This article provides a comprehensive analysis of the case ITA No. 4816/DEL/2019, where the appellant, Unity Automation Solution Ltd., contested against the respondent, Income Tax Officer (ITO), Ward-27(1), New Delhi. The case pertains to the assessment year 2010-11. The appeal was filed on May 27, 2019, and the final tribunal order was pronounced on March 20, 2020.
The dispute arose when the ITO, Ward-27(1), New Delhi, issued an assessment order for the assessment year 2010-11 under Section 147 read with Section 143(3) of the Income Tax Act, 1961. The appellant, Unity Automation Solution Ltd., with its registered office at B-41, Shivam Apartments, Plot No. 13, D-Block, Vikaspuri, New Delhi, challenged the ITO’s order.
The primary grievance raised by the appellant was against the addition of Rs. 55,83,787/- made by the Assessing Officer (AO) by erroneously applying Section 44AD of the Income Tax Act, 1961. The appellant also contested the disallowance of the claimed loss of Rs. 27,49,347/-.
The Delhi Bench ‘I(2) + SMC’ of the Income Tax Appellate Tribunal (ITAT) heard the appeal with Ms. Suchitra Kamble as the Judicial Member and Shri Prashant Maharishi as the Accountant Member. The hearing took place on March 5, 2020, and the order was pronounced on March 20, 2020.
The appellant, Unity Automation Solution Ltd., was represented by none, while the respondent was represented by Sh. Pradeep Singh Gautam, Sr. DR. The AO issued a notice under Section 148 on March 30, 2017, for reopening the assessment proceedings of AY 2010-11. The appellant filed its Income Tax Return on October 16, 2017, declaring a loss of Rs. 27,49,347/-. The AO completed the assessment by applying an 8% rate on the total receipts of Rs. 3,54,30,497/- under Section 44AD, disallowing the claimed loss.
The CIT(A) dismissed the appeal of the appellant, upholding the AO’s application of Section 44AD. The CIT(A) noted that the request of the appellant to restrict the rate to 3% was not substantiated by the books of accounts nor was it a part of the provisions of the Income Tax Act.
The ITAT upheld the findings of the CIT(A), stating that there was no need to interfere with the CIT(A)’s decision. The appeal was dismissed, and the order concluded as follows:
This appeal is filed by the assessee against the order dated 27/03/2019 passed by CIT(A)-16, New Delhi for Assessment Year 2018-19.
The grounds of appeal are as under:
- That on the facts and circumstances of the case, the order passed by the Ld. CIT(A) – 16 is bad both on the facts and in law in confirming the addition of Rs. 55,83,787/- made by A.O by erroneously applied Section 44AD of the Act.
- That the Ld. CIT (Appeals) – 16 without considering the facts sustained the addition @ 8% on total receipts of Rs. 3,54,30,497/- for the A.Y. 2010-11 by taking guidance as per Section 44AD of the Income Tax Act, 1961 whereas the Section 44AD shall
- That Section 44AB of the Income Tax Act, 1961 applicable in the case as the gross receipts of the appellant for the A.Y. 2010-11 exceeds Rs. 3.50 crore. The A.O. also initiated penalty proceedings u/s 27 IB for non-filing of audit report for A.Y. 2010-11. Therefore, A.O. erroneously applied the provision of the Section 44AD of the Act.
- That the A.O. rejected the books of account due to the reason not satisfied about the correctness or completeness of the accounts ignoring the fact that the appellant filed Audited Financial Statement including Balance Sheet and P & L A/c during assessment proceedings. Whereas the A.O. took gross receipts value as shown by the appellant in its P & L A/c even after rejecting the same.
- That the A.O. disallowed the loss of Rs. 27,49,347/- claimed by the appellant in the Income Tax Return for the A.Y. 2010-11 without any adverse material available against the appellant on record and unlawfully applied the provisions of Section 44 AD of the Income Tax Act, 1961
The assessee company had been assessed under Section 147 read with Section l43(3) of the Income Tax Act, 1961 for the A.Y. 2010-11. The assessee company had not filed its Income Tax Return under Section 139(1) of the Act for e A.Y. 2010-11. The assessee Company deposited Cash of Rs. 8,31,500/- with Standard Chartered Bank and total receipts for the year under consideration was Rs. 3,54,30,497/-. The assessee company was in the business of Sale and Service of CCTV cameras and other security equipment’s. The Assessing Officer issued Notice u/s 148 on 30.03.2017 for opening assessment proceedings of A.Y. 2010-11. The assessee company filed its Income Tax Return on 16.10.2017 declaring loss of Rs. 27,49,347/- vide Acknowledgement No. 245796791161017 in compliance to the Notice u/s 148 dated 30.03.2017. Director of the Company attended the hearing and filed Audited financial statement including Balance Sheet and P & L A/c for the A.Y. 2010-11. The Assessing Officer completed the assessment proceeding and 3 ITA No. 4816/Del/2019 assessed the total income of Rs. 28,34,440/- i.e. 8 % of total receipts of Rs. 3,54,30,497/- by taking the guidance from Section 44AD of the Act and disallowed the claim of loss of Rs. 27,49,347/- vide order dated 28.12.2017.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
None appeared on behalf of the assessee and there is no adjournment application on behalf of the assessee. The notice has been served to the assessee. Therefore, we are taking up the submissions of the assessee before the CIT(A) as well as before the Assessing Officer.
The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard the Ld. DR and perused the material available on record. The CIT(A) has given a categorical finding that the Assessing Officer righty invoked the provisions of Section 44AD and applied rate of 8% on the contract receipts of the assessee during the year under consideration. The CIT(A) further observed that the request of the assessee to restrict the rate to 3% was never substantiated by the books of accounts nor was a part of the provisions of the Income Tax Act. Thus, there is no need to interfere with the findings of the CIT(A). Therefore, the appeal of the assessee is dismissed.
In result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 20th March, 2020.
Sd/- (PRASHANT MAHARISHI) ACCOUNTANT MEMBER
Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBERDated: 20/03/2020
Copy forwarded to:
- Appellant
- Respondent
- CIT
- CIT(A)
- DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
The appeal filed by Unity Automation Solution Ltd. against the Income Tax Officer, Ward-27(1), New Delhi, for the assessment year 2010-11, was dismissed by the ITAT. The tribunal upheld the AO’s application of Section 44AD, confirming the addition of Rs. 55,83,787/- and disallowing the claimed loss of Rs. 27,49,347/-. This decision underscores the importance of substantiating claims with proper documentation and adhering to the provisions of the Income Tax Act.
Unity Automation Solution Ltd. vs ITO Ward-27(1), New Delhi: Case Summary
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