Elsner Technologies Pvt. Ltd., Ahmedabad V. The ITO, Ward - 2(1)(1), Ahmedabad

ITA 3329/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6360 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Section: 133(6)

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.3329/AHD/2015 ( / ASSESSMENT YEAR : 2012-13) ELSNER TECHNOLOGIES PVT.LTD. 305,ISCON CENTRE SHIVRANJANI CROSS ROAD SATELLITE AHMEDBAD 380 015 / VS. THE ITO WARD-2(1)(1) AHMEDABAD # ./ ./ PAN/GIR NO. : AACCE 2232 P ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : MS.URVASHI SHODHAN, AR &#%(' / RESPONDENT BY : SHRI RAJESH MEENA, SR.DR )*(+ / DATE OF HEARING 02/01/2018 ,-./(+ / DATE OF PRONOUNCEMENT 05 /01/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTA NCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AHMEDABAD [CIT(A) IN SHORT] DATED 31/08/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961 ITA NO.3329/AHD /2015 ELSNER TECHNOLOGIES PVT.LTD. VS. ITO ASST.YEAR 2012-13 - 2 - (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 26/02 /2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. 2. BY ITS GROUNDS OF APPEAL, THE ASSESSEE IN ESSE NCE HAS CHALLENGED THE ACTION OF THE CIT(A) IN PARTLY CONFIRMING THE A CTION OF THE ASSESSING OFFICER (AO) TOWARDS DISALLOWANCE ON ACCOUNT OF ALL EGED INFLATED EXPENSES. 3. BRIEFLY STATED, THE ASSESSEE A PRIVATE LIMITED IS ENGAGED IN I.T. ENABLED SERVICES AND BPO SERVICES. THE RETURN OF T HE ASSESSEE RELEVANT TO AY 2012-13 WAS SUBJECT TO SCRUTINY ASSESSMENT. IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE AO INTER ALIA OBSERVED THAT A SUM OF RS.1,05,38,348/- WAS CLAIMED UNDER THE HEAD OTHER E XPENSES WHICH IS RELATABLE TO DATA ENTRY CHARGES. THE AO ON ENQUIRY FOUND THAT THE ASSESSEE HAS FAILED TO OFFER SATISFACTORY EXPLANATI ON ON ITS EXACT REVENUE MODEL BOTH CUSTOMER-WISE AND SERVICE-WISE AND FAILE D TO CORRELATE THE DATA ENTRY CHARGES WITH THE CORRESPONDING SERVICES PROVIDED. THE AO ALSO FOUND CERTAIN ABNORMAL FEATURES IN THE HANDS O F THE RECIPIENTS OF THE PROFESSIONAL FEES ON ENQUIRY CONDUCTED UNDER S.133( 6) OF THE ACT. THE RELEVANT OPERATIVE PORTION OF THE ORDER OF THE AO I S REPRODUCED HEREUNDER:- 3.1.1 BOTH THE REPLIES OF THE ASSESSEE HAVE BEEN CAREFULLY CONSIDERED. HOWEVER AS THE ASSESSEE HAS NOT BEEN ABLE TO EVEN P RODUCE THE BIFURCATION OF ITA NO.3329/AHD /2015 ELSNER TECHNOLOGIES PVT.LTD. VS. ITO ASST.YEAR 2012-13 - 3 - THE TOTAL REVENUE RECEIPTS- SHOWN, IT COULD NOT BE ASCERTAINED WHETHER THE EXPENSES RELATED TO THE REVENUE RECOGNIZED ONLY HAV E BEEN CLAIMED. AS THE NATURE OF WORK OF THE ASSESSEE IS SUCH THAT THERE MAY BE SEVERAL ON-GOING CONTRACTS FOR WHICH REVENUES MAY NOT YET HAVE BEE N RECOGNIZED, BUT THE ASSESSEE CLAIMED DATA ENTRY EXPENSES IN RESPECT OF THOSE CONTRACTS. HENCE SUCH EXPENSES ARE NOT ALLOWABLE ON MATCHING PRINCIPLE OF ACCOUNTING OF CONTRACTUAL INCOME. IT IS SETTLED LAW THAT THE PRIMARY ONUS WAS ON THE ASSESSEE TO PRODUCE EVIDENCES TO THE DEPARTMENT SHOWING THAT IT HAS CL AIMED ONLY THOSE EXPENSES WHERE REVENUE HAS BEEN RECOGNIZED. VIDE THE ABOVE REPLIES, THE ASSESSEE HAS NOT BEEN ABLE TO JUSTIFY ENTIRE CLAIM OF EXPENSES A ND EVEN IT HAS ADMITTED THAT MAPPING OF REVENUE TO EXPENSES IS NOT POSSIBLE IN I TS CASE. MOREOVER, THIS OFFICE HAD ALSO ISSUED NOTICE U/S 133(6) TO VARIOUS PERSONS WHO HAD DONE DATA ENTRY WORK OF THE ASSESSEE I.E MEENABEN KANTIALAL S HAH, TANVI KANTILAL SHAH, MAMTA KANTILAL SHAH ETC WHO ARE FOUND TO BE OPERATI NG FROM COMMON PREMISES. FURTHER PERUSAL OF THE BANK STATEMENT ALS O OF THESE PERSONS REVEALED THAT THERE WERE CREDIT ENTRIES FROM ASSESSEE COMPAN Y ONLY AND ON CREDIT OF THE AMOUNTS IN THEIR BANK ACCOUNTS, IMMEDIATE WITHDRAWA L IN THE NAME OF 'DIPAK JAYANTILAL' WAS EFFECTED. FURTHER ONE OF THESE PART IES WAS EVEN PAID RENT BY THE ASSESSEE. ALL THESE FACTS INDICATE THAT THESE PERSO NS WERE CLOSELY RELATED TO THE ASSESSEE COMPANY AND THE ASSESSEE HAD ADOPTED THIS MODUS-OPERAND TO INFLATE ITS EXPENSES. 3.1.2 IN VIEW OF THE ABOVE, TAKING INTO CONSIDERA TION THE OVERALL NATURE OF BUSINESS, IT IS ESTIMATED THAT THE ASSESSEE HAS INF LATED ITS CLAIMED EXPENSES UNDER THE HEAD DATA ENTRY WHICH ARE NOT DIRECTLY RE LATED TO ITS REVENUE RECEIPTS COMPRISING OF SEO CHARGES BY 20%, WHICH COMES TO RS 21,07,670 ( 20% OF RS 1,05,38,348). THEREFORE A DISALLOWANCE OF RS 21,07, 670/- IS MADE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE AO ACCORDINGLY OBSERVED THAT HAVE REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS INFLATE D ITS EXPENSES UNDER THE HEAD DATA ENTRY WHICH ARE NOT DIRECTLY RELATABLE TO REVENUE RECEIPTS. HE ACCORDINGLY ESTIMATED THE POSSIBLE INFLATION OF EXP ENSES AT 20% ON DATA ITA NO.3329/AHD /2015 ELSNER TECHNOLOGIES PVT.LTD. VS. ITO ASST.YEAR 2012-13 - 4 - ENTRY EXPENSES OF RS.1,05,38,348/- AND ACCORDINGLY DISALLOWED AN AMOUNT OF RS.21,07,670/- AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE. 5. IN FIRST APPEAL, THE CIT(A) REVISITED THE SUBMIS SIONS OF THE ASSESSEE IN THIS REGARD AND RESTATED THAT ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THE LINKAGE BETWEEN THE EXPENDITURE AND INCOME. THE CIT(A) ALSO TOOK NOTE OF THE OTHER CIRCUMSTANCES AN D GRANTED PART RELIEF OUT OF ESTIMATED DISALLOWANCE UNDER THE HEAD DATA E NTRY CHARGES. THE CIT(A) SCALED DOWN THE QUANTUM OF DISALLOWANCE/ADDI TION @ 10% INSTEAD OF 20% ESTIMATED BY THE AO AND CONFIRMED TH E DISALLOWANCE OF RS.10,53,135/-. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND ADDED THAT THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED UNDER S.44AB OF THE ACT WHERE NO ADVERSE REMARKS HAVE BEEN OBSERVED. THE LD.AR SUBMITTED THAT THE BOOKS OF ACCOUNTS OUGHT NOT TO H AVE BEEN REJECTED BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT ON THE FACE OF TANGIBLE EVIDENCES TO SUPPORT THE EXPENDITURE INCURRED, SUCH AS COPY OF INVOICES, CONFIRMATION OF WORK DONE AS WELL AS BANK STATEMENT AND INCOME-TAX RETURNS OF THE RECIPIENTS ETC. ITA NO.3329/AHD /2015 ELSNER TECHNOLOGIES PVT.LTD. VS. ITO ASST.YEAR 2012-13 - 5 - 8. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE CIT(A) AND SUBMITTED IN FURTHERANCE THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT EXPENDITURE INCURRED RELATES TO THE CORRESPOND ING REVENUE RECOGNIZED. LIKEWISE DOUBTFUL CIRCUMSTANCES FOUND IN ENQUIRY UNDER THE PROCEEDINGS UNDER S.133(6) OF THE ACT HAS REMAINED UNEXPLAINED. THE LD.AR SUBMITTED THAT THE CIT(A) HAS, IN THE GIVEN C IRCUMSTANCES, ALREADY TAKEN A MOST BENEVOLENT VIEW AND GRANTED SU ITABLE RELIEF AGAINST THE ACTION OF THE AO. THE LD.DR ACCORDINGLY SUBMIT TED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL ADVERTED TO US IN THE COURSE OF HEARING. WE FIND THAT THE CIT(A) HAS EXAMINED THE FACTS IN PERSPECTIVE AND OBSERVED THAT THE ASSESSEE HAS F AILED TO CORRELATE THE DATA ENTRY CHARGES WITH THE REVENUE COLLECTION TO T HE SPECIFIC TASK. THE CIT(A) HAS ALSO TAKEN INTO ACCOUNT THE OUTCOME OF T HE ENQUIRY CONDUCTED UNDER S.133(6) OF THE ACT AND THEREAFTER ESTIMATED THE PROBABLE INFLATION IN THE DATA ENTRY CHARGES. WE DO NOT FIND ANY IRR EGULARITY IN THE ACTION OF THE CIT(A). THE CIT(A) WAS JUSTIFIED IN ENDORSING THE ACTION OF THE AO IN PRINCIPLE, WHERE THE ASSESSEE HAS FAILED TO DISC HARGE ITS ONUS BY PLACING SATISFACTORY EXPLANATION WHICH WAS FOUND TO BE SCRAPPY IN THE FACTS OF THE CASE. WE FIND THAT THE CIT(A) HAS P ROCEEDED TO AFFIRM THE ITA NO.3329/AHD /2015 ELSNER TECHNOLOGIES PVT.LTD. VS. ITO ASST.YEAR 2012-13 - 6 - ACTION OF THE AO PARTLY IN VIEW OF THE FACTUAL INCO HERENCE AS NOTED IN ITS ORDER. WE THUS DECLINE TO INTERFERE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05 / 01 /201 8 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 05/ 01 /2018 3..),.)../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-2, AHMEDABAD 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD