DCIT, Haridwar V. M/s. United Concept & Solution Pvt. Ltd., Noida

ITA 1768/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3111 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ SINGH

Judgement Text

1 ITA NO. 1768/DEL/2016 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 1768/DEL/2 016 (A.Y 2011-12) DCIT CIRCLE HARIDWAR, D-29 & 30, INDUSTRIAL AREA HARIDWAR (APPELLANT) VS UNITED CONCEPT & SOLUTION PVT. LTD. C-18, SECTOR-67 NOIDA AAACU3800D (RESPONDENT) APPELLANT BY SH. SHIV RAJ SINGH, SR. DR RESPONDENT BY NONE ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER DATED 20/1/2016 PASSED BY CIT(A)-DEHRADUN ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD.CIT(A), DEHRADUN HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE DISALLOWANCE OF RS.75,16,013/- DE BY T HE A.O OUT OF PROJECT MONITORING EXPENSES AND ERECTION AND COM MISSIONING CHARGES IGNORING THE FACT THAT THE ASSESSEE HAS FA ILED BEFORE THE A.O TO SPECIFY THE REASON OF LESS PROFIT THIS YEAR ALTHOUGH TURNOVER WENT UP SUBSTANTIALLY AS COMPARE TO LAST YEAR. DATE OF HEARING 21.11.2017 DATE OF PRONOUNCEMENT 08.12.2017 2 ITA NO. 1768/DEL/2016 2. THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3. THE ASSESSEE FILED INCOME TAX RETURN ON 28/9/201 1 AT A TOTAL INCOME OF RS.1,81,18,370/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY AND STATUTORY NOTICE U/S 143(2) OF THE INCOME TAX ACT W AS ISSUED ON 26/9/2012 AND WAS DULY SERVED ON THE ASSESSEE. THE AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAI LED REPLY ALONG WITH BOOKS OF ACCOUNTS CASH BOOK LEDGER AND OTHER DOCUMENTS. THE SAME WAS PLACED ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDING S THE ASSESSING OFFICER NOTED THAT THE TURNOVER OF THE ASSESSEE HAS GONE UP FROM RS.22,84,22,128/- IN THE PREVIOUS YEAR TO RS.26,01,09,470/- IN THIS YEAR , BUT THE NET PROFIT HAD COME DOWN FROM RS.2,52,05,645/-. THUS, THE ASSESSI NG OFFICER OBSERVED THAT EVEN WHILE THE TURNOVER HAS GONE UP THE PROFIT HAD DECLINED AND THE DECREASING PROFIT WAS MAINLY DUE TO ABNORMAL INCREASE IN TWO E XPENSES I.E. THE PROFIT MONITORING EXPENSES WHICH HAS GONE FROM RS.31,65,7 68/- TO RS.84,21,250/- AND ERECTION AND COMMISSIONING CHARGES WHICH HAS GO NE UP FROM RS.4,65,768/- TO RS.66,10,810/- AND THE NET PROFIT HAD DECREASE DUE TO SUBSTANTIAL INCREASE IN THESE EXPENSES. THE ASSESS EE WAS ASKED TO JUSTIFY THIS ABNORMAL INCREASE IN TWO EXPENSES. THUS, THE ASSES SEE SUBMITTED THAT MOST OF THE PROJECT WERE IN THIS YEAR WAS CARRIED IN DIFFER ENT OCCASIONS OF INDIA SUCH AS BANGALORE, CHENNAI, MUMBAI & PUNE. THEREFORE, THES E EXPENSES WENT UP. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES REA SON AND HELD THAT THE TURNOVER HAD GONE UP BUT THE PROFIT IN ABSOLUTE TER M HAD COME DOWN FROM RS.2,52,05,645/- TO RS.1,71,98,445/- AND OPINED THA T NO PRUDENT MAN WOULD INCREASE HIS BUSINESS SO AS TO GET LESS PROFIT. TH EREFORE, THE EXPLANATION OF THE ASSESSEE WAS REJECTED AND HALF OF THE ABOVE EXPENSE S WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D DISALLOWED. THUS, OVER ALL A SUM OF RS.75,16,013/- WAS DISALLOWED FROM THE EXP ENSES AND WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO. 1768/DEL/2016 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT THE ASSESSING OFF ICER MADE ESTIMATED DISALLOWANCES BECAUSE OF SOME EXPENSES WHICH HAD GO NE UP, HOWEVER, THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD A SING LE INSTANCE OF EXPENSES NOT BEING VOUCHED PROPERLY, ANY INSTANCE OF ANY OF THES E EXPENSE BEING ARTIFICIALLY INFLATED OR BEING OF A BOGUS NATURE. THE CIT(A) FU RTHER HELD THAT THERE WAS NO ALLEGATION THAT THE EXPENDITURE OCCURRED OUT OF ANY OTHER ACTIVITY AND ASSESSING OFFICER DID NOT BRING ON RECORD ANY INSTANCE OF TH E EXPENDITURE BEING USED FOR PURPOSES OF THE OTHER BUSINESS. THUS, THE ADDITION MADE IN ROUTINE MANNER AND ON AN AD-HOC BASIS WAS DELETED BY THE CIT(A). 5. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE EXPENSES TO THE EXTENT OF 50%, AS TO INCREASE B USINESS NO ONE WILL GET A LESS PROFIT. THUS, THE LD. DR SUBMITTED THAT THE CIT(A) FAILED TO SEE THIS ASPECT AND THE ORDER MAY BE SET ASIDE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. DESPITE SENDING THE NOTICE NO ONE HAS APPE ARED FOR THE HEARING. WE HAVE PERUSED ALL THE RECORDS AND GONE THROUGH THE O RDER OF THE CIT(A) WHEREIN THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AS THE ASSESSING OFFICER MADE THE ESTIMATED ADDITION OR AD-HOC ADDITION WITHOUT ASSIG NING ANY REASON TO THAT EFFECT. MERELY, ON THE BASIS OF SURMISES, THE ASSE SSING OFFICER CANNOT MAKE AN ADDITION WHEN THE ASSESSEE HAS GIVEN ALL THE DETAIL S ABOUT THE EXPENSES AND THE SAME WAS NEVER DOUBTED BY THE ASSESSING OFFICER AT ANY POINT OF TIME. THE CIT(A) HELD IN PARA 6,7,8 & 9 ARE AS UNDER:- I HAVE DULY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A.O HAS MADE ESTIMATED DISALLOWANCES BECAUSE SOME OF TH E EXPENSES HAVE GONE UP. HOWEVER, HE HAD NOT BROUGHT ON RECORD A S INGLE INSTANCE OF EXPENSES NOT BEING VOUCHED PROPERLY, ANY INSTANCE O F ANY OF THESE EXPENDITURES BEING ARTIFICIALLY INFLATED OR BEING O F A BOGUS NATURE. THERE IS NO ALLEGATION THAT THE EXPENDITURE HAS OCCURRED OUT OF ANY OTHER ACTIVITY. 4 ITA NO. 1768/DEL/2016 HE HAS NOT BROUGHT ON RECORD ANY INSTANCE OF THE EX PENDITURES BEING USED FOR PURPOSES OTHER THAN BUSINESS. HE HAS NOT SPECIF IED IN ANY COGENT MANNER WHY THE EXPLANATION CITED BY THE ASSESSEE FO R THE INCREASE IN EXPENDITURES I.E. THE FACT THAT IN THE CURRENT YEAR THE MOST OF THE PROJECT WORK WERE DONE IN DIFFERENT LOCATION OF INDIA WHICH RESULTED IN THE INCREASE, WERE NOT ACCEPTABLE. HE HAS NOT BROUGHT A NY INSTANCE ON RECORD THAT ANY OF THESE EXPENDITURES WERE INADMISSIBLE TO BE DEDUCTED AND HE HAS ALSO NOT EXPLAINED WHY A PARTICULAR PERCENTAGE OF THE EXPENDITURE MERITS DISALLOWANCE. THUS IT APPEARS THAT THE ADDIT ION HAS SIMPLY BEEN MADE ON A SUSPICION OF LEAKAGE. NO SUSPICION CAN BE THE BASIS OF A SUSTAINABLE ADDITION. IN THE ABSENCE OF ANY SPECIFI C REFERENCE TO ANY EXPENDITURE THAT THE AO HAD FOUND TO NOT BE INCURRE D OR TO BE INCURRED FOR A PURPOSE OTHER THAN BUSINESS OR INCURRED IN A MANN ER THAT MADE THEM ELIGIBLE FOR DEDUCTION, AN ESTIMATED DISALLOWANCE O NLY ON ACCOUNT OF THE FACT THAT AN EXPENDITURE MAY HAVE INCREASED IN COMP ARISON TO THE PREVIOUS YEAR IS NOT JUSTIFIED. IN THE CIRCUMSTANCES THERE DOES NOT APPEAR TO BE AN Y REASON TO MAKE THE DISALLOWANCE OF EXPENDITURE WITHOUT BRINGING SPECIF IC MATERIAL ON RECORD TO JUSTIFY THE DISALLOWANCE. THUS, THE ADDITION HAS BE EN MADE IN A ROUTINE MANNER AND ON AN ADHOC BASIS. THE HONBLE ITAT IN T HE FOLLOWING DECISIONS HAS HELD THAT ADHOC DISALLOWANCES CANNOT BE MADE I. M/S. GANESH FOUNDRY VS. ACIT 78 TTJ IT WAS HELD THAT DISALLOWANCE MADE WITHOUT PINPOINT ING OUT ANY ITEM OF DISALLOWABLE NATURE CANNOT BE SUSTAINED. II. ACIT VS. GOVIND RAM KAKWANI 90 TTJ (JABALPUR) 1981 IT WAS HELD THAT ANY ADHOC DISALLOWANCE MADE WITHOU T PINPOINTING PARTICULAR ITEM OF DISALLOWANCE AND BASED ON VAGUE OBSERVATIONS WAS RIGHTLY DELETED BY CIT (APPEALS) 5 ITA NO. 1768/DEL/2016 III. TRIMURTI SALT CO. VS. ITO 12 TTJ 485 IT WAS HELD THAT THERE IS NO JUSTIFICATION FOR DISA LLOWING EXPENSES IN A ROUTINE MANNER AND ON ADHOC BASIS. IV RAJ ENTERPRISES VS. ITO 51 TTJ 408 IT WAS HELD THAT THE AD-HOC DISALLOWANCE MADE WITHO UT COGENT REASONS ARE UNSUSTAINABLE. IN VIEW OF THE AFORESAID FACTS AND THE POSITION OF LAW AS LAID DOWN IN THE AFORESAID JUDGMENTS, THE ADDITION OF RS.75,16,013/- IS DELETED. IN THE RESULT, THE APPEAL IS ALLOWED. IN OUR OPINION, THE CIT(A) RIGHTLY HELD THAT THE A SSESSING OFFICER MADE ESTIMATED DISALLOWANCES BECAUSE OF SOME EXPENSES WH ICH HAD GONE UP, HOWEVER, THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD A SINGLE INSTANCE OF EXPENSES NOT BEING VOUCHED PROPERLY OR ANY OF THESE EXPENSE BEING ARTIFICIALLY INFLATED OR BEING OF A BOGUS NATURE, THE CIT(A) FUR THER HELD THAT THERE WAS NO ALLEGATION THAT THE EXPENDITURE OCCURRED OUT OF ANY OTHER ACTIVITY AND ASSESSING OFFICER DID NOT BRING ON RECORD ANY INSTANCE OF TH E EXPENDITURE BEING USED FOR PURPOSES OF THE OTHER BUSINESS. THE ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE CIT(A). THUS, THERE IS NO NEED TO IN TERFERE WITH THE FINDINGS GIVEN BY THE CIT(A). 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH DECEMBER, 2017 . SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 08/12/2017 R. NAHEED * 6 ITA NO. 1768/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 21/11/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 27 /11/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 8.12.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 8 .1 2 .2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 1768/DEL/2016