Infinite Civil Solutions Pvt. Ltd., Ahmedabad V. The Dy.CIT, Circle-2(1)(1), Ahmedabad

ITA 541/AHD/2022

AI Insights

The case involves Infinite Civil Solutions P. Ltd. appealing against a penalty order related to the assessment year 2014-15, which was initially passed by the DCIT, Circle-2(1)(1), Ahmedabad, and later upheld by the CIT(A). The primary issue was the addition of Rs. 11,85,000 as bogus expenditure under the head of legal and professional charges. The Tribunal noted that similar payments had been allowed in previous years and no disallowance was made in subsequent years, indicating a consistent treatment of such expenses in the assessee's case. The Tribunal found that the assessee had provided sufficient evidence to substantiate the payments and that the lower authorities had not adequately addressed these evidences.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124734 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-06-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 06-12-2022
• Other Referred Cases: JCIT vs. Tractors & Farm Equipments Ltd., Shahrukh Khan Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHADRESH
• Keywords: Additional evidence; Condonation of delay; TDS
• Section: 143(3); 37(1); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I. T.A. No. 541/Ahd/20 22 ( नधा रण वष / A ss es sment Year : 2014-15) I nf i nit e C i vi l So lu t io ns P . L t d. F. P. 2 5, N r . A d i t ya Eli ga nc e, C I M S H o s pi ta l R o a d, T ha lt ej , A h m ed a b a d - 3 80 052 बनाम/ Vs . T h e D C IT C ir c l e- 2( 1 ) ( 1 ), A h m e da b ad थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A B C I 7 5 8 6 H (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Dhinal Shah & Shri Bhadresh Gandhakwala, A.Rs. यथ क ओर से/Respondent by : Shri Atul Pandey, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 22/06/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 05/07/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the assessee is directed against the order dated 18.07.2017 passed by the Ld. Commissioner of Income Tax (Appeals)- 2, Ahmedabad arising out of the penalty order dated 15.12.2016 passed by the ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 2 – DCIT, Circle-2(1)(1), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2014-15. 2. The appeal is time barred by 1906 days. The application for condonation of delay has also been filed by the appellant prepared on 29.11.2022 before us alongwith an affidavit filed by the appellant dated 03.12.2022. 3. The impugned order was passed by the Ld. CIT(A) under Section 143(3) of the act dated 18.07.2017 against the order passed by the Ld. AO dated 15.12.2016 for A.Y. 2014-15 which was received by the Accountant of the appellant, namely, Shri Himanshu Shah on 20.07.2017. Due to work pressure, the fact of such passing of orders by the Ld. CIT(A) went out of mind. Subsequently, the nation suffered from Covid-19, commencing from the end of 2019 continued till March 2022. Somewhere in the Month of November 2022, the Director enquired the said Accountant as to whether the order of appellate authority for A.Y. 2014-15 was received by him whereupon the order was found out by the said Accountant on 29.11.2022. Immediately thereafter he was advised to send the same to the Office of the CA for filing the appropriate appeal before us and after an elapse of almost 5 years 4 months the appeal was filed. The above said fact was narrated by the Ld. Counsel appearing for the assessee Mr. Dhinal Shah. Such argument was also supported by the application for condonation of delay filed by the Director of the appellant company and the affidavit affirmed by the said Accountant, namely, Shri Himanshu Shah dated 3 rd December, 2022. Needless to mention the said affidavit has also been filed before us. Barring the period suffered ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 3 – from Corona pandemic, there is actually 2½ years delay in filing the appeal before us as also pointed out by the Ld. Counsel appearing for the assessee; otherwise, no negligence on the part of the appellant in filing the appeal before us as contended by him. It was candidly submitted by him that due to the work pressure of the Accountant the fact of filing of appeal against the order impugned went out of mind as already narrated in the application for condonation of delay and in the affidavit as well. As the appellant has a fair chance of success in the appeal preferred before us since the issue is also covered in appellant’s own case in favour of the appellant the assessee would be seriously prejudiced in the event, the appeal is not allowed. In that view of the matter, he also prays before us to consider the aspect of prejudice theory to condone the delay. However, the Ld. DR vehemently argued against such submissions made by the Ld. AR. 4. Upon perusal of the entire set of documents, particularly, the application for condonation of delay and the affidavit affirmed by the Accountant, namely, Shri Himanshu Shah whom the entire duty was cast upon to file the appeal before us, we find that the assessee faithfully stated the fact without any concealment or making any attempt to misrepresent the fact before us in order to pray condonation of delay. Thus, considering the entire facts narrated by the appellant faithfully, without any ploy, we find ‘sufficient cause’ has been shown in not being able to prefer the appeal before us in due time by the appellant. In our considered opinion, under these present facts and circumstances of the case as substantial justice being paramount and pivotal in the absence of malice in fact and keeping in mind the prejudice theory, the ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 4 – delay in filing the appeal be condoned. We, thus, condone the delay with the above observation. 4. The addition on account of legal and professional charges to the tune of Rs.11,85,000/- treating the same as bogus expenditure is subject matter before us. 5. During the course of assessment proceeding, upon perusal of the P&L account, it was found that assessee claimed an amount of Rs.97,46,506/- on account of legal and professional fees during the year under consideration as against the legal and professional fees of Rs.49,29,421/- claimed by the appellant in preceding assessment year. It was further noticed that the appellant made payment in respect of consultancy fees to its related parties. Details of all these transactions entering into with the persons covered under Section 40A(2)(b) of the Act, including the nature of transaction, amount of transaction and as to whether those transactions were entered into with the rate comparable to the market rate was asked for from the appellant, whereupon on 22.07.2016, details were submitted from which, fact of making following payments, in addition to salary and interest to related parties revealed: i. Consulting serving paid to Patel Consultancy Rs.250000 ii. Consulting serving paid to P&P Associates Rs.235000 iii. Consulting serving paid to Dhanji R. Patel Rs.700000 Rs.1185000 According to the Ld. AO, no comparative evidence or justification was given in respect of services so rendered by those technical persons. The basis of payment of consultancy fees made to them was, thus, found to be bogus and having regard to the fact of not disclosing of such payment as exclusively for ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 5 – the purpose of business or profession, the Ld. AO disallowed the same under Section 37(1) of the Act to the tune of Rs.11,85,000/-, which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us. 6. At the time of hearing, Ld. Counsel appearing for the assessee submitted before us that the issue is squarely covered by the judgment passed by the Chennai Bench, reported in the matter of JCIT vs. Tractors & Farm Equipments Ltd., reported in [2007] 104 ITD 149 (Chennai). Moreso, in assessee’s own case for A.Y. 2012-13, payments made to the same parties to the tune of Rs.25,30,500/- were allowed by the Co-ordinate Bench. Apart from that, on the identical issue in the A.Y. 2013-14, no scrutiny was done on the identical issue and in assessee’s own case for A.Y. 2015-16, no disallowance was made by the Department in scrutiny assessment. A copy of this order passed by the Co-ordinate bench has already been annexed by the appellant in paper book filed before us. Such factual aspect of the matter has not been able to be controverted by the Ld. DR. 7. We have heard the rival submissions made by the respective parties and perused the orders passed by the authorities below and order passed by the Co-ordinate Bench in ITA No.772/Ahd/2016 for A.Y. 2012-13 in assessee’s own case where identical issue has been found to be allowable with the following observation: 11. “In this case, ld. A.O. has made disallowance under the head of legal and professional fee payment made to the persons specified u/s. 40A(2)(b) of the Act. During the year, the appellant has claimed the legal and professional fee at Rs. ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 6 – 77,18,101/- as against the preceding year's claim at Rs. 44,12,760/-. The following payments were made to the related persons in addition to salary and interest. 1. Consulting service payment to Patel Consultancy, Smt.Pragna G. Patel W/o. Shri Got/rang D. Patel who is one of the directors in the appellant company. Rs. 8,46,000/- 2. Consultancy Service payments to PMP Associates Prop. Smt. Payal Pankaj Goyal w/o. Smt. Pankaj Goyai who is one of the director in the appellant Company Rs. 8,46,000/- 3. Consulting services paid to Shri Dhanji R. Patel father of Shri Gaurang D, Patel, who is one of the directors in the appellant company Rs. 8,38,500/- 12. When lower authorities asked for the qualification of above said three persons and nature of service rendered by them in support of claim of consulting fee, assessee failed to submit any detail before the lower authorities even though TDS was deducted. 13. In support of its contention, assessee filed details of payment and other supporting evidences such as quotations invoices, work order for services , copy of ledger account and details of work being carried out by Ms. Pragnaben, Ms. Payalben and Mr. Dhanjibhai and same are part of paper book filed by the assessee and certain documents were filed before the Ld. CIT(A) who called for remand report and Ld. A.O. could not point out any defect or inaccuracy in the details submitted by the assessee. It is pertinent to note here that assessee also filed a comparative chart where for similar kind of jobs, assessee made similar payment to unrelated parties and same is part of paper book. 14. The Ld. CIT(A)after calling for remand report rejected the additional evidences filed by the assessee. In our considered opinion, Ld. CIT(A) should have allowed the additional evidence particularly where evidences had been allowed to be in and subsequently forwarded to the A.O. for comments and at later stage it cannot be allowed to reject such evidences filed by the assessee. So In view of the above, we allow additional evidence filed by the assesse and after considering additional evidences, we allow this appeal. 15. The ITAT (Mumbai) in the matter of Shahrukh Khan Vs. DCIT 13 SOT 61 wherein it is held that mere making disallowance u/s 40A(2) onus to prove unreasonableness is on the Ld. A.O. but in present case no such exercise is being done by the A.O and same is amounting to miscarriage of justice and after considering the additional evidences and other material available on record, we are of the view, assesse should be granted relief.” ITA No. 541/Ahd/2022 (Infinite Civil Solutions P. Ltd. vs. DCIT) A.Y.– 2014-15 - 7 – 8. Thus, having regard to the facts and circumstances of the case and the identical issue as discussed hereinabove in assessee’s own case for different years, respectfully relying upon the said order passed by the Co-ordinate Bench in assessee’s own case for A.Y. 2012-13, we do not hesitate to delete the addition made to the identical parties on account of legal and professional fees which is found to be wrongly added by the authorities below. Thus, the ground of appeal filed by the appellant is, therefore, allowed. 9. In the result, assessee’s appeal is allowed. This Order pronounced on 05/07/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05/07/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad