DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-7(3)(2), MUMBAI V. POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PRIVATE LIMITED , MUMBAI

ITA 4985/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4855 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 20-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Keywords: Gift; Depreciation; Transfer pricing; Additional evidence; Corroborative evidences; Assessment record; TDS
• Section: 43B; 194C

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4985/MUM/2017 (ASSESSMENT YEAR 2012-13 ) DCIT CIRCLE-7(3)(2) ROOM NO. 669A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT. LTD., 1102, 11 TH FLOOR, TOWER B, PENINSULA BUSINESS PARK, S.B. ROAD, PAREL, MUMBAI- 400013 PAN: AAECD1892Q APPELLANT RESPONDE NT APPELLANT BY : SHRI AWUNGSHI GIMSON (CIT-DR) RESPONDENT BY : SHRI SALIL KAPOOR (AR) DATE OF HEARING : 30.04.2019 DATE OF PRONOUNCEMEN T : 22.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)- 6, MUMBAI [HEREINAFTER REFERRED AS LD. CIT(A)] DATE D 24.04.2017 FOR ASSESSMENT YEAR 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) [AILED TO TAKE THE CONTENTS OF THE REMAND RE PORT INTO CONSIDERATION BEFORE PASSING THE APPELLATE ORDER, IS PERVERSE IN NATURE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF COST OF FIXED ASSETS PURCHASED DURING THE) ASSESSMENT UNDER CONSIDERATIO N AT RS.5,60,40,964/- III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN DELETING THE ADHOC DISALLOWANCES @ 25 % MADE BY THE AO ON ACCOUNT OF ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 2 SALARY, CONTRIBUTION TO VARIOUS FUNDS ARID WORKMAN & STAFF WELFARE EXPENSES OF RS.5,86,48, 850/-. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EA SE, THE LD. CIT(A) ERRED IN DELETING THE ADHOC DISALLOWANCE @ 25% MADE BY TH E AO ON ACCOUNT OF SALARY, CONTRIBUTION TO VARIOUS FUNDS & WORKMAN & S TAFF WELFARE EXPENSES OF RS.5,86,48,850/- V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN DELETING THE AD~ DISALLOWANCE @25% MADE BY THE A.O. ON ACCOUNT OF TRAINING & SEMINAR EXPENSES OF RS.11,33,890/-. VI. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT( A) ERRED IN DELETING THE ADDITIONS @ 100% MADE BY THE AO ON ACCOUNT OF BUSINESS PROMOTION & ADVERTISEMENT EXPENSES OF RS.62,74,237/ -. VII. ON THE FNCTS NND IN TIRE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADHOC DISALLOWANCE @ 25% MADE BY T HE AO ON ACCOUNT OF TRAVELLING AND CONVEYANCE OF RS.50,74,237/- VIII. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EASE, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE @ 100% MADE BY THE AO ON ACCOUNT OF LEGAL AND PROFESSIONAL FEES OF RS. 1,15,14,850/-. IX. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EA SE, THE LD. CIT(A) ERRED IN DELETING THE ADHOC DISALLOWANCE @ 25% MADE BY TH E A.O. ON ACCOUNT OF FACILITIES MAINTENANCE EXPENSES OF RS. 22,11,991/- X. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CI T (A) ERRED IN DELETING THE DISALLOWANCE @ 25% MADE BY THE AO ON A CCOUNT OF UTILITY EXPENSES OF RS. 16,45,628/-. XI. ON THE FACTS AND IN TILE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN DELETING DISALLOWANCE @ 100% MADE BY THE AO ON A CCOUNT OF OUTSOURCE SERVICE COST EXPENSES OF RS.12,20,167/-. XII. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN DELETING THE ADHOC DISALLOWANCE @ 25% MADE BY TH E AO ON ACCOUNT OF FREIGHT EXPENSES OF RS.8,10,155/- XIII. ON TILE FACTS AND IN TILE CIRCUMSTANCES OF TI LE CASE, TILE LD. CIT(A) ERRED IN DELETING TILE ADHOC DISALLOWANCE @ 25% MAD E BY THE AO ON ACCOUNT OF RECRUITMENT & RELOCATION EXPENSES OF RS. 4,58,812/-. ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 3 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY, FILED ITS RETURN OF INCOME UNDER SECTION 1394) ON 3 0.11.2013 DECLARING TOTAL INCOME AT RS. 7,16,97,530/-. THE RETURN OF IN COME WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER RECORDED THAT DESPITE PROVIDING THE REASONABLE OPPO RTUNITY THE ASSESSEE NOT FURNISHED THE BOOKS OF ACCOUNTS AND NO COMPLIAN CE OF VARIOUS THE NOTICES WERE MADE. THE ASSESSING OFFICER AFTER EXA MINING THE BALANCE SHEET FOR THE YEAR ENDED ON 31/03/2012 MADE THE FO LLOWING DISALLOWANCES: SR.NO. PARTICULARS AMOUNT/DEDUCTION CLAIMED DISALLOWED BY AO (A) ADDITION TO FIXED ASSETS RS. 5,60,40,964/- 2 0% (B) SALARY EXPENSES & STAFF WELFARE EXPENSES RS. 22,89,70,127 / - 25% (C) TRAI NING & SEMINAR EXPENSES RS. 45 ,35,56 0/ - 25% (D) BUSINESS PROMOTION & ADVERTISEMENT EXPENSES RS. 62,74,237/- 100% (E) TRAVELING & CONVEYANCE EXPENSES RS. 2,01,94,22 3/- 25% (F) REPAIR & MAINTENANCE EXPENSES RS.8,62,957/- 25% (G) LEGAL & PROFESSIONAL FEES EXPENSES RS. 1,15,14 ,850/- 100% (H) FACILITIES MAINTENANCE EXPENSES RS. 88,47,964/ - 25% (I) UTILITIES EXPENSES RS. 65,82,514/- 25% (J) OUTSOURCES SERVICE COST EXPENSES RS. 12,20,167/ - 100% (K) FREIGHT EXPENSES RS. 32,40,662 / - 25% (L) FOREIGN EXCHANGE LOSS RS. 1,30,19,006/- 100% (M) RECRUITMENT & RELOCATION EXPENSES RS. 18,35,25 0/- 25% 3. ON APPEAL BEFORE THE LD. CIT(A), ALL THE DISALLOWAN CE WAS DELETED. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE/A SSESSING OFFICER HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 4 4. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENT REPR ESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE ( AR) OF THE ASSESSEE AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BEL OW. 5. GROUND NO. 1 RELATES TO NON-CONSIDERATION OF REMAND REPORT BY LD. CIT(A). THE LD. DR FOR THE REVENUE SUBMITS THAT LD. CIT(A) THAT ALL THE ADDITIONS/DISALLOWANCE WERE DELETED BY LD. CIT(A) W ITHOUT APPRECIATING THE REMAND REPORT. THE LD. DR FOR THE REVENUE PRAYE D THAT MATTER MAY BE RESTORED BACK TO THE FILE OF LD. CIT(A) TO CONSIDER THE REMAND REPORT AND PASS THE ORDER AFRESH. 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT WITHOUT GIVING SUFFICIENT AND FAIR OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE WAS NEVER ISSUED SHOW-CA USE NOTICE ON THE VARIOUS DISALLOWANCES MADE BY ASSESSING OFFICER. TH E ASSESSING OFFICER DISALLOWED VARIOUS EXPENSES EITHER 100% OR ON ADHOC BASIS @ 25% WITHOUT SPECIFYING ANY REASON. THE LD. AR FURTH ER SUBMITS THAT DURING THE HEARING OF APPEAL, THE ASSESSEE FURNISHE D DETAILED SUBMISSIONS ALONG WITH COPY OF BILLS AND VOUCHERS AND ALSO FILE D APPLICATION FOR ADDITIONAL EVIDENCE. BEFORE ADMITTING THE ADDITIONA L EVIDENCE, THE LD. CIT(A) EXAMINED THE ASSESSMENT RECORD AND NOTED THA T ASSESSEE WAS ONLY ASKED TO PRODUCE THE BOOKS OF ACCOUNT VIDE ORD ER-SHEET ENTRY DATED 20.01.2015 AND NO SECOND OPPORTUNITY WAS PROVIDED T O THE ASSESSEE. ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 5 AFTER CONSIDERING THE ASSESSMENT RECORD, THE SUBMIS SION AND ADDITIONAL EVIDENCES FURNISHED BY ASSESSEE WERE ADMITTED AND F ORWARDED TO THE ASSESSING OFFICER FOR HIS REMAND REPORT, THE ASSESS EE WAS ALSO DIRECTED TO APPEAR BEFORE THE ASSESSING OFFICER ON 27.02.201 7. THE REMAND REPORT OF THE ASSESSING OFFICER WAS RECEIVED ON 21. 04.2017. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT GRANTED RELIEF TO THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW CAREFULLY. WE HAVE NOTED THAT DURING THE FIRST APPELLATE PROCEEDING, THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER NEITHER ISSUED ANY SHOW-CAUSE NOT ICE NOR GIVE ANY OPPORTUNITY AND SUBMITS THAT THE ADHOC DISALLOWANCE ARE LIABLE TO BE DELETED. THE ASSESSEE ALSO FURNISHED THE ADDITIONAL EVIDENCE UNDER RULE 46A. THE LD. CIT(A) AFTER PERUSING THE ASSESSMENT R ECORD RECORDED THAT VIDE ORDER-SHEET ENTRY DATED 20.01.2015, THE ASSESS EE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT. NO SECOND OPPORTUNITY WAS GRANTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NO T ISSUED ANY SHOW- CAUSE NOTICE BEFORE MAKING VARIOUS DISALLOWANCES. T HE LD. CIT(A) ADMITTED THE ADDITIONAL EVIDENCE WHICH CONSIST OF V ARIOUS BILLS AND VOUCHERS AND FORWARDED THE SAME TO THE ASSESSING OF FICER WITH THE DIRECTION TO THE ASSESSEE TO APPEAR BEFORE THE ASSE SSING OFFICER ON 27.02.2017 ALONG WITH THE NECESSARY BILLS AND VOUCH ERS. THE ASSESSEE ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 6 REPORTED TO THE LD. CIT(A) THAT THEY APPEARED BEFOR E THE ASSESSING OFFICER ON THE DATE FIXED ALONG WITH BILLS AND VOUC HERS AND COMPLETE SET OF AUDITED BOOKS OF ACCOUNT. THE LD. CIT(A) RECORDE D THAT ASSESSING OFFICER HAS NOT FURNISHED HIS REMAND REPORT. THEREF ORE, VIDE LETTER/ORDER DATED 12.04.2017 WAS CALLED ALONG WITH ASSESSMENT R ECORD. THE ASSESSING OFFICER ATTENDED THE PROCEEDING BEFORE TH E LD. CIT(A) ALONG WITH ASSESSMENT RECORD. ON PERUSING OF RECORD, THE LD. CIT(A) RECORDED THAT ON THE GIVEN DATE, THE ASSESSEE HAD APPEARED B EFORE THE ASSESSING OFFICER ALONG WITH ALL BILLS, VOUCHERS AND AUDITED ACCOUNTS. THE ASSESSING OFFICER ADMITTED THAT NO DISCREPANCY WAS FOUND IN THE BILLS, VOUCHERS AND BOOKS OF ACCOUNT MAINTAINED BY ASSESSE E AND ALL NECESSARY BILLS PRODUCED WERE VERIFIED. THE ASSESSING OFFICER UNDERTOOK TO FURNISH REMAND REPORT WITHIN NEXT TWO WORKING DAYS. ON 21.0 4.2017, THE ASSESSING OFFICER FURNISHED THE REMAND REPORT. THE LD. CIT(A) HAS RECORDED THE CONTENTS OF REMAND REPORT IN PARA-6.1. 15 AT PAGE NO. 23 TO 34 OF HIS ORDER. THE COPY OF REMAND REPORT WAS FURN ISHED TO THE ASSESSEE FOR THEIR COMMENT. THE ASSESSEE FURNISHED THEIR RES PONSE TO THE REMAND REPORT. THE COMMENTS/REPLY OF ASSESSEE IS RECORDED BY LD. CIT(A) IN PARA-6.1.6 AT PAGE NO. 35 TO 38 OF HIS ORDER. 8. WE HAVE NOTED THAT AFTER RECORDING THE CONTENTS OF REMAND REPORT AND THE REPLY/OBJECTION OF ASSESSEE, THE LD. CIT(A) PROCEED ED TO ADJUDICATE THE VARIOUS OTHER GROUNDS OF APPEAL RAISED BY ASSESSEE. IN OUR VIEW, THE ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 7 GROUND OF APPEAL RAISED BY ASSESSING OFFICER/REVENU E HAS NO LEG TO STAND THAT REMAND REPORT WAS NOT CONSIDERED BY ASSESSING OFFICER. IN THE RESULT, GROUND NO.1 OF THE APPEAL IS DISMISSED. 9. GROUND NO.2 RELATES TO DELETING THE ADDITION ON ACC OUNT OF FIXED ASSET. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF A SSESSING OFFICER. THE DR FURTHER SUBMITS THAT LD. CIT(A) ACCEPTED THE EXPLANATION OF ASSESSEE DESPITE BRINGING ADVERSE REMAND REPORT IN RESPECT OF FIXED ASSET BY THE ASSESSING OFFICER. THE LD. DR FOR REVENUE PR AYED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FO R FRESH ADJUDICATION. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE AFTER APPRECIATING T HE EVIDENCE AND THE REMAND REPORT FURNISHED BY ASSESSING OFFICER. THERE IS ONLY MISTAKE IN DATES OF INVOICES WHICH WERE EXPLAINED TO THE LD. C IT(A). 10. WE HAVE CONSIDERED THE CONTENTION OF BOTH THE PARTI ES. IN THE BALANCE- SHEET, THE ASSESSEE HAS SHOWN THE ADDITION OF RS. 5 ,60,40,964/-, WHICH CONSIST OF RS. 5,10,69,423/- ON ACCOUNT OF COMPUTER S, RS. 38,44,488/- ON ACCOUNT OF LEASE HOLD IMPROVEMENTS, RS. 11,20,820/- ON ACCOUNT OF OFFICE EQUIPMENTS AND RS. 6,233/- ON ACCOUNT OF FUR NITURE & FIXTURES. THE ASSESSING OFFICER MADE ADDITION HOLDING THAT TH E ASSESSEE FAILED TO PRODUCE THE ORIGINAL COPY OF BILLS FOR PURCHASE OF ASSET AND NO COPY OF BILLS FOR VERIFICATION OF GENUINENESS WERE PRODUCED . THE ASSESSING OFFICER, THEREFORE, MADE THE ADDITION OF RS. 97,68, 069/-. BEFORE THE LD. ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 8 CIT(A), THE ASSESSEE SUBMITTED THAT THE ASSESSEE HA S SHOWN THE ADDITION OF RS. 5,60,40,964/- TO THE FIXED ASSETS DURING THE RELEVANT PERIOD AND CLAIMED DEPRECIATION OF RS. 2,24,93,514/- UNDER SEC TION 32. THE ASSESSING OFFICER FAILED TO CONSIDER THAT ASSESSEE HAS NOT CHARGED THE AFORESAID AMOUNT AS REVENUE EXPENSES IN ITS PROFIT & LOSS A/C. THE ASSESSEE BY FOLLOWING THE STANDARD ACCOUNTING POLIC Y CAPITALIZED THE SAID ADDITION TO THE FIXED ASSETS AND CLAIMED DEPRECIATI ON. THE ASSESSEE PRAYED THAT DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF ADDITION OF COST SHOULD BE DELETED AS THE AMOUNT WA S NOT CLAIMED AS DEDUCTION FROM THE TAXABLE INCOME. ON THE SUBMISSIO N OF ASSESSEE, THE ASSESSING OFFICER FURNISHED HIS REMAND REPORT ON 21 .04.2017. IN THE REMAND REPORT, THE ASSESSING OFFICER STATED THAT AS SESSEE MADE ADDITION TO THE FIXED ASSET NAMELY COMPUTERS, FURNITURE AND FIXTURE AND OFFICE EQUIPMENT. ON ACCOUNT OF ADDITION ON COMPUTER, THE ASSESSING OFFICER IDENTIFIED DISCREPANCIES IN FOUR RECEIPT WITH REGAR D TO RECEIPT FOR INVOICES NO. 1112/126089 AND FOR INVOICES NO. 1112/ 126090 BOTH DATED 29.11.2011 FOR RS. 77,000/- EACH, INVOICES NO. 1112 /135293 & INVOICES NO. 1112/135293 BOTH DATED 10.01.2012 FOR RS. 2,000 /-. THE ASSESSING OFFICER ON THE ABOVE DISCREPANCIES JUSTIFIED THE DI SALLOWANCE OF RS. 97,68,069/-. THE SECOND ADDITION TO FIXED ASSET REL ATES TO FURNITURE & FIXTURES. THE ASSESSING OFFICER IN HIS REMAND REPOR T ACCEPTED THAT ALL INVOICES IS DULY VERIFIABLE AND CERTIFIED BY AUDITO RS. FOR ADDITION TO ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 9 OFFICE EQUIPMENTS, THE ASSESSING OFFICER IN HIS REM AND REPORT STATED THAT ON VERIFICATION, IT WAS NOTED THAT EQUIPMENTS OF RS . 48,16,877/- WERE PURCHASED IN FINANCIAL YEAR 2008-09. FURTHER, POLYC OM INC. INVOICE DATED 16.12.2011 FOR RS. 49,92,982/- HAS BEEN PUT T O USE ON 15.12.2011. THE SHIPPING OF GOODS/ASSET WOULD HAVE TAKEN A REAS ONABLE TIME FROM USA TO INDIA. THE ASSESSEE HAS SURPRISINGLY USED TH E GOODS PRIOR TO PURCHASE. SIMILARLY, THE GOODS PURCHASED FROM THE S AME CONSIGNEE DATED 28.12.2011 FOR RS. 6,70,446/- HAVE BEEN PUT TO USE ON 31.12.2011, WHICH SHOWS THAT GOODS WERE SHIPPED AND INSTALLED IN GURG AON, INDIA WITHIN LESS THAN THREE DAYS WHICH IS UNBELIEVABLE. THE LD. CIT(A) DELETED THE ENTIRE ADDITION HOLDING THAT THE ASSESSING OFFICER HAS GIVEN HIS REMAND REPORT TO JUSTIFY THE HIGH PITCH ASSESSMENT. BEFORE US, THE LD. AR OF THE ASSESSEE HAS NOT SUBSTANTIATED AS TO HOW THERE WAS A MISMATCH OF DATE. THE ASSESSING OFFICER HAS SPECIFICALLY BROUGHT OUT THE DISCREPANCIES IN ACQUISITION OF VARIOUS ASSETS. THE ASSESSING OFFICE R HAS ONLY ACCEPTED THAT INVOICES REGARDING FURNITURE & FIXTURES ARE VE RIFIABLE. THEREFORE, IN OUR VIEW, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETI NG THE ENTIRE ADDITION WITHOUT SPECIFYING AS TO HOW THE ASSETS WERE PUT TO USE EITHER BEFORE THE DATE OF PURCHASE OR INSTALLED WITHIN THREE DAYS FRO M SHIPPING USA TO GURGAON, INDIA. THUS, THIS GROUND OF APPEAL IS RESO RTED TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH AFTE R VERIFICATION OF THE FACTS AND THE EVIDENCES ABOUT THE ACQUISITION OF TH E ASSET AND PASS THE ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 10 ORDER IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT BEFORE PASSING THE ORDER, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSE. 11. GROUND NO. 3, 4, 5, 7, 9, 10, 12 & 13 RELATES TO DE LETING THE ADHOC DISALLOWANCE @ 25% ON ACCOUNT OF SALARY, CONTRIBUTI ON TO VARIOUS FUNDS, TRAINING & SEMINAR, TRAVELLING & CONVEYANCE, FACILI TIES MAINTENANCE, UTILITY ACCOUNT EXPENSES, FREIGHT EXPENSES AND RECR UITMENT & RELOCATION EXPENSES. THE LD. DR FOR THE REVENUE SU BMITS THAT DURING THE ASSESSMENT, THE ASSESSEE HAS NOT SUBSTANTIATED THE EXPENSES NOR FURNISHED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE EXPENSES. THE ASSESSING OFFICER HAS MADE REASONABLE DISALLOWANCE IN ABSENCE OF VERIFIABLE EVIDENCE. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER MADE ADHOC DISAL LOWANCE WITHOUT ASSIGNING ANY SPECIFIC REASON. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT FIND THAT THE ASSESSING OFFICER HAS N OT SPECIFIED ANY DISCREPANCIES AND CONSIDERING THE REMAND REPORT DEL ETED THE ENTIRE ADDITION/DISALLOWANCE. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFI CER MADE ADDITION ON ADHOC BASIS ON DEDUCTION ON ACCOUNT OF SALARY, CONT RIBUTION TO VARIOUS FUNDS, TRAINING & SEMINAR, TRAVELLING & CONVEYANCE, FACILITIES MAINTENANCE, UTILITY ACCOUNT EXPENSES, FREIGHT EXPE NSES AND ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 11 RECRUITMENT & RELOCATION EXPENSES. BEFORE MAKING AD DITION, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS N OT FILED ANY DOCUMENTARY EVIDENCE NOR FURNISHED ANY DETAILS, THE REFORE, ADHOC DISALLOWANCE ON ACCOUNT OF ALL THESE EXPENSES @ 25% DISALLOWED. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED DETAI LED SUBMISSION ALONG WITH DOCUMENTARY EVIDENCES AS STATED ABOVE, THE SUB MISSION AND THE DOCUMENTARY EVIDENCES OF ASSESSEE WAS FORWARDED TO THE ASSESSING OFFICER FOR HIS REMAND REPORT. THE ASSESSING OFFICE R FURNISHED HIS REMAND REPORT ON 21.04.2017. THE LD. CIT(A) AFTER P ERUSING REMAND REPORT CONCLUDED THAT THE ADDITION ON THE PRESUMPTI ON THAT NO BILLS OR VOUCHER OR BOOKS OF ACCOUNT PRODUCED CANNOT BE SUST AINED ON ADHOC BASIS. THE ASSESSING OFFICER MADE DISALLOWANCE WITH OUT SPECIFYING ANY SPECIFIC INCIDENCE, SUCH DISALLOWANCES ARE NOT SUST AINABLE AS PER THE PROVISIONS OF LAW. 13. WE HAVE INDEPENDENTLY EXAMINED THE DISALLOWANCES. T HE ASSESSING OFFICER MADE 25% DISALLOWANCE ON ACCOUNT OF SALARY, CONTRIBUTION TO VARIOUS FUNDS AND WORKMEN AND STAFF WELFARE. DURING THE REMAND REPORT, THE ASSESSEE FURNISHED DETAILS OF SALARY AND ALLOWA NCES, FURNISHED COPY OF FORM-16 ISSUED TO CERTAIN EMPLOYEE AS SUPPORTING EVIDENCES FOR THEIR SALARY PAID DURING THE YEAR. THE ASSESSEE ALSO FURN ISHED THE BREAK-UP OF CONTRIBUTION MADE TO VARIOUS FUNDS. THE ASSESSEE AL SO FURNISHED DETAILS OF GRATUITY, PF CONTRIBUTION, PF ADMIN. CHARGE, ESI CONTRIBUTION, EDLI ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 12 CONTRIBUTION. DETAILS OF STAFF WELFARE EXPENSES, SE MINAR EXPENSES, WHICH IS DULY RECORDED BY LD. CIT(A) IN PARA-6.1.5 IN ITS ORDER. THE ASSESSING OFFICER OBJECTED ABOUT THE ALLOWANCE BY E XPRESSING HIS VIEW THAT STOCK OPTIONS HAVE BEEN MADE TO THE EMPLOYEES, WHICH HAVE BEEN ADDED TO THE TOTAL INCOME OF RESPECTIVE EMPLOYEE AS PERQUISITE. UNDER WHICH HEAD THE PAYMENTS IS MADE IS NOT VERIFIED. FO R PAYMENT OF HRA MADE TO THREE EMPLOYEES, THE ASSESSING OFFICER STAT ED THAT NO EVIDENCE IS FURNISHED BY THESE EMPLOYEES AS TO WHOM THE HRA HAS BEEN PAID. THE ASSESSING OFFICER FURTHER STATED THAT WORKING O F GRATUITY IS NOT FURNISHED. FOR CLAIM OF PF CONTRIBUTION, THE ASSESS ING OFFICER OBJECTED THAT SAME IS SUBJECTED TO THE PROVISION OF SECTION 43B AND THAT THE ASSESSEE HAS NOT FURNISHED THE PROOF OF PAYMENT. FO R STAFF WELFARE EXPENSES, THE ASSESSEE HAS NOT FURNISHED THE DETAIL S OF EMPLOYEES AND TO WHOM THE PAYMENTS HAVE BEEN MADE FOR USE OF MEAL AN D ENTERTAINMENT COUPON. NO DETAIL OF STAR AWARD WAS FURNISHED. THE PURPOSE OF PAYMENTS FOR STAR AWARD IS NOT EXPLAINED. WE HAVE N OTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS AND ADMISSIBILITY OF EXPENSES RATHER DISPUTED THAT QUANTUM OF THE EXPENS ES. THE ASSESSING OFFICER DURING THE REMAND REPORT HAS NOT SOUGHT SUC H EXPLANATION ABOUT THE QUANTUM OF EXPENSES FROM THE ASSESSEE AND IN TH E REMAND REPORT INSISTED TO SUSTAIN THE ADDITION. IN OUR VIEW, WITH OUT SPECIFYING THE GENUINENESS OF EXPENSES, THE ADHOC DISALLOWANCE IS NOT JUSTIFIED. ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 13 THEREFORE, WE DO NOT FIND ANY MERITS IN THE GROUND NO. 3, 4, 5, 7, 9, 10, 12 & 13, WHICH WE DISMISSED. 14. GROUND NO. 6, 8 & 11 RELATES TO DELETING THE 100% A DDITION ON ACCOUNT OF BUSINESS PROMOTION & ADVERTISEMENT EXPENSES, LEG AL & PROFESSIONAL FEES AND OUTSOURCE SERVICE COST EXPENS ES RESPECTIVELY. THE LD. DR FOR THE REVENUE SUBMITS THAT DURING THE ASSESSMENT, THE ASSESSEE HAS NOT SUBSTANTIATED THE EXPENSES NOR FUR NISHED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE EXPENSES. THE ASSESSING OFFICER HAS MADE DISALLOWANCE IN ABSENCE OF ANY EXP LANATION OR IN ABSENCE OF VERIFIABLE EVIDENCE. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER MADE AD DITION WITHOUT ANY SPECIFIC REASON. THE LD. CIT(A) AFTER CONSIDERING T HE REMAND REPORT FIND THAT THE ASSESSING OFFICER HAS NOT SPECIFIED ANY DI SCREPANCIES AND CONSIDERING THE REMAND REPORT DELETED THE ENTIRE AD DITION/DISALLOWANCE. 15. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PART IES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THE ASSESS ING OFFICER MADE THE ADDITION BY MAKING 100% DISALLOWANCE HOLDING THAT N O PROOF, BILL OR VOUCHER WAS PRODUCED. FOR BUSINESS PROMOTION AND AD VERTISEMENT EXPENSES AND THAT NO TDS UNDER SECTION 194C WAS DED UCED. FOR PROFESSIONAL FEES & TRAVELLING EXPENSES, THE ASSESS ING OFFICER CONCLUDED THAT NO DETAILS WERE FURNISHED. FOR OUTSO URCE EXPENSES, THE ASSESSEE HAS NOT DEDUCTED TDS. THEREFORE, THE ASSES SING OFFICER HAS ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 14 MADE 100% ADDITION ON THESE EXPENSES. THE LD. CIT(A ) DELETED THE ENTIRE ADDITION HOLDING THAT NO DISCREPANCIES IN TH E VOUCHERS AND BOOKS OF ACCOUNT WAS NOTICED BY ASSESSING OFFICER AND THA T ALL THESE FACTS WERE VERIFIED FROM THE ASSESSMENT RECORD THAT ALL THE VO UCHERS AND BOOKS WERE PRODUCED BEFORE ASSESSING OFFICER. 16. WE HAVE EXAMINED ALL THESE ADDITIONS/DISALLOWANCES. FOR LEGAL & PROFESSIONAL EXPENSES, THE ASSESSING OFFICER IN HIS REMAND REPORT STATED THAT ASSESSEE SUBMITTED PART WISE DETAILS OF LEGAL & PROFESSIONAL EXPENSES INCURRED DURING THE YEAR ALONG WITH THE DE TAILS OF TDS. THE ASSESSEE ALSO FURNISHED THE ALL INVOICES OF PARTIES HAVING MAJOR AMOUNTS. ON VERIFICATION OF INVOICES AND TDS, THE ASSESSING OFFICER TRIED TO JUSTIFY THE PAYMENT DUE TO SHORT DEDUCTION OF TDS. THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF PROFESSI ONAL EXPENSES. NO ADVERSE MATERIAL WAS BROUGHT ON RECORD BY ASSESSING OFFICER. THEREFORE, IN ABSENCE OF GENUINENESS OF LEGAL AND PROFESSIONAL EXPENSES, THE 100% DISALLOWANCE IS NOT JUSTIFIED. 17. FOR BUSINESS PROMOTION EXPENSES, THE ASSESSING OFFI CER IN HIS REMAND REPORT STATED THAT THE ASSESSEE FURNISHED PARTY-WIS E DETAILS ALONG WITH DETAILS OF TDS. THE ASSESSEE UNDER THIS HEAD, CLAIM ED EXPENSES RELATING TO THE GIFT ITEM. THE ASSESSEE FURNISHED INVOICES O F PARTIES HAVING MAJOR AMOUNTS AND INVOICES ON SAMPLE BASIS FOR OTHER PART IES. THE ASSESSING OFFICER OBJECTED THE ALLOWANCE ON THE GROUND THAT N O NEXUS OF BUSINESS ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 15 ACTIVITIES AND THAT BUSINESS EXPEDIENCY HAVE NOT BE EN ESTABLISHED AND RECOMMENDED 20% OF DISALLOWANCE. THE ASSESSING OFFI CER NOT DOUBTED THE GENUINITY AND THE IDENTITY OF THE RECIPIENT. TH E ASSESSING OFFICER HAS NOT EXAMINED THE PERCENTAGE OF EXPENSES VIS--VIS T HE BUSINESS TURNOVER OF THE ASSESSEE. MOREOVER, THE ITEMS ON THE ASSESS EE MADE EXPENSES FOR BUSINESS PROMOTION CONSIST OF PEN HOLDERS, PRINTED FOLDERS, LEAFLETS, PENS, MUGS, BLACK MUGS AND BOXES. IN OUR VIEW THE ASSESSEE HAS MADE GENUINE BUSINESS PROMOTION EXPENSES AND THE DISALLO WANCE WAS NOT JUSTIFIED. 18. FOR OUTSOURCES SERVICE COST THE ASSESSING OFFICER IN HIS REMAND REPORT STATED THAT THE OUTSOURCE SERVICE COST WAS CLAIMED TO HAVE BEEN INCURRED ON CENTRALIZED TRAINING EXPENSES. THE SAID EXPENSES WAS MADE TO THE ASSOCIATED ENTERPRISES M/S POLYCHAM INC IN USA, WHI CH HAD CONDUCTED THE TRAINING. THE TDS PROVISIONS ARE NOT APPLICABLE , SO NO TDS WAS MADE. THE ASSESSEE FURNISHED THE DETAILS OF TRAININ G PROGRAM AND THE BREAKUP AND DETAILS OF THE EXPENSES ALONG WITH THE DETAILS OF THE PARTICIPANTS, VENUE AND DATE. THE ASSESSING OFFICER SUGGESTED DISALLOWING 25% OF SUCH EXPENSES. WE HAVE SEEN THAT WHEN THE ACTIVITY OF THE TRAINING PROGRAM AND THE GENUINENESS OF THE EXPENSES IS NOT DOUBTED BY THE ASSESSING OFFICER NO DISALLOWANCES O F SUCH TRAINING OF OUTSOURCE SERVICE COST IS JUSTIFIED. MOREOVER, THE ASSESSEE HAS PAID THE EXPENSES TO ITS ASSOCIATED ENTERPRISES, WHOSE IDENT ITY IS NOT IN DISPUTE. IN ITA NO. 4985 MUM 20 17-M/S POLYCOM UNIFIED COMMUNICATIONS SOLUTIONS PVT . LTD. 16 OUR VIEW THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SUCH DISALLOWANCE. IN THE RESULT THE GROUND NO. 6, 8 & 11 RAISED BY THE REVENUE ARE ALSO DISMISSED. 19. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/05/2019. SD/- SD /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 22.05.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI