BHAGWAN KRISHAN INVESTMENT & TRADING CO. (P) LTD.,NEW DELHI vs. ITO, WARD- 2(4), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SHRI SAKTIJIT DEY
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No. 4345/Del/2018 Assessment Year: 2009-10 Bhagwan Krishan Vs. ITO, Ward-2(4), Investment & Trading Co. New Delhi. (P) Ltd., (Now Pawansut Holding Ltd.), 415, Usha Kiran Azadpur Commercuial Complex, New Delhi, PIN: 1100 33 PAN :AACCB2095F (Appellant) (Respondent)
Appellant by Shri Vivek Agarwal, CA Respondent by Shri Om Prakash, Sr. DR
Date of hearing 23.03.2023 Date of pronouncement 31.03.2023
ORDER This is an appeal by the assessee against order dated 28.03.2018
of learned Commissioner of Income-Tax (Appeals)-2, New Delhi
pertaining to assessment year 2009-10.
The dispute in the present appeal is confined to part
disallowance of part expenses amounting to Rs.11,91,819.
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It will be relevant to observe, the present appeal was earlier
dismissed in limine by the Tribunal vide order dated 08.05.2019 on
the ground of non-prosecution. However, subsequently, while
considering miscellaneous application filed by the assessee, the
Tribunal in order dated 23.07.2021 passed in M.A. No. 224/Del/2022
recalled its ex parte order and restored the appeal to its original
position. This is how, the present appeal came up for hearing before
me.
Briefly, the facts are, the assessee is a resident corporate entity.
As stated by the Assessing Officer, the assessee, basically, is a entry
operator. For the relevant assessment year under dispute, assessee
filed its return of income on 18.08.2009 declaring income of
Rs.10,209.
In course of assessment proceedings, the assessee admitted its
business activity as an entry provider and submitted that it earned only
commission income for providing entry.
In course of assessment proceedings, Assessing Officer, on
examining the bank statement, noticed that debit entry in the bank
account was to the tune of Rs.1,13,16,750. Estimating commission at
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1% of the aforesaid amount, on account of accommodation entry, the
Assessing Officer added back an amount of Rs.1,13,167. Further, he
noticed that the assessee had claimed various expenses of
Rs.14,28,000. Being of the view that salary and other expenses
claimed by the assessee are unreasonably high, the Assessing Officer
disallowed a part of the expenses claimed by restricting the total
expenses to Rs.4,55,323 including salary expenses of Rs.3,76,400 paid
to three employees. The disallowance of expenses was confirmed by
learned First Appellate Authority.
Before me, learned counsel appearing for the assessee submitted
that part disallowance of expenses is on purely ad hoc basis . He
submitted, the assessee has employed ten persons who are continuing
to do various work for the assessee. He submitted, the employees are
working with the assessee from earlier years and the assessee has
furnished their names, addresses and PAN details. He submitted, even
in respect of other expenses, the assessee furnished all the details He
submitted, in preceding assessment years, no such disallowance was
made even in scrutiny assessments. Thus, he submitted, disallowance
made should be deleted.
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Learned Departmental Representative relied upon the
observations of Assessing Officer and learned Commissioner
(Appeals).
I have considered rival submissions and perused the material
available on record.
Reading of the assessment order, clearly reveals that being of the
view that some expenses claimed by the assessee are high and
unreasonable, the Assessing Officer has disallowed part of it on purely
ad hoc basis. Out of the total salary expenses of Rs.14,28,000 claimed
by the assessee, the Assessing Officer has allowed only an amount of
Rs.3,76,400 representing salary of three employees. Similarly, a part
of other expenses have been disallowed on purely ad hoc basis. The
Assessing Officer has not explained or stated on what basis, he has
concluded that only three of the employees are looking after the day to
day affairs of the company, whereas, the other employees were not
required for the purposes of assessee’s business. There is absolutely
no reasoning of the Assessing Officer in this regard. Even, the part
disallowance of other expenses is without any reasoning. From the
material placed before me, it is observed that the assessee had
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employed ten employees who are working with the assessee from past
years. The individual details of all such employees including names,
addresses and PAN were furnished before the Assessing Officer. On
perusal of assessment orders passed under Section 143(3)/147 of the
Income-Tax Act,1961 for assessment years 2005-06 and 2006-07
placed in the paper book, it is observed that, though, the assessee was
carrying on identical business activity, however, no such ad hoc
disallowance of expenses were made by the Assessing Officer. The
only addition made in these assessment years were on account of
commission income. Thus, the ad hoc disallowance made out of
expenses, being bereft of any valid reasoning, I am inclined to delete
the disallowance. Accordingly, the addition of Rs.11,91,890 is hereby
deleted. Consequently, ground nos. 1 and 2 are allowed. Whereas,
ground nos.3, 4 and 5 having not been pressed are dismissed.
In the result, the appeal is allowed as indicated above. Order pronounced in the open court on 31st March, 2023. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 31st March, 2023. Mohan Lal
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