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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SH. R.K. PAND
ORDER PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 19.12.2017 passed by the CIT (A)-VII, New Delhi relating to A. Y. 2014-15.
None appeared on behalf of the assessee despite service of notice. Therefore, I proceed to decide the appeal on the basis of material available on record and after hearing the Ld. DR.
Facts of the case, in brief, are that the assessee is a company engaged in the business of marketing / trading of medicines under its own brand. It filed its return of income on 26.12.2014 declaring income of Rs.20,90,580/-. During the course of assessment proceedings the Assessing Officer observed that the assessee has claimed Rs.4,72,89,613/- on account of business promotion expenses. From the details furnished by assessee justifying the claim such expenses, the Assessing Officer observed that the assessee could not furnish some of the bills for verification. Certain bills furnished by the assessee revealed that some of the expenses appear to be personal in nature. In some of the bills expenses incurred on account of travelling does not bear the date/ signature of the party. He further noted that some bills on account of boarding / lodging show that these are paid in cash above Rs.20,000/- in violation of provisions of section 40A(3) of the IT Act. In view of the above the Assessing Officer disallowed an amount of Rs.11,82,240/- being 2.5% of the total expenses of Rs.4.73 crores on estimate basis.
3.1 In appeal the Ld. CIT(A) upheld the action of the Assessing Officer by observing as under :-
“3.2 I have carefully considered the assessment order and written submission filed by the Ld. AR. In assessment proceedings, the appellant claimed Rs.4,72,89,613/- on account of business promotional expenses. The appellant was asked to file details of these expenses with documentary evidences and to justify the claim of expenses for the purpose of business. It has been submitted that the appellant is not selling any established product, hence has to spend lot of money to advertise its products, so that doctors and customer get to know about the products of the company. Necessary details, confirmations of some parties and certain bills were filed. The appellant submitted that these expenses were incurred wholly and exclusively for the purposes of business and with these business promotion expense, the turnover of the company has also increased. The explanation of the appellant was not wholly acceptable. It is seen from the assessment order that some of the expenses incurred on travelling does not bear the date/ signature of the party raising the bill. In some bills (boarding/ lodging) payment in cash above Rs.20,000/- has been made which is clear violation of Section 40A(3) of the Act. In view of this, Rs.11,82,240/- which is 2.5% of the business promotion expenses of Rs.4,72,89,613/- was correctly disallowed. Considering the facts and circumstances of the case in its totality, I hold that the Assessing Officer was justified in making the addition. Therefore, the addition made by the Assessing Officer is confirmed. This ground of appeal is rejected.”
Aggrieved with such order of the CIT(A), the assessee is in appeal by raising following ground of appeal :-
“1. The Learned CIT(A) has erred on facts and in Law in confirming addition of Rs.11,82,240/- being 2.5% of expense incurred under business promotion for violation of Section 40 A(3) of Income Tax Act, whereas the company has made all the payments through account payee cheques.”
I have heard the arguments by the Ld. DR and perused the material available on record. I find that the Assessing Officer made addition of Rs.11,82,240/- on account of non submission of certain bills, incomplete details in some cases and violation of provision u/s 40A(3) on account of cash payments in excess of Rs.20,000/-. It is the case of the assessee as per grounds of appeal
that all the payments were made through account payee cheques and therefore provision of section 40. A(3) are not applicable. Considering the totality of the facts of the case and in the interest of justice I deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one final opportunity to the assessee to substantiate its case by producing the relevant details. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
The order was pronounced in the open court at the time of hearing itself i.e. on 10.12.2018.