GRANADA AIR SERVICES PVT. LTD.,KOLKATA vs. ITO, WD-12(2), KOLKATA, KOLKATA

The assessee is a company and is engaged in the business of shipping, clearing and air freight forwarding agency. It filed the return of income for the Assessment Year (‘AY’ for short) 2009-10 on 29.09.2009 declaring income of Rs. 5,49,397/-. The AO completed the assessment u/s 143(3) of the on 21.12.2011 determining the total income at Rs. 1,26,52,516/-. Aggrieved, the assessee carried the matter in appeal. The ld. first appellate authority granted part relief. Further aggrieved, the assessee is in appeal before us on the following revised grounds: “(a) The ld. CIT(A) has erred in sustaining ad-hoc disallowance of expenses for Rs. 15 lakhs. (b) That the addition towards share application money of Rs. 25 lakhs is arbitrary. (c) That the disallowance of expenses for Rs. 34,05,072/- for non-deduction of tax at source is unjust in the absence of privity of contacts as appellant is an intermediary.”

After hearing rival contentions, perusing papers on record and the orders of the authorities below, we hold as follows.

The first disallowance under challenge is of Rs. 15 lakhs. The assessee’s case is that the expenditure in question is incurred on behalf of various customers and subsequently these amounts are reimbursed by the customers. Thus he submits that no disallowance can be made, that too on an ad-hoc basis.

We find that the ld. AO as well as ld. CIT(A) have disallowed the claim of the assessee on ad-hoc basis. The ld. CIT(A), without going into the merits of disallowance, telescoped and set off the disallowance made by the AO against the addition made on account of unexplained share application money u/s 68 of the Act. In our view, this is not correct. When the entire expenditure is incurred by the assessee was on behalf of a third party and when the same has been reimbursed to the assessee by the third party, the question of making an ad-hoc disallowance does not arise. No specific expenditure has been identities as bogus or ingenuine claim. Additions cannot be sustained on the ground of telescoping. Thus, this ground of the assessee is allowed.

The next ground is on the issue of addition on account of unexplained share application money. From a perusal of page 19 of the ld. CIT(A)’s order, we find that an amount of Rs. 25 lakhs has been introduced as share application money during the year. The ld. CIT(A) has analysed the facts and legal positions correctly. No evidence is filed by the assessee before us to prove the genuineness of the share application money received. The findings of fact of the ld. CIT(A) are not controverted by the assessee. Under these circumstances we have no other alternative but to confirm the addition in question. In the result this ground of the assessee is dismissed.

The last ground is on the disallowance u/s 40(a)(ia) of the Act. The details are brought out at page 24 of the order of the ld. CIT(A). The perusal of the chart on this page, takes to a conclusion that the amount deducted as TDS was deposited with Government before the due date of filing of return of income. Thus, this disallowance is deleted.