Income Tax Appellate Tribunal - Ahmedabad
Cemach Machineries Limited, Ahmedabad vs Ito, Ward-1(1)(3),, Ahmedabad on 11 December, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ "ए" अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 952/Ahd/2018
नधारण वष/Assessment Year: 2014-15
Cemach Machineries Ltd., Vs. Income Tax Officer,
C/o. Ketan H. Shah, Advocate, Ward 1(1) (3),
903, Sapphire Complex, Ahmedabad
CG Road, Navrangpura,
Ahmedabad
PAN : AADCC 0186 B
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Ketan H. Shah, AR with
Shri Aman Shah, AR
Revenue by : Shri N R Soni, CIT-DR
सु न वा ई क! ता र ख/ Date
of Hearing : 17/10/2019
घोषणा क तार ख / Date of Pronouncement: 11/12/2019
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
The assessee is in appeal before the Tribunal against the order of learned CIT(A)-1, Ahmedabad dated 26.03.2018 passed for Assessment Year 2014-15.
2. In the first ground of appeal the assessee has pleaded that learned CIT(A) has erred in confirming the disallowance of loss of Rs.6,72,66,732/-.
3. The brief facts of the case are that the assessee has filed its return of income electronically on 30.11.2014 declaring loss of (-) Rs.23,325/-. The case of the assessee was selected for scrutiny assessment and a notice under Section 143(2) of the Income-tax Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 2 that the closing stock as on 31.03.2014 is shown at Rs. Nil. The assessee has shown business income of (-) Rs. 8,12,46,412/-. He found that the opening stock as Work-In-Progress (WIP) of Rs.9,55,78,790/- was shown by the assessee. It has made purchases of Rs.67,14,205/-. If both these figures are taken together (i.e. WIP + Purchases), then it would come to Rs.10,22,92,995/-. The assessee has sold this stock for a sum of Rs.3,50,26,263/- and reduced the stock to Rs. Nil. This exercise has given rise to loss of (-) Rs.6,72,66,732/-. The Assessing Officer invited the explanation of the assessee to show as to why it has disposed of its stock of Rs. 10.22 crores for a sum of Rs.3.50 crores only. In response to the query of the Assessing Officer, the assessee has filed a detailed reply - it has partly reproduced by the Assessing Officer as well as by the learned CIT(A). Copy of such reply is available on page nos. 26-30 of the paper-book and our attention was drawn towards this reply by the learned Counsel for the assessee at the time of hearing. We will revert back to this reply while making an analysis of this issue.
4. After considering the reply of the assessee, the learned Assessing Officer was of the view that the assessee has shown profit on sale of assets at Rs.7,34,94,438/-; therefore, in order to avoid payment of taxes on this profit, it has adopted this modus operandi of showing business loss. He accordingly disallowed the claim of the assessee.
5. Dissatisfied with this disallowance, assessee carried the matter in appeal before the learned CIT(A), but the appeal did not bring any relief to the assessee. Learned First Appellate Authority has concurred with the view of the learned Assessing Officer.
6. While impugning the orders of the Revenue Authorities, learned Counsel for the assessee took us through the reply of the assessee available ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 3 on page nos. 26-30 of the paper-book. He pointed out that the assessee has pleaded that all the circumstances mentioned in the reply have forced the assessee to close its business and to sell all the stock-in-trade at the best available price. He further contended that the books of accounts of the assessee are duly audited. No defects in the books were found out. The Assessing Officer was unable to lay his hands on any transaction which suggests that the assessee has sold a particular item at a higher price and received extra consideration in cash. In other words, the Assessing Officer had doubted the loss suffered by the assessee in the business on a suspicion. He submitted that, without rejection of books, such loss cannot be determined for disallowance. He relied upon the order of ITAT in the case of ACIT vs. Aroma Hightech Ltd, reported in [2019] 109 taxmann.com 65 (Ahd Trib). He further relied upon the order of the Tribunal in the case of DCIT vs. Paras Dyeing & Printing Mills (P.) Ltd., reported in [2011] 44 SOT 12 (Ahmedabad). The decision of Hon'ble Karnataka High Court in the case of CIT vs. Anil Kumar & Co., reported in [2016] 67 taxmann.com 278 (Kar) has also been referred. Apart from these, the learned Counsel for the assessee has also placed on record a larger number of decisions. We think it is not necessary to recapitulate and recite all the decisions on this legal aspects, but suffice it to say that core of all the decisions of the Tribunal as well as of the Hon'ble High Courts is to the effect that sales of the assessee could be doubted if it was not practically possible for the Assessing Officer to deduce true income from the books of accounts maintained by the assessee. In other words, if books of accounts are rejected, only then estimated value of the sales shown by the assessee is to be worked out. He pointed out that when this aspect was brought to the notice of the learned CIT(A), then learned CIT(A) has merely observed that since the Assessing Officer was estimating sales only, there was no necessity to reject the books ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 4 of accounts. Learned Counsel for the assessee submitted that the loss suffered in the business ought not to have been disallowed.
