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Facts
The assessee filed five appeals against CIT(A) orders for assessment years 2012-13 to 2016-17, each with a 4-day delay. The Assessing Officer (AO) disallowed the assessee's expenses, questioning the physical existence of the company and treating it as a shell company, a stance upheld by the CIT(A).
Held
The Tribunal condoned the 4-day delay in filing the appeals. It found ample evidence of the assessee company's existence, including statutory registrations (Companies Act, Service Tax, EPF Act), audited accounts, significant turnover, payment of various taxes and expenses, and contracts with government organizations like CPWD and Rail Vikas Nigam Ltd, whose payments were reflected in Form 26AS. Consequently, the disallowance of expenses made by the AO and confirmed by the CIT(A) was deleted for all assessment years.
Key Issues
Whether the assessee company genuinely existed and was not a shell company, and consequently, whether the disallowance of its business expenses by the tax authorities was justified.
Sections Cited
Sections 143(1), Section 203AA, Section 206C(5) of the Income Tax Act, Companies Act, 1956, Finance Act, 1994, Service Tax Rules, 1994, Employees' Provident Funds and Miscellaneous Provisions Act, 1952
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R Per Bench : These are the appeals filed by the assessee against the separate orders passed by the ld. CIT(A), Bhubaneswar, all dated 31.03.2025 for the assessment years 2012-2013, 2013-2014, 2014-2015, 2015-2016 & 2016-2017, respectively.
All the five appeals of the assessee is barred by 04 days each. In this regard, the assessee has filed condonation application supported with an affidavit stating therein sufficient reasons for condonation of delay. Ld.Sr. DR also did not object to the same. Accordingly, we condone the delay of 04 days each in said appeals and proceed to dispose off all the appeals of the assessee under consideration.
342-345/CTK/2025 3. It was submitted by the ld. AR that the assessee is a company incorporated under the Companies Act. The ld. AR drew our attention to the Certificate of Incorporation which reads as follows :-
It was the submission that the assessee is also registered under the Central Board of Excise and Customs. The registration reads as follows :-
It was the submission that the assessee is also registered under the EPF Act which reads as follows :-
The accounts of the assessee are also audited. The assessment year 2012-2013 is taken as a sample year. It was the submission that the turnover of the assessee during the year 2012-2013 was Rs.55,89,838/- 342-345/CTK/2025 and profit has been shown at Rs.3,29,880/- being profits before taxes and Rs.2,27,947/- and profits after taxes. It was the submission that there was a search on the SM Consultancy Group on 20.10.2016. There was also a survey operation at Secunderabad. In the course of survey operations at Secunderabad some letter heads and unsigned cheques of the assessee were also found. The AO questioned the assessee the genuineness of the existence of the assessee company and took a stand that the Inspector’s report was called for, who had visited the address of the assessee and the Inspector’s report showed that the name board of the assessee was available at the given address, however, it was informed by one of the persons being a Civil Engineer of the said company that it is a laboratory that was functioning there and there was no technician or other persons available in the premises. Thus, the AO took a stand that there was no physical existence of the said company. Consequently the AO disallowed the entire expenses claimed by the assessee. It was submitted by the ld. AR that the company existed and the company was also having contracts with Railways being a Central Government Organization and other Government agencies. It was the submission that the AO was wrongly in drawing a conclusion that there was no physical existence of the company. It was the submission that the fact that the notice u/s.143(1) of the Act was served on the company. The notice has been served on the employee of the assessee company and the assessee company has cooperated in the assessment proceedings, which clearly shows the existence of the company itself. It was further submitted that the taxes paid by the assessee 342-345/CTK/2025 company have also been accepted by the revenue. It was the submission that the disallowance of the expenses as made by the AO and as confirmed by the ld. CIT(A) is liable to be deleted.
In reply, ld. Sr. DR submitted that the company like assessee company were just shell companies and their existence itself is questionable. It was the submission that he vehemently supported the orders of the AO and ld. CIT(A).
We have considered the rival submissions. The facts in the present case clearly show that at no point is the AO making any claim that the assessee is shell company. There is no allegation against the assessee company that the assessee is doing any financial irregularities. There is no claim that the assessee is providing on-money transactions or share transactions. The receipts of the assessee are clearly from contracts. The receipts are through banking channels. The receipts are also from Government organizations. The expenses are paid in respect of PF & ESI as also the VAT and Service Taxes. There is no evidence anywhere to show that the company does not exist. In fact, the assessee has paid service tax of nearly Rs.5,28,776/-, salaries of Rs.25,93,824/-, testing and survey charges of Rs.12,12,496/- and other expenses. The ESI has bene paid on account of assessee’s share at Rs.10,720/- and EPF at Rs.84,802/-, consultancy charges have also been paid. A perusal of 26AS shows that payments have been made by Bhushan Steel, by CPWD and by Rail Vikas Nigam Ltd. The payments by CPWD to the assessee is to the extent of Rs.1,84,873/- and the Rail Vikas Nigam Ltd. is at Rs.53,44,300/-. When one