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Facts
The assessee is aggrieved by additions made to laundry expenses and management consultancy/royalty and marketing fee expenses. The Assessing Officer (AO) disallowed a portion of these expenses for failure to produce supporting bills.
Held
The Tribunal noted that the assessee failed to produce all supporting bills for the claimed expenses. However, considering the facts, the Tribunal found it just and proper to allow a lumpsum addition of Rs. 3 lakhs on laundry expenses and Rs. 5 lakhs on management consultancy expenses, without treating it as a precedent.
Key Issues
Whether the disallowance of expenses for non-production of bills is justified and if a partial relief can be granted on estimation basis.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
Date of hearing 28.05.2025 Date of pronouncement 28.05.2025 ORDER
PER SATBEER SINGH GODARA, JM
This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1069274049(1), dated 30.09.2024 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
Suffice to say, we find during the course of hearing that the assessee herein is aggrieved against both the learned lower authorities’ action inter alia disallowing/adding its expenditure claim under various heads on estimation basis; in the course of assessment framed on 28.12.2019 and upheld in the lower appellate discussion reading as under: “5. After taking into consideration the AO's findings and appellant's written submission made through ITBA/grounds of appeal in the course of hearing as well as the facts of the case, the issues involved in appeal are discussed and decided as under:- 5,1 Ground No. 1:- Through this ground of appeal, the appellant has challenged the addition made by the AO amounting to Rs:- 12,99,844/- out of Laundry Expenses. During the course of assessment proceedings, the AO has asked the appellant to produce the bills in support of Laundry expenses claimed. The appellant able to produce the bills amounting to Rs: 18,02,073/- only, whereas the appellant has claimed Laundry expenses amounting to Rs: 31,01,917/-. The appellant failed to produce the bills in respect of the expenses of Rs: 12,99,844/-. Therefore, the AO is justified in making the disallowance in respect of the bills not produced during the course of assessment proceedings. Thus, the addition made by the AO amounting to Rs: 12,99,844/- is Confirmed. Therefore, the appeal on this ground is Dismissed. 5.2 Ground No. 2:- Through these grounds of appeal, the appellant has challenged the addition/disallowance made by the AO amounting to Rs: 13,63,157/- out of Management consultancy/Royalty and Marketing Fee expenses. During the course of assessment proceedings, the AO has asked the appellant to produce the bills in support of Management consultancy/Royalty and Marketing Fee expenses claimed. The appellant has claimed Management consultancy/Royalty and Marketing Fee expenses amounting to Rs: 1,60,48,781/-. The appellant is able to produce the bills in respect of the expenses of Rs: 92,32,992/-. The appellant failed to produce the bills in respect of the expenses of Rs: 68,15,789/-. Therefore, the AO is justified in making the disallowance @ 20% in respect of the bills not produced during the course of assessment proceedings. Thus, the 2 | P a g e addition made by the AO amounting to Rs: 13,63,157/- is Confirmed. Therefore, the appeal on this ground is Dismissed.”
3. This is what leaves the assessee aggrieved who seeks to claim its entire expenditure of laundry expenses and management consultancy/royalty and marketing expenses which has been disallowed mainly on account of his alleged failure in producing all the corresponding details; @ 20%, on estimation basis; respectively.
4. Faced with this situation, we note that neither the assessee could plead and prove the impugned expenditure items as to have been incurred wholly and exclusively for the purpose of the business to the entire satisfaction of the lower authorities nor the department has quoted any abnormality therein vis-à-vis the corresponding book results in preceding and succeeding assessment years.
Be that as it may, we are of the considered view in this factual backdrop that a lumpsum addition of Rs.3 lakhs on laundry expenses out of that in question amounting to Rs.12,99,844/- and 5 lakhs qua the latter head of management consultancy etc. would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law. 3 | P a g e