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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI O.P.KANT & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Present appeal has been filed with the delay of 8 days.
Assessee moved the application for condonation of delay on the on the grounds inter alia that the impugned order passed by Ld. Pr. CIT was received by Ashok Paswan who was not aware of the legal proceedings and ; that due to inadvertence, he has kept the order with himself leading to the delay of 8 days filing the appeal. The Ld. CIT-DR opposed the application for condonation of delay. However, we are of the considered view that since the application of condonation of delay is supported within affidavit of the Director of the assessee company and reasons disclosed appears to be sustainable, 8 days delay in filing the present appeal stands condoned.
Appellant, Supreme Build Cap P. Ltd. (hereinafter referred to as ‘the assessee’), by filing the present appeal sought to set aside the impugned order dated 30.03.2018 passed by the Pr.
CIT, New Delhi, qua the assessment year 14-15 on the grounds inter alia that :- “1. That the order of Principal Commissioner of Income Tax, Central 1, New Delhi (“Ld. Pr. CIT”) under section 263 of the Income Tax Act (“Act”) is against the law and without jurisdiction.
2. That the Ld. Pr. CIT grossly erred in law and on facts in setting aside the assessment framed u/s 143(3) of the Act by the Learned Assistant Commissioner of Income Tax, New Delhi (“Ld. AO”).
The Ld. Pr. CIT ought to have considered while framing the order under section 263 that the assessment had been framed by the Ld. AO after considering details and the law applicable in the circumstances of the case and therefore, the order of assessment was framed after proper enquiry and therefore, such order could not be considered as “erroneous” within the meaning of section 263 of the Act.
4. That the Ld. Pr. CIT has grossly erred in law and on facts in treating the assessment order as ‘erroneous’ and ‘prejudicial to the interests of the revenue’ when the Ld. AO has completed the assessment u/s 143(3) after detailed verification
of the documents furnished by the assessee in the assessment proceedings.
5. That the Ld. Pr. CIT has grossly erred in law and on facts in not allowing sufficient opportunity of being heard to the appellant during the course of proceedings under section 263 of the Act.
6. That the Ld. Pr. CIT has grossly erred in law and on the facts in not appreciating that the expenditure of Rs. 1,89,08,562/- under the head “Legal & Profssional Charges” were incurred wholly and exclusively for the purpose of business and applicable taxes were deducted at source on such payments and were duly deposited. That the above grounds of appeal
are without prejudice to each other.”
3. Briefly stated that facts necessary for adjudication of the controversy at hand are : assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on at income of Rs. 1,14,80,270/-. Ld. Commissioner of Income Tax (CIT) by invoking provisions contained u/s 263 of the Act perused the record and noticed that the assessee company has claimed an expenditure of Rs. 1,89,08,562/- under the head “Legal and Professional charges” during the year under assessment in profit and loss account. Ld. CIT after adjourning the proceedings for 3 dates, rejected the adjournment application on 3rd date and proceeded to conclude that the assessment order passed by the Assessing Officer is erroneous and pre-judicial to the interest of revenue in so far as the expenses claim of Rs. 1,89,08, 562/- of the assessee is concerned and allowed the same without due care and verification by the AO and directed the AO to make fresh assessment after examining the claim of the assessee in respect of such expenses.
Feeling aggrieved the assessee has challenged the impugned order passed by ld. CIT before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
The Ld. AR for the assessee challenged the impugned order on two grounds ; one that sufficient opportunity of being heard has not been given by the Ld. CIT before the passing the impugned order; two that the adequate inquiry has been conducted by AO whom the entire record as to claiming the expenditure of Rs. 1,89,08,562/- were supplied during the assessment proceedings.
On the other hand Ld. DR in order to repel the argument addressed by Ld. AR contended that the order has been passed without making any inquiries or verifications and relied upon explanation 2, to Section 263 of the Act inserted by Finance Act, 2015 with effect from 01.06.2015. The Ld. DR further relied upon decision rendered by the Hon’ble Supreme Court and Hon’ble High Courts cited as Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/2017) dated 29.11.2017), Malabar Industrial Co. Ltd. vs. CIT [2000] 109 Taxman 66 (SC) / [2000] 243 ITR 83 (SC)/[2000] 159 CTR 1(SC), Rajmandir Estates (P.) Ltd. vs. PCIT [2016] 386 ITR 162
So far as the question of providing the adequate opportunity of being heard by Ld. CIT to the assessee is concerned undisputedly first notice was issued to the assessee to appear on 14.03.2018, on which date none-appeared. Then Ld. CIT received an adjournment application for 21.03.2018. Again on 21.03.2018 assessee failed to file any reply and documentary evidence and his request for further adjournment was rejected and Ld. CIT(A) and proceeded to pass the order ex parte. Facts show that sufficient opportunities were given to the assessee but he has not preferred to defend the case by filing reply supported with documentary evidence. So this contention raised by the assessee is not sustainable.
Now the second question to be decided is “as to whether the assessing officer has made adequate inquiry or verification which was required to be made as per amended provisions contained in Explanation 2 Section 263 of the Act”.
For ready perusal provision contained u/s 263 Explanation 2 effective from 01.06.2015 are extracted as under :-
“Explanation 2-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if , in the opinion of the Principal Commissioner or Commissioner,- (a)the order is passed without making inquiries or verification which should have been made; (b)the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.”
Now coming to the facts of this case, the Ld. AR for the assessee drew our attention towards page 54 to 58 of paper book , which is the reply filed by the assessee to the queries raised by the AO. At item no. 20 at page 57 of paper book AO has made specific query that :
“20. Details of all expenses exceeding Rs. 80,000/- debited in accounts and copies of ledger accounts with necessary evidences for the year ending 31.03.2014 is enclosed.”
No doubt, the Assessing Officer has raised specific query that all expenses exceeding Rs. 80,000/- debited in the accounts and copies of ledger accounts with necessary evidences are to be produced. But the Ld. AR for the assessee has failed to point out if he has produced bills vouchers and nature of the legal and professional charges paid to the legal professionals before AO.
We are of the considered view that enquiries as to the expenses claim of legal and professional charges cannot be allowed merely on the basis of ledger unless supported with documentary evidence. So, we are of the considered view that Explanation 2 to Section 263 is attracted in this case and the Assessing Officer has passed order without making enquiries or verification which should have been made during the assessment proceedings.
Even otherwise, the Ld. CIT(A) has passed a legal and valid order directing the Assessing Officer to make fresh assessment so far as expenses claim of Rs. 1,89,08,562/- is concerned , by affording reasonable opportunity of being heard to the assessee and in these circumstances no prejudice is being cuased to assessee who can produce the necessary evidence in support of its claim before the AO before whom assessment is pending as per impugned order passed by Ld. CIT. So Finding no illegality or perversity appeal filed by the assessee is hereby dismissed. Order pronounced in open court on this 25th October, 2018.