Sigma Infotech Pvt. Ltd., Kolkata V. ITO, WD-10(3), KOLKATA, Kolkata

ITA 923/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4222 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 23-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-05-2016
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEEN ADLL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.923/KOL/2016 ( / ASSESSMENT YEAR:2005-2006) SIGMA INFOTECH PVT. LTD., KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700020 VS. ITO WARD-10(3), KOLKATA-700069 ./ ./PAN/GIR NO. : AAHCS 2874 C ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI MIRAJ D. SHAH, A/R /REVENUE BY : SHRI SALLONG YADEEN, ADLL.CIT / DATE OF HEARING : 23/11/2016 /DATE OF PRONOUNCEMENT 30/11/2016 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2005-2006, IS DIRECTED AGAINST AN O RDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-11, KOLKATA IN APPEAL NO.432/CIT(A)-11/WD.-12(3)/14-15/KOL, DATED 24.02.2 016, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFI CER (AO) UNDER SECTION.143(3) OF THE INCOME TAX ACT 1961, (IN SHOR T THE ACT), DATED 20.12.2007. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE COMPANY HAD FILED INCOME TAX RETURN FOR THE ASSESSM ENT YEAR 2005-06 ON 6-12-2005 DECLARING TOTAL INCOME OF RS.2,37,060/ -. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S.143(3) OF THE AC T AND THE AO HAS COMPUTED THE ASSESSMENT AFTER MAKING DISALLOWANCE ( BASED ON ESTIMATE @10% OF THE EXPENSES) I.E. THE AO HAS DISALLOWED BU SINESS PROMOTION ITA NO.923/16 SIGMA INFOTECH(P) LTD. 2 EXPENSES, OFFICE RENT, TRAVELLING EXPENSES, ANNUAL MAINTENANCE CHARGES, PROJECT EXPENSES @10% OF THESE EXPENSES BASED ON TH E ESTIMATE BECAUSE THE ASSESSEE DURING THE ASSESSMENT PROCEEDI NGS COULD NOT PRODUCE SUPPORTING BILLS AND VOUCHERS IN RESPECT OF ALL THESE EXPENSES. 3. AGGRIEVED FROM THE ORDER OF LD. AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS ALSO CONFIRMED THE A DDITION MADE BY THE AO, BY OBSERVING THE FOLLOWINGS :- 4.1 IN THIS CASE ASSESSING OFFICER HAS DISALLOWED 10% OF EXPENSES INCURRED UNDER THE HEADS 'BUSINESS PROMOTION', 'OFF ICE RENT', 'TRAVELLING EXPENSES', 'ANNUAL MAINTENANCE CHARGES PAID' AND 'PROJECT EXPENSES' AS THE ASSESSEE COULD NOT PRODUC E THE ENTIRE BILLS/VOUCHERS FOR THESE EXPENSES. THUS, DISALLOWAN CE OF RS.3,30,044/- WAS MADE. AS THE ISSUE RELATES TO FAC TUAL VERIFICATION AND THE ASSESSEE HAS NOT PRODUCED ANY SUPPORTING EV IDENCES, I HAVE NO OPTION BUT TO CONFIRM THE ADDITION OF RS.3 ,30,044/-. THE GROUNDS OF APPEAL ARE DISMISSED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATU RAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCE THE LD. C OMMISSIONER OF INCOME TAX APPEALS PASSED THE APPELLATE ORDER WITHO UT GIVING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE HENCE IS 'BAD IN LAW AND BE QUASHED. 3. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE DISALLOWANCE OF RS.15,779.12/- BEING 10% OF THE EXP ENDITURE INCURRED UNDER THE HEAD BUSINESS PROMOTION ON ESTIM ATION WITHOUT ANY JUSTIFIED REASONS AND THUS THE SAME BE REVERSED . 4. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS.11,637.50/- BEING 10% OF THE EX PENDITURE INCURRED TOWARDS OFFICE RENT THE DISALLOWANCES IS U NJUSTIFIED AND THE ADDITION MADE SHOULD BE REVERSED. ITA NO.923/16 SIGMA INFOTECH(P) LTD. 3 5. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS.12,664.80/- BEING 10% OF THE EXP ENSES INCURRED UNDER THE HEAD TRAVELING EXPENSES, THE SAID BEING A N EXPENDITURE FOR THE PURPOSE OF BUSINESS THUS THE SAME BE ALLOWE D' AND THE DISALLOWANCE MADE BE REVERSED. 6. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS.2,41,759.30/- BEING 10% OF THE E XPENDITURE TOWARDS ANNUAL MAINTENANCE CHARGE ON THE BASIS OF E STIMATION AND WITHOUT ANY REASON. THE SAID DISALLOWANCE IS UNJUST IFIED AND UNCALLED FOR AND AS SUCH THE ADDITION SHOULD BE REV ERSED. 7. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS.21,209.10/- BEING 10% OF EXPENDI TURE INCURRED TOWARD PROJECT EXPENSES WITHOUT ANY REASON, THE SAI D BEING AN EXPENDITURE FOR THE PURPOSE OF BUSINESS THUS THE SA ME BE ALLOWED AND THE DISALLOWANCE MADE BE REVERSED. 8. THE APPELLANT CRAVES LEAVE TO PRODUCE ADDITIONAL EVIDENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBU NAL) RULES 1963. 9. FOR THAT THE INTEREST COMPUTED U/S 234A/B/C/D OF THE IT ACT 1961 IS OVER CHARGED AND WRONGLY CALCULATED AND OR IS NO T APPLICABLE TO THE ASSESSEE CASE IT BE DIRECTED TO RE-COMPUTE THE INTEREST AS PER LAW. ALTHOUGH IN THIS APPEAL, THE ASSESSEE HAS RAISED MU LTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVAN CE OF THE ASSESSEE HAS BEEN CONFINED TO GROUNDS NO.3, 4, 5, 6 & 7 AND OTHE R GROUNDS OF APPEAL WERE NOT PRESSED BY THE ASSESSEE. 4.1 IN ALL THE GROUNDS RAISED BY THE ASSESSEE, THER E IS A COMMON ISSUE INVOLVED. THE AO DISALLOWED 10% OF THE EXPENDITURE OBSERVING THAT ASSESSEE HAD NOT PRODUCED BILLS AND VOUCHERS OF THE SE EXPENSES. SINCE IN ALL THESE GROUNDS, COMMON ISSUE IS INVOLVED, I.E . DISALLOWANCE OF 10% OF ESTIMATE BASIS, THEREFORE, THESE GROUNDS OF APPE AL ARE BEING ADJUDICATED EN MASSE . ITA NO.923/16 SIGMA INFOTECH(P) LTD. 4 5. LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE L D. CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE AO WITHOUT ANY BASIS. THE AO MADE THE ADDITION @ 10% OF ALL THE EXPENSES WHICH IS BAS ED ON SURMISE, GUESS AND CONJECTURES. LD. AR FOR THE ASSESSEE HAS FURTHE R SUBMITTED THAT THE AO MADE THE ADDITION MECHANICALLY AND WITHOUT APPLY ING THE MIND. THE ASSESSEE HAS SUBMITTED DURING THE ASSESSMENT PROCEE DINGS, THE BOOKS OF ACCOUNTS, EXPLANATIONS AND THE FOLLOWING DOCUMENTS :- I) DETAILS OF SHARE CAPITAL AND SHARE APPLICATION M ONEY WITH NAME AND ADDRESS OF THE SHAREHOLDERS; II) A COPY OF MEMORANDUM OF ASSOCIATION; III) COPY OF LETTER DATED 2-4-2005 REGARDING DETAIL S OF CAR LOAN FROM HDFC LTD. IV) DETAILS OF BANK STATEMENTS BEING OVERDRAFT WITH INDIAN BANK; V) NAME AND ADDRESS OF SUNDRY DEBTORS AND SUNDRY CREDITORS; VII) SECURITY DEPOSIT FROM STAFF; VIII) DETAILS OF SALES & SERVICES AND OTHER DIRECT INCOME; IX) DETAILS OF CLOSING STOCK; X) DETAILS OF EXPENSES XI) PURCHASE LEDGER XII) COPY OF BANK STATEMENTS XIII) CASH BOOK ALL THE BOOKS OF ACCOUNTS, DOCUMENTS, BILLS AND VOU CHERS, WHICH WERE PRODUCED, HAVE BEEN CHECKED BY THE AO. THE AO DID N OT FIND ANY ERROR IN THE DOCUMENTS AND EXPLANATION SUBMITTED BY THE ASSE SSEE, THEREFORE, THE ADDITION BASED ON ESTIMATION MAY BE DELETED. LD. AR FOR THE ASSESSEE ALSO SUBMITTED THAT THE AO DID THE GUESSWORK AS HE DID NOT BRING ANY COGENT MATERIAL ON RECORD TO S HOW THAT THE EXPENSES CLAIMED BY THE ASSESSEE ARE NOT GENUINE. LD. AR FOR ASSESSEE ALSO RELIED ON THE JUDGMENTS IN THE CASE OF MUKESH KUMAR MAHAWA R, ITA ITA NO.923/16 SIGMA INFOTECH(P) LTD. 5 NO.615/LKW//2014, ORDER DATED 16-09-2015, WHEREIN I T HAS BEEN OBSERVED BY THE TRIBUNAL AS UNDER :- 4. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE ARE OF THE V IEW THAT THE AD HOC DISALLOWANCE IS NOT PERMISSIBLE UNDER THE LAW AND I F THE ASSESSING OFFICER IS NOT SATISFIED WITH A PARTICULAR EXPENSE, HE MAY MAKE NECESSARY VERIFICATION AND ALSO TO POINT OUT DEFECT IN THE BOOKS OF ACCOUNT, BUT AD HOC DISALLOWANCE SHOULD NOT BE MADE BY MAKING GENERAL OBSERVATION. IN THE INSTANT CASE, SINCE AD HOC DISALLOWANCE IS MADE BY MAKING GENERAL OBSERVATION, WE DO NOT FI ND ANY MERIT IN THE ADDITION MADE BY THE ASSESSING OFFICER. WE ACCO RDINGLY DELETE THE ADDITION MADE ON AD HOC BASIS AFTER SETTING ASI DE THE ORDER OF THE ID. CIT(A) 6. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT I N THE SUBMISSIONS OF THE ASSESSEE, AS THE PROPOSITIONS CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPORTED BY THE ABOVE CITED JUDGMENT OF LUCKNO W BENCH OF THE TRIBUNAL (SUPRA) AND THE FACTS NARRATED BY HIM ABOV E. LD. AR FOR THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE DURING T HE ASSESSMENT PROCEEDINGS, SUBMITTED BOOKS OF ACCOUNTS DETAILS, L EDGER ACCOUNT AND DETAILS OF SUNDRY DEBTORS AND CREDITORS, SECURITY D EPOSIT FROM STAFF, PURCHASE LEDGER AND DETAILS OF EXPENSES. THE AO DID NOT FIND ANY DISCREPANCY OR MISTAKE IN THE DETAILS/DOCUMENTS SUB MITTED BY THE ASSESSEE. THE AO MADE THE ADDITION @10% OF THE EXPE NDITURE INCURRED BY THE ASSESSEE BASED ON THE ESTIMATION. LD. AR ALS O POINTED OUT THAT AD HOC DISALLOWANCE IS NOT PERMISSIBLE UNDER THE LAW A ND IF THE AO IS NOT SATISFIED WITH A PARTICULAR EXPENSE, HE MAY MAKE NE CESSARY VERIFICATION AND ALSO TO POINT OUT DEFECT IN THE BOOKS OF ACCOUN T, BUT AD HOC DISALLOWANCE SHOULD NOT BE MADE BY MAKING GENERAL O BSERVATION. IN THE ITA NO.923/16 SIGMA INFOTECH(P) LTD. 6 INSTANT CASE, ADHOC DISALLOWANCE WAS MADE BY AO BAS ED ON GENERAL OBSERVATION WITHOUT BRINING ANY COGENT MATERIAL ON RECORD. HENCE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CI T(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. 7. IN THE RESULT, APPEAL OF THE ASSESSEE ON ALL GRO UNDS IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30/ 11/2016. SD/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 30/11/2016 & ()* /PRAKASH MISHRA , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) & ' , / ITAT, 1. / THE APPELLANT-SIGMA INFOTECH(P) LTD. 2. / THE RESPONDENT.-ITO, WARD-10(3), KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//