INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘H’: NEW DELHI
BEFORE SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
AND
SHRI ANUBHAV SHARMA, JUDICIAL MEMBER
ITA No. 1697/DEL/2020
(Assessment Year: 2016-17)
Quickmed Healthcare Pvt. Ltd,
S-22, Green Park Extension,
New Delhi
PAN: AAACQ3075A
(Appellant)
vs.
ACIT, Central Circle-16,
New Delhi
(Respondent)
Assessee by: P. Roy Chowdhary Adv with Smt Sweta Bansal, CA
Revenue by: Shri M. Baranwal, Sr. DR
Date of Hearing: 19/07/2022
Date of Pronouncement: 29/07/2022
PER ANUBHAV SHARMA, J. M.:
1. These appeals have been preferred by the Assessee against the order dated 28.09.2020 of Ld Commissioner of Income Tax (Appeals) -26, New Delhi (Ld. CIT(A)) in appeal Nos. 10310, 10314, 10317/19-20 before it against the order dated 31.12.2019 passed u/s 153A/143(3) of the Income Tax Act, 1961 (the Act) by the Ld. AO, ACIT, Central Circle-16, New Delhi (Ld. AO).
2. In these appeals, common issues are involved, parties argued them together, and therefore, to avoid any contradictory finding and for convenience, these are disposed of by this consolidated order.
3. The facts in brief are that pursuant to the warrant of authorization, a search and seizure operation u/s 132 of the Act was conducted on 02.11.2017 and on subsequent dates on different business and residential premises of Rakesh Jain Group of cases. The case of the Assessee company was also covered, and various incriminating papers/documents were found and seized during the search. Notice u/s 153A of the Act was issued, and the Assessee company filed its return. The Assessee was asked to explain why 3% of the expenses should not be disallowed and added to the income of the Assessee company as per the statement of Shri Rakesh Jain recorded u/s 132(4) of the Act, wherein he admitted that cash was generated and siphoned out from the business by way of inflated expenses such as salary, travelling, conveyance, staff welfare, etc. Based upon the Assessee’s reply, the following disallowances were made:
Total disallowances:
Rs. 77,292 – AY 2016-17
Rs. 612,647 – AY 2017-18
Rs. 532,110 – AY 2018-19
4. The above total expenditures were added to the return income.
5. The Ld CIT(A) had sustained the same, and accordingly, the Assessee is in appeal raising grounds challenging the ad-hoc disallowances made by the authorities.
6. On behalf of the Assessee, it was argued that Shri Rakesh Jain’s statement does not refer to the Assessee company directly, and specific references were made to statements related to a proprietary concern, Vedent Medicine Agency. It was contended that the statement, recorded at Shri Rakesh Jain’s premises, cannot be considered conclusive evidence against the Assessee company, which is a separate legal entity.
7. Conversely, the Ld Sr. DR argued that since the additions were based on Shri Rakesh Jain’s statement, there is no error in the findings of the Ld CIT(A).
8. After considering the arguments and the records, it is observed that the tax authorities proceeded on a wholesale basis without scrutinizing the specific expenses. Expenses such as bank charges, payments to auditors, postal expenses, telephone expenses, and bank interest are verifiable and likely incurred in the regular course of business. The unilateral inflation of these expenses without concrete evidence of excess or inappropriate expenditure is unjustifiable. The remaining expenses also appear to be regular business expenditures without any evidence suggesting disproportionality or impropriety. Relying solely on an oral statement to justify an ad-hoc disallowance of 3% of total expenses is not sustainable.
9. The Ld CIT(A) has emphasized the evidentiary value of Shri Rakesh Jain’s statement and surrounding circumstances of unaccounted cash transactions. However, the mere statement under section 132(4) does not constitute sufficient incriminating material to justify disallowances without corroborative evidence.
10. Consequently, the grounds raised by the Assessee are sustained. The appeals are allowed, and the Ld AO is directed to delete the impugned disallowances.
Order pronounced in the open court on 29/07/2022.
-Sd/- B.R.R. KUMAR
ACCOUNTANT MEMBER
-Sd/- ANUBHAV SHARMA
JUDICIAL MEMBER
Dated: 29/07/2022
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
ITA 1697/DEL/2020 – Quickmed Healthcare Pvt Ltd vs. ACIT Central Circle-16, New Delhi (AY 2016-17)
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