M/S. DELITE PROPERTIES PVT. LTD.,,KOLKATA vs. ITO, WARD - 7(3), KOLKATA, KOLKATA

ORDER

PER MADHUMITA ROY, JM

2. For that on the facts and in the circumstances of the case the addition by disallowance of a sum of Rs.1,58,061/-being 30% of Rs 5,28,870/-claimed or account of service and supervision charges is unwarranted, wrong and incorrect and confirmation of the same by the CIT(A) is incorrect, erroneous and unsustainable.

3. For that on the facts and in the circumstances of the case the addition by disallowance of a sum of Rs 64,020/- being 30% of total claim of Rs 2,99,396/- on account of professional and legal charges is arbitrary, wrong and incorrect and confirmation of the same by the CIT(A) is unjust, wrong and unlawful.

4. For that on the facts and in the circumstances of the case the Assessing officer was not justified in law and facts in not accepting the claim of the appellant for M/s Delite Properties Pvt. Ltd. A.Y.2006-07 2

deduction of the sum of Rs 7,00,000/- from total income on account of provision for bad and doubtful debts and confirmation of the same by CIT(A) in utter disregard of the principle of taxation is unjust and bad in law.

2. The ld. AR at the very outset of the proceedings submitted before us that he does not want to press ground No.1. Therefore ground no.1 is dismissed as not pressed.

3. Ground No.2 relates to the case of addition by disallowance to the tune of Rs.1,58,061/- being 30% of Rs.5,26,870/- claimed on account of service and supervision charges made by the assessee. 4. The said expenses was made by the assessee on account of service and supervision charges but 30% of the total expenses of Rs.5,26,870/- i.e. Rs.1,58,061/- has been disallowed by the assessee on the ground that the assessee has not produced any bill in respect of such payments rather the assessee produced self made vouchers towards payment made to different persons. 4.1. The ld. CIT(A) on appeal upheld the order passed by the Ld.AO on the ground that such expenses were not supported by cogent material and neither any attempt has been made by the assessee to substantiate the genuineness of the expenses. 5. At the time of hearing of the instant appeal before us, the ld. AR submitted that it has not been disputed by the ld. AO that the expenses were actually incurred by the assessee and the same is recorded in the regular books of accounts. Further that the AO has not brought on record any cogent material so as to justify that, part of the major expenses should be disallowed on estimate basis and thus neither the said expenditure was considered to be bogus by the AO. The ld. AR further added that this is just a mechanical addition for the sake of disallowance. On the contrary, the ld. DR relied upon the order passed by the Ld. AO. 6. We have heard the ld. Representatives of the respective parties. We find that when the AO allowed 70% of the total expenses made on account of service and supervision charges as thought fit there was no reason to reject the balance 30% of it. The expenses so incurred in this particular head was also properly recorded in the books of account of the assessee which was neither rejected by the AO. In this respect M/s Delite Properties Pvt. Ltd. A.Y.2006-07 3 the ld. AR relied upon the judgments passed by the Hon’ble Madras High Court in the matter of CIT vs Lakshmi Vikas Bank Ltd. 2014(4)/TMI 827the relevant portion whereof is reproduced hereinbelow : “when revenue had thought fit to allow 90% of the claim there was no reason to reject the balance 10%. The court confirmed the order of Tribunal that held that both AO and CIT(A) had no material on record to reject the claim. Once AO held that 90% of expenditure of this nature is liable to be accepted there was no reason to restrict the claim to 90% alone and disallow 10%. It was also held in the case of Asian Techs Limited vs CIT 103CTR 101 that when substantial part of expenses incurred has been admitted as incurred, AO was not justified to disallow a small portion thereof by resorting to estimate. Assessee also draws your honour's attention to the judgement in the cases of Tripat Kaur vs- ACIT 22(1) in and ITO vs Lake palace hotels and motel p Itd 13 TT J(JP) 216 wherein it was held that addition made on estimated basis can not be justified and sustained in law.”

Taking into consideration the entire aspect of the matter and the judgement cited above we are of the view that the order passed by the ld. CIT(A) confirming the order of addition made by the AO on estimated basis without assigning any reason thereof is incorrect, erroneous and not sustainable in the eyes of law. We, therefore, delete the addition by disallowance of Rs.1,58,061/-.

could not say anything. In view of the above 30% of the total expenses( 141100+40300+16000+16000) =Rs 64020/· is disallowed and added back to the total income.”

8.1. The ld. CIT(A) relied upon the order passed by the AO dismissing the ground of appeal preferred by the assessee on the ground that the AR failed to prove the genuineness of this transaction in the appellate proceedings. The ld. AR at the time of hearing could not deliver strong argument in support of his claim. The ld. DR also relied upon the order passed by the ld. AO.

9. We have heard the rival contentions made by the parties. We have gone through the materials available on records. We, however, could not justify the attempt and conduct of the assesee to substantiate the genuineness of such expenses in its entirety in the absence of valid documents. We therefore think it fit to disallow 15% of it and delete 15% of the addition made by the AO in this regard. The said ground of appeal is thus partly allowed.

10. Ground No.4 relates to addition of Rs.7,00,000/- for bad and doubtful debts, written back during the relevant A.Y.2006-07 and reduced from the other expenses. By and under the additional ground the assessee has prayed for a direction upon the AO to reduce Rs.7 lacs from the total income of the assessee on account of provisions for bad and doubtful debts written back in accounts. The AO made the addition on the ground that it was incorrect representation in terms of Schedule-6 of the Companies Act, the prior period adjustment ought to have been shown in the appropriation section. The assessee has neither filed revised return to correct this anamoly relying upon the judgement of Goetze India Ltd. Vs CIT 204 CTR 182. The ld. CIT(A) upheld the action made by the AO.

11. The ld. AR at the time of hearing of the matter submitted that in the preceding year i.e. A.Y.2005-06 an amount of Rs.7,00,000/- was debited in the profit and loss account under the head “other expenses” as provision for bad and doubtful debts. The provision was thus directly debited to the profit and loss account. Accordingly, the said provision for bad and doubtful debts of 7,00,000/-was written back in the accounts of the relevant year. Inadvertently and due to ignorance of the accountant the said amount was shown by reducing the same from gross amount appearing in the profit and loss M/s Delite Properties Pvt. Ltd. A.Y.2006-07 5 account under the head 'other source' instead of showing it below the line of profit and loss a/c as should have been. This resulted to a wrong disclosure of loss in the accounts as this reduction had the effect of reducing the actual loss incurred for the year and on the other hand said Rs 7,00,000/- was again wrongly taxed as income of the relevant year. During audit this fact of wrong presentation of account leading to wrong disclosure of loss appears to have also skipped notice and attention of the auditor. 11.1. During the assessment proceedings the assessee by its letter dated 03.11.2008 and 24.11.2008 drew attention to the ld. AO and requested to exclude the same from the income of the assessee as this is not lawfully to be taxed. The AO, however, declined to entertain the said claim of the assessee on the ground that since no revised return was filed the claim for exclusion of the same could not be entertained. The ld. AR further submitted that such mistake was done due to ignorance of the accountant and the assessee cannot be made to suffer the loss and damage for such ignorance of the accountant for lack of attention on the part of qualified auditor. On the contrary the ld. DR argued in support of the order passed by the AO and the CIT(A).

Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches