ASST CIT CEN CIR 47, MUMBAI vs. R TECH SYSTEMS INDIA P.LTD, NAVI MUMBAI

The only common issue raised in the aforesaid appeals relates to the decision of the learned Commissioner (Appeals) in restricting the disallowance of expenditure to 25% as against 50% made by the Assessing Officer. Since facts are common in all these appeals, we will refer to the facts as involved in ITA no.5322/Mum./2014.

Brief facts are, pursuant to a search and seizure action under section 132 of the Act, carried out in case of Flemingo / Bermaco Group on 31st October 2009, proceeding under section 153C of the Act was initiated in case of the assessee. In the course of assessment proceedings, as alleged by the Assessing Officer, in spite of statutory notices being issued, the assessee neither filed its return of income nor appeared and furnished the details called for. Therefore, the Assessing Officer proceeded to complete the assessment to the best of his judgment under section 144 of the Act on the basis of material available on record. Referring to a statement of Shri Brian Castellino, Director of R. Tech Systems (I) Pvt. Ltd., the Assessing Officer disallowed assessee’s claim of exemption under section 10B of the Act. Further, the Assessing Officer having noticed that in the Profit & Loss account the assessee had credited income of ` 4,80,32,676 and 3 M/s. R. Tech Systems India Pvt. Ltd. debited expenditure of ` 3,89,68,292 held that in the absence of details / supporting evidences of the expenditures claimed it cannot be fully allowed. Hence, he disallowed 50% of the total expenditure claimed. In the aforesaid manner, assessment for other assessment years under appeal were completed. Being aggrieved of the assessment orders so passed, assessee preferred appeals before the first appellate authority.

The learned Commissioner (Appeals) after considering the submissions of the assessee and perusing the material on record, though, agreed with the Assessing Officer that in the absence of books of account and supporting vouchers, expenditure claimed by the assessee cannot be allowed fully, however, he observed that the disallowance made should be reasonable. Accordingly, he directed the Assessing Officer to restrict the disallowance to 25% of the expenditure claimed. Being aggrieved of the aforesaid decision of the learned Commissioner (Appeals), Department is in appeal before us.

When the appeals were called for hearing, no one was present on behalf of the assessee. On a perusal of the order sheet entries, it is noticed, on earlier occasions when the appeals were fixed for hearing no one had appeared on behalf of the assessee. In fact, notice issued per registered with A/D has returned back un–served with the postal

As submitted by the learned Departmental Representative, when the Assessing Officer attempted to serve the notice of hearing on the assessee through the Ward Inspector, it was found that no one was available at the address of the company and no further information about the whereabout of the company was also available. Accordingly, notice was served by way of affixture. Considering the aforesaid facts, we proceed to dispose off the appeal ex–parte, qua the assessee after hearing the learned Departmental Representative.

As could be seen, during the assessment proceedings, in spite of several opportunities being granted by the Assessing Officer, the assessee neither appeared nor produced any documentary evidence in support of the expenditure claim. In fact, even the books of account were not produced. Therefore, the Assessing Officer proceeded to complete the assessment to the best of his judgment and while doing so, he disallowed 50% out of the total expenditure claimed. However, the learned Commissioner (Appeals) having found that disallowance made by the Assessing Officer at 50% is high and excessive restricted disallowance to 25% of the expenditure claimed. Considering the 5 M/s. R. Tech Systems India Pvt. Ltd. totality of the facts and circumstance of the case, in our view, the decision of the learned Commissioner (Appeals) in restricting the disallowance to 25% of the total expenditure claimed by the assessee is fair and reasonable, hence, do not call for any interference. Accordingly, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the Department. The aforesaid decision applies to all the appeals filed by the Department.