DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Swamina International (P) Ltd., Kolkata

ITA 559/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9822 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift
• Section: 44AD; 43B; 133(6); 37(1)

Judgement Text

1 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 559/KOL/2016 ASSESSMENT YEAR: 2012-13 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-10(1), KOLKATA. VS. M/S. SWAMINA INTERNATIONAL PVT. LTD, (PAN: AAECS5223J) APPELLANT RESPONDENT & CO. NO. 53/KOL/2016 IN I.T.A. NO. 559/KOL/2016 ASSESSMENT YEAR: 2012-13 M/S. SWAMINA INTERNATIONAL PVT. LTD, VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-10(1), KOLKATA. CROSS OBJECTOR RESPONDENT DATE OF HEARING 10.07.2018 DATE OF PRONOUNCEMENT 26.09.2018 FOR THE APPELLANT/REVENUE SHRI SALLONG YADEN, ADDL. CIT, SR. DR FOR THE ASSESSEE/CROSS OBJECTOR SHRI SUBASH AGARWAL, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE LD. CIT(A)-4, KOLKATA DATED 18.01.2016 FOR AY 2012- 13. 2. GROUND NO.1 OF APPEAL OF REVENUE IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF PAYMENTS TOWARDS PF AND GROU ND NO.1 OF THE CROSS OBJECTION OF THE ASSESSEE IS SUPPORTING THE ACTION OF THE LD. CIT(A) ON THIS ISSUE. 2 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 2.1. BRIEFLY STATED FACTS ARE THAT FROM THE TAX AUD IT REPORT THE AO FOUND THAT THE ASSESSEE HAS NOT PAID THE EMPLOYEES CONTRIBUTION TOWARDS PR OVIDENT FUND WITHIN THE PRESCRIBED DUE DATES AS PER PROVIDENT FUND ACT. DURING THE COURSE OF HEARING THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE LATE PAYMENT OF PF SHOULD NOT BE ADDED TO THE TOTAL INCOME. IN RESPONSE, THE ASSESSEE STATED THAT AS PER SETTLED P RINCIPLES OF LAW IF THE PAYMENTS HAVE BEEN MADE WITHIN THE DUE DATE OF FILING OF THE RETURN OF INCOME AS PER THE ACT, THE PAYMENT MADE CANNOT BE ADDED. HOWEVER, THE AO REJECTED THE SUBM ISSION OF THE ASSESSEE FOR THE REASON THAT THE AMENDMENT MADE IN THE ACT WAS ONLY IN RES PECT OF EMPLOYER CONTRIBUTION WHICH WAS COVERED UNDER SECTION 43B OF THE INCOME-TAX ACT , 1961 (HEREIN BEFORE AND AFTER REFERRED TO AS THE ACT) AND THAT NO SUCH AMENDMEN T WAS IN RESPECT OF EMPLOYEES CONTRIBUTION WHICH IS COVERED U/S. 36(1)(VA) OF THE ACT. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE DISALLOWANCE AS MADE BY THE AO. AGGRIE VED, REVENUE IS BEFORE US. 2.2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAS DEPOSITED THE E MPLOYEES CONTRIBUTION TO EMPLOYEES RELEVANT ACCOUNT BEFORE THE DUE DATE OF FILING OF R ETURN AS PER THE ACT. THE DUE DATE AS PRESCRIBED IN SEC. 43B(B) OF THE ACT IS IN RESPECT TO REMITTANCE OF THE CONTRIBUTION MADE TO PF SHOULD BE MADE BY THE ASSESSEE ANY TIME BEFORE F ILING OF RETURN AS STIPULATED UNDER SECTION 139(1) OF THE ACT. THE ASSESSEE, WHEN IT CL AIMS DEDUCTION HAS TO HAVE EVIDENCE TO ESTABLISH THE FACT OF REMITTANCE OF PF CONTRIBUTION MADE BEFORE THE RETURN IS FILED AS PER SECTION 139(1) OF THE ACT. IF THE ASSESSEE HAS REMI TTED THE PF BEFORE THE RETURN OF INCOME WAS FILED AS PER SEC. 139(1) OF THE ACT, THE AO OUG HT NOT TO HAVE PROCEEDED ON THE BASIS THAT DUE DATE AS MENTIONED IN SEC. 36(1)(VA) OF THE ACT IS THE DUE DATE FIXED BY THE PF ACT, WHEREAS THE DUE DATE HAS TO BE READ IN CONJUNCTION WITH SEC. 43B(B) OF THE ACT AND BY READING SO, THE DUE DATE AS MENTIONED IN SEC. 36(1) (VA) OF THE ACT IS DUE DATE AS MENTIONED IN SEC. 43B(B) OF THE ACT I.E. BEFORE FILING THE RE TURN FOR THE YEAR UNDER CONSIDERATION. THE LD. DR COULD NOT BRING ANYTHING TO CONTROVERT THE F ACTUAL FINDING OF THE LD. CIT(A) THAT THE PF CONTRIBUTIONS HAVE BEEN REMITTED BY THE ASSESSEE BEFORE THE RETURN OF INCOME WAS FILED AS PRESCRIBED U/S. 139(1) OF THE ACT. IN SUCH A SCENA RIO, WE DO NOT FIND ANY INFIRMITY IN THE 3 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 ORDER PASSED BY THE LD. CIT(A). THE LD. CIT(A) VID E PARA 5.1 OF HIS ORDER HAS HELD THE FOLLOWING: 5.1 AT THE APPELLATE STAGE, THE AR OF THE APPELLA NT ARGUED ON THE MATTER AND THE WRITTEN SUBMISSION ALONG WITH A PAPER BOOK. ON CONSIDERATI ON OF THE SUBMISSION OF THE AR IN THIS REGARD, I FIND THAT THE MATTER IS WELL SETTLED BY D ECISIONS OF VARIOUS JUDICIAL FORUMS WHEREIN IT WAS RULED THAT AS LONG AS THE DEPOSITS ON ACCOUNT O F PF/ESI WERE MADE BEFORE THE FILING OF THE RETURN, THE SAME WOULD BE ALLOWABLE AS DEDUCTIO N. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIJAY SHREE LTD. HELD, AFTER RE FERRING TO THE DECISION OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. ALOM EXTRUSION LTD. THAT THE DEPOSIT OF THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI WO ULD BE ALLOWABLE IF THE SAME IS DEPOSITED WITHIN THE DUE DATE OF FILING RETURN OF I NCOME. IN VIEW OF THE FOREGOING I DO NOT FIND ANY PREMISE TO SUSTAIN THE ACTION OF THE AO WH EN THE SAID IMPUGNED AMOUNT WAS SAID TO BE DEPOSITED BEFORE THE DUE DATE OF FILING OF THE R ETURN. THE AO SHALL VERIFY THIS FACT AND ALLOW THE DEDUCTION ACCORDINGLY. CONSEQUENTLY, THE PROPORTIONATE ADMINISTRATIVE EXPENSES DISALLOWED OF RS.14,98,352/- ALSO STANDS DELETED AC CORDINGLY. 2.3. THEREFORE, FOR THE REASON STATED AFORESAID, WE CONCUR WITH THE VIEW OF THE LD. CIT(A) AS DISCUSSED ABOVE AND, THEREFORE, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE AND GROUND NO. 1 OF THE ASSESSEES CROSS OBJECTION IS I N SUPPORT OF THE ORDER OF LD. CIT(A) HENCE, THE SAME IS DISMISSED BEING INFRUCTUOUS. 3. GROUND NOS. 2 AND 3 OF REVENUES APPEAL ARE AGAI NST THE ACTION OF LD. CIT(A) IN GIVING RELIEF TO THE ASSESSEE BY RESTRICTING THE AD DITION TO 50% UNDER THE HEAD ENTERTAINMENT EXPENSES & ON ACCOUNT OF GIFT EXPENSES WHEREAS T HE CROSS OBJECTIONS OF ASSESSEE ARE FOR THE LD. CIT(A) NOT GIVING FULL RELIEF TO THE ASSES SEE ON THESE ISSUES. 3.1 BRIEFLY STATED FACTS ARE THAT FROM THE P&L ACCO UNT THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 14,21,000/- AND RS.1 ,01,747/- ON ACCOUNT OF ENTERTAINMENT EXPENDITURE AND GIFT EXPENSES RESPECTIVELY. ACCORD ING TO AO, THE ASSESSEE WAS UNABLE TO ESTABLISH THE PROOF OF EXPENDITURE BY PRODUCING THE SUPPORTING BILL, VOUCHERS OR DOCUMENTATION ETC. HENCE, HE DISALLOWED THE CLAIM O F THE ASSESSEE AND ADDED BACK THE SAME TO HIS INCOME. ON APPEAL, THE LD. CIT(A) FOUND IT REASONABLE TO DISALLOW 50% OF BOTH THE EXPENDITURE CLAIMED BY THE ASSESSEE. AGGRIEVED, TH E REVENUE AND ASSESSEE ARE BEFORE US BY FILING APPEAL AND CROSS OBJECTION RESPECTIVELY. 