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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: Sh. R. K. Panda
Per R. K. Panda, Accountant Member:
This appeal filed by the assessee is directed against the order dated 15.02.2019 of ld. CIT(A)-28, New Delhi relating to A.Y. 2010-11.
None appeared on behalf of the assessee at the time of hearing when the name of the assessee was called. It was seen that the assessee was not appearing on the earlier dates. Further, the notice sent by the Registry through RPAD was returned by the Postal Authority with the remarks “no such company in this address”. I, therefore, deem it proper to decide the appeal on the basis of material available on record and after hearing the ld. DR.
Although a number of grounds have been raised by the assessee, however, these relate to the validity of the 2 United Fabricators & Technical Services Pvt. Ltd. reassessment proceedings and the order of the ld. CIT(A) in sustaining the addition of Rs.6,34,800/- made by the AO under the provisions of Section 40A(2b) of the Income Tax Act, 1961.
Facts of the case, in brief, are that the assessee is a private limited company and engaged in the business of job work of erection and installation. It filed its return of income on 17.09.2010 declaring total income of Rs.41,74,183/-. The return was processed u/s 143(1) of the I.T. Act. Subsequently, on the basis of information received from Investigation Wing of the department, the AO, after recording reasons reopened the case u/s 147 of the I.T. Act. Accordingly, notice u/s 148 dated 31.03.2017 was issued and served on the assessee.
During the course of assessment proceedings, the AO asked the assessee to explain its transaction with one Mr. Amit Sharma. The assessee filed his reply before the AO by submitting as under:
“Sh. Amit Sharma is a son of Mr. Kanti Saroop Sharma and brother of Mr. Sumit Sharma who are the director in the company. He was employed in Bangalore company. United Fabricator………. "The Company” had also execute a work contract in Bangalore at the same time. In the absence of responsible person in the company at customer site for the transaction related to cash payment to labour at site, the company had relied upon Mr. Amit Sharma, being a reliable person, transfer Rs. 6,34,800/- to his total personal account as imprest account on behalf of the company during the financial year 2009-10 on account for the payment made to labour site.
Hence company had transfer the above amount into Amit Sharma’s Bank account and Amit Sharma withdraw an the same from his bank account and paid to labour
3 United Fabricators & Technical Services Pvt. Ltd. charges at Bangalore site on behalf of the company. The above site is the remote area of Karnataka and small worker did not have any bank account in which the company can deposit their charges directly.”
However, the AO was not satisfied with the arguments advanced by the assessee and made addition of Rs.6,34,800/- by invoking the provisions of Section 40A(2b) of the I.T. Act by observing as under:
“5.2 The submission and reason recorded by the assessee was perused by this office and the claim of imprest payment to Sh. Amit Sharma on account of labour expense charges of Rs. 6,34,800/- was found to be not allowable. Here it is noted that Sh. Amit Sharma is not an employee of the assessee company. The assessee company has further submitted that Sh. Amit Sharma is the relative of the directors of the company, this clearly warrants a scrutiny of the payment made out of company’s account in view of the provision contained in section 40A(2b) of the IT Act. Though, the genuineness of the claim of expenses has also not been verified by the assessee as no supporting document with regard to expense incurred was submitted to this office. The assessee has not submitted the details of the project undertaken by it during the period under consideration in Bangalore, also no copy of agreement for undertaking contractual job in Bangalore was provided to this office. This raises the doubt of the expenses claimed by the assessee on account of imprest payment of Rs. 6,34,800/- paid to Sh. Amit Sharma who happened to be relative of the directors of the assessee company.
5.3. Thus, in view of the above the expenses claimed on account of imprest payment of Rs. 6,34,800/- is disallowed and added back to the total income of the assessee under section 37 of the IT Act being expenses incurred not for the purpose of the business.”
(Addition: Rs. 6,34,800/-)
4 United Fabricators & Technical Services Pvt. Ltd. 7. Accordingly, the AO determined the total income of the assessee at Rs.48,08,980/-.
In appeal, the ld. CIT(A) upheld the addition made by the AO. He also upheld the reassessment proceedings initiated by the AO.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.
I have heard the ld. DR and perused the record. I find the AO in the instant case made addition of Rs.6,34,800/- by invoking the provisions of Section 40A(2b) of the I.T. Act on the ground that the assessee could not substantiate with evidence to his satisfaction regarding the expenses claimed by the assessee on account of imprest payment of Rs.6,34,800/-. I find the ld. CIT(A) upheld the validity of the reassessment proceedings as well as the addition on merit by observing as under:
“4. The Grounds No. 1 & 2 taken by appellant pertain to the reopening of assessment proceedings on the basis of information received from Investigation Wing. Whether information received from Investigation Wing can be a basis for reopening the assessment proceedings or not, has been answered by Hon'ble jurisdictional High Court in the case AGR Investment Ltd. vs. Addl. CIT & Anr. 333 ITR 146, wherein it was held that the 'specific information received from the office of the Directorate of Investigation as regards the transactions entered into by the assessee with a number of concerns which had made accommodation entries and they were not genuine transactions, was neither a change of opinion nor did it convey a particular interpretation of a specific provision which was done in a particular manner in the original
5 United Fabricators & Technical Services Pvt. Ltd. assessment and sought to be done in a different manner in the proceedings u/s 147 of the Act. Rather the reason to believe was appropriately understood by the Assessing Officer and there was material on the basis of which the .notice was issued'. Similarly, in other case, Rajat Export Import India Pvt. Ltd. vs. ITO, 341 ITR 135, Hon'ble jurisdictional High Court again substantiated the aforesaid stand by holding that information received by Assessing Officer from Investigation Wing regarding entry taken by assessee from entry provider with specific details was a valid ground for reopening the assessment. It has been further held by Hon'ble Court that at the stage when reasons are recorded for reopening the assessment, the Assessing Officer is not required to build a fool- proof case for making addition to the assessee income; all that he is required to do at that stage is to form a prima facie opinion or belief that income has escaped assessment. The relevancy of the material before the Assessing Officer is to be judged only from that perspective and not from the perspective as to whether the material is sufficient or adequate to sustain the addition ultimately. Similar view has been taken by Hon'ble Court in other case Contel Medicare Systems P. Ltd. vs. CIT, 349 ITR 649, wherein the reopening was initiated on the basis of information received by AO from, the Directorate of Income Tax (Investigation), in the cases, Aravali Infrapower Ltd. Vs. DCIT 390 ITR 456 and PCIT Vs. Paramount Communication Pvt. Ltd. 392 ITR 444, Hon'ble Court has opined that the information received from Directorate constitutes the tangible material and reopening of assessment on the basis of such tangible material is valid.
4.1 The facts in the case of appellant are similar to aforesaid cases. Here also, information was received by AO from Investigation Wing of the Department that assessee has entered into unexplained and doubtful transactions with Shri Amit Sharma to the extent of Rs. 5.62 lakhs. After analyzing the said transactions and verifying from the details of return of income of appellant, the AO formed an opinion that the appellant has escaped the assessment to the tune of Rs. 5.62
6 United Fabricators & Technical Services Pvt. Ltd. lakhs of taxable income. All these information received from Investigation Wing, have been examined in details with the details of return of income and a belief was formed by him that there was escapement of income of Rs. 5.62 lakhs on the part of appellant and consequently, he recorded the reasons before issuing notice u/s 148 of the Act and initiated the reassessment proceedings in the case of the appellant.
4.2 In view of the above, I uphold the validity of reassessment proceedings and dismiss the grounds taken by appellant.
5. The Grounds No. 3 & 4 relate to the merit of the case. It can be seen from the facts discussed by AO in the assessment order that the amount of Rs.6,34,800/- was disallowed by him on account of fact that these amounts spent by Shri Amit Sharma were no way connected with appellant's company and secondly, no documentary evidence could be produced by appellant to support its claim that the expenses have been incurred for business purposes. Against it, the appellant neither during assessment proceeding nor appellate proceedings could give any specific reply about the genuineness of these transactions or utilization of aforesaid amounts towards business purposes. It failed to give any details/documents to prove that these expenses are incurred wholly or exclusively for business purposes as per-section 37(1) of IT Act. In view of this, the AO was justified in disallowing the aforesaid expenses and making addition to income of assessee. I, therefore, confirm the addition made by AO and dismiss the grounds taken by appellant.”
I do not find any infirmity in the order of the ld. CIT(A) in absence of any material brought before me to take a contrary view than the view take by the ld. CIT(A) on both the issues i.e. the validity of reassessment proceedings and the addition on merit. I, therefore, uphold the order of the ld. CIT(A) and the grounds raised by the assessee are dismissed.
7 United Fabricators & Technical Services Pvt. Ltd. 12. In the result, the appeal filed by the assessee is dismissed.
Order Pronounced in the Open Court at the time of hearing on 28/03/2022.