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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI T.S. KAPOOR, & SHRI AMIT SHUKLA,
PER T.S. KAPOOR, ACCOUNTANT MEMBER
1. This appeal has been filed by the assessee against the order of the Ld. CIT(A)-02, New Delhi, dated 17/08/2018. The grounds taken by the assessee are as under:-
That on the facts of the case and under the law, the Id. CIT(A) has erred in dismissing the appellant's petition moved u/r 46A seeking admission of few evidences as additional evidences. After receiving the appellant's Petition u/r 46A and also after going through the facts of the case, the Id. CIT(A) had taken a conscious decision to call for the Remand Report from the Id. A.O. When the Id. CIT(A) had received the final Remand Report dt. 11.06.2018 from the Id. A.O., he has taken a U-turn and held that the appellant do not fulfill the conditions laid down u/r 46A.
That on the facts of the case and under the law, the expenses of Rs. 36,06,289/- incurred by the appellant on sales
promotion (which were reimbursed by the principal namely EATON) ought to had been allowed.
The Id. A.O., vide final Remand Report dt. 11.06.2018, had admitted to had examined the expenses with the help of supporting documents, during the course of remand proceedings.
That on the facts of the case and under the law, the expenses of Rs. 26,99,360/- incurred by the appellant on travelling (which were reimbursed by the principal namely EATON) ought to had been allowed.
The Id. A.O., vide final Remand Report dt. 11.06.2018, had admitted to had examined the expenses with the help of supporting documents, during the course of remand proceedings.”
2. At the outset, the Ld. AR submitted that the assessee company was working as service provider and as per terms of the agreement, the assessee was to be reimbursed salaries & management charges at actuals and for that purpose, assessee had raised monthly invoices in respect of services provided by it. It was submitted that the assessee had been regularly maintaining its books of accounts, bills, etc. and was getting the same audited by Chartered Accountants and during the year under consideration, the assessee had incurred expenses on sales promotion and travelling expenses on behalf of the assessee, which were reimbursed by the M.N.C. Company and which was included in the gross receipts reflected in the profit & loss account and therefore, the action of the authorities below for making additions was not warranted.
The ld. AR further submitted that the Ld. CIT(A) had required Assessing Officer to submit remand report on the additional evidences filed by the assessee and the Assessing Officer in the remand report had stated that additional evidences should not be admitted and therefore, the Ld. CIT(A) again directed the Assessing Officer to submit remand report on merits of the evidences. It was submitted that in the second remand report, the AO himself agreed with the contentions of assessee and our attention was invited to copy of remand report dated 11/06/2018 placed in paper book page-96. The Ld. AR submitted that Assessing Officer in his remand report has accepted that the documents were examined on test check basis and had found them in order and therefore it was prayed that appeal of the assessee be allowed.
3. The ld. DR, on the other hand, relied on the order of the authorities below.
We have heard rival parties and have gone through the material placed on record. We find that the Assessing Officer during the assessment proceedings, has made addition of Rs.63,05,649/- on account of disallowances of sale promotion expenses and travelling expenses by holding as under:-
“5. During the course of assessment proceedings and on perusal of details filed by the assessee company, it was observed that the company has incurred and claimed Rs.36,06,289/- as Sales Promotion expenses as compare to Rs.1,52,733/- in the immediate preceding year and Rs.26,99,360/- as Travelling expenses as compare as to Rs.2,63,464/- in the immediate preceding year. Assessee was asked to file the party wise details of Sales Promotion expenses with copies of Form 16A issued to them and details of travelling expenses with place of travel, period of travel and name of the person travel with justification for business purposes along with copies of bills.
In support of which assessee company had filed the ledger account of the expenses claimed and vide letter dated 24/02/2016 regarding justification of sales promotion Expenses that:- The company is engaged in doing Sales Promotion Activities for and on Behalf of Product of M/s Eaton Automotive Industries Ltd. For doing so the company has employed some Sales Executive Procedure followed for Sales Promotion expenses are as under:- The company (BMPL) issue advance to its Sales Executives. The advance is transferred to Sales Executive’s Bank Account. Sales Executive collects the coupons from their area of operation and sends the details to BMPL on weekly or monthly basis and these coupons are dispatched to Eaton Automotive Industries Ltd by BMPL based on which amount is re-imbursed. Coupons are collected from mechanics /reborers. This is the main function of Sales Executive and affectively of the same helps to grow the demand and in turn sales of the company. The coupons charges paid to the end user of product of Eaten by the BMPL have been debited to Sales Promotion Expenses in the Books of account. This coupon charges are re-imbursed by the EATON to BMPL. This coupon charges are given by EATON to end user through BMPL as an incentive to purchase large qty. In reply to the Travelling expenses vide letter dated 08.12.2015, it was submitted that the ledger account of expenses is enclosed and these expenses were re-imbursable expenses so, details are with client customer. Reply of the assessee company is considered but not acceptable as the assessee company has not filed the copies of bills and evidence of TDS deducted thereon whereas incomplete details of travelling and sales promotion expenses were filed which does not have the name., address, place of travelling, period of travel and justification for business purposes. Moreover during the assessment proceedings assessee company had accepted that these expenses were incurred on behalf of P/s Eaton Automotive industries Limited and the same are reimbursable from the said company. No justification has been filed by the assessee company since the expenses are reimbursable, then how the same are claimed in Profit & Loss Account. In view of incomplete details , which are not supported with the bills and vouchers and considering the fact that these expenses are reimbursable from M/s Eaton Automotive Industries Limited on whose behalf these expenses were incurred, which is accepted by the assessed company, I hereby disallow Rs. Rs. 36,06,289/- as Sales Promotion expenses and Rs.26,99,360/- as traveling Expenses claimed by the assessee company and add the same to the, income of the assessee company. I am also satisfied that the assessee company had furnished inaccurate particulars of income, for which penalty proceedings under section 271(1)(c)) are being initiated separately.
Against the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A) and filed certain additional evidences. The Assessing Officer objected to the admission of additional evidences and his objections against admission of additional evidences is placed at paper book page 93 to 94 of the paper book. However, the Ld. CIT(A) vide letter dated 01/06/2018 placed in paper book page 95, again directed the Assessing Officer to submit his comments on the documents on merits and in view of such directions, the Assessing Officer, vide letter dated 11/06/2018, placed in paper book page 96 stated that he had verified on test check basis the bills and bank statements pertaining to sales promotion expenses and travelling expenses and has found to be them in order. The ld. CIT(A), on receipt of second remand report dated 11/06/2018, however, dismissed the appeal of the assessee by holding that the additional evidences cannot be accepted. This findings of the Ld. CIT(A) are contrary to his earlier directions whereby he has directed the Assessing Officer to file his observations and comments on merits of the additional evidences. From the contents of the assessment order as reproduced in our order, we find that the Assessing Officer had made the disallowance of expenses as he held that these expenses were reimbursable from the company. The Assessing Officer in the remand report dated 11/06/2018 has not commented on this aspect. Therefore, the second remand report is also not specific to the issue and is non- speaking. Therefore, keeping in view, all these facts and circumstances, we deem it appropriate to remit the issue back to the office of the Assessing Officer, who should readjudicate on the issue regarding disallowances on the basis of documents submitted by the assessee. The Assessing Officer is also directed to verify the contentions of the assessee that the assessee had received the reimbursements from the company which had included in the gross receipts declared by it. Needless to say that the assessee will be provided sufficient opportunity of being heard.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14/08/2019.