M/S. Indian Chain Pvt. Ltd., Kolkata V. A.C.I.T., Circle - 12(1), Kolkata, Kolkata

ITA 152/KOL/2023

AI Insights

The case involves M/s. Indian Chain Pvt. Limited appealing against the order of the Commissioner of Income Tax (Appeals), which confirmed the disallowance made by the CPC on expenses claimed by the assessee for club subscriptions and services amounting to Rs.4,47,990/-. The CPC had treated these expenses as personal in nature based on the tax audit report, which suggested disallowance. The Tribunal examined whether such an adjustment was permissible under section 143(1)(a) of the Income Tax Act, 1961. The Tribunal concluded that the CPC had overstepped its authority by disallowing the expenses without a detailed examination of the bills and vouchers, which are necessary to determine the personal nature of the expenses.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129025 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 26-02-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA No. 152/KOL/2023 Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Dr. Manish Borad, Accountant Member & Shri Sonjoy Sarma, Judicial Member I.T.A. No. 152/KOL/2023 Assessment Year: 2018-2019 Indian Chain Pvt. Limited,.......................Appellant C/o. M/s. Salarpuria Jajodia & Co., 7, C.R. Avenue, 3 rd Floor, Kolkata-700072 [PAN: AAACI6291G] -Vs.- Assistant Commissioner of Income Tax,....Respondent Circle-12(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: Shri S. Jhajharia, A.R.,, appeared on behalf of the assessee Shri Vijay Kumar, Addl. CIT, appeared on behalf of the Revenue Date of concluding the hearing : April 11, 2023 Date of pronouncing the order : April 13, 2023 O R D E R Per Dr. Manish Borad, Accountant Member:- This appeal at the instance of assessee for assessment year 2018-19 is directed against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 08.02.2023, which is arising out of the order under section 143(1)of ITA No. 152/KOL/2023 Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited 2 the Act on 22.10.2019 framed by ld. ACIT/DCIT, Circle- 12(1), Kolkata. 2. The sole grievance raised by the assessee in these grounds of appeal is that the ld. CIT(Appeals) erred in confirming the disallowance made by the Centralized Processing Centre (CPC) disallowing the expenditure of Rs.4,47,990/- incurred by the assessee towards Club subscription fees and Club services. 3. Ld. Counsel for the assessee stated that the said adjustment made by the CPC is bad-in-law since it is not covered in the adjustments referred in section 143(1)(a) of the Act. 4. On the other hand, ld. Departmental Representative submitted that the alleged expenses are personal in nature and has been indicated in the tax audit report based on which alleged disallowance has been made. 5. We have heard the rival contentions and perused the relevant record placed before us. We notice that the assessee incurred subscription expenses of Rs.92,949/- and club services expenses of Rs.3,55,041/-. In the tax audit report in Point No.21(a), such expenses have been mentioned. The Centralized Processing Centre (CPC) has treated that the alleged expenses are personal in nature as the auditor has indicated for the ITA No. 152/KOL/2023 Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited 3 disallowance of such expenditure. Further, ld. CIT(Appeals) has also confirmed this transaction for want of necessary details. Before us, the issue is whether such adjustment as has been made in the case of assessee is permissible as made by the CPC for the observation of the auditor in the 3CD report issued by the auditor. In Form 3CD annexed Form 3CA, various details need to be filled in. Some of which comes under the category of disallowance of expenditure, which are specifically indicated in the audit report, but all the details filed in the 3CD report are not meant for making disallowances but they are actually made to assist the ld. Assessing Officer in case of scrutiny proceedings and certain important details are readily available with the assessing authority to carry out the scrutiny proceedings. Section 143(1)(a)(iv) of the Act provides for the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income of the income-tax return. In our considered view, the details furnished by the auditor in the 3CD report about subscription and club services is a mere information and such type of expenditure may have some personal element but whether expenditure of any personal nature is included in such expenses can be examined only after verification of the bills and vouchers. Such observation of the auditor is similar to the observations made for the payment to the relatives under section 40A(2)(b) of the Act which cannot lead to disallowance of all expenses but only if the case of the assessee is scrutinized and such expenditure incurred for which payment has been made to relatives has to be examined by the ld. Assessing Officer as to whether such expenses are excessive ITA No. 152/KOL/2023 Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited 4 or unreasonable having regard to the fair market value of the goods services or facilities, then such excess expenditure claimed by the assessee may be disallowed. Therefore, we are of the considered view that for the information regarding subscription and club services prima facie no adjustment was possible under the provisions of section 143(1)(a)(iv) of the Act and the CPC has exceeded its jurisdiction for making alleged disallowances. Going into the merits of the case as to whether of personal in nature was involved in the alleged amount of subscription and club services is not required to be dealt at this stage since the CPC has gone beyond the power provided in section 143(1)(a) of the Act for making the alleged disallowance. Thus we delete the disallowance of Rs.4,47,990/- and allow the grounds of appeal raised by the assessee. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 13 th April, 2023. Sd/- Sd/- (Sonjoy Sarma) (Manish Borad) Judicial Member Accountant Member Kolkata, the 13 th day of April, 2023 Copies to :(1) Indian Chain Pvt. Limited, C/o. M/s. Salarpuria Jajodia & Co., 7, C.R. Avenue, 3 rd Floor, Kolkata-700072 ITA No. 152/KOL/2023 Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited 5 (2) Assistant Commissioner of Income Tax, Circle-12(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; 4) Commissioner of Income Tax- ; (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.