M/s Hindustan Information Technology Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 759/DEL/2011

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1527 (ITAT-DELHI)
• Duration Of Justice: 13 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-06-2024
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARUL SINGH
• Section: 12; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member, Sh. Anubhav Sharma, Judicial Member ITA No. 759/Del/2011 : Asstt. Year: 2005-06 M/s Hindustan Information Technology, I-50, Jangpura Ext., New Delhi-110052 Vs Income Tax Officer, Ward-12(4), New Delhi (APPELLANT) (RESPONDENT) PAN No. AABCH7406A Assessee by : Sh. Tarun, Adv. Revenue by : Ms. Parul Singh, CIT-DR Date of Hearing: 18.06.2024 Date of Pronouncement: 21.06.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-XI, New Delhi dated 03.11.2010. 2. Following grounds have been raised by the assessee: “(1) Th e ap p el lan t p ra y s t ha t t h e a s s es sm en t f ra m ed u nd er s ect i on 1 43( 3 ) of t he A ct b e am en d ed sin c e it i s n ot b a s ed on fa ct s. ( 2) A ss es si ng Au th o ri t y erred i n d i sreg ardi ng th e b a si c c ond it io ns p r esc rib ed f o r m a kin g an as s ess m en t un d e r sec ti on 143(3 ) an d t h e rel eva nt o rd er i s not b as ed on ma t eri al ava il ab l e with th e A . O; ( 3) Th e Ld .C IT( A) h a s c on fi rm ed t h e ad di ti on s of R s . 10, 70 ,46 0.0 0 b y di sr eg a rd i n g t h e Ex p en d i tu re on E mpl oy ees Sal a ry , C on v ey an c e .D ep rec iat i on an d Ot h er Ex p en s es . ( 3) Th e Ld .CI T( A ) h a s al s o ig n ored t h e f act s t hat a pp ell ant c omp any h as r ecei v ed b u si n ess In c om e of R s . 12, 50 ,000/ - f rom M/ s Leadi n g Edg e C om mu ni cat i on Pvt . Ltd . du ri ng th e y ea r and th at b u si n ess act ivi ty al r ea dy m en ti on ed in “M emor and u m and Art icl e of As s oci a t i on ” of th e c om pan y . C o mpan y i s h ead ed b y ITA No. 759/Del/2011 Hindustan Information Technology Pvt. Ltd. 2 Mr. Ha rm in d er Bh at ia. Th e v en tu re h a s b een set u p f or u si ng th e ex p ert i s e of M r. Ha rm i nd er Bh at ia b y p rom ot ers . Ap p el l an t C om pan y & Lead in g E dg e C om mu ni cat i on Pv t . Ltd . a re s epa rat e i d en ti t y i n th e ey e of la w an d a l s o d oin g sep arat e bu sin es s wi th s ep arat e cl i en t s. Th er efor e, di sa l l ow an c e of exp en di tu res on p rem is e of d oi ng bu s in ess wit h th e a sso ci at ed c omp any i s a w ron g t reat m en t by th e A . O. ( 4) Th e exp en di tu re i s in cu rred on Bu si n es s A cti vit i es onl y. Ld C I T(A ) h as al s o c on fi rm ed t h e di sal l ow an c es o f exp en di tu re whi ch w ere di sal l o w ed b y A O on ad -h oc bas i s. ( 5) Th e A p p ell an t co mpan y h as recei v ed "M a rk et i ng F ee rela t ed t o C omp u t er Ha rwa re & A cc es sori es o f Rs. 12 ,50 ,0 0 0.0 0 du ri ng th e a sses sm en t y ear 20 05- 20 0 6 f rom M /s Lead in g E dg e Comm un i cat i on P vt . Lt d . C omp an y has i n cu rred th e t ot al E xp en di tu res of R s. 1 0, 70 ,460 .00 un d er s ect i on 37( 1) of t h e In co m e Ta x A ct ,1 9 61 a g ain st th e i n c ome of R s. 12 ,5 0, 00 0.0 0 f or th e A s ses sm en t Y ea r 2 005- 06 - A . O. ha s di sal l owed Rs.10 ,70, 460 .00 t ot al E xp en di tu res wi th ou t an y b a si s and ig no ri n g. D et ail s of exp en di t u re as : Comp an y h as b oo k ed t h e E xp en di tu res du ri ng t h e A ss es sm ent Yea r 200 5-2 006 a s f oll ow s: Em pl oy ees Rem u n erat i on Rs .8 ,00 ,8 41.00 Con v eyan c e Rs .1 ,83 ,2 56.00 Ot h er s E xp en se s Rs .86 ,3 63 .00 Tot al : Rs .10 ,7 0, 460 .00 8. Th e a pp ell an t p ra y s t h at t h e sai d ad d iti on of Rs.10 ,70, 460 .00 b e del et ed . ” 3. The appeal in this case has been filed on 08.02.20211 in the ITAT. From the record, we find that the ld. CIT(A) confirmed the addition of Rs.10,70,460/- on account of employees remuneration, conveyance and other expenses. 4. The ld. AR submitted that the company is already been inexistence and the employees remuneration is prerequisite for operation of the company. In the absence of employees salary, ITA No. 759/Del/2011 Hindustan Information Technology Pvt. Ltd. 3 the company cannot run its day to day affairs and also the company has earned interest income of Rs.12,50,000/-. 5. On this issue, the submission of the ld. DR is as under: “1. A ss essi n g Of fi c er ha s n ot g iv en Opp ort un i t y fo r h ea ri n g : Th i s c on t en ti on of th e app el lan t i s fa ct ua lly w ron g as can b e seen f rom t h e a s s es sm en t ord er p ag e 1 wh erei n t h e Ld . A O h a s men ti on ed th at – "vi d e ord er sh eet d at ed 13 .03 .2007 d u rin g th e cou rs e of a sses sm en t pr oc eed in g s t h e a p p el l ant w as a sk ed t o fu rni sh d etai ls / d o cu m en t s an d reas on for cla imi n g of ex p en s es aga in st i nc om e u n der h ead " oth er sou rc es " ev en th ou gh t h e a sses s ee c om p an y h a s n ot ca rri ed ou t an y b us i n es s act ivit i es . Th e a pp ell ant c ou l d n o t f urn i sh an y det ail s/d ocu m ent s t il l fi rst h al f o f Oct ober, 2007 h en ce, s ho w c aus e n oti c e w as i ssu ed on 09 .10 .2007 fo r 0 2.1 1. 200 7. Th e a s s ess ee ag ain c oul d n ot fu rni sh ed rea son f or cl ai m i ng o f ex p en s es d et ai l s and evid en ces i n res p ect of exp en ses i n cl ud i n g c omp l et e n am e and add ress t o wh o m sa lary pa id ot h er t h en pa rt d et ail s ." Th i s f a ct w as al s o reit erat ed b y Ld. CI T( A) i s h i s o rd er on p ag e n um b er 3 wh erei n h e ha s no t ed th at- "Th e reco rd s rev eal s th at r ep eat ed opp ort un i ti es w ere all ow ed b y t h e AO t o t h e a p p ell an t to est ab l i sh th e exp end i t u re an d on each an d ev ery oc ca si on t h e ap p el l an t f ai l ed t o d o s o." Th e L d. AO wa s wel l aw a re of th e b u s i n es s a cti vit i es ca rri ed ou t by th e app el lan t an d n ow h ere in t h e ord er Ld . A O ha s wron gl y m en ti on ed th e nat u re of t h e b u si n es s of t h e c om pa n y. 3. Bu sin es s In com e of R s. 12 ,25, 000/ - rec ei ved f rom M / s Lea d in g Ed g e Com mu n ic ati on P vt . Lt d . i) In th e in s tan t cas e t h e a pp ell ant h as sh own i n com e rec ei v ed f rom M/ s Leadi ng Edg e Com mu n i c ati on P vt . Ltd . u nd er t h e h ead ITA No. 759/Del/2011 Hindustan Information Technology Pvt. Ltd. 4 " oth er s ou rc es" . D u rin g t he a ss es sm ent p roc eedin g s t h e ap p ell ant wa s a sk ed by t h e Ld . A O t h e rea s on s f or cla imi ng of exp en s es ag ain st in c om e u n d er h ead " oth er s ou rces" ev en t h oug h t h e app ell an t h a s n ot ca rri ed out any b u sin es s a ct i vit i es, w h ich t h e a p p el l an t fa i l ed t o expl a in in sp it e of v ari ou s op p ortu n iti es b ei n g g i v en b y th e Ld . A O. In fa ct th e n o d et a il s su ch a s nam e an d ad d ress es t o wh o m sal ar y w a s bei ng pai d wa s fu rn i sh ed b efore t h e Ld . AO . ii ) Th e f ac t t hat M / s L ead i ng Edg e C om mu ni cati on Pvt . Lt d. , is doi n g bu sin es s w i th G ov ernm en t d ep a rt m en t i s n ot d is pu t ed . H ow ev er, du ri ng t he a s ses sm en t p roc eedi ng s an d th e ap p el lat e pr oc eed in g s b ef ore Ld . CI T( A) th e a pp ellan t coul d n ot p rovid e a sat i sfa ct ory exp l a n at i on f or th e ma rk et in g f ees rec ei v ed f rom M/ s Lead in g Ed g e C om mu n i cati on P vt . Lt d . and c orresp on d in g exp en ses cla i m ed ag ain st n o bu sin es s in com e. 4. Th e ap p ell an t h a s qu ot ed H on 'bl e I TA T' s or d er f or su bs equ en t as s ess m en t y ea r A . Y. 20 08-0 9 wh i ch i s rel at ed t o d eem ed di vid en d u nd er sec . 2( 2 2) ( e) an d ha s n o rel eva n c e in t h is y ea r.” 6. We find that the employee’s salary expenses have not been disputed by the revenue authorities and hence the disallowance cannot be made merely on the ground that the appellant has not carried any business activity though the assessee has earned Rs.12,50,000/- on account of marketing. Hence, keeping in view the specific facts of the case, we hold that no disallowance is called for on account of salary, conveyance and other office expenses. ITA No. 759/Del/2011 Hindustan Information Technology Pvt. Ltd. 5 7. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 21/06/2024. Sd/- Sd/- (Anubhav Sharma) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 21/06/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR