Case Law Details

Case Name : TUV India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Appeal Number : ITA No. 6628/Mum/2017
Date of Judgement/Order : 20/08/2019
Related Assessment Year :
Courts : All ITAT (7631) ITAT Mumbai (2176)

TUV India Pvt. Ltd. Vs DCIT (ITAT Mumbai)

No defects in the books of accounts were brought on record by the authorities below nor books of accounts were rejected by the authorities below. If the authorities were not satisfied with aforesaid details , then they ought to have called for further details. In the preceding assessment year i.e. ay: 2010-11 and in immediately succeeding assessment year i.e. ay: 2012-13, no adhoc disallowances of expenses were made by the AO in an assessment framed u/s. 143(3) of the Act. The assessment orders for ay: 2010-11 and ay: 2012-13 are placed in file. The assessee has discharged its onus by bringing on record complete details of the expenses incurred by it albeit the same was brought on record during the course of appellate proceedings before learned CIT(A)/remand proceedings conducted by the AO under directions of learned CIT(A). The powers of learned CIT(A) are co-terminus with powers of the AO. No enquiries were conducted by the AO/learned CIT(A) even during appellate/remand proceedings . The books of accounts were not rejected by authorities below nor any defect is pointed out by the AO/learned CIT(A) in the books of accounts maintained by the assessee. There is no allegation by Revenue that the assessee claimed any bogus expenses or any attempt is made to defraud Revenue. Under these circumstances keeping in view factual matrix of the case, we are of the considered view that aforesaid adhoc disallowance of expenses under various heads of expenses to the tune of 10% of the total expenses incurred by the assessee under these heads of expenses is not warranted and we order deletion of the said adhoc disallowance of expenses.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal, filed by assessee, being ITA No. 6628/Mum/2017, is directed against appellate order dated 05.09.2017 in appeal no. CIT(A) -22/DCIT-10(3)/IT-314/ 13-14, passed by learned Commissioner of Income Tax (appeals)-24, Mumbai (hereinafter called “the CIT(A)”), for assessment year(ay) 2011-12, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 29.01.2014 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”) for ay:20 11-12.

2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”), reads as under:-

“1) The learned Commissioner of Income Tax (Appeals) failed to consider that the notice under section 143(2) of the Act issued by the Assessing Officer was time barred, and hence, the order passed under section 143(3) of the Act was illegal and bad in law.

2) The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 1,80,57,980/-, being income corresponding to alleged unreconciled TDS 18,05,798/-, as per the Form 26AS.

3) Having regard to letter dated February 24, 2017 filed with the Assessing Officer during remand proceedings, remand report dated March 24, 2017 and letter dated April 10, 2017 filed with the Commissioner of Income Tax (Appeals) during appeal proceedings, the Appellant submits that the finding of the Commissioner of Income Tax (Appeals) that some amount of TDS is unreconciled is perverse, and contrary to facts on record.

4) In any event, the Appellant Company submits that the addition of Rs. 1,80,57,980/- is highly excessive and arbitrary, and the same requires to be reduced substantially .In any event, the alleged difference in TDS could not have exceeded Rs. 12,82,637/-

5) The learned Commissioner of Income Tax (Appeals) erred in confirming the ad hoc disallowance of 10% amounting to Rs. 2,76,51,835/-, in respect of the various expenses claimed by the Appellant. Having regard to the facts and circumstances of the case, the Appellant submits that the disallowance is unwarranted and requires to be deleted.

6) Without prejudice to the above ground, and in any event, the Appellant submits that the above disallowance is grossly excessive and arbitrary, and the same requires to be reduced substantially.

7) The learned Commissioner of Income Tax (Appeals) erred in holding that interest under section 234A of the Act of Rs. 4,41,960/- of the Act is mandatory and consequential, ignoring the fact that the Appellant had filed its Return of Income within the time prescribed under the Act, The Appellant denies its liability to be levied any such interest under section 234A of the Act.”

3. The brief facts of the case are that the assessee is engaged in the business of certification for Quality & Environmental Management Systems, QS 9000 for Automobile Industry, Third Party Inspection, CE Marketing and other related work. The assessee also carries out testing services and solutions for the food and agricultural sector.

4. The Ld. Counsel for the assessee at the outset submitted that the assessee did not wish to pursue Ground no. 1 raised by it in memo of appeal filed with tribunal and the same may be dismissed as not being The Ld. DR did not raised any objection to the dismissal of ground no. 1 as not bring pressed by the assessee. After hearing both the parties , we dismiss Ground no. 1 raised by assessee in memo of appeal filed by it with tribunal as not bring pressed. Thus, Ground no. 1 stand dismissed. We order accordingly.

5. So far as Ground no. 7 raised by assessee in its memo of appeal filed with tribunal is concerned, it is submitted by learned counsel for the assessee that the AO has already rectified and granted relief sought by the assessee and it is submitted that ground no. 7 be also dismissed as assessee has already got the relief sought from the AO. The Ld. DR did not raised any objection to the dismissal of Ground No. 7 raised by assessee in its memo of appeal filed with tribunal. After hearing both the parties , we dismiss this Ground No. 7 raised by assessee in memo of appeal filed with the tribunal as not being pressed. We order accordingly.

6. It is then brought to the notice of the Bench during the course of hearing that now there are only two effective issues which need to be adjudicated by tribunal, wherein Ground no. 2 to 4 raised by assessee in memo of appeal field with tribunal represent one effective issue concerning additions made on account of mismatch of Income-tax deducted at source(TDS) as per books of accounts maintained by the assessee with the TDS credit as is appearing in Form no. 26AS information per income-tax data base . It was then submitted that second effective issue in this appeal filed by assessee is covered by Ground No. 5 and 6 raised by assessee in memo of appeal filed with tribunal which concerns itself with ad-hoc disallowance of expenses @10% amounting to Rs. 2,76,51,835/- out of aggregate expenses to the tune of Rs. 27,65,18,354/- claimed by assessee under various heads of expenses.

7. During the course of assessment proceedings conducted by the AO u/s 143(3) read with Section 143(2) of the 1961 Act, the AO observed that the assessee has claimed TDS of Rs. 6,02,54,624/- in its return of income filed with Revenue , as against TDS as appearing in AIR information data base of income-tax department to the tune of Rs. 6,33,43,230/-. The assessee was asked by AO to explain the aforesaid difference and to reconcile income as is represented by aforesaid TDS as appearing in AIR information per data base of Income-tax department with that of income disclosed in return of income filed by assessee with Revenue. As per AO, the assessee failed to submit reconciliation statements for the receipts as are appearing in its return of income with receipts as are reflected in AIR information . Thus, the AO concluded that the assessee has not disclosed the receipts of fee/income represented by TDS of Rs. 30,88,606/- and it was observed by the AO that the assessees main activities are from receipts covered under the provisions of Section 194J on which TDS was required to be deducted @10% which led AO to make additions to the income of the assessee to the tune of Rs. 3,08,86,060/- by extrapolating TDS , which income was brought to tax by the AO in the hands of the assessee as undisclosed income/receipts of the assessee, vide assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act. The AO also observed that the assessee vide letter dated 08.02.20 13 has itself admitted that the TDS as per Form No. 26AS is Rs. 6,33,43,059/- and as per AO the assessee failed to explain the income represented by aforesaid receipts which were offered to tax in the year under consideration and hence the differential income computed between aforesaid TDS as per Form No. 26AS information per income-tax data base and income as offered for taxation as per return of income of Rs. 6,02,54,624/- were brought to tax by the AO in the hands of the assessee, to the tune of Rs. 3,08,86,060/- vide assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act.

