Manford Allianz Consultants Pvt. Ltd., Gurgaon V. ITO, Gurgaon

ITA 5874/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2990 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHOUDHARY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , DELHI SMC BENCH , NEW DELHI BEFORE SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 5874 /DEL /201 6 [ ASSESSMENT YEAR: 20 12 - 13 ] MANFORD ALLIANZ CONSULTANTS PVT LTD E 2094, PALAM VIHAR GURGAON (PAN: AAFCM 1027 M ) VS. THE I . T .O WARD 2 ( 4 ) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M.P. RA STOGI , CA REVENUE BY: MS. BEDOBANI CHOUDHARY , SR. DR DATE OF HEARING : 11 .0 5 .2017 DATE OF PRONOUNCEMENT : 31 .0 5 .2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15 . 09 .201 6 OF THE CIT (A) - I , GURGAON RELATING TO A.Y. 20 12 - 13 . 2. ADDITION OF RS. 1 6 , 76 , 336 / - MADE BY THE A.O BY APPLYING N.P. RATE OF 9.31% OF THE GROSS RECEIPTS WHICH HAS BEEN UPHELD BY THE LD. CIT(A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 3 . FACTS OF CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONDUCTING TRAINING PROGRAMS AND WORKSHOPS, BESIDES DESIG N ING THE NECESSARY FRAMEWORK FOR LEADERSHIP 2 ITA NO. 5874 /DEL/201 6 BREAKTHROUGHS AND MANAGEMENT DEVELOPMENT PROGRAMS FOR ORGANIZATIONS . IT FILED ITS RETURN OF INCOME ON 12.09.2012 DECLARING TOTAL INCOME OF RS. 73,550/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O ANALYZED THE TRADING RESULTS OF THE ASSESSEE FOR THE PRECEDING TWO A.YS VIS A VIS THE CURRENT A.YS AND OBSERVED THE FOL LOWING TRADING RESULTS: A.Y 2010 - 11 2011 - 12 2012 - 13 N.P. RATE 12.46% 15.44% 0.03% NET PROFIT 2234993 3303213 4605 TURNOVER/SALES 17944333 21400338 18055222 4. SINCE THERE WAS STEEP DECLINE IN THE N.P. RATE DURING THE IMPUGNED A.Y, THE A.O ASKED THE ASSESSEE TO EXPLAIN THE REASONS FOR DECREASE IN SUCH TRADING RESULTS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DECREASE IN SALE WAS DUE TO FALL IN SALE FROM THE COM PANYS BANGALORE OFFICE AS IT COULD NOT GENERATE MORE BUSINESS IN SPITE OF ITS BEST EFFORTS AND THE BRANCH WAS CLOSED DOWN FROM 01.01.2012. THE ASSESSEE HAS PAID RS. 6,58,150/ - FOR LEASED ACCOMMODATION AT BANGALORE. 5. HOWEVER, THE A.O DID NOT ACCEPT T HE ABOVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. HE OBSERVED THAT DURING THE A.Y 2010 - 11, THE ASSESSEE HAS DECLARED N.P. OF RS. 22,34,993/ - ON TURNOVER OF RS. 1,79,44,333/ - . HOWEVER, DURING THE IMPUGNED A.Y, ON A TURNOVER OF RS. 1,80,55,222/ - , TH E ASSESSEE HAS DECLARED N.P. OF RS. 4,605/ - . FURTHER, 3 ITA NO. 5874 /DEL/201 6 DURING THE YEAR UNDER CONSIDERATION, SALARY EXPENDITURE OF RS. 87,06,161/ - IS HIGHER AS COMPARED TO THE PRECEDING YEARS RS. 51,66,830/ - . FURTHER, THE ASSESSEE HAS CLAIMED CONSULTANCY EXPENSES OF RS. 58,99 , 377/ - WHEREAS GROSS RECEIPTS HAVE BEEN DECLARED CONSIDERABL Y ON THE LOWER SIDE. IN VIEW OF THE ABOVE, THE A.O REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE . A PPLYING N.P. RATE OF 9.31% BEING AVERAGE RATE OF THREE YEARS IN ASSESSEES OWN CASE THE ASSESSING OFFICER ARRIVED NET PROFIT AT RS. 16,80,941/ - . A FTER GIVING BENEFIT OF THE N.P. ALREADY DECLARED BY THE ASSESSEE AT RS. 4,605/ - , THE A.O MADE ADDITION OF RS. 1 6,76,336 / - , WHICH HAS BEEN UPHELD BY THE LD. CIT(A). 6 . AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7 . THE LD. COUNSEL FOR THE ASSESSEE, STRONGLY OBJECTED TO THE ORDER OF THE LD. CIT(A). REFERRING TO THE COMPARATIVE CHART OF THE PROFIT AND LO S S ACCOUNT FOR THE PRECEDING THREE YEARS, HE SUBMITTED THAT THE PROFESSIONAL FEES HAS COME DOWN TO RS. 1,83,33,222/ - DURING THE YEAR AS AGAINST RS. 2,14,00,338/ - IN THE PRECEDING A.Y. HE SUBMITTED THAT IF THE EMPLOYEE BENEFITS AND CONSULTANCY CHARGES ARE CONSIDERED TOGETHER, THEN SUCH EXPENDITURE CO MES TO RS. 1,47,18,830/ - DURING THE YEAR AS COMPARED TO RS. 1,39,00,967/ - IN THE IMMEDIATELY PRECEDING A.Y. HE SUBMITTED THAT THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT WHICH ARE AUDITED AND THE A.O HAS NOT FOUND ANY 4 ITA NO. 5874 /DEL/201 6 DEFECT IN THE BOOKS OF ACCOUN T. THEREFORE, MERELY BECAUSE THE N.P. OF THE ASSESSEE HAS FALLEN DURING THE YEAR THE SAME CANNOT BE A GROUND TO REJECT THE BOOK RESULTS AND GO FOR ESTIMATION. 8 . THE LD. DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE LD. CIT(A), SUBMITTED THAT THE A.O IN THE INSTANT CASE HAS GIVEN JUSTIFIABLE REASONS AS TO WHY HE HAS APPLIED N.P. RATE OF 9.63%. THE LD. CIT(A) HAS UPHELD THE ORDER OF THE A.O WHICH , UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS FULLY JUSTIFIED. SHE, ACCORDINGLY, SUBMITTED THAT THE GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 8. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME . I FIND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF CONDUCTING TRAINING PROGRAMS OF MANAGEMENT, DESIGNING THE NECESSARY FRAMEWORK FOR LEADERSHIP BREAKTHROUGHS AND MANAGEMENT D EVELOPMENT PROGRAMS FOR ORGANIZATIONS, ETC. I FIND THE ASSESSING OFFICER HAS ADOPTED N.P. OF 9.31% OF THE GROSS RECEIPTS ON THE GROUND THAT N.P. DECLARED BY THE ASSESSEE IS TOO LOW . WHILE DOING SO, HE REJECTED THE EXPLANATION OF THE ASSESSEE THAT IT HAD CLOSED DOWN ITS BANGALORE OFFICE AND THERE IS DECREASE IN THE PROFESSIONAL RECEIPTS . THE ABOVE N.P. OF 9.31% HAS BEEN UPHELD BY 5 ITA NO. 5874 /DEL/201 6 THE LD. CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DECLINE IN THE N.P. RATE IS DUE TO DECREASE IN THE PROFESSIONAL FEES , INCREASE IN THE EMPLOYEE COST AND CONSULTANCY CHARGES DURING THE YEAR. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO DEFECTS HAVE BEEN FOUND IN THE BOOKS WHICH WERE DULY AUDITED. 9. I FIND MERIT IN THE A BOVE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND FILED ITS RETURN OF INCOME ALONGWITH AUDIT REPORT. THE AUDITORS HAVE NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICE R HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO SUBSTANTIATE THAT THE GROSS RECEIPTS DECLARE D BY THE ASSESSEE IS INCORRECT OR THE EXPENSES DEBITED BY THE ASSESSEE IS OVER STATED. THE ASSESSEE HAS GIVEN JUSTIFIABLE REASONS FOR ITS DE CLINE IN THE N.P. WHICH IS DUE TO DE CREASE IN PROFESSIONAL FEES OF ABOUT RS. 33 LAKHS DURING THE YEAR, AS COMPARED TO THE PREVIOUS ASSESSMENT YEAR. THE ASSESSEE HAS ALSO SUBMITTED THAT ONE OF THE CONSULTANTS WAS INDUCTED AS DIRECTOR, FOR WHICH THE EMPLOYEE BENE FIT HAS GONE UP AND CONSULTANCY EXPENSES HAS COME DOWN. SINCE IN THE INSTANT CASE THE ACCOUNTS ARE AUDITED AND NO DEFECTS HA VE BEEN FOUND BY THE ASSESSING OFFICER REGARDING SUPPRESSION OF RECEIPTS OR INFLATION OF EXPENSES, THEREFORE, MERELY BECAUSE THERE IS STEEP FALL IN THE N.P. THE SAME CANNOT BE A GROUND FOR REJECTION OF BOOK RESULTS AND ESTIMATE THE N.P. 6 ITA NO. 5874 /DEL/201 6 IN THIS VIEW OF THE MATTER, I SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. GROUND RAISED BY THE A SSESSEE IS ACCORDINGLY ALLOWED. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 3 1 .0 5 .2017. SD/ - (R.K. PANDA) ACCOUNTANT MEMB E R DATED: 3 1 . 0 5 .2017 V. LAKSHMI COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT (APPEALS) 5) DR: ITAT ASSISTANT REGISTRAR 7 ITA NO. 5874 /DEL/201 6 DATE DRAFT DICTATED ON 11 .0 5 .2017 DRAFT PLACED BEFORE AUTHOR 11 .0 5 .2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .0 5 .2017 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.