Serco India Pvt. Ltd., Pune V. ACIT, Circle-4(1), Gurgaon

ITA 1187/DEL/2018

AI Insights

The case involves M/s. Serco India Private Limited appealing against the order of the Commissioner of Income Tax (Appeals) -I, Gurgaon, which arose from the assessment order passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2014-15. The primary issues in the appeal were the additions made under Section 68 of the Act concerning the increase in sundry creditors and the estimated disallowance of expenses categorized under 'other expenses'. The assessee argued that the additions and disallowances were erroneous and sought relief, which was denied by the CIT (A) and subsequently by the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121512 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-11-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 18-02-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 68; 143(3); 201; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A No.1187/DEL/2018 Assessment Year 2014-15 M/s. Serco India Private Limited, C/o Yamini Panchwagh & Co. Varad CTS No. 21, Lokmanya Nagar, Sadashiv Peth, Opp. Tilak College Gate, Pune. v. Assistant Commissioner of Income Tax, ACIT, Circle-4(1), Gurgaon. TAN/PAN: AAJCS6704P (Appellant) (Respondent) Appellant by: Shri Suraj Bhan Nain, Adv. Shri Mahfuzur Rahman, CA Respondent by: Shri Kumar Pranav, Sr.DR Date of hearing: 22 11 2022 Date of pronouncement: 16 02 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capti oned app eal has b ee n f il ed b y the A sse ssee a gainst the order of t he C ommissi one r of In come Ta x (A ppea ls ) -I, G urgaon (‘C IT (A) ’ in s hort ) dat ed 21. 12. 201 7 a ri sing from the assess me nt orde r dat ed 15. 12. 20 16 pass ed by th e Assessing O fficer under Secti on 143 (3) of t he I nco me T ax A c t, 1961 (the A ct) c onc er ning A Y 2014- 15. 2. T he grou nds of appea l raised b y the assesse e read as unde r: “ 1 . Th at o n fa c t s a nd i n t he c i r c u m s t a nc e s of t h e cas e , t he im pu g ne d o r de r o f t he L e a r n e d C o m m i s s i o n e r of I nc o me - t ax (A p pe a l s ) (" L d. C I T ( A ) " ) s u s t ai n i ng t h e ad d it i o ns / di s a l l ow a n c e s I.T.A No.1187/Del/2018 2 m a de by t h e Le a r n e d A s s e s s i n g O f f i c e r (" L d . A O " ) i s e r r o n e ou s an d t h u s , t h e a dv e r s e f i n di n gs r e c o r d e d by t he Ld . C I T ( A ) a n d L d . A O d e s e r v e t o b e d e le t e d , a s a ls o t h e de d u c t i o n an d a d di t i o n s us t ai n e d t o t he t o t al l o s s d e c l ar e d b y t he A p pe l l ant ; 2. Th at t he Ld . C I T ( A ) h a s e r r e d i n n o t a c c e p t i n g the ad di t i o na l e v i d e nc e s s u b m i t t e d by t he a p p e l la n t u nde r R ul e 4 6 A of th e I nc o m e Ta x R u le s , 1 9 62 . 3. Th at t he L d . C I T ( A ) h as e r r e d on f ac t s a n d in l aw i n c on f i r m i n g t h e ad -h o c di s a l l ow a n c e o f e x p e ns e s m a de b y t he Ld . A O of R s . 4 , 6 8, 3 0 , 03 4 b e i ng 2 0 % of 'o t h e r e x p e n s e s ' a nd o ut r i g ht l y r e j e c t i n g t h e ad d it i o na l e v i de n c e s f il e d b y t h e A p pe ll a n t d u r i ng t he ap pe l l a t e pr o c e e di n g s on a n a r b i t r a r y ba s i s . 4. Th at t h e L d. C I T (A ) ha s e r r e d in f ac t s a n d on l aw in c on f i r m i n g t h e a d d i t i on o f R s . l , 8 7 , 0 3, 7 3 1 m a d e by the L d . A O u / s 68 o f t he I n c o m e - t ax A c t , 19 6 1 ( ' A c t ' ) on a c c ou n t of d i f f e r e nc e be t w e e n t h e o p e n i n g a nd c l os i n g b a la n c e o f c r e di t o rs w h i c h ha s be e n t ax e d at t h e r a t e o f 3 0 % u /s 11 5B B E o f t he A c t. 5. Th at t h e Ld . A O e r r e d i n n o t ap p r e c i a t i n g t h e c om p le t e fa c t s of t he c as e an d p as s e d i t s a p p e l l at e or de r i n ha s t e . F u r t h e r , th e L d. C I T (A ) h as e r r e d i n no t p r o v i di n g s u f fi c i e nt t i m e c on s i d e r i ng t h at t he A pp e l l a n t w as i n t he pr oc e s s of c o ll e c t i n g v ar i o u s e v i d e nc e s s u c h a s w i t h ho l d in g t a x d oc u m e n t s/ i n f o r m at i o n fr om t h e j u r i s d i c t i on al T D S of f i c e r w h i c h w e r e c r uci a l e v i d e nc e t o s ub s t a nt i a t e i ts c l ai m s m a de i n t he a p p e al . 6. Th at t h e L d. A O i gn or e d t he f ac t t h a t t h e C i r c ums t an c e s w e r e b e y on d t h e c on t r o l o f t he A p pe l l a nt du e t o w h ic h t he r e q ui r e d da t a / d o c u m e n t s c o u l d no t be s ub m i t t e d i n t i m e . 7. Th e d i s m i s s a l o f a p p e a l b y t he Ld . C I T ( A ) i s e r ro n e o u s a n d un j us ti f i e d . 8. Th at o n f a c t s a nd i n t he c i r c u m s t a n c e s of t h e c as e a n d i n la w , t he L d . A O e r r e d i n i n i t i at i n g p e n al t y p r oc e e di ng s u nd e r s e c t io n 2 7 1 (1 )( c ) o f t he A c t , a s n ot a d j u d ic a t e d b y t h e L d. C I T ( A ) . ” 3. When the ma tte r w as cal led f or he ar ing, th e l d. cou nsel submit ted tha t G rou nds N o.1, 2, 5 and 8 a re not p resse d. Conse que ntl y, thes e grou nds are d is m isse d as not p ressed. 4. G ro und No.3 c onc er ns adhoc di sal l ow ance of expens es of Rs. 4, 68, 30, 034/- being 20% o f ot he r expens es. I.T.A No.1187/Del/2018 3 5. Br ie fl y s tat ed, t he assessee-company is a subs idia ry of Serc o G roup PLC, UK inc orpora ted in Ind ia on 27.0 2. 2006. The co mpan y w as s tat ed to be estab lis he d as a cap ti ve se rvice cente r w ith an obj ect i ve t o p rovi de IT Serv ices & IT ena bled s er vi ces t o Serco G rou p. T he assesse e-compa ny ent ered into a Mas ter Servi ce A gre emen t (MSA ) w ith Ser co U K for provi di ng such servic es. The assessee compa ny clai ms t o be prov idi ng IT s ervic es an d IT enabl ed a s w ell as ma nagement s er vices t o Se rc o G r oup on a cos t pl us ma rkup of 15% for t he Assess ment Y ear 2 014- 15 in q uest i on. The assess ee fil ed ret urn decl ar ing loss o f Rs. 28, 34,9 0, 537/ - f or the AY 2 014-15 in ques ti on. T he ret ur n s o filed w as s ubjecte d to scr ut iny asses s me nt. T he A sse ssing Of ficer i nter ali a fou nd t hat the as sessee ha d incurred h uge expens es a mo unti ng to Rs. 23, 41,50, 172/ unde r t he head ‘oth er ex penses ’. The Assessi ng O fficer made an e nqui r y on t he e xpenses incurre d and asked the A ssessee t o c orr oborate such expenses w ith n ecess a ry evi dences. The A ssess ing O ffic er how ever note d that desp it e multi ple opportunit ies, t he assesse e has fa il ed to su bs ta nt iate t he expens es incu rred. T he A ssessing O fficer lis ted t he se quence o f eve nts and pointed out that the adjo urnme nt w as given f rom o ne dat e to anot her b ut t he ass essee has total l y fa ile d to compl y t he rew it h and has f ai led to s upport the c lai m. C ri ppled b y the ali enat ing att it ude and lac k of subs tant iat ion, the A O reso rt ed to di sallow a nce est i mated a t 20% of s uch expenses cla imed, holding t he same to be e xcess i ve in nat ure and n ot i ncurred w ho ll y a nd exclusivel y f or the purpos e of bus ine ss. T he est i mated disa ll ow anc e of ex penses w as thus w ork ed o ut a t R s.4, 68, 30, 03 4/ -. 6. T his apar t, the A ssessing O ffi cer a lso obse rved that huge sundr y credit ors outs tandi ng at the begi nni ng as w ell as at the e nd I.T.A No.1187/Del/2018 4 of t he yea r. The A ssessi ng O ffi cer r equ ired t he assessee to fu rni sh detai ls of c re dit or s al ong w it h thei r confi rmati on. T he Assessee how e ver did not comply w ith t he re qui re me nt a nd could not suppo rt the bona fi des of outs tan din g s un dry cr edit ors. Conse que ntl y, i n the abs ence of an y cogent details o f cre di tors and t heir con fi rmatio ns, the A ssess in g O fficer al lege d t ha t the assessee has fa il e d to di scharge onus cas t u pon i t to expla in the source, ide nti ty a nd ge nui neness of t he c re di to rs. The Assessi ng O fficer th us invok ed Sec ti on 68 o f t he A ct and mad e an add it i on of Rs.1, 87, 03, 7 31/ - (closi ng bal ance Rs. 23, 04, 71, 124 /- l ess ope ning bala nce R s. 21, 17, 67, 393/- ) bei ng the d if fere nce betw een ope ning and closing balance of the sundr y c red it ors. 7. A gg rieve d by t he addi tions made, the as sessee pre fe rre d appea l before t he CIT (A). 8. T he C IT (A) how ever confir me d the esti ma ted disa ll ow ance of expe nses as w ell a s add it ions un der Sec ti on 68 on accou nt of sundr y c re ditors obse rvi ng that t he assessee has failed to fu rnis h an y s atis fac to r y e xpla nati on or evi dence about t he in curri ng of expens es as w ell a s the increas e in th e sundr y cr edi tors dur in g the ye ar. 9. Fur th er aggrie ve d by t he de nial of a ny re lie f, the asse ssee prefe rr ed a ppe al before the Tr ibunal. 10. When the ma tte r w as cal led f or he ar ing, th e l d. cou nsel submit ted that tw o mai n issues a re involved for adjudic ati on. 10. 1 T he L d. Counsel adve rte d to f irst issue tow a rds additi ons under Sec tion 68 of t he Ac t amount ing t o Rs.1, 87, 03, 731/ - be ing I.T.A No.1187/Del/2018 5 di ffe re nce betw een opening bala nce and closi ng balance of cred it ors a nd c on tended t ha t (i) fact uall y, t he re is no new c redit obta ined an d t he sundry c re di to rs o uts ta ndi ng at t he end of the ye ar a re g en uine a nd ar ose i n the or dinar y cou rse of business. The trad e pa ya bles a t the beginni ng of the FY 2013-14 i. e. 1- 4-2013 sta nds a t Rs. 21, 17, 67, 393/ - w he reas the tr ade pa ya ble at the e nd of t he yea r on 31. 03. 2014 st an ds at R s.23, 04, 71, 124/ -. The accounts w ere draw n in In dian rupe es. A s fur ther s ubmi t ted, out of ad dit ions of R s. 1,87, 03, 731/-; Rs. 1, 77, 6 4, 975/- relat es t o tr ade pa yab le att ri buta ble to Se rc o L imit ed U K . T he i ncrease in the sundr y credi tors (trade payable ) in case of Serco Ltd. U K is me re ly on acc ount of conversi on of account i n Indian curren cy at the exc ha nge ra te app licabl e at t he e nd o f t he FY 2013-14 but in real it y, the outstanding lia bil it y, w hen see n i n forei gn c urrenc y (U K po und), has a ctuall y come dow n during the ye ar. It w as t hus cla imed that no ne w cred it was rece ived dur in g t he yea r on whic h Sect ion 68 c ould be applied (ii) L ega ll y, no a ddi tion can be made under Se ction 6 8 of t he A ct on a ccou nt of di ff er en ce in ope ning balance and closin g balance of sundr y credit ors. 10. 2 A dvert i ng t o sec ond iss ue of esti mated dis al lowances, the ld. counse l submi ts t hat t he acti on of the CIT (A) i n confi rmin g adhoc dis al low ances of e xpe nses of R s. 4, 68, 30,034/ - bei ng 20% o f ‘othe r expens es ’ is totall y uncal led f or. It w as submitt ed that the assessee compan y w as ma inta i ni ng regular books of account i n co mpute rized for m. T he acc ounts w ere dul y audited by the sta tutor y a udi tors as we ll as tax a udit was als o conducte d b y re puted audito rs M/s. D eloite H as kins & S el ls LL P. The a udi tors di d not make an y adve rse re ma rks/ qual ification i n the statu to r y audi t report a nd tax au dit re port. A ll the ex penses unde r the hea d I.T.A No.1187/Del/2018 6 ‘ot he r exp ens es’ debite d to P r ofi t an d L oss accoun t we re genu in e expens es inc ur red w hol l y a nd exc l usivel y for the p urpose of bus iness. No te N o. 21 o f audi ted financial s tat e ment s how i ng detai ls of othe r expenses w as ad verted a nd i t w as sub mi tted t hat (i ) the total expenses of Rs. 234 1. 50 l akh ‘ ot her expe nse s’ , a mong ot he rs, include bad deb t Rs. 64. 60 lakh on whic h esti ma te d dis al low ance cann ot be a ppl ied as incor re ct l y d one by th e AO. Simila rl y, a n amo unt of R s. 245. 01 lakh out of ‘ ot her expe nses ’ re presents ‘n et loss of f ore ig n cur re nc y trans act ion and trans la tions ’ w hich expe nses a lso cannot be s ubj ec te d t o esti ma te d dis al low ance b y i t s ver y n at ure. T he l d. co uns el next submi t te d that the assessee during the yea r w as inter ali a engaged i n ope rations a nd ma inte na nce of BRT Bus Services i n Indore as pe r ag reement wit h Atal Indore C it y T ransp ort Serv ices Ltd. Th e incr ease i n pow er fue l expenses was on accoun t of BR T Bus Ser vices togethe r with incre ase i n rates of pow er and fuel. T he l d. counse l furthe r pointed o ut t ha t t he assessee co mpan y has take n off ice pre mi se on lease a nd par t of that has been sub- let to othe r pa rt ies w he re in i t derived inco me fro m s ub-lett ing a ggregating to Rs. 243. 63 lakh. Thus, t he rent expe nses clai med in ‘other expens es ’ R s. 6 66. 06 a ct ua ll y w orks out to Rs. 422. 43. Moreove r, suc h expe nses on rent are no rma ll y fi xe d i n the earlie r ye ars a nd simi la r re nt exp ense of Rs. 657. 86 w as i nc urred. T he l d. counsel als o qui pped that TD S have bee n deducted on va ri ous expens es appea ri ng under t he hea d ‘othe r expe nses’ at appli cable ra tes w hich re-enforces the cla im o f expenses bei ng rea s ona ble and genuine a nd incurred w hol l y a nd exc lusi vel y for t he bus in ess pur pos e of t he ass essee compan y. 10. 3. T he ld. cou nsel ha rped that the Board of t he ass essee I.T.A No.1187/Del/2018 7 co mpan y i n i ts res ol ut i on da ted 27. 08. 2014 deci de d to close dow n the ope ra t io ns of t he compan y in a f oresee able fut ure as disclos ed in t he n otes an nex ed t o the financia l statemen t. Therea ft er, all the sha res of the ass e ssee -compan y w er e so ld b y the Serc o G roup t o ot he r ent i tie s n amel y, M/s. Travel T ime C a r Re nt al Pv t. Lt d. (T TC RPL ) and M ahala xmi A utomot ives P vt. L td. (MA PL) v ide sha re purc has e agr ee ment e xecuted on 11. 03. 2015. C onseq uen tl y, the manag ement a nd co ntr ol of the assessee c ompan y w as sh if te d and t aken over by t ra ns fere e c os. from Se rco G roup in Marc h, 2015. T he asse ss me nt proce edin gs of A ssess ment Ye ar 2 014-15 w ere taken up b y the Assessin g Of fi cer i n the A ssess ment Y ear 2016, b y w hich time, t he manag ement of the com pan y had underg one a c ompl ete change and the subse quent ma nageme nt in- char ge o f the affai rs o f the compa ny w as han dica pped and coul d not pr oduc e the books o f a cc ount and suppo rting documents be fore t he A O as the same was not avai lable w it h the new ma na gement. D espite their b est eff ort s to collect th e doc uments fro m ea rl ier man agement, th e new manage me nt co uld not o bt ai n the relevan t d ocu me nts from S er co G roup U K . In t he absence of the docume nts, the A ssessi ng Of ficer completed the assess ment under Sec tion 14 3(3) of t he A ct by makin g t he i mpugned addi ti ons. Subsequ ent to t he ass ess ment, the new mana ge me nt of the compan y a gai n approached the earli er ma na gem ent but the re le vant d ocume nt s could not be obtaine d an d v ide ma il da ted 20 t h Jan uar y, 2017, t he Serco Gr oup exp ressed thei r inabili t y t o sh are the co py o f b ooks and documents on th e pre mi se that the y are sens it ive to t he di scl osure of data t o t hird parties. H ow ever, the chang ed ma nagem ent ga t hered some documents in the form of cop y of a gree me nts, lease dee ds, etc. evi de nc in g bona fi des of I.T.A No.1187/Del/2018 8 expens es a nd urg ed t he CIT (A ) u nde r R ul e 46A of the Income Tax Rules to a dmi t the fres h evi de nces wh ic h w as no nethe les s decli ned. T he L d. Couns el t hus voci ferous l y c ont ende d that d ue t o existe nce of peculia r circums ta nces of t he case, the new ma na gement is ha ndicapp ed a nd is not in a pos ition to prov id e re le vant b ooks of account and other doc ume nts to subs tantiate th e expens es t o be Re venue A uthoriti es but the fact s how ever remai ns that ex penses w er e genu ine l y incu rred by t he as sessee compan y. The fact t hat books of acc ount s mainta in ed b y th e asses see - co mpan y, under t he contr ol of ea rlier manage ment, were dul y audi ted, ta x audit w as conducte d, applicabl e T D S w as ded ucte d on the e xpens es incur re d an d th e pa yments w ere made t hrough banking cha nnels goes to p rove t he ge nuineness of expen ses debi ted in t he P& L account and hence re qui res to be given due w eighta ge. 10. 4 T he l d. counse l t hus submi tted no ad hoc dis allow a nce out of ot he r e xpenses w a s j usti fied and t hus urge d f or reve rsal of the act io n of the Rev enue A uthoriti es. 10. 5 In the alt er nati ve, t he L d. Couns el submi tt ed tha t the dis al low ance made by t he A sses si ng O ffice r @ 20 % of the ‘othe r expens es ’ is unre asonable a nd exce ssiv e especiall y keeping the fact that T DS ha s be en deduct ed on t he maj or port ion of the expens es and t he pa yments ha ve been ma de t hrough ban ki ng chann el. Furt he r, out of rent e xpens es incur red, the as sessee h as earned i nc ome f rom su b-l et tin g and loss incur red on acco unt of forei gn c urrenc y t ransact io ns als o ne eds t o be kept i n mind. It w as thus urge d t hat t he es ti ma ted disa ll ow anc e, if an y, should b e cu rt ai led and brought at a re aso nable leve l. I.T.A No.1187/Del/2018 9 11. T he l d. D R for t he Revenue, on the ot he r hand, re lied up on the order of the C IT(A ) and t he A sse ssing O ffic er. I n f urt he rance, the ld. D R submit ted tha t a mp le opportuni t ies w ere give n to th e assessee to su bs ta nt iate the genu ineness of t he credit ors and als o sta ggering a moun t cla imed under the miscel la ne ous head ‘ot he r expens es ’. A s can be obse rve d fr om t he a ssess me nt order, the A ssessee has g ros s l y faile d to provi de even t he basic de tai ls about the nature of ex penses c la i med a nd mere l y w ante d t he Assessing O fficer to bel iev e the fi nanci al state ment as gos pel trut h. The A ssessi ng O ff ice r disc har gi ng the quas i -j udicia l f unct ion w as havi ng t he ne cess ar y pow e r and rathe r a dut y to as certa in the ve racit y o f s uch la rge misce ll aneous expenses clai med. T he sta tutor y a udi tor d oes not have w he rewit hal a nd powers to mak e inde pen den t enq uiri es a nd f ind out t he bo nafides o f t he ex penses as the AO is conferre d w ith. T he s tatutor y powe rs and duties of A O and audi tors a re mate ri al l y di ffe rent. T he AO was lef t w ith no opti on but t o e mbark on es ti mati ons i n the absenc e o f a ny co rro bora tio n of income filed i n t he R O I. 11. 1 It w as cont en ded t ha t the exc use given by t he Assessee tow ard s change of manage me nt to justi fy i ts inabi l it y to s upport the RO I i s ut terly fa ncif ul a nd u npa la tabl e. The compa ny is assessee a nd n ot the manage me nt pe r s e. The rec ords are kept in the c ust ody of t he co mpan y ha vi ng pe rpe tual exis tence and ma na gement is onl y i ts cust odian. Th e rec ords are expe cted t o be kept w ith the new ma nangme nt and t he explana ti on of the A ssessee t ow ards non-possess ion of accout i ng reco rds is be yo nd co mprehe ns ion of any person i nst ruc ted i n law . The suppression of reco rds fro m the obj ecti ve sc rut in y of t he A O pe rf ormin g q uas i judi cia l funct ion h as thus f orced the A O to ind ulge i n e stimat ions I.T.A No.1187/Del/2018 10 and the A O has most reas onab ly est imat ed disall ow ance o f onl y 20% of ‘othe r ex penses ’ where as t he disal low ance cou ld have been far g reate r ow ing to such abj ect fa il ure t o dis ch ar ge i ts onus. 11. 2 In r eb ut ta l of t he c lai m of the ass esse e t ha t due to c han ge in ma na gement, t he fina nc ia l rec ords a re not avai lable to support the cla im of e xpe nses or trade credi ts etc. T he ld. D R adve rt ed to a Share P urcha se Ag reement dat ed 1 1. 03. 2015 e ntered into betw ee n the ol d manage ment an d the new ma nagement a nd re fe rre d t o pa ra graph 7. 1 at page 32 o f the a gree me nt w hich reads as ‘7. 1 True, correc t and com ple te c opies of f inancia l s ta te m ents h ave been prov ided to t he pur chaser and the sam e is ack nowle dged by the purc hasers. T he l d. D R thus s ubmi ts that the new management is appa re ntl y i n c ustody of a ll the financia l record si nc e inc epti on. O therw ise als o, t he Re venue A ut ho rities are c onc erne d wit h the assessee and change of ma nage me nt w oul d not exone rate th e assessee to a voi d pro duc tion of f ina nci al r ecor ds wi thout wh ic h the assess ment under Secti on 143(3) w ould be mea ningless. T he assessee was th us dut y boun d to produce t he full rec ords w hich he doe s not clai m e ve n today to be in any p osi tion t o do s o. Thus, the cours e ad opted by the Assessing O fficer was most liber al a nd beni gn in t he c onte xt of t he circums ta nces. T he abst ract explana tio n offe re d b y t he asses see thus ca nnot be give n an y credence to toppl e the r ig htful ac ti on of the Assess ing O ffice r and CIT (A ). 11. 3 A s rega rd s the as sertions ma de on beh al f o f the asse ssee tow ard s bad de bts, fore ign excha nge fl uc tuat io n loss and re nt etc. , the ld. D R poi nted out that eac h ex pen se ne ed to be seen in the context a nd accept abi l it y o f s uch c lai m is squa re l y a ques ti on of I.T.A No.1187/Del/2018 11 fact. In t he absence of records, it i s not know n w he t her the bad debts cla imed are in relati on to bus i ness or otherwise. The clai m of ba d debt is subj ect t o co ndi tion s enumerat ed in S. 36(1 )(vii ) r. w . s 36(2 ) of the A ct. I n order to cl aim the bad debt, suc h d ebt must go to sw ell the prof its of the Co. and sho ul d a rise i n the cours e of ordinar y busi ness and thus each a nd ever y debt is not all ow ab le. T he onus in t hi s regard is neit he r disc ha rged nor asce rt ai na ble. L i kew ise, exc hange fluctuation loss cla im ed b y the assessee und er t he head ‘ot her exp enses ’ a lso req uires fact ual ve ri fica tion and it s relat ion to t he busi ness and als o w hether the loss has arisen in t he c ap it al fie ld or in the re venue f ie l d. I t i s for the assess ee to pr ovi de fac ts and j ust ification. Mere nomenc lat ure of expens es as bad debt or foreign currenc y loss b y itse lf wi ll not abs ol ve t he assess ee of onus cas t upon it. It is an a dmi t ted fact that as sesse e ha s not pr oduce d an y w orthw hi le rec ord before th e A ssessi ng O ffic er. T he asse ssee even toad y does not c lai m t o poss ess books of acco unts or c ogent docu me ntar y evide nce to suppo rt va ri ous expens es ca talogu ed unde r t he he ad ‘othe r expens es ’. The assessee merel y w ante d casual admi ssion t o addi ti onal e vi de nces bef ore the CIT (A ) wi thout showi ng it s re le vanc y and w h y it fai le d to pr oduce the books of ac count a nd ot he r un der lyin g docume nts. T he CIT (A) t hus right ly refuse d ad mis sion of s ome casua l docume nts in s yn c w ith t he let te r a nd spi rit of R ule 46A. 11. 4 T he l d. D R next c onte nde d t ha t the mere asse rtio n on behal f of the assessee t hat cr ed it ors hav e not increased during the fi na ncia l ye ar but di fferent ial a mou nt is on account of f ore ign excha nge fl uc tu at i on is a gain a b al d asse rt ion. The asse ssee has to pro duc e t he books of acc oun t a nd the ledger accou nt o f the sund r y I.T.A No.1187/Del/2018 12 cred it ors t o establi sh w hy no new/ fresh c re di t w as made in t hese accounts durin g th e yea r at a ny po in t of ti me. In the absence of ledger and bank s t ate me nt s, the ass e rt ions ma de i n res pect is not capa ble of an y verif ic at ion. The ld. DR submi tt ed tha t even i f the incr ease i n t he cre di tors is on account of co nversion ra te of forei gn cu rre nc y at t he en d of the year, t his by its el f w il l not abs ol ve th e asse ss ee fr om the rigors of Sec ti on 68. Sect ion 68 appl ies to a ll cr edits rece ived d uri ng the yea r w ithou t an y dis ti nc t ion a nd co nsequen tl y the onus lies up on the assessee t o explain the nat ure and s ource of suc h credi t to the sat is fact ion o f the A ssessi ng Of fi cer. It is qui te possible t hat some new cre di ts w ere re ceived du ring the yea r a nd so me old c re dits mi ght have been paid. T he i ngre di ents of S. 68 w ou ld a ppl y t o all new credits. The A O was pr evented fro m as ce rt ai ni ng t hese f acts in the absence of ba sic r ecords and hen ce t he A ssess ing O ffic er w as yet again very be ni gn in maki ng the a ddit ions of onl y di fferent ial amount. Th e A ssessee, on t he ot he r ha nd, mis er ab ly fai led t o dis charge onus w hich la y upon him. T he L d. D R thus s ubmit ted i n concl us ion t hat no inter fe re nce wi th the orders of R eve nue A uthori t ies ar e cal led for. 12. We have ca re ful l y c onsi de re d t he rival s ub mi ss ion s and pe rus ed t he firs t appel late or der and th e Assess ment or de r. We have a lso pe ruse d the mat erial and doc uments referred t o a nd re li ed u pon in t he cours e of hea ri ng by bot h s ides. T he ad di tions/ dis al low ance made o n tw o cou nts are i n ques t ion namel y (i ) est i mated disall ow ance of Rs. 4, 68, 30, 034/- be ing 20% of ‘othe r expens es ’ a mount ing to R s. 23,4 1, 50, 172/- in the absence of an y subs tantia tion of suc h e xpens es w hatsoeve r an d (i i ) additi ons under Sect ion 68 amounting to Rs. 1, 87,0 3, 731/- being inc rease i n I.T.A No.1187/Del/2018 13 the sundr y c re di tors r ep orted qua the p revio us financ ial yea r res ul ting from lack of expla na tion o n nature a nd sour ce of s uc h incr eased credits. 13. T he de ta ils o f ‘other exp enses ’ p rovi de d as pe r N ot e No. 21 of t he Au di te d Financial Stat ements are noted as under: Sl. No. Particulars Amount for the year ended 31.03.2014 (Rs.) Amount for the year ended 31.03.2013 (Rs.) 1 Power & Fuel 3,80,41,461.00 1,08,87,689.00 2 Rent including lease rentals 6,66,06,799.00 6,57,86,425.00 3. Repairs & Maintenance – others 2,18,70,978.00 2,37,09,398.00 4. Insurance 14,21,325.00 9,45,773.00 5. Rates & Taxes 9,46,974.00 6,20,718.00 6. Communication 31,70,163.00 48,17,904.00 7. Travelling & Conveyance 2,42,42,572.00 4,86,52,982.00 8. Legal & Professional 3,77,90,458.00 4,61,31,711.00 9. Payment to Auditors 9,34,100.00 7,80,500.00 10. Loss on sale of fixed assets - 20,75,674.00 11 Conference Expenses 31,04,851.00 1,39,43,881.00 12. Bad Trade receivables written off 64,60,569.00 - 13. Net loss on Foreign currency transactions & translations 2,45,01,591.00 - 14. Miscellaneous Expenses 50,58,331.00 56,12,396.00 Total 23,41,50,172.00 22,39,65,051.00 14. O utst and in g trad e pa ya bles as pe r N ote N o. 7 of notes for mi ng pa rt of t he financia l state me nt as note d here in. P a r t i c u l a r s A s a t 3 1 M a r c h 2 0 1 4 A s a t 3 1 M a r c h 2 0 1 3 N o t e N o . 