The Income Tax Appellate Tribunal (ITAT), Delhi bench, while directing readjudication, observed that the assessee had failed to produce the books of accounts during the assessment proceedings due to a communication gap between the assessee’s representative and the company.
The assessee, Sercon India Pvt. Ltd., claimed to be engaged in the business of providing services in the field of advertisement, publicity, promotion, event management, and marketing consultancy.
During the assessment proceedings, the Assessing Officer (AO) observed that the assessee claimed huge expenses under the head of operating and administration. The AO asked the assessee to produce the complete set of books of account along with bills and vouchers. However, the assessee produced only ledger accounts in soft copy.
Therefore, the AO could not verify the nature, reasonableness, and allowability of the said expenses in the absence of books of account and supporting documents. Thus, to protect the interest of revenue, 10% of operating and administrative expenses were disallowed along with certain other expenses. Thereafter, an assessment order was passed.
Aggrieved by the order, the assessee filed an appeal before the CIT(A), who dismissed the appeal of the assessee. Thereafter, the assessee filed an appeal against the CIT(A) order before the tribunal.
Rano Jain, Counsel for the assessee, argued that the Company was not in a position to gather all the relevant documents and papers to be submitted before the Assessing Officer, as required by the A.O. during the assessment proceedings and before the CIT(A) during the appellate proceedings. Further, this happened due to some misunderstanding between the assessee’s representative and the assessee company.
Amit Katoch, Counsel for Revenue, relying on the orders of the Lower Authorities, sought the dismissal of the Appeal.
It was observed by the tribunal that the books of account and records of the assessee company were being maintained in New Delhi. Due to the closure of activities of the assessee company, the employees left the service, resulting in a communication gap between the Assessee’s Representative and the Company regarding the submission of documents during the assessment proceedings and appellate proceedings.
The assessee before the tribunal also produced certain additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. Hence, the bench observed that the material referred to by the assessee company is relevant to correctly determine the tax liability of the Assessee.
After considering the facts submitted and the circumstances, the two-member bench of Yogesh Kumar U.S. (Judicial Member) and G.S. Pannu (President) allowed the additional evidence and directed readjudication in respect of the evidence.
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