MAHARANI OF INDIA,NEW DELHI vs. ACIT, NEW DELHI

The addition has been made on suspicion and surmises without any material on record.

The addition made is against the law and facts of the case.

The brief facts of the case are that return of income was filed on 29.9.2012 at Rs. 38,12,390/- and processed u/s. 143(1) of the I.T. Act on the same income. On selection of case of scrutiny, notice u/s. 143(2) of the I.T. Act, 1961 was issued on 20.8.2013. Subsequently, notice u/s. 142(1) of the I.T. Act, 1961 was also issued on 19.5.2014. In compliance to notices, Ld. AR of the assessee attended the hearing from time to time and furnished the written submissions and required details called for. Books of accounts and bills / vouchers etc. were produced and put to test. Thereafter, AO observed that on perusal of P&L account of the assessee, it was noticed that assessee has debited Rs. 66,12,203/- on account of travelling and conveyance expenses. However, no amount on account of use of assets / facilities by the assessee and their family members has been added back by the assessee. Accordingly, the AO added Rs. 6,61,220/- vide his order dated 27.2.2015 passed u/s. 143(3) of the I.T. Act, 1961.

During the hearing, Ld. Counsel of the assessee has filed a Paper Book containing pages 1 to 17 having the copy of letter sent to ACIT dated 18.2.2015; copy of written submissions before the CIT(A); copy of details of foreign traveling expenses; copy of domestic travelling expenses and copy of month-wise details of conveyance expenses. He stated that assessee during the year spent a sum of Rs. 66,12,203/- on account of travelling including local travelling and conveyance in order to meet the competition and to obtain the orders, as a 2 result the sales have increased by Rs. 8 crores and in the subsequent year by Rs. 15 crores. Therefore, he requested that the expenses incurred are reasonable and may be allowed.

On other hand, Ld. DR has relied upon the orders of the authorities below and stated that the order of the Ld. CIT(A) is a well reasoned and the same does not need any interference on my part, hence, the same may be upheld and accordingly, the appeal of the assessee may be dismissed.

I have heard both the parties and perused the records, especially the orders of the revenue authorities and the Paper Book alongwith its enclosures. After perusing the Paper Book including letter to ACIT dated 18.2.2015, copy of written submissions before CIT(A), copy of details of Foreign Travelling Expenses, Copy of details of domestic travelling expenses; and copy of monthwise details of conveyance expenses, I find that AO has disallowed this expense without pointing out any defect in the books of account or in the evidence filed by the assessee which is merely on the basis of estimation and on presumption and assumption only, which is not permissible in the eyes of law. I also find that the said expenses have been incurred by the assessee to meet the competition for which the assessee has to travel abroad to obtain the orders and to keep in constant touch with the buyers abroad and for this purpose the assessee’s firm has to explore new markets for the exports of goods. It was also seen that the sale of the assessee has increased by Rs. 8 crores and in the subsequent year by Rs. 15 crores which was only possible due to the efforts made by the three working partners. In my considered opinion, the expenses incurred by the assessee seems to be genuine and therefore, I accept the same and accordingly, delete the addition of Rs. 6,61,220/- on account of travelling and conveyance expenses made by the AO and allow the ground the appeal of the assessee.

In the result, the Appeal of the Assessee is allowed.