7 – T r a d e p a y a b l e s I.T.A No.1187/Del/2018 14 T r a d e P a y a b l e s ( o t h e r t h a n a c c e p t a n c e ) 2 3 , 0 4 , 7 1 , 1 2 4 2 1 , 1 7 , 6 7 , 3 9 3 15. T o add ress t he dis pute, it w oul d be pe rt inen t to observe that ad mi tt edl y, t he as sessee ha s not pr oduce d t he books of acc ount and other fi na ncia l rec ords to s ubs tantiate th e c lai m of expenses gro upe d under the head ‘oth er expen ses’ eit her be for e the A O or be fore the CIT (A ). N otici ab ly, multi ple opport unities were given by the A O in t his regard. In fact, on bei ng inqui red b y the B enc h, the ass essee has c onti nued to expres s i ts ina bil it y to do s o e ve n toda y cla i mi ng cust od y of recor ds w ith old manage ment and incapaci t y of new ma na gement t o substa nt ia te t he clai m. 16. O n a si mila r footing, i t is not iced that the b ona fi des a nd co rrectne ss o f outstanding trade pa yable s is not evidenc ed b y a n y ma teri al availa bl e on rec ord. T he a ssessee has tried t o pr ove its cla im circums tant i all y in the abs enc e o f t he foundati onal re co rds cit ing pec ul ia r ci rcumst ances o f c ha nge of mana ge ment. Be for e the C IT (A ) als o, the assessee ha d at tempted t o f ile c ertain doc uments t o su pport its case c ir cu ms tant iall y a nd wit hout poss ess io n of any cli nc hi ng evide nce . 17. A s obser ved, t he a ssessee has en te re d int o a Shar e Purchas e A gre emen t w hi ch res ul ted i n t ra ns fer of manage ment a nd c ont rol fro m the one set of s ha re holders to the new set of s ha re holders na me ly M /s. T ra velT ime Ca r Re nt al Private L i mi te d and M /s. Mahalaxmi A ut omotives Pr ivat e Li m ite d. T he agreeme nt runs into 44 pages punct uate d b y 24 clauses and sub- cl aus es dul y numbe re d. The co ns id er at ion invol ved for tr ans fer o f shares is Rs. 9. 54 c ror e. This apart, the a ssessee c o. , dr iven b y new mana ge me nt and I.T.A No.1187/Del/2018 15 backe d b y new set of sh ar eholders, w as al so put unde r a n obli gati on t o meet the substantial l iabi lit y t o t he t une of Rs. 9. 21 cr ore of Se rc o Ltd. U. K . It is t hus mani fes t tha t huge consi derati on has been exc hanged for t ra nsf er of manageme nt. 17. 1 It is rat he r ba ffli ng and paradoxica l to vis ualiz e t hat w here an a gree me nt of s uch ma gnit ude has bee n entered and reins o f th e co mpan y st ood veste d wit h new management purs uant to such ag reement, a new manage me nt w i ll be so l ackadais ic al and w ould dis pl ay s uch enor mous dis da in to not bother to see k an y da ta & reco rds for any effec t ive continuance of a ffa i rs of t he compan y. The ine xpl ica bl e e xpla nati on tow a rds no n-posses si on of data and bas ic records, as soug ht t o be ca nva ssed, is in t he le ague o f unprece dented. T he proces s of asses s me nt is qua the assessee c o. and not q ua the mana ge me nt t hereof. N eedless to say, the ma na gement o f a co mpan y is on ly cust od ia n of the f in anc ial a nd ot he r records of a compan y and hol ds such rec ords in a fi duci ar y capa ci t y a s a trustee. The acc ount i ng rec ord a nd ot he r reco rds and evidence s a re t he pro per ty of the co mpan y re gar dl ess of the chang e of man age me nt. Notw i thsta nding, t he g overni ng l aw s pro vi ded in the C o mpa ni es A c t, I nc ome Ta x A c t and man y othe r A cts require the assess ee c ompan y t o keep an d produce the fi na ncia l re co rds of th e ea rl ier ye ar w he ne ver t he ne cessi t y fo r suc h rec ords a ris es. T he as sesse e seeks to absol ve it fro m t he un- detac hab le res p onsibili t y of suppo rt ing its ret urn of i ncome w ithout product ion of unde rl yi ng r ecords on a f li msy pre mise of suc h records not a vaila bl e wit h new mana ge me nt. N aturall y, s uc h deep sl umber and ‘c ouldn’t-ca re -less and inso ucia nt a ttit ude’ is at its ow n pe ril of the c ompan y. Notic iabl y, the assess ment proceed ings re ma i ned pending at t he ti me of exchange of cont rol I.T.A No.1187/Del/2018 16 of manage ment. O ve rt ly, s uc h ins i pi d and i nd if ferent ar guments are a da mp s qui b a nd if all ow ed to be acc epte d, w oul d be des tr ucti ve of c ar ryi ng o ut asses sment i n a fa ir and non- pa rt isa n ma nner. Where t he i nquir y and examinatio n is im peded, the dis traught a ut hor it ies w oul d be l eft w ith no rec ourse but w ould be natu rall y forc ed t o i ndulge i n som e ki nd o f es ti ma tions and gue ssw ork t o comp ensa te t he r evenue for repre he ns ible beha vi our. 17. 2 Co upled with this, as adver ted b y th e L d. DR on beha lf of the re venue, Claus e No. 7. 1 of t he Share Purc has e A gre e me nt gives an impress ion t ha t t he new management has d ul y obtained the fi na ncia l reco rds a nd na tu rall y sa t isf ied wi th its co rrec tness pri or to e nter in g i nt o any ag reement of su ch magni tude. Suc h clause of the agree me nt runs contrar y to th e s tan d of the assess ee t ow a rds non-av ai labil it y of recor ds. A s c ontende d, the ass essee has deftl y sto newa lle d the enqu ir y an d invest i ga ti ons b y su ch non-product ion of rec ords b y suc h crave n exc uses. 17. 3 T hus, the sto ry pro poun ded on beha l f of th e ass essee tow ard s i ts ina bil it y to pro duce the books of acc ount defies ra ti on al e and is utt erl y unc onceivable and un belie vable and he nce rejec te d. 18. In t he a bse nce of an y rec ords, the A O ca nnot be faul ted i n ma ki ng esti ma tio ns of poss ible dis al low ances t ow ards no n- bus iness pu rpos es and other count. T he e xpla nati on of the assessee t o justi fy the genuineness of ‘ ot he r e xpe nse s’ c lai med w ithout any coge nt support mat eria l has no le g to stand. It is for the ass essee t o c orrobora te the e nt ri es in t he financ ial reco rds w ith docume ntar y evi de nces w hen cal led for. Mere l y because simi la r e xpens es h ave been inc urred in t he ea rlier yea r b y itsel f I.T.A No.1187/Del/2018 17 can be no ground to summaril y all ow the expens es i n the subs eque nt yea rs w ithout product ion o f any d ocu mentary e vi de nce and a t tenda nt enquir y, i f s o nee de d. It goes w ithout sa yi ng the process of asses sment ca nnot be re ga rded as an empty fo rma lit y. The A O, as quas i j udicial f unctionar y, is entr usted w i th sacr osa nct tas k of ma king fai r ass ess ment w ith t he ai d of co llect ion a nd colla ti on of e vide nces and data and after maki ng s uch enquir y as ma y be co nsidered expedi ent. A s a corol la ry, t he Assessi ng O fficer was w i thi n its powe r to es t imate the disal lowa nces unde r suc h ci rcumsta nc es, in disc har ge of its q uasi-j ud icial fu nct i on. The ac tion of t he A ssessing O fficer i n making es ti mati ons t hus canno t be dubbed as as ymme tr ic or beset wit h an y i llegi timac y. The CIT (A ) res onate d w ith t he act i on of the A O and co ncurre d w ith the sa me ow ing to fai lure of the A ssess ee yet a gain to subs tantia te the c lai m. In suc h a backdrop, i t w ill be w holl y specul ative for t he tribu nal to d ispla ce th e qua nt um of e stimat ions by s o me lowe r a mount an d sa y t hat estimate ar rived by reve nue under suc h gro ss circu ms tance s w as excess ive o r ot herwise. We are in no posi ti on to w ei gh or modif y t he es timat ions as urge d on behal f of t he as sessee o n the basis of some abs t ract e xplanat i ons offer ed on be half of the asse ssee. T he A ssess ing O fficer has ar ri ve d at an esti mate of disa ll ow ance which he was ent itle d to, i n the a bsence of s uppo rting evi de nces. The C IT (A ) has endorse d the af oresaid ac tion a ft er due app raisa l of facts and ci rc umsta nc es. We har dl y se e any pote nc y i n the plea of t he A ssessee. O n the cont rar y, the arguments canvass ed by R evenue in pa ra 11, wit hout re pe ti tion, h as co nsiderabl e f orce. We thus decli ne to in te rfere ther ew ith. 19. A verti ng t o t he ot her iss ue of ad di ti on unde r Secti on 68 of I.T.A No.1187/Del/2018 18 the A ct, i t is the case of t he assess ee t hat the sundr y credit ors predomi nantl y c omprises of outstandi ng p aya ble b y th e assesse e to Serco U K. As co ntended, th e inc rease in sundr y c re di tors is ma inly on acc ount of i nc rease in outs ta ndi ng l ia bi lit y of Se rc o U K. A s clai med, the i nc re ase in such li ab il i ty of Serco UK is ow ing t o cu rrenc y diff erenc e and con sequentl y i nc rease in the value foreign c urren cy ( pound ) qua the ea rl ier yea r. Th e explana tio n of fe red by the assessee is obviousl y abs tr act one and w ithout s u pport of an y doc umenta ry e vi de nces. A t the c os t of re pe ti tion, n ei ther the ledg er a ccou nt of cr ed it ors a re available nor an y document to vouch for s uc h a bst ra ct expl anation. It is not known w he ther th e ol d l ia bi l it y on accou nt of t rade pa ya bl e has cont inued as such w hen t he bus iness of the assesse e compan y show s the e xpens es incurred pe gge d a t R s. 29. 35 cror e a nd re ve nue of R s. 7. 35 C r. . In t he a bse nce of an y rec ord t o vindica te the bonaf id es of outs tandi ng lia bilit y on account of trad e pa yables as c la imed, w e see no tracti on in t he ple a of the Assessee. We are ra th er pe rsuade d by the cont entions ra ise d on behalf of Revenue. We a re t hus d is -incli ned t o i nter fe re w ith th e fi ndings of A ssessi ng O ffi cer and C IT (A ). 20. In the res ul t, the appeal of t he asses see is dis mi sse d. Order pronounced in the open Court on 16/02/2023. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /02/2023 Prabhat