M/S. SUBHRASHI ENCLAVE PVT. LTD.,KOLKATA vs. ITO, 10 (2), KOLKATA, KOLKATA

The present appeal has been preferred by the assessee against the order dated 01.09.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).

The appeal is time-barred by 324 days. An application for condonation of delay has been filed, which is also supported with the affidavit of Shri Subhash Sharma, the director of the assessee company, wherein, it has been pleaded that the impugned order of the CIT(A) was passed on 01.09.2023 but the order was communicated to the assessee on 03.09.2024. Immediately, the assessee engaged an authorized representative and filed the appeal. The ld. AR further stated that the notice and also the impugned order were not duly served upon the assessee due to mismatch of email address which was provided in Form 35. Therefore, the assessee was not aware of the passing of the impugned order and as and when the assessee came to know about the passing of the impugned order, the assessee preferred the present appeal. The ld. Counsel for the assessee, therefore, has submitted that the delay in filing the appeal was not intentional but due to aforesaid circumstances and the assessee is not a wilful defaulter. Therefore, the ld. AR prayed for condonation of delay. Considering the above submissions, we find reasonable cause behind such delay. Accordingly, we condone the delay of 324 days in filing of the present appeal and proceed to decide the appeal on merits of the case.

Brief facts of the case are that the assessee filed its return of income for the assessment year 2015-16 by declaring total income of Rs.2,530/-. The case of the assessee was selected for limited scrutiny based on specific issues including low income in comparison to very high loans/advances/investments in the balance sheet, mismatch in profit before tax as per P & L A/c and schedule BP of return. The Assessing Officer issued statutory notices u/s 143(2) and 142(1) of the Act to the assessee. In response to the notices, the assessee complied and filed various details before the Assessing Officer. During the assessment proceedings, the Assessing Officer made the disallowances on account of salary expenses at Rs.29,18,500/-, administrative and other expenses at Rs.2,19,203/- (Rs.49,251/-, Rs.18,347/-, Rs.47,677/-, 31,928/- and Rs.72,000/- as staff welfare, books and periodical, general expenses, printing & stationary, rent & electricity respectively). The Assessing Officer determined the total income of the assessee at Rs.31,40,230/- by alleging that the expenses were not incurred by the assessee in relation to its business operation.

Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A) challenging the disallowances made by the Assessing Officer. However, the ld. CIT(A) upheld the order of the Assessing Officer and dismissed the appeal without adequately considering the submissions and supporting documents provided by the assessee.

Dissatisfied with the above order, the assessee is in appeal before this Tribunal raising multiple grounds. However, the main contention of the ld. AR is that the Assessing Officer went beyond the scope of limited scrutiny without obtaining prior approval for complete scrutiny. Moreover, the assessee furnished all necessary details/supporting documents such as copies of ITR, audited accounts, salary payment details, month-wise daily attendance register, rent agreement during the assessment proceedings as well as before the ld. CIT(A) which was also produced before the Bench through a paper-book containing 132 pages. The ld. AR, therefore, stated that the disallowances were arbitrarily made and are lack of substantive evidence to suggest that the expenses were not genuine or not related to business. The ld. AR also stated that the Tribunal in the assessee’s own case under similar facts and circumstances vide for assessment year 2017-18 dated 12.11.2024 has allowed the appeal of the assessee. Therefore, he prayed before the Bench that the instant additions made by the Assessing Officer need to be set aside since all supporting documents were placed before the authorities below.

On the other hand, the ld. DR could not rebut the aforesaid contention of the ld. AR. The ld. DR however supported the decisions of the authorities below.

We, after hearing the rival submissions and perusing the material available on record, find primarily that the Assessing Officer exceeded the scope of limited scrutiny which was confined only to specific issues and the additions made by the Assessing Officer were without proper justification despite being submitting relevant documents. We note that 3 the assessee submitted sufficient documents in relation to the expenses and no discrepancies were identified during the assessment proceedings on the part of the Assessing Officer. Even, the books of account of the assessee were not rejected by the Assessing Officer. We also find that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for conversion of the limited scrutiny case to a complete scrutiny case. We also note that the Assessing Officer without converting the case into complete security and without obtaining necessary approval cannot disallow the expenses beyond the scope of limited security which is lacking in the present case while passing the assessment order. We place reliance in the decision of the Tribunal in assessee’s own case for assessment year 2017-18 in ITA No.1442/Kol/2024. Considering the above and also following the decision of the Tribunal in assessee’s own for assessment year 2017-18, the disallowances on account of salary expenses at Rs.29,18,500/-, administrative and other expenses at Rs.2,19,203/- (Rs.49,251/-, Rs.18,347/-, Rs.47,677/-, 31,928/- and Rs.72,000/- as staff welfare, books and periodical, general expenses, printing & stationary, rent & electricity respectively) are not sustainable and we direct the Assessing Officer to delete the same.

In the result, the appeal of the assessee is allowed.