8. The second addition which was made by the AO was with respect to various expenditure incurred by the assessee under different heads of expenses which expenses aggregated to Rs. 27,65,18,354/- , which stood disallowed by the AO on ad-hoc basis @ 10% of the aforesaid expenses, vide assessment order dated 01.2014 passed by the AO u/s 143(3) of the 1961 Act leading to additions to the income of the assessee to the tune of Rs. 2,76,51,835/- in the hands of the assessee. The AO had observed that assessee had failed to give documentary evidences and details with respect to these expenses to substantiate these expenses. It was also observed by the AO that complete details were not submitted by the assessee during assessment proceedings and under these circumstances it could not be established that these expenses were incurred wholly and exclusively for the purposes of business of the assessee and also it could not be concluded whether these expenses are revenue in nature. The AO also observed that in absence of aforesaid details, it could not be established that proper income-tax was deducted by the assessee while making payments for these expenses as is mandated under Chapter XVII-B of the 1961 Act which led AO to make additions to the tune of Rs. 2,76,51,835/- being ad-hoc disallowance @ 10% of the expenses aggregating to Rs. 27,65,18,354/- of the total expenses incurred by assessee under various heads of income as are enumerated in details in assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act.

9. The assessee being aggrieved by additions made by the AO vide assessment order dated 29.01.2014 passed u/s 143(3) of the 1961 Act, filed first appeal with learned CIT(A) and detailed contentions were raised by assessee before learned CIT(A) with respect to both the issues. It was explained by the assessee that no proper and adequate opportunity was given to the assessee by the AO during the course of assessment proceedings. It was also claimed that AIR information on the basis of which additions were made by the AO on account of TDS differential between as reported in AIR information and as filed in return of income filed with Revenue, was itself not provided to the assessee and in the absence thereof , it would have not been possible for the assessee to reconcile the differences between TDS as reported in AIR information per data base of income-tax department and as filed in return of income filed with Revenue. During the course of appellate proceedings before learned CIT(A), it was submitted by the assessee, as under:-

“No appropriate opportunity given to the appellant before passing the assessment order

3. Although the notice under section 143(2) was not served to the appellant within the time limit specified under section 143(2) of the Act, the learned DCIT (during the course of the hearing on 7 October 2013) requested the appellant to file the details requested in the notice issued under section 142(1) once the same is compiled.

4. Without prejudice to appellants plea that notice under section 143(2) selecting the case for scrutiny was not served on time and hence the assessment proceeding was time-barred, the appellant started compiling the details as requested by the learned DCIT in his notice dated 24 September 2013.

5. Vide letter dated 6 November 2013, the appellant filed part of the details requested in the notice and for the balance details, requested for some more time. For the balance details, the learned DCIT asked the appellant to file the details by end of December 2013.

6. On 18 December 2013, the staff of the learned DCIT called the authorised representative of the appellant to discuss the case. On the same day the authorised representative of the appellant appeared before the staff of the learned DCIT wherein the staff issued a fresh notice under section 142(1) dated 18 December 2013.

7. During the course of the hearing, the authorised representative of the appellant checked with the staff of the learned DCIT whether the appellant is required to file the details as per earlier notice (dated 24 September 2013) and the details as per the new notice dated 18 December The staff of the learned DCIT informed that the earlier notice dated 24 September 2013 can be ignored and asked the appellant to file the details as requested in the new notice dated 18 December on 26 December 2013, on the basis of which the assessment will be completed, Further , the staff of the DCIT also informed that hence forth the appellant has to file the details / discuss the case with him, and only at the time of finalising the assessment order, the learned DCIT will take the hearing.

8. Accordingly, the appellant compiled and filed around 65% of the details requested in the notice dated 18 December 2013 vide its letter dated 26 December 2013. The appellant submits that during the current year there was change in the Financial Controller and new Financial Controller has assumed the office only in the month of October 2013. Further, in the accounts team of the company, there were few changes and some of the old staff had left the organisation. Due to these problems, the appellant was taking little more time to compile the data requested by the learned DCIT. However, as stated above, 65% of the details requested in the notice dated 18 December 2013 had already been filed and request was made to give some more time for the balance details. The request of the appellant was accepted and the staff of the learned DCIT asked the appellant to file the balance details by 2 January 2014.

8. On 2 January 2014, when the representative of the appellant company called the staff of learned DCIT to check his availability, they were informed that he is on leave for 15-20 days because he was unwell and will discuss the case when he resumes the office.

9. On 21 January 2014, the authorised representative of the appellant again called the staff of the learned DCIT to check whether he has resumed office and were informed that he was still on leave and will take some more time to resume office.

10. On 6 February 2014, the authorised representative of the appellant once again called the staff of the learned DCIT to check his availability. The staff of the learned DCIT asked them to meet him on 7 February 2014 to discuss the case. Accordingly, the authorized representatives of the appellant visited the office of the learned DCIT on 7 February 2014 and were informed that the staff had still not resumed the office.

12. On the same day i.e. 7 February 2014, the appellant received an order dated 29 January 2014 passed under section 143(3) of the Act, wherein the total income of the appellant for the assessment year 2011-12 was assessed at Rs. 28,23,92,670 and a demand of Rs. 2,83,04,300 has been raised.

13. It is submitted that inspite of constant follow-up with the staff of the learned DCIT, the appellant was not provided with an opportunity to file necessary details / submission and represent its case before the learned DCIT before the assessment order was passed.”

9.2 Coming to the additions made by the AO , it was submitted by the assessee before learned CIT(A) with respect to first issue that there was a difference of Rs. 30,88,606/- in the TDS as was reflected in Form no. 26AS per income-tax department data base and as claimed by the assessee in return of income filed with the Revenue and based on the same additions to the income of the assessee were made by the AO to the tune of Rs. 3,08,86,060/- by holding that these are professional services and provisions of Section 194J are applicable which contemplate deduction of income-tax at source @10% and an amount of Rs. 3,08,86,060/- stood added to income of the assessee by the AO by extrapolating the income accordingly. The assessee claimed that it was not provided with AIR information by the AO during the course of assessment proceedings. The assessee also claimed before learned CIT(A) that proper and adequate opportunity of hearing was not provided by the AO during the course of assessment proceedings. The assessee submitted that the AOs observations that the assessee has not submitted explanation and reconciliation of TDS is not correct. The assessee prayed that these additions be deleted. The assessee also submitted that at the time of filing of return of income, it claimed credit of TDS based on original TDS certificates available with it even though income offered by the assessee was much more than the claim for credit of TDS. . The assessee submitted that it claimed TDS credit of Rs. 6,02,54,624/- based on original TDS certificates available with it at the time of filing of return of income but Revenue gave credit of TDS of Rs. 5,99,27,222/- while processing return of income u/s 143(1) of the 1961 Act and the assessee filed rectification application on 08.02.2013 and at that point of time TDS credit as is appearing in Form Number 26AS per data base of income tax department was Rs. 6,33,43,059/- which was claimed by assessee in rectification application , and against which entire income was already offered to tax by assessee while filing return of income originally with Department. It was explained that it is common phenomenon that TDS certificates are not available at the time of filing of return of income and credit of TDS is claimed based on available TDS certificates but later as and when these TDS certificates are received and are reflected in Form No. 26AS, the credit for said TDS are claimed. The assessee reiterated that it offered entire income to tax in return of income filed with Revenue and no income was concealed by the assessee from Revenue in its return of income filed with Revenue. The assessee also submitted chart of income earned/accrued to it , as detailed here under:-

Particulars Amount (In Rs.)
Fees from services (net of service tax) of the appellant as per Profit and Loss account 72,84,91,431
Add: Travelling and other expenses recovered from the customers from which taxes have been deducted by them (these are reduced from the expenses) 1,51,70,116
Less: Export of services 4,58,53,992
Net income( net of service tax) which is liable to TDS 69,78,07,555

9.3 The assessee submitted that total income of the assessee(net of service taxes) which was liable to TDS works out to be Rs. 69,78,07,555/-. It was submitted that the aforesaid amount of Rs. 69,78,07,555/- stood credited to Profit and Loss Account, which is net of service tax. The assessee submitted that gross income as reflected in Form No. 26AS was Rs. 65,68,39,242/- ( including service tax) and hence net income as per Form No. 26AS after excluding service tax @10.3% works out to Rs. 59,55,02,486/-. The assessee submitted that income offered by it in its return of income which was liable to TDS of Rs. 69,78,07,555/- was much higher than the income as reflected in Form No. 26AS viz. Rs. 59,55,02,486/-. Thus, the assessee claimed that it offered entire income as is reflected in Form No. 26AS to tax and there is no undisclosed income which was not offered to tax and prayers were made to delete the additions. The assessee also claimed that this differential of TDS of Rs. 30,88,606/- is mainly due to error made by one of the clients of the assessee namely Tilaknagar Industries Limited wherein PAN number of the assessee was mentioned instead of PAN number of their client to whom income was paid, while filing their TDS return with Revenue. The assessee produced evidences by way of emails exchanged with said Tilaknagar Industries Limited to prove that error took place while filing TDS returns by said Tilaknagar Industries Limited. The revised TDS return filed by said Tilaknagar Industries Limited correcting said mistake in PAN was also filed. The ledger account of said Tilaknagar Industries Limited in assessees books of accounts was also produced. This error had an implication of TDS amount of Rs. 27,64,023/- which was rectified by Tilaknagar Industries Limited by filing revised TDS return. The impact on income due to the aforesaid error was Rs. 2,76,40,230/- computed keeping in view TDS rate u/s 194J on professional/technical services is @10% by extrapolating income, out of total additions to the tune of Rs. 3,08,86,060/- made by the AO while framing assessment u/s 143(3) against the assessee. The assessee also submitted that there are more than 3000 entries in respect of income-tax deducted at source u/s 194J of the 1961 Act which are appearing in Form No. 26AS. The assessee also submitted that remaining differential/mismatch in TDS as is reflected in form no. 26AS and in its return of income is an amount of Rs. 3,24,583/- which is due to various other reasons. The learned CIT(A) remanded additional evidences for verification/rebuttal to the AO under Rule 46A of the Income-tax Rules, 1962 and the assessee claimed that during remand proceedings before the AO, the remaining differential of Rs. 3,24,583/- also was duly reconciled. It was submitted that during remand proceedings before the AO, the TDS as appearing in form no. 26AS was Rs. 6,15,37,261/- on 17.01.2017. The assessee claimed that detailed party wise reconciliation to explain differences in TDS credit as per AIR and as per books of accounts was submitted. The assessee prayed for deletion of additions as were made by the AO to the income of the assessee on account of differential in TDS as is appearing in AIR information and as claimed by assessee in return of income filed with Revenue.

9.4 The Ld. CIT(A) rejected the contentions of the assessee vide appellate order dated 05.09.20 17, by holding as under:-

“5.3 Ground No. 4 is directed against the addition of undisclosed income of Rs. 3,08,86,060/- from the AIR information. The AO made this addition by extrapolating the unreconciled TDS amount of Rs. 30,88,606/-. The AR has contended that no AIR statement was provided to the appellant at the time of assessment. However the appellant has filed during the appeal proceedings the details and relevant documents in the form of additional evidence. The AO in his remand report has objected to the admission of additional evidence. The Ld AR has explained from the documents filed as additional evidence, that a mistake occurred at the time of uploading the TDS certificates by the deductors especially in the case of one M/s Tilaknagr Industries. The Ld AR contended that it had correctly claimed its TDS at Rs. 6,02,54,624/- and the corresponding receipts accordingly admitted in the P&L account and no income was omitted to be offered. There is some force in the contention of the appellant. But as per the copy of latest form 26AS filed, it is still remained unreconciled. The TDS amount appearing in the latest 26AS is said to be Rs. 6,15,37,261/- as against the original amount of Rs. 6,33,43,059/- thereby resulting in difference of Rs. 18,05,798/-Considering the AO’s stand in making the extrapolated computation of the receipts, it has to be now worked out with the latest unreconciled figure of RS. 18,05,798/-. The AO’s findings are upheld to that extent and addition is restricted to Rs. 1,80,57,980/-. The AO is therefore directed to recompute the income accordingly. This ground is partly allowed.”

9.5 Thus as could be seen from above, additions to the income of the assessee to the tune of Rs. 1,80,57,980/- were upheld by learned CIT(A) on the grounds that the assessee was not able to finally reconcile the differential in TDS amount as per Form No. 26AS per income-tax department data base and as claimed by assessee in its return of income filed with Revenue, to that extent. So far as an error which crept in Form No. 26AS owing to quoting of wrong PAN by Tilaknagar Industries Limited while filing its TDS return to the tune of Rs. 27,64,023/- , the same stood accepted by learned CIT(A) as the said company Tilaknagar Industries Limited filed revised TDS return rectifying/correcting said error while filing its TDS return originally , which also get rectified and updated in Form No. 26AS.

