M/S KANOHAR ELECTRICALS LTD.,,MEERUT vs. ACIT, MEERUT

Brief facts of the case are that the assessee is a company engaged in the manufacture and sale of transformers during the year under consideration. They have filed the return of income on 29/9/2013 for the assessment year 2013-14 declaring a total income of Rs. 3,09,23,694/-. Assessment was completed under section 143(3) of the Act by order dated 13/2/2015 by

In the appeal preferred by the assessee, Ld. CIT(A) observed that no correspondence, Papers or any agreement or MOU was brought on record before the Ld. CIT(A) to make a prima facie justification on facts that this expenditure was indeed incurred for the purpose of business. Further according to the Ld. CIT(A) if a payment has been made to a foreign agent the issue of withholding tax also arises and no information or evidence or arguments have been made on this aspect of the applicability of section 195 of the Act clarifying the issue. It is further observed by the Ld. CIT(A) that it is not clear that the assessee had discharged their primary onus of bringing on record all the facts and evidences justifying the expenditure and, therefore, it appears as if there may be some ulterior motive behind this expenditure. Ld. CIT(A), therefore, refused to interfere with the assessment and confirmed the disallowance and consequent addition.

Assessee is, therefore, before us in this appeal stating that the findings of the authorities below are factually and legally incorrect. The orders of the authorities below are also assailed on the ground that at no point of time the authorities called upon the assessee to explain anything that was in their mind and without providing any opportunity on the issue they disallowed the expenses. It is the submission of the Ld. AR that the assessee had no occasion to file any document before the learned assessing officer because the learned

Per contra it is the submission of the Ld. DR that at no point of time the assessee justified the expenditure or shown it to have been incurred and as rightly observed by the Ld. CIT(A) in the impugned order. the onus lies on the assessee to prove that the assessee had incurred the expenditure in the 1st place and that there is justification for the same in the 2nd place. She, therefore, submitted that there are no reason to interfere with the impugned order.

We have gone through the record in the light of the submissions made on either side. Assessment order does not reveal that the disallowance was made for want of any evidence to be produced by the assessee. It simply speaks that since no export receipts have accrued to the assessee for the financial year 2012-13, such expenses cannot be allowed as a deductible under section 37 of the Act. Further the impugned order speaks that the assessee did not produce the documents to show that such an expenditure was incurred and justified. It does not appear from the record that either the learned assessing officer or the Ld. CIT(A) called upon the assessee to produce any of the documents or to explain anything in this regard. We find

In view of this set of circumstances, we are of the considered opinion that it is a fit case to set aside the impugned order and remand issue of allowability of the business development expenses to the file of the learned assessing officer to take a view in the light of the additional evidences filed by the assessee and the decision in the case of EKL Appliances Ltd (supra) after affording an opportunity to the assessee on the requirement of any documents or any explanation as the case may be. We accordingly set aside the impugned order and remand issue of business development expenses to the file of the learned Ld. AO for compliance with or direction. Grounds of appeal are answered accordingly.

In the result appeal of the assessee is allowed for statistical purpose. Order pronounced in the Open Court on 06.02.2019.