Durga Signai Infra Pvt. Ltd, Kolkata V. ACIT(OSD) Ward-1(1). , Kolkata

ITA 251/KOL/2023

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The case involves Durga Signal Infra Pvt. Ltd., a company engaged in railway contracting, which appealed against an ad-hoc disallowance of 20% on its claimed site expenses amounting to Rs.3,67,37,203 for the assessment year 2015-16. The disallowance was initially made by the Assistant Commissioner of Income Tax due to alleged lack of documentary evidence supporting the expenses. The company argued that the expenses were consistent with those claimed in other years and provided a detailed list of the expenses. The Tribunal, after considering the arguments and evidence presented, decided in favor of the assessee, stating that the ad-hoc disallowance was arbitrary and lacked a rational basis.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124537 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 26-03-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A(SMC)” BENCH KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.251/Kol/2023 Assessment Year: 2015-16 Durga Signal Infra Pvt. Ltd., C/o Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2 nd floor, Kolkata- 700069. (PAN: AACCD 8079 K) Vs. Assistant Commissioner of Income Tax (OSD), Ward- 1(1), Kolkata. (Appellant) (Respondent) Present for: Appellant by : Shri Siddarth Agarwal, Advocate Respondent by : Shri P. P. Barman, Addl. CIT, Sr. DR Date of Hearing : 20.06.2023 Date of Pronouncement : 23.06.2023 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Appeal No. ITBA/NFAC/S/250/2022-23/1050540758(1) dated 09.03.2023 passed against the assessment order by ACIT(OSD), Ward-1(1), Kolkata u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.12.2017 for AY 2015-16. 2. Sole issue raised by the assessee in this appeal is in respect of ad-hoc disallowance @ 20% of total site expenses of Rs.3,67,37,203/-. The disallowance is of Rs.61,54,501/-. 2 ITA No.251/Kol/2023 Durga Signal Infra Pvt. Ltd. AY: 2015-16 3. Brief facts of the case are that assessee is engaged in the business as a Railway contractor and supplier. It filed its return of income on 30.09.2015 reporting a loss of Rs.13,45,191/-. Case was selected for scrutiny assessment under CASS for which statutory notices were served on the assessee and were duly complied with. In the course of assessment, Ld. AO noted that assessee has claimed huge expenses in the P&L Account amounting to Rs.13,99,71,432/- which principally resulted in a loss of Rs.17,25,690/-. Ld. AO called for details and explanations towards major expenses claimed under the head “Other Expenses/Miscellaneous expenses”. In this respect assessee produced a detailed list of particulars for site expenses claimed in the P&L Account for an amount of Rs.3,67,37,203/-. However, Ld. AO by observing that assessee has not provided any documentary evidence in support of claim of site expenses, adopted an ad-hoc rate of 20% to disallow the site expenses after reducing the component of sales tax from it (20% of Rs.3,67,37,203/- less sales tax Rs.59,64,698/- = Rs.61,54,501/-). Aggrieved, assessee went in appeal before the Ld. CIT(A), who dismissed the same. 4. Before us, Ld. Counsel for the assessee emphasized that Ld. AO himself has noted that assessee has produced a detailed list of particulars in respect of site expenses. Further, nothing has been specifically pointed out in respect of defect or shortcoming in the claim of the assessee. Ld. Counsel also referred to a comparative chart to demonstrate the quantum of site expenses which had been claimed regularly by the assessee both in the preceding year as well as subsequent years vis-à-vis the turnover of the assessee. From the said chart, ld. Counsel submitted that claim of assessee towards site expenses is more or less range bound from 19.1% in AY 2017-18 to 25.52% in AY 2016-17. He also submitted that no such disallowance 3 ITA No.251/Kol/2023 Durga Signal Infra Pvt. Ltd. AY: 2015-16 has been made in the preceding as well as subsequent years and that there is no basis of adopting 20% to make an ad-hoc disallowance without pointing out any defect in the information and details furnished by the assessee. The comparative chart is reproduced as under: 4.1. Ld. Counsel also submitted that in the impugned order, Ld. AO himself has noted that assessee is engaged in the job of installing electronic signalling system for Railways and has submitted a break- up of the site expenses claimed. According to Ld. Counsel, the ad-hoc disallowance made is ought to be deleted. 5. Per contra, Ld. Sr. DR submitted that reference to proceding as well as subsequent years has no bearing on the year under consideration and that the assessee had merely produced a list in respect of site expenses claimed which is not supported by any other documentary evidence. Hence, he urged before the bench to confirm the actions of the authorities below. 6. We have heard the rival contentions and gone through the material placed before us. We note that assessee is a company engaged in the business as railway contractor and supplier. Assessee has furnished the break-up of site expenses which it has claimed in its P&L Account. Ld. AO has adopted ad-hoc percentage of 20% to make a disallowance towards site expenses without giving any rational basis for the same. Ld. AO while making a disallowance has reduced the 4 ITA No.251/Kol/2023 Durga Signal Infra Pvt. Ltd. AY: 2015-16 component of sales tax from the total amount of the site expenses. Further, assessee has furnished a comparative analysis of the claim of site expenses in the preceding as well as subsequent years as tabulated above. Section 37(1) of the Act provides for allowing expenditure incurred by the assessee for the purpose of its business if they are not in the nature of capital expenditure or personal expenses and not being expenditure of the nature prescribed in section 30 to 36. In the present case before us, none of the authorities below as well as Ld. Sr. DR could bring on record any material to dislodge the claim of the assessee and substantiate the ad-hoc disallowance by adopting a rate of 20% for the same. Considering the facts on record and the submissions made by the Ld. Counsel, as well as the provision of section 37(1), we delete the ad-hoc disallowance made by the Ld. AO and confirmed by the Ld. CIT(A). Accordingly, grounds taken by the assessee in this respect are allowed. 7. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 23 rd June, 2023. Sd/- Sd/- (Sanjay Garg) (Girish Agrawal) Judicial Member Accountant Member Dated: 23rd June, 2023 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(A), NFAC, Delhi 4. CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata