9911796707
TMI Blog2018 (6) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental ground is dismissed Disallowance of Expenses - HELD THAT:- On a careful consideration of the same, we find that admittedly the disallowances have been made and been sustained by the AO and the CIT(A) respectively without any cogent reason. The books of account have been produced. Evidences supporting the claim are available on record. In the absence of any rebuttal on the same, the AO or for that matter, the tax authorities are not justified to enter into the terrain for determining the reasonableness of the expenditure. The legal position on the said aspect is well settled. Respectfully following the precedent, ground No. 2 of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.6% 8.0% On examination of the above comparison, it is noticed that in each of the earlier 3 years (i.e. assessment years 2008-09, 2007-08 and 2006-07) the assessee has shown substantial quantities of 'Sales Return sold as it as', but in the year under assessment no such sale has been shown. Instead of it, the assessee has shown 'Sale of semi-finished goods' to its wholly owned subsidiary M/s jai Suspension Limited, the quantity having sold was 3,433.603 MTs. This sale of semi-finished goods, therefore, cannot reasonably and justifiably be considered to have been produced during the year under assessment. The plea of the assessee that for arriving at the scrap generation %age the quantity of semifinished goods so sold to its subsidiary should be considered to have been produced during the relevant year, cannot consequently be accepted. Accordingly the production for the year under assessment is exclusive of the semi-finished goods sold. The %age of scrap generated during the year under assessment works out to 7.2% and not 6.8% as has been worked out by the assessee, the average scrap generated during the earlier 3 years working out to 6.8%. This means that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts. Therefore the conclusion of the AO regarding non-production of semifinished goods during the year is not based upon any factual evidence. b) The AO has made an observation that if the sale of semi-finished goods was not manufactured during the year, the percentage of scrap generation comes to 7.2%, which is higher than the average of 6.8% in the last three years. In this regard, the AR has strongly argued that there are bound to be variation in scrap generation from year to year and in A.Y. 2006-07, the scrap generation was 8% and the same had been accepted by the Department. In this regard, it is pertinent to note that the scrap percentage in manufacturing is amenable to variations from year to year for various reasons and various judicial pronouncements have upheld such contentions. Further, it appears that in earlier years the scrap percentage has been higher than 7.2% and this account, adverse view has been taken on all the computation of scrap percentage at 7.2% by the AO is not based upon any concrete evidence regarding unaccounted scraps and secondly marginal variations in scrap generation cannot be rejected unless there is specific and concrete ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue is in appeal before the ITAT. 5. The ld. CIT-DR inviting attention to the specific reasoning of the AO and referring to the chart at page 6 of the assessment order which has been extracted in the impugned order submitted that in the year under consideration, the assessee has not shown any direct sales as had been shown in 2006-2007, 2007-08 and 2008-09 assessment years. In the last three years, it was submitted, the assessee has shown substantial sales. The assessee instead has shown a sale of semi finished goods to its subsidiary M/s Jai Suspension Limited. The quantity claimed to be sold, it was submitted, could not have been produced in the year under consideration. The argument of the assessee that for arriving at the scrap generation percentage, the quantity of semi finished goods, sold to its subsidiary should also be considered to have been produced in the year has been rejected by the AO. It was his submission that the conclusion of the AO that the production for the year under consideration was exclusive of the semi-finished goods sold, was heavily relied upon. It was submitted that the AO noticed that percentage of scrap generated during the year was 7.2% and not 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir and general expenses have been considered by the ITAT. Copy of the order dated 19.02.2018 in ITA 855/CHD/2017 pertaining to 2008-09 assessment year was filed. Attention was invited to para 8 of the same where considering the submissions that there was not a single instance cited to show that the expenses were not supported by bills and vouchers and in the facts where genuineness of the expenditure has not been doubted, the ITAT had restored the issue back to the AO to verify the bills. Attention was invited to paras 6 to 8 of the said order. 10. The ld. CIT-DR though placed reliance upon the orders of the authorities below, however, in the face of the categoric finding of the ITAT on facts and circumstances which remained identical, did not oppose the prayer for remand. 11. We have heard the rival submissions and perused the material on record. In the light of the submissions of the parties before the Bench, following the precedent in assessee's own case on similar set of facts and circumstances, the impugned order on these issues is set aside back to the file of the AO with direction to pass a speaking order in accordance with law. The assessee is directed to ensure that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs.112.07 lacs in the immediate preceding year. The assessee's gross turnover during the year increased to Rs.54119.34 lacs from 32371.82 lacs shown in the immediate preceding year. Considering the pace of increase in the gross turnover, the corresponding increase in the discounts and rebates is not comparable. The assessee could not explain satisfactorily such a hefty increase in this expenditure. In order to cover any leakage on account of inadmissible expenditure under the head discount and rebate, 1/10th of these expenses i.e. a sum of Rs.37.06 lacs is disallowed and added to the assessee's income. 12.2 Inviting attention again to the copy of the order dated 19.02.2018 in ITA 855/CHD/2017 it was submitted that addition made on identical reasoning had been deleted by the ITAT. Heavy reliance was placed thereon. The said submissions, it was submitted, have not been rebutted by the Revenue. For ready reference, relevant discussion in paras 11 to 14 from the order of the Co-ordinate Bench is extracted hereunder : "11. Before us Ld. AR argued that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
