ACIT, New Delhi v. M/s. Mesco Airlines Ltd., New Delhi

ITA 1571/DEL/2012 | 2007-2008
Pronouncement Date: 29-04-2015 | Result: Dismissed

Appeal Details

RSA Number 157120114 RSA 2012
Assessee PAN AAACM3539R
Bench Delhi
Appeal Number ITA 1571/DEL/2012
Duration Of Justice 3 year(s) 24 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Mesco Airlines Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 29-04-2015
Date Of Final Hearing 20-04-2015
Next Hearing Date 20-04-2015
Assessment Year 2007-2008
Appeal Filed On 04-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU: JUDICIAL MEMBER ITA NO. 1571/DEL/2012 A.Y. 2007-08 ACIT CEN. CIRCLE-7 VS. MESCO AIRLINES LTD. NEW DELHI. H-1 ZAMRUDPUR COMMUNITY CENTRE KAILASH COLONY NEW DELHI. PAN: AAACM 3539 R ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SALIL AGGARWAL ADV. RESPONDENT BY : SHRI K.K. JAISWAL SR. DR DATE OF HEARING : 20/04-2015 DATE OF ORDER : 29-04-2015. O R D E R PER S.V. MEHROTRA A.M:- THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST CIT(A)S ORDER DATED 10-1-2012 RELATING TO AY 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED ITS RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSEE COMPANY I N THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF PLYI NG OF HELICOPTERS ON COMMERCIAL BASIS. THE ASSESSMENT WAS COMPLETED BY M AKING DISALLOWANCE OF FOLLOWING EXPENSES: - BUSINESS PROMOTION & TRANSIT HOUSE RS. 3 58 750/- - TRAVELLING AND TRUNK CALL RS. 24 48 421/- 2 ITA 1571/DEL/2012 ACIT VS. MESCO AIRLINES LTD. 2.1. IN APPEAL THE LD. CIT(A) DELETED THE DISALLOW ANCE. BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE AND HAS TAKEN FOLLO WING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE LD . CIT (APPEAL) HAS ERRED IN DELETING OF THE ADDITION OF RS. 3 58 750/- WHICH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AD-HOC DISALLOWANCE OUT OF BUSINESS PROMOTION EXPENSES AS THE ASSESSEE DEBITED IN PROFIT AND LOSS ACCOUNT. 2. ON THE FACTS AND. IN THE CIRCUMSTANCES OF THE CASES THE LD CIT(A) HAS ERRED IN' DELETING DISALLOWANCES OF RS. 24 48 421/- WHICH WAS MADE BY THE ASSESSING OFFICER: ON ACCOUNT OF DISALLOWANCE O UT OF TRAVELLING AND TELEPHONE EXPENSES AS THE; . ASSE SSEE 'FAILED TO PRODUCE VOUCHERS OR BILLS IN SUPPORT OF TRAVELLING AND TELEPHONE EXPENSES AND PART OF THE EXPENSES BEING PERSONAL IN NATURE. 3. THE ORDER OF LD CIT (A) IS PERVERSE IN LAW ARID ON THE FACTS. 4. THE APPELLANT CRAVES LEAVE TO ADD AMEND ANY/ALL 'OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. APROPOS GROUND NO. 1 WE FIND THAT ASSESSEE HAD DEBITED A SUM OF RS. 6 77 685/- ON ACCOUNT OF BUSINESS PROMOTION EXPENSE S INCLUDING FOREIGN TRAVELLING AND RS. 11 16 068/- ON ACCOUNT OF TANS IT HOUSE EXPENSES. THE AO DISALLOWED 20% OF THE EXPENSES ON ACCOUNT OF BE ING NON-VERIFIABLE AND NON-BUSINESS NATURE INTER ALIA OBSERVING THAT ASS ESSEE COULD NOT GIVE DETAILS OF EXPENSES INCURRED UNDER THE ABOVE TWO HEADS. 3 ITA 1571/DEL/2012 ACIT VS. MESCO AIRLINES LTD. 3.1. IN APPEAL LD. CIT(A) DELETED THE DISALLOWANCE INTER ALIA OBSERVING THAT AO MADE AD HOC DISALLOWANCE WITHOUT SPECIF YING ANY ITEM OF EXPENDITURE WHICH WAS NOT VERIFIABLE AND FOR WHICH ASSESSEE DID NOT MAINTAIN ANY VOUCHER. 3.2. LD. DR SUBMITTED THAT ASSESSEE DID NOT FURNISH COMPLETE DETAILS IN TIME AND THEREFORE THE AO HAD NO OPTION BUT TO MA KE DISALLOWANCE ON ESTIMATE BASIS. 3.3. LD. COUNSEL FOR THE ASSESSEE SHRI SALIL AGARWA L RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF STATE OF OR ISSA VS. MAHARAJA SHRI B.P. SINGH DEO 76 ITR 690 FOR THE PROPOSITION THAT ARBITRARY DISALLOWANCE IS NOT CALLED FOR. THE HONBLE SUPREME COURT IN THIS D ECISION INTER ALIA HAS OBSERVED AS UNDER: WHERE IN AN APPEAL FROM A BEST JUDGMENT ASSESSMENT MADE ON THE BASIS OF AN ESTIMATE THE ASSISTANT COLLECTOR APART FROM COMIG TO THE CONCLUSION THAT THE MATERIAL PLACED BEFORE HIM BY T HE ASSESSEE WERE NOT RELIABLE HAD GIVEN NO REASONS FO R ENHANCING THE ASSESSMENT: HELD THAT THE MERE FACT THAT THE MATERIAL PLACED B Y THE ASSESSEE WERE UNRELIABLE DID NOT EMPOWER THE ASSISTANT COLLECTOR TO MAKE AN ARBITRARY ORDER OF ENHANCEMENT. THE POWER TO LEVY ASSESSMENT ON THE BASIS OF BEST JUDGMENT IS NOT AN ARBITRARY POWER; I T IS AN ASSESSMENT ON THE BASIS OF BEST JUDGMENT: THE ASSESSMENT HAD TO BE BASED ON RELEVANT MATERIAL. 4 ITA 1571/DEL/2012 ACIT VS. MESCO AIRLINES LTD. 3.4. HE FURTHER RELIED ON THE FOLLOWING DECISIONS F OR THE PROPOSITION THAT NO DISALLOWANCE CAN BE MADE IN CASE OF COMPANY ON ACCO UNT OF PERSONAL EXPENSES. - SAYAJI IRON & ENGINEERING CO. VS. CIT 253 ITR 749 ( GUJ.) - ITAT AGRA BENCH ORDER DATED 28-1-2013 RENDERED IN I TA NO. 92/AGR/2008 IN THE CASE J.M. AGARWAL TOBACCO CO. VS . ACIT 4. HAVING HEARD BOTH THE PARTIES WE FIND THAT AO H AS OBSERVED THAT ON TEST CHECK BASIS SOME OF THE EXPENSES COULD NOT BE VERIFIED BY THE ASSESSEE. THEREFORE THE AO SHOULD HAVE GIVEN AT LEAST THE DE TAILS OF THOSE EXPENSES WHICH ASSESSEE COULD NOT VOUCH OR VERIFY. UNDER SUC H CIRCUMSTANCES WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) BECAUSE AD HOC DISALLOWANCE WITHOUT ANY BASIS CANNOT BE SUSTAINED. 5. FACTS APROPOS GROUND NO. 2 ARE THAT ASSESSEE H AD CLAIMED AN AMOUNT OF RS. 1 04 21 538/- ON ACCOUNT OF TRAVELLING EXPEN SES (INCLUDING FOREIGN TRAVELLING) AND RS. 18 20 569/- ON ACCOUNT OF TELEP HONE & TRUNK CALL EXPENSES. THE AO HAS OBSERVED THAT DURING THE ASSES SMENT PROCEEDINGS THE ASSESSEE SUBMITTED DETAILS OF TRAVELLING INCLUDING FOREIGN TRAVELLING AND AFTER CONSIDERING THE SAME SINCE ASSESSEE COULD NOT PROD UCE ALL THE BILLS AND VOUCHERS IN SUPPORT OF THESE EXPENSES 20% DISALLOW ANCE WAS TO BE MADE. HE FURTHER OBSERVED THAT THE PERSONAL EXPENSES ALON G WITH THE BUSINESS COULD NOT BE RULED OUT. 5.1. BEFORE LD. CIT(A) THE ASSESSEE INTER ALIA SU BMITTED THAT COMPLETE DETAILS OF THE EXPENDITURE DULY SUPPORTED BY BILLS / VOUCHERS WERE FILED BEFORE THE AO AND HENCE THERE WAS NO GROUND FOR MAK ING SUCH DISALLOWANCE. 5 ITA 1571/DEL/2012 ACIT VS. MESCO AIRLINES LTD. 5.2. LD. CIT(A) DELETED THE DISALLOWANCE QUA FOLLOW ING TWO REASONS- A. THE AO COULD NOT GIVE SEPARATE DETAILS OF VOUCHERS WHICH WERE NOT PRODUCED DURING ASSESSMENT PROCEEDINGS; B. IN CASE OF COMPANY DISALLOWANCE COULD NOT BE MADE B Y TREATING THE PART OF SUCH EXPENDITURE AS PERSONAL IN NATURE. 5.3. HAVING HEARD BOTH THE PARTIES WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE FINDING RECORDED BY LD. CIT(A) ON BOTH THE COUNTS. RELIANCE PLACED BY LD. COUNSEL ON THE DECISIONS NOTED SUPRA SQUA RELY COVERS THE ISSUE. GROUND IS DISMISSED. 6. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29-04-2015. SD/- SD/- (H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29-04-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR