The ITO, Ward-4(3), Ahmedabad V. Ascendum KPS Pvt. Ltd., ( Formerly known as I Call India Pvt.Ltd.), Ahmedabad

ITA 2479/AHD/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0650 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KHAN
• Assessee Lawyers: BIREN SHAH
• Keywords: TDS

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE JUSTICE P.P. BHATT, PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NO. 2479/AHD/2014 ( / ASSESSMENT YEAR : 2011-12) THE ITO WARD-4(3) AHMEDABAD / VS. ASCENDUM KPS PVT.LTD. (FORMERLY KNOWN AS I CALL INDIA PVT.LTD.) A/7, GROUND FLOOR SAFAL PROFITAIRE OFF 100FT. PRAHALD NAGAR SATELLITE AHMEDABAD-15 ./ ./ PAN/GIR NO. : AAAC 18432 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M.S. KHAN, CIT-DR / RESPONDENT BY : SHRI BIREN SHAH, AR / DATE OF HEARING 07/10/2019 !'# / DATE OF PRONOUNCEMENT 20/12/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)VIII, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- VIII/ITO/WD.4(3)466/13-14 DATED 13/06/2014 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 14 /03/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 2 - 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL: 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS T O DELETE THE DISALLOWANCE OF RS.33,30,790/- ON ACCOUNT OF CONSULTANCY FEE EXPENS ES NOT PROVED TO BE GENUINE AND INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. 3. IT IS THE RECALLED MATTER FOR THE ADJUDICATI ON OF GROUND NO. 3 AS EVIDENT FROM THE ORDER OF THE MA NO.170/AHD/2019 AR ISING OUT OF ITA NO. 2479/AHD/2014 DATED 19-08-2019 AS THE SAME WAS OMITTED TO BE ADJUDICATED IN THE ITA NO. 2479/AHD/2014 ORDER DATE D 06-09-2018. NOW ACCORDINGLY, WE PROCEED TO ADJUDICATE THE GROUN D NO. 3 OF THE REVENUE RAISED IN THE MEMO OF APPEAL. 4. THE ISSUE RAISED BY THE REVENUE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 33,30,790.00 ON ACCOUNT OF CONSULTANCY FEES. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF IT ENABLED SERVICES. THE ASSESSEE IN THE YEAR UNDER CONSIDERAT ION HAS INCURRED AN EXPENSE OF 35,30,790.00 UNDER THE HEAD CONSULTANCY EXPENSES. THE ASSESSEE IN SUPPORT OF SUCH EXPENSES FURNISHED THE BILLS FOR THE CONSULTANCY FEES ALONG WITH FORM 16A OF ALL THE PAR TIES. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED AS UN DER: ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 3 - I. THE DETAILS OF THE SERVICES RENDERED BY THE PARTIES TO THE ASSESSEE WERE NOT FURNISHED. II. MOST OF THE BILLS ISSUED BY THE PARTIES ARE IN THE SAME FORMAT, THEREFORE, THE CREDENTIALS OF THE SAME CANNOT BE SA ID FREE FROM THE DOUBTS. THE ORIGINAL BILLS WERE NOT FILED FOR T HE VERIFICATION. III. THERE WAS THE INCREASE IN THE EXPENSES UNDER THE HE AD CONSULTANCY FEE IN COMPARISON TO THE IMMEDIATE PREC EDING ASSESSMENT YEAR. THE ASSESSEE IN THE IMMEDIATE PREC EDING ASSESSMENT YEAR INCURRED CONSULTANCY EXPENSES AT 1,36,961.00 ONLY. 5.1. IN VIEW OF THE ABOVE, THE AO HELD THAT THE SUM OF RS. 2 LAKHS IS REASONABLE TOWARDS THE CONSULTANCY CHARGES AND THUS HE DISALLOWED THE BALANCE AMOUNT OF 33,30,790.00 ( 35,30,790-2,00,000 ) IN THE ABSENCE OF DOCUMENTARY EVIDENCES. HENCE THE AO ADDED THE SU M OF RS. 33,30,790.00 TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). 6. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUB MITTED THAT THE AO IN THE SHOW CAUSE NOTICE DATED 28 FEBRUARY 2014 REQUIR ED IT (THE ASSESSEE) TO FURNISH THE DETAILS WHETHER THE TDS ON SUCH CONS ULTANCY FEES HAS BEEN DEDUCTED. ACCORDINGLY THE DETAILS OF THE TDS WERE F URNISHED. HOWEVER THE AO WITHOUT PROVIDING AN OPPORTUNITY TO THE ASSE SSEE HAS MADE THE DISALLOWANCE BY CHANGING HIS STAND AND HOLDING THAT THE IMPUGNED ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 4 - CONSULTANCY EXPENSES ARE NOT GENUINE DESPITE THE FA CT ALL THE BILLS, FORM 16A, COPY OF THE TDS RETURNS AND CHALLANS WERE DULY FURNISHED DURING THE ASSESSMENT PROCEEDINGS. 6.1. THE ASSESSEE FURTHER SUBMITTED THAT THERE W AS AN INCREASE OF THE CONSULTANCY FEES AS IT HAS ENTERED INTO THE NEW PRO JECTS WITH ITS EXISTING CLIENTS IN UK ACCOUNTING AND USA MORTGAGING. THEREF ORE IT HAS HIRED PROFESSIONALS SUCH AS CHARTERED ACCOUNTANTS AND MBA IN CONNECTION WITH SUCH PROJECT. THE ASSESSEE ALSO CLAIMED THAT ALL TH E PROFESSIONALS WERE HAVING IMMENSE EXPERIENCE AND SPECIALIZED KNOWLEDGE FOR THE NEW PROJECTS UNDERTAKEN BY IT. 6.2. THE ASSESSEE ALSO CLAIMED THAT IT HAS INCURR ED A SUM OF RS. 2,24,836.00 OUT OF THE TOTAL CONSULTANCY OF RS. 35,30,790.00 TOWARDS THE RECRUITMENT CONSULTANCY AND CALL CENTRE TRAININ G. THEREFORE, THE SUM OF RS. 2,24,836.00 CANNOT BE COMPARED WITH THE CONS ULTANCY FEES OF THE EARLIER ASSESSMENT YEAR. 6.3. THE ASSESSEE FURTHER CLAIMED THAT ITS BOOKS OF ACCOUNTS WERE DULY AUDITED AND NO DEFECT OF WHATSOEVER WAS POINTED OUT BY THE AO DURING THE ASSESSMENT PROCEEDINGS. 6.4. THE LEARNED CIT (A) AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE AND THE ORDER OF THE AO OBSERVED THAT THE ASSESSEE HAS FURNISHED ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 5 - THE REQUISITE DETAILS ABOUT THE PARTIES TO WHOM THE PAYMENT WAS MADE ALONG WITH THE TDS RETURNS, PAN ETC. AS DESIRED DUR ING THE ASSESSMENT PROCEEDINGS. BUT THE AO WITHOUT POINTING OUT ANY DE FECT IN THE DETAILS FURNISHED BY THE ASSESSEE HAS DOUBTED ON THE GENUIN ENESS OF THE EXPENSES AND THEREFORE HE MADE THE DISALLOWANCE WITHOUT GIVI NG THE OPPORTUNITY OF THE ASSESSEE. 6.5. THE LEARNED CIT (A) FURTHER FOUND THAT THE INCREASE IN THE PROFESSIONAL FEE IN COMPARISON TO THE EARLIER ASSES SMENT CANNOT BE THE BASIS FOR MAKING THE DISALLOWANCE. AS SUCH ALL THE DETAILS OF THE PARTIES WERE AVAILABLE WITH THE AO TO WHOM THE PAYMENTS WER E MADE THROUGH ACCOUNT PAID CHEQUE AND AFTER DEDUCTING THE TDS. IN VIEW OF THE ABOVE THE LEARNED CIT-A DELETED THE DISALLOWANCE MADE BY THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DR BEFORE US SUBMITTED THAT THE A SSESSEE HAS NOT FURNISHED THE DETAILS ABOUT THE SERVICES RENDERED B Y THE PARTIES TO WHOM THE CONSULTANCY FEE WAS PAID. ACCORDINGLY THIS FACT WAS NOT EXAMINED BY THE AUTHORITIES BELOW. THE LEARNED DR ALSO CLAIMED THAT THE BUSINESS OF THE ASSESSEE WAS NOT INCREASED AGAINST THE EXPENSES CLAIMED BY IT. ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 6 - 8. ON THE CONTRARY, THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 346 AND SUBMITTED THAT THE BUSINESS OF THE ASSESSEE HAS INCREASED AGAINST THE EXPENSES INCURRE D BY IT. THE LEARNED AR IN SUPPORT OF HIS CONTENTION REFERRED TO THE PRO FIT AND LOSS ACCOUNT OF THE ASSESSEE PLACED ON PAGE 278 OF THE PAPER BOOK. BOTH THE LEARNED DR AND THE AR VEHEMENTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES TO THE FACT WHETHER THE CONSULTANCY EXPENSES INCURRED BY THE ASSESSEE ARE GENUINE. THE GENUINENESS OF THE EXPENSES WAS DOUBTE D BY THE AO ON THE REASONS THAT THE DETAILS OF THE SERVICES RENDERED B Y THE PARTIES TO THE ASSESSEE WAS NOT FURNISHED, THE ORIGINAL BILLS WERE NOT FILED FOR THE VERIFICATION AND INCREASE IN THE EXPENSES IN COMPAR ISON TO THE EARLIER YEAR. 9.1. HOWEVER, WE FIND THAT ALL THE NECESSARY D ETAILS ABOUT THE PARTIES TO WHOM THE CONSULTANCY FEE WAS PAID BY THE ASSESSE E WERE AVAILABLE BEFORE THE AO. IN CASE OF ANY DOUBT ABOUT THE GENUI NENESS OF THE EXPENSES, THE AO BEFORE MAKING ANY DISALLOWANCE WAS UNDER THE OBLIGATION TO CONDUCT THE NECESSARY ENQUIRY FROM TH E CONCERN PARTIES BUT THE AO HAS NOT DONE SO. ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 7 - 9.2. WE FURTHER NOTE THAT THE NON-SUBMISSION O F THE ORIGINAL BILLS CANNOT BE A GROUND FOR MAKING THE DISALLOWANCE OF T HE EXPENSES ON AD HOC BASIS. WE ALSO APPREHEND WHETHER THE AO REQUIRE D THE ASSESSEE TO FURNISH THE ORIGINAL BILLS DURING THE ASSESSMENT PR OCEEDINGS. IT IS BECAUSE WHAT IS TRANSPIRED FROM THE ORDER OF THE AO THAT TH E AO MAINLY REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF THE TDS DEDU CTED ON THE PAYMENT OF SUCH CONSULTANCY EXPENSES. MOREOVER, THE AO HAS NOT POINTED OUT ANY DEFECT IN THE BILLS FILED BY THE ASSESSEE. ACCORDIN GLY, WE HOLD THAT THERE CANNOT BE ANY DISALLOWANCE OF SUCH EXPENSES IN THE ABSENCE OF THE ORIGINAL BILLS. 9.3. INDEED, THERE WAS AN INCREASE IN THE AMOUNT OF CONSULTANCY EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR V IZ-A-VIZ IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR. BUT WE FIND TH AT THE ASSESSEE HAS DULY JUSTIFIED THE INCURRENCE OF SUCH EXPENSES ON A CCOUNT OF NEW PROJECTS UNDERTAKEN BY IT FROM ITS CLIENTS BASED IN UK AND T HE USA. THE CONTENTION OF THE ASSESSEE THAT IT HAS UNDERTAKEN N EW PROJECTS HAS NOT BEEN DOUBTED. THEREFORE IT IS INFERRED THAT THE IMP UGNED EXPENDITURE WERE INCURRED BY THE ASSESSEE IN CONNECTION WITH TH E NEW PROJECTS. WE ALSO NOTE THAT THE INCOME FROM OPERATIONS OF THE AS SESSEE HAS INCREASED IN COMPARISON TO THE PREVIOUS YEAR AS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT. THE RELEVANT EXTRACT OF THE PROFIT AND LOS S ACCOUNT IS REPRODUCED AS UNDER: ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 8 - ASCENDUM KPS PRIVATE LIMTIED (FORMERLY, I CALL INDIA PROVATE LIMITED) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2011 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PARTICULARS SCHE- FOR THE DULE FOR THE YEAR ENDED 31 ST MARCH 2011 YEAR ENDED (AMOUNT (RS .) AMOUNT (RS.) 31/3/2010 A MOUNT (RS.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - INCOME INCOME FROM OPERATIONS 8 01 82 793 7 75 70 595 9.5. ACCORDINGLY, WE HOLD THAT THERE CANNOT BE A NY DISALLOWANCE OF THE EXPENSES AS THE ASSESSEE HAS JUSTIFIED THE INCURREN CE OF SUCH EXPENSES FOR THE PURPOSE OF THE BUSINESS. 9.6. IN ADDITION TO THE ABOVE, WE ALSO NOTE THA T THE AO HAS ACCEPTED PART OF THE CONSULTANCY EXPENSES AS GENUINE AND PAR T OF THE EXPENSES AS NON-GENUINE. IN OUR VIEW THE ACTION OF THE AO IS ER RONEOUS AS THE EXPENSES CAN EITHER BE NON GENUINE OR GENUINE IN EN TIRETY. AS SUCH IT CANNOT BE SAID PART OF THE EXPENSES AS GENUINE AND PART OF THE EXPENSES NON GENUINE WITHOUT GIVING ANY SPECIFIC REASON. THE REFORE, WE OF THE VIEW THAT THE IMPUGNED EXPENSES CANNOT BE TREATED A S NON GENUINE IN SUMMARILY MANNER. AS SUCH THE IMPUGNED EXPENSES CAN NOT BE SAID AS NON GENUINE IN VIEW OF THE FACT THAT THE PAYMENT WA S MADE THROUGH BANKING CHANNEL, SUBJECT TO THE TDS PROVISIONS AND ALL THE PARTIES WERE HOLDING THE PAN. THUS, IN SUCH FACTS OF CIRCUMSTANC ES, THE AO AT THE ITA NO.2479/AHD/2014 ITO VS. ASCENDUM KPS PVT.LTD. ASS T.YEAR 2011-12 - 9 - MOST CAN HOLD THAT SUCH EXPENSES WERE NOT INCURRED IN THE COURSE OF THE BUSINESS THAT TOO BASED ON SOME DOCUMENTARY EVIDENC ES BUT THERE IS NO SUCH ALLEGATION BY THE AO. IN VIEW OF THE ABOVE AND AFTER CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON TO INT ERFERE IN THE FINDING OF THE LEARNED CIT(A). HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2019 SD/- SD/- ( JUSTICE P.P. BHATT ) ( WASEEM AHMED ) PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED 20/12/2019 &.., .(.. / T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-VIII, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD