Air Control Engineers, Hyderabad, Hyderabad V. DCIT, Circle-4(1), Hyderabad, Hyderabad

ITA 523/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6507 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SURESH BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Reasonable cause; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 523/HYD/2017 ASSESSMENT YEAR: 2012-13 AIR CONTROL ENGINEERS, HYDERABAD. PAN AAHFA 0640F VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 4(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI B. SURESH BABU DATE OF HEARING 02/07/2018 DATE OF PRONOUNCEMENT 20/07/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28/12/2016 OF CIT(A) 5, HYDERABAD FOR AY 20 12-13. 2. THE ASSESSEE FILED THIS APPEAL WITH A DELAY OF 1 5 DAYS. TO THIS EFFECT, ASSESSEE FILED A PETITION FOR CONDONATION A S WELL AS AN AFFIDAVIT WHEREIN IT WAS STATED THAT SINCE THE MANAGING PAR TNER OF THE FIRM WAS NOT WELL AT THE RELEVANT POINT OF TIME HE COULD NOT CONSULT THE ADVOCATE. A COPY OF THE MEDICAL CERTIFICATE IS ANNE XED TO THE PETITION. FURTHER, IT WAS STATED THAT THE DELAY WAS FOR THE R EASONS BEYOND ITS CONTROL AND IS NOT INTENTIONAL, THEREFORE, THE DELA Y MAY BE CONDONED. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE OBJECTION OF THE LD. DR, WE HEREBY CONDONE THE DELAY AS THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE IN NOT FILING THE APPEAL WITHIN TH E STIPULATED TIME AND THE APPEAL IS ADMITTED FOR HEARING AND ADJUDICATION. 2 ITA NO. 523/HYD/17 AIR CONTROL ENGINEERS, HYD. 3. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILE D ITS RETURN OF INCOME FOR THE AY 2012-13 ON 28/09/2012 DECLARING A TOTAL INCOME OF RS. 75,48,110/-. SUBSEQUENTLY, THE CASE WAS SELECTE D FOR SCRUTINY UNDER CASS. IN RESPONSES TO THE NOTICES ISSUED U/S 143(2) AND 142(1), THE AR OF THE ASSESSEE SUBMITTED THE INFORM ATION AS CALLED FOR. ON EXAMINATION OF THE TRADING AND PROFIT & LOS S ACCOUNT FILED BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAD BOOKED EXPENSES OF RS. 2,11,30,207/- AS WORK EXPENSES FOR THE SALES, SERVICES AND AMC SERVICES PROVIDED BY THE FIRM. ON EXAMINING THE INFORMATION AND VOUCHERS FURNISHED BY THE ASSESSEE, THE AO OBSERVED THAT FOR MANY OF THE VOUCHERS, THE ACTUAL NATURE OF SERVICES/SPARES PURCHASED WERE NOT CLEARLY MENTIONE D. CONSIDERING THE VOLUME OF TURNOVER DONE BY THE ASSESSEE, THE SA LES & SERVICES RENDERED AND AMC SERVICES PROVIDED IN THE LIGHT OF THE TOTAL EXPENDITURE BOOKED BY THE ASSESSEE, THE AO PROPOSED TO DISALLOW RS. 10,00,000/-, FOR WHICH AR OF THE ASSESSEE AGREED FO R SUCH DISALLOWANCE. ACCORDINGLY, THE AO DISALLOWED RS. 10 ,00,000/- AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 85,48,11 0/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE ADDITION WAS MADE ON AGREED BASIS AND HENCE NO APPEAL LIES AGAINST SUCH AGREED ADDITION. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING RS.L0 LAKHS ON AD HOC BASIS / OUT OF THE WORK EXPEN SES INSPITE OF THE FACT THAT THE ASSESSEE PRODUCED THE DETAILS OF THE EXPENDITURE BEFORE THE HON'BLE COMMISSIONER OF INCO ME-TAX (APPEALS) DURING THE COURSE OF APPEAL PROCEEDINGS. 3 ITA NO. 523/HYD/17 AIR CONTROL ENGINEERS, HYD. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER IS EXCES SIVE. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 6. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THOUGH THE ASSESSEE PRODUCED THE DETAILS OF EXPENDITURE BEFORE THE CIT(A), THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON AD HOC BASIS ON MERE ACCEPTANCE OF LD. AR. THERE IS NO BASIS FOR SU CH AD-HOC DISALLOWANCE AND ALSO SIMILAR DISALLOWANCE WAS MADE BY AO IN THE EARLIER AY 2009-10, THE SAME WAS DELETED BY HONBLE ITAT. 7. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON VERIFICATION OF RECORD, WE FIND THAT THE ASSESSEE FILED BEFORE THE AO AS WELL AS CIT(A) COMPLETE LEDGER COP Y OF WORK EXPENSES, WHICH ARE PLACED AT PAGE NOS. 41 TO 85. W E ARE OF THE VIEW THAT ALMOST ALL THE WORK EXPENSES FOR THE SALES, SE RVICES AND AMC SERVICES PROVIDED BY THE ASSESSEE WERE ACCEPTED BY THE AO, HOWEVER, HE MADE AN ADHOC DISALLOWANCE OF RS. 10,00 ,000/- OUT OF TOTAL EXPENSES OF RS. 2,11,30,207/- ON THE GROUND T HAT IN SOME OF THE VOUCHERS THE ACTUAL NATURE OF SERVICES/SPARES PURCH ASED WERE NOT CLEARLY MENTIONED. IT IS NOT THE CASE OF THE AO THA T EXPENSES ARE RELATED TO NON-BUSINESS ACTIVITY. WE FIND THAT ON S IMILAR REASONS FOR THE AY 2009-10, THE AO MADE SIMILAR DISALLOWANCE OF EXPENDITURE AND THE CIT(A) DELETED THE SAME. WHEN THE DEPARTMENT CA ME IN APPEAL BEFORE THE ITAT, AGAINST THE ORDER OF CIT(A), THE I TAT VIDE ITS ORDER DATED 30 TH JUNE, 2014 IN ITA NO. 863/HYD/2013, UPHELD THE ACT ION OF THE CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. IN THIS AY, THE CIT(A) HAS CONFIRMED THE ADDITION BASED ON MUTUAL A CCEPTANCE OF AO AND LD. AR OF THE ASSESSEE. BUT THE PRACTICE OF ACC EPTANCE BY LD. AR 4 ITA NO. 523/HYD/17 AIR CONTROL ENGINEERS, HYD. WITHOUT PROPER ACCEPTANCE OF ASSESSEE IS NOT PROPER . AO SHOULD HAVE BROUGHT ON RECORD THE ACCEPTANCE OF ASSESSEE AS WEL L. SINCE, THE ASSESSEE IS DISPUTING THE ACCEPTANCE IN APPEAL, WE HAVE TO ADJUDICATE ON MERIT ONLY. AS DISCUSSED ABOVE, AO D ISALLOWED WITHOUT ANY BASIS. HENCE, THE AD-HOC DISALLOWANCE WITHOUT A NY BASIS IS BAD IN LAW. THEREFORE, ON CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 10,00,000/- MADE TOWARDS EXPENDITURE. ACCORD INGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE AL LOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH JULY, 2018 KV COPY TO:- 1) AIR CONTROL ENGINEERS, H.NO. 1-2-412/D, GAGANMA HAL COLONY, HYDERABAD. 2) DCIT, CIRCLE 4(1), IT TOWERS, AC GUARDS, HYD ERABAD. 3) CIT(A) 5, HYDERABAD. 4) PR. CIT - 1, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE