IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `A' NEW DELHI
BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER
AND
SMT DIVA SINGH, JUDICIAL MEMBER
I.T.A .No.-1883/Del/2012
(ASSESSMENT YEAR-2007-08)
ITO, M/s Aryan Life Style Pvt. Ltd.,
Ward-39(1), Room No.-381, 17B, MGF House, Asaf Ali Road,
C.R. Building, I.P.Estate, vs New Delhi-110002.
New Delhi-110002. PAN-AAFCA5158F
(APPELLANT) (RESPONDENT)
Appellant by Sh. Yogesh K. Verma, CIT DR
Respondent by Sh. Umesh Gupta, CA
ORDER
PER DIVA SINGH, JM
This is an appeal filed by the Revenue against the order dated 17.02.2012 of
CIT(A)-V, New Delhi pertaining to 2007-08 assessment year on the following
grounds:-
"1. The learned CIT(Appeals) has erred on facts and in law in
admitting additional evidences filed by the assessee in violation
of Rule 46D of the I.T. Rules.
2. The learned CIT(Appeals) has erred on facts in deleting the
disallowance of Rs.58,16,787/- made u/s 40(a)(ia) by the A.O. on
account of rental expenses.
3. The learned CIT(Appeals) has erred on facts in deleting the
disallowance of Rs.2,13,81,924/- made by A.O. on account of
office and administrative expenses.
4. The learned CIT(Appeals) has erred on facts in deleting the
disallowance of expenditure on fixed assets at Rs.2,00,00,000/-
and disallowance depreciation of Rs.20,00,000/-.
5. The appellant craves leave for reserving the right to amend,
modify, alter, add or forego any ground(s) of appeal at any time
before or during the hearing of this appeal."
2 I.T.A .No.-1883/Del/2012
2. The relevant facts of the case are that the assessee in the year under
consideration e-filed its return declaring an income of Rs.13,905/-. However as per
the computation of income business loss for the year shown was Rs.4,50,96,221/-
and after adjusting short-term capital gain of Rs.13,905/-, the loss carried forward to
the next year was shown as Rs.4,50,82,316/-. As per the assessment order in the
year under consideration the assessee has earned income from trading of sports
goods, foot wear, apparels and accessories etc from retail outlets at various
locations. In the course of the assessment proceedings the assessee was required to
produce books of accounts for examination and verification of the details submitted.
However the books of the accounts were not produced. Accordingly qua the ground
2,3 & 4, the AO made additions for the reasons set out in para 3.2, 3.3 & 3.4
observing as under :-
"3.2. Disallowance u/s 40(a)(ia):- Perusal of details filed shown that
TDS has not been deducted on commission of Rs.5,87,667/-
pertaining to May, 2006 payable/paid to M/s ADM Apparels,
therefore, the same is disallowed as per the provision of section
40(a)(ia) of the IT Act, 1961. Similarly, out of Rental expenses of
Rs.2,95,04,177/-, it is seen that TDS have been paid on aggregate
amount of Rs.52,29,120./- pertaining to February 2007 in the
month of June 2007. Since, TDS pertaining to February 2007
should have been paid during the financial year itself as per
provisions of section 40(a)(ia) of the IT Act, 1961, the same is
disallowed and added to the income of the assessee for the
relevant assessment year 2007-08. Since, books of accounts have
not been produced for verification it can not be ascertained as to
whether the TDS have been deducted and paid as per the
provisions of section 40(a)(ia), therefore, a further disallowance
of Rs.25,00,000/- is made on estimated basis. Thus, total
disallowance u/s 40(a)(ia) comes to Rs.58,16,787/-
3.3. It is observed that office and administrative expenses of
Rs.7,12,73,080/- is more than the cost of goods sold i.e.
Rs.6,58,50,604/-. Thus, it is apparently excessive, unreasonable
and unjustified. Since books of accounts have also not been
produced during the assessment proceedings a sum of
Rs.2,13,81,924/- i.e @ 30% of the said expenses is disallowed
3 I.T.A .No.-1883/Del/2012
being unverified, unreasonable and excessive and added to the
income of the assessee for the relevant assessment year 2007-08.
3.4. An addition of Rs.9,97,91,647/- have been made in fixed assets.
Since, books of accounts along with bill, vouchers, in respect of
the said addition in fixed assets have not been furnished a sum of
Rs.2,00,00,000/- is disallowed out of addition of Rs.8,8893,149/-
in furniture and fitting blocks on account of being unverified
expenses and added to the income of the assessee for the relevant
assessment year. Depreciation of Rs.20,00,000/- is also
disallowed accordingly."
3. In appeal before the First Appellate Authority, petition moved under Rule 46A
by the assessee was accepted. Considering the arguments advanced on behalf of the
assessee, Ground No-2 raised in the present petition was decided in the following
manner:-
"4.1. The issue involved and the submission made by the
appellant have been considered. Anybody verifying the details of
TDS can see that the appellant has itself noted the date of TDS in
a wrong fashion which is different from the earlier one-It is not
continuously writing dates as per date first, month afterwards
and year in the end. This can be seen from page 106 & 107 of
the Paper Book (PB). It is only on actual verification and that
also on being told by the appellant or its AR that one can find out
that month has been written first, date second and year in the end
of the TDS pertaining to February deposited in March 2007 i.e.
3.6.2007 stands for 6th March 2007. (Fault does not lie with the
AO as such) but the fact remains that he did not convinced with
the version of the appellant. Although the summery of TDS on
the same account i.e TDS on rent payment is available on page
109 of the Paper Book. The undersigned has seen copy of
challans (Pg 110 of the PB) showing the deposit of TDS and the
payment has been found in order. Therefore, the disallowance of
rental expenses made under section 40(a)(ia) is deleted and the
ground of appeal is allowed."
3.1. Qua Ground No-3 agitated by the Revenue, the issue was concluded vide para
5.1 in the following manner:-
4 I.T.A .No.-1883/Del/2012
"5.1. The issue involved and the submission made by the appellant
have been considered:-
(i) The AO has made disallowance of 30% of the total office
and administrative expenses purely on adhoc basis without
bringing anything on record that to show that the payments were
bogus or did not have business nexus.
(ii) Even if the books of account were not produced during
assessment proceedings, the same were produced during remand
proceedings as noted above and the AO appears to have
examined the same.
(iii) The AO was given reasonable opportunity to submit its
remand report-a letter asking for the remand report was issued
on 12.10.2011; the remand report was received on 11.02.2011.
In view of the above, the additions made by the AO are deleted
and the grounds of appeal no.5 is allowed."
3.2. Similarly the issue agitated by Ground No-4 was decided in assessee's favour
vide Ground No.-6.1 in the following manner:-
"6.1. The issue involved and the submission made by the
appellant have been considered. The AO has not established that
the expenditure on fixed assets was from undisclosed sources.
He has not conduced any inquiry even during remand
proceedings as to the source of investment in the assets under
consideration. This is also a fact that the assessee has not
claimed the expenditure in its Profit & Loss a/c since it is capital
expenditure and has added to its fixed assets. Therefore, the
addition of Rs.2 crores on account of fixed assets and Rs.20 lacs
on account of depreciation are deleted. This ground of appeal is
therefore allowed."
4. Aggrieved by this the Revenue is in appeal before the Tribunal. Whereas the
Ld. CIT DR placed heavy reliance upon the assessment order, copy of the remand
report was filed so as to emphasize that despite the fact that the issue was remanded
even in the remand proceedings the assessee did not comply with the specific
directions given in regard to the production of relevant record, books of accounts
and vouchers etc. Specifically addressing Ground No-2 it was his submission that
the CIT(A) has given a finding that the assessee had noted all data of TDS in wrong
5 I.T.A .No.-1883/Del/2012
fashion and made specific reference to pages 106 and 107 of the paper book
however in the copies available in the paper book, the relevant months are not very
clear. As such it was his request that the assessee should be directed to produce
original documents. Qua the other issues it was also his stand that despite being
afforded specific opportunities the assessee could not produce the relevant record
neither in regard to the administrative expenses nor in regard to the amount of
investment made by the assessee. In the circumstances it was his prayer that the
impugned order be set aside and the assessment order be upheld.