10. So far as the second issue is concerned , the assessee made elaborate contentions before learned CIT(A) to justify that no disallowance of expenses on ad-hoc basis are warranted as assessee had all the evidences to prove that these are genuine and bonafide expenses incurred by the assessee for the business of the assessee. The assessee offered explanation with respect to each of these expenses before learned CIT(A) as under:

“55. As regards the disallowance of expenses, the appellant submits that the expenses disallowed includes:

a) Professional/technical services of Rs. 15,59,84,928/- : These expenses include the payments made to local technical experts (hired on contract basis) for rendering services in connection with inspection and certification audits. It also includes fees paid to affiliates and other foreign vendors for performing technical inspection and certification services outside India.

b) Registration expenses of Rs. 2,04,65,911: It may be noted that the customers based in India require certification from the entities that has specified Accordingly, the appellant enters into an agreement with the Indian customers for obtaining certificates from TUV NORD Gmbh Essen Germany and TUV NORD Systems GMH Hamburg Germany. Thus, these expenses are incurred towards baseload/ workload charges, certification charges, etc.

c) Travelling and conveyance expenses of Rs. 5,31,06,751: These expenses mainly include the business expenditure like travel charges , car hire charges , lodging and boarding charges incurred in the course of providing an audit or an inspection service to the client, conveyance paid to employees for working overtime, car hire charges , expenses of managers meeting, etc.

d) Seminar & business promotion expenses of Rs. 1,20,06,995: These expenses mainly include the expenditure incurred on business training courses provided mainly to imbibe the good business practices for the benefit of the client at large, IRCA certificated lead auditor certificate courses fees payable to TUV Nord Cert GMBH, advertisement and trade fairs , club charges, marketing fees, advertisement charges, entertainment expenses, seminar expenses, etc.

e) Miscellaneous expenses of Rs. 1,33,65,339: These expenses mainly include expenditure incurred on festival and gift expenses, recruitment expenses, bank charges, insurance, octroi / freight charges , rates and taxes, exchange differences , office expenses , fees to directors , audit fees expenses, etc.

f) Repairs and maintenance-building of Rs. 78,71,119: This include amenities charge, house-keeping charges, municipal charges, electricity charges, water charges , security charges repairs and renovation charges etc. in connection with the rented premises occupied by the appellant.

g) Repairs and maintenance-others of Rs. 1,15,42,538: This include expenditure incurred for repairs cost of office equipment’s , furniture , plumbing charges, purchase of laptop battery , mouse, etc. and charges in relation to SAP maintenance payable to TUV Nord Services GMBH.

h) Staff training expenses of Rs. 21,74,773: This include expenses in relation to workshops attended by the employees , training fees, etc.”

10.2 The explanations offered by assessee did not found favour with Ld. CIT(A) who rejected the contentions of the assessee vide appellate order dated 05.09.2017, by holding as under:-

“5.5 Ground no. 6 is directed against the AO’s action in making ad hoc disallowance of Rs. 2,76,51,835/- being @ 10% of various expenses. AO noted that the assessee had debited various expenses amounting to Rs. 27,65,18,354/. But the assessee has not filed details and evidences. The assessee failed to submit the details and to substantiate its claim of allowability of these expenses u/s. 37 of the Income Tax Act. As these expenses were not fully substantiated with necessary supporting documentary evidences, 10% of the above mentioned expenses (Rs. 27,65,18,354/-) being Rs. 2,76,51,835 was disallowed and added back to the total income of the assessee.

5.5.1 The appellant has, during the appellate proceedings, filed evidences in the form of additional evidence. A remand report was called for from the AO. He submitted the remand report in which he had strongly objected to the admission of additional evidence as the appellant’s case was not covered by any of the exceptional cause under Rule 46A. Ld AR has made detailed submissions on the issue. The appellant had alleged that the AO had not given proper opportunity before making addition. As it could be seen from the above facts, it can not be said that the AO had not given opportunity to the appellant. He had given statutory notices under section 143(2) and 142(1) and posted the case for hearings on given dates.

5.5.2 It is needless to say that it is the sole discretion of the AO how to compute income of the assessee. But the question arises here is that whether the AO has fairly and correctly exercised such discretion or not. In the instant case, it is observed that the ld AO has estimated the disallowance at @ 10% of the expenditure. It is considered that the ad hoc disallowance @ 10% to be very fair and reasonable. As the AO had exercised his discretion and made best judgment and also taking into consideration of the facts and circumstances of the case, I do not find any reason to delete the same. I therefore uphold the addition made by the AO and hence this ground raised by the appellant is also dismissed.”

11. Now , aggrieved by appellate order dated 05.09.2017 passed by learned CIT(A), the assessee has filed an appeal before the tribunal and elaborate contentions were made by Ld. Counsel for the assessee on both the aforesaid issues . The learned counsel for assessee explained before the Bench that the assessee is a service provider engaged in the certification work. It was explained that additions to the tune of Rs. 3,08,86,060/- were made by the AO to the income of the assessee on account of mismatch of TDS to the tune of Rs. 30,88,606/- between the books of accounts maintained by the assessee and Form No. 26AS per income tax department data base. It was submitted that AIR information was not provided to the assessee by AO during the course of assessment proceedings. It is submitted by learned counsel for the assessee before the Bench that AO in its remand report has stated that AIR information was not provided to assessee at the time of framing of assessment. Our attention was drawn to page no. 7 of the paper book wherein Profit and Loss Account of the assessee is placed for the impugned year under consideration and it was submitted that the total income / fees received by assessee from services were tune of Rs. 72.84 crores.Our attention was also drawn to page no. 33 of the paper book and it was submitted by learned counsel for the assessee that the assessee has declared income of Rs. 22,17,31,420/- in its return of income filed with Revenue. Our attention was drawn to page no. 34 and 35 of the paper book , wherein notices issued by the AO u/s. 143(2) r.w.s. 142(1) of the 1961 Act, both dated 24.09.2013 are placed. It was explained that the AO asked for details of TDS and the reconciliation thereof , which reply was given during assessment proceedings vide letter dated 06.11.2013 which was received by AO on 11.11.2013 , which is placed in page no. 39 of the paper book .Our attention was drawn also to page no. 43 of the paper book wherein fresh notice dated 18.12.20 13 u/s. 142(1) of the 1961 Act was issued by the AO is placed and it was submitted that in this notice there is no reference to reconciliation of TDS details sought by the AO. Our attention was drawn by learned counsel for the assessee to page no 45/paper book wherein reply dated 26.12.20 13 was submitted by the assessee before the AO during the course of assessment proceedings , in response to notice u/s. 142(1) dated 18.12.20 13 issued by the AO. Our attention was also drawn to page no. 47 of the paper book, wherein assessee has submitted vide letter dated 30.12.2014 additional evidences before Ld. CIT(A) and it was explained in this letter proper and adequate opportunity of being heard was not given to the assessee by the AO during the course of assessment proceedings. In this letter dated 30.12.20 14 assessee has tried to reconcile difference in TDS between as is reflected in return of income filed with Revenue with that as reflected in 26AS maintained per data base of income-tax department . It was submitted that assessee has duly reconciled the difference in TDS and no additions are warranted. Our attention was also drawn to page no. 55/paper book wherein details of TDS as per form no. 26AS is placed. Our attention was also drawn to page no. 57 of the paper book wherein M/s. Tilaknagar Industries Ltd. one of the client of the asssessee , agreed that they have mistakenly declared TDS of Rs. 27,64,023/- against assessee, as against actual TDS deducted against income of Rs. 51,951/- invoiced by the assessee for the entire year under consideration . Our attention was also drawn to page no. 61 to 62/paper book wherein party wise reconciliation of difference in TDS is placed. Our attention was drawn to page no. 63 to 66/paper book wherein party wise difference of TDS as per Form No. 26AS per income-tax department data base and return of income filed with Revenue is placed. With respect to second issue also, the assessee claimed before the Bench that it has given/written complete details of the expenses incurred against which adhoc disallowances were made by the AO @10% of various expenses leading to disallowance of Rs. 2,76,51,835/ .Our attention was drawn to page 68 to 93/paper wherein item wise detail of various expenses are placed, of which adhoc disallowances of expenses @10% of the total expenses under various heads was made by authorities below. Our attention was drawn to page 94/paper book wherein the AO vide letter dated 05.08.2015 during remand proceedings provided opportunity to assessee to explain as to why these additional evidences be admitted keeping in view Rule 46A of the Income-tax Rules, 1962. Our attention was also drawn to page no. 95 to 98 of the paper book, wherein letter dated 12.08.2015 is filed by the assessee before the AO during the course of remand proceedings. The assessee has also filed affidavit dated 12.08.2015 before AO during remand proceedings which is placed in paper book/page 99-101, wherein it is averred that the assessee was not provided with copy of AIR statement by the AO during assessment proceedings and also that proper and adequate opportunity of hearing was not given to the assessee by the AO during the course of assessment proceedings before making additions in assessment framed u/s 143(3) of the 1961 Act. Our attention was also drawn by learned counsel for the assessee to page no. 103-108/paper book wherein remand report dated 16.10.20 15 issued by the AO (which remand report was forwarded by learned CIT(A) to the assessee vide letter dated 21.10.2015), is placed. Our attention was also drawn to para no. 5.3 of Ld. CIT(A) appellate order dated 05.09.20 17 wherein learned CIT(A) confirmed the additions on account of difference in TDS as is reflected in Form No. 26AS and TDS claimed in return of income filed with the Revenue. Our attention was drawn to page no. 112 to 115 of the paper book wherein detailed contentions were made by assessee vide letter dated 04.01.2016 before the learned AO/ CIT(A) with respect to remand report on the issue of additions being made owing to mismatch of TDS as reflected in Form No. 26AS per income tax data base and income as is offered for taxation in return of income filed with Revenue. Our attention was also drawn to page no. 118 of the paper book wherein the assessee has vide letter dated 30.08.2016 submitted its contentions before learned AO/CIT(A) with respect to additions being made owing to mismatch of TDS as per Form no. 26AS with that of TDS claimed as per return of income filed with Revenue. Our attention was also drawn to page no. 123 of the paper book, wherein the assessee has explained before AO vide letter dated 24.02.20 17 differences in TDS as per books of accounts and TDS as is reflected in Form no. 26AS per income-tax department data base and it was explained that the difference between the two as of date is only to the tune of Rs. 12.89 lacs which is an insignificant amount vis-a-vis total TDS of Rs. 6.02 crores. Reliance was placed by learned counsel for the assessee on the decision of Honble Delhi High Court in the case of Court on its own Motion v. CIT reported in (2013) 352 ITR 273 (Delhi) and decision of Honble Bombay High Court in the case of Arun Ganesh Jogdeo v. Union of India , dated 28.08.2015 in PIL no. 27 of 2014 . Our attention was also drawn to pages no. 125-129 , pages no. 133-203 and page no. 204 -212 of the paper book and it was submitted that the difference in TDS stood duly explained and no additions to the income of the assessee are warranted. It was further submitted by learned counsel for the assessee that the second remand report issued by the AO , dated 14.03.20 17 is placed in paper book at page no. 130-132.

11.2 With respect to second issue , it was further submitted by learned counsel for the assessee that AO has made adhoc disallowance to the tune of 10% of expenses under various heads. It was submitted that this is the only year when such disallowance of expenses on adhoc basis was done by the AO and neither in earlier years nor in later years , any disallowance of expenses on adhoc basis was made by the authorities. Our attention was drawn to page no. 43 of the paper book wherein the AO asked for details of these expenses vide notice dated 18.12.20 13 issued u/s 142(1) of the 1961 Act. Our attention was drawn to page 37 of the paper book wherein the AO vide notice dated 24.09.2013 had asked for details of these expenses vide notice issued u/s 142(1) of the 1961 Act. Our attention was also drawn to page no. 248-250 of the paper book wherein assessment order dated 02.03.20 13 issued by the AO u/s 143(3) in assessees own case for ay: 2010-11 is placed , wherein no additions of expenses on adhoc basis was made by the AO. Our attention was also drawn to page no. 255- 257 of the paper book wherein assessment order dated 29.02.20 16 for ay: 20 12-13 in assessees own case is placed , wherein no additions to the income of the assessee were made towards adhoc disallowances of expenses. We are presently concerned with ay: 2011-12 . It was submitted that complete details of expenses were given before the AO , which is placed in paper book at page no. 68 to 93 of paper book. Our attention was drawn to page 75 of the paper book wherein details of registration expenses are placed and it was submitted that due income-tax was also deducted at source by assessee in accordance with provisions of the 1961 Act while making payment to these parties. Our attention was also drawn to expenses for Travelling and Conveyance which are placed in paper book at page no. 76 to 84 . Our attention was also drawn to paper book / page no. 85 to 88 wherein details of Seminar and Business promotion expenses incurred by the assessee are placed. Our attention was also drawn to page no. 89 of the paper book wherein details of Miscellaneous Expenses incurred by the assessee are placed. Our attention was also drawn to page no. 90 of the paper book wherein details of Repairs(Building)incurred by the assessee are placed. Our attention was also drawn by learned counsel for the assessee to page no. 91-92 of the paper book, wherein details of Repairs(Others) incurred by the assessee are placed. Our attention is also drawn to page 93 of the paper book wherein details of Staff Training Expenses incurred by the assessee are placed. Our attention was also drawn to para 5.5 of appellate order passed by learned CIT(A) and it was submitted that Ld. CIT(A) confirmed adhoc disallowance of these expenses , to the tune of 10% of these expenses incurred by assessee under various heads of expenses. It was submitted additional evidences were placed before Ld. CIT(A) but the same were rejected. It was submitted that no adhoc disallowance of expenses are warranted as complete details of these expenses were furnished. The learned counsel for the assessee also brought to our notice, assessment order dated 23.11.2018 passed by the AO in assessees own case for ay: 2016-17 passed u/s 143(3) of the 1961 Act and assessment order dated 15.12.2009 passed by the AO u/s 143(3) of the 1961 Act for ay: 2007-08 , wherein in both these ays no additions were made on adhoc basis by disallowance of these expenses. The learned counsel for the assessee relied upon decision of the Honble Bombay High Court in the case of PCIT v. Quest Investment Advisors Private Limited (2018) 96 taxmann.com 157(Bom.) to contend that by following rule of consistency no disallowances of expenses on adhoc basis are warranted in the case of the assessee as these expenses were fully allowed in preceding as well succeeding year(s).

11.3 The Ld. DR on the other hand submitted that the assessee had admitted that there still remains difference in reconciliation of TDS to the tune of Rs. 12,82,637/- vide ground number 4 raised by it with tribunal even as of now for which matter may be set aside and restored to the file of the AO for factual verification. So far as disallowance of adhoc disallowance of expenses is concerned, it was submitted by learned DR that even if no disallowances of expenses were made in the preceding year as well succeeding year but still disallowance of expenses could be made in the impugned assessment year under consideration as principles of res judicata are not applicable to income-tax proceedings and every assessment year is a separate unit. It was submitted by learned DR that the AO had issued two notice(s) u/s. 142(1), firstly dated 24.09.20 13 and secondly dated 18.12.20 13. Thus, it was submitted that two questionnaires were issued vide these notices u/s 142(1) and it is not correct on part of the learned counsel for the assessee that only one questionnaire was issued. It was submitted that the assessee did not gave details asked for by the AO vide questionnaire issued on 24.09.2013. It was submitted by learned DR that rather assessee is contending that no further details were called for by the AO vide notice u/s. 142(1) , dated 18.12.2013 which is a wrong interpretation by the assessee that it need not comply with earlier notices. It was submitted that matter can go back to AO for verification of the contentions of the assessee that entire TDS now stood reconciled and there is no difference between TDS as is reported in Form No. 26AS per data base maintained by income-tax department and TDS as is reported in return of income filed by assessee with Revenue.

11.4 The Ld. Counsel for the assessee in rejoinder submitted that ground no. 4 is alternative and without prejudice to ground no. 2 and 3 raised by assessee in memo of appeal filed with tribunal . It was submitted that no additions should be made on account of mismatch of TDS in Form No. 26-AS and as claimed in return of income filed with Revenue. Our attention was drawn to paper book / page no. 48 and it was submitted that proper and adequate opportunity of heard was not provided to assessee by the AO during the course of assessment proceedings. The assessee placed reliance on the decision of Honble Bombay High Court in the case of Prabhavati Shah(supra).

12. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is engaged in the business of certification for Quality & Environmental Management Systems, QS 9000 for Automobile Industry, Third Party Inspection, CE Marketing and other related work. The assessee also carries out testing services and solutions for the food and agricultural sector. The assessee has gross revenue of Rs. 72.84 crores from services and the income declared per 1961 Act in return of income filed with Revenue was Rs. 22.17 crores. We have observed that there are two effective issues which we are now required to be adjudicated by us in this appeal. The additions have been made mainly on two counts firstly, there is a difference in TDS amount deducted by assessees clients on behalf of the assessee on invoices for services raised by assessee in favour of its clients as is claimed by assessee in its return of income filed with Revenue and in information as reflected in Form no. 26AS maintained in data base of Income-tax department, wherein the differential income was extrapolated by applying TDS rate of 10% as is applicable on professional/technical services covered u/s 194J of the 1961 Act. The AO had observed that there was a difference of Rs. 30,88,606/- in aforesaid TDS amounts, wherein TDS as per form no. 26AS information per income-tax data base was Rs. 6,33,43,059/- , while TDS amount claimed by assessee in return of income filed with Revenue was Rs. 6,02,54,624/- , which led AO to make additions to the tune of Rs. 3,08,86,060/- in the hands of the assessee by extrapolating the income by applying TDS rate of 10% on professional/technical services rendered by the assessee as is laid down u/s 194J of the 1961 Act, while framing assessment order u/s 143(3) of the 1961 Act. The assessee case was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act. The AO issued first notice u/s 143(2) of the 1961 Act, dated 01.08.2012. Later, the AO issued notices u/s 143(2) and 142(1) of the 1961 Act , both dated 24.09.2013 wherein assessee was asked to submit various details called for per aforesaid notices . At point number 40 of the notice dated 24.09.203 issued by the AO u/s 1421(1) of the 1961 Act , the assessee was asked to reconcile the TDS claimed as per certificates and the income offered in Profit and Loss Account. The assessee responded to most of the queries raised in aforesaid notice dated 24.09.2013 issued by the AO u/s 142(1), vide reply dated 06.11.2013 filed with AO on 11.11.2013, but did not responded, inter-alia, to this query at point number 40 reconciling the income as per TDS certificates and income offered as per Profit and Loss Accounts . No details were , thus , submitted by the assessee in context thereof even till the conclusion of assessment proceedings. A fresh questionnaire was issued on 18.12.20 13 by the AO vide notice issued u/s 142(1) of the 1961 Act. There was no query raised by the AO in this notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act with respect to the reconciliation of TDS with income as is reflected in the books of accounts of the assessee. The said fresh questionnaire vide notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act never stipulated that it is issued in suppression of the earlier questionnaire issued vide notice dated 24.09.203 issued by the AO u/s 142(1) of the 1961 Act, rather it stipulated that this notice dated 18.12.2013 issued by the AO u/s 142(1) of the 1961 Act is in connection with ongoing assessment proceedings , for which the details are called for. This query as to reconciliation of TDS with the income as is reflected in its books of accounts raised by the AO vide notice dated 24.09.20 13 issued u/s 142(1) of the 1961 Act remained un-complied with by assessee till culmination of assessment proceedings. The assessee is now contending that the AO did not gave proper and adequate opportunity of being heard to the assessee and one of the staff of the AO verbally told assessees counsel that there is no need to comply with earlier details asked for vide notice dated 24.09.20 13 issued by the AO u/s 142(1) of the 1961 Act. The assessee is also contending that various telephonic calls were made to the office of the AO but no hearing took place and finally it culminated into an assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act , which prejudiced the assessee as additions to the tune of Rs. 3,08,86,060/- were made by the AO towards differential income represented by the income as is reflected in Form No. 26AS per income-tax department data base and income as is reflected in its books of accounts. This contention of the assessee that proper and adequate opportunity was not granted by the AO cannot be accepted as the assessee was represented by an experienced tax-consultants and nothing prevented assessee to file reconciliation of TDS as per certificates with income as is reflected in its books of accounts in tapal of the department to comply with query number 40 raised by the AO in notice dated 24.09.20 13 issued u/s 142(1) of the 1961 Act and secondly when the details called for in the first notice u/s 142(1) dated 24.09.2013 were never intimated to have been withdrawn by the AO, then in that situation to presume that second notice dated 18.12.2013 issued u/s 142(1) calling for information has waived the information called for by the AO in the first notice dated 24.09.2013 issued u/s 142(1) was not correct on the part of the assessee . Thus, in our considered view even if it is presumed that the AO was not conducting hearing , the assessee in order to protect itself from any prejudice which might comes its way, ought to have submitted the details called for in notices dated 24.09.2013 issued by the AO u/s 142(1) wrt aforesaid TDS mismatch , but instead the assessees counsel chose not to furnish the said details . Thus, the assessee is equally responsible for its woes and hence plea of the assessee that it was not provided with adequate opportunity of being heard is rejected as the assessee in the first instance itself never discharged the burden as cast by provisions of the 1961 Act , during the course of assessment proceedings. Now, before learned CIT(A), the assessee has duly filed all the details wherein attempt was made by assessee in reconciling the TDS difference between as is reflected in Form No. 26AS information per income-tax department data base and in the return of income filed with the Revenue. There was one of the client of the assessee namely Tilaknagar Industries Limited who filed an erroneous TDS return with department wherein PAN of assessee was wrongly quoted by them instead of quoting correct PAN of some other vendor on whose behalf TDS was deducted by said Tilaknagar Industries Limited. This led to an error of TDS amount of Rs. 27,64,023/- which got credited to the assessee account, instead of applicable TDS on correct invoice amount of Rs. 51,951/- raised by assessee in favour of Tilaknagar Industries Limited for the entire year under consideration, which was rectified by Tilaknagar Industries Limited by filing revised TDS return. The impact on income due to the aforesaid error was to the tune of Rs. 2,76,40,230/- computed keeping in view that TDS rate u/s 194J on professional/technical services is @10% by extrapolating income, out of total additions to the tune of Rs. 3,08,86,060/- made by the AO . The assessee has produced all relevant details and explanations in remand proceedings conducted by the AO in pursuant to directions issued by learned CIT(A). The assessee is multi location company having branches/offices across India. There are more than 2800 entries of TDS to the credit of assessee in Form No. 26AS information. The income from professional fees( net of service tax) earned by the assessee is more than Rs. 72,84,91,431/- in the year under consideration. The details of professional fee/services are as under :

Particulars Amount (In Rs.)
Fees from services (net of service tax) of the
appellant as per Profit and Loss account
72,84,91,431
Add: Travelling and other expenses recovered from the customers from which taxes have been deducted by them ( these are reduced from the expenses) 1,51,70,116
Less: Export of services 4,58,53,992
Net income( net of service tax) which is liable to TDS 69,78,07,555

The TDS credit as is claimed in return of income filed by assessee is around Rs.6,02,54,624/- . The difference now remaining to be reconciled in TDS as is reflected in 26AS information per income-tax data base and as is reflected in return of income filed with Revenue is Rs. 12,82,637/-.The un-reconciled differential is around 2.13% of the total TDS which is not significant differential of the TDS . The assessee has submitted reconciliation statements and offered explanations party wise during appellate proceedings conducted before Ld. CIT(A) and remand proceedings conducted by the AO during appellate proceedings being conducted by learned CIT(A). Thus, the assessee has duly discharged its primary onus as is cast under provisions of the 1961 Act. The AO has submitted two remand reports firstly on 16.10.20 15 and secondly on 14.03.20 17, during the course of appellate proceedings conducted by learned CIT(A) in accordance with direction of learned CIT(A). The AO has stated in the second remand report that TDS credit as per latest Form No. 26AS information per income-tax data base as on 17.01.2017 is Rs. 6,15,37,261/- and TDS claimed in the return of income filed by the assessee with Revenue on 28.11.2011 was Rs. 6,02,54,624/-, leading to TDS differential to the tune of Rs. 12,82,637/- . It can be seen that first remand report is dated 16.10.20 15 and second remand report is dated 14.03.20 17, both these remand reports were issued by the AO during appellate proceedings conducted by learned CIT(A) , which effectively means that there is a gap of almost 17 months. Thus, AO/learned CIT(A) had effective/sufficient time to conduct necessary enquiries to demolish/rebut the version of the assessee that all its income stood duly disclosed in return of income filed with Revenue and no additions are warranted for this TDS mismatch. The powers of learned CIT(A) are co-terminus with the powers of the AO. Neither AO nor learned CIT(A) had considered it appropriate to conduct enquiries with the parties who had deducted TDS on behalf of the assessee wherein there are differential between information as per Form No. 26AS per income-tax data base and TDS as per books of accounts of the assessee, despite having all information in their possession which was submitted by assessee during appellate/remand proceedings and sufficient time to conduct such enquiries. No notice u/s 133(6) or summons u/s 131 of the 1961 Act were issued by both these authorities to various clients of the assessee to whom the assessee has claimed to have invoiced during the year or to those persons whom TDS credit is reflected in 26AS while assessee is denying to have dealt with these persons. The assessee has done all what best it could do to discharge its onus/burden which lay under provisions of the 1961 Act by submitting reconciliation statements as well explaining the reasons for differential between income as is reported in Form No. 26AS information per data base maintained by income-tax department and income as is reflected in its books of accounts. The assessee has discharged its primary onus/burden and the assessee could not be asked to do impossible. It is well known that there are several reasons for differential in income computed based on TDS as is reflected in Form No. 26AS per data base maintained by income-tax department with income as is reported in the books of accounts. There could be differences in the accounting policy followed by the tax-payer and its clients who have deducted income-tax at source on behalf of the tax-payer as well wrong mention/punching of the PAN number of the taxpayers by clients while filing TDS returns with the department. One of the reasons for differential could be that clients have deducted TDS on gross amount inclusive of service tax while income is reflected by tax-payers exclusive of service tax. The assessee has no control over the data base of the Income-tax department as is reflected in Form No. 26AS and at best the assessee could do is to offer bonafide explanations for these differential which assessee did in this case during appellate/remand proceedings. On the other hand , the Income-tax department has all the information and data base in its possession and control . The learned CIT(A)/AO ought to have conducted necessary enquiries to unravel the truth but asking assessee to do impossible is not warranted. No defect in the books of accounts are pointed out by the authorities below nor were books of accounts rejected by the authorities below. No cogent incriminating material were brought on record by the authorities below to evidence/prove that the assessee has received/earned any income outside its books of accounts . The authorities below also did not dislodge/rebutted the contentions of the assessee . The assessees case was also scrutinised under the provisions of Section 143(2) read with Section 143(3) of the 1961 Act for immediately preceding year as well immediately succeeding year ,but no such additions were made on account of mismatch of income vide TDS as is reflected in Form No. 26AS information per income-tax data base maintained by department and the income as is reflected in assessees books of accounts. The assessment orders for ay: 2010-11 and 2012-13 are placed on record in file. We are presently concerned with ay: 20 12-13. No doubt every assessment year is a separate unit and principles of res judicata are not applicable but indications can be drawn/gathered from assessment orders of the other years as to behaviour pattern of the tax-payer and modus operandi of the tax-payer adopted to defraud Revenue/conceal income, if any. No such incriminating information is brought on record by Revenue. Thus in our considered view keeping in view complete factual matrix of the case before us as is emerging from records and on the touch stone of preponderance of probabilities, we accept contentions of the assessee and are of the considered view that no additions to the income are warranted in the hands of the assessee for impugned ay: 2011-12 owing to differential in income as was extrapolated from TDS as is reflected in for No. 26AS information per income-tax department data base and income as is reflected in books of accounts maintained by the assessee. The assessee succeeds on these ground number 2-4 raised by assessee in its memo of appeal filed with the tribunal. We order accordingly.

12.2 With regard to the second issue we have also observed that adhoc disallowance @ 10% of various expenses incurred by the assessee were made by the AO leading to additions to the income of the assessee to the tune of Rs. 2,76,51,835/- being 10% of expenses incurred by assessee under various heads of expenses aggregating to Rs. 27,65,18,354/-, which additions were later confirmed by learned CIT(A). The assessee has raised similar plea that no proper and adequate opportunity was granted by the AO during the course of assessment proceedings . We have observed that similar situation has arisen during assessment proceedings as we have discussed while adjudicating issue of grant of proper and adequate opportunity by the AO during assessment proceedings while adjudicating earlier issue of mismatch in TDS. The assessee in this case was asked by the AO vide notice dated 24.09.20 13 issued u/s 142(1) to submit details of various expenses vide point number 30 and 31 in aforesaid communication dated 24.09.2013. The assessee submitted its reply on 11.11.2013 before the AO vide letter dated 06.11.2013 , but the assessee chose not to reply to point number 30 and 31 raised by the AO vide notice dated 24.09.20 13 issued u/s 142(1) of the 1961 Act. The assessee was again asked by the AO vide notice dated 18.12.2013 issued u/s 142(1) to give details of ledger account of the expenses vide point number 11. The assessee submitted reply before the AO on 26.12.20 13 but chose not to reply to point number 11 of AO notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act. The said fresh notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act never stipulated that it is issued in suppression of the details called for vide earlier notice dated 24.09.2013 issued u/s 142(1) of the 1961 Act rather this notice dated 18.12.2013 stipulated that it is in connection with ongoing assessment proceedings , for which the details are called for. This query as to submissions of details of various expenses incurred by the assessee remained un-complied with by the assessee till culmination of assessment proceedings. The assessee is now contending that the AO did not gave proper and adequate opportunity of being heard to the assessee and that one of the staff of the AO verbally told assessees counsel that there is no need to comply with earlier details asked for vide notice dated 24.09.20 13 issued u/s 142(1) of the 1961 Act. The assessee is also contending that various telephonic calls were made to the office of the AO but no hearing took place and finally it culminated into an assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act , which prejudiced the assessee as additions to the tune of Rs. 2,76,51,835/- were made by the AO towards adhoc disallowance computed @10% of expenses incurred under various heads. This contention of the assessee that proper and adequate opportunity was not granted by the AO during the course of assessment proceedings cannot be accepted as the assessee was represented by an experienced tax-consultants and nothing prevented assessee to file these details of expenses under various heads in tapal of the income-tax department to comply with query number 30 and 31 raised in notice dated 24.09.2013 issued u/s 142(1) of the 1961 Act and query number 11 raised in notice dated 18.12.2013 issued by the AO u/s 142(1) of the 1961 Act. Secondly when the details called for in the first notice u/s 142(1) dated 24.09.2013 were never intimated to have been withdrawn by the AO, then in that situation to presume that second notice dated 18.12.2013 issued by the AO u/s 142(1) calling for further information has waived the information called for by the AO in the first notice dated 24.09.2013 issued u/s 142(1) was not correct on the part of the assessee . Thus, in our considered view even if it is presumed that the AO was not conducting hearing , the assessee in order to protect itself from any prejudice, ought to have submitted the details called for in notices dated 24.09.2013 and 18.12.2013 issued by the AO u/s 142(1) in tapal of the income-tax department but instead the assessee chose not to furnish the aforesaid details . Thus, the assessee is equally responsible for its woes. We have observed that the assessee has duly submitted complete details of these expenses during the course of appellate proceedings before learned CIT(A). The details submitted by the assessee during appellate proceedings before learned CIT(A)/AO in remand proceedings are reproduced here under:

a) Professional/technical services of Rs. 15,59,84,928/- : These expenses include the payments made to local technical experts (hired on contract basis) for rendering services in connection with inspection and certification audits. It also includes fees paid to affiliates and other foreign vendors for performing technical inspection and certification services outside India.

b) Registration expenses of Rs. 2,04,65,911: It may be noted that the customers based in India require certification from the entities that has specified Accordingly, the appellant enters into an agreement with the Indian customers for obtaining certificates from TUV NORD Gmbh Essen Germany and TUV NORD Systems GMH Hamburg Germany. Thus, these expenses are incurred towards baseload/ workload charges, certification charges, etc.

c) Travelling and conveyance expenses of Rs. 5,31,06,751: These expenses mainly include the business expenditure like travel charges , car hire charges , lodging and boarding charges incurred in the course of providing an audit or an inspection service to the client, conveyance paid to employees for working overtime, car hire charges , expenses of managers meeting, etc.

d) Seminar & business promotion expenses of Rs. 1,20,06,995: These expenses mainly include the expenditure incurred on business training courses provided mainly to imbibe the good business practices for the benefit of the client at large, IRCA certificated lead auditor certificate courses fees payable to TUV Nord Cert GMBH, advertisement and trade fairs , club charges, marketing fees, advertisement charges, entertainment expenses, seminar expenses, etc.

e) Miscellaneous expenses of Rs. 1,33,65,339: These expenses mainly include expenditure incurred on festival and gift expenses, recruitment expenses, bank charges, insurance, octroi / freight charges , rates and taxes, exchange differences , office expenses , fees to directors , audit fees expenses, etc.

f) Repairs and maintenance-building of Rs. 78,71,119: This include amenities charge, house-keeping charges, municipal charges, electricity charges, water charges , security charges repairs and renovation charges etc. in connection with the rented premises occupied by the appellant.

g) Repairs and maintenance-others of Rs. 1,15,42,538: This include expenditure incurred for repairs cost of office equipment’s , furniture , plumbing charges, purchase of laptop battery , mouse, etc. and charges in relation to SAP maintenance payable to TUV Nord Services GMBH.

h) Staff training expenses of Rs. 21,74,773: This include expenses in relation to workshops attended by the employees , training fees, etc.”

The assessee also submitted break up of these expenses before learned CIT(A) during appellate proceedings and before the AO during remand proceedings which are placed in paper book . The Remand Reports were called for by learned CIT(A) from the AO with respect to additional evidences filed before it keeping in view Rule 46A of the 1962 Rules. No defects in the books of accounts were brought on record by the authorities below nor books of accounts were rejected by the authorities below. If the authorities were not satisfied with aforesaid details , then they ought to have called for further details. In the preceding assessment year i.e. ay: 2010-11 and in immediately succeeding assessment year i.e. ay: 2012-13, no adhoc disallowances of expenses were made by the AO in an assessment framed u/s. 143(3) of the Act. The assessment orders for ay: 2010-11 and ay: 2012-13 are placed in file. The assessee has discharged its onus by bringing on record complete details of the expenses incurred by it albeit the same was brought on record during the course of appellate proceedings before learned CIT(A)/remand proceedings conducted by the AO under directions of learned CIT(A). The powers of learned CIT(A) are co-terminus with powers of the AO. No enquiries were conducted by the AO/learned CIT(A) even during appellate/remand proceedings . The books of accounts were not rejected by authorities below nor any defect is pointed out by the AO/learned CIT(A) in the books of accounts maintained by the assessee. There is no allegation by Revenue that the assessee claimed any bogus expenses or any attempt is made to defraud Revenue. Under these circumstances keeping in view factual matrix of the case, we are of the considered view that aforesaid adhoc disallowance of expenses under various heads of expenses to the tune of 10% of the total expenses incurred by the assessee under these heads of expenses is not warranted and we order deletion of the said adhoc disallowance of expenses. The assessee succeeds on ground number 5 and 6 raised by it in memo of appeal filed with tribunal. We order accordingly.

13. In the result, appeal of the assessee in ITA no. 6628/Mum/2017 for ay: 2011-12 is partly allowed.

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