TaxTMI 
TaxTMI 
2025 (3) TMI 2055
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....s noted to have found certain discrepancies in their books of accounts and the Income Tax Return (ITR), for which they recorded the statements of Smt. VidhyaMadan Mohan [Executive Director], Shri. S.C. Paneerselvam, [GM (Finance)] and other key individuals of the assessee company. The AO in the assessment framed u/s 143(3) of the Act dated 21.09.2021 for the relevant AY 2019-20 is noted to have made additions on account of (a) unaccounted purchases of Rs. 5,45,50,646/- under Section 69A of the Act, (b) disallowance of expenses incurred on freezer boxes supplied to their agents of Rs. 52,62,942 holding it to be capital in nature, (c) disallowance of salary of Rs. 30,23,496/- for want of supporting details, (d) disallowance of expenses towards rent & professional fees of Rs. 6,99,803/- and Rs. 2,76,784/- respectively. The AO accordingly computed the total income of the assessee at Rs. 7,67,19,781/- instead of Rs. 1,29,06,110/- as returned by the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the additions. Now, the Revenue is in appeal before us on the following grounds: - "1. The order of the learned Commissioner of Inc....
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....e quantity of milk purchased as maintained in the SAP data by the assessee, and that this discrepancy could not be explained by the General Manager (finance) as well as the Executive Director of the assessee. The assessee, in the course of assessment, is noted to have explained that, the purported loose sheet SI. No. 122 which was impounded during the course of survey, was not found from their premises, but was prepared at the instructions of the survey team by their office staff. For this, the assessee brought to notice the statement given by the Executive Director in the course of survey wherein he clearly stated that this loose sheet was typed by the office staff at the instance of the survey team, and that they need time to reconcile this voluminous data with the SAP data. The relevant extracts of his statement, is noted to be as under: - "I understand as you just explained that the RCM data mentioned about has been typed in excel during the course of this survey by our staff. This voluminous data typed has to be verified, and the data extracted from SAP also has to be validated" 4.2 The assessee therefore explained that, this loose-sheet was not reliable as it was ....
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....he assessee's premises, several stock- registers were found to be manually maintained at the floor level. Since these registers were voluminous, the investigating officer wanted to reconcile the noting's in these manual registers with SAP data, for which they required one floor staff to simply type the quantitative details mentioned in all these registers in an excel sheet, for their working purposes, which was carried out by the floor staff in a short span of time. He further explained that, the floor staff didn't apply their mind to the contents of these manual registers, but simply typed the details onto an excel sheet at the time of survey. According to the Ld. AR, this fact was verifiable from the time-stamp which would be discernible from this excel sheet, which was printed and seized by way of loose-sheet no. 122 in the course of survey. We find this explanation of the assessee to be plausible, in light of the statement of the Executive Director recorded at the time of survey, which is being extracted again below, - "I understand as you just explained that the RCM data mentioned about has been typed in excel during the course of this survey by our staff.....
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....ever, the absence of any such incriminating evidence or details, supports the assessee's plea that, the above referred loose-sheet was not reliable and that the assessee had not effected any unaccounted purchases outside the books of accounts. 4.8 Apart from the above, we also countenance the Ld. CIT(A)'s following finding that, the invocation of Section 69A of the Act by the AO was legally untenable, as it did not have any application on the given facts of the present case. The relevant findings taken note of by us is as follows: - "6.2.11 In the instant case the AO has invoked the provisions of section of section 69A of the Act to treat the alleged difference as unaccounted purchase / unaccounted excess stock in the order. Whereas it can be seen that the Appellant company was not found to be owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of accounts of the Appellant company by the survey team. Further the AO has not called for any explanation in this regard and in the absence of any such explanation, the AO has not made any findings that the explanation offered in his opinion is not satisfactory. Thus the un....
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....zers there is every possibility that any non-sold item will perish at the selling point. In such scenario the findings of the AO that these freezer boxes belong to the company and shall be taken back if and when the contract with a particular ends is contrary to the practice in vogue, once the freezers are handed over to the Agent, the Appellant lost its control over such asset. 6.3.7 The Hon'ble Apex Court in the case of Empire Jute Co Ltd Vs. CIT-1980 124 ITR 1 (SC) has held that to treat a particular expenditure pertains to the character of revenue or capital, there does not exist an all-embracing formula which can provide a ready solution to the problem; no touchstone has been devised and that every case has to be decided on its own facts keeping mind the broad picture of the whole operation in respect of which the expenditure has been incurred. 6.3.8 The undersigned has taken into consideration the broad picture of the operation in respect of which the expenditure was incurred by the Appellant, while doing so naturally the expenditure has to be seen from the eye of the appellant. The appellant Company has reported a turnover of Rs. 106,33,55,523/- and cla....
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....ew that, the expenses incurred for purchasing these freezer boxes supplied to the agents/vendors are meant to facilitate the assessee's business and doesn't give the assessee any advantage in capital field. 5.4 At this stage, it would be relevant to discuss the principles laid down judgment of Hon'ble Supreme Court in the case of Empire Jute Vs CIT (124 ITR 1) relied upon by the Ld. CIT(A), wherein the theory of expenditure of enduring nature, was repelled, in a great measure. In that case, the Hon'ble Supreme Court noted that by decided cases, that the Courts had evolved various tests for distinguishing between the capital and revenue expenditure, but no test is paramount or conclusive. It was accordingly held that, every case has to be decided on its facts keeping in mind the broad picture of whole operation in respect of which the expenditure has been incurred. One such test which was specifically spelled-out and may be relevant for our purpose was "when an expenditure is made not only once and for all, but with a view to bringing into existence or an advantage for which enduring benefit of a trade, the expenditure can be treated as capital in nature and not a....
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....ture, as it was meant to facilitate the business of the assessee and did not give any permanent advantage in capital field, though there was an enduring advantage in future. 5.7 In light of the above reasons and the given facts of the present case, as discussed above, we countenance the above findings of Ld. CIT(A) holding the expenditure on freezer boxes supplied to agents/vendors for storing the assessee's milk products to be revenue in nature. Accordingly, this ground is dismissed. 6. Ground No. 4 raised by the Revenue is against the Ld. CIT(A)'s action of deleting the disallowance of salary expenses of Rs. 30,24,546/-. The facts on records reveals that, the AO while examining the books of accounts found that a bulk sum of Rs. 30,23,496/- has been claimed as salary paid to Village Level Collection Centers ('VLCC'). The AO observed that, the salary had not been paid specifically to any individual person and that the details of the bank account of the individual person to which payment was done, was not made available by the assessee. According to AO therefore the amount debited by way of 'VLCC staff salary' remained unsubstantiated and accordingly he....