DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), BANGALORE vs. GREENKO BUDHIL HYDRO POWER PRIVATE LIMITED, HYDERABAD,

This appeal by the Revenue is directed against the order dated, 31/01/2024 of the learned CIT (A)-15, Bangalore, for the A.Y.2014-15.

The Revenue has raised the following grounds of appeal:

Aggrieved by the impugned order of the learned CIT (A), the Revenue has filed the present appeal.

The learned CIT (DR) has submitted that the Assessing Officer has recorded in the assessment order that despite various notices, the assessee failed to submit any supporting evidences for the claim of expenses under the head “transmission charges” as well as various miscellaneous expenses including depreciation and therefore, the Assessing Officer was having no option but to estimate the income of the assessee @ 20% of gross turnover. He has further submitted that, even before the learned CIT (A), the assessee failed to submit any document in support of the claim. However, the learned CIT (A) has proceeded to make an adhoc disallowance of 30% of the transmission charges and 50% of the other miscellaneous expenses. The learned DR has further submitted that, even during the remand proceedings, the assessee has not produced any supporting evidences and taken an excuse that due to change of management, the assessee could not receive complete record from the previous management. He has further submitted that the learned CIT (A) has allowed the loan processing fee of Rs.4.24 crores without any supporting evidence. He has referred to the P&L Account and submitted that the assessee has claimed this expenditure as under the head “borrowing cost”. However, there was no new loan during the year under consideration, therefore, the claim of loan processing fee in Page 3 of 18 the year under consideration cannot be allowed. As regards the other expenses allowed by the learned CIT (A) to the tune of 50% of the claim, this issue was not even part of the remand proceedings as well as remand report and therefore, in the absence of any supporting evidence, the estimation is without any basis. Thus, the learned DR has submitted that the impugned order of the learned CIT (A) is not sustainable and liable to be set aside and the order of the Assessing Officer be restored.

On the other hand, the learned AR of the assessee has submitted that the transmission charges were paid to the Power Grid Corporation of India, Power System Operation Corporation Ltd and National Energy Trading and Services Ltd. The assessee produced the details of the transmission charges before the Assessing Officer, during the remand proceedings along with party-wise payment and TDS return in Form 26Q. Thus, the transmission charges were paid after deduction of TDS, details of which were duly furnished before the Assessing Officer during the remand proceedings. The learned AR of the assessee has further submitted that though the assessee has not submitted copy of the ledger account and bank statements to support the payment but the breakup of the payments along with the TDS returns showing the payments were made to the above 3 PSU entities were produced during the remand proceedings. The learned AR of the assessee further submitted that the payments were made to the Public Sector undertakings after deducting the Tax at Source and therefore, the claim of the assessee cannot be doubted. He has supported the impugned order of the learned CIT (A).

As regards the loan processing fee, the learned AR of the assessee has submitted that the consolidated loan/total borrowings have come down from Rs.539.99 crores to Rs.362.54 crores. However, the borrowings from banks have increased from Rs.95.14 crores to Rs.271.17 crores. Thus, there is an increase in the borrowings during the year of Rs.176.02 crores on which processing charges were paid to the ICICI Bank.

Other Miscellaneous Expenses: The learned AR of the assessee has submitted that the Assessing Officer has not commented upon in the remand report about these expenses and therefore, the learned CIT (A) has made a disallowance of 50% of the total claim. He has further pointed out that for the A.Y 2013- 14, the Assessing Officer proposed a disallowance of 25% of the total expenses in the absence of original books of account in comparison to the same, the disallowance made by the learned CIT (A) is much higher. The learned AR of the assessee has thus, pleaded that the company was taken over by the present management in the corporate debt restructuring of the earlier group and hence, is not in a position to file the supporting documents in support of the expenses claimed. He has supported the impugned order of the learned CIT (A).

We have considered the rival submissions as well as the relevant material available on record. The Assessing Officer has not made specific disallowance of any expenditure or claim, but in the absence of the relevant details and supporting

The assessee has not disputed this fact that he could not produce any supporting evidence for various claim of expenses, therefore, in those circumstances, the Assessing Officer should have estimated the income of the assessee on some reasonable and proper basis. The estimation of the income @ 20% of the gross turnover is without any basis as the Assessing Officer has not given any instance or any p1ast history or future details of the net profit of assessee as well as the prevailing profit rate in the Industry of Power Generation from Hydro Project. The assessee explained the circumstances and its inability to produce the evidence in support of the claim because of the change of management and not receiving the complete record from the earlier management. The learned CIT (A) called for a remand report from the Assessing Officer which was submitted on 17/11/2022. The remand report with comments of the Assessing Officer extracted by the learned CIT (A) in para 4.10 of the impugned order are as under:

As it is manifest from the above report, the Assessing Officer has accepted some of the claims in the remand report where the assessee produced the relevant details. The Assessing Officer has made the remarks regarding the transmission charges that the charges debited in the P&L Account amounting to 30.46% of the Revenue and details have been sought from the assessee. The Assessing Officer has also mentioned that the additional evidence was submitted by the assessee. Thus, wherever the assessee produced the additional evidence, the Assessing Officer has agreed to the claim of the assessee. The learned CIT (A) after considering the remand report has given the findings in Para 4.11 to 7 as under:

Thus, it is manifest from the remand report of the Assessing Officer that various details were produced by the assessee during the remand report. The learned CIT(A) has estimated the various expenses and made the disallowance of 30% of the transmission charges as the assessee failed to produce the proof of the payments of these claims. Accordingly, having regard to the facts and circumstances of the case and the reasons explained by the assessee for non-production of some of the supporting evidences and proof of payments, that there was change of management due to the Corporate Restructuring, the Page 17 of 18 assessee could not lay hand to the entire relevant record, we do not find any error or illegality in the impugned order of the learned CIT (A) and the same is upheld.