M/S. IMPERIAL AUTO INDUSTRIES LTD.,NEW DELHI vs. DCIT, FARIDABAD

Per Dr. B. R. R. Kumar, Accountant Member:

1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making a disallowance of Rs.5,75,145/- on account of short & excess recoveries that too without any basis and merely on the basis of surmises and conjectures.

2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making a disallowance of Rs. 5,75,145/- is bad in law and against the facts and circumstances of the case.

Imperial Auto Industries Ltd. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in making disallowance to the extent of Rs.5,00,000/- on account of business promotion expenses holding the same to have been incurred allegedly for non business purpose that too without any basis and merely on the basis of surmises and conjectures.”

Imperial Auto Industries Ltd. 2014-15 wherein assessee is consistently following this practice of write off. All the assessment years involved are assessed under section 143(3) of the Act and in four prior years and three subsequent years to the impugned assessment year the claim of the assessee is allowed. Even otherwise the above amounts written off are mostly pertaining to the sundry debtors and creditors. Because of the smallness of the amount some are clubbed together and are transferred to profit and loss account. In the event it is debited to the profit and loss account it par takes the character of either discount or bad debts. In the present year the amount is debited to the profit and loss account, therefore, naturally it par takes the character of discount or write off of the bad debt. Both these expenditure are allowable as deduction. In view of above facts, we direct the learned Assessing Officer to delete the disallowance of Rs.3,09,792/- on account of short and excess recoveries. Reversing the order of the learned CIT (Appeals) we allow ground Nos. 1 to 3 of the appeal of the assessee.”

Imperial Auto Industries Ltd. 4604/Del/2016, the relevant findings have been given in para 5 which read as under: “5. We have carefully gone through the record. It is an undisputed fact that neither the Ld. AO not the Ld CIT(A) pointed out any discrepancy relating to the “Business Promotion Expenses” with reference to the books of accounts of the assessee. Books of accounts of the assessee are not rejected. Though, the Ld. AO and for that matter Ld. CIT(A) made the ad hoc disallowance, there does not appear to be any basis for the same. It is not in dispute that vide letter dated 26/09/2014 the assessee has always been maintaining that expenses are purely and comprehensively further business purpose. There is no dispute that any of these expenses are not for business purpose. It is not the case of the Revenue that any of these expenses is towards personal expense of any person relating to the assessee. In these circumstances, we find it difficult to sustain the ad-hoc disallowance, in the absence of authorities pointing out any discrepancy in respect of these expenses with reference to the books of accounts maintained by the assessee. There is no basis for quantifying the disallowance. We, therefore, find it difficult to sustain the orders of the authorities below, as such, while upholding the contention of the assessee, we find that the disallowance has to be deleted. We, accordingly, direct the AO to delete the disallowance.”