M/S. BHATTER SILVER & JEWELS (P) LTD.,KOLKATA vs. ITO, WARD - 5(3), KOLKATA, KOLKATA

The issue raised in Ground No. 1 (as revised) relates to the disallowance of Rs.2,20,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee’s claim for the expenses incurred on supply of snacks and foods.

The assessee in the present case is a Company, which is engaged in the business of “Making and Trading of Diamond, Gold & Silver Ornaments. The return of income for the year under consideration was filed by it on 29.09.2010 declaring total income of Rs.5,46,937/-. In the ./2014 Assessment year: 2010-2011 Page 2 of 6 Profit & Loss Account filed along with the said return, a sum of Rs.2,87,260/- was debited by the assessee on account of business promotion expenses. The said expenses claimed by the assessee were inclusive of sum of Rs.2,20,000/- paid by the assessee to M/s. Rilton International for supply of snacks and foods. In this regard, explanation offered by the assessee before the Assessing Officer was that different schemes were framed by it from time to time for business promotion, which involved get together of customers every month and the expenses in question were incurred for providing snacks and foods to the customers during such get together. This explanation of the assessee was not found acceptable by the Assessing Officer and he proceeded to disallow the expenses of Rs.2,20,000/-claimed by the assessee for the following reasons given in the assessment order:- “(a) That although the assessee claimed that the bills were raised for alleged catering service by the concern [M/s Rilton International] throughout the year (during each month), bill was raised only on 31-03-2010.

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the ld. counsel for the assessee has reiterated before me the submissions made by the assessee on this issue before the authorities below, I find that the specific adverse findings/observations recorded by the Assessing Officer on verification of the relevant evidence filed by the assesese in the form of one bill issued by M/s. Rilton international are sufficient to show that there was failure on the part of the assessee to establish on evidence that the expenditure in question was wholly and exclusively incurred for the purpose of its business. The claim of the assessee of having promoted different schemes of business promotion and having organized get together of customers every month is also not supported by any cogent or convincing evidence. I, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and upholding the same, I dismiss Ground No. 1 of the assessee’s appeal.

In Ground No. 2, the assessee has challenged the action of the ld. CIT(Appeals) in sustaining the disallowance of 50% made by the Assessing Officer out of tour and travel expenses to the extent of 25%.

Under the head of business promotion expenses, a sum of Rs.67,260/- was claimed by the assessee on account of tours and travels undertaken by its Directors and other persons for exhibitions. Before the Assessing Officer, the assessee, however, could not establish the business ./2014 Assessment year: 2010-2011 Page 4 of 6 expediency of the said expenditure. The Assessing Officer also found many shortcomings and anomalies in the claim made by the assessee on this issue as specifically pointed out on pages 3 & 4 of the assessment order. Accordingly, he held that the claim of the assessee for expenditure incurred on tours and travels was not fully verifiable and made a disallowance of Rs.33,630/- being 50% of the total expenses claimed by the assessee. On appeal, the ld. CIT(Appeals) upheld the action of the Assessing Officer in making disallowance on account of tours and travels expenses in principle after having found that the son of one of the Directors of the assessee, who was not even an employee of the assessee- company, had also undertaken the travel. He, however, considered the disallowance of 50% made by the Assessing Officer to be excessive and restricted the same to 25%.

As regards the issue involved in Ground No. 3 relating to the disallowance of Rs.35,500/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40A(3) of the Act, the ld. counsel for the assessee has submitted that the amount of Rs.35,500/- in question ./2014 Assessment year: 2010-2011 Page 5 of 6 having been deposited by the assessee directly in the Bank account of the concerned vendor, no disallowance under section 40A(3) is called for in view of the decision of the Hon’ble Gujarat High Court in the case of Anupam Tele Services –vs.- ITO (Tax Appeal No. 556 of 2013 dated 22.01.2014). This issue thus is squarely covered in favour of the assessee by the said decision of the Hon’ble Gujarat High Court and respectfully following the same, we delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue under section 40A(3) of the Act.

As regards the issue involved in Ground No. 4 relating to the addition of Rs.20,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of advance received by the assessee treating the same as its undisclosed income, no material argument has been advanced on behalf of the assessee at the time of hearing before me to take a different view on this issue. I, therefore, uphold the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue and dismiss Ground No. 4.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on October 04, 2016.