DURGA SIGNAI INFRA PVT. LTD,KOLKATA vs. ACIT(OSD) WARD-1(1)., KOLKATA

This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Appeal No. ITBA/NFAC/S/250/2022-23/1050540758(1) dated 09.03.2023 passed against the assessment order by ACIT(OSD), Ward-1(1), Kolkata u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.12.2017 for AY 2015-16.

Sole issue raised by the assessee in this appeal is in respect of ad-hoc disallowance @ 20% of total site expenses of Rs.3,67,37,203/-. The disallowance is of Rs.61,54,501/-.

Brief facts of the case are that assessee is engaged in the business as a Railway contractor and supplier. It filed its return of income on 30.09.2015 reporting a loss of Rs.13,45,191/-. Case was selected for scrutiny assessment under CASS for which statutory notices were served on the assessee and were duly complied with. In the course of assessment, Ld. AO noted that assessee has claimed huge expenses in the P&L Account amounting to Rs.13,99,71,432/- which principally resulted in a loss of Rs.17,25,690/-. Ld. AO called for details and explanations towards major expenses claimed under the head “Other Expenses/Miscellaneous expenses”. In this respect assessee produced a detailed list of particulars for site expenses claimed in the P&L Account for an amount of Rs.3,67,37,203/-. However, Ld. AO by observing that assessee has not provided any documentary evidence in support of claim of site expenses, adopted an ad-hoc rate of 20% to disallow the site expenses after reducing the component of sales tax from it (20% of Rs.3,67,37,203/- less sales tax Rs.59,64,698/- = Rs.61,54,501/-). Aggrieved, assessee went in appeal before the Ld. CIT(A), who dismissed the same.

Before us, Ld. Counsel for the assessee emphasized that Ld. AO himself has noted that assessee has produced a detailed list of particulars in respect of site expenses. Further, nothing has been specifically pointed out in respect of defect or shortcoming in the claim of the assessee. Ld. Counsel also referred to a comparative chart to demonstrate the quantum of site expenses which had been claimed regularly by the assessee both in the preceding year as well as subsequent years vis-à-vis the turnover of the assessee. From the said chart, ld. Counsel submitted that claim of assessee towards site expenses is more or less range bound from 19.1% in AY 2017-18 to 25.52% in AY 2016-17. He also submitted that no such disallowance

Per contra, Ld. Sr. DR submitted that reference to proceding as well as subsequent years has no bearing on the year under consideration and that the assessee had merely produced a list in respect of site expenses claimed which is not supported by any other documentary evidence. Hence, he urged before the bench to confirm the actions of the authorities below.

We have heard the rival contentions and gone through the material placed before us. We note that assessee is a company engaged in the business as railway contractor and supplier. Assessee has furnished the break-up of site expenses which it has claimed in its P&L Account. Ld. AO has adopted ad-hoc percentage of 20% to make a disallowance towards site expenses without giving any rational basis for the same. Ld. AO while making a disallowance has reduced the Durga Signal Infra Pvt. Ltd. AY: 2015-16