SHAMBHU SHARAN GIRI,LAKHANSAI NOAMUNDI BAZAR vs. INCOME TAX OFFICER, 47, C.H. AREA, JAMSHEDPUR

This is the appeal preferred by the assessee against the orders of the Ld. Commissioner of Income Tax(Appeals)- NFAC, Delhi [hereinafter referred to as ‘Ld. CIT(A)’] dated 14.03.2022for the assessment year 2018-19.

The only issue raised by the assessee is against the confirmation of disallowance @ 50% of sales promotion by the Ld. CIT(A) as made by the AO on account of payments as to employees who are based in different locations/places.

Facts in brief are that the assessee is engaging the business selling LIC policies, mutual funds and company’s deposits. During the year the assessee has incurred expenses on business promotion of Rs. 17,65,994/-. The assessee has also employed various persons for effecting the sale of products who are residing in the far flung areas whose parents are working in mines. The payments are made to these employees

The Ld. CIT(A) affirmed the order of AO on the ground of bills and vouchers were not produced and most of the payments were made in cash to the employees.

After perusing the material on record, we observe that the assessee is an agent of LIC, selling policy, mediclaim, mutual funds and company’s deposits. In order to effect in sale of these products, the assesse has employed some employees on various locations. The assesse advanced money to his employees to incur expenses on behalf of the assesse. It is quite incidental to incur the business promotion expenses while effecting sales of the products. In our opinion the authorities below have disallowed the expenses by applying average rate of 50% which was highly excessive and unreasonable. In our considered view it would be reasonable and fair and if the disallowance of 5% is made. Accordingly we set aside the order of Ld. CIT(A) and direct the AO delete the disallowance to the extent of 45%. Consequently the addition is partly sustained @ 5%.

In the result, the appeal of the assessee is partly allowed.