claimed as Rs. 47 lacs. AO had given full opportunity to the assessee, who could submit evidence of expenditure of about Rs. 8 lakhs out of his claim of Rs. 54.92 lakhs. The Tribunal has further held that the disallowance was rightly restricted to 1/10th of the expenditure, which had not been substantiated by the assessee, which comes to about Rs. 4,70,000/-. After going through the impugned judgment, this Court is of the view that in this case, the Tribunal has rightly dismissed the appeal(s) of the assessee by appreciating the evidence in the right perspective. Appellant-assessee has not led any cogent and convincing evidence to prove his case. No substantial question of law arises for consideration in these appeals.

Summary

Issues involved:
The judgment involves an appeal against the orders passed by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) for the assessment year 2014-15 regarding discrepancies in stock valuation and expenses claimed by the appellant-assessee engaged in an agro-based industry and manufacturing of bio-fuel briquettes as well as sanitary items.

Discrepancy in Stock Valuation:
The appellant-assessee challenged the addition of Rs. 14,62,636 in income due to a discrepancy in stock valuation. The Assessing Officer found the closing stock short by the said value and added the entire stock value to the income. The appellant claimed the benefit of deduction under Section 80JJA, which was denied as the undisclosed stock belonged to the sanitary business, not covered under Section 80JJA. The Tribunal upheld the addition, stating that the excess closing stock was profit not declared as income by the assessee. The appellant failed to provide evidence of the stock disclosure, leading to the dismissal of the appeal.

Disallowed Expenses Claimed:
The Assessing Officer disallowed 25% of the expenses claimed by the appellant under various heads due to lack of vouchers for expenditures totaling Rs. 47 lakhs. The appellant could only substantiate about Rs. 8 lakhs of the claimed expenditure. The Tribunal upheld the disallowance but restricted it to 1/10th of the unsubstantiated expenditure, amounting to Rs. 4,70,000. The appellant's appeal challenging this disallowance was dismissed by the Tribunal as no cogent evidence was presented to support the case.

Conclusion:
The High Court upheld the Tribunal's decision, stating that no substantial question of law arose in the appeals. The Court found that the Tribunal correctly appreciated the evidence and dismissed the appeals as the appellant failed to provide convincing evidence to support their case. Consequently, both appeals, ITA No. 127 of 2021 and ITA No. 55 of 2021, were dismissed for lack of merit.