SMT. SARITA BHARALAWALA,CUTTACK vs. ACIT, CIRCLE-2(2), CUTTACK

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK ‘SMC’ BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER

ITA No.41 /CTK/2016 Assessment Year :2010-2011

Smt. Sarita Bharalawala, Vs. ACIT, Circle 2(2), Cuttack Choudhary Bazar, Cuttack. PAN/GIR No. AAWPB 4453 E (Appellant) .. ( Respondent)

Assessee by : Shri Mahavir Prasad Mundhra, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 03 /01/ 2017 Date of Pronouncement : 03/01/ 2017

O R D E R This is an appeal filed by the assessee against the order of CIT(A)-

Cuttack, dated 16.11.2015, for the assessment year 2010-2011.

the ld CIT(A) erred in confirming the addition of Rs.68,447/- out of claim of

Rs.2,69,804/- under the head “travelling and conveyance” and Rs.74,429/-

under the head “vehicle maintenance and fuel charges” and Rs.23,382/- @

10% under the head “sales promotion expenses” of Rs.2,33,820/-.

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authorities and materials available on record. During the course of

assessment proceedings, the Assessing Officer found that the assessee has

claimed Rs.6,68,868/- i.e. under the head “travelling & conveyance” of

Rs.2,69,804/- , vehicle maintenance and fuel expenses of Rs.74,429/- and

sales promotion expenses of Rs.2,33,820/-. The Assessing Officer observed

that the assessee could not furnish supporting documentary evidence such as

bills/vouchers to substantiate the claim of expenses incurred wholly for the

purposes of business and hence, disallowed 20% out of total expenses and

added Rs.1,15,610/- to the income of the assessee.

Officer under the head “travelling and conveyance” “vehicle maintenance and

fuel expenses” on the ground that it contained personal element in such

expenses. As regards sales promotion expenses, he restricted the

disallowance to 10% of the total expenses of Rs.2,33,820/- in place of 20%

made by the Assessing Officer.

claimed by the assessee are incurred wholly and exclusively for the purposes

of business of the assessee. He submitted that the travelling & conveyance

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expenses are incurred by the staff of the assessee company. He submitted

that there are hotel bills for the same. On a query by the Bench that whether

the person who stayed in the hotel as per the bill shown is staff as per muster

roll maintained by the assessee company, he submitted that no such muster

roll is maintained and the salary is paid by cash. In the above facts and

circumstances of the case, as the expenses claimed by the assessee is being

incurred otherwise than the business purposes of the assessee, personal uses

cannot be ruled out. Hence, I do not find any good and justifiable reason to

interfere with the order of the ld CIT(A), which is hereby confirmed and

Ground Nos.3 & 4 are dismissed.

ld CIT(A) erred in restricting the disallowance out of discount of Rs.2,06095/-

@ 10% in place of 20% made by the Assessing Officer.

authorities and materials available on record. In the instant case, the

Assessing Officer found that the assessee has debited Rs.10,30,477/- towards

discount from the gross turnover for arriving at the net turnover. The

Assessing Officer found that the average rate of discount as compared to the

net sales of the assessee works out to 2.5%. During the course of

assessment, the assessee was asked to produce the details of such discount

deducted from the gross sales, ledger copies and sale invoice copies for

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verification, which was complied with by the assessee. After verifying the

ledger copies, the Assessing Officer found that the percentage of discount

given on the sales varies from 2% to 2.5%. Hence, he disallowed 20% out of

the total discount claimed by the assessee.

report has observed that the discount is found to have been allowed through

issue of credit note there being no specific contract, agreement for such

purpose.. Apparently it is an unilateral accounting entry. As the discount is

not allowed in “Bills”, it is not verifiable whether the debtor is actual recipient

of the discount. There may be occasions when cash receipts from the debtors

could have been suppressed with the entry of discount in the ledger account

and hence, he restricted the disallowance to 10% out of total discount claimed

by the assessee.

been given by way of issue of credit note and hence, the observation of the

Assessing Officer that it can be cash received from the debtors which have

been suppressed with the entry of discount in the ledger account is without

any basis and, therefore, the disallowance should be deleted.

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been brought on record either by the Assessing Officer or by the ld CIT(A) to

show that the credit notes issues by the assessee represent the cash receipts

from the debtors, which have been suppressed with the entry of discount in

the ledger account. The disallowance has been made only on conjectures and

surmises by the Assessing Officer, which cannot be sustained in law without

bringing credible evidence on record. Hence, I set aside the orders of the

lower authorities on this issue and delete the disallowance made @ 10% out

of discount of Rs.2,06,095/- and allow this ground of appeal of the assessee.

ASST.REGISTRAR, ITAT, Cuttack