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(A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)- 2, New Delhi, [“Ld. CIT(A)”, for short], dated 07.09.2017 for Assessment Year 2014-15. Grounds taken in this appeal of Assessee are as under:
“1. Disallowance of Professional Expenses paid on estimated basis @ 5% of the total payments amounting to Rs. 60,53,727/- and confirmation of the same by the CIT(A) is contrary to facts and law and therefore, the disallowance is liable to be deleted.
ITA No.- 7736/Del/2017 CL Educate Ltd., 2. Disallowance of expenses paid to contractors @ 1% of the total payments amounting to Rs. 55,03,286/- and confirmation of the same by the CIT(A) is contrary to facts and law and therefore, the disallowance is liable to be deleted. 3. The appellant craves leave to add or amend any of the grounds of appeal.”
(B) The first ground of appeal pertains to disallowance amounting to Rs. 60,53,727/- out of professional expenses totaling Rs. 12,10,74,547/-. This disallowance @ 5% of total claim, was made by the Assessing Officer (“AO”, for short) on the ground that the assessee had not given even the addresses and PAN of certain/ concerned parties because of which the verification regarding genuineness of the same could not be carried out; and further, that the assessee could not explain and substantiate the justification for such huge expenses for business need. The disallowance of aforesaid amount of Rs. 60,53,727/- was confirmed by the Ld. CIT(A) in impugned appellate order dated 07/03/2017, taking adverse view of the facts that the assessee had written letter to the AO admitting that addresses of all the parties to whom professional payments had been made could not be provided; and that no vouchers/ bills were produced by the assessee either before the AO or before the Ld. CIT(A).
(C) The second ground of appeal pertains to disallowance amounting to Rs. 55,03,286/- out of expenses claimed on account of contract payments totally Rs. 55,03,28,622; on the grounds, firstly that the assessee had not given the addresses and PANs of certain/ concerned parties because of which the verification regarding genuineness of the same could not be carried out; and, secondly that the assessee had ITA No.- 7736/Del/2017 CL Educate Ltd., applied lower rate for deducting tax at source as reported in the Audit Report. The aforesaid disallowance was confirmed by Ld. CIT(A), taking adverse view of the facts that the assessee had submitted nothing regarding non deduction of TDS in certain cases; and further, that the assessee had concerned that the addresses of all the persons to whom contractual payments were made could not be submitted.
(D) The non-compliances on the part of the assessee during proceedings before the AO and before Ld. CIT(A); as mentioned in foregoing paragraphs (B) and (C) of this order, which resulted in adverse view against the assessee by the authorities below are not in dispute. At the time of hearing before us, learned Authorised Representative (“Ld. AR”, for short) of the assessee admitted that the non-compliances noted by the AO and by Ld. CIT(A) in their respective orders; were factually correct; in respect of both the aforesaid disallowances of Rs. 60,53,727/- and Rs. 55,03,286/-. He explained that the non-compliances by the assessee were not intentional; and that full compliances could not be made because of large number of parties to whom the payments were made. He submitted that the required details could not be furnished due to paucity of time; as enormous work was involved in compilation of the information. He submitted that the assessee would have submitted details in respect of any specific payment claimed by the assessee as deduction. He submitted that the disallowances made by the AO, and confirmed by Ld. CIT(A) were excessive; and he pleaded that the disallowances be brought down to reasonable quantum. The Ld. Departmental Representative relied on the orders of Ld. CIT(A) and AO.
ITA No.- 7736/Del/2017 CL Educate Ltd., (E) We have heard both sides. We have perused the materials on record. The non- compliances noted by the AO and by Ld. CIT(A) in their respective orders are not in dispute. It is also not in dispute that the non-compliance was not intentional; but resulted from paucity of time as payments were made by the assessee to numerous parties; and enormous work was involved in compilation of the information. It is settled law that onus is on the assessee to prove the genuineness of expenses claimed by the assessee as deduction. It is also settled law that the AO has statutory authority to make inquiries before completing assessment; and to gather all relevant material. Such statutory authority of the AO has also been specifically mentioned in relevant provisions of law including in sections 142, 142A 143(3), 131, 133, 133A of IT Act, for example. It is an assessee’s duty to comply with lawful requirements prescribed by Revenue authorities. When an assessee does not comply with lawful requirements prescribed by Revenue authorities, the assessee cannot claim a lenient view as a matter of right, and the assessee must face the consequences in accordance with law; more so, when the onus is on the assessee to prove the genuineness of a claim. For this view, we take support from order of Co-ordinate Bench of ITAT, Delhi in the case of Aradhana Foods & Juices Pvt. Ltd. v/s. ITO (2017) 50 CCH 0080 DelTrib; in which similar view was taken in respect of disallowance of unverified purchases which was affirmed by Hon’ble Delhi High Court in the case of Aradhana Foods & Juices Pvt. Ltd. (2018) 102 CCH 0247 DelHC . In the fitness of things, therefore, in view
ITA No.- 7736/Del/2017 CL Educate Ltd., of the foregoing, and in the facts and circumstances of the present case; we set aside the impugned order dated 07/09/2017 of Ld. CIT(A); and restore the issues in dispute in the present appeal before us to the file of the Assessing Officer for fresh order as per law after providing reasonable opportunity to the assessee.
(F) This appeal is disposed off in accordance with the aforesaid directions. For statistical purposes the appeal is partly allowed.
Order pronounced in the open court on 23.02.2021.