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Facts
The assessee challenged the disallowance of hospitality expenses of Rs. 10,68,717/- and an addition of unexplained cash credit of Rs. 4,42,358/-. The assessee contended that adequate opportunity to present documents and justifications was not provided before the assessment order and CIT(A) order were passed.
Held
The tribunal held that the CIT(A) order was passed without affording the assessee an adequate opportunity to file submissions. Consequently, the case is remanded back to the CIT(A) for adjudication on merits after providing a proper opportunity of being heard to the assessee.
Key Issues
Whether the disallowance of hospitality expenses and the addition of unexplained cash credit were justified, especially when the assessee was not given adequate opportunity of being heard or to submit evidence.
Sections Cited
Section 37(1), Section 68, Section 71(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Shri Anubhav Sharma, Judicial Member ITA No. 6669/Del/2019 Asstt. Year: 2016-17 Vigen Healthy Tech India P Ltd., Vs The ACIT, Circle -26(2), Plot No. 16-17, Near Bramha New Delhi Apartment, Sector 7, Dwarka, New Delhi 110075 (APPELLANT) (RESPONDENT) PAN No. AADCV 0003 A Assessee by : Sh. Abhijeet, Adv. Revenue by : Sh.Amit Katoch, Sr. DR Date of Hearing: 07.02.2024 Date of Pronouncement: 09.02.2024
ORDER Per Dr. B. R. R. Kumar:- The present appeal has been filed by the assessee against the orders of ld. CIT(A)-9, New Delhi dated 12.06.2019.
The assessee has raised the following grounds: A. Because the respondent failed to appreciate that the assessment order dated 26.12.2018 was bad in law and against all settled judicial precedents. B. Because the respondent failed to appreciate that the assessment order dated 26.12.2018 is against basic notions of computation and assessment. C. Because the respondent failed to appreciate that the settled legal principle of "audi alteram partem" was not followed as the assessment order was passed without giving an opportunity to the appellant to put forth and explain its stance before the assessing authority. Reference in this regard may be made to the case titled "Sarita Devi Vs ITO" LITA No. 2363/DEL/2014] and copy of the same is annexed herewith as Annexure A-9. D. Because the impugned order dated 12.06.2019 is bad in law as also contrary to the facts and as such liable to be set aside on this ground only.
2 ITA No. 6669/Del/2019 Vigen Healthy Tech India P. Ltd., E. Because the impugned order dated 12.06.2019 is based on surmises and conjectures and hence liable to be set aside. F. Because the impugned order dated 12.06.2019 needs to be set aside also on account of the reason that the respondent failed to take note of the facts in the correct perspective and as such the impugned order is perverse. G. Because the impugned order dated 12.06.2019 suffers from material infirmities and as such the same is not sustainable in the eyes of law. H. Because the respondent failed to appreciate that the disallowance of Hospitality expenses of Rs. 10,68,717/- was without any basis as the hospitality expenses (mainly food expenses at guest house was wholly for the business of the appellant as the appellant carries on its business all over India through various distributors. The distributors of the appellant visit head office at Delhi from time to time and many of the distributors had to stay at Delhi on account of various business commitments. In this regard it would be relevant to mention herein that the company hired a guest house to save cost as the Hotel expenses would have been much more than the expenses incurred in guest house, further, all the expenses incurred in hiring the guest house was supported by proper bills and as such there was no occasion for the assessing authority as also the respondent to have arrived at any other conclusion. Moreover, the provision of section 37 (1) of the income tax act, in this regard, categorically states as under:- ".......37. (1)Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee aid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". [Explanation. —For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. ........." I. Because the respondent failed to appreciate that the Hospitality expenses are duly supported by bills/vouchers and as such the respondent had no occasion to arrive at any other conclusion, further, in so far as the issue of non-submission of supporting documents/justification is concerned, it is most respectfully submitted that the show cause notice was issued on 22.12.2018 which was a Saturday, and a weekend/extended holiday for the appellant, thereby giving a time of only two days to the appellant to submit its reply, however, 25.12.2018, being a holiday, on account of Christmas, the reply could not be filed on 25.12.2018 and when the appellant went to file its reply on 26.12.2018, the assessing officer, by that time, had already passed the order and as such no opportunity was given to the appellant to submit any document/justification in support of its contention. The appellant, at this stage, is submitting a month-wise breakup of the expenses incurred towards hospitality expenses and seeks the leave of this Hon'ble Tribunal
3 ITA No. 6669/Del/2019 Vigen Healthy Tech India P. Ltd., to file all the relevant bills/vouchers as and when desired and permitted by this Hon'ble Tribunal. Copy of the month-wise break-up of the expenses incurred towards hospitality expenses is annexed herewith as Annexure A-10. J. Because the respondent failed to appreciate that the addition on account of Unexplained Cash Credit of Rs. 4,42,358/- was without any basis and contrary to settled business practice. Even otherwise, there is no prohibition regarding sale on cash basis of more than Rs. 20,000/- in a day, moreover, each and every sale, in cash, was made through proper bills and sale tax/Vat was charged and duly deposited with the statutory authorities. It would not be out of place to mention herein that the appellant has a total turnover of Rs. 16.27 Crores of which cash sale was only of an amount of Rs. 4.42 lacs, duly supported by bills, which is a miniscule percentage of 0.27 out of the total sale and as such there was no reason for the respondent as also the assessing authority to treat the said amount of Rs. 4,42,358/- as unexplained cash credit. Further, Section 68 of the Income Tax Act, in this regard, is quoted herein below:- "...Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year....." Moreover, it is reiterated even at the cost of repetition that in so far as the issue of non-submission of supporting documents/justification is concerned, it is most respectfully submitted that the show cause notice was issued on 22.12.2018 which was a Saturday, and a weekend/extended holiday for the appellant, thereby giving a time of only two days to the appellant to submit its reply, however, 25.12.2018, being a holiday, on account of Christmas, the reply could not be filed on 25.12.2018 and when the appellant went to file its reply on 26.12.2018, the assessing officer, by that time, had already passed the order and as such no opportunity was given to the appellant to submit any document/justification in support of its contention. The appellant, at this stage, is submitting a month-wise breakup of the expenses incurred towards hospitality expenses and seeks the leave of this Hon'ble Tribunal to file all the relevant bills vouchers as and when desired and permitted by this Hon'ble Tribunal. K. Because the respondent failed to appreciate that the addition on account of alleged unexplained cash of Rs. 4,42,358/- is, even otherwise, bad in law for the reason that either the said amount of alleged unexplained cash of Rs. 4,42,358/- ought to have been deducted from the total sales revenue or the said amount of alleged unexplained cash of Rs. 4,42,358/- ought to have been set off under Section 71(1) of the Income Tax Act against the net business loss of the appellant, however, the respondent as also the assessing officer chose not to adopt any of the said courses and as such the impugned order dated 12.06.2019 needs to be set aside on this ground alone. Reference in this regard may be held from the matter titled "M/s KR Automobiles Vs ACIT" [ITA No. 1972/Ahd/ 2012] and copy of the same is annexed herewith as Annexure A-11. L. Because the respondent failed to appreciate that the appellant had all the documents substantiate each and every contention of the appellant, however, the
4 ITA No. 6669/Del/2019 Vigen Healthy Tech India P. Ltd., appellant was not provided an opportunity to adduce evidence/supporting documents to substantiate its contention and the impugned order needs to be set aside on this ground alone. 11. That the appellant craves the leave of this Hon'ble Tribunal to add, amend or alter any of the grounds after seeking the permission of this Hon'ble Tribunal. 12. That the appellant would suffer irreparable, harm and injury if the impugned order dated 12.06.2019, passed by the Commissioner of Income Tax, (Appeal)-IX, New Delhi as also the assessment order dated 26.12.2018 of the assessing authority are not set-aside. 13. That the appeal is being filed within the period of limitation. 3. We find that the order of the ld. CIT(A) has been passed without affording adequate opportunity to the assessee to file their submissions. Hence, the case is being remanded to the file of the ld. CIT(A) to adjudicate the issue on merits after affording an opportunity of being heard to the assessee.
4 In the result, the appeal of the assessee is allowed for statistical purpose.
Order Pronounced in the Open Court on 09/02/2024. Sd/- Sd/- (Anubhav Sharma) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 09/02/2024 *NV, Sr. PS*