HARISH CHANDER TALUJA,DELHI vs. ACIT, CIRCLE- 63(1), NEW DELHI

“The order dated 30.03.2017 passed by the learned Commissioner of Income Tax (CIT) Appeals-XX, New Delhi is bad in law and on facts and deserves to be quashed.

Facts giving rise to the present appeal are that the return of income was filed by the assessee on 30.09.2013 declaring total income of Rs.58,35,250/-.

Aggrieved against this, the assessee preferred appeal before Ld.CIT (A) who after considering the submissions of the assessee and material available on record, partly allowed the appeal. Thereby, Ld.CIT(A) confirmed the addition of Rs. 3,00,000/-. On the basis that there was substantial increase by 6.53% in the purchases and decrease in the gross profit over last year.

Aggrieved against this, the assessee is in appeal before this Tribunal.

The only effective ground in this appeal is against sustaining the addition of Rs. 3 lacs out of additions made by the Assessing Officer.

Ld. Counsel for the assessee at the outset submitted that the Ld.CIT (A) confirmed the ad-hoc disallowance made on account of purchases. He submitted Page | 2 that the Ld.CIT(A) ex-facie erred in confirming the disallowance on account of purchases. He submitted that the reason for confirming the disallowance is absolutely incorrect, the comparison of gross profit with purchase by the Ld.CIT (A) was incorrect as per the actual figures. He drew our attention to the chart submitted before the Ld.CIT(A) to demonstrate that the N.P ratio and G.P ratio increased but were not decreased as stated by the Ld.CIT(A). He submitted Ld.CIT(A) grossly erred in calculating and considering the average figures as the figure of the current year. He submitted that the GP ratio for the Assessment Year 5.95% in comparison to 5.34% average of last two years and NP ratio was 2.21% against 2.11% of the average of last 2 years. He submitted even if the reason of the Ld.CIT (A) is considered as regarding comparison of ratios for previous years as per actual figures. The ratio had increased. Hence, there ought not to be any disallowance on account of purchases.

It was further submitted that the disallowance on account of ad-hoc basis is not permissible under the law. There has to be some basis for making such ad-hoc disallowance. He submitted that the Assessing Officer as well as the Ld.CIT(A) did not point out any specific bills which did not qualify the expression u/s 37(1) of the Act. He submitted the payments were made through banking channel confirmation of most of the parties were submitted during the course of assessment proceedings. It was stated even the Assessing Officer made the disallowance in the absence of any tangible material on record. He submitted the Assessing Officer without mentioning any instance of absence of the date of missing voucher made an ad-hoc disallowance in respect of purchases made by the assessee. He submitted that the Assessing Officer failed to appreciate that the complete details along with the address, TIN Number were made available on record. He submitted that the assessee has been filing that VAT returns before the concerned Department no adverse finding is given by the said Department.

Ld. Counsel for the assessee placed reliance on the decision of the Coordinate Bench rendered in the case of Prayag Polytech Vs. ADIT, Judgment of Hon’ble Delhi High Court in the case of Friends Clearing Agency Pvt. Ltd. Vs. CIT 322 ITR 269. Further, reliance was placed on the decision of the Tribunal in the case of ACIT Vs. M/s Ganpati & Company being to buttress the contention if the books of the assessee are properly maintained and produced before the assessing authority. The disallowance should proceeds on items of expenditure which were not proved by the assessee and Ad-hoc disallowance on every year without assigning any reason is not justifiable.

On the contrary, Ld. Departmental Representative opposed the submissions and supported the assessment order and finding of the Ld.CIT(A) on this issue.

We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. We find merit into the contention of the ld. Counsel for the assessee that the Ld.CIT(A) in Para 5.32 of his order erroneously stated that there was decrease in gross profit for the last year from the 5.57% to 5.34%.

From the above finding, Ld.CIT(A) it is evident that the basis of confirming the addition is contrary to the records. The Revenue has not brought any material to substantiate the finding of the Ld.CIT(A). Therefore, considering the material available on records, we hereby direct the Assessing Officer to delete the addition. This ground of the assessee’s appeal is allowed.