CREATIVE ARTS EDUCATION SOCIETY, NEW DELHI V. ACIT, CIRCLE- 50(1), NEW DELHI

ITA 951/DEL/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6640 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR VARMA
• Keywords: Gift; Depreciation
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”, NEW DELHI BEFORE SHRI G. S. PANNU, PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA No.951/Del/2019 Assessment Year: 2014-15 Creative Arts Education Society, A-21/13, Local Shopping Centre, Naraina Industrial Area, Phase-II, New Delhi PAN No. AAAAC9245N Vs ACIT Circle- 50 (1) New Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Anupam Shukla, CA Respondent by Sh. Sumit Kumar Varma, Sr. DR Date of hearing: 07.12.2021 Date of Pronouncement: 10.12.2021 ORDER PER RAVISH SOOD JM: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-42, New Delhi, which arises from the order passed by the A.O u/s. 143(3) of the Income-Tax Act, 2 ITA No.-951/Del/2019 1961 (for short “Act”), dated 31.12.2018 for A.Y 2014-15. The assessee has assailed the impugned order on the following solitary ground before us : “That the Ld.CIT(A) has erred in law and on facts of the case in upholding the ad-hoc addition of Rs.12,50,000/- towards personal and non-business use of various expenses (like telephone expenses, staff welfare expenses, vehicle repair and maintenance expenses and depreciation on vehicles etc) despite the fact that all the documents and information was filed before the assessing officer. The addition is made without considering the genuineness of the documents being submitted by the appellant.” 2. Briefly stated, the assessee which is engaged in the business of providing of education and consultancy services had filed its return of income for A.Y 2014-15 on 21.11.2014, declaring an income of Rs.91,28,540/-. The return of income filed by the assessee was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143 (2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have incurred expenditure aggregating to Rs.3,22,95,400/-, as under :- 1. Miscellaneous expenses Rs. 13,30,858/- 2. Telephone expenses Rs. 23823209/- 3. Staff welfare expenses Rs. 46,90,119/- 4. Repair and maintenance expenses Rs. 5,24,393/- 5. Depreciation on vehicle Rs. 19,26,821/- Rs.3,22,95,400/- Observing, that the assessee had failed to produce complete details such as bills/vouchers, log books and other documentary evidence qua usage of cars etc., the A.O was of the view that the genuineness and authenticity of the assessee’s claim of having incurred the 3 ITA No.-951/Del/2019 aforesaid expenditure remained unproved. It was further observed by the A.O that some of the aforementioned expenses were incurred by the assessee in cash. Also, backed by the fact that some of the vouchers furnished by the assessee were self made and handwritten, the A.O was of the view that for the said reason the same did not inspire much of confidence as regards the genuineness of the expenses in question. In the backdrop of his aforesaid deliberations the A.O made an ad-hoc disallowance of Rs. 12.50 lacs out of the aforesaid expenses. 4. Aggrieved, the assessee carried the matter before the CIT(A). As the assessee in the course of the appellate proceedings had furnished detailed documents to drive home its claim that the A.O. had made an unreasonable addition, the CIT(A), therefore, called for a remand report from the A.O. Vide his report dated 27.10.2017, it was submitted by the A.O that the assessee had in the course of remand proceedings despite specific directions not produced before him the complete bills and vouchers for the month of November, 2013. In rebuttal, it was the claim of the assessee, that it was not afforded sufficient opportunity to substantiate its aforesaid claim of expenses and furnish the requisite documentary evidence in support thereof. Accordingly, the CIT(A) vide his letter dated 14.09.2018 again directed the A.O to examine whether the bills and vouchers were properly maintained by the assessee. In the course of the second round of remand proceedings, the A.O called upon the assessee to furnish the complete bills/vouchers of an amount of Rs. 1 lac and above. Also, the assessee was directed to furnish the 4 ITA No.-951/Del/2019 copies of the remaining bills/vouchers which were divided into three categories, viz. First category (Rs.5,000/- to Rs.20,000/-); Second category (Rs.20,000/- to Rs.50,000/-); and Third category (Rs.50,000/- to Rs.1,00,000/-), and was directed to produce top 10 bills/vouchers (amount wise) for the aforesaid categories of expenses. Vide his report dated 31.10.2018 filed by the A.O, it was now stated by him, viz. (i) that from a perusal of the hand written log book of travel and conveyance the assessee’s claim of expenses as regards usage of the car was not verifiable.; (ii) that as the assessee had failed to furnish the details of telephones installed at various places and had also not maintained log book, therefore, the element of personal usage could not be ruled out.; and (iii) that in so far the staff welfare expenses were concerned, as most of those pertained to catering services, purchase of items i.e diwali gifts etc, therefore, the assessee’s claim that those have been incurred for business purposes could not established. Further, the A.O dislodged the assessee’s claim that no part of the expenses were incurred in cash. In rebuttal, the assessee furnished its reply in support of its claim of having incurred the aforesaid expenses wholly and exclusively for the purpose of its business. However, the CIT(A) not finding favor with the claim of the assessee upheld the ad-hoc disallowance of Rs.12.50 lac made by the A.O. 5. At this stage, we may herein observe, that the CIT(A) while upholding the aforesaid ad-hoc disallowance of expenses had relied on the order that was passed by his predecessor while disposing off 5 ITA No.