DCIT, NEW DELHI vs. M/S. UOP INDIA PVT. LTD., NEW DELHI

ORDER ORDER ORDER ORDER

PER PER H.S. PER PER H.S. H.S. SIDHU : JM H.S. SIDHU : JM SIDHU : JM SIDHU : JM

“1. Ld. CIT(A) had erred in deleting the addition of Rs. 38,77,222/- without appreciating that the assessee is following mercantile system of accounting and claimed expenditure on accrual basis at the end of the previous year. 2. The appellant craves, leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal.”

In this case the AO had made the disallowance of provisions expenses under the various heads of Rs. 47,92,249/- mainly on the ground that the payments were made in the next financial year and as such the same are not allowable in this year. The assessment in this case u/s. 143(3) of the I.T. Act, 1961 has been completed at an income of Rs. 11,65,46,350/- vide order dated 27.12.2010.

7. On the contrary, the Ld. Counsel of the Assessee contended that the action of the AO was not justified. Therefore, he relied upon the order of the Ld. CIT(A) and stated that the same may be upheld.

“5.6 I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assesse. It is seen that all the expenses under the various heads like security charges, professional expenses, driver charges, housekeeping services, computer repairs, consultancy charges, telephone charges, printing and stationary etc. are related to the last month of the year i.e March 2007 and the payments has been made in the subsequent year. The assessee has offered the excess provisions of Rs. 3,26,223/-of earlier years u/s 41(1) and the same has been reduced from the current provisions. The assessee has also reversed and offered the excess provision of commission of Rs. 4,63,427/- and Rs. 78,418/- under the head electricity for taxation u/s 41(1) in the next assessment year. It is seen that the assessee has made the provisions of expenses which has arisen and crystallzed during the current year and as such the assessee is eligible for deduction of these expenses and the case laws relied on by the assessee are also applicable in favour of the assessee. It is seen that the assessee had submitted all the details of expenses/ provisions which were forwarded to the AO for the remand report and the AO has not also given any adverse finding about any expenditure being bogus or not allowable as per law vide the remand report of the AO. But it is seen that the assessee has not submitted any details or vouchers or any evidence of the miscellaneous expenses/ provisions of Rs.

9,15,027/- either before the AO or at the appellate stage and as such the claim of these expenses is apparently not justifiable.

5.7 It is also seen that the AO did not make any enquiry either at the stage of assessment proceedings or at the stage of remand report proceedings regarding the genuineness of the claim of the provisions/ expenses and as such there is no proper justification for the addition made by the AO. There is also no merit in the submissions of the AO that the additional evidence/ details submitted by the assessee should not be admitted as it is against the principle of natural justice and it is difficult to sustain any addition/ disallowance unless it is proved by the AO through enquiry and examination that the claim of the assessee is either bogus or the same I not allowable as per law.

5.8 After considering all the facts and circumstances of the case, I am of the view that the provision for expenses are allowable business expenses and the assessee has made the provisions as per AS-1 and there is no evidence from the AO to show that any of the claims are bogus and as such there is no proper justification either in the order of the AO or in the order of the Ld. CIT(A) to disallow such expenses/ provisions and as such all the expenses claimed by the assessee are allowed following the case laws by the assessee except the miscellaneous expenses of Rs. 9,15,027/- for which no details or evidences were submitted and accordingly the addition to the extent of Rs. 9,15,027/- is confirmed and the balance addition of Rs. 38,77,222/- (Rs. 47,92,249/- (-)

Rs.9,15,027/-) is deleted.”

8.1 After perusing the aforesaid Ld. CIT(A)’s finding, I find that all the expenses under the various heads like security charges, professional expenses, driver charges, housekeeping services, computer repairs, consultancy charges, telephone charges, printing and stationary etc. are related to the last month of the year i.e March 2007 and the payments has been made in the subsequent year. The assessee has offered the excess provisions of Rs. 3,26,223/- of earlier years u/s 41(1) and the same has been reduced from the current provisions. The assessee has also reversed and offered the excess provision of commission of Rs. 4,63,427/- and Rs. 78,418/- under the head electricity for taxation u/s 41(1) in the next assessment year. We also note that the assessee has made the provisions of expenses which has arisen and crystalized during the current year and as such the assessee is eligible for deduction of these expenses. We also note that the assessee had submitted all the details of expenses/ provisions which were forwarded to the AO for the remand report and the AO has not also given any adverse finding about any expenditure being bogus or not allowable as per law vide the remand report of the AO. But it is seen that the assessee has not submitted any details or vouchers or any evidence of the miscellaneous expenses/ provisions of Rs. 9,15,027/- either before the AO or at the appellate stage and as such the claim of these expenses is apparently not justifiable.

We further find that AO did not make any enquiry either at the stage of assessment proceedings or at the stage of remand report proceedings regarding the genuineness of the claim of the provisions/ expenses and as such there is no proper justification for the addition made by the AO. In view of above, after considering all the facts and circumstances of the case, we are of the view that the provision for expenses are allowable business expenses and the assessee has made the provisions as per AS-1 and there is no evidence from the AO to show that any of the claims are bogus and as such there is no proper justification either in the order of the AO or in the order of the Ld. CIT(A) to disallow such expenses/ provisions and as such all the expenses claimed by the assessee are allowed following the case laws by the assessee except the miscellaneous expenses of Rs. 9,15,027/- for which no details or evidences were submitted and accordingly the Ld. CIT(A)’s action relating to addition to the extent of Rs. 9,15,027/- was rightly confirmed and the balance addition of Rs. 38,77,222/- (Rs. 47,92,249/- (-) Rs.9,15,027/-) was accordingly.

Order pronounced in the Open Court on 16/12/2016.