M/s. Bala Enviro Maintenance Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2010/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6653 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R SANTHARAM
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2010/DEL/2016 ASSESSMENT YEAR : 2012-13 BALA ENVIRO MAINTENANCE PVT. LTD., H-122, LGF, GAUTAM NAGAR, NEW DELHI. PAN: AADCB7584N VS. DCIT, CIRCLE 4(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. SANTHARAM, ADVOCATE DEPARTMENT BY : SHRI ANIL KUMAR SHARMA, SR.DR DATE OF HEARING : 17.11.2016 DATE OF PRONOUNCEMENT : 18.11.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 16.2.2016 IN RELATION TO THE ASSESSME NT YEAR 2012-13. ITA NO.2010 /DEL/2016 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL THROUGH V ARIOUS GROUNDS IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.1,18 ,33,568/- MADE BY THE AO. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANPOWER SUPPLY/CONTRACT OR. GROSS RECEIPTS OF RS.13.67 CRORE WERE SHOWN FROM WHICH NET PROFIT OF RS.36.05 LAC, GIVING NP RATE OF 2.64% WAS DECLARED, AS AGAINST T HE IMMEDIATELY PRECEDING YEARS GROSS RECEIPTS OF RS.11.80 CRORE A ND NET PROFIT OF RS.31.95 LAC AND NET PROFIT RATE OF RS.2.71%. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT DEDUCT ION WAS CLAIMED BY THE ASSESSEE FOR A SUM OF RS.13.02 CRORE UNDER THE HEAD EMPLOYEE BENEFIT EXPENSES. THE ASSESSEE WAS ASKED TO FURNIS H DETAILS OF SALARY AND WAGES PAYABLE, BONUS PAYABLE AND PROOF OF SALAR Y PAYABLE. APART FROM THAT, THE ASSESSEE WAS ALSO CALLED UPON TO JUS TIFY THE EXPENSES INCURRED ON VEHICLE MAINTENANCE BY SUBMITTING THE N ECESSARY DETAILS. THE ASSESSEE APPEARED ON 16.12.2014 AND FURNISHED T HE DETAILS, INTER ALIA, OF SALARIES AND WAGES PAID AND VEHICLES REPAIRS AN D MAINTENANCE. ON PERUSAL OF SUCH DETAILS, THE AO OBSERVED THAT TH ESE WERE SELF GENERATED SHEETS CONTAINING INFORMATION FOR WAGES A ND SALARIES AND ITA NO.2010 /DEL/2016 3 VEHICLE REPAIR AND MAINTENANCE. THE ASSESSEE GAVE F URTHER DETAILS OF THE PERSONS TO WHOM LABOUR/MANPOWER WAS SUPPLIED. THE AO REFUSED TO ACCEPT THE AUTHENTICITY OF THESE DETAILS AS THESE W ERE SELF GENERATED SHEETS CONTAINING SOME INFORMATION. IN THE ABSENCE OF THE ASSESSEE PRODUCING BOOKS OF ACCOUNT AND IN VIEW OF UNVERIFIA BLE NATURE OF EXPENSES, THE AO DISALLOWED 10% OF THE TOTAL EXPENS ES TOWARDS SALARY AND WAGES, BONUS AND VEHICLE MAINTENANCE, WHICH RES ULTED IN TO DISALLOWANCE OF RS.118,33,568/-. IN THE FIRST APP EAL, THE ASSESSEE FURNISHED FURTHER DETAILS OF SUCH EXPENSES, WHICH T HE LD. CIT(A) SENT TO THE AO AND A REMAND REPORT WAS CALLED FOR. THE FIR ST REMAND REPORT DATED 4.6.2015 WAS SUBMITTED IN WHICH THE AO OBJECT ED TO THE ADMISSION OF ADDITIONAL EVIDENCE AS IN HIS OPINION SUFFICIENT OPPORTUNITY WAS PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDING S. THE ASSESSEE WAS PROVIDED A COPY OF SUCH REMAND REPORT. IN REJO INDER, THE ASSESSEE SUBMITTED THAT THE AO WAS WRONG IN SAYING THAT IT W AS NOT PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING SUCH EVIDENCE BEFOR E THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO WAS ONCE AGAIN REQUESTED BY THE LD. CIT(A) TO GIVE HIS COMMENTS ON THE MERITS O F ADDITIONAL ITA NO.2010 /DEL/2016 4 EVIDENCE. VIDE HIS FINAL REMAND REPORT DATED 29.7. 2015, THE AO APART FROM RAISING OBJECTION AGAINST THE ADMISSION OF ADD ITIONAL EVIDENCE, ALSO RECORDED THAT THE ASSESSEE SIMPLY SUBMITTED LEDGER ACCOUNT OF WAGES PAID TO VARIOUS PARTIES FROM WHICH MODE OF PAYMENT WAS NOT CLEAR. FURTHER, ON TALLYING PAYMENT OF SUCH LEDGER ENTRIES WITH BANK ACCOUNT STATEMENT, THE AO FOUND THAT ALL THE ENTRIES WERE N OT RECONCILING. THE ASSESSEE IN REJOINDER TO THE AOS SECOND REMAND REP ORT, SUBMITTED THAT IT WAS NEVER CALLED UPON FOR VERIFICATION OF INFORM ATION DURING THE COURSE OF REMAND PROCEEDINGS. THE LD. CIT(A) CAME TO HOLD THAT THERE WAS NO REASON TO ADMIT ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE, WHICH WAS EVENTUALLY NOT ADMITTED. ON MERITS, HE SUSTAINED T HE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED AGAINST THIS ADDITION. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) SEN T THE ADDITIONAL EVIDENCE TO THE AO AND SOUGHT REMAND REPORT NOT ONC E, BUT, TWICE. HAVING ACKNOWLEDGED THE ADDITIONAL EVIDENCE FILED B Y THE ASSESSEE AND, THEREAFTER, SENT THE SAME TO THE AO FOR COMMENTS IN REMAND REPORT, HE ITA NO.2010 /DEL/2016 5 COULD NOT HAVE REFUSED TO ADMIT THE ADDITIONAL EVID ENCE. IF HE WAS SATISFIED THAT THE PROVISIONS OF RULE 46A WERE NOT APPLICABLE, HE SHOULD HAVE REFUSED TO ENTERTAIN THE ADDITIONAL EVIDENCE A T THE VERY OUTSET INSTEAD OF ACCEPTING THE SAME AND SENDING IT TO THE AO FOR REMAND REPORT. 4. ON MERITS, WE FIND THAT THE AO HAS MADE AN AD HOC DISALLOWANCE @ 10% OF EMPLOYEES BENEFIT EXPENSES AND VEHICLE MAI NTENANCE EXPENSES ON THE GROUND THAT DETAILS OF THE SAME WER E ON SELF GENERATED SHEETS CONTAINING SOME INFORMATION FOR WAGES AND SA LARIES. DURING THE REMAND PROCEEDINGS, THE AO DID NOT ACCEPT THE ASSES SEES CLAIM BY NOTICING THAT THE PAYMENTS MADE AND RECORDED IN THE BOOKS WERE NOT TALLYING WITH THE BANK ENTRIES AND SOME RECONCILIAT ION WAS REQUIRED. IF SOME RECONCILIATION WAS REQUIRED, IT WAS FOR THE AO TO SEEK EXPLANATION FROM THE ASSESSEE AND CONSIDER THE DISALLOWANCE IF WARRANTED. NOTHING OF THE SORT WAS DONE. IT IS NOT PERMISSIBLE TO MAKE AN AD HOC DISALLOWANCE @ 10% OF EXPENSES ON FRIVOLOUS ISSUES. THE ASSESSEE HAS PLACED ON RECORD A COPY OF ITS PROFIT & LOSS ACCOUNT FROM WHI CH IT CAN BE SEEN ITA NO.2010 /DEL/2016 6 THAT THE PERCENTAGE OF EMPLOYEE BENEFIT EXPENSES TO GROSS RECEIPTS FOR THE YEAR UNDER CONSIDERATION IS 95.26% AS AGAINST T HE PRECEDING YEARS PERCENTAGE AT 95.64%. THIS SHOWS THAT THE EMPLOYEE S BENEFIT EXPENSES HAVE RATHER DECREASED IN PERCENTAGE TERMS VIS--VIS THE PRECEDING YEAR. IN SO FAR AS THE VEHICLE MAINTENANCE EXPENSES ARE C ONCERNED, THESE ARE PROPERLY TOTALED AND THE AO HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF UNVERIFIED VOUCHERS. IN VIEW OF THE FOREGOING DISC USSION, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUST IFIED IN SUSTAINING THE AD HOC DISALLOWANCE @ 10% OF EMPLOYEES BENEFIT EXPENSES A ND VEHICLE REPAIR AND MAINTENANCE EXPENSES. THE SAME IS DIRECT ED TO BE DELETED. 5. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.20 16. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 18 TH NOVEMBER, 2016. DK ITA NO.2010 /DEL/2016 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.