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Facts
The assessee, Asian Pacific Learning Limited, engaged in educational and computer training programs, filed a belated return for AY 2011-12 claiming a business loss. The Assessing Officer (AO) made substantial additions and disallowances leading to a high assessed income. The CIT(A) granted significant relief, prompting the revenue to appeal before the ITAT concerning the deletion of various disallowances and the adjustment of returned loss.
Held
The ITAT remanded the deletion of disallowances for training expenses and office/general expenses (Grounds 1, 2, 3) back to the AO, noting that additional evidence was filed before the CIT(A) without seeking a remand report from the AO. The ITAT upheld the CIT(A)'s deletion of disallowances under section 40(a)(ia) (Ground 4), finding no infirmity as TDS returns were filed. The claim for adjustment of returned loss (Ground 5) was also remanded to the AO for verification.
Key Issues
Whether the CIT(A) erred in deleting ad-hoc disallowances of training and office/general expenses without the AO's comments on additional evidence, whether the CIT(A) correctly deleted disallowances made u/s 40(a)(ia) for non-deduction of TDS, and whether the CIT(A) erred in allowing the assessee to revise business loss.
Sections Cited
143(3), 46A, 139(4), 40(a)(ia), 194C, 194J
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 1958/Del/2021 (Assessment Year: 2011-12) ITO, Vs. Asian Pacific Learning Ltd, Ward-3(1), D-14, First Floor, Lajpat Delhi Nagar, Parti-II, New Delhi (Appellant) (Respondent) PAN: AAGCA9071N Assessee by : Shri Shambhu Lal Gupta, CA Revenue by: Shri Kanv Bali, Sr. DR Date of Hearing 08/11/2023 Date of pronouncement 06/02/2024
O R D E R PER M. BALAGANESH, A. M.: The appeal in ITA No.1958/Del/2021 for AY 2011-12, arises out of the order 1. of the Commissioner of Income Tax (Appeals)-32, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 10146/2018-19 dated 22.09.2020 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 10.09.2015 by the Assessing Officer, ITO, Ward-1(2), Hyderabad (hereinafter referred to as ‘ld. AO’).
The revenue has raised the following grounds of appeal :-
“1. CIT(A) erred in deleting the disallowance of training expenses of Rs. 2,44,45,228/- by accepting additional documents submitted by the assessee only at CIT(A) level without giving asking for AO's comments u/r 46A despite the fact that sufficient opportunities were giving to assessee for submitting the documents during assessment proceedings. 2 CIT(A) erred in deleting the disallowance of office and general expenses of Rs. 64,75,005/- by accepting additional documents submitted by the assessee only at CIT(A) level
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without giving asking for AO's comments u/r 46A despite the fact that sufficient opportunities were giving to assessee for submitting the documents during assessment proceedings. 3. CIT(A) erred in holding that all the "training" and "office and general" expenses were made through banking channel after taking approval from assessee's head office without appreciating the fact that mere using of banking channel for any payments does not exonerate the assessee from proving genuineness of expenses. 4. CIT(A) erred in deleting the disallowance of expenses made u/s 40(a)(ia) on expenses made under head consultancy and faculty charges, securities charges, rent, advertisement by 4 accepting additional documents submitted by the assessee only at CIT(A) level without giving asking for AO's comments u/r 46A despite the fact that sufficient opportunities were giving to assessee for submitting the documents during assessment proceedings. 5. CIT(A) erred in allowing the assessee to revise business loss to Rs. 21,40,492/- from loss of Rs. 4,76,324/- claimed by assessee in belated return as the assessment proceedings could not be used by assessee as a platform to claim benefit of revising the belated returns filed under 139(4) of the Income Tax Act, 1961 6. That the Ld. CIT(A) has erred in not considering the conduct of assessee reflected from the facts that despite so many opportunities having been provided by AO, the part compliance was made only 4 days prior to the time barring date.”
We have heard the rival submissions and perused the material available on record. The assessee company M/s Asian Pacific Learning Limited is engaged in educational and computer training programs activity and during the year under appeal, it has operated various computer training programs from simple short term courses for first time users, to advanced high tech offerings for IT professionals, looking at upgrading their knowledge in IT with various centers across the country. Each center is operated by a separate Coordinator who procure all resources to run the center and expenditure as claimed by him are to be Page | 2
ITA No. 1958/Del/2021 Asian Pacific Learning Ltd
paid by Head Office. All receipts and expenses are routed through bank account only and there are hardly any payment by cash. The company had its Registered Office at Delhi and also had an administrative office at Hyderabad for some time. However, due to operations not found profitable, the assessee company suspended its commercial operations and closed its offices to avoid further losses to the company. The company filed its return of income for the AY 12-13 claiming loss Rs.21,40,490/- including claim of depreciation Rs 4,76,324/-. The case was selected for scrutiny as per Computer Assisted Selection of Cases for Scrutiny (CASS). However the notices issued by the tax authorities could not be responded as the said notices were not reached to the concerned person as the offices of the company were closed since 2014-15 resulting in much delay of communication of notice to concerned Director but as soon as it is communicated, complete proceedings were attended by the Director himself. The assessment was completed by the ld. AO after receiving all information and explanations as called for with various additions and disallowance of expenditure to the tune of Rs 4,60,94,530/- and determining total assessed income as Rs 4,60,94,530 without adjustment of returned loss by considering the returned income as Nil. Aggrieved by the above said order, the assessee preferred an appeal before ld CIT(A). The ld CIT(A) gave relief for the following additions:-
(i) Addition for alleging variation in gross receipt: Rs 20,81,484 (ii) Disallowance of expenses claimed alleging non production of supporting:
Out of training expenses 2,44,45,228 Out of office and general expenses 64,75,005 (iii) Disallowance for alleging non deduction of TDS u/s 40(a)(ia) of the Act-
Consultancy and faculty charges 20,46,079 Security charges 2,25,045
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Rent 46,15,062 Advertisement 44,89,794 (iv) Addition of income included in Profit and loss account alleging not included in computation of total income in head of other sources:- Interest income 12,33,100 Any other income 4,69,750
(v) Allowing adjustment of returned loss from assessed income.
Out of above, the revenue is in appeal before us against the deletion of disallowances of training expenses of Rs. 2,44,45,228/- on adhoc basis; deletion of disallowances of office and general expenses of Rs. 64,75,005/- on adhoc basis; disallowances of expenses u/s 40(a)(ia) of the Act in respect of consultancy & faculty charges, security charges, rent and advertisement; allowing adjustment of returned loss from assessed income.
The ld AR submitted that since the office of the assessee were closed, the notices sent by the ld AO during the course of assessment proceedings did not reach the assessee in time and on further receipt of notice, the Director of the assessee company personally attended the hearing and provided the relevant documents like audited financial statements, tax audit report, copies of bank statements, extracts of expenditure and income with full details and nature thereof and other expenditure ledgers with all explanation as called for during the course of assessment proceedings. The ld AR submitted that there is no pending information and explanation on part of the assessee company to submit for further verification before the ld AO. Further, no show cause notice was even issued by the ld AO to the assessee company indicating his intention of making the aforesaid additions/ disallowances.
The assessee submitted the following submissions before the ld CIT(A):-
ITA No. 1958/Del/2021 Asian Pacific Learning Ltd
“2. Disallowance out of training expenses Rs 24445228
The ld A.O. arbitrarily disallowed 30% of training expenses of Rs 81484092 Le.Rs 24445228 alleging non production of supporting. The fact as submitted is that theassessee company engaged in computer training program at various center spread in every state of country. These are direct expenses related to operational activity of company. The expenses are incurred at the center by the center coordinator to conduct the training program and communicate to administrative office and after approval of administrative office, payment made by authority from Head Office through banking channel only. Not a single payment made in cash. Regular accounting of all such expenses maintained center wise. A copy of complete account of such expenses with complete detail of nature of payment produced during course of hearing. Copy enclosed for your reference (PB4 page 1-146). There was no further query or shortcoming communicated during course of hearing, the Ld A.O. As such the expenses are fully verifiable from regular books of accounts maintained and detail submitted.
Disallowance out of office and general expenses 6475005: The ld A.O arbitrarily disallowed 30% of office and general expenses of Rs 21583350 ie. Rs 6475005 alleging non production of supporting. A copy of complete account of such expenses with complete detail of nature of payment produced during course of hearing. The expenses are incurred at head office as well as at the center by the center coordinator incidental to conduct the training program and communicate to administrative office and after approval of administrative office, payment made by authority from Head Office through banking channel only. Not a single payment made in cash Further it is submitted that in office and General expenses mainly included Rs 20000291 for books expenses. These related to purchases of books from Subscription and Magazine Centre Delhi and Books and General Agency Delhi. In addition to ledger account of expenses included in expenses detail, we further enclosed copy of ledger account of parties from whom books purchases. From these account, the expenses also independently verifiable with payment through cheque showing in these account. Copy of expenditure in head and parties as mentioned enclosed(PB 5 page 1-23) 4. Disallowance of consultancy and faculty charges Rs 2046079 The Ld A.O arbitrarily made addition u/s 40(a)(ia) for consultancy expenses assuming no TDS made which is against the fact. In fact all TDS made from eligible which is verifiable from copy of account of parties to whom payment made and TDS account appearing in books of accounts. A copy of all expenses in the head, copy of relevant parties account and copy of TDS on professional fees from books of account enclosed(PB 6 page 1-15) for your reference. As such the Ld A.O not verified the the fact
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correctly and there is no case of any payment of professional fees without TDS hence requested to delete the addition made arbitrarily. 5. Disallowance of Security charges Rs 225046 The Ld A.O arbitrarily made addition u/s 40(a)(ia) for Security expenses assuming no TDS made which is against the fact. In all TDS made from eligible payment which is verifiable from copy of account of parties to whom payment made and TDS account appearing in books of accounts. A copy of all expenses in the head, copy of relevant parties account and copy of TDS on contractor from books of account enclosed for your reference(PB 7 page 1-10). As such the Ld A.O not verified the the fact correctly and there is no case of any payment of security charges without TDS hence requested to delete the addition made arbitrarily 6. Disallowance of Rent Rs 4615062 The Ld A.O arbitrarily made addition u/s 40(a)(ia) for Rent expenses assuming no TDS made which is against the fact. In fact all TDS made from eligible payment which is verifiable from copy of account of parties to whom payment made and TDS account appearing in books of accounts. A copy of all expenses in the head, copy of relevant parties account and copy of TDS on land and building and TDS on Rent of equipment account enclosed for your reference(PB 8 page 1-46). As such the Ld A.O not verified the fact correctly and there is no case of any payment of rent wherever applicable without TDS hence requested to delete the addition made arbitrarily. 7. Disallowance of Advertisement expenses Rs 4489796 The Ld A.O arbitrarily made addition u/s 40(a)(ia) for Advertisement expenses assuming no TDS made which is against the fact. In fact all TDS made from eligible payment either under 194C and 194J which is verifiable from copy of account of parties to whom payment made and TDS account appearing in books of accounts. A copy of all expenses in the head, copy of relevant parties account and copy of TDS on contract and TDS on professional fees from books of account enclosed for your reference(PB 9 page 1 to 16). As such the Ld A.O not verified the fact correctly and there is no case of any payment of advertisement expenses without TDS hence requested to delete the addition made arbitrarily.” 10. Non adjustment of loss Rs 2420272 in computation of Income: While computation of total income the LD. A.O taken returned income Nil while there is loss Rs 2420272 as per computation of total income in return filed( PB10). As total income is to compute considering loss already claimed hence request to direct to compute income considering loss as per returned income.”
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The assessee also submitted TDS returns in Form 26Q for all the four quarters which are downloaded from Traces and together with TDS remittance challans in support of the contention that no payments were made without deduction of tax at source as and when applicable and accordingly, no disallowance u/s 40(a)(ia) of the Act need to be made.
The ld CIT(A) appreciated the aforesaid contentions of the assessee in respect of disallowance made @30% on adhoc basis for training expenses and office/ general expenses. The ld CIT(A) observed that assessee also submitted the ledger account of expenses included in expenses detail and also ledger account of parties from whom books were purchased by the assessee together with the corresponding payments made by cheque and these details were filed only during the appellate proceedings by the assessee. Thereafter, the ld CIT(A) without seeking any remand report from the ld AO and without appreciating the fact that these are additional evidences filed by the assessee before him directly proceeded to consider the same and adjudicate the entire dispute in favour of the assessee. To this extent, the contention raised by the revenue in its ground that the ld AO had not been given opportunity to examine the additional evidences filed by the assessee before the ld CIT(A) hold good. Accordingly, we are inclined to restore the issue in respect of deletion of training expenses, and deletion of office and general expenses to the file of the ld AO to decide in the light of evidences filed by the assessee. The assessee is also at liberty to furnish further evidences, if any, in support of its contentions. Accordingly, the ground Nos. 1, 2 and 3 raised by the revenue are allowed for statistical purposes.
With regard to disallowances made u/s 40(a)(ia) of the Act, the assessee had merely filed the TDS returns for all the four quarters which are already available with income tax department from which it was evident that there was no violation of provisions of section 40(a)(ia) of
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the Act at all by the assessee. These facts have been duly examined by the ld CIT(A) and having been satisfied with the same, relief was granted to the assessee. We do not find any infirmity in the said order of the ld CIT(A). Accordingly, ground No. 4 raised by the revenue is dismissed.
With regard to claim of set off of returned loss with the assessed income made by the assessee before the ld CIT(A) in the form of additional ground of appeal, the ld CIT(A) on examination of the income tax return and the revised computation filed by the assessee, had merely directed the ld AO to consider the revised loss. However, this revised computation was not available before the ld AO hence, in the interest of justice and fairplay, we deem it fit to restore this issue to the file of Ld. AO for verification of revised computation of income filed by the assessee and ascertain the veracity of the claim of loss of Rs. 21,40,492/- made by the assessee and if the same is found to be correct, the said loss is required to be set off with that the assessed income finally. If there is no assessed income, then the said loss should be allowed to be carry forward to the subsequent years. With these directions, the ground No. 5 raised by the revenue is allowed for statistical purposes.
Ground Nos. 6 and 7 are general in nature and does not require any specific adjudication.
In the result, appeal of the revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 06/02/2024.
-Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06/02/2024 A K Keot
ITA No. 1958/Del/2021 Asian Pacific Learning Ltd