TaxTMI 
TaxTMI 
2018 (3) TMI 941
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....T(A) allowed the deduction equivalent to tooling consumed during the year. Both assessee and revenue are in appeal. The Ld. AR for assessee did not press this ground citing the reason that claim of tooling either on consumption basis or amortization basis only makes difference as of timing and does not, therefore, makes any impact as such, therefore, the assessee does not want to contest this ground. Consequently, we reverse the order of Ld. CIT(A) and uphold the order of AO on this issue. Revenue's appeal on this issue is allowed. 3. Ground no. 2 of assessee's appeal and ground no. 2 of revenue's appeal are against the order of disallowance/restriction of raw material consumed to 1% of the value of raw material consumed on estimate basis respectively. Briefly stated facts are that the assessee company is a manufacturer and trader of Refractory's. On examination of details filed by the assessee it was noticed by the AO that considering the decrease of Rs. 226.55 lakhs in closing stock, the consumption of raw materials have shown an upward trend of 25% whereas the production of finished products shown an upward trend of 10% only. At the same time he also noted that considering th....
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....ejected by the AO, therefore, the estimation was not warranted. In the light of the aforesaid facts and circumstances the fact that the Ld. CIT(A) erred in restricting the disallowance to 1% of raw material consumed. Therefore, in the interest of justice and fair play for both the parties, we set aside the order of Ld. CIT(A) and remand the matter back to the file of AO for de novo adjudication and the direct the AO to take into consideration all the factors and not to be swayed away by clause 28(a) annexure 19 to the audited accounts wherein the quantitative details of principal items of good traded was stated to be not readily ascertainable (page 34 of paper book), when the quantity manufactured during the year and the closing stock of the year are discernible from annexure 20 clause 28(b) (page 35 of paper book). With the aforesaid observation, we remand the matter back to the file of the AO to decide this issue afresh after giving adequate opportunity to the assessee. 4. Ground no. 3 of both the assessee's appeal and revenue's appeal are against the order of Ld. CIT(A) on account of disallowance of site expenses-Maintenance and site expensesothers u/s. 40(a)(ia) of the Incom....
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....iding proper opportunity to the assessee. The Ld. CIT(A) gave partial relief after taking note of the details submitted before him. The AO ought to have done the assessment by providing sufficient opportunity to the assessee and since no opportunity was given to the assessee at the time of assessment proceedings on the addition/disallowance made, the proper course to be taken is that the matter needs to be remanded back to the AO. In support of this, we rely on the decision of Hon'ble Supreme Court (three judges Bench) in Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC) wherein the Hon'ble Supreme Court has held as under: "It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been g....
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....s. 40(a)(ia) read with sec. 194C of the Act. On appeal, the Ld. CIT(A) gave partial relief to the assessee by holding as under: "The AO made disallowance u/s. 40(a)(ia) on the ground that the appellant failed to produce tax deduction details in respect of site expenses - maintenance/others. On the other hand the appellant referring to questionnaire issued by AO submitted that the AO had not called for the details in respect of the above mentioned expenses. The appellant while submitting the details of the above expenses stated that it's employee's incurred expenses at the customer site and the same are charged to site expenses and hence there is no requirement to deduct tax. I have considered the submissions of the appellant. The AO appears to be not justified to make disallowance u/s. 40(a) (ia) without calling for the details and examining the nature of such expenses debited. However, the perusal of details of nature of expenses submitted shows that in respect of 'labour charges" (through contractors) and 'office rent', the appellant should have made tax deductions. As such, I direct the AO to restrict the disallowance u/s 40(a)(ia) only to these two ....
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....n clause 22(b) of the tax audit report which according to the assessee was duly offered to tax in the computation of total income. However, without assigning any reason the authorities below have made the addition which renders the order bad in law for non-application of mind, therefore, in the interest of justice relying on the order of Hon'ble Supreme Court in the case of Tin Box Company (cited supra), we remand this issue to the file of AO for de nove adjudication. This ground of appeal of assessee is allowed for statistical purposes. 7. Ground no. 5 of revenue's appeal is against the order of Ld. CIT(A) in allowing gifts of Rs. 5 lacs. Brief facts of the issue are that the AO made the disallowance of Rs. 5 lacs out of Rs. 16,89,072/- incurred on gifts and presents on the contention that the assessee neither categorized the persons to whom gifts were presented nor their correlation with business activity. On appeal, the Ld. CIT(A) while deleting the ad hoc disallowance made by the AO has observed as under: "I have carefully examined the submissions of the appellant including case laws relied upon. I find there is force in appellant's arguments. The AO has made on ad ....
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....that the A.O cannot make an ad-hoc disallowance in view of the ratios laid down by the judicial forums. The appellant also submitted details of such foreign travel expenses. I have carefully considered the submissions and case laws relied on by the appellant. I am of the view that the A.O could have categorisd such expenditure and accordingly made disallowance. The ad-hoc disallowance of Rs. 20,00,000/- made is not justifiable as there is no basis for such ad-hoc disallowance. Hence I direct the A.O to delete the addition. As far as the second addition is concerned, the A.O made this addition on the ground that the expenditure incurred is not exclusively laid out for the purpose of business. On the other hand the appellant submitted that the expenditure incurred for the purpose of acquisition of refractory business and hence for the purpose of business. The appellant relied on certain case laws in support of its arguments. I have perused the assessment order. I find myself not in agreement with the reasoning given by the A.O for making such disallowance. As argued, the appellant is placed in a better position to decide about incurring particular expenditure in a particular....
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....ness and that the A.O never requisitioned for bills and vouchers. The appellant submitted details of hotel expenses including bills/vouchers. I have carefully considered the submissions of the appellant. I have also examined the facts of the case and the reasoning given by the AO. As I held earlier in respect of other ad-hoc additions, I am not in agreement with the A.O for making an ad-hoc addition in respect of hotel expenses also. The AO should have made specific additions after categorizing such expenses where discrepancies noticed." In view of the facts of the case and also keeping in view the case laws cited, I direct the A.O to delete the addition made on this count." Aggrieved, revenue is in appeal before us. 9.1. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the employees of the group companies, auditors, directors were travelling to different units of the company for holding various conferences and seminars. We have already upheld the travelling expenses allowed by the Ld. CIT(A). The assessee had claimed an amount of Rs. 73,47,894/- for hotel expenses. However, the AO disallowed Rs. 20 lacs on the specious pl....