Pioneer Industries Ltd., Pathankot vs Department Of Income Tax
- CitationI.T.A. No.112(Asr)/2014
Ratio decidendi
The rule this decision rests on
An assessing officer may not disallow expenses on the basis of an assertion that the assessee failed to maintain separate accounts where the assessee was never confronted with that allegation and never given an opportunity to produce the separate accounts; a disallowance so made rests on surmise and conjecture and cannot stand. Where the assessing officer relies on the assessee's past history to make a disallowance without any discussion of that history in the assessment order, and the assessee in the current year has maintained separate accounts for the relevant unit, the current year's facts cannot be equated with the past history, so the reliance on past history is unjustified. An assessee's failure to object to a disallowance during assessment proceedings does not sustain the addition where the assessee was never confronted with the material underlying it and so had no opportunity to answer it, and where the audited books of account disclose no specific defect.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Asstt. Commr. of Income Tax, vs. M/s. Pioneer Industries Limited. Circle-VI, Pathankot. Chhoti Nehar, Malikpur, Pathankot. (Appellant) (Respondent)
Appellant by:Smt. Ratinder Kaur, DR Respondent by:Sh. Smeer Aggarwal, CA
Date of hearing:20/01/2015 Date of pronouncement:28/01/2015
ORDER
PER B.P. JAIN, AM :
This appeal of the Revenue arises from the order of the CIT(A),
Amritsar, dated 06.12.2013 for the assessment year 2008-09. The Revenue
has raised the following grounds of appeal:
"1. Whether on the facts and circumstances of the case the Ld. CIT(A) is right in law in deleting addition of Rs.10,00,000/- made by AO out of expenses on account of wages and salary, traveling, general expenses etc. included in capital work in progress and for which assessee had not maintained the separate accounts and the assessee did not come forward to object to the disallowance during the assessment proceedings.
2 ITANo.112(Asr)/2014 2. Appellant craves leave to amend or add any or more grounds of appeal."
2. The brief facts of the case as per AO's order are reproduced
hereinbelow:
"The assessee is engaged in the business of manufacturing of Vanaspati & Refined Oil, Gluten and ENA, IMFL, Country Liquor. During the course of assessment proceedings, it was observed that the assessee had debited the following expenses under the head salary, Travelling and other expenses:
Wages and salary Rs.90,26,313/- Travelling Rs. 7,56,113/- General Expenses Rs.10,82,757/- Telephone and Postage Rs. 4,04,996/- Staff welfare Rs. 5,32,010/-
Assessee is running units which are manufacturing, Glutin, Refined Oil & related products as well as a new distillery unit have set up. During the year, the assessee has made addition of Rs.8,56,82,871/- under the head "Capital-Work-in Progress' for expansion of its units. The assessee has not maintained separate accounts showing any expenses on account of new unit being set up, under the heads of different types of expenses as narrated above which relate t setting up and expansion of new units. For example the use of telephones, conveyances etc. for these units being set up cannot be ruled out. Similarly the expenses on account of wages and salary. Traveling, General expenses, staff welfare etc. As it is not separable from existing and other units wherein expansion is there during the year and the assessee has not maintained separate accounts for their expenses, as per the past history of the case an addition of Rs.10,00,000/- is made on account of disallowances on account of expenses relating to setting up and expansion of the new units and added back to the income of the assessee. Since the assessee has furnished inaccurate particulars of its income, penalty proceedings u/s 271(1)(c) of the Income Tax Act, are initiated separately."
3 ITANo.112(Asr)/2014 3. The Ld. CIT(A) deleted the addition. While deleting the addition, Ld.
CIT(A) observed that assessee has been contesting that separate records for
distillery unit are duly maintained, but the assessee has been deprived of the
opportunity of confronting the AO's observation. The impugned expenses
have been capitalized under the head "capital work-in-progress" which is
well within the accounting standard. The accounts of the assessee are duly
audited and duly supported by vouchers. No defect in the same has
specifically been pointed out. The disallowance has been made on surmises
and guess-work. Accordingly, the Ld. CIT(A) deleted the disallowance so
made by the A.O.
4. The Ld. DR argued that the assessee has not maintained separate
accounts and assessee has not come forward to object to the disallowance
during the assessment proceedings.
5. The Ld. Counsel for the assessee, Mr. Sameer Aggarwal, CA argued
that the assessee has maintained complete head-wise accounts showing
separate pre-operative expenditure of the new distillery unit, duly supported
by bills and vouchers. Therefore, the facts in the impugned year are quite
different to the preceding year as followed by the A.O. The Ld. Counsel for
the assessee relied on the order of the ld. CIT(A). 4 ITANo.112(Asr)/2014
6. We have heard the rival contentions and perused the facts of the case.
The allegation of the AO was that the assessee had not maintained separate
accounts with regard to the expenses of the new unit being set up. From the
perusal of the order of the AO, it is evident that the AO has not provided any
opportunity to the assessee to produce the accounts separately maintained
for the new unit being set up. Any decision in the matter by the AO without
affording opportunity of being heard to the assessee shall be presumed to be
a decision on surmises and conjectures. The AO has followed the past
history of assessee's own case in the absence of any discussion of past
history in the assessment order. However, the assessee had maintained
before the AO as well as before the ld. CIT (A) that the separate accounts
have been maintained for the new unit being set up and therefore, the facts in
the impugned year where accounts have been separately maintained for the
new unit being set up cannot be equated with the past history of the case
where the accounts probably have not been maintained. Accordingly, the
AO is not justified in following the past history of the case. As regards the
objection of Ld. DR that the assessee did not object to the disallowance
during assessment proceedings. In view of our findings hereinabove, the
assessee was never confronted whether he had maintained separate accounts
for the new unit being set up i.e. he was never given an opportunity to 5 ITANo.112(Asr)/2014
produce accounts of new unit being set up. Accordingly, in the absence of
any specific defects in the books of accounts which are duly audited and in
view of our findings hereinabove, the ground of the revenue fails and
therefore, we find no infirmity in the order of the ld. CIT(A) who has rightly
deleted the disallowance made by the AO. Thus, the sole ground of the
revenue is dismissed.
7. In the result, the appeal of the Revenue in ITA No.112(Asr)/2014 is
dismissed.
Order pronounced in the open court on 28th January, 2015.
Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28th January, 2015 /SKR/ Copy of the order forwarded to:
1. The Assessee:M/s. Pioneer Industries Limited, Pathankot.
2. The ACIT, Cir.VI, Pathankot
3. The CIT(A), Asr.
4. The CIT, Asr.
5. The SR DR, ITAT, Amritsar.
True copy By order
(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.
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