7. On the other hand, learned Departmental Representative relied upon the orders of the authorities below. He pointed out that there was a profit on sale of assets; therefore, there was a motive for the assessee to reduce the profit so that it can avoid payment of taxes; otherwise, no businessman would like to sell the stock-in-trade at 1/3rd of its value and it is a very strong circumstance to doubt the transactions undertaken by the assessee.
8. We have duly considered the rival contentions and gone through the record carefully. Section 145 has a direct bearing on the controversy; therefore, it is imperative upon us to take note of the relevant part of the section which reads as under: -
"145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.
(2) The Central Government may notify in the Official Gazette from time to time [accounting standards] to be followed by any class of assessees or in respect of any class of income.
(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) [or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee], the Assessing Officer may make an assessment in the manner provided in section 144.]"
9. A bare reading of Section 145 would reveal that it provide the mechanism how to compute the income of the Assessee. According to sub- section 1, the income chargeable under the head profit and gains of business or profession or income from other source shall be computed in accordance with the method of accountancy employed by an Assessee regularly, subject ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 5 to sub-section 2 of Section 145 of the Act. Sub-section 2 provides that the Central Government may notify in the official gazette from time to time, the Accounting Standard required to be followed by any class of Assessee in respect of any class of income. Thus, it indicates that income has to be computed in accordance with the method of accountancy followed by an Assessee i.e. cash or mercantile, such method has to be followed keeping in view the Accounting Standard notified by the Central Government from time to time. Sub clause 3 provides a situation, that is, if the Assessing Officer is unable to deduce the true income. On the basis of method of accountancy followed by an Assessee than he can reject the book result and the assessee's income according to his estimation or according to his best judgment. The Assessing Officer in that case is required to point out the defects in the accounts of Assessee and required to seek explanation of the Assessee qua those defects. If the assessee failed to explain the defects than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income.
10. In the light of above, let us appreciate facts of the present case and, in order to appreciate the dispute, it is necessary to take note of the reply given by the assessee to the Assessing Officer during the course of assessment proceedings, which reads as under:-
"Sub: Detailed submission in reference to expenditure claimed of Rs.9,55,78,790/-
1. Please refer to para 20 of the audit report, from which it is found that there is WIP of Rs.9,55,78,790/-. This amount has been written off during the Financial Year 2013-14 i.e. Asst. Year 2014-15.
2. The assessee company, Cemach Machineries Limited, has been incorporated on 27.02.2007. The main business of the assessee is to manufacture pharmaceutical machineries like (i) tablet making machine, (ii) venulation machine, (iii) pharma accessories machine and (iv) ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 6 pharmaceutical machinery spares. The project report dated 24.03.209 is enclosed herewith. Practically, the first Financial Year is 2008-09, wherein there is turnover of Rs. 5,19,33,745/-. During this Financial Year, the assessee has purchased plant and machinery worth Rs.5,04,01,616/-, for which necessary schedule is attached herewith at page 5. This machinery has been purchased by taking finance from Syndicate Bank, Maninagar Branch, Ahmedabad. The secured loan taken for the Financial Years 2008-09 and 2009-10 is in reference to the following banks:
As on As on
31.03.2010 31.03.2009
(Rs.) (Rs.)
--------------- ---------------
ICICI Bank Hondacity Loan 0 298547
ICICI Bank - Innova Car 0 217537
ICICI Bank - Santro Car 0 70525
Reliance Capital Ltd.-Verna Car 256736 511338
Syndicate Bank CC 27800730 13506289
Syndicate Bank WCDL 19539061 28868470
Syndicate Bank PCL 3240073 0
Syndicate Bank Term Loan 20440448 27191007
--------------- --------------
71277048 70663713
--------------- --------------
The main secured loan is from Syndicate Bank, CC Account and WCDL (Working Capital Decreasing Limit) meaning thereby that this loan of Rs.2,88,68,470/- has been given to the assessee-company against the pending and new orders, for which a list has been given to the bank at the relevant point of time.
3. For the Financial Year 2009-10 i.e. Asst. Year 2010-11, there is turnover of Rs. 14,52,98,432/-, which consists of pharmaceutical machinery as stated above, In this year, the secured loan in reference to Syndicate Bank is increased to Rs.2,78,00,730/- and overall secured loan is increased to Rs.7,12,77,048/-.
4. For the Financial Year 2010-11 i.e. Asst. Year 2011-12, there is turnover of Rs.26,34,96,951/-. During this year, the assessee has also started manufacturing plastic machineries like PVP pipe making machineries, Sutali plant, plastic sheet plant etc. During this year, the assessee tried to increase the price of their finished products looking to huge investment and secured loan. The assessee has to compete with the big brands having market establishment i.e. Cadmach Pharmaceutical Machinery Private Limited, Kevin Processing Private Limited, CMC Pharmaceuticals, Flute Pipe ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 7 Private Limited etc. All these companies are existing in the market since 1990 or so.
5. The details of monthly Purchase Account with parties' name are enclosed herewith for total purchase made in form of monthly purchase register. Simple invoices have already been submitted during the course of last hearing along with letter dated 14.11.2016.
6. Regarding break-up for an amount of Rs.9,55,78,790/-, the detailed break- up of WIP is attached herewith, from which it is found that the machines of the assessee are technically back driven because the competitors are offering more advance technological instruments. They have done automization and they have produced in the market with interchangeability, that the customer has to buy one more machine with the first part of 3 / 4 types so that they avoided to purchase four machines of the assessee and replaced it with competitors' machine. Therefore, the buyers of the assessee avoided to purchase assessee's machine because for their use, if they purchase the machine of the assessee, it requires more space and more labour, and therefore, they opted only one machine instead of the outdated machine of the assessee. The main thing is that due to financial hurdle of the assessee, the assessee cannot afford to R& D unit since there are recovery proceedings started by Syndicate Bank.
7. We hereby attach various correspondences with the bankers of the assessee, which prove that the assessee on a proposed list of NPA since the year 2008.
(i) Letter dated 02.06.2008 from Syndicate Bank in reference to extension of adhoc facility because the company was not able to repay the adhoc limit.
(ii) Letter dated 23.06.2008 from Syndicate Bank, again in reference to extension of adhoc facility, that they have again extended the limit.
(iii) Letter dated 30.10.2008 in reference to renewal proposal in reference to reconstructing of limit.
(iv) Letter dated 06.12.2008 from the assessee to the bank. It is said that there is liquidity shortfall of 1.50 crores and stated that there is global recession going on, and the entire nation is facing financial trouble and further stated that there is possibility of revival of pharmaceutical market and requested to provide liquidity support.
(v) Letter dated 07.01.2009 from the assessee to the Manager requesting for reconstructing of the banking facility of the assessee in reference to term loan, cash credit and Working Capital Deficit Limit (WCDL), wherein the assessee has again proposed cash flow statement ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 8 mentioning the projected sales for getting such limit, which cannot be achieved in view of various factors, which were beyond the control of the assessee.
(vi) Letter dated 24.03.2009 to the Manager from the assessee in reference to reconstructing request and projected revenue, which has not been achieved due to competition in the market.
(vii) Letter dated 27.03.2009 from Syndicate Bank in reference to reconstructing of credit limit addressed to the Regional office.
(viii) Letter dated 30.03.2009 from Syndicate bank in reference to reconstructing the request made by the assessee vide letter dated 30.01.2009.
(ix) Letter dated 06.06.2009 from Regional office to the Bank in reference to sale of property, proposal made by the assessee and requested that to monitor the account closely to ensure that it does not sleep into NPA.
8. It may not be out of place to mention here that in view of the aforesaid correspondences, it is admitted fact that assessee's financial health was not so good, looking to various big groups involved in similar line of business. Since the assessee is not able to update itself and was under financial crunch nor the banking people were ready to give any finance to the assessee. Further, the majority staff of the assessee has started their own company. We further say that the assessee has sold its property of Plot No.56/A/14, Phase I, Vatva, GIDC in the year 2008 for an approximate amount of Rs.1.2 crore just to pay up the bankers' due. Thereafter, the things are not going to be materialized, and therefore, again compelled to sell remaining factory building along with various furniture and fixture mentioned therein in F.Y.2013-14 for an amount of Rs.9,09,00,000/.
9. We also enclose herewith the details unsecured loan received from various parties like Barclays Bank and other financial institutions since 2007, which prove that the assessee has already got an idea of the financial crunch in the future years if it does not achieve its projected sales because the company has done heavy investment In the building sold during F.Y. 2013- 14, which was purchased in the year 2007 and onwards. The company is trying its level best since year 2007-08 but ultimately the factory building had to be sold out in the F.Y. 2013-14, and accordingly, whatever WIP that the company is having in reference to various space were written off Jn the books of accounts. These are not saleable in the open market since there were no buyers to purchase these items.
10. It is said that, during the year the purchase of Rs. 67,14,205/- as per copy of the purchase register and copy of the sample invoices filed. Details of the sales of Rs. 3,50,26,263/- has also been placed on record. There cannot be ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 9 sale of Rs. 3.50 crore in reference to 67.14 lacs and therefore, as per the submission made dated 14.11.2016, assessee has sold out the sellable item out of the opening W.I.P. Therefore, we have tried our level best to sell various items lying in our factory building and godown has also been sold out in FY 2013-14. Therefore, we have no space to store our raw material and / or finished goods.
11. It may be noted that one party namely Shiv Krupa Steel has taken stay against the property sold during FY 2013-14 and therefore, we have given final settlement amount of Rs. 12,60,000/- to the said party and thereafter the present property has been sold for the amount of Rs. 9,09,00,000/-.
12. It may be noticed that in earlier assessment year, scrutiny has been done u/s. 143(3) by Shri U. G. Joshi however, the order is not traceable in our office.
13. There was a notice from arbitration proceedings from arbitral Tribunal, New Delhi in reference to dues with Religare Finance for the amount of Rs. 24,25,000/-, which is dated 13-12-2013. This itself proves that the assessee's position was not financially sound.
14. It is further stated that, the cheque issued by us has also been returned of various parties and list of the parties with amount and other details are attached herewith.
15. It may be noted that whatever sales consideration has been received from sale of factory building, has been used to pay off the various dues of Syndicate Bank. It is not the case that the directors have taken out the sales consideration received of Rs. 9.09 crores.
16. Mr. Amit Shah - Domestic Marketing head, Mr. Ashish Venkar -Export, Mr. PiyushRarnawat - Production Head, Mr. Mrugesh Gajjar -Production Head. All these four persons have left the job and started their home company form the FY 2011-12 under the name of Cemach Pharmaceutical Pvt. Ltd. and they have contacted our customers directly. They have started making rumours in the market that our company is undergoing financial trouble and if the customer gives the order then, the company will not provide the goods since the company is under NPA list of Syndicate Bank. Letter from Syndicate bank in reference to NPA dated 01.09.2013 is enclosed herewith.
17. In nutshell, we say that, the company was in a financial trouble since the year 2008 when the first property has been sold out and with the cheque issued to various parties has been returned back. Therefore, the assessee has no other alternate to accept tomorrow the fund from the market to pay off the dues of various bankers. Further, there was notice u/s. Surfasi Act by the ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 10 Syndicate Bank dated 01.09.2013 requesting us to pay their dues by selling out the remaining building and stock.
Therefore, the assessee has no alternate to write off the remaining stock in FY 2013-14 which is allowable as the business loss or business expenditure u/s. 28 and / or 37 of the income tax Act."
11. At this stage, we would like to appraise ourselves with the observations of the Hon'ble Gujarat High Court in the case of Voltamp Transformers P. Ltd vs. CIT, reported in 129 ITR 102 (Guj), though the observation was made in the context of allowance or disallowance of business expenditure, however, it is related to appreciation of commercial expediency while allowing such business expenditure. The Hon'ble Court has observed that "so far as the questions of commercial expediency and business needs of an organization are concerned, it is not the view-point of a revenue officer which should count, but it should be the view-point of an ordinary business man dealing with a situation like the one faced by him". Hon'ble Delhi High Court in the case of CIT Vs. Dalmia Cement Ltd., reported in 254 ITR 377, also had an occasion to appreciate the expression "commercial expediency" and the Hon'ble High Delhi High Court has observed as under:-
"An expenditure to which one cannot apply an empirical or subjective standard is to be judged from the point of view of a businessman and it is relevant to consider how the businessman himself treats a particular item of expenditure. The term "commercial expediency" is not a term of art. It means everything that serves to promote commerce and includes every means suitable to that end. In applying the test of commercial expediency, for determining whether the expenditure was wholly and exclusively laid out for the purpose of the business the reasonableness of the expenditure has to be judged from the point of view of the businessman and not the Revenue (see CIT v. Walchand and Co. (P.) Ltd. ; J. K. Woollen Manufacturers v. CIT ; Aluminium Corporation of India Ltd. v. CIT and CIT v. Panipat Woollen and General Mills Co. Ltd. . But it must not suffer from the vice of collusiveness or colourable devices."
12. In the present case, the assessee was incorporated on 27.02.2007. It has been manufacturing pharmaceutical machineries, but over a period of ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 11 time its products became outdated because the competitors have introduced new alternative products. The creditors, more particularly secured creditors, have launched recovery proceedings against the assessee. The assessee has pointed out to the Assessing Officer that Syndicate Bank has issued a notice on 01.09.2013 under SARFAESI Act and the assessee was under tremendous pressure for discharging loan liability. Its sales were declining and it has to sell off its stock-in-trade including raw-material. In such circumstances, it is highly improbable that an assessee would receive market price, more so, when a manufacturing unit is selling its raw-material and other byproducts on closure of its business and it is quite impossible to fetch the market price. We could appreciate the case of Revenue if it was able to lay its hands on particular transaction and could verify from major sales that these sales have not been materialized on the prices reflected by the assessee in its invoices, rather buyers have purchased at a higher price and some underpayments were made; and no efforts were taken to inquire with this angle. The Assessing Officer simply assumed that, since there is profit on sale of plant and assets, the assessee must have manipulated sale of stocks & assets and shown the same at a lesser price. There should be a demonstrative proof of this assumption - either on the basis of direct evidences or on the basis of circumstantial evidences - more so in a situation where the assessee was unable to manufacture the products on account of financial crunch and going to close-down the business. At the time of hearing, it was brought to our notice that even the sale proceedings from the assets have not come to the Directors. It was totally utilized for the purpose of repayment of existing loans. Therefore, in our view, the assessee has rightly demonstrated the loss suffered by it on sale of stock and the learned Assessing Officer failed to bring sufficient evidence to doubt these transactions. We, therefore, allow this ground of appeal and delete the disallowance amounting to Rs.6,72,66,732/-. In other words, learned ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 12 Assessing Officer shall treat this loss as genuine and give consequential benefit of set off, if any, available to the assessee.
13. In ground no.2, the assessee has pleaded that learned CIT(A) has erred in not deleting the disallowance of Rs.14,47,707/-. This disallowance was made by the Assessing Officer with the aid of Section 40(a)(ia) of the Act on the ground that the assessee has made payment of interest to various financial institutions and failed to deduct the TDS. No arguments were advanced on this aspect and there is no explanation with the assessee. Therefore, this ground of appeal is rejected.
14. In ground no.3, the grievance of the assessee is that learned CIT(A) has erred in confirming the addition of Rs.5,89,375/-, which was added by the Assessing Officer with the help of Section 40A(3) of the Act.
15. The brief facts of the case are that the assessee has made payments to five persons/entities amounting to Rs.5,89,375/-. These payments have been made in excess of Rs.20,000/- and these were made without account payee cheque. Therefore, according to the Assessing Officer, the assessee has committed a default within the meaning of Section 40A(3) of the Act. He, therefore, disallowed the claim of the assessee. Appeal to the learned CIT(A) did not bring any relief to the assessee.
16. Before us, learned Counsel for the assessee submitted that, on the genuineness of expenditure and genuineness of the payments, no objection was raised by the Assessing Officer. Therefore, the expense deserves to be allowed to the assessee. He made reference to Rule 6DD (j). Learned Counsel for the assessee relied upon the order of ITAT, Delhi bench in the case of KGL Network (P) Ltd vs. ACIT, reported in [2018] 97 taxmann.com 400 (Delhi Trib). He also relied upon the judgment of Tribunal in the case of ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 13 A. Daga Royal Art vs. ITO, reported in [2018] 94 taxmann.com 401 Jaipur - Trib.). On the other hand, learned Departmental Representative relied upon the orders of the Revenue Authorities.
17. We have duly considered the rival contentions and gone through the record carefully. The ITAT, Delhi Bench in the case of KGL Network (P) Ltd (supra) has observed that, though there is an amendment in Rule 6DD of the Income-tax Rules in the year 2008, but Section 40A(3) of the Income-tax Act itself provides an exception on account of nature and extent of banking facilities available, consideration of business expediency and other relevant factors. In the present case, no such factors have been pointed out. The assessee is having number of bank accounts. It is operating in an area where banking facilities are available. No business expediency has been pointed out, because it has already sold all of its stock, then what was a compulsion to the assessee to make payments to these five entities without account payee cheque. It has committed a default within the meaning of Section 40A(3) of the Act which contemplates that if an assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque or draft exceeds Rs.20,000, no deduction shall be allowed in respect of such expenditure. The case of the assessee duly falls within this clause and, therefore, it is not entitled for any deduction. Hence, this ground of appeal is rejected.
18. In ground no.4, the grievance of the assessee is that learned CIT(A) has erred in confirming the addition of Rs.1,69,608/-.
19. The brief facts of the case are that the assessee has received interest of Rs.1,69,608/- from Intec Capital Ltd., but this income has not been accounted for by the assessee. The assessee has contended that a dispute ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 14 was pending with Intec Capital Ltd and it has not received this amount. Learned CIT(A) has confirmed this addition on the ground that the assessee has been following the mercantile system of accounting. It has already recognized this account of the assessee; therefore, this should also have been accounted for the purpose of Income-tax also. After going through the well reasoned findings of the learned CIT(A), we do not find any force in the submissions of the assessee. Accordingly, this ground of the assessee is also rejected.
20. In ground no.5, the grievance of the assessee is that learned CIT(A) has erred in confirming the addition of Rs.70,723/- u/s. 36(1)(va) of the Act. A perusal of the record would indicate that the assessee failed to deposit employees' contribution to ESIC and PF account within the due date provided under those Act. Hence, learned Assessing Officer has disallowed the claim of deduction. Learned CIT(A) confirmed the disallowance by following the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Gujarat State Road Transport Corporation, reported in 366 ITR 170 (Guj) since the assessee failed to deposit the employees' contribution within the due date provided under ESIC & PF Act. Therefore, in view of the Hon'ble Gujarat High Court judgment (supra), learned CIT(A) has not committed any error by putting reliance upon this decision. In view of the above, this ground of assessee's appeal is also rejected.
21. In the result, appeal of the assessee is partly allowed.
Order pronounced in the Court on 11th December 2019 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 11/12/2019 Biju T., Sr.PS ITA No. 952/Ahd/2018 Cemach Machineries Ltd Vs.ITO For AY: 2014-15 15 आदे श क! &त'ल(प अ)े(षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं!धत आयकर आयु#त / Concerned CIT 4. आयकर आयु#त(अपील) / The CIT(A) 5. &वभागीय त न!ध, आयकर अपील य अ!धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. / BY ORDER, आदे शानुसार TRUE COPY उप/सहायक पंजीकार (Dy./Asstt. Registrar) / ITAT, Ahmedabad आयकर अपील य अ धकरण, अहमदाबाद 1. Date of dictation- ...10.12.2019.....
2. Date on which the typed draft is placed before the Dictating Member ....10.12.2019.....
Other member ...11.12.2019................
3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...11.12.2019........
4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...11.12.2019..
5. Date on which the file goes to the Bench Clerk......11.12.2019............
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order......
8. Date of Despatch of the Order..................