Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: MS SUCHITRA KAMBLE & SH. PRASHANT MAHARISHI
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 27/09/2017 passed by CIT(A)-11, New Delhi for assessment year 2013-14.
The grounds of appeal
are as under:-
1. On the facts and in the circumstances of the case the Id. CIT(A) has grossly erred in confirming the addition of Rs. 6,08,753 to the returned income made by the A.O. on estimated basis by disallowing the following expenses:- Particulars Total Amount 10% of the amount Business Promotion 8,29,406 82,941 Conveyance 7,24,041 72,404 Festival Expense 4,13,804 41,380 Telephone & Internet 19,27,552 1,92,755
Vehicle running and 21,59,193 2,15,919 maintenance Challan and Penalty 3,354 Total 6,08,753
2. That the assessee has suomoto disallowed a sum of Rs. 4,20,232 out of Vehicle Maintenance and a sum of Rs. 81,626 out of Telephone Expenses, which is evident from the detail of drawings (attached to the personal balance sheet as on 31.03.2013 on record) and no further disallowance is called for from any of the six expenditures in dispute.
3. That it is denied that the AR of the ‘A’ admitted that “Though these expenditure related to business purposes but element of personal nature out of these expenses cannot be ruled out.” 4. That the first appellate authority has failed in his duty to apply just and equitable mind, while dismissing the appeal by the ‘A’. 5. That the order is based on surmises and conjectures and nothing positive or concrete evidence has been placed on record, which is the requirement of the law. 6. The assessee pray that entire addition of Rs. 6,08,753 be deleted in full on merits to meet both ends of justice and on the basis of equity also.
The assessee is engaged in the business of manufacturing and exports of readymade garments under the name and style of M/s Chelsea Mills as a proprietor. During the year under consideration, the assessee has export turnover of Rs. 51,74,29,006/- and filed return declaring income at Rs. 1,66,46,545. During assessment proceedings u/s 143(2), the Assessing Officer on estimate basis, disallowed 10% of the following expenses debited to profit and loss account vide orders u/s 143(3) dated 21.03.2016.
Particulars Total Amount 10% of the amount Business Promotion 8,29,406 82,941 Conveyance 7,24,041 72,404 Festival Expense 4,13,804 41,380 Telephone & Internet 19,27,552 1,92,755 Vehicle running and 21,59,193 2,15,919 maintenance Challan and Penalty 3,354 Total 6,08,753
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the assessee actually incurred these expenditures and these are very much relevant and necessary for carrying out the export business. The Assessing Officer failed to point out any specific mistake or create any specific evidence from the books of accounts produced. The penalty of Rs. 3354/- is in the nature of demurrage for late performance and not penalty for infringement of law. The Ld. AR further submitted that it is also denied that the AR has admitted that “though these expenses relate to business purpose, but element of personal nature out of this expenses cannot be ruled out. It is not possible to maintain log books for such a number of cars/vehicles because the assessee is a private enterprise having limited resources and always on toes for making export shipments.” The Ld. AR further submitted that the personal balance sheet and the drawings from the bank account of the assessee was also not considered by the Assessing Officer. The Assessee has suo moto disallowed and debited to drawing account a sum of Rs. 5,01,858 on account of possible personal element.
The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused the material available on record. During the course of hearing, the Ld. AR demonstrated before us that these are purely business expenses. By disallowing 10% of all these expenses without any basis or any finding by the Assessing Officer as well as CIT(A) is contrary to the provisions of law. In fact, the Assessing Officer as well as the CIT(A) ignored the evidences brought on record by the assessee during the assessment proceeding such as personal balance sheet and drawings from the bank account, bank statements and the business outlet of the assessee company for export of readymade garments. Thus, the CIT(A) was not right in confirming the ad-hoc/estimated disallowance of the expenditure which was purely that of business expenses. Hence, the appeal of the assessee is allowed.