PARNEET KAUR BAGGA,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-6(1), HYDERABAD

The brief facts of the case are that the assessee, an individual and proprietrix of M/s. Pooja Marketing Agency, filed her Return of Income for the Assessment Year 2005-06 on 1.11.2005 admitting an income of Rs.1,64,56,944. During the assessment proceedings u/s. 143(3) of the Income Tax Act, 1961 ('the Act'), various details were called for which were furnished by the assessee.

After perusal of the details filed by the assessee, the Assessing Officer noticed that the assessee has debited a sum of Rs.12,101 as a donation and she has produced a xerox copy of receipt issued by the donor but the receipt did not have any mention of the eligibility or otherwise of the donation u/s. 80G of the Act. Therefore he disallowed the sum of Rs.12,101 and brought it to tax.

The Assessing Officer further observed that the assessee has debited a sum of Rs.10,72,000 to the Profit and Loss account under the head ‘trade expenses’. On verification of the details filed by the assessee, he observed that this expenditure is nothing but amounts paid to the officials of the Andhra Pradesh Breverages Corporation Limited and holding that this expenditure has no bearing on the assessee's business, the entire amount was disallowed by the Assessing Officer.

Further the Assessing Officer, observed that the assessee has also debited a sum of Rs.8,30,95,827 under the narration ‘scheme paid’. After verification of the bills and vouchers filed by the assessee, the Assessing Officer observed that certain expenses booked under this head were not supported by proper bills and vouchers. Therefore he disallowed 10% of the expenses amounting to Rs.83,09,583 and brought it to tax.

The Assessing Officer further verified the claim of other expenditure of Rs.3,38,45,072 and found that they are also not supported by proper bills and vouchers. He accordingly disallowed 10% of the same and brought the sum of Rs.33,84,507 to tax.

The learned counsel for the assessee submitted that the assessee has never claimed exemption u/s. 80G of the Act and therefore the disallowance of Rs.12,101 is not warranted.

As regards disallowance of 10% of other expenses, he submitted that the assessee had maintained proper books of accounts and the Assessing Officer has not been able to point out any particular expenditure which is not relevant. He therefore prayed for deletion of this disallowance.

Having regard to the facts and circumstances of the case, we find that though the assessee claims that, she has not claimed the sum of Rs.12,101/- as exempt u/s. 80G of the Act the assessee has not been able to produce any evidence to this effect. Therefore, we do not find any reason to interfere with the order of CIT(A). The addition is accordingly confirmed.

As regards the addition of 10% of ‘schemes paid’, we find that the assessee has received the scheme and also paid the scheme to her distributors and the balance which has not been paid to the scheme distributors has been offered to tax. The assessee has transferred the scheme to the customers and as stated by the learned counsel for the assessee, all the receipts and payments were made by cheques. Therefore in our opinion there cannot be any disallowance of such payments. Therefore the disallowance of 10% of the ‘scheme paid’ is deleted.

As regards the disallowance of 10% of the other expenditure under the heads conveyance, entertainment expenses, sales promotion, staff welfare and vehicle maintenance, we find that the Assessing Officer has observed that the assessee has not maintained proper bills and vouchers and therefore the same are not verifiable.

In the result, the assessee's appeal is partly allowed. Order pronounced in the open court on 30.08.2021.