2018 (8) TMI 1048 - AT - Income Tax

Tribunal Upholds Assessee's Appeals, Dismisses Revenue's Challenges, and Seeks AO Review

DCIT, Corporate Circle-1 (1), Bhubaneswar Versus M/s Indian Metals & Ferro Alloys Ltd. Vice-Versa And DCIT, Corporate Circle-1 (1), Bhubaneswar Versus M/s IMFA Alloys & Finlease Ltd.

DCIT, Corporate Circle-1 (1), Bhubaneswar Versus M/s Indian Metals & Ferro Alloys Ltd. Vice-Versa And DCIT, Corporate Circle-1 (1), Bhubaneswar Versus M/s ... Issues Involved:1. Deletion of addition made under Section 68 of the Income Tax Act.2. Deletion of addition on account of bogus lease rental expenses.3. Deletion of addition on account of transmission charges.4. Deletion of addition on account of Director's remuneration.5. Deletion of addition on account of prior period expenses.6. Disallowance under Section 43B of the Income Tax Act.7. Disallowance of foreign travel expenses.8. Disallowance of entertainment expenses.9. Disallowance of miscellaneous expenses.10. Disallowance of petty balances written off.11. Disallowance of deduction for advisory services, export commission, and VMI charges.12. Levy of interest under Section 234C of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68:The Revenue contested the deletion of an addition of Rs. 33,28,47,561/- made under Section 68. The CIT(A) observed that the assessee satisfactorily explained the identity, creditworthiness, and genuineness of the transaction. The AO did not provide reasons for finding the explanations unsatisfactory. The Tribunal upheld the CIT(A)'s decision, stating the AO's suspicion could not substitute for evidence.2. Deletion of Addition on Account of Bogus Lease Rental Expenses:The Revenue challenged the deletion of an addition of Rs. 49,01,411/- for bogus lease rental expenses. The CIT(A) found the sale and lease-back arrangement legally valid and commercially acceptable. The Tribunal upheld this finding, noting the AO's failure to provide concrete reasons for rejecting the assessee's explanations.3. Deletion of Addition on Account of Transmission Charges:The Revenue appealed against the deletion of Rs. 7,77,82,376/- on transmission charges. The Tribunal referred to its earlier decision in Gridco Ltd. vs. ACIT, where it held that Section 194-I was not applicable to transmission charges, and thus, no disallowance under Section 40(a)(ia) could be made. The Tribunal upheld the CIT(A)'s decision.4. Deletion of Addition on Account of Director's Remuneration:The Revenue contested the deletion of Rs. 1,60,00,000/- for Director's remuneration. The CIT(A) found the addition by the AO not based on evidence or legal proposition. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the Revenue.5. Deletion of Addition on Account of Prior Period Expenses:The Revenue challenged the deletion of Rs. 8,70,167/- out of Rs. 13,59,500/- for prior period expenses. The CIT(A) found the assessee's explanation reasonable and logical. The Tribunal upheld this decision, noting no new facts were presented by the Revenue.6. Disallowance under Section 43B:The assessee contested the disallowance of Rs. 9,10,34,665/- under Section 43B. The Tribunal restored the issue to the AO to consider based on the final outcome of a similar issue pending before the High Court for the assessment year 2009-2010.7. Disallowance of Foreign Travel Expenses:The assessee appealed against the disallowance of foreign travel expenses. The CIT(A) had restricted the disallowance to 20%. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the assessee.8. Disallowance of Entertainment Expenses:The assessee contested the disallowance of Rs. 11,12,200/- for entertainment expenses. The CIT(A) had partly allowed the expenses. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the assessee.9. Disallowance of Miscellaneous Expenses:The assessee appealed against the disallowance of Rs. 9,71,082/- for miscellaneous expenses. The CIT(A) had partly allowed the expenses. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the assessee.10. Disallowance of Petty Balances Written Off:The assessee contested the disallowance of Rs. 97,285/- for petty balances written off. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the assessee.11. Disallowance of Deduction for Advisory Services, Export Commission, and VMI Charges:The assessee appealed against the disallowance of Rs. 4,91,78,071/- for advisory services, export commission, and VMI charges. The Tribunal found the issue covered by its earlier decision in Paradeep Phosphates Limited and CIT vs. Eon Technology P. Ltd., and deleted the addition.12. Levy of Interest under Section 234C:The assessee contested the levy of interest under Section 234C. The Tribunal upheld the CIT(A)'s decision, finding no new material presented by the assessee.Conclusion:The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals for statistical purposes, restoring certain issues to the AO for reconsideration based on pending High Court decisions. The Tribunal upheld the CIT(A)'s findings on most issues, emphasizing the lack of new material or cogent facts presented by the Revenue to controvert the CIT(A)'s observations.