CEC CICI JV,GURGAON vs. ACIT, CIRCLE-62(1), NEW DELHI

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ITA 4397/DEL/2018Status: DisposedITAT Delhi02 March 2021AY 2013-145 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal noted that the assessee had opted for the Vivad Se Vishwas Scheme and requested to withdraw the appeal. Consequently, the appeal was treated as withdrawn and dismissed as infructuous, subject to the settlement under the scheme.

What were the facts?

The assessee filed an appeal against the order of the CIT(A) for AY 2013-14, challenging additions made by the AO on account of disallowances for unverifiable material, salary, vehicle maintenance, and telephone expenses. The assessee later opted to settle the appeal under the Vivad Se Vishwas Scheme, 2020.

What were the issues?

Whether the disallowances made by the AO and confirmed by the CIT(A) were justified. The primary issue became the withdrawal of the appeal due to settlement under the Vivad Se Vishwas Scheme.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-20, New Delhi, [“Ld. CIT(A)”, for short], dated 28.03.2018 for Assessment Year 2013-14. Grounds taken in this appeal of Assessee are as under:

“1. That the Ld. AO has erred both in law and on facts in determining the assessed loss amounting to INR (3,134,280) as against the returned loss of INR (3,881,370)/-. The Ld. CIT(A) has further erred in conforming the additions made by the Ld. AO. 2. That the Ld. AO has erred both in law and on facts in making Page 1 of 6 ITA No.-4397/Del/2018 CEC ICIC JV a disallowance of INR 300,000 under the head of purchase of material as an unverifiable material consumed out of the total expenses of INR 300,419,588 claimed in profit and loss account. The Ld. AO has erred on the facts in alleging that the assessee has failed to produce some bills/vouchers in support of claim of expenses during the assessment proceedings and hence claim of INR 300,000 being a purchase of material disallowed in absence of missing bills/vouchers. 2.1 That in making the above disallowance of purchase of material, the Ld. AO has proceeded without verification of bill/voucher. The assessee has even never being asked to produce the bills/vouchers in support of the claim debited in profit & loss account for INR 300,419,588. The appellant has incurred entire expenses wholly and exclusively for business purpose under section the 37(1) of the said Act. The finding of the leaned Ld. AO is factually incorrect, legally misconceived and absolutely unsustainable and therefore, wholly unwarranted; and 2.2 That while making the disallowance of the claim of expenses being purchase of material, the Ld. AO has not only failed to ask bills/vouchers to be produce before him for verification from the appellant company but also misconstrued the statutory provisions of law to disallow the claim of expenses of INR 300,000/ -which was otherwise allowable under the Act. The Ld. CIT(A) further erred in confirming the additions made by the Ld. AO without giving opportunity of being heard to the assessee.

3.

That the Ld. AO has erred both in law and on facts in disallowing the part of the claim of INR 200,000/- out of total expenses of INR 52,855,347/- incurred by the appellant towards salary & other allowances incurred for the project undertaken during the assessment year under the on-going assessment proceedings by holding that the appellant has not produced muster roll for verification expenses. The Ld. AO has erred while making the disallowances alleging that in absence of muster roll it not possible to vouch the authenticity of the payment made therefore, disallowances of INR 200,000/- is made to plug the leakage of revenue. However, the appellant has maintained the muster roll for salary & wages incurred for the assessment year under on-going assessment proceeding. 3.1 That the Ld. AO, while making the impugned disallowance, has never asked to produce the muster roll for verification of salary and other allowances expenses claimed by the appellant, Ld. AO has also not given any reason or findings to ITA No.-4397/Del/2018 CEC ICIC JV disallow the same and the accounting treatment followed by appellant consistently. The Ld. AO has made the addition on the basis of ad hoc disallowance without having actual finding therefore the addition wholly unwarranted. The Ld. CIT(A) further erred in confirming the additions made by the Ld. AO without giving opportunity of being heard to the assessee.

4.

That the Ld. AO has erred both in law and on facts in disallowing the claim of INR 175,532/- out of the total expenses of INR 1,755,329/- made towards the payment of vehicle running & maintenance expenses by holding that the assessee has not placed the vehicle log book to verify the geniuses of the expenses. The Ld. AO has never asked to submit the vehicle log book before him in support of running & maintenance expenses claimed by the appellant. The record which was never being asked to produce how it can be treated as failure on the part of appellant. The appellant has incurred the entire expenses wholly and exclusively for business purpose under section 37(1). The finding of the Ld. AO is factually incorrect and wholly unwarranted. The Ld. CIT(A) further erred in confirming the additions made by the Ld. AO without giving opportunity of being heard to the assessee.

5.

That the Ld. AO has erred both in law and on facts in disallowing the part of the claim of INR 71,556/- out of total expenses of INR 715,560/- incurred by the assessee towards telephone expenses, The Ld. AO has made the addition on the ground that the assessee has not maintained personal telephone call register for partner/employee and hence it is not possible to predict that said expenses incurred wholly & exclusively for business purpose. The Ld. AO has made ad hoc disallowances on the basis of prediction by making general observation without having specific evidence on nature of calls made by the appellant's employee/partner, Therefore, the ad hoc disallowances of INR 71,556/- i.e., 10% of total expenses is unsustainable, inaccurate finding and wholly unwarranted. The Ld. CIT(A) further erred in confirming the additions made by the Ld. AO without giving opportunity of being heard to the assessee.

6.

The Ld. CIT(A) grossly erred in passing order without following the principle of natural justice. The assessee has not been given any opportunity to produce documents in relation to the appeal filed before the Ld. CIT(A). The Ld. CIT(A) has erred in passing order in haste.

ITA No.-4397/Del/2018 CEC ICIC JV 7. The Ld. CIT(A) erred in confirming the additions made by the Ld. AO merely based on the fact that the assessee incurred losses during the year. The Ld. CIT(A) erred in understanding that any assessee can be in losses. The Ld. CIT(A) erred in forming opinion without providing any opportunity to the assessee to substantiate the same.

8.

The Ld. CIT(A) erred in holding that the expenses incurred by the assessee is excessive in nature without providing any reason for such contentions. The Ld. CIT(A) further erred in forming this opinion without providing any opportunity to the assessee to explain the reasonability of the expenses.

9.

That the assessee requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off.”

(B) At the time of hearing, at the outset, the learned Counsel for the Assessee informed us that the assessee has opted to settle the appeal under Vivad Se Vishwas Scheme, 2020 (“VSVS”, for short) and that the assessee has already filed the relevant forms. The Ld. Counsel for assessee also drew our attention to letter dated 17th February, 2021 filed in Income Tax Appellate Tribunal (“ITAT”, for short) giving intimation for the same, and requesting to withdraw the appeal.

(B.1) At the time of hearing before us, the Ld. Counsel for assessee submitted before us that this appeal may be treated as withdrawn and may be dismissed on account of the aforesaid VSVS. After due consideration, and in view of the foregoing; we are of the view that this appeal has become infructuous, and we treat this appeal as withdrawn on account of the aforesaid VSVS. Accordingly, this appeal having become infructuous, are hereby dismissed as withdrawn, subject to settlement of the disputes in the appeal under the aforesaid VSVS.

ITA No.-4397/Del/2018 CEC ICIC JV (C) Before we part, we hereby clarify, by way of abundant caution, that if for some reason the disputes under this appeal before us are not settled under the aforesaid VSVS, then the assessee will be at liberty to approach ITAT for restoration of this appeal, in accordance with law.

(D) In the result, this appeal is dismissed. Order pronounced in open court on 02/03/2021

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