This appeal was filed by the Income Tax Officer (ITO), Ward 21(3), New Delhi (the appellant) against the order dated 10.04.2019 passed by the Commissioner of Income Tax (Appeals)-7, New Delhi, for the assessment year 2015-16. The case was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘F’, through video conferencing.
The respondent, Ritual Holidays Pvt. Ltd., is a company engaged in the business of Tour Operator Services. The respondent filed its return of income for the assessment year 2015-16 on 01.10.2015, declaring a total income of Rs. NIL. The case was selected for scrutiny, and the assessment was framed u/s 143(3) of the Income Tax Act, 1961, vide order dated 28.12.2017, determining the total income at Rs. 1,69,38,308/-.
The Assessing Officer (AO) disallowed the entire direct and indirect expenses claimed by the respondent, amounting to Rs. 1,69,38,308/-. The AO concluded that the respondent had failed to produce supporting evidence to prove the genuineness, creditworthiness, and nature of these expenses.
The Revenue raised the following grounds of appeal:
The respondent carried the matter before the CIT(A), who granted substantial relief by deleting the addition made by the AO. The CIT(A) noted that the AO had not identified any specific bills and vouchers that were not for the purpose of business, nor had the AO pointed out any defects in the supporting evidence provided by the respondent. The CIT(A) also observed that as a Private Limited Company, the respondent could not have incurred any personal expenses. Additionally, the respondent’s accounts were audited, and the disallowance made by the AO was found to be on an estimated and ad-hoc basis without any substantial basis. The CIT(A) thus deleted the ad-hoc disallowances made by the AO.
During the hearing on 16.06.2022, the Learned Departmental Representative (DR) supported the order of the AO, while the respondent’s Authorized Representative (AR) reiterated the submissions made before the AO and CIT(A). The AR highlighted inconsistencies in the AO’s observations, noting that the AO acknowledged that the respondent had filed documents which were verified on a test-check basis but later disallowed the expenses citing lack of evidence.
The Tribunal noted that the AO had disallowed the entire direct and indirect expenses without identifying specific non-business-related expenses or defects in the evidence. The CIT(A), after considering the remand report and the respondent’s submissions, found the disallowance to be without basis and deleted it. The Tribunal found no fallacy in the CIT(A)’s findings and upheld the deletion of the addition.
Thus, the appeal of the Revenue was dismissed.
The Tribunal’s decision to dismiss the appeal underscores the importance of proper substantiation and justification for disallowances made by the AO. This case highlights the necessity for detailed examination and specific identification of non-business-related expenses in tax assessments.
The order was pronounced in open court on 7th July 2022.
Order pronounced in open court on this 7th day of July 2022.
Sd/-
(Narender Kumar Choudhary)
Judicial Member
Sd/-
(Anil Chaturvedi)
Accountant Member
Date: 07.07.2022
Copy forwarded to:
Assistant Registrar
ITAT, Delhi Benches
Delhi
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