ITO 7(3)(2) vs. EAGLE HOME APPLIANCES P.LTD, PUNE

The assessee in appeal has raised as many as 17 grounds. Shri M.K. Kulkarni appearing on behalf of the assessee submitted at the outset that the ground Nos. 1, 2, 5 to 9 and 12 to 14 of the appeal are not pressed. Thus, the only grounds left for adjudication before the Tribunal are ground Nos. 3, 4, 10, 11, 15 and 16. The same are reproduced here-in-below : “3. On the facts and circumstances of the case and in law the Ld. C.I.T.(A) erred in confirming the addition of Rs.6,17,152/- made by A.O. being Employer‟s Contribution to Provident Fund. The disallowance is not contrary to law in view of Hon‟ble Supreme Court judgment in the reported case as (2009) 319 ITR 306 (SC). The disallowance be deleted. 4. On the facts and circumstances of the case and in law the Ld. C.I.T.(A) erred in confirming the addition made by A.O. of Rs.4,76,670/- incurred towards legal and professional fees. The disallowance has been confirmed without assigning any cogent reasons and by not passing a „speaking order‟. The disallowance be quashed. 10. On the facts and circumstances of the case and in law the Ld. C.I.T.(A), Mumbai erred in confirming the disallowance made by the A.O. of Rs.7,55,350/- u/s. 40-A(3) of the Act. The disallowance has been confirmed without assigning any cogent reasons and sans „speaking order‟. The disallowance be quashed. 11. On the facts and circumstances of the case and in law the Ld. C.I.T.(A) was not justified in restricting the disallowance out of Travelling expenses to Rs.3,49,469/-. The entire claim of Rs.59,21,115/- be allowed in full. 15. On the facts and circumstances of the case and in law the Ld. C.I.T.(A), Mumbai erred in confirming the disallowance of Rs.35,33,080/- made by A.O. which was claimed as deduction on account of Sales promotion expenses. The disallowance has been confirmed without any cogent reasons sans any „Speaking order‟. The disallowance be deleted. 16. On the facts and circumstances of the case and in law the assessee denies its liability to pay interest u/s. 234-B of the Act and the same be deleted.”

In respect of ground No. 3 of the appeal, the ld. Counsel submitted that the authorities below have erred in making addition of Rs.6,17,152/- in respect of Employer’s Contribution to Provident Fund. Admittedly, there

On the other hand Shri N. Ashok Babu representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in upholding the additions. The ld. DR submitted that the assessee has failed to furnish evidence regarding deduction of tax at source in respect of payment of professional fees. Hence, the payment of legal charges were disallowed u/s. 40(a)(ia) of the Act. Similarly, in respect of disallowance u/s. 40A(3) of the Act, the assessee failed to offer any explanation for cash payments. Further, the assessee did not furnish the details of expenditure in respect of sales promotion and advertisement. Therefore, the same were disallowed by the Assessing Officer as well as the Commissioner of Income Tax (Appeals).

Both sides heard. Orders of the authorities below perused. The ld. Counsel for the assessee has sated at the Bar that he is not pressing ground Nos. 1, 2, 5 to 9 and 12 to 14 of the appeal. Thus, in view of the statement made, the aforesaid grounds are dismissed as not pressed.

In ground No. 3 of the appeal, the assessee has assailed disallowance of Rs.6,17,152/- in respect of Employer’s Contribution towards Provident Fund. The Hon’ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. (supra) and the Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ghatge Patil Transports Ltd. reported as 368 ITR 749 have held that the payments on account of Provident Fund made before due date of filing return of income are to be allowed as deduction. A perusal of assessment order reveals that the assessee has filed return of income for the impugned assessment year on 29-10-2007. The ld. Counsel for the assessee has furnished details of Provident Fund contributions at page 10 of the paper book. A perusal of the same reveals that except contribution for the month of March, 2007 which was due on 15-04-2007 and the same was paid on 26-08-2008, all contributions starting from April, 2006 to February, 2007 were made up to 15-05-2007 i.e. well before the date of filing return of income. The Provident Fund contribution for the month of March, 2007 only was made after filing return of income for the impugned assessment year. Hence, the contributions made by the assessee before due date of filing return of income deserves to be allowed as deduction. We hold and direct accordingly. Consequently, ground No. 3 of the appeal by the assessee is partly allowed.

In ground No. 4, the assessee has assailed the addition of Rs.4,76,670/- towards legal and professional fees. The Assessing Officer has disallowed the aforesaid amount u/s. 40(a)(ia) of the Act as the assessee has failed to furnish the details of TDS deducted in respect of aforesaid payments. The Commissioner of Income Tax (Appeals) in one line observation as upheld the disallowance made by the Assessing Officer u/s.

In ground No. 10 of the appeal, the assessee has assailed disallowance of Rs.7,55,350/- u/s. 40A(3) of the Act. The assessee has allegedly made cash payments. Neither any explanation has been furnished by the assessee before the authorities below for making such cash payments nor any effort is made by assessee to substantiate that the aforesaid cash payments fall within the exceptions provided under Rule 6DD of the Income Tax Rules. No material has been furnished by the assessee before the Tribunal to dispel the findings of authorities below. In

The ground No. 11 of the appeal by assessee is against disallowance of travelling expenses amounting to Rs.3,49,469/-. The Assessing Officer had disallowed entire expenditure towards travelling expenses claimed by the assessee i.e. Rs.59,21,115/-. The assessee furnished documentary evidence to substantiate its claim before the First Appellate Authority. The Commissioner of Income Tax (Appeals) sought remand report. The assessee furnished documentary evidence to substantiate the expenditure claimed under the head travelling expenses. The Commissioner of Income Tax (Appeals) accordingly, allowed the expenditure to the extent the assessee furnished supporting documents. The assessee could not prove expenditure to the extent of Rs.3,49,469/-, thus, the same was disallowed by Commissioner of Income Tax (Appeals). Even before the Tribunal, the assessee has not furnished any documentary evidence to substantiate the claim disallowed by First Appellate Authority. In the absence of any documentary evidence, we find no reason to interfere with the findings of Commissioner of Income Tax (Appeals) in restricting the disallowance to Rs.3,49,469/-. Accordingly, ground No. 11 of the appeal by the assessee is dismissed.

The ground No. 15 of the appeal is against disallowance of sales promotion expenses Rs.35,33,080/-. A perusal of impugned order shows that the Commissioner of Income Tax (Appeals) had sought remand report on the documents furnished by the assessee in support of sales promotion expenditure. The Commissioner of Income Tax (Appeals) has merely

In ground No. 16 of the appeal, the assessee has assailed charging of interest u/s. 234B of the Act. Charging of interest u/s. 234B is consequential and mandatory, hence, ground No. 16 raised in appeal by the assessee is dismissed being devoid of any merit.

The ground No. 17 is general in nature, hence, requires no adjudication.

In the result, appeal of the assessee is partly allowed in the terms aforesaid.

The Revenue in its appeal has raised solitary issue of violation of provisions of Rule 46A of the Income Tax Rules, 1962. The ld. DR submitted that the assessee filed some additional documents before the First Appellate Authority. Proper opportunity was not afforded to the Assessing Officer to examine the said documents. Thus, there was contravention of Rule 46A by the Commissioner of Income Tax (Appeals).

On the other hand the ld. Counsel for the assessee submitted that the documentary evidences filed before the Commissioner of Income Tax (Appeals) were referred to Assessing Officer by the Commissioner of Income Tax (Appeals) for his comments and report. The Assessing Officer furnished his report on 28-07-2010. On the basis of said report the Commissioner of Income Tax (Appeals) granted partial relief on some of the issues and upheld the findings of Assessing Officer on some issues. Thus, there is no violation of Rule 46A as alleged by the Department.

Both sides heard. The Revenue in appeal has impugned the order of Commissioner of Income Tax (Appeals) on the solitary issue of violation of Rule 46A. A perusal of impugned order reveals that the Commissioner of Income Tax (Appeals) had sought remand report on the new evidences filed by the assessee during First Appellate proceedings. The Assessing Officer furnished remand report on the 28-07-2010. Thus, we are of considered view that fair opportunity was given to the Assessing Officer by the Commissioner of Income Tax (Appeals) to rebut the additional evidences filed by the assessee during First Appellate stage. The ld. DR has not pin pointed the additional evidences filed by assessee before First Appellate Authority that were considered to grant relief without referring to Assessing Officer. In our considered view there seems to be no violation of Rule 46A as alleged by the Department. We do not find any merit in the grounds raised by the Revenue, accordingly, the appeal of Revenue is dismissed.

The assessee has filed Cross Objections in support of order of Commissioner of Income Tax (Appeals) in admitting additional evidences. Since, we have dismissed the appeal of Revenue, the Cross Objections of the assessee has become infructuous and the same are dismissed as such.

To sum up, the appeal of assessee is partly allowed and the appeal by the Revenue, as well as, Cross Objections of the assessee are dismissed.