The Income Tax Appellate Tribunal (ITAT) Delhi Bench “F” pronounced its judgment on the appeals filed by the Revenue against the consolidated order of the Commissioner of Income Tax (Appeals)-35, New Delhi (“CIT(A)”) dated 01.03.2019 pertaining to Assessment Years 2011-12 and 2012-13. The appeals, ITA Nos. 5149 & 5150/Del/2019, were heard by Dr. BRR Kumar, Accountant Member, and Ms. Astha Chandra, Judicial Member.
The Revenue raised several grounds of appeal for both assessment years. For AY 2011-12, the CIT(A) had deleted the addition of Rs. 1,73,33,666/- on account of disallowance of 40% of total direct/indirect expenses, and the addition of Rs. 51,653/- on account of disallowance of the assessee’s claim under Section 80C of the Income Tax Act.
For AY 2012-13, the CIT(A) had deleted the addition of Rs. 1,75,71,490/- on account of disallowance of 40% of total direct/indirect expenses, the addition of Rs. 76,09,453/- due to the difference in the opening stock figure of the current year with the closing stock figure of the previous year, and the addition of Rs. 51,653/- on account of disallowance of the assessee’s claim under Section 80C of the Income Tax Act.
The assessee, engaged in the business of manufacturing and exporting garments under the name M/s. P6 Design, filed returns for AY 2011-12 and 2012-13 declaring incomes of Rs. 11,27,066/- and Rs. 13,80,340/- respectively. Both returns were processed under Section 143(1) of the Income Tax Act, 1961. The cases were selected for scrutiny through the Computer-Assisted Scrutiny Selection (CASS) system.
The assessee failed to respond to statutory notices for both assessment years, resulting in ex-parte assessments. The AO made several disallowances and additions, including the disallowance of 40% of total direct/indirect expenses and disallowance under Section 80C, as well as an addition for the difference in stock figures.
During the appellate proceedings, the assessee submitted additional evidence under Rule 46A of the Income Tax Rules, 1962. The CIT(A) admitted this additional evidence, explaining the non-compliance with notices due to the assessee’s personal circumstances, including his mother’s critical illness and disputes with other communities.
The CIT(A) accepted the additional evidence and deleted the disallowances and additions made by the AO. The Revenue appealed against this decision, arguing that the CIT(A) erred in admitting the additional evidence and deleting the disallowances and additions.
The Tribunal observed that the assessments were made ex-parte due to non-compliance with notices. It noted that the assessee had provided a reasonable explanation for the non-compliance and had furnished the necessary evidence during the appellate proceedings. The Tribunal found no grounds to dispute the veracity of the assessee’s explanation and upheld the CIT(A)’s decision to admit the additional evidence.
The Tribunal also upheld the CIT(A)’s deletion of the 40% disallowance of direct/indirect expenses, the disallowance under Section 80C, and the addition due to the stock difference. It noted that the Revenue had not provided any substantial evidence to challenge the CIT(A)’s findings.
The Tribunal dismissed the Revenue’s appeals for both assessment years, upholding the CIT(A)’s decision to delete the disallowances and additions. The final judgment was pronounced on 21st September 2023.
Order pronounced in the open court on 21st September 2023.
sd/- (DR. BRR KUMAR) ACCOUNTANT MEMBER
sd/- (ASTHA CHANDRA) JUDICIAL MEMBER
Date: 21/09/2023
Veena
Copy forwarded to:
ASSISTANT REGISTRAR, ITAT, New Delhi
ITA 5150/DEL/2019: Appeal Against Disallowance of Expenses and Stock Difference
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