M/S. JEEWAN MOTORS P. LTD.,BHOPAL vs. THE JCIT- RANGE-2, BHOPAL

आदेश / O R D E R

PER KUL BHARAT, J.M: This appeal is filed by the assessee against the order of Commissioner of Income Tax (appeals)-I, Indore, dated 16.09.2014 pertaining to the A.Y. 2010-11. The assessee has raised following grounds of appeal: 1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of Rs.24,01,617/- on account of prior period expenses under the following subheads:

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S.No. Particulars of expenses crystallized Disallowance in the year confirmed by Ld. CIT(A) 1.1 Advertisement and publicity 19,20,125/- 1.2 Labour charges 3,66,760/- 1.3 Traveling Expenses 15,919/- 1.4 Office Expenses 15,000/- 1.5 Staff Training Expenses 62,600/- 1.6 Telephone Expenses 19,166/- 1.7 Security 2,047/- Total 24,01,617/-

S.No. Particulars of Expenses Disallowance confirmed by Ld. CIT(A) 3.1 Conveyance Expenses 46,763/- 3.2 Customer Entertainment 18,326/- 3.3 Other Expenses 63,191/- 3.4 Sales Promotion Expenses 2,100/- 3.5 Staff Welfare Expenses 27,836/- 3.6 Telephone Expenses 79,766/- 3.7 Traveling Expenses 22,410/- 3.8 Depreciation on motor car 63,635/- Total 3,24,027/-

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of the Income Tax Act 1961(hereinafter called as ‘the Act’) was framed vide order dated 28.03.2013 while framing the assessment, the assessing officer made various disallowances added the same to the income of the assessee. The additions were made on account of disallowance of traveling expenses, prior period expenses, disallowance on account of interest, non deduction of tax etc. 4. Aggrieved by this order the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions partly allowed the appeal. Thereby the Ld. CIT(A) confirmed by prior period expenses and other ad-hoc disallowances. 5. Aggrieved by this the assessee is in present appeal before this Tribunal. The Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. 6. Ground No.1 is against confirmation of addition in respect of prior period expense amounting to Rs.24,01,617/-. The Ld. counsel for the assessee submitted that out of prior period expenses of Rs.24,01,617/-. A sum of Rs.19,20,125/- was incurred on advertisement and publicity. He submitted that the assessee is a company engaged in the business of dealership (sale and service) of Maruti Eicher for vehicles and spare parts. The ld. counsel submitted that the expenditure was incurred for advertising brand name of Maruti. He submitted that it was understanding with the manufacturer and dealer, assessee would incur these expenses. The ld. counsel submitted that these expenditure however incurred in earlier years crystalized in the year under appeal. The expenditure was essentially incurred for business

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purpose. The authorities below were not justified in rejecting the claim of the assessee. He submitted that under the facts of the present case prior period expenses about to have allowed. The Ld. counsel further submitted that an agreement to this effect pertained to the subsequent years is available, however the agreement related to year under appeal is not available. 7. The Ld. DR opposes the submission and stated that onus is only on the assessee to prove that this expenditure was made for business purpose under a contract with the manufacturer. He submitted that there is no evidence on record suggesting that the expenditure was incurred under any commercial expediency. Therefore, he submitted that there is no reason to interfere in the finding of the Ld. CIT(A). 8. We have heard rival contention perused material on record. Admittedly before the Ld. CIT(A), there is no evidence to support these expenses, even the AO has given a finding of fact that the assessee had furnished a copy of extract account of Atul Publicity Pvt. Ltd. in its books of accounts that showed opening debit balance of Rs.8,26,295/- and the transactions are recorded from the month of April 2009. It clearly showed the said expenses were debited on various dates prior to date of audit/date of filing of return of income for earlier financial year 2008-09 to which the said expenses is related. It is further pointed out that auditor himself has pointed out that the said expenses pertains to earlier year and therefore, cannot be allowed as expenditure for the year under consideration. This contention of the assessee that assessee had

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followed mercantile system of accounting during the year, it has claimed prior period expenses pertaining to earlier assessment years on the basis of crystallization. The assessee company had incurred some expenses in prior assessment years which was crystalized during the current year. It is stated that all the expenses were properly accounted during the year under consideration. None of the expenses as shown prior period expenses were accounted in any of the previous assessment years. There is no dispute that prior period expenses are allowable if the same are crystalized during the year under consideration for the purpose of claiming these expenses. The assessee has to demonstrate that such expenses were related to business of the assessee and crystalized in the year under appeal. The assessee has not filed any agreement under which such expenditure was to be borne by the assessee. Admittedly, the expenditure was incurred for the advertisement of Maruti Car such advertisement is not for the assessee company but the assessee is only dealer. The contention of the Ld. Counsel for the assessee is that one of the understandings in the dealership contract was that the assessee dealer would incur expenditure for advertisement of the Maruti Brand, no such contract is placed on record. It is also stated that the payments to the M/s Atul Advertisement Co. is made through banking Channels and due taxes have been effected on payment of such amount. Even, if it is assumed that these are business expenditure incurred by the assessee on behalf of the manufacturer and borne by it the assessee was required to demonstrate that when such expenditure was

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crystalized and reason for claiming in the year under appeal. The assesse had made a bald statement that these expenses are crystalized in the year under appeal. We are of the opinion that on the basis of such bald statement expenses related to earlier year cannot be allowed. Hence we do not see any merit in these grounds of the assessee. Ground No.1 of the assessee is dismissed. 9. Ground No.2 is against confirming the disallowance of Rs.67,020/- on account of receipts reflected in 26AS statement but allegedly not accounted for. Ld. DR opposes the submissions of the assessee. 10. We have heard rival contention perused material on record. We find that the difference is on account of different method as adopted by the payer and payee. Therefore, we direct the AO to delete the disallowance. Ground No.2 of the assessee is allowed. 11. Ground No.3 is against in respect of ad-hoc disallowances totalling to Rs.3,24,027/- in respect of various expenses. Ld. counsel for the assessee reiterated the submissions as made in the synopsis. It is stated that the expenses have been disallowed on ad hoc basis. There is no material which suggests that the expenses are not genuine. On the contrary Ld. DR supported the order of the authorities below. 12. We have heard rival contention perused material on record. We find that the expenses have been disallowed on ad hoc basis without on the basis of any material evidences. Under these facts we are unable to confirm the same. Therefore, we direct the AO to

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delete the disallowance. Ground No.3 of the assessee’s appeal is allowed.

Order was pronounced in the open court on 17 .08.2018.

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER Indore; �दनांक Dated : / 08/2018 ctàxÄ? P.S/.�न.स.

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore