M/s. Spar Krognos Marketing Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5436/DEL/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4671 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 08-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Assessee Lawyers: H P AGARWAL
• Keywords: Bad and doubtful debts; TDS
• Section: 271(1)(c); 201; 73; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 5436/DEL/2014 : ASSTT. YEAR : 201 0-11 ITA NO. 1375/DEL/2016 : ASSTT. YEAR : 2011-12 1. M/S SPAR KROGNOS MARKETING PVT. LTD., EXEVO BUILDING, G- 6/B-1, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI 2. C/O S S KOTHARI MEHTA & CO. (CHARTERED ACCOUNTANTS), 146- 148, TRIBHUVAN COMPLEX ISHWAR NAGAR, MATHURA ROAD, NEW DELHI - 110065 VS INCOME TAX OFFICER, WARD-9(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAICS2241J ASSESSEE BY : SH. H. P. AGARWAL, CA REVENUE BY : SH. SARAS KUMAR, SR. DR DATE OF HEARING: 02 . 0 1 .2020 DATE OF PRONOUNCEMENT: 20 .02 .2020 ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A)-XII, NEW DELHI DATED 26.08.2014 AND THE ORDER OF LD. CIT (A)-8, NEW DELH I DATED 03.12.2015. 2. IN ITA NO. 5436/DEL/2014, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 2 2. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS. 14,82,000 /- . 3. THE LD. CIT(A) ERRED BOTH IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING DISALLOWANCE AMOUNTING TO RS. 8,92,847 ON ACCOUNT OF SERVICE TAX/-. 4. THE LD. ASSESSING OFFICER ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 14,48,828/- BEING INCOME SHORT BOOKED WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES O F THE CASE. 5. THE LD. CIT(A) ERRED BOTH IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING DISALLOWANCE AMOUNTING TO RS. 20,62,589/-ON ACCOUNT OF UNVERIFIABLE EXPENSES. 6. THE LD. CIT(A) ERRED BOTH IN LAW AND ON THE FACT S OF THE CASE BY CONFIRMING INTEREST CHARGED UNDER SECTION 234B. 234C & 234D. 7. THE LD. CIT(A) ERRED BOTH IN LAW AND ON THE FACT S OF THE CASE BY CONFIRMING WITHDRAWAL OF INTEREST GRANTED U/S 244A. 8. THE LD. CIT(A) ERRED BOTH IN LAW AND ON THE FACT S OF THE CASE IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) SEPARATELY. 3. IN ITA NO. 1375/DEL/2016, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THAT THE LD. CIT (A) HAS ERRED BOTH IN LAW AND ON THE FACTS BY TREATING COMPUTER SOFTWARE EXPENSES AMOUNTING TO RS.12,997/- AS PREPAID. 2. THAT THE LD. CIT (A) HAS ERRED BOTH IN LAW AND O N THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF 5% OF PROFESSIONAL EXPENSES AMOUNTING TO RS.2,25,613/- ON ADHOC BASIS. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 3 DISALLOWANCE OF 10% OF DATABASE & POSTAGE EXPENSES AMOUNTING TO RS.3,52,035/- ON ADHOC BASIS. 3. THE LD. CIT (A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.41,880/- ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 194C. 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR , THE ASSESSEE HAS WRITTEN OFF THE BAD DEBTS OF RS.83,39, 840/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAS SUBMITTED THE DETAIL TOTAL BAD DEBTS WRITTEN OFF AM OUNTING TO RS.83,39,840/- OUT OF WHICH RS.81,91,048/- RELATING TO M/S NOKIA INDIA (P) LTD. AND RS.1,48,792/- PERTAINS TO M/S INDIA BULLS RETAIL SERVICES (IBRS) LTD. THE ASSESSING OF FICER AFTER EXAMINING MADE ADDITION OF RS.73,00,000/- RELATING TO M/S NOKIA INDIA (P) LTD. THE ASSESSEE HAS RECEIVED RS.5 8,18,000/- IN THE FINANCIAL YEAR 2011-12 AND OFFERED IT TO TAX AS OTHER INCOME IN THE ASSESSMENT YEAR 2012-13. THE LD. CIT (A) CONFIRMED THE REMAINING AMOUNT OF RS.14,82,000/-. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. DURING THE HEARING, IT WAS ARGUED THAT THE BAD D EBTS HAVE ARISED OWING TO THE FOLLOWING REASONS: 'SPAT SOLUTION MERCHANDISING PRIVATE LIMITED WAS CA RRYING OUT RETAIL MERCHANDISING FOR NOKIA. THE PAYMENT TERMS WERE IMMEDIATE FOR THE DATE OF INVOICE RAISED. HOWEVER, NOKIA WAS IRREGULAR IN PAYMENTS, LEADING TO WORK HAVING TO BE CURTAILED ON PREVIOUS OCCASIONS. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 4 AS ON DECEMBER 31, 2008, OUTSTANDING HAD AGAIN BUIL T UP TO RS.1.286 CRORE WHICH LED TO MARKET ACTIVITIES BEING RESTRICTED WHICH LEADS TO PERIODICAL STOPPING OF WO RK AND NOKIA VISIBILITY SUFFERING. HENCE THERE WERE COMMERCIAL DISAGREEMENTS WITH NOKI A AN ON 4TH AUGUST, 2009, NOKIA COMMUNICATED THE MERCHANDISING PROJECT WOULD COME TO AN END IN AUGUS T 2009. AT THE TIME OF TERMINATION OF THE PROJECTS, NO PAYM ENT HAD BEEN RECEIVED BY SPAR FROM MARCH, 2009 ONWARD EXCEPTS FOR A COUPLE OF MINOR AMOUNTS. ON FOLLOWING UP FOR RELEASE OF OUR OUTSTANDING PAYM ENTS, SPAR WAS ADVISED THAT FURTHER PAYMENTS WOULD BE RELEASED ONLY AFTER RECONCILIATION. THERE WAS NO RESPONSE BY NOKIA ON FOLLOW UPS REQUES TING FOR ACCOUNTS RECONCILIATION ON SEPTEMBER 1, 2009 SP AR COMMUNICATED TO NOKIA THAT THE POINT OF SALE MATERI AL LYING IN SPAR GODOWN WOULD BE HANDED OVER ONLY ON CLEARING OF THE OUTSTANDING WHICH WAS RS. 1.03 CROR ES. ON OCTOBER 8, 2009 NOKIA ASKED FOR THE POINT OF SAL E MATERIAL INVENTORY TO BE HANDED OVER SPAR DECLINED, REQUESTING FOR THE OUTSTANDING ISSUE TO BE CLEARED AND SPECIFYING THAT IT WOULD ADVISE DATE TILL WHICH THE WAREHOUSE MATERIALS COULD BE USED, AND IF NOT HANDE D OVER BEFORE SAID DATED, THE COMMERCIAL WILL DEDUCT THE VALUE FROM OUR OUTSTANDING. NO DATE WAS COMMUNICATED TO SPAR FOR THE HANDOVER O F THE INVENTORY. SPAR REPEATEDLY FOLLOW-UPS FOR THE RESOLUTION. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 5 BUT NO RESOLUTION WAS DONE AND NOKIA INFORMED THAT IT WOULD BE DEDUCTING RS. 73 LACS AND OTHER CHARGE FRO M SPAR'S OUTSTANDING. NOKIA DID NOT RESPOND TO SPAR'S REQUEST FOR RESOLUT ION AND NOR WERE ANY PAYMENTS MADE. 7. THE LD. AR HAS ALSO TOOK US THROUGH THE CORRESPO NDENCE BETWEEN THE NOKIA AND THE ASSESSEE. HE ARGUED THAT THE ASSESSEE HAS ALREADY RECOVERED THE DUES TO THE TUNE OF RS.58,00,000/- AND THE AMOUNT WHICH HAS BEEN RECEIV ED IS BEING OFFER TO TAX AND IN CASE ANY AMOUNT RECEIVED IN FUTURE DAYS WOULD ALSO BE OFFERED TO TAX. HE ARGUED THAT T HE REVENUE CANNOT DISALLOW THE BAD DEBTS IRRECOVERABLY WRITTEN OFF BY THE ASSESSEE ON ACCOUNT OF THE VALUE OF INVENTORY WHICH HAS BECOME OBSOLETE WITH PASSING OF THE TIME. 8. ON THE OTHER HAND, THE LD. DR ARGUED THAT IT IS TOO PREMATURE TO TREAT THE OUTSTANDING AMOUNT AS BAD DE BTS, AS THERE IS FURTHER SCOPE OF EARNING INCOME BY WAY OF DISCOUNTED SALE BY THE GOODS STILL AVAILABLE WITH THE ASSESSEE . 9. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 10. THE STATUTORY POSITION ON BAD DEBTS AS PER SECT ION 36(1)(VII) OF THE INCOME TAX ACT, 1961 AS AMENDED W .E.F. 01.04.1998 IS AS UNDER: 'SECTION 36: OTHER DEDUCTIONS (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 6 DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRE D TO IN SECTION 28 (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR:' FURTHER, SUB-SECTION (2) OF SECTION 36 STOOD AS UND ER: '(2) IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THEREOF, THE FOLLOWING PROVISIONS SHALL APPLY (I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOU S YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THERE OF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY-LENDING WHICH IS CARRI ED ON BY THE ASSESSEE;' THE PROVISION OF CLAUSE (VII) PRIOR AND POST AMENDM ENT ARE SUBJECT TO PROVISIONS OF SUB-SECTION (2) WHERE IT IS A PRE-REQUISITE THAT THE DEBT SHOULD HAVE BEEN TAKE N INTO ACCOUNT IN COMPUTING THE INCOME OF THAT YEAR O R OF EARLIER YEARS. AND, HERE, IN CASE OF THE.ASSESSE E, THE ENTIRE AMOUNT OF BAD DEBTS WAS DULY CONSIDERED AS INCOME OF THE CONCERNED YEARS. 11. DURING THE YEAR, THE AMENDED PROVISIONS OF SECT ION 36(1)(VII) BEING DULY COMPLIED, THE ASSESSEE, AFTER BEING SATISFIED THAT THE AMOUNT RECOVERABLE FROM THE DEBT ORS IS NO MORE RECOVERABLE, HAS WRITTEN-OFF THE AFOREMENTIONE D AMOUNT AS BAD IN THE BOOKS OF ACCOUNT. 12. THE CIRCULAR OF THE CBDT REGARDING THE ALLOWABI LITY OF THE BAD DEBTS IS AS UNDER: ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 7 CIRCULAR NO. 12/2016 F.NO.279/MISC./140/2015-ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES ******** NEW DELHI, DATED 30TH MAY, 2016 SUBJECT: - ADMISSIBILITY OF CLAIM OF DEDUCTION OF B AD DEBT UNDER SECTION 36(1) (VII) READ WITH SECTION 36(2) O F THE INCOME-TAX ACT, 1961- REG. PROPOSALS HAVE BEEN RECEIVED BY THE CENTRAL BOARD O F DIRECT TAXES REGARDING FILING OF APPEALS/PURSUING LITIGATI ON ON THE ISSUE OF ALLOWABILITY OF BAD DEBT THAT ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE DISPUTE RELATES TO CASES INVOLVING FAILURE ON THE PART OF A SSESSEE TO ESTABLISH THAT THE DEBT IS IRRECOVERABLE. 2. DIRECT TAX LAWS (AMENDMENT) ACT, 1987 AMENDED TH E PROVISIONS OF SECTIONS 36(1)(VII) AND 36(2) OF THE INCOME TAX ACT 1961, (HEREAFTER REFERRED TO AS THE ACT) TO RATIONALIZE THE PROVISIONS REGARDING ALLOWABILITY O F BAD DEBT WITH EFFECT FROM THE IS1 APRIL, 1989. 3. THE LEGISLATIVE INTENTION BEHIND THE AMENDMENT W AS TO ELIMINATE LITIGATION ON THE ISSUE OF THE ALLOWABILI TY OF THE BAD DEBT BY DOING AWAY WITH THE REQUIREMENT FOR THE ASS ESSEE TO ESTABLISH THAT THE DEBT, HAS IN FACT, BECOME IRRECO VERABLE. HOWEVER, DESPITE THE AMENDMENT, DISPUTES ON THE ISS UE OF ALLOWABILITY CONTINUE, MOSTLY FOR THE REASON THAT T HE DEBT HAS NOT BEEN ESTABLISHED TO BE IRRECOVERABLE. THE H ONBLE SUPREME COURT IN THE CASE OF TRF LTD. IN CA NOS. 52 92 TO 5294 OF 2003 VIDE JUDGMENT DATED 9.2.2010, HAS STAT ED THAT THE POSITION OF LAW IS WELL SETTLED. AFTER 1.4.198 9, FOR ALLOWING DEDUCTION FOR THE AMOUNT OF ANY HAD DEBT O R PART THEREOF UNDER SECTION 36(1)(VII) OF THE ACT, IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF BAD DEBT IS W RITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF ASSESS EE. 4. IN VIEW OF THE ABOVE, CLAIM FOR ANY DEBT OR PART THEREOF IN ANY PREVIOUS YEAR, SHALL BE ADMISSIBLE UNDER SECTIO N 36(1)(VII) OF THE ACT, IF IT IS WRITTEN OFF AS IRRE COVERABLE IN ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 8 THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THAT PREV IOUS YEAR AND IT FULFILLS THE CONDITIONS STIPULATED IN SUB SE CTION (2) OF SUB-SECTION 36(2) OF THE ACT. 5. ACCORDINGLY, NO APPEALS MAY HENCEFORTH BE FILED ON THIS GROUND AND APPEALS ALREADY FILED, IF ANY, ON THIS I SSUE BEFORE VARIOUS COURTS/TRIBUNALS MAY BE WITHDRAWN/NOT PRESS ED UPON. 6. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERN ED. 13. RELIANCE IS PLACED ON THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT [1 90 TAXMAN 391(2010)] WHEREIN IT WAS HELD THAT FOR CLAIMING TH E DEDUCTION OF BAD DEBTS, THE ASSESSEE NEED NOT PROVE THAT THE DEBT HAS ACTUALLY BECOME BAD. ONLY WRITING-OFF OF THE DEBT I N THE BOOKS OF ACCOUNTS IS ENOUGH TO CONSIDER IT AS BAD DEBT. H ENCE, KEEPING IN VIEW THE JUDGMENT OF THE APEX COURT, CIR CULAR OF THE CBDT AND THE FACTS OF THE CASE, WE HEREBY DELET E THE ADDITION MADE ON ACCOUNT OF BAD DEBTS. 14. THE GROUND NO. 3 RELATES TO DISALLOWANCE OF RS. 8,92,847/- ON ACCOUNT OF SERVICE TAX. 15. THE ASSESSING OFFICER MADE AN ADDITION OF RS.8, 92,847/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIF FERENCE BETWEEN SERVICE TAX CHARGED BY THE ASSESSEE DURING THE YEAR AMOUNTING TO RS.2,31,68,112/- AND AMOUNT OF SERVICE TAX DEPOSITED THROUGH THE CHALLANS AGGREGATING TO RS.2,22,75,265/-. THE ASSESSING OFFICER HELD THAT T HE ASSESSEE HAS FURNISHED DETAILS OF CHALLANS ONLY TO THE EXTEN T OF RS.2,22,75,265/- AND CLAIMED RS.8,92,847/- MORE THA N THE VALUE OF CHALLANS. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 9 16. THE SERVICE TAX RULES ENTITLES DEPOSIT OF SERVI CE TAX ON RECEIPT BASIS AND WHEREAS BOOKS OF ACCOUNT OF THE A SSESSEE ARE MAINTAINED ON ACCRUAL BASIS. SINCE, THE SERVICE TAX RULES PROVIDES FOR PAYMENT OF SERVICE TAX ON RECEIPT BASI S, THE ASSESSEE IS ALLOWED TO DEDUCT THE QUANTITY OF THE A MOUNT NOT RECEIVED DURING THE YEAR IN THE COMPUTATION OF INCO ME. THE APPEAL OF ASSESSEE ON THIS GROUND IS ALLOWED. 17. THE GROUND NO. 4 RELATES TO MISMATCH BETWEEN TH E 26AS AND THE REVENUE BOOKED AS PER THE ACCOUNTS. THE ASS ESSEE EXPLAINED THAT THE CLIENTS HAVE BOOKED THE EXPENDIT URE ON PROVISIONAL BASIS AND DEDUCTED TDS ON ADVANCE BILLI NG. THE LD. AR EXPLAINED THAT TOTAL ADVANCE BILLING AT THE END OF FINANCIAL YEAR ARE DEDUCTED FROM THE REVENUE AS CLOSING ADVAN CE BILLING AND THE TOTAL AMOUNT TRANSFERRED TO ADVANCE BILLING IN THE LAST YEAR ARE ADDED TO REVENUE AS OPENING ADVANCE BILLIN G. THE INCOME FROM THE SALE OF SERVICES IS RECOGNIZED ON C OMPLETION OF RESPECTIVE JOB. WE FIND THAT THE REVENUE NEED NOT C REDIT FOR THE TDS FOR WHICH THE CORRESPONDING RECEIPTS HAVE N OT BEEN OFFERED TO TAX. THERE IS ALWAYS BEEN A OVERLAPPING ON THE RECEIPTS IN THE TDS DEDUCTED. KEEPING IN VIEW, THE CBDT HAS ISSUED CIRCULAR, THE RELEVANT PART OF WHICH IS REPR ODUCED BELOW: CIRCULAR NO. 18 OF 2019 F.NO. 370142/1/2019-TPL (PT -1) GOVERNMENT OF INDIA, MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES (TPL DIVISION ) DATED: 8TH AUGUST, 2019 ISSUED CLARIFICATION IN RES PECT OF FILLING-UP OF THE ITR FORMS FOR THE ASSESSMENT YEAR 2019- 20 WHICH IS AS UNDER: QUESTION.19: IN SCHEDULE TDS, ONE IS REQUIRED TO EN TER THE HEAD UNDER WHICH CORRESPONDING RECEIPT HAS BEEN OFF ERED. IN SOME CASES, TDS IS DEDUCTED BY THE PAYER IN CURR ENT ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 10 YEAR, BUT CORRESPONDING INCOME IS TO BE OFFERED IN FUTURE YEARS. HOW TO FILL UP SCHEDULE TDS IN SUCH CASES? A NSWER: IN SUCH CASES, NO TDS CREDIT SHOULD BE CLAIMED UNDE R THE COLUMN IN OWN HANDS FOR THE CURRENT YEAR. IF THIS IS DONE, THE COLUMN CORRESPONDING RECEIPT OFFERED IS GREYE D-OFF AND IS NOT REQUIRED TO BE FILLED UP. (SALIL MISHRA) DIRECTOR (TPL-IV) 18. HENCE, THE ASSESSING OFFICER IS HEREBY DIRECTED TO CARRY FORWARD THE TDS TO THE SUBSEQUENT YEAR AND SUCH CAR RIED FORWARD TDS BE GIVEN CREDIT ONLY IF THE CORRESPONDI NG RECEIPTS ARE OFFERED TO TAX IN THE SUBSEQUENT YEAR. 19. GROUND NO. 5 RELATES TO DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE EXPENSES. 20. DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSE E COMPANY HAD INCURRED VARIOUS EXPENSES ON ACCOUNT OF PURCHAS E OF PRINTING & STATIONARY ITEMS AMOUNTING TO RS.20,62,5 89/-, MAINLY M/S LALJI ENTERPRISES AND M/S SUDIPTO GHOSH IN THE BOOKS. THE ASSESSING OFFICER INTENDED TO VERIFY THE AUTHENTICITY OF THE PURCHASES AND CALLED FOR CONFIRMATION FROM T HE PARTIES FROM WHOM THE PURCHASES WERE MADE, HOWEVER, IN THE ABSENCE OF THE CONFIRMATION FROM THE PARTIES, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE WITH RESPECT TO THE PRINTING AND STATIONERY ITEMS. THE CONTENTION OF THE ASSESSI NG OFFICER ON THE ABOVE GROUND IS HEREUNDER: UNDER THE FACTS AND CIRCUMSTANCES STATED ABOVE, A SUM OF RS.20,25,753/- PERTAINING TO M/S LALJI ENTERPRISES AND RS.36,836/- PERTAINING TO SH. SUDIPTO GHOSH CLAIMED AS EXPENDITURE BY THE ASSESSEE REMAINED UNVERIFIABLE. THEREFORE, THESE EXPENSES TOTALING TO RS.20,62,589/ - ARE NOT ALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 11 21. THE LD. AR ARGUED THAT THE PURCHASES OF PRINTIN G & STATIONERY ITEMS FROM M/S LALJI ENTERPRISES AMOUNTI NG TO RS.19,21,673/- ARE MADE BY THE ASSESSEE ON BEHALF O F ITS CLIENT, NAMELY, HINDUSTAN UNILEVER LTD. AND DELIVER ED THE SAME TO IT AFTER ADDING 5% MARKUP ON PURCHASE PRICE AND ASSESSEE COMPANY DULY PLACED ALL THE PURCHASE BILLS FROM M/S LALJI ENTERPRISES BEFORE THE ASSESSING OFFICER. FURTHER, COPY OF AGREEMENT ENTERED WITH HINDUSTAN UNILEVER LTD. HAS BEEN PLACED BEFORE THE ASSESSING OFFICER WHICH HAS BEEN PLACED (AT PAGE NO. 100-111 OF THE PAPER BOOK), WHICH CLEARLY STATES THAT THE ASSESSEE HAS TO INCUR CERTAIN EXPENSES ON BEHAL F OF ITS CLIENTS AND HAS TO BILL IT TO THE CLIENT AND CLAIM IT AS REIMBURSEMENT AFTER ADDING 5% MARKUP. IT WAS ARGUED THAT ALL THESE PURCHASE INVOICES BEAR TIN NUMBER, AND ADDRES S OF THE PARTY FROM WHOM THE PURCHASES WERE MADE AND ALL THE SE PURCHASES WERE CHARGED TO SALES TAX OR VAT, WHICH C OULD BE VOUCHED FROM THE COPY OF THE INVOICES PLACED ON REC ORD. WE ALSO FIND IN THE RECORDS THAT THE ASSESSEE HAS ALSO DEDUCTED RS.30,35,164/- UNDER THE HEAD INVOICES NOT BOOKED B Y THE CLIENT FOR THE CURRENT YEAR/REVENUE WITHOUT TDS LIA BILITY. HENCE, THE ASSESSING OFFICER IS HEREBY DIRECTED TO EXAMINE THE ISSUE WITH REFERENCE TO THE SHORT BOOKINGS. THE ASS ESSEE IS HEREBY DIRECTED TO SUBMIT THE RECONCILIATION TO THE ASSESSING OFFICER WHO WOULD GO THROUGH THE DETAILS AND ALLOW THE PURCHASES IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 22. THE GROUNDS TAKEN IN THE ASSESSEES APPEAL IN I TA NO. 1375/DEL/2016 PERTAINS TO A) COMPUTER SOFTWARE EXPENSES OF RS.12,997/- B) DISALLOWANCE OF 5% ON PROFESSIONAL EXPENSES ITA NO. 5436/DEL/2014 ITA NO. 1375/DEL/2016 SPAR KROGNOS MARKETING PVT. LTD. 12 C) DISALLOWANCE OF 10% ON DATABASE 23. REGARDING THE SOFTWARE EXPENSES, WE FIND THAT I T IS THE AMOUNT PAID FOR AMC EXPENSES RENEWED FROM TIME TO T IME. HENCE, THERE IS NO NEED TO TAKE US PREPAID EXPENSES . THE ASSESSING OFFICER DISALLOWED 50% OUT OF PROFESSIONA L EXPENSES WHICH THE LD. CIT (A) RESTRICTED 5% WITHOUT ANY BAS IS. SIMILARLY, THE ASSESSING OFFICER DISALLOWED 50% OUT OF DATABASE AND POSTAGE EXPENSES WHICH THE LD. CIT (A) RESTRICTED 10% WITHOUT ANY BASIS. SINCE, THE REVENUE COULD NOT SPELT OUT ANY REASONS FOR DISALLOWANCE EVEN ON NOTIONAL/ADHOC DISALLOWANCE, THE SAME IS HEREBY ORDERED TO BE DELE TED. 24. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/02/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B.R.R. KUMAR) VICE PRESIDENT ACCOUNTANT ME MBER DATED: 20/02/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR