Himson International Pvt.Ltd.,, Surat vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद Ûयायपीठ ''D'', अहमदाबाद ।

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, "D" BENCH सव[ौी ौी जी.

जी.सी.

सी.गुƯा, माननीय उपाÚय¢, उपाÚय¢, एवं एन.

एन.एस.

एस. सैनी, ी, लेखा सदःय के सम¢ ।

BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER)

ITA No.2393/Ahd/2008 [Asstt.Year : 2005-2006]

Himson International P. Ltd. बनाम/Vs. JCIT, Range-1 701, Centre Point Surat.

Ring Road, Surat.Gujarat.

PAN : AAACN 7828 A ITA No.2948/Ahd/2008 [Asstt.Year : 2005-2006]

JCIT, Range-1 बनाम/Vs. Himson International P. Ltd.

Surat. 701, Centre Point Ring Road, Surat.Gujarat. ITA No.2521/Ahd/2010 [Asstt.Year : 2005-2006]

DCIT, Cir-1 बनाम/Vs. Himson International P. Ltd. Surat. Hiralal Colony A.K. Road, Surat.

(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)

राजःव कȧ ओर से/ : Revenue by Smt.Sonia Kumar, Sr.DR िनधा[ǐरती कȧ ओर से/ : Assessee by Shri M.K. Patel सुनवाई कȧ तारȣख/ : Date of Hearing 1st December, 2014 घोषणा कȧ तारȣख/ : Date of Pronouncement 09-01-2015 आदे श / O R D E R

PER G.C. GUPTA, VICE-PRESIDENT: These appeals by the assessee and the Revenue for the Asstt.Year 2005-06 are directed against the order of the CIT(A). These are being disposed with this consolidated order.

ITA No.2393/Ahd/2008 &2 Others ITA No.2393/Ahd/2008 (Assessee's Quantum Appeal) 2. The ground no.1 of the assessee's appeal is as under:

"1. On the facts and in the circumstances of the case, the ld.CIT(A ought to have granted deduction of Rs.4,98,402/- towards electric power as the same is incurred in the course of business."

3. The learned counsel for the assessee submitted that an amount of Rs.4,98,402/- towards electric power was capitalized by the department and depreciation has been allowed therein by the CIT(A). The learned DR has relied on the orders of the AO and the CIT(A). We have considered rival submissions and perused the orders of the AO and the CIT(A). The assessee has already been allowed depreciation on the amount of electric power capitalized and no case for allowing the same as revenue expenditure could be made before us, and accordingly, the ground no.1 of the assessee is dismissed.

4. The ground no.2 of the assessee is as under:

"2. On the facts and in the circumstances of the case the ld.CIT(A) added erred in disallowing 50% traveling expenses Rs.331474 out of total traveling expenses of Rs.662948/-"

5. The learned counsel for the assessee submitted that there was no basis for disallowing 50% of travelling expenses out of total traveling expenses of Rs.6,62,948/-. The learned DR has relied on the orders of the AO and the CIT(A). We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that the disallowance was made out of foreign travelling expenses, but the assessee could not file complete details such as, person who has travelled, his designation and purpose of visit etc. The assessee has only filed the bills in support of the tickets purchased for foreign travelling. In these facts, we see no reason to interfere with the order of the CIT(A), which is confirmed and the ground no.2 of the assessee is dismissed.

-2- ITA No.2393/Ahd/2008 &2 Others 6. The ground no.3 of the assessee is as under:

"3. On the facts and in the circumstances of the case, the ld.CIT(a) has erred in confirming the action of the AO for disallowing Rs.3,68,208/- towards interest paid to ABN Ambro Bank Ltd."

7. The learned counsel for the assessee submitted that the interest was paid to ABN Amro Bank Ltd. and the same was disallowed for want of evidence. The learned DR has relied on the orders of the AO. We have considered rival submissions. We find that no evidence in support of the claim of the assessee could be filed by the assessee before us also, and accordingly, the ground no.3 of the assessee is dismissed.

8. The ground no.4 of the assessee is as under:

"4. On the facts and in the circumstances of the case, the ld.CIT(A) erred in confirming disallowance of Rs.51,216/- out of garden expenses when all the details, bills and vouchers were produced during assessment stage."

9. The learned counsel for the assessee submitted that expenses of Rs.51,216/- is incurred for maintenance of garden and complete details thereof were filed. The learned DR relied on the orders of the AO and the CIT(A). We have considered rival submissions. We find that the garden expenses were incurred by the assessee for the business purpose and copies of bills were also produced before the AO and the CIT(A), and therefore, there is no case for disallowance of 20% of the total garden expenses claimed by the assessee. Accordingly, the disallowance of Rs.51,216/- is deleted, and the ground no.4 of the assessee is allowed.

10. The ground no.5 of the assessee is as under:

"5. On the facts and in the circumstances of the case, the ld.CIT(A) ought to have allowed consultancy charges to the tune of Rs.2,92,815/-, and therefore, has erred in confirming the action of the AO towards disallowance of the said item."

-3- ITA No.2393/Ahd/2008 &2 Others 11. The learned counsel for the assessee submitted that the amount of Rs.2,92,815/- was capitalized, but no depreciation thereon was allowed to the assessee. The learned DR has relied on the orders of the AO and the CIT(A). We have considered rival submissions. We find that the CIT(A) has given a finding that the amount of Rs.2,92,815/- is not incurred wholly and exclusively for the purpose of business. The assessee could not establish that the promotional charges were paid for the business run by the assessee-company. The expenses incurred even though genuine could not be allowed till it is proved that the same was incurred for the business purpose only. Accordingly, the ground no.5 of the assessee is dismissed.

12. The ground no.6 of the assessee is as under:

"6. Without prejudice to above, on facts and circumstances of the case the ld.CIT(A) ought to have granted deduction u/s.10 in respect of SEZ Unit."

13. We have heard parties. This ground is merely academic in nature, and accordingly is not adjudicated upon.

ITA No.2948/Ahd/2008 (Revenue's Quantum Appeal) 14. The only ground of the appeal of the Revenue is as under:

"1. On the facts and in the circumstances of the case and in law, theld.CIT(A) has erred in deleting the addition made by the AO of Rs.26lacs on estimation of profit."

15. The learned DR submitted that the assessee could not justify the loss shown in its trading account by the assessee, and therefore, the addition of Rs.26 lakhs was made on estimation of profit was justified. The learned counsel for the assessee submitted that the assessee could not compete with the foreign manufacturers of the textile machinery and spare parts, and therefore, there was sharp decline of sales of Rs.50.57 lakhs during the year as against last year's sales of Rs.1023.40 lakhs, and the assessee has declared loss in the current year

-4- ITA No.2393/Ahd/2008 &2 Others

as against GP rate of 9.05% in the last year. He submitted that due to continuous loss, the assessee has to close down its business, and could not revive the same till the date. He submitted no defect of the accounts of the assessee could be pointed out by the Revenue.

16. We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that the assessee has declared sales of Rs.50.57 lakhs during the year as against Rs.1023.40 lakhs in the immediately preceding assessment year. The assessee has declared loss in the current year, as against GP rate of 9.05% in the immediately preceding assessment year. No cogent defect in the account books of the assessee could be pointed out by the department except that the assessee could not maintain day-to-day consumption register of the items of raw-material, which are stated to be one thousand in number. The fact that the assessee has to close down its business after sometime, could not be controverted by the Revenue. We find that the CIT(A) has passed well reasoned order on this issue and held that in the books of the accounts of the assessee cannot be rejected and has deleted the addition. There being no mistake in the order of the CIT(A), the same is confirmed, and the ground of the appeal of the Revenue is dismissed.

ITA No.2521/Ahd/2010 (Revenue's appeal) - Penalty under section 271(1)(c) of the Act.

17. The only ground of the appeal of the Revenue is as under:

"1. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in deleting the penalty imposed by the AO in respect of additions of Rs.4,98,402/-, Rs.3,31,474/-, Rs.3,68,207/- and Rs.2,92,8125/- made on account of disallowance of capital expenditure, foreign travelling expenses, interest u/s.36(i)(iii) and professional fees, respectively."

18. The learned DR relied on the order of the AO. She referred to the relevant portions of the penalty order and assessment order in support of the case of the Revenue. The learned counsel for the assessee submitted that the -5- ITA No.2393/Ahd/2008 &2 Others

penalty was levied on the amount of certain disallowances made by treating the expenditure as capital expenditure, out of foreign travelling expenses, interest under section 36(i)(iii) and professional fees. He submitted that all the material facts were disclosed by the assessee in the computation of income.

19. We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that the penalty under section 271(1)(c) of the Act has been levied on certain disallowances made by the AO. We find that all the material facts necessary for the assessment of the case of the assessee were filed along with return of income. The assessee has filed explanation in this regard, which seems to be bona fide. It seems that this is a case of honest difference of opinion between the assessee and the Revenue with regard to allowability of certain expenses claimed by the assessee. Merely because certain expenses were capitalized and/or certain disallowances were made, it cannot be said that the assessee is guilty of concealment of income or filing of inaccurate particulars of income. The CIT(A) has deleted the penalty by following the decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC). There being no mistake in the order of the CIT(A) in deleting the penalty in this case, we confirm his order and the ground of the appeal of the Revenue is dismissed.

20. In the result, the appeal of the assessee is partly allowed and the appeals of the Revenue in quantum as well as in penalty are dismissed.

Order pronounced in Open Court on the date mentioned hereinabove.

Sd/- Sd/- एन. एन.एस. (एन एस. सैनी /N.S.SAINI) (जी. जी.सी. सी.गुƯा/G.C. GUPTA) लेखा सदःय /ACCOUNTANT MEMBER उपाÚय¢ /VICE-PRESIDENT

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