3.2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE PROVIDES SERVICES TO COMPANIES SUCH AS INDIAN OIL, RELIANCE INDUSTRIES, ESSAR PROJECTS AND BHARAT OMAN REFINERI ES. THE ASSESSEE IS A SERVICE PROVIDER 4 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 AND ALSO EXECUTES CONTRACT WORK FOR INSTALLING TOWE RS, COMMISSIONING OF TOWERS AND SUPPLY OF LABOURERS ETC. THE SITES FOR EXECUTION ARE SPRE AD ALL OVER INDIA EVEN IN REMOTE PARTS OF INDIA. THE ASSESSEE HAS TURNOVER OF RS.61.48 CR. C ONSISTS MAINLY OF JOB-WORK RECEIPTS FROM THE REPUTED COMPANIES WHICH ARE SITUATED IN SEZ ARE A AND NON-SEZ AREAS. AS PER SEC. 37(1) OF THE ACT, THE EXPENDITURE INCURRED AND CLAIMED BY AN ASSESSEE SHOULD HAVE BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR BUSINESS INCURRED IN THE PREVIOUS YEAR FOR BUSINESS CARRIED OUT BY THE ASSESSEE BUT IT SHOULD NOT BE CAPITAL EXPENDITU RE, PERSONAL IN NATURE AND FOR AN UNLAWFUL PURPOSE. WE NOTE THAT THE ASSESSEE HAD CLAIMED THE ENTERTAINMENT EXPENSES FOR LOOKING AFTER CLIENTS, ENGINEERS, OFFICIALS AND OTHER DIGNITARIES WHILE THEY VISIT THE SITE OF PROJECTS. WE NOTE THAT OUT OF THE CLAIM OF ENTERTAINMENT EXPENDI TURE OF RS.14.21 LACS UNDER THIS HEAD RS.14.05 LACS HAVE BEEN PAID BY CHEQUE AND THE RES T ONLY I.E. RS.16,000/- HAVE BEEN PAID IN CASH. TAKING INTO CONSIDERATION THE NATURE AND TUR NOVER (RS.61.48 CR.) OF BUSINESS UNDERTAKEN BY THE ASSESSEE IN RUNNING ITS BUSINESS UNDERTAKING, LIKEWISE THE GIFT EXPENDITURE INCURRED ARE ALSO INCURRED BY THE ASSESSEE FOR VISI TING DIGNITARIES TO GIVE AWAY MEMENTOES ETC. SO AN AMOUNT OF RS.1,01,747/- WAS EXPENDED FOR THE PURPOSE OF BUSINESS SO, WE AGREE WITH THE LD. CIT(A) THAT THE EXPENSES ARE ESSENTIAL LY REQUIRED OF RUNNING OF THE BUSINESS OF THE ASSESSEE. WE ALSO NOTE THAT ASSESSEES ACCOUNTS ARE SUBJECT TO AUDIT U/S. 44AD OF THE ACT AND THE AO HAS NOT FOUND ANY DEFECTS IN THE BOOKS M AINTAINED BY THE ASSESSEE. IN SUCH A SCENARIO, THE EXPENDITURE CLAIMED SHOULD HAVE BEEN ALLOWED WHEN THE ASSESSEE HAD SUBMITTED BEFORE THE AO THE LEDGER COPY OF THE ENTE RTAINMENT EXPENDITURE AND VOUCHERS WHICH CONTAINED DETAILS OF EXPENSES INCURRED AT DIF FERENT SITES WHERE CONTRACT JOBS WERE CARRIED OUT. THEREFORE, TAKING INTO CONSIDERATION ALL THESE FACTS, THE AO WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE CLAIM AND FOR THE SAME REASO N THE LD. CIT(A) OUGHT NOT TO HAVE RESTRICTED THE EXPENDITURE ON AD HOC BASIS WITHOUT ANY COGENT GROUNDS TO DO SO. THEREFORE, WE ARE OF THE OPINION THAT THE ENTIRE EXPENDITURE B EING INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS NEED TO BE ALLOWED AND, THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT DELETION OF THE ADDITION MADE ON BOTH THESE COUNTS. THEREFORE, REVENUES GROUNDS ARE DISMISSED AND THE GROUNDS OF ASSESSEES CROSS OBJEC TION ARE ALLOWED. 4. GROUND NO. 4 OF REVENUES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS. 10,00,000/- UNDER THE HEAD SALE OF FLAT AND GROUND NO. 4 OF ASSESSEES CROSS OBJECTION IS IN SUPPORT OF THE ORDER OF LD. CIT(A). 5 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 4.1 BRIEFLY STATED FACTS ARE THAT IT WAS OBSERVED B Y THE AO THAT THE ASSESSEE SOLD PROPERTY AS PER AGREEMENT ENTERED INTO WITH THE BUYER AT RS. 61,80,000/- BUT THE CONSIDERATION WAS SHOWN AT RS.59,40,000/- AS PER THE ACCOUNTS OF THE ASSESSEE. THEREFORE, ACCORDING TO AO, THERE WAS UNDERSTATEMENT OF CAPITAL GAINS BY RS.2,3 6,000/-. THEREFORE, THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO M/S. LEMONGRASS ADVISORS (THROUGH WHOM THE PROPERTY WAS SOLD) AND TO THE DIRECTOR OF REGISTRATION & STAMP REVENUE , KOLKATA TO FIND OUT THE VALUATION OF THE PROPERTY. HOWEVER, AS THE ADEQUATE DETAILS OF PROPERTY AND THE AUTHENTICATED SALE AGREEMENTS WERE NOT RECEIVED IN DUE TIME, THE AO RE SORTED TO MAKING AN AD HOC ADDITION OF RS.10,00,000/-. ON APPEAL, THE LD. CIT(A) DELETED THE AD HOC ADDITION AS MADE BY AO. AGGRIEVED, REVENUE IS BEFORE US AND ASSESSEE HAS FI LED CROSS OBJECTION IN SUPPORT OF THE ORDER OF LD. CIT(A). 4.2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAD SOLD A FLAT DU RING THE YEAR AND HAS SHOWN AN INCOME OF RS.35,63,135/- WHICH WAS REFLECTED AS MISC. INCOME UNDER THE HEAD OTHER INCOME. THE AO NOTED THAT THE ASSESSEE WHEN ASKED FOR THE DETAI LS OF THE RECEIPTS UNDER THE HEAD OTHER INCOME IT HAS DECLARED THAT RS.35,63,135/- WAS THE CONSIDERATION FOR SALE OF PROPERTY HELD BY THE ASSESSEE COMPANY. THE AO NOTED THAT THE SAL E CONSIDERATION AS PER THE AGREEMENT WAS TO THE TUNE OF RS.61,80,000/- BUT AS PER THE PR OFIT BOOKED BY THE ASSESSEE, I.E CAPITAL GAIN HAS BEEN SHOWN ON THE BASIS OF THE SALE CONSID ERATION AT RS.59,40,000/- THUS THE AO NOTED THAT THERE WAS AN UNDERSTATEMENT IN RESPECT T O CAPITAL GAINS TO THE TUNE OF RS.2,36,000/- (RS.61,80,000 RS.59,40,000/-). IN ORDER TO ASCERTAIN THE VERACITY OF THE SALE CONSIDERATION OF THE PROPERTY THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE BROKER (M/S. LEMONGRASS ADVISORS) OF THE PROPERTY AND ALSO TO TH E DIRECTOR OF THE REGISTRATION & STAMP REVENUE, KOLKATA, WHICH WAS NOT TIMELY REPLIED BY T HEM AND THIS FACT AO ACKNOWLEDGES. THEREFORE, HE MADE AN AD HOC ADDITION OF RS. 10 LAC S WHICH HAS BEEN DELETED BY THE LD. CIT(A). IT WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT THE MISS-MATCH OF RS.2,36,000/- WAS ON ACCOUNT OF THE ASSESSEE GIVING BROKERAGE AND OTHER INCIDENTAL CHARGES TO EFFECT THE TRANSFER OF THE PROPERTY. WE DO NOT UNDERSTAND HOW THE AO HAS MADE THE ESTIMATION OF RS. 10 LACS TO DISALLOW THE SAME. WE NOTE THAT THE BOO KS OF ACCOUNT HAVE NOT BEEN REJECTED. THE ASSESSEE HAS PRODUCED THE AGREEMENT/SALE DEED T O SUPPORT ITS CLAIM OF SALE OF THE PROPERTY AND THE LD. CIT(A) HAS RIGHTLY OBSERVED T HAT AN AD HOC ADDITION CANNOT BE 6 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 SUSTAINED. WE NOTE THAT THE AO HAS ARBITRARILY MAD E AN ADDITION OF RS. 10 LACS WHICH THE LD. DR HAS NOT BEEN ABLE TO JUSTIFY. WHEN THE ASSE SSEE HAS PRODUCED THE RECORDS TO SUPPORT THE TRANSFER OF PROPERTY AND THE OTHER DOCUMENTS TO SUBSTANTIATE THAT RS.2,36,000/- HAS BEEN PAID AS BROKERAGE AND OTHER INCIDENTAL CHARGES TO E FFECT THE TRANSFER OF PROPERTY, THE DISALLOWANCE OF RS. 10 LACS IS CLEARLY AN ARBITRARY EXERCISE OF POWER WHICH CANNOT BE SUSTAINED AND, THEREFORE, THE LD. CIT(A) HAS RIGHTL Y DELETED THE SAME WHICH WE CONFIRM. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED AND T HE GROUND OF CROSS OBJECTION OF ASSESSEE IS ALSO DISMISSED BEING INFRUCTUOUS. 5. GROUND NO. 5 OF REVENUES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS. 6,01,193/- UNDER THE HEAD DONATION AND GROUND NO. 5 OF ASSESSEES CROSS OBJECTION IS IN SUPPORT OF THE ORDER OF LD. CIT(A). 5.1. BRIEFLY STATED FACTS ARE THAT THE AO DISALLOWE D THE CLAIM OF THE ASSESSEE SINCE NO DOCUMENTARY EVIDENCES WERE PRODUCED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT RS.6,01,193/- WAS EXPENDED ON BUSINESS EXIGENCIES. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION AS MADE BY THE AO BY FOLLOWING THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF CIT VS. BATA INDIA LTD. 201 ITR 884 AND ANOTHER JUD GMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MYSORE KIRLOSKAR LTD. VS. CIT 166 ITR 836. AGGRIEVED, REVENUE IS BEFORE US AND ASSESSEE HAS FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF LD. CIT(A) . 5.2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE CLAIMED TO HAVE IN CURRED EXPENSES TO THE TUNE OF RS.6,01,193/- UNDER THE HEAD DONATION WHICH WAS D ISALLOWED BY THE AO. ON APPEAL, THE LD. CIT(A) DELETED THE SAME. WE NOTE THAT THE LD. CIT(A) HAS TAKEN NOTE THAT THE SAID EXPENSES HAVE BEEN ACCOUNTED FOR IN ITS BOOKS OF AC COUNT AS WELL AS IN ITS LEDGER ACCOUNT WHICH WERE PRODUCED BEFORE THE AO. IT IS NOT THE C ASE OF THE AO THAT THE SAID EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF THE BUSINESS. TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSEE IS A SERVICE PROVIDER AND SUPPLIES LABOURE RS FOR INSTALLATION OF TOWERS AND COMMISSIONING OF TOWERS IN REMOTE AREAS OF THE COUN TRY AND FOR SMOOTH FUNCTIONING OF ITS BUSINESS HAD TO GIVE CONTRIBUTION TO THE LOCAL ORGA NIZATIONS SO THAT NO HINDRANCES OCCURS IN ITS SMOOTH OPERATION OF PROJECT SITES AND FROM SUCH BUSINESS ACTIVITY THE ASSESSEE COULD NOT HAVE MADE A TURNOVER OF MORE THAN RS.61.48 CR. THE REFORE, TAKING INTO CONSIDERATION THE 7 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE OF THE A SSESSEE, WE DO NOT WANT TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND, THEREFORE, WE DISM ISS THIS GROUND OF APPEAL OF THE REVENUE AND THE GROUND OF CROSS OBJECTION OF ASSESSEE IS AL SO DISMISSED BEING INFRUCTUOUS. 6. GROUND NO. 6 OF REVENUES APPEAL AND GROUND NO. 6 OF ASSESSEES CROSS OBJECTION IS AGAINST THE ACTION OF LD. CIT(A) IN RESTRICTING THE ADDITION TO 5% UNDER THE HEAD TRAVELING EXPENSES WHICH WAS MADE BY THE AO AT 10%. 