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Income Tax Appellate Tribunal, DELHI BENCH “SMC-3”, NEW DELHI
Before: SHRI H.S. SIDHU
Date of Hearing : 13-07-2016 Date of Order : 02-08-2016
ORDER PER H.S. SIDHU : JM Assessee has filed this Appeal against the impugned Order dated 30.12.2014 passed by the Ld. CIT(A), Ghaziabad relevant to assessment year 2010-11 on the following grounds:-
Addition of Rs. 750,000: Adhoc disallowance of Professional charges
That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not deleting the unlawful adhoc
addition of Rs. 750,000/- made by the AO on account of disallowance of professional charges paid to SNRS &
Associates (Chartered Accountants) being genuine professional charges.
2. That on the facts and in the circumstances of the case
and in law, learned CIT-A erred in not deleting the unlawful adhoc addition of Rs 750,000 made by Ld AO on account of disallowance of professional charges without appreciating that: a. That payment is made by banking channel; b. That payment is duly and correctly subject to TDS; c. That payment is made to unrelated party; d. That recipient firm has duly filed the return of income including subject sum as receipts in its hands; e. That duly confirmed ledger alc was filed to Ld AO during assessment proceedings; f. That service tax is paid on subject services; g. That no enquiry is made at any stage to dislodge assessee's claim
That on the facts and in the circumstances of the case
and in law, learned CIT-A erred in not deleting the unlawful adhoc addition of Rs 30,000 on alc of "possible leakages" in self made vouchers which is contrary to law and justice.
That the appellant craves leave to add, to, amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of hearing of this appeal.”
The brief facts of the case are that Assessee had filed the return declaring total income of Rs. 14,70,334/- on 11.10.2011 which was later selected for scrutiny. Accordingly, the AO issued notices u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act). In response to the same, Assessee’s Representative attended the proceedings and produced the books of accounts, bills and vouchers which were examined by the AO. During the year assessee derives income from manufacturing and sale of Dish Anteena and electronics goods. On examining the expenses under the head Administration, finance and other, AO noted that assessee has made payment of Rs. 8 lacs to M/s SNRS Associates, Chartered Accountants which was as per AO appeared to be unreasonable and accordingly, the assessee was asked to explain the same. Assessee replied vide his letter dated 11.3.2013 and on examining the same, AO treated Rs. 50,000/- as reasonable for filing e-TDS returns and other financial mattes, but expenditure of Rs. 7.50 lacs was treated as unreasonable and added back to the income of the assessee. AO further while verifying the bills and vouchers in respect of the expenses debited to profit and loss account, noticed that some of the expenses are not fully verifiable under the head vehicle maintenance, business promotion, festival expenses and misc. expense as the same have been claimed on self made vouchers. The assessee was confronted with the 3 discrepancy. Thereafter, the AO made the disallowance of Rs. 30,000/- to cover up the possible leakages and completed the assessment u/s. 143(3) of the I.T. Act, 1961 vide his order dated 25.3.2013.
3. Aggrieved with the assessment order dated 25.3.2013, the assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 30.12.2014 has dismissed the appeal of the assessee and affirmed the additions.
Against the impugned order dated 30.12.2014, assessee has filed the Appeal before the Tribunal.
At the time of hearing, Ld. Counsel of the assessee stated that Ld. CIT(A) erred in not deleting the unlawful adhoc addition of Rs 7,50,000 made by AO on account of disallowance of professional charges without appreciating that the payment is made by banking channel; that payment is duly and correctly subject to TDS; that payment is made to unrelated party; that recipient firm has duly filed the return of income including subject sum as receipts in its hands; that duly confirmed ledger alc was filed to Ld AO during assessment proceedings; that service tax is paid on subject services; that no enquiry is made at any stage to dislodge assessee's claim. In view of the above, he requested the addition made by the AO and confirmed by the ld. CIT(A) may be deleted.
5.1 Ld. Counsel of the assessee further stated that the another adhoc disallowance of Rs. 30,000/- on account of possible leakages in self made vouchers is contrary to law and justice and needs to be deleted. 4
On the other hand, Ld. DR relied upon the orders of the authorities and stated that the orders of the authorities below may be affirmed and appeal of the assessee may be dismissed.
I have heard both the parties and perused the records available with me especially the orders of the revenue authorities. With regard to disallowance of Rs. 7.50 lacs towards professional charges is concerned, I have seen from the records that the payment of Rs. 8 lacs has been paid to M/s SNRS Associates, Chartered Accountants towards professional fee/consultancy charges as a retainer annual fee for Rs. 8 lacs to provide the professional services in the field of Income Tax, Service Tax, Excise Duty, Factory Act and Financial & Management Consultancy. It was also find that the aforesaid payment was made through a banking channel and the same was duly subject to TDS. The said payment is made to unrelated party and the recipient firm has duly filed the return of income including subject sum as receipts in its hands which was duly confirmed in ledger alc which was filed before the AO during assessment proceedings. It was also noted that service tax is paid on subject services and no enquiry is made at any stage to dislodge assessee's claim. In the background of the aforesaid discussions, the disallowance made by the AO and confirmed by the Ld. CIT(A) is deleted and the issue in dispute raised by the Assessee is allowed.
With regard to adhoc addition of Rs. 30,000/- out of expenses for vehicle maintenance, business promotion, festival and miscellaneous. I find that AO had made the disallowance without pointing out any specific expenditure which is of inadmissible in nature, which is not sustainable in the eyes of law and against the well settled law. Hence, the same is deleted and the issue in dispute raised by the Assessee is allowed.
In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 02/08/2016.