DCIT, NEW DELHI vs. M/S SIEL EDIBLE OILS LTD., DELHI

Following grounds have been raised in this appeal:

Facts of the case in brief are that the assessee filed the return of income declaring a loss of Rs.1,93,73,757/- on 19.09.2008 which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). Later on, the case selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had debited an amount of Rs.15,37,848/- in its profit and loss account on account of sales commission expenses. The AO asked the assessee to furnish the details along with documentary evidences of the said expenses. In response, the assessee furnished the requisite detail vide letter dated 22.11.2010. The AO after considering the submissions of the assessee observed that no bill/vouchers and agreement with the parties to whom such payments were made were Siel Edible Oils Ltd. furnished by the assessee to substantiate the claim and even if any such agreement existed, the transaction was not beyond doubt, therefore, it was established that the expenses were not wholly and exclusively incurred for the purpose of business activities. Accordingly, disallowance of Rs.15,37,848/- was made.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee was maintaining full details in respect of each of the heads of the expenses and the accounts were duly audited. It was further submitted that the copies of vouchers had not been furnished just for the reason of being voluminous and if the AO was not satisfied with the details furnished by the assessee, he ought to have required the assessee to submit further detail/copy of agreement/bills & vouchers in respect of any of the items. The assessee furnished the additional evidences in the form of vouchers, bills and other supporting documents. The ld. CIT(A) asked the AO to furnish the remand report after going through the material given by the assessee and verifying the contention. However, no report was received by the ld. CIT(A) in spite of various reminders sent vide letters dated 23.05.2012, 10.09.2012, 15.01.2013. Therefore, the ld. CIT(A) admitted the additional evidences

Now the department is in appeal. The ld. DR supported the order of the AO and reiterated the observations made by the AO.

In his rival submissions the ld. Counsel for the assessee reiterated the observations made by the ld. CIT(A) and strongly supported the impugned order.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO in spite of various opportunity given by the ld. CIT(A) did not comment on the additional evidences furnished by the assessee in the form of bills and vouchers, copies of the agreement relating to the commission paid on the sales. The ld. CIT(A) verified from the details furnished by the assessee that the expenses were incurred for the purpose of business which were allowable u/s 37(1) of the Act and that the amount of sales commission was very small in comparison to the quantum of sale. We, therefore, do not see any merit in this ground of the departmental appeal.

Vide Ground Nos. 2 & 3, the grievance of the department relate to the deletion of addition of R.29,74,798/- and Rs.25,31,881/- made by the AO on account of freight outward and advertisement respectively.

Facts related to these issues in brief are that the AO disallowed 25% of the freight outward expenses and total amount of the advertisements expenses by observing that the assessee did not provide any bills/vouchers to Siel Edible Oils Ltd. substantiate its claim and in its reply it had only given brief description of the expenses.

Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the additions made by the AO by observing that the copies of the bills and vouchers were never asked by the AO and he did not give an opportunity to the assessee to produce the supporting documents which were produced before the ld. CIT(A) and were test checked. According to the ld. CIT(A), the AO should have given a finding as to which vouchers were not genuine. He was of the view that the assessee was required to incur the advertisement and freight expenses for the sales of Rs.71,26,76,050/-. Accordingly, the addition made by the AO was deleted.

Now the department is in appeal.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the ld. CIT(A) admitted the additional evidences under Rule 46A(b) & (c) of the Income Tax Rules, 1962, those documents were not asked by the AO, so were not produced by the assessee during the assessment proceedings. However, the bills and Siel Edible Oils Ltd. vouchers to substantiate the claim of the expenses being incurred for the business purposes were furnished before the ld. CIT(A) who verified the same on test check basis. The ld. CIT(A) deleted the addition made by the AO by considering the volume of sales vis-à-vis the expenses incurred on freight outward and advertisement. In our opinion, the ld. CIT(A) was justified in deleting the addition made by the AO. We do not see any valid ground to interfere with the findings of the ld. CIT(A) on these issues.

In the result, appeal of the department is dismissed. (Order Pronounced in the Court on 13/01/2016)