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TMI Blog2020 (11) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,99,30,449/- being mismatch in details. 2. violated the principles of natural justice by not giving an opportunity of being heard before making an enhancement under section 251 of the Act. 3. Disallowance of expenditure of Rs. 54,65,476/- i. erred in restricting the allowable expenditure to the extent of revenue from operations of Rs. 22,08,686/-, thereby disallowing the excess expenditure of Rs. 54,65,476/- without any cogent reasons; ii. the learned CIT(A) ought to have considered the fact that the details of expenditure debited to the profit and loss account of Rs. 76,74,162/- were provided during the course of assessment proceedings to the assessing officer; and iii. without prejudice to the above, the learned CIT(A) has erroneously stated the amount of revenue from operations as Rs. 22,08,686/- instead of Rs. 24,08,686/-. 4. In making an addition of Rs. 1,99,30,449/- being mismatch in Employee Benefit Expenses in the financial statements of 2 years i. erred in making an addition of Rs. 1,99,30,449/- on the basis that the amounts under the head "Employee Benefit Expense" as appearing in the previous year column [i.e. pertaining to Financial Year (FY) 2012- 13] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve figures, the Ld. CIT(A) asked the assessee to show cause as to why the excess expenditure under the head "Other Expenses" shown for the financial year 2012-13 in the notes to the financial statements for the year ended 31.03.2014 should not be treated as its unexplained expenditure for the AY 2013-14. Also the Ld. CIT(A) noted that the assessee was not able to explain the basis for apportioning Rs. 74,16,058/- out of the "Other Expenses" of Rs. 9,95,10,344/- to its own business ; similarly, the assessee was not able to explain the basis for apportion Rs. 2,58,104/- out of the Employees Benefit Expenses. Further, it is noted by him that the assessee failed to get its accounts audited u/s 44AB of the Act, even though its total receipts including the receipt from Cigna TTK was Rs. 20,63,59,512/-. Thereby restricting the expenditure relatable to the service income, the Ld. CIT(A) directed the AO to restrict the allowable expenditure to Rs. 22,08,686/- ; to disallow expenditure of Rs. 54,65,476/- (Rs. 76,74,162/- minus Rs. 22,08,686/-) out of the expenditure of Rs. 76,74,162/- debited to the P&L account and to disallow Rs. 18,545/- out of the expenses apportioned to the initial infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Employee Benefit Expenses that the so-called inconsistency in the financial statement is merely on account of restatement/reclassification of expenses in the schedules to the profit and loss accounts with no impact on the profit and loss account ; the fact that the amounts in the financial statement are regrouped/reclassified has been mentioned in the Note 27 of the financial statement of FY 2013-14; further for the year ended 31.03.2013 Cigna TTK had incurred total expenditure of Rs. 76,74,162/- and net loss of Rs. 33,70,356/- ; the aforesaid amounts as appearing in the previous year column (i.e. pertaining to FY 2012-13) of the audited financial statements of 31.03.2014 is the same as amounts appearing in the audited financial statements of 31.03.2013 and accordingly the difference in the amount of Employee Benefit Expenses between the two financial statement is merely on account of restatement. Regarding interest on late payment of TDS, it is stated by the Ld. counsel that enhancement of income by Rs. 18,545/- has been done on the basis of tax audit report submitted during the course of appellate proceedings, whereas the said report has been rejected by the Ld. CIT(A) as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g was scheduled on 27 December 2018. The notice neither states the details required by your goodself nor the fact that an enhancement was proposed in the case of CHSI. Copy of the said notice downloaded from the web portal of IRA is enclosed as Annexure 7)." 6.1 Thus it is clear that the notice dated 17.12.2018 was issued by the Ld. CIT(A) to an old address of the assessee thereby the assessee could not comply with the said notice. Considering the above facts, we set aside the order of the Ld. CIT(A) on enhancement and restore the matter to him to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant accounts/documents/evidence before the Ld. CIT(A). 7. In the result the appeal filed by the assessee is allowed for statistical purposes. ITA No. 1650/MUM/2019 Assessment Year: 2013-14 8. The grounds of appeal filed by the Revenue read as under : 1. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 3,68,97,011/- at the rate 20% of expenses incurred by the assessee for services rendered to M/s Cigna TTK during the year. 2. Whether on the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons covered u/s 40A(2)(b) of the Act during FY 2012-13, it is stated that the transfer pricing provisions are not applicable. 12. We have heard the rival submissions and perused the relevant materials on record. Giving that the assessee received development cost for developing and transferring the initial infrastructure to Cigna TTK, the transaction is not expenditure in the hands of the assessee. For the assessee (the recipient of the amount) the provisions of specified domestic transaction would not be applicable. Further we find that (i) the vendor agreement between the assessee and Cigna TTK has been entered at cost and no income has been earned by the assessee, (ii) there is neither any evidence nor allegation that assessee has received any consideration over and above to what is mentioned in the aforesaid agreement. In Calcutta Discount Co. Ltd. (supra), the assessee company transferred certain shares held by it to its subsidiary company at loss than their book value. Though the ITO had not found that the assessee has made secret profits, he held that the assessee must be deemed to have made a profit amounting to the difference between the market price of the shares and th ..... 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