MAZARS,MUMBAI vs. ACIT WARD 17(2), MUMBAI

There is a delay of 10 days in filing the present appeal. After considering the rival submissions and perusing the contents of the 2 Mazars delay condonation application and affidavit filed, we are satisfied that the delay in filing the appeal is due to reasonable cause. Hence, we are inclined to condone the delay of 10 days and admit the appeal for adjudication on merit.

In ground no.1, the assessee has challenged the disallowance of unrecovered out of pocket expenses amounting to `5,04,264.

Brief facts are, the assessee, a partnership firm, is engaged in the business of consulting in corporate finance, including, financial and tax due diligence of internal control, internal audit, accounting and other services. For the assessment year under dispute, the assessee filed its return of income on 30th September 2012 declaring loss of ` 46,80,931. During the assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of ` 30,47,912, towards client recovery expenses. When called upon by the Assessing Officer to furnish details and justify the claim, the assessee furnished necessary details and submitted that while rendering services to clients, the assessee has to incur certain out of pocket expenses which are subsequently recovered from the clients. However, in certain cases, the clients refused/declined to reimburse such expenditure. Therefore, the assessee has to claim such expenditure on its account. After perusing the submissions of the assessee in the context of materials furnished, the Assessing Officer found that out of the total

The learned Authorised Representative submitted, there is no dispute that the assessee has incurred the expenditure, as, all the details relating to such expenditure were furnished before the Assessing Officer. He submitted, even the name of the parties for whom expenditure was incurred was also furnished to the Assessing Officer. He submitted, a detailed explanation was also filed before the Assessing Officer explaining the nature of expenses. He submitted, without properly considering assessee’s explanation and the evidences filed, the Assessing Officer has disallowed the amount. He also submitted, while deciding identical issue in assessee’s own case for the assessment year 2013–14, in ITA no.2505/Mum./2018, dated 30th September 2019, the Tribunal has deleted the disallowance. Thus, he submitted, facts being identical, the disallowance made in the impugned assessment year should also be deleted.

The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).

We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the assessee during the year under consideration has incurred certain out of pocket expenditure while rendering services to the clients. A major part of such expenditure has been recovered from the clients. However, only an amount of ` 5,04,264, remained unrecovered. The Assessing Officer has disallowed the amount primarily on the reasoning that the assessee failed to furnish any evidence to show that the amount is not recoverable. However, the assessee has furnished all the details relating to the expenditure incurred, including, the details of parties for whom such expenditure was incurred. It is also not a fact that the assessee has received the disputed amount from the clients. In such circumstances, the explanation of the assessee that the amount is not recoverable has to be accepted. It is relevant to observe, while deciding identical issue in assessee’s own case for the assessment year 2013–14 cited supra, the Tribunal has deleted the disallowance made by the Assessing Officer and sustained by learned Commissioner (Appeals). Facts being identical, following the aforesaid decision of the 5 Mazars Co–ordinate Bench, we delete the disallowance of ` 5,04,264. Accordingly, this ground is allowed.

Ground no.2, is not pressed due to smallness of the addition. Accordingly, this ground is dismissed without prejudice to the rights and contentions of the parties, if such issue arises in any other assessment year in future.

Besides the above, the assessee has raised additional ground with regard to the determination of loss at ` 41,26,920, and levy of interest under section 234B of the Act for the very same amount.

The learned Authorised Representative submitted, the tax payable by the assessee is nil. Rather, the assessee is entitled for refund of ` 47,27,381 due to credit of TDS. Therefore, no interest at all is payable under section 234B of the Act. The learned Authorised Representative submitted, though, the assessee has filed an application for rectification under section 154 of the Act on 28th August 2018, before the Assessing Officer, no action as yet has been taken by the Assessing Officer. Thus, he submitted, the Assessing Officer may be directed to dispose off assessee’s application for rectification within a time bound period.

The learned Departmental Representative has no objection if a direction is issued to the Assessing Officer for disposal of assessee’s application under section 154 of the Act.

Having considering the rival submissions, we are of the view that the additional ground raised by the assessee since does not require investigation into fresh facts, have to be admitted for adjudication. Accordingly, we do so.

Having held so, it is noticed that on the issue raised in the additional ground, the assessee has already moved an application for rectification of mistake under section 154 of the Act, before the Assessing Officer as early as on 28th August 2018. It is stated before us by the learned Authorised Representative that the said application is still pending. In our view, the inaction of the Assessing Officer in disposing off assessee’s application filed under section 154 of the Act for such a long period cannot be appreciated. Therefore, we direct the Assessing Officer to dispose off assessee’s application filed under section 154 of the Act, as referred to above, as expeditiously as possible and preferably within a period of three months from the date of receipt of this order. Needless to mention, the Assessing Officer must dispose off the aforesaid application filed by the assessee on merits and in accordance with law after affording a reasonable

In the result, appeal is partly allowed. Order pronounced in the open Court on 17.01.2020