What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal. It held that the rent payment was not disputed and the assessee had provided compelling circumstances for the increase, thus deleting the disallowance.

The assessee's appeal was filed 55 days late due to the company shifting operations and a delay in receiving the CIT(A) order. The CIT(A) order was passed ex-parte. The disallowance was related to rent expenditure due to an unexplained year-on-year increase.

What were the issues?

Whether the delay in filing the appeal should be condoned and if the disallowance of rent expenditure due to an unexplained increase was justified.

M/S Kerry Ltd., Ludhiana vs DCIT | ITAT Chandigarh 2018

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 21.12.2016 of the Commissioner of Income Tax(Appeals)-1, Ludhiana [hereinafter referred to as ‘CIT(A)’].

The appeal is time barred by 55 days. A separate application for condonation of delay has been filed accompanied with an affidavit of one Shri Ajay Sharma, Director of the assessee company, wherein, it has been pleaded that assessee did not receive the notice of hearing before the CIT(A) as the assessee company has shifted its operation to Banglore. That even the order of the CIT(A) was served on one Shri Jatinder Kumar who

ITA No. 733-Chd-2017- m/s Kerry Limited, Ludhiana 2

was serving as a security guard of the lessor / land owner of the assessee

and that he did not inform in time to the assessee about the receipt of the

said notice. Therefore, a delay of 55 days has occurred in filing the appeal.

The Ld. Counsel has further submitted that in this case the addition is

regarding the disallowance of the rent expenditure for the year under

consideration. However, for the assessment year 2014-15 onwards the

assessee had already shifted its premises to the Bangalore.

In view of the above submissions, which are further supported with

the affidavit of the director of the company and considering the shortness

of the period of delay, in our view, the interest of justice will be served if

the delay in filing the appeal is condoned. We order accordingly.

The Ld. counsel at this stage has invited our attention to the

impugned order of the CIT(A) and has submitted that the same is an ex-

parte order. It has been submitted that the assessee could not get the notice

of the hearing before the CIT(A) which resulted in ex-parte proceedings.

It has, therefore, been submitted by the Ld. Counsel for the assessee that

the assessee may be given an opportunity to appear before the CIT(A) to

present its case.

The Ld. DR, on the other hand, has opposed the above submissions of

the Ld. counsel and has submitted that assessee has failed to appear as

when called for by the Ld. CIT(A) and, hence, the Ld. CIT(A) has passed

the impugned order ex-parte of the assessee.

The Ld. counsel for the assessee, however, has submitted that even

on merits, the impugned additions are not sustainable in the eyes of law.

Referring to the issue involved in this case, the Ld. Counsel has submitted

ITA No. 733-Chd-2017- m/s Kerry Limited, Ludhiana 3

that the disallowance has been made by the Assessing officer observing

that there was increase in the rent on year to year basis. The Assessing

officer observed that there was no justification to increase the rent every

year. However, on the other hand, the contention of the assessee has been

that rent was increased under compelling circumstances. The assessee was

in process of shifting its premises. However, since it could not vacate /

shift its premises, hence, it agreed to pay the increased rent. However, the

payment of rent had not been disputed by the Assessing officer.

On the other hand, Ld. DR has submitted that there was no

justification of the assessee to increase rent every year and, therefore, the

Assessing officer has rightly taken note of that the assessee has booked

the expenditure which was apparently excessive.

We have considered the rival submissions. The payment of rent for

the year under consideration has not been doubted by the Assessing officer.

The only contention for which the impugned disallowance has been made is

that the assessee had not offered convincing justification for the increase

in rent. On the other hand, the contention of the assessee was that it had to

increase / pay the increased rent due to compelling circumstances as

discussed above. It is also a fact on the file that the assessee ultimately in

the year 2013-14 has shifted its premises and vacated the premises for

which the alleged rent has been paid. We are of the view, that the payment

of rent has not been disputed, and the assessee has explained the

compelling circumstances for which there was an increase in rent. There

was no justification on the part of the lower authorities in making the

impugned disallowance and the same is accordingly ordered to be deleted.

ITA No. 733-Chd-2017- m/s Kerry Limited, Ludhiana 4

In the result, the appeal of the assessee stands allowed.

Order dictated and pronounced in the Open Court immediately on completion of hearing.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 11.12. 2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

M/S KERRY LTD.,LUDHIANA vs. DCIT, LUDHIANA

What did the Tribunal hold?

What were the facts?

What were the issues?

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