Team Maintenance Specialities, Surat vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA No. 1732/Ahd/2011 & CO No. 172/Ahd/2011 िनधा रण वष /Assessment Year: 2007-08 The ACIT, M/s. Team Maintenance Circle-7, Specialities, Surat 806, Abhinandan Royale, Nr. Mangaldeep Apartment, Bhattar Road, Surat PAN : AABFT 4572 F

अपीलाथ / अपीलाथ / (Appellant) ू यथ यथ / थ / (Respondent/Cross-

Objector) Revenue by : Smt Sonia Kumar, Sr. DR. Assessee(s) by : Shri K. K. Shah, AR सु नवाई क$ तार ख / Date of Hearing : 15/06/2015 घोषणा क$ तार ख / Date of Pronouncement: 25/06/2015

आदे श/O R D E R

PER BENCH :

The Revenue is in appeal before us against the order of the ld. Commissioner of Income-tax (Appeals)-I, Surat dated 28.03.2011 passed for Assessment Year 2007-08. On receipt of notice in the Revenue's appeal, the assessee has filed Cross-Objection bearing No. 172/Ahd/2011.

2. The ld. Counsel for the assessee, at the very outset, did not press the Cross-Objection filed by the assessee; hence, the Cross-Objection filed by the assessee is rejected.

3. In the first ground of appeal, the Revenue has pleaded that ld. CIT(A) has erred in deleting the addition of Rs.78,03,060/-.

ITA No.1732/Ahd/2011 & CO No.172/Ahd/2011 ACIT vs. Team Maintenance Specialities For AY: 2007-08 2

4. The brief facts of the case are that the assessee is a partnership firm engaged in the business of trading in chemicals and maintenance materials. It has filed its return of income on 30.10.2007, declaring total income at Rs.13,74,870/-. The case of the assessee was selected for scrutiny assessment and notice u/s 143(2) of the Income-tax Act was issued on 17.07.2008. This notice was served upon the assessee on 28.07.2008. According to the Assessing Officer, a notice u/s 142(1) was again issued on 05.10.2009 and thereafter, a questionnaire was issued on 10.11.2009 alongwith notice u/s 142(1) which were remained un-complied with. Therefore, he proceeded to pass an ex-parte assessment u/s 144 of the Income-tax Act. On perusal of the details, it revealed to the Assessing Officer that there is a fall of about 19.58% in the GP in comparison to preceding year. The assessee had made purchases. The ld. Assessing Officer has disallowed 25% of the claim of the assessee out of purchases and depreciation. He has noticed all these details in paragraph No.4 of the assessment order. According to the Assessing Officer, the assessee has debited a total sum of Rs.3,15,07,724/- under the head 'various expenses' including depreciation. The 25% of the total expenses were worked out to Rs.78,76,931/-. The ld. Assessing Officer has made addition of this amount.

5. On appeal, it was pleaded by the assessee that notice issued u/s 142(1) was not served upon the assessee. The notice dated 30.11.2011 was served upon the assessee on 04.12.2009. The assessee appeared before the Assessing Officer and the questionnaire was served upon it. The effective date of hearing was 14.12.2009 only. Due to this paucity of time, the assessee could not compile the details. The details were alleged to have been submitted on 16.12.2009 which were not taken on record by the Assessing Officer and he passed the assessment order. Considering this ITA No.1732/Ahd/2011 & CO No.172/Ahd/2011 ACIT vs. Team Maintenance Specialities For AY: 2007-08 3

aspect, the ld. First Appellate Authority has allowed the assessee to place on record the details. The ld. CIT(A) has called for a remand report from the Assessing Officer. After going through the remand report of the Assessing Officer, the ld. CIT(A) has partly allowed the appeal of the assessee and deleted the major addition. The finding recorded by the CIT(A) read as under:-

"6.3 The third ground of appeal is related to the addition of Rs.78,76,931/- on adhoc base for disallowance at 25% of the purchases and all expenses including depreciation at Rs.3,15,07,724/- as per para 4 of the order.

