ENVEA INDIA PRIVATE LIMITED,NAVI MUMBAI vs. ASST. COMMISSIONER OF INCOME TAX, MUMBAI

The brief facts of the case are that the assessee filed its return of income for Assessment Year 2022-23 declaring a total income of ₹3,14,70,410/-. During the course of assessment proceedings, Assessing Officer looked into the allowability of service charges amounting to ₹9,71,28,000/-. The assessee submitted that the expenditure was towards installation charges, commission and other expenses incurred for rendering services and execution of projects at different locations. However, the Assessing Officer observed that the documentary evidence furnished by the assessee was only for expenditure amounting to ₹1,57,52,401/-, whereas supporting bills and vouchers for the balance amount of ₹8,13,75,599/- were not produced by the assessee despite repeated notices and opportunities of hearing. By holding that the expenditure was not supported unsupported by documentary evidence, the Assessing Officer disallowed the balance service charges. The Assessing Officer also observed that there was a discrepancy between the travelling expenditure claimed in the profit and loss account at ₹2,68,38,000/- and the amount reflected in the ledger account at ₹2,50,59,489/-. Since the assessee did not furnish any reconciliation for the difference of ₹17,78,511/-, the Assessing Officer added the same to income of the assessee. The Assessing Officer further examined the rent expenditure of ₹1,57,81,000/-. The Assessing Officer observed that the assessee could give documentary evidence to substantiate rent payments only to the extent of ₹1,13,34,476/-. The Assessing Officer further observed that one of the rent agreements was executed in the name of Environment SA India Pvt. Ltd. instead of the assessee company. According to the Assessing Officer, the assessee failed to substantiate the balance claim towards rent expenditure and therefore the Assessing Officer made a disallowance of ₹47,76,524/-. In respect of bad debts, the Assessing Officer accepted that provision for doubtful debts had already been added back by the assessee but he held that the claim of actual bad debts amounting to ₹38,18,000/- could not be justified by establishing the circumstances in which the debts had become irrecoverable. The claim was therefore disallowed.

In appeal, the Commissioner (Appeals) observed that with respect to service charges of ₹8,13,75,599/- and travelling expenses of ₹17,78,511/-, the assessee furnished a Google Drive link containing the service charge ledger and supporting invoices instead of uploading the documents through the Income-tax portal. The Commissioner (Appeals) held that documents uploaded on Google Drive could not be treated as a reliable evidence because they remained within the control of the assessee and could be altered or edited by the assessee. Accordingly, the Commissioner (Appeals) specifically directed the assessee to upload the supporting documents through the ITBA portal and Ld. CIT(A) granted further opportunities for compliance. However, according to the Commissioner (Appeals), the assessee neither uploaded the material through the prescribed portal nor sought any further adjournment despite sufficient opportunity. The Commissioner (Appeals) held that the genuineness of the service charge expenditure and the reconciliation of travelling expenses could not be proved and he confirmed both the disallowances made by the Assessing Officer.

With regard to the disallowance of rent expenditure, the Commissioner (Appeals) re-examined the documentary evidence and granted substantial relief to the assessee. The CIT(Appeals) accepted the assessee's explanation that the rent agreement executed in the name of Environment SA India Pvt. Ltd. pertained to the assessee itself on account of change of name and consequently allowed the claim. However, the Commissioner (Appeals) noted that rent agreements and TDS certificates relating to four parties for aggregate rent of ₹6,39,000/- had not been furnished. The Commissioner (Appeals) restricted the disallowance to ₹6,39,000/- while deleting the balance addition.

The assessee is in appeal before us against the order passed by CIT(Appeals) partly allowing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record.

During the course of hearing, the learned Authorised Representative submitted that with regard to service changes, the Assessing Officer had required supporting documents for every line item of expenditure, which exceeded 1,400 entries. Owing to the file-size restrictions on the Income-tax portal, the assessee had uploaded samples vouchers and furnished the complete supporting documents through a Google Drive link. The learned Authorised Representative fairly submitted before us that, if one final opportunity is granted, the assessee shall furnish all supporting documents in the format prescribed by the Department before the Jurisdictional Assessing Officer and shall fully cooperate in the verification proceedings.

We are of the considered view that the issues involved require detailed verification of documentary evidence. The impugned additions have essentially been sustained for want of supporting documents in the prescribed mode rather than on examination of the merits of the expenditure. The learned Authorised Representative has made a categorical statement before us that the assessee is ready and willing to furnish the documentary evidence before the Jurisdictional Assessing Officer in the manner required under the Act. In these peculiar facts and circumstances, and in order to ensure that the controversy is adjudicated on the basis of complete material, we deem it appropriate, in the interest of justice, to restore the matter to the file of the Jurisdictional Assessing Officer for de novo consideration.

Accordingly, the matter is restored to the file of the Jurisdictional Assessing Officer for de novo consideration after granting the assessee opportunity of being heard. The assessee shall furnish supporting documents relating to the service charge expenditure in the manner prescribed by the Department, together with invoices, bills, vouchers, ledger accounts and such other documentary evidence as may be called for by the Assessing Officer.

In so far as the travelling expenditure is concerned, we notice that the assessee had primarily furnished only the General Ledger. The assessee is, therefore, directed to produce supporting documents, bills, vouchers, invoices, travel records etc. as may be necessary, before the Assessing Officer for verification.

Accordingly, all issues are restored to the file of jurisdictional Assessing Officer for de-novo consideration as per directions in the preceding part of the order.

In the result, appeal of the assessee is allowed for statistical purposes.