The ACIT, Circle-1, Surat V. M/s. Dewshree Network Pvt.Ltd., Surat

ITA 635/AHD/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8162 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: M J SHAH
• Keywords: Non compliance
• Section: 144

Judgement Text

, *MH *MH*MH *MH* ** * IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. NO.635/AHD/2013 ( / ASSESSMENT YEAR : 2009-10) THE ACIT, CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT 395 001 VS. M/S. DEWSHREE NETWORK PVT.LTD. 157-158, GROUND FLOOR, PATEL PARK APARTMENT, KUBER NAGAR KATARGAM DARWAJA, SURAT. ! PAN/GIR NO. : AABCD 7299 J ( ' / APPELLANT ) .. ( #' RESPONDENT ) '$ APPELLANT BY : SHRI V. K. SINGH, SR. D.R. #'%$ / RESPONDENT BY : SHRI M. J. SHAH, A.R. & ' (%) * / DATE OF HEARING 17/11/2017 +,-. %) * / DATE OF PRONOUNCEMENT 17/11/2017 DICTATED ORDER PER PRAMOD KUMAR, ACCOUNTANT MEMBER : BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 07/12/2012 PASSED BY THE LD. CIT(A)-I, SURAT IN THE MATTER OF ASSESSMENT UNDER SECTION 144 OF THE I NCOME TAX ACT, 1961 FOR ASSESSMENT YEAR (A.Y.) 2009-10. ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 2 - 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFF ICER HAS RAISED THE FOLLOWING GRIEVANCE: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE OF RS.49,31 ,040/- ON ACCOUNT OF DISALLOWANCE OF PLACEMENT EXPENSES INSPITE OF THE F ACT THAT THE ASSESSEE FAILED TO PROVE ANY NEXUS BETWEEN THEM AND THE PARTIES IN WHOSE NAMES EXPENSE WERE CLAIMED. 3. BRIEFLY STATED THE RELEVANT FACTS OF THE CASE AR E DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.1,64,36,800/- ON ACCOUNT OF PLACEMENT EXPENSES. THIS EXPENDITURE WAS VERY HIGH COMPARABLE TO THE SI MILAR EXPENDITURE INCURRED IN THE IMMEDIATELY PRECEDING YEAR AT RS.17 ,79,992. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS THE ASSESSEE HAS NO T GIVEN ANY JUSTIFICATION FOR THE INCREASE IN EXPENDITURE OR ANY SUPPORTING EVIDE NCES LIKE BILLS/VOUCHERS IN RESPECT OF THE SAME, IT IS A FIT CASE TO DISALLO W 30%, ON ESTIMATE BASIS, FOR WANT OF VERIFICATION. ACCORDINGLY, DISALLOWANCE OF RS.49,31,040/- WAS MADE. 4. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). DURING THE COURSE OF PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS POINTED O UT THAT NON COMPLIANCE BEFORE THE ASSESSING OFFICER WAS ATTRIBUTABLE TO TH E AUTHORIZED REPRESENTATIVE THEN HANDLING THE CASE WHICH WAS NEGLIGENT IN HIS P ROFESSIONAL WORK. THE ENTIRE RELEVANT DETAILS WERE PRODUCED BEFORE THE LD . CIT(A) WHO THEN CALLED FOR REMAND REPORT ON THE SAME. IN THE REMAND REPOR T, THE ASSESSING OFFICER HEAVILY RELIED ON THE ASSESSMENT ORDER U/S.143(3) I N THE CASE OF M/S. S. D. ENTERPRISES, THE ORGANIZATION, WHICH HAS RENDERED P LACEMENT SERVICES, ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 3 - WHEREIN A FINDING WAS GIVEN THAT NO WORK WAS ACTUAL LY DONE BY M/S. S. D. ENTERPRISES. LD. CIT(A) THEN TOOK NOTE OF THE APPEL LATE ORDER PASSED BY THE LD. CIT(A) IN THE CASE OF M/S. S. D. ENTERPRISES, WHERE IN, THE DISALLOWANCE WAS RESTRICTED TO 15%. CONSIDERING THE SUBMISSIONS OF T HE A.O. AND THE REMAND REPORT GIVEN BY THE A.O. IN THE CASE OF M/S. S. D. ENTERPRISES, THE CIT(A) WAS OF THE OPINION THAT CLEARLY WORK WAS DONE BY M/S. S . D. ENTERPRISES AND THE MERE FACT THAT A PART OF EXPENDITURE INCURRED BY M/ S. S. D. ENTERPRISES WAS DISALLOWED. IT IS NOT THE MERE FACT THAT THE EXPEND ITURE WAS DEDUCTABLE U/S.38(1) OF THE I.T. ACT, LD. CIT(A) ALSO NOTED TH AT SO FAR AS THE PARTIAL DISALLOWANCE OF EXPENSES INCURRED BY THE M/S. S. D. ENTERPRISES IS CONCERNED, IT WILL HAVE NO IMPACT IN THE CASE OF THE ASSESSEE SINCE THAT IS NECESSARY FOR THE PURPOSE OF THE ASSESSEE, WHETHER THE WORK ACTUALLY DONE BY M/S. S. D. ENTERPRISES. ON THE BASIS OF THIS REASONING, THE LD . CIT(A) DELETED THE IMPUGNED DISALLOWANCE OF RS.49,31,040/-. THE ASSESS ING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. 6. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, OUR ATTENTION WAS INVITED TO THE DECISION DATED 11/04/2014 OF A CO-ORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF M/S. S. D. ENTERPRISES VS. ACIT AND VIC E VERSA (ITA NO.2618/AHD/2012 & 2794/AHD/2012), WHEREIN, THE STA ND OF THE CIT(A) UPHOLDING THE CLAIM MADE BY THE ASSESSEE THAT EXPEN DITURE WAS ACTUALLY INCURRED WAS UPHELD. IT WAS THUS CONTENDED THAT ONC E THE SERVICES WERE ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 4 - PROVIDED AND THE TRIBUNAL HAS REACHED A CATEGORICAL FINDING THAT SERVICES WERE RENDERED, THERE CANNOT BE ANY OCCASION TO UPHO LD THE DISALLOWANCE IN THE CASE OF THE ORGANIZATION AVAILING THIS SERVICE I.E. THE ASSESSEE BEFORE US ON THE SERVICES RENDERED. WHEN THE ASSESSING OFFICER S IMPLY PLACED HIS RELIANCE ON THE STAND OF THE ASSESSING OFFICER, WE SEE MERIT S IN THE PLEA TAKEN BY THE LD. COUNSEL. IT IS A SETTLED FACTUAL FINDING OF THE TRIBUNAL THAT THE SERVICE WAS RENDERED BY THE ENTERPRISES. WE HAVE TO ESSENTIALLY HOLD THAT THE DISALLOWANCE IN THE PRESENT CASE, WHICH RESTS ON TH E CONTENTION THAT NO SUCH SERVICES RENDERED, CEASES TO BE SUSTAINABLE IN LAW. IN THIS VIEW OF THE MATTER, WE URGE TO UPHOLD THE ACTION OF THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. GROUND NO.1 IS THUS DISMISSED. 7. IN THE SECOND GROUND OF APPEAL, THE ASSESSING OF FICER HAS RAISED THE FOLLOWING GRIEVANCE : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION MADE OF RS.13 ,77,755/- ON ACCOUNT OF DISALLOWANCE OF CABLE MAINTENANCE CHARGES TO RS.1,4 4,664/- INSPITE OF THE FACT THAT THE ASSESSEE FAILED TO PROVE ANY NEXUS BETWEEN THEM AND THE PARTIES IN WHOSE NAMES THE EXPENSES WERE CLAIMED. 8. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFICE R IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THERE IS AN UNUSUAL INCREASE IN THE CABLE MAINTENANCE CHARGES IN THE CURRENT YEAR, WHICH IS RS.45,92,515/-, COMPARING TO RS.4,44,998/- SHOWN IN THE IMMEDIATELY PRECEDING YEAR. IN THE ABSENCE OF DETAILS & EVIDENCES, THE EXPENSES COULD NOT BE VERIFIED FULLY. THE A.O. THUS DISALLOWED 30% OF THE EXPENDITURE SO CLAI M BY THE ASSESSEE. ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 5 - ACCORDINGLY RS.13,77,755/-, BEING 30% OF THE EXPEND ITURE OF RS.45,92,515/-, WAS DISALLOWED. AGGRIEVED, ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE LD. CIT(A). UPON PERUSAL OF THE DETAILS FURNISHED B Y THE ASSESSEE AND EXAMINING THE REMAND REPORT SUBMITTED BY THE ASSESS ING OFFICER, LD. CIT(A) NOTED THAT OUT OF THE ENTIRE AMOUNT OF RS.45,92,515 /-, RS.41,09,200/- WAS PAID TO THE M/S. S. D. ENTERPRISES. LD. CIT(A) WAS OF TH E VIEW THAT IN THE LIGHT OF THE FACT, THE EXPENDITURE IS ACCEPTED TO HAVE BEEN INCURRED BY M/S. S. D. ENTERPRISES, THERE CANNOT BE ANY QUESTION ABOUT DED UCTIBILITY OF THIS AMOUNT OF RS.41,09,200/-. AS REGARDS THE REMAINING AMOUNT WHICH IS RS.4,82,214/-, FOLLOWING THE PARTIAL DISALLOWANCE @ 30% ADOPTED BY THE ASSESSING OFFICER, THE CIT(A) COMPUTED THE DISALLOWANCE OF RS.1,44,664 /-. IT WAS ON THE BASIS OF LINE OF REASONING THAT THE DISALLOWANCE WAS MADE OU T OF RS.1,44,664/-. THE A.O. IS AGGRIEVED OF THE RELIEF GIVEN BY THE LD. CI T(A) AND IS IN APPEAL BEFORE US. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. 10. SO FAR AS THE DELETION OF DISALLOWANCE, IN RESP ECT OF THE EXPENDITURE INCURRED BY MAKING PAYMENT TO M/S. S.D. ENTERPRISES IS CONCERNED, THERE CANNOT BE ANY DISPUTE. FOLLOWING THE VIEW SO TAKEN WHILE DEALING IN GROUND NO.1 OF THIS APPEAL, THE DELETION IS TO BE UPHELD. AS REGARDS THE REMAINING EXPENDITURE OF RS.4,82,214/-, LD. DEPARTMENTAL REPR ESENTATIVES CONTENTION IS THAT THIS AMOUNT HAS BEEN REMAINED COMPLETELY VERIF IED AND THUS THE AMOUNT SHOULD BE DELETED IN THIS CASE. LD. COUNSEL FOR THE ASSESSEE CONTENTS THAT THE ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 6 - A.O. HIMSELF HAS DISALLOWED ONLY 30% OF THE EXPENDI TURE, IT WOULD NOT BE APPROPRIATE FOR US TO INCREASE THE PROPORTIONATE DI SALLOWANCE. IN OUR CONSIDERED VIEW, THE MERE FACT THAT RS.4,82,214/- I S PAID BY THE ASSESSEE TO A CONCERN OTHER THAN M/S. S. D. ENTERPRISES BY ITSELF CANNOT BE REASON ENOUGH TO DISALLOW THE ENTIRE PAYMENT. IN VIEW OF THIS DI SCUSSION, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. THEREFORE, GROUND NO.2 IS DISMISSED. 11. IN THIRD GROUND OF APPEAL, THE ASSESSING OFFICE R HAS RAISED THE FOLLOWING GRIEVANCE:- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION MADE OF RS.3, 66,872/- ON ACCOUNT OF DISALLOWANCE OF CABLE MAINTENANCE CHARGES CLAIMED U NDER THE HEAD REPAIRS AND MAINTENANCE TO RS.1,82,936/- AS THE ASSESSEE F AILED TO SUBSTANTIATE ITS CLAIM WITH BILLS/VOUCHERS. 12. SO FAR THIS GRIEVANCE OF THE ASSESSEE IS CONCER NED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED A SUM OF RS.3,65,782/- , BEING 20% OF THE EXPENDITURE INCURRED ON ACCOUNT OF WANT OF VERIFICA TION AND IN THE ABSENCE OF EVIDENCES. WHEN THE MATTER TRAVELLED IN APPEAL BEF ORE THE LD. CIT(A), THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 10% BY OBSERV ING THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT AND HAS MADE DISALLOWANCE IN GENERAL MANNER. THE A.O. I S AGGRIEVED AND IS IN APPEAL BEFORE US. ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 7 - 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. 14. WE FIND THAT LD. CIT(A) HAS NOT GIVEN ANY REASO N FOR RESTRICTING THE DISALLOWANCE AND STATED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT. LD. CIT( A) HAS OVERLOOKED THE FACT THAT NO DETAILS WERE EVER PRODUCED BEFORE THE ASSES SING OFFICER. IN THESE FACTS, THE RELIEF GRANTED BY THE ASSESSING OFFICER IS RESTORED I.E. RS.3,65,782/-. TO THIS EXTENT WE UPHOLD THE GRIEVANCE OF THE REVEN UE. GROUND NO.3 IS THUS ALLOWED. 15. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. THIS ORDER DICTATED AND PRONOUNCED IN OPEN COURT ON 17/11/2017 SD/- SD/- EGKOHJ IZLKN IZEKSN DQEKJ EGKOHJ IZLKN IZEKSN DQEKJ EGKOHJ IZLKN IZEKSN DQEKJ EGKOHJ IZLKN IZEKSN DQEKJ U;KF;D LNL; YKS[KK LN L; U;KF;D LNL; YKS[KK LN L; U;KF;D LNL; YKS[KK LN L; U;KF;D LNL; YKS[KK LN L; ( MAHAVIR PRASAD ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 17/11/2017 ITA NO.635/AHD/ 2013 THE ACIT VS. M/S. DEWSHREE NETWORK PVT. LTD. ASST.YEAR 2009-10 - 8 - !'# $#! COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. /01) & 2) / CONCERNED CIT 4. & 2) 34 / THE CIT(A)-I, SURAT. 5. 56 7)'01 *01. / / DR, ITAT, AHMEDABAD 6. 7 89 ( GUARD FILE. % & / BY ORDER, # 5)) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 17/11/2017 (DICTATION-PAD 7 PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/11/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER