M/s Anchal Agro Chillers Pvt.Ltd., 272, Prabhat Nagar, Meerut. Vs. Commissioner of Income Tax, Meerut.
February, 02nd 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
`A' : NEW DELHI
DELHI BENCH `A
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SIDHU, JUDICIAL MEMBER
SHRI H.S. SIDHU,
Assessment Year : 2008-
M/s Anchal Agro Chillers Vs. Commissioner of Income Tax,
272, Prabhat Nagar,
PAN : AAFCA1036L.
Appellant by : Shri P.S. Kashyap, CA.
Respondent by : Smt. A. Mishra, CIT-DR.
PER G.D. AGRAWAL, VP :
This appeal by the assessee is directed against the order of
learned Commissioner of Income Tax, Meerut dated 21st March, 2013
for the AY 2008-09.
2. Ground No.1 of the assessee's appeal reads as under:-
"That on facts and in law order passed under section 263 is illegal
and unwarranted. The ld.CIT has not met the basic conditions for
passing order under section 263 i.e. original assessment order
should be erroneous and prejudicial to the interest of revenue.
The assessment order passed is neither erroneous nor prejudicial
to the interest of revenue. Therefore, the order passed by the
ld.CIT is illegal and void ab initio."
3. The other grounds raised by the assessee are only arguments in
support of above ground No.1
4. At the time of hearing before us, the limited request of the
learned counsel for the assessee was to modify the order of the
learned CIT(A) to the extent of his direction with regard to
disallowance of expenses. He pointed out that in the original
assessment order, the Assessing Officer has already noticed that the
assessee has not done any business activity during the year and
accordingly disallowed 25% of the expenses. On appeal, learned
CIT(A) vide his order dated 18th March,2013 sustained the
disallowance to 15% of the expenses claimed by the assessee. The
order of learned CIT(A) has become final as no party had filed the
appeal against the order of learned CIT(A). That in the order under
Section 263 dated 21st March, 2013, the learned CIT observed for
100% disallowance of the expenses claimed by the assessee. That
since this issue has already been adjudicated by the CIT(A), the CIT
was not empowered to pass order under Section 263 with regard to
disallowance of expenses. In support of his contention, he referred to
Explanation (c) to Section 263. With regard to the other part of the
order of learned CIT passed under Section 263, the learned counsel
did not make any submission.
5. Learned DR, on the other hand, relied upon the order of the
learned CIT passed under Section 263 and pointed out that the
difference between the order of learned CIT(A) and learned CIT is only
three days and probably, on the date on which the CIT passed the
order, it was not brought to his knowledge that the CIT(A) has already
adjudicated this issue. She, therefore, submitted that the order of
learned CIT passed under Section 263 should be sustained.
6. We have carefully considered the submissions of both the sides
and perused relevant material placed before us. Explanation (c) to
Section 263(1) reads as under:-
"(c) where any order referred to in this sub-section and
passed by the Assessing Officer had been the subject
matter of any appeal [filed on or before or after the 1st
day of June, 1988], the powers of the [Principal
Commissioner or] Commissioner under this sub-section
shall extend [and shall be deemed always to have
extended] to such matters as had not been considered
and decided in such appeal.]."
7. From the above, it is evident that the powers of the CIT under
Section 263 are extended to the matters as had not been considered
and decided in appeal. In the case under consideration before us, we
find that the CIT(A) in the order dated 18th March, 2013 decided the
issue of disallowance of expenses with the following finding:-
"Ground No.1 : In the course of assessment
proceedings the A.O. found that the assessee had not
done any business activities though had claimed certain
expenses in the profit & loss accounts. The A.O.
specifically asked the assessee to justify these
expenses as claimed in the profit and loss accounts. In
response the assessee stated that despite best efforts
no shop could be sold and that the expenses were
minimum possible to run the business. The assessee
was asked to produce books of accounts along with
supporting bills/vouchers. In response the books of
accounts were produced by the assessee but the
assessee failed to produce supporting bills and
vouchers. In the above circumstances, the A.O. did not
find it possible to verify the genuineness of the
expenses without bills and vouchers or any other
evidences in support of various items of expenses by
the assessee in the profit and loss accounts.
Accordingly 25% of the total expenses claimed by the
assessee in profit and loss accounts was disallowed on
estimate basis by the A.O. to prevent any possible
leakage of revenue.
I have carefully considered the submission of the
appellant in this regard. Vide its written submission
dated 15/3/2013 the appellant has tried to justify the
genuineness of various items of expenditure claimed by
the appellant. However, on being specifically asked by
me, the AR of the appellant expressed his inability to
produce bills and vouchers or any other supporting
evidences to justify the various items of expenses so
claimed by the appellant as deduction. Therefore, in
the absence of proper bills/vouchers or other evidences
in support of various items of expenses, I agree with the
A.O.'s contention that it was not possible to verify the
genuineness of expenses. As such, in my considered
view A.O. was justified in making lump sum
disallowance on estimate basis. However, in view of
submissions made by the appellant and on
consideration of facts and circumstances of the case I
believe that disallowance @ 25% made by A.O. on
estimate basis certainly appears to be on higher side,
whereas in the light of facts and circumstances of the
case A.O.'s concern for possible leakage of revenue
cannot also be ignored altogether. Therefore, I restrict
the estimated disallowance to 15% of the expenses as
claimed by the assessee which works out to
Rs.2,98,412/-. As such assessee gets a relief of
Rs.1,98,942/- (i.e. Rs.4,97,354/- minus Rs.2,98,412/-.)."
8. Learned CIT in the order passed under Section 263 dated 21st
March, 2013 made the observation that the total expenditure of
`19,89,416/- was disallowable but the Assessing Officer disallowed
mere 25% of the expenses. Since this issue has already been
adjudicated by the learned CIT(A) before the order under Section 263
was passed, in our opinion, the CIT was precluded from making any
observation or issuing any direction under Section 263 with regard to
disallowance out of expenses. Whether the order of the CIT(A) was
brought to the knowledge of the CIT or not would be irrelevant
because the fact remains that the CIT(A) had already passed the order
adjudicating the issue of disallowance of expenses before the order of
the CIT passed under Section 263. We, therefore, partly modify the
order of the CIT passed under Section 263 and his
observations/directions with regard to disallowance out of expenses
9. In the result, the appeal of the assessee is partly allowed.
Decision pronounced in the open Court on 30th January, 2015.
(H.S. SIDHU) AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 30.01.2015
Copy forwarded to: -
1. Appellant : M/s Anchal Agro Chillers Pvt.Ltd.,
272, Prabhat Nagar, Meerut.
2. Respondent : Commissioner of Income Tax, Meerut.
5. DR, ITAT