M/S. WEP PERIPHERALS LTD.,,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1)(1), BANGALORE

Assessment Year: 2005-06 WeP Peripherals Ltd. II Floor, Basappa Complex 40/1A, Lavelle Road DCIT Vs. Bangalore 560 001 Circle-7(1)(1) Bangalore PAN NO :AAACW3103F APPELLANT RESPONDENT Appellant by : Sri K.R. Pradeep, A.R. & Ms. Girija G.P., A.R Respondent by : Sri Biju M.K., D.R. Date of Hearing : 15.10.2024 Date of Pronouncement : 09.01.2025 O R D E R

PER KESHAV DUBEY, JUDICIAL MEMBER:

M/s. WeP Peripherals Ltd., Bangalore Page 4 of 7 1. Provision for Warranty Rs. 7,52,000/- 2. Staff Welfare Expenses Rs. 40,28,195/- 3. Travelling Expenses Rs. 20,00,000/- 4. Advertisement and Sales Promotion Expenses Rs. 35,73,721/-

5. Miscellaneous Expenses Disallowed Rs. 5,00,000/-

Total disallowances Rs.1,08,53,916/- 2.1 The assessee company challenged the above additions/disallowances by filing an appeal before the CIT-Appeals. During -the course of the hearing before the CIT-Appeals, the assessee made detailed submissions along with evidences on the additions/disallowances involved in the appeal. The CIT-Appeals called for a remand report from the Assessing Officer. The remand report submitted by the AO was general in nature did not contain any findings on the details and evidences submitted before the CIT- Appeals by the assessee. The CIT- Appeals being not satisfied with the report/sought once again a fresh remand repot from the AO. Even the second-remand report was furnished on adhoc basis without considering the details and evidences furnished by the assessee. The CIT-Appeals order giving partial relief to the assessee without going in details to evidences submitted by the assessee. Aggrieved by the Order of CIT-Appeals, the assessee filed an appeal before the Tribunal. The ITAT observed that both the parties agreed that let the matter be sent back to AO for de-novo assessment in the light of evidences filed by the assessee.

2.2 In the set aside proceedings before the AO, the assessee furnished all the details /evidences filed before the Tribunal and took the AO through the details and evidences. It was submitted M/s. WeP Peripherals Ltd., Bangalore Page 5 of 7 that substantial details were provided during the course of hearing and then AO by picking certain entries randomly had made adhoc disallowances without seeking clarification or providing opportunity to the assessee. The assessee submitted that the assessee company has a very systematic process of approval of the expenditure incurred, that the books of account have been audited, payments have made through banking channels, etc. Further it was also submitted that as the matter relates to more than 10 years back it may take considerable time to collate further the details, if any, hence, sufficient time be provided in case further details are required. The AO sought time to go through the details and would call, if any further details are required. However, the AO has completed the assessment by disallowing the certain expenditure of Rs.6,13,56,025/- which was even allowed in original assessment and erred in exceeding what was originally disallowed and was subject matter of appeal.

2.3 Being aggrieved, the assessee again went in appeal before the ld. CIT(A) in the 2nd round. The ld. CIT(A) again restricted the disallowance of total expenditure to Rs.3,07,64,078/-. Aggrieved, the assessee is again before us in the 2nd round.

Particulars Actual Disallowances Confirmed by Disallowed Confirmed expenditure in original CIT(A) in by AO in by CIT(A) assessment original present proceedings proceedings proceedings Lunch 825000 820500 0 820500 205125 reimbursement Business 562885 281443 140722 557885 281442 Meeting Staff Welfare 5452504 2726252 1363126 5091775 2726252 Training & 3170271 200000 200000 1768814 200000 development Travelling & 5062418 2000000 2000000 3532546 2000000 Conveyance Sales 3602773 1801386 900693 1726491 1801386 Conference Market 1544669 772335 386168 312389 772334 research expenses Advertisement 44647728 1000000 0 44555078 22277539 and publicity Misc. 2146831 500000 500000 2146831 500000 expenditure, 843716 0 Brokerage & commission Total 67015079 10853916 5490709 61356025 30764078 5.1 In the original assessment, disallowances were made on account of non-allowability of expenditure as exclusively incurred for business purpose, non-production of bills and vouchers in support of expenditure, claim of certain personal nature of expenses. We also cannot completely deny the fact that there is no possibility of certain expenditure being incurred that are personal in nature and incurred exclusively for business purposes. The AO also observed the absence of bills and vouchers relating to certain expenditures.

5.2 Considering the facts that this is 2nd round of litigation and also considering the time lapsed and the assessment year involved in the matter, we without further going to the merits of the case in the interest of justice, deem it fit to restrict the disallowances to 5% of the total expenses claimed as expenditure amounting to Rs.6,70,15,079/-, which works out to be Rs.33,50,754/-.

Order pronounced in the open court on 9th Jan, 2025