Tribunal upholds 30% disallowance of FFB expenses, dismisses appeals.

The tribunal upheld the CIT(A)'s decision, deeming the 30% disallowance of Fresh Fruit Bunching (FFB) expenses reasonable. Both the revenue and the assessee's appeals were dismissed, along with the assessee's cross objections. The appeal concerning the addition of Rs. 21,000/- for donations was also dismissed. The order was issued on 30th April 2019.

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Issues Involved:
1. Condonation of delay in filing appeals.
2. Disallowance of Fresh Fruit Bunching (FFB) expenses for A.Y. 2013-14 and A.Y. 2014-15.
3. Reasonableness of the disallowance percentage.
4. Conditional offer made by the assessee during assessment proceedings.
5. Addition of Rs. 21,000/- pertaining to donations.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The Assessing Officer (AO) filed appeals with a delay of 31 days, accompanied by a petition explaining the reasons for the delay. The assessee's representative did not object to the condonation of delay. After hearing both parties, the delay was condoned, and the appeal was admitted.

2. Disallowance of Fresh Fruit Bunching (FFB) Expenses:
For A.Y. 2013-14, the assessee declared a loss of Rs. 1,18,01,012/-. During scrutiny, the AO found that the assessee had debited Rs. 3,28,27,958/- towards FFB expenses. The AO issued summons to subcontractors who were either employees or relatives of employees of the assessee company. Upon verification, it was found that these subcontractors did not maintain any books of accounts or produce any bills or vouchers. The AO disallowed the entire expenditure of Rs. 2,46,45,671/- for A.Y. 2013-14 and 80% of Rs. 3,17,99,320/- for A.Y. 2014-15, citing non-genuine claims.

3. Reasonableness of the Disallowance Percentage:
The CIT(A) reviewed the process of collection, handling, and transportation of FFBs and concluded that the expenditure was inevitable for the business operations. However, the CIT(A) found the modus operandi for booking the expenditure to be improper and held that disallowance of 30% of the expenses was reasonable. The CIT(A) directed the AO to restrict the disallowance to 30% for both A.Y. 2013-14 and A.Y. 2014-15, allowing relief of 70%.

4. Conditional Offer Made by the Assessee:
During assessment proceedings, the assessee conditionally accepted the addition of expenditure, subject to the non-initiation of penalty proceedings under Section 271(1)(C). The AO rejected this conditional offer and proceeded with the assessment, initiating penalty proceedings. The tribunal held that once the AO rejects the conditional offer, it loses its binding nature and is no longer valid.

5. Addition of Rs. 21,000/- Pertaining to Donations:
For A.Y. 2013-14, the AO added Rs. 21,000/- for donations, which was not allowable as an expenditure. The CIT(A) confirmed this addition, and during the appeal hearing, the assessee did not contest this issue. Therefore, this ground of appeal was dismissed as not pressed.

Conclusion:
The tribunal upheld the CIT(A)'s order, finding the 30% disallowance of FFB expenses reasonable and dismissing the appeals of both the revenue and the assessee. The tribunal also dismissed the cross objections filed by the assessee as infructuous. The appeal regarding the addition of Rs. 21,000/- for donations was dismissed as not pressed. The order was pronounced in the open court on 30th April 2019.

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