DEEPAK ENTERPRISES,NEW DELHI V. ACIT CIRCLE-32(1), NEW DELHI

ITA 2262/DEL/2023

AI Insights

The case involves Deepak Enterprises appealing against the order of the Commissioner of Income Tax (Appeals), which confirmed various disallowances made by the Assessing Officer under sections 10AA, 36(1)(iii), and 37 of the Income Tax Act, 1961. The disallowances pertained to deductions claimed by the assessee, which were either partially or fully disallowed by the Assessing Officer. The Tribunal noted that the Commissioner had not properly considered the assessee's submissions and documents, leading to the decision to remand the case for a fresh hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34171 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: S. N. BHARGAVA
• Keywords: Opportunity of being heard; Bad and doubtful debts; Depreciation; Tax effect
• Section: 143(3); 143(2); 271(1)(c); 145; 37; 10AA

Judgement Text

"ITA No.2262/Del/2023 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI BEFORE SH. PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.2262/Del/2023 Assessment Year: 2013-14 Deepak Enterprises 95/1, Gautam Nagar, New Delhi PAN No. AAEFD7578G Vs. ACIT Circle 32(1) Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. S. N. Bhargava, Advocate Respondent by Sh. Javed Akhtar, CIT DR Date of hearing: 28/11/2024 Date of Pronouncement: /01/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)/NFAC, Delhi [hereinafter referred to as “CIT(A)”] vide order dated 12.06.2023 pertaining to assessment year 2013-14 and arises out of the ITA No.2262/Del/2023 2 assessment order dated 10.03.2015 under section 143(3) of the IT Act, 1961 of the Income Tax Act 1961 [hereinafter referred as ‘the Act’]. 2. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us by raising the following grounds: “ Section: 10AA Tax effect relating to each Ground of Appeal. That Id. ACIT has erred in law as much as on the facts of the case by an arbitrary to restrict the deduction allowable under section 10AA to Rs.32,75,392.00 instead of Rs.68,30,160.00 a s claimed by the appellant. Hence id. ACIT is not justified to disallow Rs.35,54,768.00 under section 10AA of the act 1961. Further Id. AC IT has not given the reasonable opportunity to the appellant to the justify the claim of Rs.68, 30,160.00. Section:36(1)(iii) That Id. ACIT has erred in law as much as on the facts of the case by arbitrary disallowed 50% of Interest expenses i.e. Rs.15,47,325.00 under section 36(1)(iii) of the Act. Section:-37 That Id. ACIT has erred in law as much ITA No.2262/Del/2023 3 as on the facts of the case by arbitrary disallowed the following expenses out of the total expenses of respective head as personal expenses under section 37 of the Income tax act 1961. Following expenses disallowed by 5%: 1. Vehicle Running & Maintenance, Total Expenses Rs.1,57,590.00 disallowed Rs.7:823.00.2.Depreciation on Vehicles, Total Expenses Rs.2,31,78 0.00 disallowed Rs. 11,589.00. 3. Insurance of Vehicle, Rs.49,501.00 Total disallo Expenses wed Rs.2,475.00. Following expenses disallo wed by 10%: 1. Staff welfare, Total Rs.4,36,760.00 Expenses disallowed Rs.43,376.00. 2. Tour Travelling, Total. & Expenses Rs.21,54,313.00 disallowed Rs.2,15,431.00. 3. Telephone, Total Expenses Rs.4,85,327.00 disallowed Rs.48532.00/- 4. 271(1)(C) That the Id. ACIT has erred in law in initiating the penalty proceedings under section 271(1)( C) of the act on the aforesaid unwarranted disallowed to Rs.35,54,768.00 under section 10AA of the act and Rs.15,47,325.00 under section 3 6(1)(iii) of the act. It is therefore kindly prayed that the aforesaid unwarranted disallowance under various sections i.e. 10AA, 36(1)(iii) and 37 of the act to Rs.54,31,379.00 may kindly be deleted ITA No.2262/Del/2023 4 after providing an opportunity of being heard to the appellant.” 3. The brief facts of the case are that return of income of Rs 57,35,070/-was filed on 30-09-2013 for the assessment year 2013-14. The case of the assessee was selected for scrutiny under CASS. Notice under Section 143(2) of the Act was issued to the assessee. In the response of the notice the ld. A.R. of the assessee has attended the proceedings. The assessment order came to be passed on 31-03-2016 by making disallowances of deduction of Rs. 35,54,768/- claimed under Section 10AA of the Act, Rs15,47,325/- disallowance of interest claimed by assessee under Section 36(1)(iii) of the Act, Rs.21,947/- claimed for vehicle running and maintenance of expenses of claimed by the assessee, and Rs 3,07,339/- claimed by the assessee as other expenses. Accordingly, the Ld. Assessing Officer disallowed/added total at Rs.1,11,66,450/- vide assessment order dated 31-03-2016. ITA No.2262/Del/2023 5 4. Aggrieved the order of the Assessing Officer, the assessee has filed the appeal before the Ld. CIT(A) who vide his order dated 12-06-2023 dismissed the appeal, against which the assessee is in appeal before the Tribunal. 5. The Ld. Counsel for the assessee vehemently submitted that the order of the Ld. CIT(A) in confirming the disallowances made by the Assessing Officer is erroneous as the Ld. CIT(A) has not given the reasonable opportunity for hearing to the assessee. The appeal was dismissed without considering the submissions made by the assessee. He has further submitted that for the assessment year 2012-13 same type of order was passed by the Ld. CIT(A), which has been set a side and matter was remanded back for fresh hearing. In the support of his contention the assessee has filed the paper book containing pages 1 to 103 in which he attached copy of the order passed in ITA2256/Del/2023 at page no 95 to 100. 6. The Ld. DR relying upon the order of the lower authorities submitted that sufficient opportunity of being heard was ITA No.2262/Del/2023 6 provided to the assessee and order was passed on merit. He prayed for the dismissal of the appeal. 7. We have heard the parties and perused the materials available on record. It is found that the ld. AR of the assessee had participated in the appellate proceedings and submitted various documents, but the Ld. CIT(A) has not considered any of the submissions and the grounds of appeal have been dismissed without considering the documents on record and the submissions made by the assessee. The relevant portion of the order of the Ld. CIT(A) is as under: “2. GROUNDS OF APPEAL: Grounds of appeal as enumerated by appellant in Form 35 are reproduced as under: \"1. That Id. ACIT has erred in law as much as on the facts of the case by an arbitrary to restrict the deduction allowable under section 10AA to Rs.32,75,392.00 instead of Rs.68,30,160.00 as claimed by the appellant. Hence Id. ACT is not justified to disallow Rs.35,54,768.00 under section 10AA of the act 1961. Further Id. AC/T has not given the reasonable opportunity to the appellant to the justify the claim of Rs. 68,30, 160,00. 2. That Id. ACIT has erred in law as much as on the facts of the case by arbitrary disallowed 50% of Interest expenses i.e. Rs.15,47,325.00 under section 36(1)(iii) of the act. 3. That Id. ACIT has erred in law as much as on the facts of the case by arbitrary disallowed the following expenses out of the total expenses of respective head as personal expenses under section 37 of the Income ITA No.2262/Del/2023 7 tax act 1961. Following expenses disallowed by 5%: 1. Vehicle Running, & Maintenance, Total Expenses Rs. 1,57,590.00 disallowed Rs. 7,823.00. 2. Depreciation on Vehicles, Total expenses Rs.2,31,780.00 disallowed Rs. 11,589.00. 3. Insurance of Vehicle, Total Expenses Rs.49,501.00 disallowed Rs.2,475.00. Following expenses disallowed by 10%: 1. Staff welfare, Total Expenses Rs.4,36,760.00 disallowed Rs.43,376.00. 2. Tour & Travelling, Total Expenses Rs.21,54,313.00 disallowed Rs.2,15,431.00. 3. Telephone , Total Expenses Rs.4,85,327.00 disallowed Rs.48,532.00. 4. That the Id. ACIT has erred in law in initiating the penalty proceedings under section 271(1)(C) of the act on the aforesaid unwarranted disallowed to Rs.35,54,768.00 under section 10AA of the act and Rs.15,47,325.00 under section 36(1)(iii) of the act. It is therefore kindly prayed that the aforesaid unwarranted disallowance under various sections i.e. 10AA, 36(1)(il) and 37 of the act to Rs. 54,31,379.00 may kindly be deleted after providing an opportunity of being heard to the appellant.\" 3. Submissions of the Appellant: During the course of appellate proceedings, various notices of hearing were issued to the appellant. However, written submission has been made by the appellant, hence the appeal is decided on the basis of material available on record. 4. Decision: I have gone through the grounds of appeal, statement of facts, order passed by the AO and submissions made by the appellant. 4.1 First ground is disallowance of Rs. 35,54,768/- as excess deduction claimed u/s 10AA of the Income Tax Act, 1961. It has been raised by the appellant regarding disallowance made by the Assessing Officer worth Rs. 35,54,768/-, the Assessing Officer has made disallowance worth Rs.35,54,768/- as excess deduction taken by the appellant us 10AA of the Income Tax Act, 1961. The Assessing Officer asked the appellant to furnish the details of direct and indirect expenses claimed in SEZ and Non-SEZ units. The appellant failed to furnish any genuineness, basis or justifications of bifurcation of expenses between SEZ and Non-SEZ units. The Assessing Officer noted that the expenses of Partner's remuneration, Advertisement expenses, audit Fee, Interest expenses, postage & stationary, Rent expenses, Property tax, ITA No.2262/Del/2023 8 installation and maintenance charges, bad debts etc. have been claimed 100% against Non-SEZ units. The Assessing Officer noted that The Auditor in his Audit Report submitted in form no. 56F has also not given any proper computation of exemption u/s 10A and no justification of bifurcation of expenses has been furnished. Hence, the Assessing Officer rejected the book result of the appellant u/s 145 of the Income Tax Act, 1961 and made disallowance of Rs. 35,54,768/-. Now before me in the appellate proceedings, written submission has been filed. I have gone through them. Details of expenses have been filed. No reason of apportionment/bifurcation of expenses in SEZ and Non-SEZ Units have been filed. Hence, I agree with the contention of the Assessing Officer. Addition made by the Assessing Officer worth Rs. 35,54,768/- is confirmed and the appeal of the appellant on this ground is dismissed. 4.2 Second Ground is addition made by the Assessing Officer worth Rs.15,47,325/- u/s 36(1)(I) of the Income Tax Act, 1961. The Assessing Officer made the addition as hefty amounts were diverted to Devine Medhihealth Pvt. Ltd. Without any incentive of interest being received. Hence, the Assessing Officer made the addition. Now before me in the appellate proceedings, written submission has been fled. I have gone through them. Hence, I agree with the contention of the Assessing Officer. Addition made by the Assessing Officer worth Rs. 15,47,325/- is confirmed and the appeal of the appellant on this ground is dismissed. 4.3 Third Ground is Addition made on ad-hoc basis out of staff welfare, Tour & Travelling and Telephone Expenses, Vehicle Expenses. The Assessing Officer made the addition as bills and vouchers and log book were not made available before the Assessing Officer. Hence, the Assessing Officer made the addition as the expenses, incurred for non- business uses. Now before me in the appellate proceedings, no proper reply have been filed. No vouchers and books of accounts have been produced. Hence, I agree with the contention of the Assessing Officer. ITA No.2262/Del/2023 9 Addition made by the Assessing Officer on ad-hoc basis is confirmed and the appeal of the appellant on this ground is dismissed. 8. In our considered opinion, the said order of the Ld. CIT(A) is cryptic and not well reasoned. We deem it fit to restore the matter to Ld.CIT(A) for deciding the same considering the submission made by the assessee and documents produced thereon. In the result the issues involved in the present appeal are restored with a direction to decide the appeal in accordance with law after giving adequate opportunity of heard to the assessee at the earliest as possible. 9. In the result, the appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 06.01.2025 Sd/- Sd/- ( PRADIP KUMAR KEDIA ) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER *Mohan Lal* Dated: 06.01.2025 ITA No.2262/Del/2023 10 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "