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Facts
The Revenue appealed against an order that restricted a disallowance of direct expenses from ₹.3,10,72,663/- to ₹.77,68,166/-. The Assessing Officer made the original disallowance because the assessee, a company with NIL declared income, failed to provide details of expenses amounting to ₹.3,10,72,663/-.
Held
The Tribunal held that the CIT(A) correctly restricted the disallowance. Although the assessee initially provided no evidence to the Assessing Officer, the CIT(A) considered the assessee's breakup of expenses submitted in Form 35 and applied a 25% disallowance, which the Revenue could not rebut with evidence.
Key Issues
Whether the restriction of disallowance of direct expenses by the CIT(A) was justified in the absence of evidence provided by the assessee.
Sections Cited
143(3), 145
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
Year: 2017-18 The Income Tax Officer, Vs. Tam World Travel Private Limited, Corporate Ward 3(1), Flat No. 1, Ground Floor, 27/13, Chennai. Venkataraman Street, T. Nagar, Chennai 600 017. [PAN:AAECT5864C] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Ms. Gouthami Manivasagam, JCIT ��थ� की ओर से/Respondent by : None सुनवाई की तारीख/ Date of hearing : 15.10.2024 घोषणा की तारीख /Date of Pronouncement : 23.10.2024 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order dated 03.05.2024 passed by the ld. Commissioner of Income Tax, National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2017-18.
We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee-respondent called absent and set exparte. We proceed to decide the appeal after hearing the ld. DR basing on the material available on record.
The Revenue has raised 2 grounds of appeal amongst which the only issue emanates for our consideration is as to whether the ld. CIT(A) justified in restricting the disallowance at ₹.77,68,166/- against the disallowance of ₹.3,10,72,663/- made by the Assessing Officer in the facts and circumstances of the case.
4. At the outset, we note that the assessee is a company and filed revised return of income declaring NIL income. On an examination of the record, the Assessing officer asked the assessee to provide details of direct expenses amounting to ₹.3,10,72,663/-. According to the Assessing Officer, no reply was filed by the assessee and thus, the Assessing Officer proceeded to disallow the said expenses vide his order dated 13.12.2019 under section 143(3) of the Income Tax Act, 1961 [“Act” in short].
The ld. CIT(A) discussed the issue in detail. We find at para 7 of the impugned order that the ld. CIT(A) observed that the Assessing Officer disallowed the entire direct expenses without pointing out any deficiencies in the books of account under section 145 of the Act. Thus, the ld. CIT(A) restricted the disallowance at 25% of the total expenditure.
The ld. DR Ms. Gouthami Manivasagam, JCIT vehemently opposed the finding of the ld. CIT(A) in giving relief to the assessee. She argued that the ld. CIT(A) was not correct to give partial relief to the assessee when no evidence furnished before both the authorities below. The ld. CIT(A) fell in error to hold that there was no deficiency as pointed out by the Assessing Officer in the assessment order with reference to the books of account under section 145 of the Act. She argued that the ld. CIT(A) failed to take note of the show-cause notice issued by the Assessing Officer, wherein, it was clearly stated that the expenses will be disallowed in case the assessee fails to submit any corroborative evidences.
Having considered the submissions of the ld. DR and that of the reasons stated by the ld. CIT(A) while restricting the addition at 25% of the direct expenses, we note that admittedly, there was no evidence furnished by the assessee before the Assessing Officer. The ld. DR could not rebut the finding of the ld. CIT(A) as to why in the absence of any evidence, the addition could be restricted on the basis of assumption. We note that the assessee made the breakup of creditors and submitted before the ld. CIT(A) in Form 35, wherein, we note that the assessee has given breakup of submissions of disallowance of direct expenses. We note that the ld. CIT(A) while restricting the disallowance at 25%, taken into note all the submissions into consideration. The ld. DR could not rebut any evidence with regard to the submissions of the assessee before the first appellate authority. Therefore, we find no infirmity in the order of the ld. CIT(A) in restricting the addition to an extent of ₹.77,68,166/- as against the disallowance of ₹.3,10,72,663/- and it is justified. Thus, the grounds raised by the Revenue are dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 23rd October, 2024 at Chennai.