As per the remand report, verification in respect of purchases and commission expenditure was made and no discrepancy was found. The appellant had reconciled the differences, if any. I therefore, hold that no addition is justified in respect of purchase and commission for Rs.2,78,10,483/- and Rs.24,73,775/- respectively. The appellant has filed details of other expenses alongwith the major evidence, however, there is likely to be some personal elements in expenses like traveling and telephone expenses. I, therefore, sustain addition of Rs.20% of traveling and telephone expenses which comes to Rs.73,871/-"

6. Before us, the ld. Departmental Representative contended that though the assessee has reconciled the purchases but still there is a discrepancy with regard to the purchases made from Ceratizit India (P) Ltd and Stanvac Chemicals India Ltd. These concerns did not response to the notices of the Assessing Officer. Therefore, ld. First Appellate Authority ought to have not deleted the total disallowance out of the expenses.

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7. The ld. Counsel for the assessee, on the other hand, contended that the Assessing Officer did not find any discrepancy in the evidences furnished by the assessee. He drew our attention towards the observations of the Assessing Officer in the remand report.

8. We have duly considered the rival submissions and gone through the remand report of the Assessing Officer dated 14.03.2011. The observations ITA No.1732/Ahd/2011 & CO No.172/Ahd/2011 ACIT vs. Team Maintenance Specialities For AY: 2007-08 4

of the Assessing Officer with regard to disallowance out of purchases as well as commission are worthwhile to refer. The relevant paragraphs read as under:-

"In response to these notices all the purchase parties have furnished the assessee's copy in their books of account and details of total purchases made by the assessee from them. Similarly all the parties filed confirm/computation of income/TDS certificates etc. The details submitted by these parties have been compared with the details of purchases and commission furnished by the assessee. No discrepancies have been noticed in purchases and commission payment shown by the assessee in details of purchases and commission."

9. Since the disallowance was made in an ex-parte assessment order, once the assessee was given an opportunity to reconcile its expenses, the Assessing Officer was satisfied with the quality of the evidence produced by the assessee. He did not find any discrepancies (as disclosed from his observation) in the purchases and commission payment shown by the assessee. Therefore, we do not find any error in the order of the CIT(A); accordingly, this ground of appeal is rejected.

10. In Ground No.2, the Revenue has pleaded that the ld. CIT(A) has erred in deleting the addition of Rs.1,33,679/-. This addition has been made on an estimated basis out of "commission income". According to the Assessing Officer, the assessee failed to submit the TDS details; therefore, he estimated the commission income. The ld. First Appellate Authority has deleted the addition on the ground that the commission income is verifiable from the TDS certificate. The finding of the CIT(A) in this regard is as under:-

"6.4 The fourth ground of appeal is related to the addition of Rs.1,33,679/- on account of estimate of commission income as per para 6 of the order.

ITA No.1732/Ahd/2011 & CO No.172/Ahd/2011 ACIT vs. Team Maintenance Specialities For AY: 2007-08 5

The commission income is verifiable from the TDS certificate and, therefore, estimate of such income at lumsum amount is not required and, therefore, the addition of Rs.1,33,679/- is hereby deleted."

11. After going through the finding of the CIT(A) and the remand report of the Assessing Officer, we do not find any error in the above finding of the CIT(A). Accordingly, this ground of appeal of the Revenue is also rejected.

12. In the next ground of the appeal, the grievance of the Revenue is that the CIT(A) has erred in deleting the addition of Rs.24,19,324/- which was added by the Assessing Officer u/s 68 of the Income-tax Act.

13. In the remand proceedings, the assessee has substantiated that this amount represents the loan taken from ICICI Bank Ltd for the purpose of vehicle. There is no unexplained credit in the account of the assessee. Ld. First Appellate Authority has deleted the addition after appreciating the remand report and the evidences produced by the assessee. Therefore, we do not find any error in the order of the CIT(A); accordingly, this ground of appeal is rejected.

14. In view of above, the appeal of the Revenue is devoid of any merit and dismissed.

15. In the result, the Revenue's appeal as well as assessee's Cross- objection, both are dismissed.

Order pronounced in the Court on 25th June, 2015 at Ahmedabad.

Sd/- Sd/-

(G.D. AGRAWAL) (RAJPAL YADAV) VICE-PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 25/06/2015 Biju T., PS ITA No.1732/Ahd/2011 & CO No.172/Ahd/2011 ACIT vs. Team Maintenance Specialities For AY: 2007-08 6 षत Copy आदे श क$ ूितिल+प अमे+षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू यथ / The Respondent. 3. संबंिधत आयकर आयु. / Concerned CIT 4. आयकर आयु.(अपील) / The CIT(A)

5. +वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY

Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad