SIGMA INFOTECH PVT. LTD.,KOLKATA vs. ITO, WD-10(3), KOLKATA, KOLKATA

O R D E R

Per Dr. Arjun Lal Saini, AM:

“4.1 In this case Assessing Officer has disallowed 10% of expenses incurred under the heads 'business promotion', 'office rent', 'travelling expenses', 'annual maintenance charges paid' and 'project expenses' as the assessee could not produce the entire bills/vouchers for these expenses. Thus, disallowance of Rs.3,30,044/- was made. As the issue relates to factual verification and the assessee has not produced any supporting evidences, I have no option but to confirm the addition of Rs.3,30,044/-. The grounds of appeal are dismissed.”

2. For that in the facts and circumstance the Ld. Commissioner of Income Tax Appeals passed the appellate order without giving proper opportunity of hearing to the assessee hence is 'bad in law and be quashed. 3. For that in the facts & circumstances of the case the Ld. Commissioner of Income Tax (Appeals) erred in upholding the disallowance of Rs.15,779.12/- being 10% of the expenditure incurred under the head Business Promotion on estimation without any justified reasons and thus the same be reversed. 4. For that in the facts & circumstances of the case the Ld. Commissioner of Income Tax Appeals erred in upholding the disallowance of Rs.11,637.50/- being 10% of the expenditure incurred towards Office Rent The disallowances is unjustified and the addition made should be reversed.

3 Sigma Infotech(P) Ltd.

6. For that in the facts & circumstances of the case the Ld. Commissioner of Income Tax Appeals erred in upholding the disallowance of Rs.2,41,759.30/- being 10% of the expenditure towards Annual Maintenance charge on the basis of estimation and without any reason. The said disallowance is unjustified and uncalled for and as such the addition should be reversed.

7. For that in the facts & circumstances of the case the Ld. Commissioner of Income Tax Appeals erred in upholding the disallowance of Rs.21,209.10/- being 10% of expenditure incurred toward Project expenses without any reason, the said being an expenditure for the purpose of business thus the same be allowed and the disallowance made be reversed.

Although in this appeal, the assessee has raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee has been confined to grounds No.3, 4, 5, 6 & 7 and other grounds of appeal were not pressed by the assessee.

4.1 In all the grounds raised by the assessee, there is a common issue involved. The AO disallowed 10% of the expenditure observing that assessee had not produced bills and vouchers of these expenses. Since in all these grounds, common issue is involved, i.e. disallowance of 10% of estimate basis, therefore, these grounds of appeal are being adjudicated en masse.

5. Ld. AR for the assessee has submitted that the ld. CIT(A) has confirmed the additions made by the AO without any basis. The AO made the addition @ 10% of all the expenses which is based on surmise, guess and conjectures. Ld. AR for the assessee has further submitted that the AO made the addition mechanically and without applying the mind. The assessee has submitted during the assessment proceedings, the books of accounts, explanations and the following documents :-

i) Details of share capital and share application money with name and address of the shareholders; ii) A copy of Memorandum of Association; iii) Copy of letter dated 2-4-2005 regarding details of car loan from HDFC Ltd. iv) Details of bank statements being overdraft with Indian Bank; v) Name and address of Sundry Debtors and Sundry Creditors; vii) Security deposit from staff; viii) Details of sales & services and other direct income; ix) Details of closing stock; x) Details of expenses xi) Purchase ledger xii) Copy of bank statements xiii) Cash Book All the books of accounts, documents, bills and vouchers, which were produced, have been checked by the AO. The AO did not find any error in the documents and explanation submitted by the assessee, therefore, the addition based on estimation may be deleted.

Ld. AR for the assessee also submitted that the AO did the guesswork as he did not bring any cogent material on record to show that the expenses claimed by the assessee are not genuine. Ld. AR for assessee also relied on the judgments in the case of Mukesh Kumar Mahawar, ITA observed by the Tribunal as under :-

4. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we are of the view that the ad hoc disallowance is not permissible under the law and if the Assessing Officer is not satisfied with a particular expense, he may make necessary verification and also to point out defect in the books of account, but ad hoc disallowance should not be made by making general observation. In the instant case, since ad hoc disallowance is made by making general observation, we do not find any merit in the addition made by the Assessing Officer. We accordingly delete the addition made on ad hoc basis after setting aside the order of the Id. CIT(A)