Principal Commissionerof Income-Tax – 2 v. Cheil India Private Limited

$~3 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA No. 190/2017 PRINCIPAL COMMISSIONEROF INCOME-TAX – 2..... AppellantThrough :Mr. Rahul Chaudhary, SeniorStanding Counsel with Mr. SanjayKumar, Junior Standing Counsel forRevenue. versus CHEIL INDIA PRIVATE LIMITED ..... Respondent Through :Mr. Salil Kapoor Mr. SumitLalchandani, Advocates. CORAM:JUSTICE S. MURALIDHARJUSTICE PRATHIBA M. SINGH % O R D E R11.09.2017 1. The Revenue is in appeal against an order dated 17[th]August 2016 passedby the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 6184/Del/2014for the Assessment Year (‘AY’) 2010-11. 2. Broadly, there are three questions urged by the Revenue for considerationby this Court. The first concerns the deletion, by the ITAT, of the additionmade by the Assessing Officer (‘AO’) on account of ‘fall in net profit toturnover ratio’. The ITAT observed that the lower net profit rate of 24.80%has been accepted by the AO for the earlier AY, i.e. 2008-09. However, theAssessee’s line of business was not consistent over the years. The ITAT was of the view that, without rejecting the accounts of the Assessee, making anaddition merely on the basis of fall of the net profit ratio was not warranted.In the considered view of the Court, the view of the ITAT does not sufferfrom any infirmity. It is a plausible view to take in the facts of the case. Nosubstantial question of law arises. 3. The second and third questions pertain to the disallowance under Section40 (a) (ia) of the Income Tax Act, 1961 (‘Act’). The question concernsreimbursement of expenses paid to the employees/vendors on behalf of theAssessee in the sum of Rs. 1,20,49,546/-. The ITAT held that the CIT (A)exceeded his powers in issuing a notice of enhancement and making theabove disallowance. On this aspect, the Court finds that the CIT (A) issuednotice for enhancement of the disallowance but, in that process, entered intothe question whether the expense in question was eligible for deduction atall in the first place. As rightly pointed out by the ITAT, this was beyond thescope of inquiry before the CIT (A). There was also no factual basis for theCIT (A) to doubt the reimbursement of the employees’ expenses. In thecircumstances, the impugned order of ITAT holding that the CIT (A)travelled beyond the scope of the appellate proceedings in disallowing theabove expenses does not suffer from perversity. The Court is, therefore, notinclined to frame a question of law on this issue as well. The appeal isaccordingly dismissed. S. MURALIDHAR, J. SEPTEMBER 11, 2017/j PRATHIBA M. SINGH, J.