Divine Infracon Pvt. Ltd., New Delhi V. ACIT Central Circle-17, New Delhi

ITA 9013/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9589 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 19-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 142(1); 143(2)

Judgement Text

1 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 9013/DEL/2019 (A.Y 2016-17) Divine Infracon Pvt. Ltd. Plot No. 4, Sector-13, Dwarka, New Delhi PAN: AACCD4476A (APPELLANT) Vs. ACIT Central Circle-17 New Delhi (RESPONDENT) ORDER PER YOGESH KUMAR U.S., JM The present appeal is filed by the assessee against the order dated 17/09/2019 of the ld. Commissioner of Income Tax (Appeals)-31, New Delhi [hereinafter referred to CIT (Appeals)] for Assessment Year 2016-17. 2. The grounds of appeal are as under:- 1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in partly sustaining an ad-hoc disallowance of a sum of Rs. 7, 49, 623/- (10% of and while sustaining the instant disallowance, the learned CIT (A) has Assessee by : Sh. Madhur Aggarwal, Adv Department by: Sh. S. L. Anuragi, Sr. DR Date of Hearing 28.09.2022 Date of Pronouncement 30.09.2022 2 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT proceeded on irrelevant and extraneous considerations, and as such the disallowance so sustained is wholly untenable either on facts or in law. 2. That the adverse findings recorded by the learned AO and Commissioner of Income Tax (Appeals) are perverse and have been recorded with preconceived notions and without considering the submissions/evidences/material produced on record and also without providing fair and proper opportunity of being heard, hence such findings are vitiated and deserves to be deleted.” 3. Brief facts of the case are that, the assessee Company was engaged in the business of running hotel and shopping complex in the year under consideration. The assessee filed ‘NIL’ taxable income after the adjustment of loss. The case of the assessee was selected for scrutiny through CASS. The statutory notice u/s 143(2) of the Act and the notice u/s 142(1) of the Act along with questionnaire were issued to the assessee. In compliance, the assessee furnished the relevant details/information. The assessee was asked to file complete details in respect of commission expenses along with documentary evidence and also asked to justify the payment of the same and the details of the expenses of Rs. 1,00,000/- incurred by the assessee. As per the Ld. A.O., the assessee could not furnish the complete details. Therefore, 10% of the actual amount of commission expense, other expenses, printing stationary repair and maintenance training, travelling expenses are added to the total income of the assessee to safeguard any loss of revenue to the Department. Accordingly, 10% expense i.e. 16,24,889/- has been added to the total income of the assessee. Further, a sum of Rs. 24,106/- has been added to the total income on the ground that the assessee has deposited Employees Contribution after the due date. Accordingly, the assessment order came to be passed on 20/11/2018. 3 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT 4. As against the assessment order dated 20/11/2018, the assessee has preferred an appeal before the CIT(A). The Ld.CIT (A) has deleted the addition made for Employees Contribution to ESI which has been paid belatedly. Further, in so far as, disallowance of Rs. 16,48,955/- made by the A.O., the Ld.CIT(A) is of the opinion that the expenses incurred by the assessee was through banking channel and are necessary for conducting the business. Therefore, the Ld. CIT(A) of the opinion that no disallowance out of the commission expenses on ad-hoc basis is called for, other expenses considered for disallowance are incurred partly in cash, thus the same are not fully verifiable, accordingly, the Ld.CIT (A) has directed the A.O to disallow 10% of the expenses including commission expenses of Rs. 87,52,656/- and further directed to allow the consequential relief by way of order dated 17/09/2019. 5. Aggrieved by the order dated 17/09/2019 passed by the Ld. CIT(A), the assessee has preferred the present appeal on the grounds mentioned above. 6. The Ld. Counsel for the assessee vehemently argued that the Ld.CIT (A) has grossly erred in partly sustaining the ad-hoc disallowance of Rs. 7,49,623/-which is on estimate basis without pointing out any specific inflation of expenditure or un-vouched item of expenditure. The approach of the Ld.CIT(A) in directing the A.O to disallow 10% of the expenses excluding commission expenses of Rs. 87,52,656/- is without any basis and further submitted that the Ld.CIT(A) ought have deleted the entire addition. The Ld. Counsel for the assessee has also relied on the following judgments:- Judgment of Hon’ble Supreme Court in the case of State of Orissa vs. Maharaj B.P. Singh Deo reported in 76 ITR 690 (SC) Order of ITAT, Delhi Bench in the case of Asst. CIT vs. Ganpati Enterprises Ltd. reported in 154 TTJ 1 (Del Trib.) Order of ITAT, Calcutta Bench in the case of Dwarka Prasad Agarwal vs. ITO reported in 52 ITD 239 (Kol Trib.) Order of ITAT, Delhi Bench in the case of Asst. CIT vs. Amtek Auto Ltd. reported in 112 TTJ 455 (Del Trib.) 4 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT 7. Per contra, the Ld. DR by relying on the orders of the Lower Authorities, submitted that the assessee has not produced complete details of the expenses, the addition has been rightly partly upheld by the Ld.CIT(A). 8. We have heard the parties, perused the material on record and gave our thoughtful consideration. 9. While making the addition, the Ld. A.O has observed that the assessee could not furnish the complete details of the expenses, therefore, 10% of the total amounts of the commission expenses, other expenses printing and stationary, repair and maintenance, training, travelling expenses have been added to the total income. Even during the first appellate proceedings, the Ld.CIT(A) observed that “the commission expenses of Rs. 87,52,656/- are pertaining to travel agents for booking of hotel in India and aboard bank charges and commission on credit/debit cards etc. These expenses have been incurred through banking channel”. Therefore, the Ld.CIT(A) is of the opinion that no disallowance out of commission expenses on ad-hoc basis is called for. Further, in so far as, other expenses concerned, which are incurred partly in cash, therefore, the same are not fully verifiable. Accordingly, the Ld.CIT(A) has directed to disallow 10% of the expenses excluding the commission expenses. Neither the A.O nor the CIT(A) have discussed the details of the expenses and how the assessee has failed to prove the genuineness of the expenses, but proceeded to disallow the expenses without pointing out the defects in the accounts of the assessee. Therefore, in our opinion, the entire approaches of the Lower Authorities are erroneous. 5 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT 10. In the case of State of Orissa Vs. Maharaja Sh. B. P. Singh D.O reported in 1970 (76) ITR 690 (S.C). The Hon'ble Supreme Court held as under:- “4. Apart from coming to the conclusion that the materials placed before him by the assessee were not reliable, the Assistant Collector has given no reasons for enhancing the assessment. His order does not disclose the basis on which he has enhanced the assessment. The mere fact that the material placed by the assessee before the assessing authorities is unreliable does not empower those authorities to make an arbitrary order. The power to levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. In other words, that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this court. 5. The Agricultural Income-tax Tribunal gave no reasons in its order for affirming the decision of the Assistant Collector. It appears to have been of the view that once the assessing authorities reject the material placed before them as being unreliable those authorities can proceed to levy whatever tax they may levy. It failed to bear in mind the scope of the power of the assessing authorities to levy assessment on the basis of best judgment. Therefore, the Tribunal was clearly in error in confirming the decision of the Assistant Collector. Hence, the High Court was justified in interfering With the order of the Tribunal.” 6 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT 11. Further, the case of Asst. Commissioner of Income Tax Vs. Ganpati Enterprises (2013) 32 Taxman. Com 262 (Delhi-Trib.), the Coordinate Bench of the Tribunal has held as under:- “Before Ld. first appellate authority, assessee has furnished details of the expenses in its return submissions such details have been noticed in Paragraph No. 3.1 of the order. The assessee has also pointed out that A.Y. 2004-05 an ad-hoc disallowance of Rs.5,00,000/- was made by the AO it was confirmed by the Id. CIT (A) but HAT has deleted the disallowance. The assessee has further pointed out that in A.Y. 2005-06 an ad hoc disallowance of Rs. 1,45,000/- was made which was restricted to Rs. 90,000/- by the Id. CIT (A) but ITAT has deleted the disallowance, in A.Y. 2006- 07, ad hoc disallowance of Rs. 2,00,000/- was made, it was restricted to Rs. l,00,000/-by the Id. CIT (A) but ITAT has deleted the disallowance. The Id. first appellate authority has gone through all these details and thereafter observed that Assessing Officer has not discussed the details of expenses arid how assessee fail to prove the genuineness of the expenses. In our opinion the Scheme of the Act does not authorize the Assessing Officer to make a disallowance according to his wishes, rather it provide that he should first point out the defects in the accounts of the assessee. In the finding extracted (Supra) it nowhere reveals what was the total amount of expenditure claimed by the assessee, which specific vouchers was not in accordance with law. In a just sweeping statement, the Id. AO observed that on verification, some of the expenses were found to be unverifiable, but what were those expenses, he should make out in the assessment order, only then he can disallow them. This is more important when in a row in the last 4-5 years, similar disallowances were made by him but deleted by the Id. CIT (A) as well as ITAT. Therefore, if we weigh the finding 7 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT of the Assessing Officer extracted (Supra) vis-a-vis the view taken by the Id. CIT (A) which is a higher authority in the pedestal of the hierarchy, the scale would tilt in favour of the Id., first appellate authority, no interfere is called for in the order of Id. CIT (A) on this issue, the first ground of appeal is rejected.” 12. The similar views have also been taken by the ITAT, Calcutta Bench in the case of Dwarka Prasad Agarwal vs. ITO reported in 52 ITD 239 (Kol Trib.) and the ITAT, Delhi Bench in the case of Asst. CIT vs. Amtek Auto Ltd. reported in 112 TTJ 455 (Del Trib.). 13. By following the above judicial pronouncements and by considering the facts and circumstances of the case as discussed above, we are of the opinion that the revenue authorities have committed error in disallowing the expenses claimed by the assessee. Accordingly, the disallowance sustained by the CIT(A) of Rs. 7,49,623/-is hereby deleted. Accordingly, we allow the grounds of Appeal No. 1 & 2. 14. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on : 30/09/2022. Sd/- Sd/- ( SHAMIM YAHYA ) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 30/09/2022 *R.N* Sr PS Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT 8 ITA No. 9013/Del/2019 Divine Infracon P. Ltd. Vs. ACIT ASSISTANT REGISTRAR ITAT NEW DELHI