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Before: Shri Duvvuru RL Reddy & Shri S. Jayaraman
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 3, Chennai, dated 06.02.2019 relevant to the assessment year 2014-15. The grounds raised in the appeal of the assessee are that the ld. CIT(A) has erred in (i) confirming the disallowance of 23,44,666/- towards sundry creditors made under section 41(1) of the Income Tax Act, 1961 [“Act” in short], (ii) confirming the disallowance of repairs and maintenance expenditure of ₹.9,45,279/- and confirming the disallowance of business promotion expenses of ₹.1,25,302/-.
Brief facts relating to the disallowance made under section 41(1) of the Act are that while completing the assessment under section 143(3) of the Act, the Assessing Officer made a disallowance of ₹.60,88,570/- on the ground that no confirmation from the creditors have been received or produced during the course of assessment proceedings. However, during the course of appellate proceedings, the confirmation letters furnished were sent to the Assessing Officer for verification and called for remand report. In his remand report, after verification of the details, the Assessing Officer has reported that no replies were received or letters were returned in respect of various creditors to the extent of ₹.23,44,666/-. Since these credits were neither reconciled nor further evidences were submitted either before the Assessing Officer or before the appellate authority, the ld. CIT(A) confirmed the addition to the extent of ₹.23,44,666/-.
2.1 With regard to the claim of business promotion expenses of ₹.1,25,302/-, the assessee has failed to provide the bills/vouchers either before the Assessing Officer or before the appellate authority to substantiate the claim of business promotion expenses. Accordingly, the disallowance made by the Assessing Officer was confirmed by the ld. CIT(A).
2.2 With regard to the claim of expenses towards repairs and maintenance of ₹.64,55,733/- since the assessee could not produce bills and vouchers for the same, an amount of ₹.945,279/- was disallowed and brought to tax. Since the assessee has not produced any bills/vouchers even before the appellate authority, the ld. CIT(A) confirmed the disallowance of expenses towards repairs and maintenance.
On being aggrieved, the assessee is in appeal before the Tribunal.
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. With regard to the claim of expenses towards sundry creditors, the ld. Counsel for the assessee has submitted that the creditors M/s. ARV Meta Chem Industries for ₹.9,47,014/-, M/s. South Western Engineering (I) Ltd. for ₹.2,16,168/- and M/s. Jivanlal Corporation for ₹.1,64,506/- have sent the confirmation reply directly to the Income Tax Officer by registered post and the assessee has the acknowledgement for the same. With regard to the creditors M/s. Aswathy Engineers and Co. for ₹.7,52,900/- and M/s. Comet Engineering Works for ₹.1,57,849/-, the ld. Counsel for the assessee has submitted that the assessee could not get the confirmation from the parties due to paucity of time and these purchases were duly reflected in the books of the assessee. With regard to the creditor M/s. Fairdeal Supplies Ltd. for ₹.1,06,229/-, it was the submission of the ld. Counsel that the payment was made after the year end and a copy of the bank statement reflecting the same was stated to be brought on record and thus, prayed for deleting the addition. Since the assessee has filed various details as stated above in the form of paper book, we direct the Assessing Officer to re-examine the disallowance of sundry credits and decide the issue afresh in accordance with law after affording an opportunity of being heard to the assessee.
4.1 With regard to the confirmation of the disallowance of expenses towards repairs and maintenance of ₹.9,45,279/-, by filing copy of vouchers and bills in the form of paper book page 26 to 314, the ld. Counsel for the assessee has submitted that the assessee has obtained the bills and vouchers for the amount of ₹.7,72,039/- and prayed for deleting the addition. Since the assessee has filed copy of vouchers and bills as stated above in the form of paper book, we direct the Assessing Officer to re-examine the disallowance of expenses under the head repairs and maintenance and decide the issue afresh in accordance with law after affording an opportunity of being heard to the assessee.
4.2 With regard to the confirmation of the disallowance of ₹.1,25,302/- claimed towards business promotion expenses, it was the submissions of the ld. Counsel that the assessee could not produce the vouchers as these expenses relate to petty expenses and considering the value of business of the assessee, the ld. Counsel prayed for allowing the same as business expenditure. Admittedly, the assessee has not filed any vouchers for the claim of business promotion expenses. Since the ld. Counsel has prayed that the assessee has incurred the petty expenses towards business promotion, the assessee is directed to produce any piece of evidence of the activity carried out for promotion of its business before the Assessing Officer and after considering the submissions, if satisfied, the Assessing Officer shall decide the issue afresh.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on the 15th March, 2021 in Chennai.