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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
आदेश/ ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-48, Mumbai (in short ‘the CIT(A)’) dated 15/02/2019 for the assessment year 2013-14.
The brief facts of the case assessee as emanating from the records are: The assessee is engaged in manufacturing and trading of Kitchen items. During the course of scrutiny assessment proceedings the Assessing Officer made additions/disallowances on following counts:-
S.No. Nature of expenditure Expenditure Disallowed @ 20% 1. Sales promotion expenses Rs. 54,446/- 2. Sales Scheme Expenses Rs. 4,91,545/- 3. Packing Material Rs. 2,41,087/- 4. Travelling expenses Rs. 52,358/- Total Rs. 8,39,436/- The Assessing Officer held that the assessee merely furnished ledger accounts and some sample copy of bills. The assessee has failed to substantiate genuineness of the above expenditure. The Assessing Officer made adhoc disallowance of 20% of the expenditure claimed under the above heads by the assessee.
Aggrieved by the assessment order dated 31/03/2016 passed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) upheld the findings of Assessing Officer and dismissed the appeal of assessee in toto. Hence, the present appeal by the assessee
Ms. Kavita P. Kaushik representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of the assessee. The ld. Departmental Representative submitted that the assessee has failed to substantiate fully the expenditure claimed under various heads. The Assessing Officer and CIT (A) have been quite considerate in restricting the disallowance to 20% of the expenditure claimed.
Submissions made by ld. Departmental Representative heard and orders of the authorities below examined. The assessee has claimed business expenditure under various heads viz. sales promotion expenses, sales scheme expenses, packing material expenses, travelling expenses, etc. A perusal of the submissions made by assessee before the Assessing Officer reveal, that Sales Promotion Expenses are towards purchase of display stands that are given to the dealers for display of the products of assessee at a prominent place in the store. To substantiate the expenditure, the assessee has furnished copies of purchase bills before the Assessing Officer. Apart from above, under the head sales promotion expenses, the assessee has claimed expenditure on dealers conference held at Delhi. The assessee furnished copy of the bill from KNS Hospitality Pvt. Ltd. to corroborate the expenditure. The Assessing Officer has not disputed the expenditure but has raised doubts on the quantum of expenditure. The assessee has furnished documentary evidence to prove genuineness of the expenditure. Apparently no effort was made by the Assessing Officer to cross verify genuineness of the expenditure, hence, I find no reason to sustain adhoc disallowance in respect of the expenditure claimed under the head Sales Promotion Expenses. The addition of Rs.54,446/- is deleted and ground No.1 of the appeal is allowed.
In ground No.2 of the appeal, the assessee has assailed addition in respect of Sales Scheme Expenses. Under Sales Scheme Expenditure the assessee has incurred expenditure on travel and hotel bookings of the dealers/distributors. The Revenue has not disputed the expenditure being related to the business. It is only the quantum of expenditure on which adhoc disallowance has been made. To substantiate claim before the Assessing Officer, the assessee furnished copies of the passport, visa, tickets and hotel bills of the dealers/distributors who were eligible for tour under sales promotion scheme. The expenditure claimed by the assessee is in connection with promotion of business. The Assessing Officer has not commented on the documents furnished by the assessee and has proceeded on to make adhoc disallowance without substantive reason. I see no reason to disallow assessee’s claim. Accordingly, adhoc disallowance of Rs.4,91,545/- is deleted and ground No.2 of the appeal is allowed.
In ground No.3 of the appeal, the assessee has assailed adhoc disallowance of expenditure Rs.2,41,087/- on account of Packing Material. The expenditure has primarily been incurred on clips, carton box pack, straps, etc. These are basic business expenditure. The assessee had furnished bills for the expenditure and the ledger accounts. I see no good reason to disbelieve the documents furnished by the assessee to substantiate his claim. The addition of Rs.2,41,087/- is deleted and ground No.3 of the appeal is allowed.
In ground of appeal No.4, the assessee has assailed adhoc disallowance of Rs.52,358/- in respect of Travelling Expenditure. The assessee has claimed expenditure in respect of local conveyance, train/air fare and boarding and lodging for travelling to various cities in connection with the business. To substantiate its claim, the assessee has furnished copies of bills, train/air tickets, hotel bills, etc. before the Assessing Officer. Apparently, the nature of expenditure claimed is in connection with business. The Assessing Officer has accepted the expenditure to be allowable, however, the Assessing Officer made adhoc disallowance without assigning any cogent reason. I do not find any merit in making adhoc disallowance on the expenditure which is duly supported by valid evidence. Consequently, the addition of Rs.52,358/- is deleted and ground No.4 of the appeal is allowed.
In the result, appeal of the assessee is allowed.