M/S. INDIAN CHAIN PVT. LTD.,KOLKATA vs. A.C.I.T., CIRCLE - 12(1), KOLKATA, KOLKATA

The sole grievance raised by the assessee in these grounds of appeal is that the ld. CIT(Appeals) erred in confirming the disallowance made by the Centralized Processing Centre (CPC) disallowing the expenditure of Rs.4,47,990/- incurred by the assessee towards Club subscription fees and Club services.

3. Ld. Counsel for the assessee stated that the said adjustment made by the CPC is bad-in-law since it is not covered in the adjustments referred in section 143(1)(a) of the Act.

We have heard the rival contentions and perused the relevant record placed before us. We notice that the assessee incurred subscription expenses of Rs.92,949/- and club services expenses of Rs.3,55,041/-. In the tax audit report in Point No.21(a), such expenses have been mentioned. The Centralized Processing Centre (CPC) has treated that the alleged expenses are personal in nature as the auditor has indicated for the Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited disallowance of such expenditure. Further, ld. CIT(Appeals) has also confirmed this transaction for want of necessary details. Before us, the issue is whether such adjustment as has been made in the case of assessee is permissible as made by the CPC for the observation of the auditor in the 3CD report issued by the auditor. In Form 3CD annexed Form 3CA, various details need to be filled in. Some of which comes under the category of disallowance of expenditure, which are specifically indicated in the audit report, but all the details filed in the 3CD report are not meant for making disallowances but they are actually made to assist the ld. Assessing Officer in case of scrutiny proceedings and certain important details are readily available with the assessing authority to carry out the scrutiny proceedings. Section 143(1)(a)(iv) of the Act provides for the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income of the income-tax return. In our considered view, the details furnished by the auditor in the 3CD report about subscription and club services is a mere information and such type of expenditure may have some personal element but whether expenditure of any personal nature is included in such expenses can be examined only after verification of the bills and vouchers. Such observation of the auditor is similar to the observations made for the payment to the relatives under section 40A(2)(b) of the Act which cannot lead to disallowance of all expenses but only if the case of the assessee is scrutinized and such expenditure incurred for which payment has been made to relatives has to be examined by the ld. Assessing Officer as to whether such expenses are excessive Assessment Year: 2018-2019 M/s. Indian Chain Pvt. Limited or unreasonable having regard to the fair market value of the goods services or facilities, then such excess expenditure claimed by the assessee may be disallowed. Therefore, we are of the considered view that for the information regarding subscription and club services prima facie no adjustment was possible under the provisions of section 143(1)(a)(iv) of the Act and the CPC has exceeded its jurisdiction for making alleged disallowances. Going into the merits of the case as to whether of personal in nature was involved in the alleged amount of subscription and club services is not required to be dealt at this stage since the CPC has gone beyond the power provided in section 143(1)(a) of the Act for making the alleged disallowance. Thus we delete the disallowance of Rs.4,47,990/- and allow the grounds of appeal raised by the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 13th April, 2023.