DCIT CENTRAL CIRCLE-20, NEW DELHI vs. BRIGHT POINT INDIA PVT. LTD., NEW DELHI

The Revenue has filed appeal against the order of the Learned Commissioner of Income-Tax (Appeals)-27, New Delhi [“Ld. CIT(A)”, for short] dated 29.03.2023 for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed its return of income for AY 2017-18 on 29.11.2017 declared loss from the business at Rs.9,70,47,842/-. The case was selected for complete scrutiny under CASS. Subsequently, notices under section 143(2) and 142(1) of the 2 Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. In response, assessee furnished the relevant details as called for. 3. Assessee is engaged in the business of wholesale trading of electronics. After considering the informations provided by the assessee, not convinced with various details submitted by the assessee, AO proceeded to make the following additions :- Addition : disallowance made under section 37(1) of the Act (as per para 3) 18,17,667 Addition : disallowance made under section 37(1) of the Act (as per para 4) 10,15,536 Addition : disallowance made under section 37(1) of the Act (as per para 5) 3,57,18,478 Addition : disallowance made under section 37(1) of the Act (as per para 6) 33,71,319 Addition : disallowance made under section 37(1) of the Act (as per para 7) 51,32,635 Addition : disallowance made under section 37(1) of the Act (as per para 8) 8,68,942 Addition : disallowance made under section 37(1) of the Act (as per para 9) 24,49,967 Addition : disallowance made under section 37(1) of the Act (as per para 10) 82,10,917

Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A)-27, New Delhi and filed detailed submissions which are reproduced at pages 6 to 27 of the appellate order. After considering the detailed submissions of the assessee, ld. CIT (A) allowed the claim of the assessee by observing as under :-

2 Hon'ble Delhi High Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX-7 versus R.G. BUILDWELL ENGINEERS LTD. has held that,

The Assessing Officer (A.O.) made the additions in respect of the return of the . Assessee's income of the Assessment Year 2010- 2011. 3. In respect of the first item, i.e. expenses/or bricks, machinery repair, cartage etc., the A.O. concluded that insufficient evidence was adduced. He therefore, disallowed 10% of the claim. This was reduced by half by the CIT (Appeals). The ITAT gave two reasons to set aside the 4 findings of the A.O. - CIT(Appeals). Firstly, that the books of account were not rejected and secondly, that in the past, consistently such expenses were allowed in scrutiny; assessments. Likewise, in the case of labour cases too, identical reasons were adduced by the A.O. to bring to tax a sum of Rs.2.2 crores. The same were set aside ultimately by the ITAT.

This Court is of the opinion that the principal reasoning of the ITAT i.e. omission to reject the books of account, in which event the adhoc disallowance could have been adjusted and also the historical treatment of such expenses, cannot be termed as unreasonable in support of its ultimate conclusion.

In these circumstances, no substantial question of law arises."

3 The SLP filed by the Department was also dismissed by the Apex Court after hearing the case.

4 In view of the above discussion and respectfully following the decision of the juri ictional High Court, the action of the ld. AO in making additions on ad-hoc basis. is not found to be sustainable.”

Aggrieved with the above order, Revenue is in appeal before us raising following grounds of appeal :- “1. The Ld. CIT (A) has erred on facts and in law by allowing the appeal of the assessee by deleting the disallowance of expenses of Rs.5,85,84,551/- made in the hands of the assessee.

The Ld. CIT(A) has erred on facts and in law by ignoring the fact that the AO has raised the question related to entries/transactions in books of accounts and assessee failed to produce the supporting documents to explain the same.

The Ld. CIT(A) has erred on facts and in law by not appreciating the fact that as the chart for previous 5 years provided by the assessee showing the expenses incurred by the assessee cannot be the basis to claim the expenses for A Y 2017-18 in the absence of evidence/documents viz. bills, invoices, medical reimbursements bills, Meal expenses bills etc.

(a) The order of the Ld. Commissioner of Income Tax (Appeals)is erroneous and not tenable in law and on facts.

At the time of hearing, ld. DR of the Revenue brought to our notice detailed findings of the AO and further brought to our notice findings of the ld. CIT (A), he objected to the deletion of disallowances by ld. CIT(A) made by the Assessing Officer. Further, he submitted that assessee has failed to submit the relevant supporting documents and merely relying on the submissions of the assessee, ld. CIT (A) has granted the relief. He prayed that findings of the AO may be sustained. 7. On the other hand, ld. AR of the assessee heavily relied on the findings of the ld. CIT (A). 8. Considered the rival submissions and material placed on record. We observe that the AO has completed assessment u/s 143(3) of the Act and disallowed the huge expenses claimed by the assessee without pointing