This article provides an in-depth analysis of the case ITA No. 4793/DEL/2019, where the appellant, JCE Engineering & Management Services Ltd., New Delhi, filed an appeal against the ITO, Ward-13(1), New Delhi, for the assessment year 2012-13. The appeal was filed on May 27, 2019, and the final tribunal order was pronounced on May 20, 2022.
JCE Engineering & Management Services Ltd. is an engineering consultancy firm that provides detailed consultancy services to various government departments, private, and public sector companies. For the assessment year 2012-13, the company filed its original return on September 29, 2012, declaring an income of Rs. 2,54,130, which was subsequently revised on January 17, 2013.
The case was selected for scrutiny assessment under CASS, and a notice under section 143(2) of the Income Tax Act, 1961, was issued to the assessee. The assessee disclosed professional receipts of Rs. 2,32,02,086 for the year under consideration, compared to Rs. 1,68,76,024 in the previous year. The assessee claimed to have paid professional charges of Rs. 1,50,54,382, up from Rs. 15,13,817 in the previous year. The Assessing Officer (AO) raised concerns about the significant increase in professional charges and issued notices under section 133(6) of the Act to various parties.
The AO did not receive replies from five parties, namely Spectrum Techno Consultants Pvt. Ltd., M.K. Soil Testing Laboratory, Balaji Hydro Mech Experts, Chaudhari Construction, and Ujwal Systems. Consequently, the AO made an addition of Rs. 28,86,607 in respect of the professional charges paid to these parties, citing a lack of satisfactory explanations. Additional disallowances included Rs. 47,470 for depreciation, Rs. 8,00,000 for non-deduction of TDS, and interest of Rs. 1,30,787, resulting in an assessed income of Rs. 41,70,741 against the returned income of Rs. 2,54,130.
Aggrieved by the AO’s decision, the assessee appealed before the CIT(A), who partially allowed the appeal by deleting the additions of Rs. 8,00,000 and Rs. 49,747 but sustained the addition of Rs. 28,86,607 related to consultancy charges. The CIT(A) noted that the assessee had submitted photocopies of confirmation certificates from four parties but failed to provide the originals for verification. Moreover, the assessee could not substantiate the TDS deductions with adequate proof.
Further aggrieved, the assessee appealed before the Tribunal. During the tribunal proceedings, the counsel for the assessee argued that the payments were genuine and that TDS had been deducted and reflected in the Income Tax Department’s portal. The counsel presented the original confirmation certificates for verification.
The Tribunal, after hearing both parties, found that the addition was sustained due to the lack of original evidences. However, the Tribunal directed the CIT(A) to verify the claim regarding the payment of professional charges and the deduction of TDS. The assessee was instructed to produce the original confirmation certificates from the four parties (M.K. Soil Testing Laboratory, Balaji Hydro Mech Experts, Chaudhari Construction, and Ujwal Systems). If the CIT(A) verifies the TDS deductions and finds the confirmations authentic, the addition would be deleted.
In conclusion, the Tribunal allowed the appeal of JCE Engineering & Management Services Ltd. for statistical purposes, directing the CIT(A) to re-examine the evidences and confirm the legitimacy of the consultancy charges and TDS deductions.
This case underscores the importance of maintaining proper documentation and original evidences to substantiate claims of expenses and deductions. It also highlights the Tribunal’s role in ensuring a fair reassessment of facts based on comprehensive verification of available evidences.
JCE Engineering & Management Services vs. ITO: Disallowance of Consultancy Expenses
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