GIIR Communications India Private Limited vs ACIT (OSD) Delhi

1.

a. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, has erred both in law and on facts in adjudicating the appeal on displaced merits by misconstruing and misappreciating the facts and evidences record, thereby rendering the appellate order unsustainable and such action is wholly unlawful, unwarranted, and unjustified. It is based on a misconception of law and facts and is in gross violation of the principles of natural. justice. Consequently, the impugned order is liable to be set aside, and the appeal under reference deserves to be admitted and adjudicated afresh on its factual and legal merits.

b. That on the facts and in the circumstances of the case and in law, the Learned Assessing Officer and the Learned Commissioner of Income Tax (Appeals) have committed a, patent, manifest, and self-evident error apparent on the face of the record in incorrectly aggregating and computing the total additions in the assessment order passed under Section 143(3) of the Income-tax Act, 1961, inasmuch as the correct total of all additions aggregates to 26,61,09,661/-, whereas the impugned assessment erroneously reflects the total additions at ₹6,62,06,662/-, resulting in an unwarranted, unexplained, and arithmetically incorrect excess addition of ₹97,001/-, which has vitiated the assessment to that extent, rendered the computation of assessed income legally infirm and unsustainable, and caused serious prejudice to the Appellant, and therefore the said excess addition is liable to be deleted and the assessment suitably modified.

2. Disallowance u/s 69 (Alleged Unexplained Investment - ₹1,50,53,742/-)

a. That the Learned Commissioner of Income Tax (Appeals) -National Faceless Appeal Centre has grossly erred, both in law and on facts, in affirming the addition of 1,50,53,742/-made by the Learned Assessing Officer towards alleged under-reporting of fresh acquisition of fixed assets, without appreciating the audited books of account, statutory schedules, and reconciliation statements placed on record. The lower authorities failed to establish any real or substantive discrepancy in the fixed asset documentations, and the impugned addition stands sustained on mere conjectures, surmises, and without conducting any independent verification as required under the Act.

b. That the authorities below have further erred in law in proceeding on the basis of a patently erroneous and arithmetically incorrect computation while arriving at the purported variation of ₹1,50,53,742/-. The impugned addition is vitiated by a fundamental mathematical mistake and is not supported by any cogent reasoning or evidentiary foundation. Consequently, the addition is perverse, arbitrary, devoid of legal sustainability, and liable to be expunged in toto.

c. That the order passed by the Learned CIT(A)/NFAC is violative of section 250(6) of the Income-tax Act, 1961, inasmuch as it fails to provide a reasoned, speaking adjudication on the specific factual and legal submissions advanced by the Appellant. The NFAC has further erred in not granting effective opportunity of hearing, thereby infringing principles of natural justice. The impugned addition does not give rise to any taxable income under the Act and is beyond the permissible scope of assessment. The Appellant craves leave to add, amend, modify, or withdraw any ground at the time of hearing.

d. That the authorities below have further erred in law and on facts in not appreciating that the alleged difference in the value of fixed asset additions amounting to ₹1,50,53,742/-(i.e., ₹11,53,42,254/- minus ₹10,02,88,512/-) arose solely on account of the inclusion of indirect taxes such as Service Tax/GST/VAT/Excise Duty in the figures considered by the Assessing Officer. In accordance with settled accounting principles and applicable tax laws, fixed assets are capitalized net of eligible input tax credits, as the tax component is creditable and therefore not required to be capitalized. The lower authorities failed to consider that the books of accounts correctly reflected fixed assets at their net values after availing input tax credit. The Appellant also produced a complete breakup of the basic cost and corresponding indirect taxes, together with copies of purchase invoices, clearly demonstrating that the tax component formed the entire basis of the alleged difference. The failure of the authorities below to examine or consider these documentary evidences has vitiated the impugned findings, rendering the disallowance wholly unsustainable, arbitrary, and contrary to law.

3. Disallowance u/s 40(a)(ia) (Rs. 3,28,578/-)

a. That on the facts and in the circumstances of the case and in law, the Learned Assessing Officer has erred in invoking the provisions of section 40(a)(ia) and disallowing a sum of 26,28,675/- in respect of payments made to contractor "Entee Constructions" for office interior works, and the Learned CIT(A)/ NFAC has further erred in sustaining such disallowance to the extent of 30% of Rs.10,95,259 on which TDS was not deducted amounting to 3,28,578/-without appreciating the documentary evidences, explanations, and the nature of the transaction as capital expenditure duly recorded in the books of account. The impugned disallowance has been sustained in a mechanical and perfunctory manner, without any independent examination of the material placed on record.

b. That the lower authorities have failed to appreciate that the Appellant had duly capitalised the expenditure towards leasehold improvements/fixed assets in its audited financial statements, supported by vendor bills, payment records, and vouchers maintained in the regular course of business. Since the said expenditure was not claimed as a deduction under any head of income, the precondition for invoking section 40(a)(ia) -i.e., allowance of an expenditure in computing income-remains unfulfilled.

c. That the authorities below have erred in law in overlooking the settled judicial position that disallowance under section 40(a)(ia) can operate only where an expenditure is "claimed" as a revenue deduction while computing taxable income. Where the expenditure is capitalised and no deduction is sought, the consequential disallowance is legally impermissible, as affirmed by various High Courts and Tribunals. The impugned disallowance is therefore arbitrary, contrary to law, and deserves to be deleted in toto.

4. Ad-hoc disallowance of General expenses of Rs. 46,79,806/-, Staff Welfare of Rs. 5,21,156/- and Cost of Services of Rs.

1,49,69,936/-

a. That on the facts and in the circumstances of the case and in law, the Learned Assessing Officer grossly erred in making an ad-hoc disallowance of ₹1,16,99,515/-being 25% of general expenses aggregating to ₹4,67,98,059/-, and the Learned CIT(A) erred in sustaining such disallowance to the extent of 10% amounting to ₹46,79,806/-, without appreciating the evidences produced, the contractual obligations undertaken, and the commercial necessity of the expenditure, The authorities failed to recognise that the impugned expenses comprising rent, power and fuel, repairs, travel, conveyance and similar operational oütlays were incurred wholly and exclusively for the purposes of business and are allowable under Section 37(1) of the Act. The action of the lower authorities is arbitrary, devoid of factual foundation, and unsustainable in law.

b. That on the facts and in law, the Learned AO further erred in disallowing 13,02,891/-being 25% of staff welfare expenditure amounting to ₹52,11,564/-, and the Learned CIT(A) erred in sustaining a 10% disallowance of ₹5,21,156/-, without properly evaluating the supporting documents, business exigency, or the inherent commercial rationale of such expenditure. The impugned disallowance is based merely on suspicion and conjecture, disregarding the fact that the expenditure was incurred in the ordinary course of business, duly supported by bills, vouchers and employee-related records, and allowable u/s 37(1).

c. That the Learned AO similarly erred in law and on facts in disallowing ₹3,74,24,839/-being 25% of the cost of services amounting to ₹14,96,99,355/-, and the Learned CIT(A) erred in sustaining a 10% disallowance of ₹1,49,69,936/-, without appreciating the nature of the Appellant's business, the contractual obligations with clients, and the extensive engagement of third-party vendors intrinsic to the Appellant's operations. The lower authorities have failed to consider that the expenditure was incurred wholly and exclusively for business purposes and duly supported by invoices, agreements, work orders and bank payments. The disallowance is therefore perverse and contrary to settled legal principles governing Section 37(1).

d. That the impugned disallowances are vitiated for the additional reason that the Learned AO travelled beyond the scope of the show-cause notice, which was confined solely to production of invoices- documents that were duly furnished. No opportunity was afforded to demonstrate business expediency or commercial rationale. The disallowances, therefore, stand invalid for breach of natural justice and denial of reasonable and effective opportunity of hearing.

e. That the ad-hoc approach adopted by the authorities below is wholly impermissible in law, as expenditure incurred in the normal course of the Appellant's business of providing event management and organisational services necessarily involves substantial operational spending, vendor engagement and incidental costs. In the absence of any specific defect pointed out in the books of account, the arbitrary percentage- based disallowances are unsustained and contrary to judicial precedents interpreting Section 37(1) of the Act.