SHRI PRADEEP KUMAR SOLANKI (HUF),BENGALURU vs. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 2(2), BENGALURU

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ITA 245/BANG/2017Status: DisposedITAT Bangalore15 July 20196 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal set aside the issue of disallowance of sales promotion expenses to the AO for due verification of details. The assessee was granted an opportunity to present its case, and the AO was directed to conduct necessary investigations.

What were the facts?

The assessee declared sales turnover of Rs. 55.34 crores and claimed sales promotion expenses. The Assessing Officer (AO) disallowed these expenses, treating them as bogus, as no documents were produced for transporting gift items to clients. The CIT(A) upheld this disallowance.

What were the issues?

Whether the disallowance of sales promotion expenses was justified without proper verification and opportunity. The validity of the notice issued under Section 143(2) was also raised but withdrawn.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 142(1),Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES : “C”, BANGALORE

Before: SHRI A.K.GARODIA & SMT.BEENA PILLAI, JUDICAL MEMBER

For Appellant: Shri V. Srinivasan, Advocate
For Respondent: Shri P.Dhivahar, Addl. CIT

PER BEENA PILLAI, JUDICIAL MEMBER : Present appeal has been filed by assessee against order dated 08/12/16 passed by Ld. CIT (A)-2, Bengaluru, for assessment year 2012-13 on following grounds of appeal:

1.

1. The orders of the authorities below in so far as they are against the appellant are opposed to la, equity, weight ITA No.245(B)/2017 2 of evidence, probabilities, facts and circumstances of the case.

2. The invocation of the provisions of sections 143(2) of the Act is bad in law as there is no material inducing the reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible to issue notice u/s 143(2) and consequently, the final assessment made is bad in law and liable to be annulled.

3. The ld. CIT(A) is not justified in upholding the disallowance of a sum of Rs.11,52,385/- being the sales promotion expenses under the facts and in the circumstances of the appellant’s case. The disallowance is purely on suspicion and surmise, assumptions and presumptions and deserves to be deleted. 3.1 Without prejudice to the above, the disallowance made is excessive and liable to reduced substantially.

4.

Without prejudice to the right to seek waiver with Hon'ble CCIT/DG the appellant denies himself liable to be charged to interest u/s 234A and 234B of the Act, which under the facts and in the circumstances of the appellant’s case and the levy deserves to be cancelled.

2.

Brief facts of the case are as under: Assessee filed its return of income for year under consideration declaring total income of Rs.22,19,000/- on 28/09/12. The return was processed under section 143 (1) of the IT Act, and subsequently taken up for scrutiny. Followed by which notice under section 142 (1) of the IT Act, 1961 was issued along with questionnaire and notice under section 143 (2) of the Act. In response to statutory 3 notices, representative of assessee appeared before Ld.AO and submitted information as called for.

3.

Ld.AO observed that assessee declared sales turnover of Rs. 55.34 crores for year under consideration, on which gross profit of Rs.1.26 crore was declared. Assessing officer accepted low profit percentage declared by assessee and explanation in respect of the same. It was observed that assessee paid commission which was called upon to be explained by Ld.AO. In response assessee filed various details wherein, he made expenses towards sales promotion. Ld.AO observed that assessee paid sum of Rs.2,09,300/- to the supplier of pens in Mumbai which was used to distribute amongst its client as sales promotion. Ld.AO recorded that, no documents were produced for transporting alleged gift items to client places and therefore entire sales promotion expenses was treated as bogus unwarranted and frivolous. He thus added commission paid to three persons as no details were filed by assessee and also disallowed sales promotion expenses made by assessee.

4. Aggrieved by additions made by Ld.AO, assessee preferred appeal before Ld.CIT (A) who gave part relief to assessee by deleting is the addition made on account of commission paid by assessee. However Ld.CIT (A) confirmed addition made on account of disallowance of sales promotion expenses.

5.

Aggrieved by order of Ld.CIT (A), assessee is in appeal before us now.

ITA No.245(B)/2017 4

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