TaxTMI 
TaxTMI 
2022 (12) TMI 876
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....action of Assessing Officer allowing TDS credit of Rs. 4790086 instead of Rs. 5642822 even Assessee claimed respective income in the respective year in which TDS was claimed. 2. Under the facts and circumstances of the case, the learned CIT(A) misconstrued/Mis-Interpret the facts and law and the denial of tax credit for TDS under rule 37BA which is contrary to facts, unjustified, arbitrary, erroneous and bad, both in the eye of law and on facts and legally not tenable. 3. Under the facts and circumstances of the case, the decision of learned CIT(A) is quite illegal, arbitrary, without any basis and based on guess, conjectures and bad in law. 4. The appellant prays to leave to, add, alter or amend aforesaid grounds of appeal's at or before the time of hearing of appeal." 3. In ITA No. 295/JP/2022, the Revenue has taken following grounds in this appeal; "1. Whether under the facts and the circumstances, the Ld.CIT(A) was justified in deleting the additions made u/s 37(1) of the Act of Rs. 2,63,00,865/-." 4. The fact as culled out from the records is that return of income was filed on 28/10/2018 declaring total income of Rs. 83,47,660/-. The c....
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....sconstrued the provision of section 199 read with Rule 37BA and the income tax return form. Sub-rule 3 of Rule 37BA specifically provides that credit of tax deducted at source and paid to the Central Government shall be given for the AY for which such income is assessable. The income of Rs.90,23,072/- on which tax of Rs.8,52,736/- was deducted has been assessed in the year under consideration and therefore as per the provisions of the Act, credit of the same has to be allowed in the year under consideration. In the return filed for AY 2017-18 in which such tax was deducted at source, assessee has not claimed the credit as is evident from S. No.15B1 (APB 35-40) where such amount has been reflected as carried forward. Therefore, the Ld. CIT(A) has erred in taking a view that the deductor should revised the TDS return for earlier year as well as of this year ignoring that there is no provision for such revision under the Act. 5. Reliance is placed on the decision of Hon'ble ITAT, Indore Bench in case of Shivganga Drillers (P) Ltd. Vs. CPC (2022) 195 ITD 555 where it is held that if assessee company had offered to tax relevant income out of which TDS was deducted in AY 2017-18....
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....ning receipt of Rs.7.29 crores works out at 23%. The doubt of AO per se cannot be a reason for resorting to addition. No specific instance of booking of bogus expenses or defect in audited accounts has been pointed out. Accordingly, the disallowance made by the AO was deleted. Submission:- 1. At the outset it may be noted that assessee vide its reply dt. 16.04.2021 (DPB 14-22) has furnished the complete details along with the bills/ invoice of the entire sales promotion expenses with nature of services provided, purpose for incurring the expense and name of the customer for whom the expense was incurred. These details are placed at DPB 24-48. From the same it can be noted that assessee has furnished the complete name and address of the vendor and the nature of services obtained from them. All the payments are through banking channel. Section 37(1) of the Act provides that any expenditure not being in the nature of capital expenditure or personal expense of the assessee, laid out or expended wholly and exclusively for the purpose of business shall be allowed in computing the income chargeable under the head business. The AO has not pointed out any expenses claimed ....
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....sively for business consideration. The doctrine that the businessman is the best judge of business expediency does not affect the right, nay duty, of the assessing authorities to know whether it was incurred for business purposes and not for other extraneous considerations. Kamal Raheja Vs. ITO (2017) 162 ITD 55 (Luck.) (Trib.) Where AO disallowed on adhoc basis expenses claimed by assessee under head conveyance and entertainment by assuming that there was disproportionate increase, since section 37(1) nowhere empowers AO to disallow expenditure in above said manner and expenses had been incurred wholly and exclusively for purpose of business, disallowance of said sum should be deleted. DCIT Vs. ABC Bearing Ltd. (2017) 157 DTR 242 (Mum.) (Trib.) Assessee having produced complete details of expenditure, adhoc disallowance by AO at 25 per cent as reduced by CIT(A) to 10 per cent on mere surmises without indicating any instance of non-business expenditure could not be sustained. Pricewaterhouse Coopers Pvt. Ltd. Vs. ACIT (2020) 183 ITD 354 (Kol.) (Trib.) Where DRP/AO without rejecting books of account of assessee had made adhoc disallowance....
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....he return of income of AY 2017-18 had carried forward TDS credit of Rs.8,52,737/- Copy of ITR is enclosed at Annexure 21 specific page 22 to 27 wherein TDS of Rs.8,52,737/has been carried forward. As per sub rule 3 of rule 37BA "Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable." Therefore as per the provisions of the law, TDS credit carried forward by assessee in AY 2017-18 of Rs.8,52,737/- should be given in AY 2018-19 as the assessee has amount on which TDS is deducted in AY 17-18 is assessed in AY 18-19. In view of above, it is kindly requested to direct AO to give TDS credit of Rs.8,52,737/- to the assessee. UNQUOTE 6.2 I have considered the matter. The procedure for giving credit to TDS is laid down in Rule 37BA. The same is extracted as under: [Credit for tax deducted at source for the purposes of section 199. 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereina....
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.... (ii) the information in the return of income in respect of the claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.] From a reading of the Rule, it is seen that credit to TDS has to be given: 1. On basis information furnished by the deductor in the TDS return. 2. In the assessment year in which the income is assessable and 3. On basis of information contained in the return of income. In case of present assessee, the income is taxable in this year. But the deductor deducted tax in the earlier year and apparently, included the same in the TDS return of that year. Under this circumstances, the order of the AO cannot be faulted. The only option available, in my considered view, is that the deductor should revise the TDs returns for earlier year as well as that of this year. The TDS on payment for this year should be included in the TDS return for this year. Once the deductor revises the TDS return, the AO can give credit to the balance amount of TDS. In view of the above, the AO cannot be directed to give credit to TDS which is not reflected in the deductor's TD....
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....as followed the applicable method permitted under the law and therefore, he has not objected to the propositions of ld. DR to get this factual aspect be verified by the jurisdictional AO. Based on these set of facts and arguments advanced before us we are of the considered view that the credit for prepared taxes carry forward for A.Y 2017-18 as claimed by the assessee in A.Y 2081-19 is required to be allowed subject to verification of the amount carry forward with that of the income offered in the year under consideration. 11. In the light of these facts, ground no. 1 & 2 raised by the assessee is allowed. Ground no. 3 & 4 being general in nature the same did not require any adjudication. 12. In terms of these observation the appeal filed by the assessee in ITA No. 293/JPR/2022 is allowed. ITA No. 295/JP/2022 for the Revenue 13. In the appeal filed by the revenue, effectively one ground is taken challenging the action of the ld. CIT(A) deleting the addition made by the ld. AO out of the sales promotion expenses for an amount of Rs. 2,63,00,865/-. The fact as succinctly culled from the assessment order is that there is considerable increase in the claim of sales promotio....
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.... 91 Future General India Insurance Co. Ltd 29,16,968 252,450 9 HDFC Bank 1,86,22,724 9,684,431 52 Hdfc Standard Life Insurance Co. Ltd. 36,53,866 68,454 2 Liberty Videocon GIC Ltd. 11,39,990 309,155 27 LOGIMATIX CONSULTANTS PVT LTD 81,66,642 1,721,814 21 Mindpool Management Solution Pvt. Ltd. 3811315 200,000 5 OTS Solutions Pvt. Ltd. 15,00,000 103,288 7 Raghav Enterprises 25,00,000 27,42,959 109 Reliance General Insurance Co. 50,14,200 1,440,065 29 UNIVERSAL SOMPO GIC LTD 1,22,955 86,914 71 Grand total 9,06,26,927 5,51,07,677 61 13.2 It is surprised to see that in once case, more expenses have been incurred than the revenue generated from that client. No prudent business enterprise will spend 109%, 91%, 71%, 51% of its earning on the sales promotion of the client. 13.3 The increase of 23% in the claim of sales promotion expenses as compared to earlier year is not realistic as not supported by the details and supportive documents. However for each entry of sales promotion expense, the assessee has not furnished the purpose for such expenses, nat....
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....d by it. Therefore, it is seen that assessee was receiving only markup portion as profit and major portion of so called business promotion expenses was incurred for client only and not for promotion of assessee's business. After exclusion of AU Small Finance Bank, sales promotion expenses came down to Rs.1.67 Cr on residual turnover of Rs.7.29 Cr. That gave expenses at 23% of receipt. 4.3.1 Be that as it may, the AO had a doubt regarding excessive expense being incurred. This doubt per se cannot be reason for resorting to addition. It can provide the foundation for further investigation. In this regard, the AO had not pointed out any specific instance of booking of bogus expenses. No particular defect has been pointed out in the audited account. In view of this, lump sum disallowance is uncalled for." Ground no. 1 is allowed. 15. Revenue did not accept the finding of the ld. CIT(A) in deleting the addition of Rs. 2,63,00,865/- this appeal is filed by the revenue solely challenging the action of deleting the addition. To support the contention raised in this appeal the revenue has relied upon the written submission and the same is reiterated here in below: ....
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....at all the expenses were incurred for business of the clients and not for assessee's own business. (Para 4.3) 2. For the expenses of Rs 3.84 crores related to business receipts from AU small finance Bank Rs 4.23 crore, the claim of the assessee was that expenses were incurred by the party and the assessee only received markup portion of 10%. (Para 4.3) 3. If AO had doubt regarding expenses being excessive, it could provide only the foundation for further 4. AO had not pointed out any specific defect of booking of bogus expenses. ( Para 4.3.1). Arguments in support of departmental appeal 1. First finding is not relevant and has no impact on the profitability of the case. The expenses have been incurred by the assessee for its own business of providing services to its clients and for such services, it has incurred the expenses. So how it affects the reasonableness or genuineness of such expenses, if these are incurred for the services of clients. 2. Second finding of the Id CIT(A) is unjustified and contrary to the facts of the case. There is nothing on record to show that the assessee had received markup amount of 10% only and all the....
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....s given the finding that he was not satisfied with the documents submitted by the assessee and that is why he has restricted the claim of expenses to 25% of total receipts based on past history of the case and balance has been disallowed being excessive, unreasonable and unproved expenses. 6. A bare perusal of some of the sample bills (enclosed copies of 10 such bills), submitted by the assessee on 16,4.2021, downloaded from the assessment module of ITBA, makes it clear that there is no evidence as to for what purposes and for which specific clients, particular expenses were incurred. Some bills are handmade and prima facie not genuine (Bill of Shiv Ratan caterers page No 2 and 3). On page No 3, the bills No are 589 to 592 dated 21.4.17 to 25.4.2017 but on page No 1, there are bill No 675 to 694 issued before 21.4.17. How is it possible to issue bills of 675 to 694 prior to 21.4.17 when Bill No 589 was issued on 21.4.2017? These bills are prima facie manipulated bills. Some bills are for purchase of costly dinner sets (Bill of Kanwal Collection, page No 4), and Bill of purchase of locket and necklace (Bill of Kalyan Jewellers, page No 5). These bills are not supported with....
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....tails of TDS deducted on payments made for sales promotion expenses and date of deposit in Government account. 4. Percentage increase in the quantum in comparison with last year sales promotion expenses and justification for the increase. 5. Provide the ratio of sales promotion expense with that of Gross profit of the business and provide a justification thereto. 5. The assessee submitted Client wise Sales Promotion Exp, chart showing sales promotion, bills and bank statement in respect of sales promotion. The assessee has stated that "no ratio of sales promotion expense with that of gross profit of the business can be calculated. As already stated, the company is in service sector, the competition is un matchingly increasing day by day. There are many other companies who are ready to provide the services to assessee's client at much lower rates as compared to assessee. Assessee has no option other than to reduce its margin/rates. The severe competition has affected the assessee so badly that its business has almost vanished. In 2018, the revenue has gone down to Rs.1152 lacs as against Rs.3408 lacs in 2017 and in 2019 to Rs.87 lacs only." 17. The ....
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....om 2% to 109% of the Revenue and therefore, there is no consistency in the claim of sales promotion expenditure claimed by the assessee. The ld. DR further drawn our attention to the bills submitted by the assessee wherein the personal expenditure like necklace and rocket purchased from Kalyan Jewellers were claimed as sales promotion expenditure. The ld. DR further submitted that invoice issued by Kanwal Collections wherein purchase of dinner sets is claimed as sales promotion expenditure how it is related to the business of the assessee and whether the same are given under the breach of law is not considered by the ld. CIT(A) while considering the appeal of the assessee. Therefore, ld. DR further drawn our attention to the provisions of section 37(1) of the I.T. Act wherein the law itself restrict allowance and prescribe the condition that the expenditure should not be in the nature of capital expenditure and personal expenditure of the assessee. He also drawn our attention to explanation (1) of section 37(1) which contains as under:- "37 (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 [***] and not being in the nature of capital e....
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....f the assessee and the expenditure claimed are wholly and exclusively in nature of business expenditure and is allowable u/s 37(1) of the Act. Before the ld. AO all these details were furnished. Thus, the AO has made choose and pick and prepared a chart which is not correct. As regards, the expenditure claimed on higher side which is on account of management of public issue of AU Small Finance Bank wherein the much of the expenditure is claimed by the assessee and if the AO is not satisfied, he might have issued a notice as per provision of section 133(6) of the I.T. Act and have got verified the details. The ld. AR of the assessee submitted that the National Faceless Appellate Proceeding cannot be challenged by the Department on the grounds that they have not received fair chance to represent the case. He vehemently argued that the expenditure claimed by the assessee under the head of sales promotion is not commensurate with the receipt the expenditure incurred are not verifiable so as to confirm whether the expenditure incurred and claimed by the assessee are in the nature of prohibited under the common law and are not of the personal nature of the assessee. The assessee is merel....
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....ture so far as to the business of the assessee is concerned. 22. In the rejoinder of the submission, the ld. DR submitted that there is an excess claim of expenditure is not supported in the assessment proceedings and confirmation of AU Bank is nothing but self-serving document submitted by the assessee themselves, the assessee dealing with corporate clients. There is no agreement or any written instructions and the contravention of any provision of the law is not apparent from the various personal nature expenditure claimed by the assessee. It is also not evident from the details submitted for the expenses incurred for hotel booked, whether the person stayed are not under the contravention of any law or not. Whether the parties are related parties or the expenditure are in the nature of personal expenditure is not established in the absence of the relevant information. The ld. DR also raised whether the provisions of TDS as applicable is applicable or not is not verified as the assessee has not given complete details. Based on these set of arguments ld. DR submitted that let the assessee prove before the AO, the claim made by the assessee as per provision of section 37(1) of th....