-951/Del/2019 the appeal in the assessee’s own case for the immediately preceding year i.e A.Y 2013-14 in ITA No.166/2016-17; dated 14.09.2017. 6. The assessee being aggrieved with the order the CIT(A) has carried the matter in appeal before us. At the very outset of the hearing of the appeal, it was submitted by the ld. Authorized Representative(“Ld. A.R”, for short) for the assessee, that a similar ad-hoc disallowance made by the A.O in the assessee’s own case for the immediately preceding year A.Y 2013-14, as was relied upon by the CIT(A) for upholding the ad-hoc disallowance of expenses made by the A.O during the year under consideration, had been vacated by the Tribunal vide its order passed in ITA No.7054/Del/2017, dated 27.01.2020. It was submitted by the Ld. A.R that the Tribunal had vacated the ad-hoc disallowance of Rs.10 lacs that was made by the A.O qua various expenses, viz telephone expenses, miscellaneous expenses, entertainment expenses and depreciation on vehicles etc., on the ground, that de hors pointing out of any specific defect in the books of account or the documents that were furnished by the assessee, the same could not be sustained. It was submitted by the Ld. A.R that as the fact situation qua the disallowance made by the A.O during the year under consideration had remained the same, therefore, the ad-hoc disallowance made on a similar footing could not be sustained and was liable to be struck down. 7. Per contra, the ld. Departmental Representative (“D.R”, for short) relied on the orders of the lower authorities. 6 ITA No.-951/Del/2019 8. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as perused the order passed by the Tribunal in assessee’s own case for the immediately preceding year i.e. A.Y 2013-14. Admittedly, it is a matter of fact borne from the record that the A.O had on an ad-hoc basis disallowed an amount of Rs.12.50 lacs out of the total expenses that were booked by the assessee under the various heads, viz. telephone expenses, miscellaneous expenses, entertainment expenses and depreciation on vehicles aggregating to Rs.3,22,95,400/-. As stated by the ld. A.R, and rightly so, there is no mention of any such specific bill/voucher qua the aforesaid expenses in question, as regards which the A.O had carried any doubts; or was of the view that the same pertained to an expenditure that was not incurred wholly and exclusively by the assessee for the purpose of its business. In fact, we find that the A.O had both in the course of the assessment proceedings as well as remand proceedings tried to justify the ad- hoc disallowance on the basis of generalized observations and not on the basis of any concrete material. As observed by the Tribunal in the assessee’s own case for the immediately preceding year i.e. A.Y 2013-14, an ad-hoc disallowance without pointing out the specific expenditure the claim for deduction of which by the assessee is not found to be in order, cannot be sustained and is liable to be vacated. Our aforesaid view is further supported by the order of the ITAT, Delhi in the case of ACIT, New Delhi Vs. M/s Modi Rubber Ltd., ITA No. 1952/Del/2014, dated 15.05.2018 and 7 ITA No.-951/Del/2019 that of the ITAT, Kolkata in the case of Animesh Sadhu Vs. ACIT, Circle-1, Hoogly, ITA No. 11/Kol/2013, dated 12/11/2014. Be that as it may, we find, that even otherwise the expenses claimed by the assessee during the year under consideration had not witnessed any abnormal rise as in comparison to those of the last two preceding years, which would have otherwise justified drawing of adverse inferences qua the claim for deduction of such expenses during the year under consideration. In the backdrop of our aforesaid deliberations, we not being able to persuade ourselves to subscribe to the ad-hoc disallowance of expenses made by the A.O., thus, set-aside the order of the CIT(A) and vacate the ad-hoc disallowance of Rs. 12.50 lac made by the A.O. 9. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 10.12.2021. Sd/- Sd/- (G.S. PANNU) (RAVISH SOOD) PRESIDENT JUDICIAL MEMBER Dated: 10.12.2021 *Neha* Copy of order to: - 1) The Appellant 2) The Respondent 3) The CIT 4) The CIT(A) 5) The DR, I.T.A.T., New Delhi Assistant Registrar ITAT, New Delhi 8 ITA No.-951/Del/2019 Date of dictation 07.12.2021 Date on which the typed draft is placed before the dictating Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order