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Agarwal Global Steels Limited v/s Dy Commissioner of Income Tax

    ITA No. 1015/Hyd of 2018

    Decided On, 09 January 2019

    At, Income Tax Appellate Tribunal Hyderabad


    For the Appellant: K.C. Devdas, Advocate. For the Respondent: Nilanjan Dey, Advocate.

Judgment Text

S. Rifaur Rahman, AM:

1. This appeal filed by the assessee is directed against the order of CIT(A) - 1, Hyderabad, dated, 12/03/2018 for AY 2014-15.

2. Brief facts of the case are that the Assessee company engaged in the business of manufacturing and trading steel, filed its return of income on 20/11/2014 for the AY 2014 -15 declaring loss of Rs. (-) 63,122/- and book profit at Rs. 21,66,825/-. Subsequently, the case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) were issued, against which, the assessee filed the required information. The AO completed the assessment u/s 143(3) on 30/12/2016 determining the total income at Rs. 27,63,653/ - by making various disallowances.

3. When the assessee preferred an appeal before the CIT(A), the CIT(A) partly allowed the appeal of the assessee.

4. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:

"The order of the Learned Commissioner of Income Tax (Appeals)-4, Hyderabad erred in -

(i). Disallowing the unexplained expenses apart from being contrary to the facts and evidence on record is wholly unsustainable both on facts and in law and therefore must be deleted.

(ii). Erred in disallowing a sum of Rs. 32,434/- being the contribution of employees towards Provident Fund (PF), which was paid before the due date of filing of return of income.

(iii). Erred in disallowing loss on sale of assets at Rs. 68,791/-.

(iv). Erred in disallowing business remuneration expenses at Rs.36,280/-.

(v). Erred in disallowing Carriage Inward Expenses at Rs. 22,56,968/-

(vi). Erred in disallowing Transport Expenses of Rs. 3,32,570/-.

(vii). Erred in disallowing De-coiling Charges at Rs. 32,434/-.

(viii). Any ground or grounds that may be urged at the time of hearing."

5. Ground Nos. (i) and (viii) are general in nature. Ground No. (iii) is not pressed before us and the same was dismis sed as not pressed.

6. As regards ground No. (ii) with regard to disallowance of Rs. 32,434/-, being the contribution of employees towards PF, the AO disallowed the same on the ground that the assessee Agarwal Global Steels Ltd., Sec 'bad has remitted the same beyond the due date stipulated under the respective Act.

6.1. Before the CIT(A), the assessee submitted that though the employees' contributions of PF was paid after the due date, but, it was paid before filing of the return of income under the provisions of section 43B of the Act, hence, no disallowance can be made. However, the CIT(A) rejected the submissions of the assessee and upheld the disallowance.

6.2. Considered the rival submissions and perused the material on record. It is a settled position of law that if the contributions towards PF & ESI are paid beyond the due date but before filing of the return of income u/s 139(1) of the Act, no disallowance can be made as per the ratio laid down by the Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC). Therefore, ground No. (ii) is allowed.

7. As regards ground Nos. (iv) to (vii) relating to disallowances like business remuneration expenses of Rs. 36,280/-, disallowance of carriage inward expenses of Rs. 22,56,968/-, disallowance of transport expenses of Rs. 3,32,570/-, and disallowance of De -coiling charges of Rs. 32,434/-, the AO has made the disallowances on these heads on the ground that they were not supported by proper bills/vouchers and are not verifiable to the extent of disallowances made as above.

8. The ld. AR of the assessee relied on the decision of the coordinate bench of this Tribunal in the case of Vishal Infrastructure Ltd. Vs. ACIT, 104 ITD 537. Further, he submitted a statement of expenditure for the year 2010 -11 to 2016-17. As per the statement, AO made disallowance in Ay Agarwal Global Steels Ltd., Sec 'bad 2012-13 & 2013-14, ld. CIT(A) has allowed the above said expenditure. He prayed that the expenditures are made for the purpose of business only and prayed that the same may be allowed for this year also.

9. Ld. DR relied on the orders of revenue authorities.

10. Considered the rival submissions and perused the material on record. It is observed that the revenue authorities have not disputed that the assessee has incurred the expenditures against the respective heads, but, the some of the expenditures were not supported by proper bills/vouchers, and preferred to disallow 15% carriage inwards and 10% o n business promotion, transport expenses and decoiling charges. In our view, assessee is running this business over the years and all along department has accepted the expenditures claimed by the assessee and only this AY, certain percentage of expenditures were disallowed for the reason that certain vouchers were not supported.

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Considering the overall facts and circumstances, we deem it fit and proper to direct the AO to disallow 5% of the expenditures considering the fact that AO should have determined the actual expenditures, which are not supported by proper vouchers and bills. We come to conclusion of 5% disallowance considering the fact that all along department allowed the claims of the assessee over the years. Therefore, the grounds raised by the assessee on these issues are partly allowed. 11. In the result, appeal of the assessee is partly allowed.