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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश / O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the learned Commissioner of Income Tax (Appeals)-13, Chennai in dated 28.02.2018 for the assessment year 2014-15.
Smt. Duraisamy Lakshmi, Proprietor of VDC Enterprises, is engaged in the whole sale business of products of Britannia, Kellogs, Pepsico and Johnson & Johnson. While making assessment for the assessment year 2014-15, on examination of bills / vouchers
Rs.9,14,143/-, the Assessing Officer found that they were self-made vouchers containing description such as tea, coffee, batta towards staff etc. The Assessing Officer disallowed it, holding, inter-alia, that these are self-made vouchers, there is no relation with sales expenses, the assessee has claimed staff welfare expenses separately and she is unable to give any satisfactory explanation. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld.CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.
The Ld.AR submitted that the Ld.AO has not seen the voucher account of sales expenses properly. The claim included expenses like fuel and diesel at Rs.1,69,183/- which have been paid through cheques. Leaving this sum, the balance amount incurred towards tea, coffee and batta expenses comes to Rs.7,45,230/- only instead of Rs.9,14,413/- considered by the Assessing Officer. The amount of Rs.7,45,230/- incurred towards tea, coffee and batta expenses on sale of Rs.20,02,74,928/- works out to 0.37%, which is lower than 0.45% incurred on sales of Rs.16,71,31,545/- made in the last year. The assessee’s nature of business is such that only hand-made vouchers could be maintained. The assessee has incurred only a minimum expenditure towards business promotion expenses
compared to the sales shown in the accounts. In the assessment made for the assessment year 2013-14, out of Rs.7,56,365/- incurred under the head sales promotion expenses, the Assessing Officer disallowed only a sum of Rs.50,000/- on which the assessee has not filed any appeal and accepted the order of the Assessing Officer. Whereas, for this assessment year 2014-15, the entire amount shown in the P&L account has been disallowed which is not reasonable. If the diesel and fuel expenses of Rs.1,69,183/- which were paid through cheques are deducted from Rs.9,14,413/-, then, the assessee has incurred Rs.7,45,230/- only towards these purposes, which is lower than the amount incurred in the earlier assessment year. Therefore, the Ld.AR submitted that the Ld.CIT(A) without properly considering the facts and circumstances of the assessee’s case, dismissed the appeal. In view of the above, the Ld.AR pleaded that the appeal may be allowed. Per contra, the Ld.DR supported the order of the lower authorities.
We heard the rival submissions. The assessee is in the whole sale business of products of Britannia, Kellogs, Pepsico and Johnson & Johnson and claimed Rs.7,45,230/- towards business promotions expenses comprising tea, coffee and batta expenses. The assessee pleads that in view of the nature of her business, she can only
maintain hand-made vouchers and the amount incurred is reasonable vis-a-vis last year. The percentage of expenses claimed works out to 0.37% on sales, which prima-facie is reasonable, compared to 0.45% sales of earlier year. Since, the Assessing Officer had disallowed only Rs.50,000/- on the similar claim made in the earlier year, we deem it fit to sustain a disallowance of Rs.50,000/- alone towards possible irregularity, if any. Therefore, the Assessing Officer is directed to restrict the disallowance at Rs.50,000/- instead of Rs.9,14,413/-. The assessee’s appeal is allowed to this extent.
In the result, the appeal is partly allowed.
Order pronounced on the 26th July, 2019 at Chennai.