Income Tax Appellate Tribunal - Amritsar
M/S Guru Nanak Auto Enterprises Ltd., ... vs The Addl. Commissioner Of Income Tax, ... on 8 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR.
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No.479/Asr/2016
Assessment Year: 2008-09
M/s Guru Nanak Auto Vs. Addl. CIT, Range-III,
Enterprises Ltd. 1st Floor, 11-A Jalandhar.
New Vijay Nagar Jalandhar.
[PAN: AAACG4804F]
(Appellant) (Respondent)
Appellant by None.
Respondent by Ms. Amanpreet Kaur, Sr. DR
Date of Hearing 28.09.2022
Date of Pronouncement 08.12.2022
ORDER
Per:Anikesh Banerjee, JM:
The instant appeal of the assessee is directed against the order of the ld.
Commissioner of Income Tax(Appeals-)-2, Jalandhar, [in brevity the CIT(A)] bearing DIN& Order No.292/10-11/CIT(A)/Jal, date of order 13.07.2016, the order passed u/s 250(6) of the Income Tax Act, 1961, [in brevity the Act] for A.Y. 2008- I.T.A. No.479/Asr/2016 2 Assessment Year: 2008-09
09.The impugned order was emanated from the order of ld. Addl. Commissioner of Income Tax, Range-III, Jalandhar, date of order 29.12.2010.
2. The present appeal has been listed for hearing before us pursuant to order dated 28/07/2022, passed by the same bench of the Tribunal under section 254(2) of the Act, in MA No. 37/Asr/2019 in ITA No. 479/Asr/2016, whereby earlier order dated 21/05/2019, passed under section 254(1) of the Act was rectified & was recalled. The appeal was directed to be listed for hearing in that regard. When the appeal was called for hearing, no one appeared on behalf of assessee to represent his case. There is only application for seeking adjournment. But the reason of adjournment was not viable. The reason of adjournment is extracted as below:-
"In this respect, it is submitted that the counsel of assessee CA Pankaj Bhalla who was to conduct this case is extremely preoccupied in preparing balance sheets and filing tax audits as due date is fast approaching i.e., 30/09/2022"
On perusal of record, we find that the hearing is scheduled on 28/09/2022. In view of the above and considering the nature of dispute, we proceed to dispose the I.T.A. No.479/Asr/2016 3 Assessment Year: 2008-09 appeal ex-parte qua the assessee after hearing the learned DR and on the basis of material available on the record.
3. The assessee has taken the following grounds which are extracted below:
"1. That on facts and circumstances of the case the Ld. CIT(A) has illegally and arbitrarily sustained the addition of Rs.5,30,133/- (being 10%) out of Foreign Currency & Credit Card Expenses.
2. That the Ld. CTT(A) failed to follow his own order passed in ITA No. 29 & 145 11-12/CIT(A)/Jal dated 19.10.2015.
3. That on facts and circumstances of the case the Ld. C1T(A) has illegally sustained addition of Rs.4,00,000/- out of Staff Welfare Expenses and Gift & Shagun Expenses
4. That the Ld. AO as well as Ld. CIT(A) have wrongly disallowed depreciation on building of Rs. 79,386/-.
5. That the impugned order is against law and facts of the case.
6. Any other ground pressed at the time of hearing."
I.T.A. No.479/Asr/2016 4 Assessment Year: 2008-09
2. Brief fact of the case is that the assessee company is engaged in the business of manufacturing of Auto Parts and filed its return of income of Rs.4,59,64,610/- on dated 30.09.2008. The assessment was completed u/s 143(3) of the Act on dated 29.12.2020 and assessed income of Rs.4,82,47,915/-. The addition was made in different heads. The assessee challenged the order of the ld. AO before the 1st Appellate Authority. After the appeal order the addition of Rs.10,60,266/- is sustained. The details of additions are as follows:-
a. Foreign Currency & Credit Card Expenses. Rs. 530,133/-
b. Staff Welfare Expenses and Gift & Shagun Expenses Rs. 400,000/- c. Disallowance of Building Depreciation Rs. 79,386/-
4. Being aggrieved assessee filed an appeal before us.
5. We consider the order of the ld. CIT(A) in paragraph 5.2 page 8 which is extracted as below: -
"5.2 I have considered the observations of the Assessing Officer as made by her in the assessment order while making impugned addition. I have also considered written submissions filed by the assessee through its learned AR vide letter dated I.T.A. No.479/Asr/2016 5 Assessment Year: 2008-09 13.07.2016. I have further considered various judicial pronouncements relied upon by the assessee including my own decision in appeals No. 29 & 145/11- 12/CIT(A)/Jal dated 19.11.2015 in the case of M/s Hindi Samachar Limited as well as other material placed by the assessee on record. On careful consideration of the rival contentions, I am also of the opinion that the expenses incurred by the directors and employees of the assessee company in foreign currency purchased by it for the purpose of foreign visits and expenses incurred through credit cards are not at all vouched as no bills or vouchers have been produced during assessment proceedings. In the absence of proper bills, it cannot be said that the entire foreign currency purchased by the assessee company has been used for the purpose of business. Similarly in the absence of proper bills, it cannot be said that the expenses incurred by the assessee through credits card have been incurred for the purposes of business. The assessee has produced bills in respect of purchases of foreign currency only but not produced bills in respect of utilization of the foreign currency. Similarly, the bills in respect of expenses incurred through credit card have not been produced by the assessee. It means, some disallowance out of foreign travel expenses will be justified. I am also of the opinion that the disallowance made by the Assessing Officer is not on ad-hoc basis but she has I.T.A. No.479/Asr/2016 6 Assessment Year: 2008-09 pointed out specific defects in the maintenance of bills and vouchers for the utilization of foreign currency and in respect of the expenses incurred through credit cards. However, keeping in view various decisions of the Honorable Jurisdictional ITAT on the subject whereby 10% disallowance out of foreign currency expenses has been held to be justified, I am of the opinion that the disallowance made by the Assessing Officer is quite excessive looking to overall facts of the case. I am further of the opinion that it will be fare and reasonable if the disallowance out of foreign currency utilization and credit card expenses is restricted to 10% of the total expenses under reference. I am again of the opinion that the judicial pronouncements relied upon by the assessee will not support its case as the facts of those cases are entirely different from the facts of the case of the assessee company."
6. We heard the submission of the ld. Sr. DR and considered the documents available in the record. The assessee filed the written submission with details of evidences in relation to its claim. The 10% disallowance out of foreign currency and credit expenses, The ld. CIT(A) had perused the issue and passed a speaking order. The disallowance @10% out of foreign currency and credit expenses has no such specific finding. The assessee in its submission mentioned that the turnover of I.T.A. No.479/Asr/2016 7 Assessment Year: 2008-09 the assessee 177.64 crores out of which exports amounting to Rs.70.94 crores. The appellant exported goods to various countries including Italy, Brazil, Germany, China, France, Sweden, Switzerland and Turkey. The appellant claimed foreign traveling expenses Rs.84,22,581/-. In this reference, the assessee enclosed complete details of expenses in APB page 1 to 2 so the partial disallowance in relation to the expenses was uncalled for as per the assessee. The assessee relied on the order of the Beta Naphthol P. Ltd. vs. DCIT (1994) 50 TTJ (Ind) 375, as per order held:
"11. The Assessing Officer made disallowance of Rs. 25,000 out of various expenses debited to profit & loss account. According to him certain miscellaneous expenses were un- vouched. Such un-vouched expenses were mostly under the head conveyance. The CIT(A) reached the conclusion that the total of un-vouched expenses would not possibly come to Rs. 25,000. He, therefore, restricted the disallowance to Rs. 15,000."
12. Learned Representatives of the parties are heard on this issue.
13. It is apparent that the Tax Authorities below did not realise the practical difficulty of a businessman that it is not possible to I.T.A. No.479/Asr/2016 8 Assessment Year: 2008-09 obtain receipts from each and every taxi-driver for utilization of the conveyance. There are certain expenses for which vouchers, as expected by the Departmental Officer, cannot be obtained. Moreover, such lumpsum disallowance without pointing out the exact amount cannot be appreciated. The disallowance of Rs. 15,000 sustained by the CIT(A) is deleted."
6.1 Here, we find that the 10% addition in the accountant of foreign currency and credit card expenses amounting to Rs.5,30,133/- is liable to be deleted. 6.2 In case of staff and welfare gift shagun expenses the ld. CIT(A) has restricted the addition of Rs.4 lac against the total expenses. To encourage the efficiency working mobility the amount was paid to staff in different occasions. All the payments are vouched and details of the payments are enclosed in APB pages 8 to 56 by the assessee. The expenses are related to this business. So, we find no specific findings in relation to this disallowance of Rs.4 lac by the ld. CIT(A) and the expenses are fully connected with the business income of the assessee. Accordingly, the addition amount of Rs.4 lac is liable to be deleted. 6.3 In case of disallowance of depreciation of Rs.79,386/- is also challenged by the assessee during the appeal proceeding. The fact is that the amount of Rs.76,62,734/- was booked by the assessee against Building in fixed asset which I.T.A. No.479/Asr/2016 9 Assessment Year: 2008-09 was reflected in the final accounts of the assessee. The ld. AO had called the valuation report of the same asset from DVO which was valued amounting to Rs.60,75,000/-. The difference amount of Rs.15,87,734/- (Rs. 76,62,734/- - Rs.60,75,000/-) was excess valuation of assesst as per the ld. AO. Accordingly, the depreciation @ 5% was disallowed which is worked out amount of Rs.79,386/- (5% of Rs. 15,87,734/-) & added back with the total income of the assessee. In the observation of the revenue there is no under valuation of the assets. The assessee booked the expenses in capital account and reason of difference is explained before the revenue authorities. Also a copy of the valuation report from registered valuer of assessee is enclosed in APB pages 65 to 70 on which the clear reflection of assessee's own claim. The report of valuer Mr. V.K. Singhal is duly enclosed in APB 65 to 70. Considering this, the depreciation cannot be rejected on basis of this valuation report. So, the addition of Rs.79,386/- is liable to be deleted.
7. Accordingly ground no. 1,3 and 4 are allowed, ground no. 2 is consequential in nature, ground no. 5 and 6 is general in nature.
I.T.A. No.479/Asr/2016 10 Assessment Year: 2008-09
8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 08.12.2022 Sd/- Sd/-
(Dr. M. L. Meena) (ANIKESH BANERJEE)
Accountant Member Judicial Member
AKV
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By Order