6.1. BRIEFLY STATED FACTS ARE THAT THE AO FOUND THA T THE ASSESSEE CLAIMED AN AMOUNT OF RS.70,40,492/- ON ACCOUNT OF TRAVELLING AND CONVEYA NCE INCURRED. DURING THE COURSE OF HEARING THE ASSESSEE WAS ASKED TO PRODUCE PROOF OF THE EXPENSES CLAIMED. ACCORDING TO AO, THE ASSESSEE WAS UNABLE TO PRODUCE ANY SUPPORTING B ILL, VOUCHERS OR DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM. HENCE, HE DISALLOWED 10% OF THE TRAVELLING AND CONVEYANCE EXPENSES OF RS.70,40,492/- AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. AGGRIEVED, REVENUE PREFERRED AN APPEAL BEFORE THE L D. CIT(A), WHO RESTRICTED THE DISALLOWANCE TO 5% AGAINST 10% MADE BY AO. AGGRIEV ED REVENUE IS BEFORE US AND ALSO THE ASSESSEE IS AGAINST THE ACTION OF LD. CIT(A) IN RES TRICTING THE DISALLOWANCE AT 5% AND FILED THIS CROSS OBJECTION BEFORE US. 6.2 WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE CLAIMED TRAVELLING AND CONVEYANCE EXPENSES OF RS.70,40,494/-. THE AO DISALLOWED 10% OF THE EXPEN SES FOR WANT OF PROPER DOCUMENTATION. IT WAS NOT THE CASE OF THE AO THAT EXPENDITURE CLAI MED TO HAVE BEEN INCURRED FOR TRAVELLING WAS NOT ON ACCOUNT OF BUSINESS BUT ONLY FOR WANT OF SUPPORTING DOCUMENTS HE RESORTED TO AD HOC DISALLOWANCE OF 10% OF THE CLAIMS. ON APPEAL, THE LD. CIT(A) MADE A FINDING THAT LEDGER COPIES WITH NARRATION AND EVIDENCE HAS BEEN PRODUCED BEFORE THE AO ON THE ISSUE AND THE AD HOC DISALLOWANCE WAS MADE BY HIM SINCE THERE WAS CASH PAYMENT TO EMPLOYEES OF THE COMPANY. IT WAS SUBMITTED BEFORE THE LD. CIT(A) TH AT SINCE THE PROJECT SITES WERE IN FAR FLUNG PLACES AND IN CASE OF EMERGENCY/URGENCY THE E MPLOYEES HAD TO MOVE ON SHORT NOTICES FROM ONE PLACE TO ANOTHER AND FURTHER WHEN THEY INC UR EXPENSES IT HAD TO BE DISBURSED IN CASH AND IT WAS BECAUSE OF THIS REASON THAT CASH PA YMENT OF SMALL AMOUNT GOT DISBURSED TO EMPLOYEES TO MEET THE BUSINESS NECESSITIES. HOWEVER , WE AGREE WITH THE LD. DR THAT WHEN EXPENSES ARE INCURRED EVIDENCE TO SUBSTANTIATE THE SAME HAS TO BE PRODUCED BEFORE THE 8 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 AO/CITA IN CASE IF THE ASSESSEE FAILS THE AO IS AT LIBERTY TO DISALLOW THE CLAIM ITEM WISE. BUT IT HAS TO BE KEPT IN MIND THAT DISALLOWANCE SHO ULD NOT BE PASSED ON AD HOC BASIS WHICH ACTION OFFEND ARTICLE 14 OF THE CONSTITUTION OF IN DIA BEING AN ARBITRARY ACTION. THEREFORE, BOTH THE AO AS WELL AS LD. CIT(A) ERRED IN DISALLOW ING THE EXPENDITURE CLAIMED ON AD HOC BASIS AND, THEREFORE, WE DELETE THE ADDITION SUSTAI NED BY THE LD. CIT(A) ALSO. THEREFORE, GROUND OF APPEAL OF REVENUE IS DISMISSED AND THIS G ROUND OF CROSS OBJECTION OF ASSESSEE IS ALLOWED. 7. GROUND NO. 7 OF REVENUES APPEAL AND GROUND NO. 7 OF ASSESSEES CROSS OBJECTION ARE AGAINST THE ACTION OF LD. CIT(A) IN RESTRICTING THE ADDITION TO RS. 50,000/- UNDER THE HEAD BANK CHARGES. 7.1 BRIEFLY STATED FACTS ARE THAT ACCORDING TO AO, AS PER THE ASSESSEES ADMISSION THAT BUSINESS PAYMENTS HAVE BEEN MADE THROUGH CREDIT CAR DS WHICH ARE IN THE NAME OF THE DIRECTORS OF THE COMPANY BUT HAVE BEEN CLAIMED AS B USINESS RELATED, BUT THE DETAILS OF THE CREDIT CARD SHOWED THAT EXPENDITURE OF PERSONAL NAT URE INCURRED THROUGH CREDIT CARD AMOUNTING TO RS. 1,00,000/-. HENCE, THE AO DISALLO WED RS. 1,00,000/- AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE AS THE EXPENDITU RE BEING PERSONAL IN NATURE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO RESTRICTED THE DISALLOWANCE TO RS.50,000/- AS POSSIBILITY OF EXPENSES OF PERSONAL NATURE CANNOT BE RULED OUT. AGGRIEVED AGAINST THE SAID PARTIAL DISALLOWANCE BOTH THE REVE NUE AND ASSESSEE ARE IN APPEAL AND CROSS OBJECTION BEFORE US. 7.2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO NOTED THAT THE DIRECTORS OF THE COMPANY HAD INCURRED CERTAIN PERSONAL EXPENDITURE WHILE USING CREDIT CARD. THER EFORE, HE ESTIMATED RS. 1 LAC TO BE DISALLOWED AND IT WAS ADDED TO THE INCOME OF THE AS SESSEE. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT DURING BUSINESS SOME PAYMEN TS WERE MADE FROM THE CREDIT CARD WHICH ARE IN THE NAME OF THE DIRECTOR OF THE COMPAN Y AND WAS BOOKED UNDER THE HEAD BANK CHARGES. THE AO WAS OF THE OPINION THAT THE EXPEND ITURE INCURRED FROM CREDIT CARD IS OF PERSONAL IN NATURE AND, THEREFORE, HE ESTIMATED THE DISALLOWANCE OF RS. 1 LAC. THE LD. CIT(A) SUSTAINED R. 50,000/-. WE NOTE THAT NO SERI OUS EFFORTS HAVE BEEN MADE BY THE ASSESSEE TO SHOW THAT THE CREDIT CARDS WERE ONLY US ED SOLELY FOR BUSINESS PURPOSE. IF THE 9 ITA NO. 559/KOL/2016 & CO NO.53 OF 2016 M/S. SWAMINA INTERNATIONAL PVT. LTD, AY 2012-13 EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND IF IT IS NOT USED FOR ANY PERSONAL PURPOSES, IT IS ALLOWABLE U/S. 37(1) O F THE ACT. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THAT THE CREDIT CARD IN THE NAM E OF THE DIRECTOR OF THE COMPANY HAS BEEN USED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES T HE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. HOWEVER, WE NOTE THAT BOTH THE AUTHORITIE S BELOW HAS RESORTED TO ESTIMATION WITHOUT REJECTING THE BOOKS OF ACCOUNT MAINTAINED B Y THE ASSESSEE. WE REITERATE THAT IF THE ASSESSEE FAILS TO SUPPORT ITS EXPENDITURE WITH SUPP ORTING MATERIAL IN THE FORM OF BILLS/VOUCHERS THE AO IS AT LIBERTY TO DISALLOW THE SAME ITEM WISE AND ALSO THE ASSESSEE HAS TO SATISFY THE AO THAT THE EXPENDITURE CLAIMED SATI SFIES THE REQUIREMENT OF SEC. 37(1) OF THE ACT. SO, WE SET ASIDE THE ORDERS OF LD. CIT(A) AND AO AND REMAND THE MATTER BACK TO AO FOR DE NOVO ASSESSMENT ON THIS ISSUE. THEREFORE, T HIS GROUND OF REVENUE AND THE GROUND OF CROSS OBJECTION OF ASSESSEE ARE ALLOWED FOR STATIST ICAL PURPOSES. 8. IN THE RESULT, BOTH THE APPEAL OF REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER IS PRONOUNCED IN THE OPEN COURT ON 26/09/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CIRCLE-10(1), KOLKATA. 2 RESPONDENT M/S. SWAMINA INTERNATIONAL PVT. LTD., PLOT-Y-20, BLOCK EP, SECTOR-V, SALT LAKE ELECTRONICS COMPLEX, KOLKATA-700 091. . 3 4 5 CIT(A)-4, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY