M/S IREO PVT. LTD.,,NEW DELHI vs. ACIT, NEW DELHI

The grievance of the assessee read as under :- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs.46,71,500/-, against 'Scrutiny Fees'. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in returning erroneous finding of fact, inter-alia at Para 9.5 of the impugned order, as to payment of Scrutiny fees not having been made by the Assessee, when:

The bone of contention is the claim of written off scrutiny fees of Rs.46,71,500/- in the P & L account by the assessee.

During the course of the scrutiny assessment proceedings the AO noticed that the assessee has written off scrutiny fees as under :-

The assessee was asked to substantiate each expense with supporting bills/ vouchers. In its reply the assessee has simply stated that it has written off Rs.46,71,500/- being scrutiny fees paid to Directorate of Town and Country Planning HUDA and submitted the copy of the ledger account. The AO observed that the assessee has paid the impugned license fees on behalf of SU Estates Private Limited, Commander Realtors Pvt. Ltd. and Adson Software Pvt. Ltd., therefore, the assessee is not entitled for the claim and disallowed the same.

Assessee carried the matter before the CIT(A) and reiterated its claim. The CIT(A) was not convinced with the claim and dismissed the appeal. The relevant observations of the CIT(A) is a under :- (i) The payments for scrutiny has been made alongwith application for license fees by other parties and not by the appellant. (ii) These payments does not belongs to the year under consideration. (iii) The application was subsequently withdrawn by the applicants. (iv) The appellant is not the owner of property. (v) There is no direct dealing by the appellant with the DTCP Haryana. (vi) In the withdrawal letter nothing has been mentioned about the forfeiture. (vii) Interestingly 3 withdrawal letters issued by DTCP Haryana to various third parties relates to the financial year 2008-09 whereas one letter addressed to Adson Software is dated 01.12.2009 No business linkages has been established. (viii) No business linkages has been established

Before us the Counsel for the assessee, referring to the documentary evidences, assailed each and every adverse observations of the First Appellate Authority. We are surprised to find that documents/ evidences referred by the Counsel do not find any place neither in the assessment order nor in the order of the first appellate authority.

It appears that the assessment and the appellate proceedings have been completed without understanding the related documents / evidences. The claim that the assessee has made the payment for and on behalf of SU Estates Private Limited, Commander Realtors Pvt. Ltd. and Adson Software Pvt. Ltd. needs to be verified. The claim that the impugned payments have been made pursuant the written understanding between the assessee and the aforementioned parties need to be verified.

The claim that all the payments have come either from the bank account of the assessee or from the bank accounts of the respective parties need to be verified. The claim that the license application was withdrawn by the parties but at the same time the fee paid was adjusted with some other contract as per the letter of the Directorate Town and Country Planning need to be verified.

All that is mentioned here in above are part of the submissions of the Counsel but no mention in the orders of the authorities below. In the interest of the justice and fair play we restore the issue to the files of the AO. The assessee is directed to furnish all the related documents before the AO and explain why the impugned payments have been made by it. The AO is directed to examine the same and decide the issue afresh after affording a reasonable and sufficient opportunity of being heard to the assessee.

In the result, the appeal of the assessee is allowed for statistical purpose.