5. The Ld. AR on the other hand heavily relied upon the impugned order. It was
his submission that due to lack of opportunity in the assessment proceedings the
books of accounts could not be produced. The said reply was given by the Ld. AR
in response to the specific query of the Bench as the AO has made an observation
that the assessee was required to produce books of accounts for examination and
verification which were not produced. Addressing the same, the Ld. AR submitted
that in the remand proceedings the books of accounts were produced and considering
the same, the relief has been granted by the CIT(A). In view of the fact that the
department had pointed out that the photocopies were not clearly showing the
month. The Ld. AR was required to file clearer copies. Responding to the said
opportunity to show original document, Ld. AR filed a copy of Challan stated to be
downloaded from the website of the department. Since it was not confirmed the LD.
AR was required to certify the same and he was asked whether the original
document was available to him. In response to which it was stated that the original
documents are available and the document sought to be filed it was stated would be
certified. Ld. AR was also required to address the Remand Report available on
record filed by the assessee itself at pages 293-295 of the paper book. A perusal of
the same shows that the AO required the assessee vide letter dated 26.10.2010 to
submit the following information:-
6 I.T.A .No.-1883/Del/2012
"..1. Details of payment in respect of which tax has been deducted at
source during the year, in the following format-
S.No. Head of A/c in Nature of Gross amount Tax Date of deposit of tax
P&L A/c payment paid by you deducted deducted
Also provide copy of TDS return for the relevant Asst. Year 2007-
08 alongwith evidence of payment of TDS deducted (in original)
and highlight corresponding entries in your bank statements.
2. Complete details of administrative expenses of Rs.7,12,73,080/-
alongwith supporting documents i.e rent agreements, sales tax
order, commission payment details etc. in original for
verification. Also give justification for such expenditure. Please
highlight these expenses in bank statement for verification.
3. Complete details of addition in fixed assets with original bills,
vouchers and complete Books of accounts (ledger, cash book,
Bank book, jornal, Fixed asset register etc.) in original for
examination/verification...."
5.1. A perusal of the same shows that as per para 3 of Remand Report dated
09.02.2011, the evidence filed was found to have various shortcomings despite
specific opportunity being given. As a result of this situation, the AO issued another
letter to the assessee on 12.01.2011 requiring him to produce the following
information:-
"4. On 12.01.2011 letter was again issued to the assessee for
producing the following:-
"...1. Please furnish the details of payment (as per P& L a/c) in respect
of which tax has been deducted at source during the year, in the
following format:-
S.No. Head of A/c Gross amount Amount on which Amount of Date of deposit of
in P&L A/c paid by you TDS deducted & Tax deducted/ tax deducted
paid rate of TDS
2. Copy of TDS return pertaining to the A.Y.2007-08 alongwith
copy of challans showing TDS payments. Please highlight
payment of TDS with respect of rent, commission and
7 I.T.A .No.-1883/Del/2012
brokerage', commission paid, `repair & maintenance expenses',
`security charges', `legal & professional expenses' and `salaries'
3. Please give detailed notes and justification of `commission and
brokerage' as well as `commission paid', as shown in P&L
account. Also, furnish complete details of parties to whom
commission, brokerage etc. paid alongwith their confirmed
copies of accounts and copies of ITR for the relevant A.Y.2007-
08.
4. Please furnish complete details of parties to whom rent were
paid alongwith their confirmed copies of accounts and copies of
ITR for the relevant A.Y.2007-08.
5. Please furnish complete details of persons to whom salaries were
paid i.e names, addresses, place of posting, monthly salary and
gross salary paid during A.Y.2007-08. Also, provide copy of
Form No-16 issued to the employees."
5.2. Consequent to this as per record the AO came to the following conclusion in
para 4 & 5 which is extracted from his Report available on record:-
"4. Matter was fixed for 18.01.2011 to furnish above said documents
before the undersigned. On that date, letter dated 18.01.2011 was filed
making claims about producing the details twice on 09.11.2010 and
16.11.2010. Contents of the letter shows assessee's/A.R.'s
uncomfortableness in furnishing details as required. I do not agree
with the claim made regarding production of details as stated in the
said letter. Since, I was required by your goodself to send remand
reports obviously I needed to examine the issues pertaining to additions
made. Since, the matter could not be examined on 09.11.2010 and
16.11.2010 due to paucity of time and urgency of attending to other
pressing matters, letter dated 12.01.2011 was issued affording the
assessee another opportunity for furnishing certain details, as stated
above. It may be seen that despite being afforded three opportunities,
details requited vide letters dated 26.10.2010 and 18.01.2011 were not
furnished.
5. Since, details required as stated above were not furnished the
issues relating to additions made in the assessment order remains
unexplained and therefore, I would request your goodself to sustain the
additions made and uphold the assessment order."
8 I.T.A .No.-1883/Del/2012
6. The Ld. AR was required by the Bench to address the same. In response
thereto it was submitted that the Remand Report was refuted by the assessee. The
assessee's submissions it was stated is placed at pages 86-89 of the paper book. A
perusal of the same shows that apart from faulting the AO and insisting that the
assessee was represented by Mr. Saheed Rizvi, the assessee has not been able to give
any cogent explanation addressing the specific objections of the AO. We have gone
through the impugned order and have already extracted the reasoning concluding the
issue in favour of the assessee given by the CIT(A). Accordingly in the light of
these peculiar facts, circumstances and submissions of the parties before the Bench
as available on record, we hold that Ground No-1 of the department in regard to
admission of additional evidence deserves to be dismissed as evidently sufficient
opportunity was not available during the assessment proceedings. Qua Ground No.-
2, the relevant evidence required to be filed by the assessee for which purpose the
appeal was adjourned to the next date the assessee has filed a printout from the
website of the department however the same has not been certified. The original
document has not been shown despite a specific opportunity. Accordingly in the
circumstances we find ourselves unable to concur with the reasoning and finding
given by the CIT(A) in para 4.1. The issue as such is restored back to the AO with
the direction to decide the same in accordance with law after giving the assessee a
reasonable opportunity of being heard. The assessee is directed to produce the
original documents before the AO in support of the claim. Addressing Ground No-
3, it is seen that no specific independent reasoning has been given in para 5.1 by the
CIT(A). It is seen that the reasoning given that the books of accounts produced
before the AO in the remand proceedings is factually incorrect. Since the Ld. AR
assured on a specific query by the Bench that the books of accounts are available
accordingly it is considered appropriate in the interests of justice to set aside the
impugned order and restore the issue to the file of the AO who shall examine the
9 I.T.A .No.-1883/Del/2012
issue de novo after giving the assessee a reasonable opportunity of being heard.
Same is the position in regard to the issue addressed in Ground No-4 as the factum
of investment qua the original documents and books of accounts were never
produced before the AO. In the circumstances, we donot find the reasoning given by
the CIT in para 6.1 to be a cogent reasoning as the necessary facts qua the issue were
never produced and the CIT(A) has not addressed this fact. The assessee is directed
to produce the relevant record. Accordingly Ground No-4 raised by the Revenue is
also allowed for statistical purpose and the issue is restored back to the file of AO
who shall decide the same in accordance with law after giving the assessee a
reasonable opportunity of being heard.
7. In the result, the appeal of the Revenue is partly allowed for statistical
purposes.
The order is pronounced in the open court on 28th of October 2013.
Sd/- Sd/-
(R.S.SYAL) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:28/10/2013
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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