ITA No. 386/ JP/2011 Assessment year 2004-05 and ITA No. 380/ JP/2011 Assessment year 2004-05. Case: 1. A.C.I.T. Circle-2, Alwar, 2. M/s Vijay Solvex Ltd. Bhagwati Sadan S.D. Marg Alwar Vs 1. M/s Vijay Solvex Ltd. Bhagwati Sadan S.D. Marg Alwar, 2. A.C.I.T. Circle-2, Alwar. ITAT (Income Tax Appellate Tribunal)
| Case Number | ITA No. 386/ JP/2011 Assessment year 2004-05 and ITA No. 380/ JP/2011 Assessment year 2004-05 |
| Judges | Shri R.K. Gupta and Shri N.L. Kalra, JJ. |
| Issue | Income Tax Act |
| Judgement Date | October 14, 2011 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
N.L. Kalra, AM, (ITAT Jaipur 'B' Bench)
1. The Assessee as well as the Revenue has filed appeals against the order of the ld. CIT(A), Alwar dated 04-02-2011.
First we will take up the appeal of the Assessee
2. The first ground of appeal of the Assessee is that the Ld. CIT(A) has erred in sustaining the trading addition of Rs. 2.00 lakhsas against trading addition of Rs. 11,78,205/- made by the AO. The Revenue is also aggrieved aginst reducing the trading addition to Rs. 2.00 lakhs as against Rs. 11,78,205.00 made by the AO.
3. The Assessee-company is engaged in the business of crushing of oil seeds mainly Mustard and Soyabeen and manufacturing of edible oil, vegetable ghee and cattle feed. During the year, there was amalgamation of M/sGoenka Products (P) Ltd. with the Assessee company w.e.f. 1.12.2003as per the order of Hon'ble Rajasthan High Court dated 26.8.2005. As a result of amalgamation of the company M/s Goenka Products Pvt Ltd., the Assessee filed revised computation of total income and claimed the loss as per Profit and loss account of M/s Goenka Products Pvt Ltd. from total income of the Assessee-company. In M/s Goenka Products Pvt Ltd. there was loss of Rs. 29,52,916/- in ground nut crushing and there was profit of Rs. 1784751/- in mustard seed crushing. The AO required the Assessee to substantiate the claim of loss in manufacturing activity done by M/s Goenka Products Pvt Ltd. The Assessee submitted that the unit of M/s Goenka Products Pvt Ltd. was located in Jobner and was being managed by the Managers. This unit was located at distance of about 200 Km from Alwar. It was being managed by the managers only and could not get the personal supervision of the directors of the company. Due to lack of personal supervision of the directions, the loss was incurred in the M/s Goenka Products Pvt Ltd. M/s Goenka Products Pvt Ltd. discontinued the crushing of ground nut. The AO considered the reply of the Assessee and held that the reply is not in order. According to the AO the Assessee has given no reasons as to why M/s Goenka Products Pvt Ltd. has shown loss. The AO disallowed the loss of Rs. 11,70,201/-
4. The Ld. CIT(A) has reduced the addition to Rs. 2.00 lakhs after observing as under:
It is seen that while disallowance the loss suffered by the Assessee-company in its M/s Goenka Products Pvt Ltd. unit of Rs. 11,78,205/- the AO has not given any cogent reasons duly supported with documentary evidences. Therefore, considering the totality of the facts and circumstances of the case and in order to meet the ends of justice it would be fair and reasonable to restrict the disallowance of loss suffered in crushing of groundnut to Rs. 2.00 lakhs and the remaining addition of Rs. 9,78,205/- is deleted.
5 On the other hand, ld. DR stated that the Assessee has not been able to establish the reasons for incurring loss in the crushing of ground nut. No specific reasons were given for incurring loss. The onus was on the Assessee to give reasons and if the Assessee failed to give the reasons then the AO is left with no alternative but to disallow the loss.
6 We have heard both the parties. The company M/s Goenka Products Pvt Ltd. merged with the Assessee-company w.e.f. 1.12.2003 by virtue of the order of Hon'ble Rajasthan High Court datred 26.8.2005. The Assessee filed the manufacturing and trading account of M/s Goenka Products Pvt Ltd. It is not the case of the Revenue that the details given in the accounts are not verifiable. The Assessee gave an explanation in incurring of loss in M/s Goenka Products Pvt Ltd.. The AO has not rejected the books of accounts of M/s Goenka Products Pvt Ltd. The AO, therefore, is not justified in not allowing the loss without rejecting the books of accounts. It is not the case of the Revenue that the Assessee was not having quantitative details. According to us, the AO has simply disallowed the loss without making any inquiry or investigation and not even rejecting the books of accounts. Therefore, the addition confirmed by the Ld. CIT(A) to the extent of Rs. 2.00 lakhs is deleted. Ground No. 1 of Assessee's appeal is allowed while ground No. 2 of Revenue's appeal is dismissed.
7 The second grievance of the Assessee is that the Ld. CIT(A) has erred in confirming and sustaining a sum of Rs. 1,56,614/- out of foreign traveling expenses.
8 The revenue vide ground No. 4 & 7 is aggrieved against the deleting the disallowance of expenses amounting to Rs. 1,34,889/- and Rs. 61,685/-. During the year under consideration, the Assessee claimed business promotion expenses of Rs. 7,29,339/-. However, the AO made disallowance of Rs. 3,53,188/-, out of the same, which is tabulated as under:
| S No | Expenditure on | Expenses claimed (Rs.) | Expenses disallowed (Rs.) | Reasons for disallowance |
| 1 | Foreign visit by M.D Shri Vijay Data to | 1,34,889 | 1,34,889 | Assessee failed to explain as to what business purpose was served by this visit. Therefore, a private visit has been given a colour and cover of business trip since assessee-company has no business links with |
| 2 | Purchase of suitcase | 61,685 | 61,685 | Assessee failed to show as to whom these suitcases were distributed. No vouchers and details are available. |
| 3 | Hotel charges and lunch dinner | 38,180 | 19,090 (50%) | Not wholly and exclusively for business purposes. |
| 4 | Foreign traveling to by Smt. Nileema Data w/o Director D.K. Dattya | 1,37,524 | 1,37,524 | No evidence was furnished to who that the tour was for business purposes or any business was conducted by the lady in |
| Total | 3,72,278 | 3,53,188 |
The Ld. CIT(A) deleted the disallowance of expenditure of Rs. 1,34,889/- incurred on foreign visit by M.D Shri Vijay Data to Brazil and expenditure of Rs. 61,685/- incurred on purchase of suitcase. However, he confirmed the disallowance of expenditure of Rs. 19,090/- incurred on hotel charges and lunch dinner and expenditure of Rs. 1,37,524/- incurred on foreign traveling to U.K. by Smt. Nileema Data w/o Director...
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