GREEN AIRWAYS PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE- 10(2), NEW DELHI

In the instant case, the Assessee by raising grounds of appeal mainly challenged three additions/disallowances. The first disallowance of Rs.50,50,000/- pertains to business promotion expenses which was made by the Assessing Officer. The Assessing Officer from Profit and loss account of the Assessee company noticed that the Assessee company has debited an amount of Rs.81,01,771/- on account of business promotion expenses. Therefore, vide letter dated 16.06.2015, asked the Assessee to submit the details of expenses which increased more than 50% as that of the last year. In compliance, the Assessee submitted the details of business promotion expenses.

The Assessee challenged the said addition before the Tribunal and to support the expenses of Rs.50,50,000/- filed an application for admission of additional evidence under Rule 29 & 30 of ITAT Rules, 1963 and claimed that Shri Harcharanjeet Singh Dang who was the Main Owner/Incharge of the management of Assessee company for a long time and during the assessment proceedings as well, was not well and ultimately died on 02.04.2016 within few days of the passing of the assessment order. As the affairs of the Assessee company were handled by Late Shri Harcharnjeet Singh, therefore, correct position with regard to claim of expenses could not be brought out before the Assessing Officer as well as before the ld. Commissioner, which resulted into the findings that the Assessee has distributed the costly gifts to the officials of the Go-Air for procuring business orders, which in fact is factually incorrect as the sale promotion expenses have been made on account of gifts distributed to the Cargo Agents who have achieved the sale targets. The Assessee in support of its claim also filed copy of sales promotion scheme launched by the Assessee company, chart giving details of achievement of sales figures, sample copies of appreciation certificates issued to the customers and photographs showing distribution of diamonds and gold coins.

On the contrary, the ld. DR by drawing our attention to the ITR acknowledgement dated 30.09.2013 for the A.Y. under consideration, claimed that in the instant case ITR was filed by Shri Tejinderjeet Dang therefore, the claim of the Assessee is not genuine. Further, both the authorities below on the basis of the claim made by the Assessee, given concurrent findings and therefore, the decision of the ld. Commissioner in affirming the addition under consideration, do not call for any interference.

We have given thoughtful consideration to the peculiar facts and circumstances of the case and observe that though there are concurrent findings of the authorities below qua the addition in hand, however, from the copy of the Scheme launched by the Assessee for diamond, gold cargo offer (page 58 of the paper book), achievement certificates to different persons and photographs handing over the gifts, the claim of the Assessee prima facie appears to be legitimate and in our considered opinion goes to the root of the addition under consideration and also essential for just decision of the controversy in hand, hence, we by taking into the peculiar facts and circumstances, referred to above, are inclined to remand the instant issue to the file of the Assessing Officer for decision afresh, suffice to say, by affording reasonable opportunity of being heard to the Assessee.

Second issue pertains to the sustenance of the addition to the extent of Rs.9,11,947/- on account of repair and maintenance expenses incurred at registered office of the Assessee. We observe that during the year under consideration, the Assessee has incurred expenses of Rs.39,28,099/- in respect of different locations of the Assessee company including its registered office out of which the amount of Rs.38,99,299 (20,75,405 + 1823,894) was incurred in Gurgaon office and registered office, in Delhi which is also the residence of the Director.

We have given thoughtful consideration to the facts of the case and observe that it is not in dispute that the expenses of Rs.18,23,894/- have been incurred by the Assessee qua registered office which is owned by the Director who is also residing therein. There is no such finding that half half of the expenses of Rs.18,23,894/- have been incurred respectively on the registered office and on residence of the Director. Hence, for just decision of the case and for substantial justice and fair play, we are inclined to restrict the disallowance @ 25% of the total expenses of Rs.18,23,894/- incurred on the registered office. Consequently, the ground No. 2(i) to 2(iv) stand partly allowed.

The third issue relates to upholding the disallowance of Rs.3,14,829/- which pertains to period from 1st April, 2012 to June, 2012. On being asked to explain and justify the said claim of prior period expense, the Assessee could not furnish any satisfactory submission, therefore, the said amount was added in the income of the Assessee by the AO on the ground that the Assessee company is following mercantile system of accounting. The ld. Commissioner affirmed the said addition.

Considering the peculiar facts and the claim of the Assessee that the expenses have been crystallized during the year under consideration and the genuineness of the expenses is not in dispute and there is no legal impediment for not allowing such prior period expenses, we are inclined to remand the instant issue to the file of the AO for factual determination qua crystallization of expenses in the year under consideration and on finding the claim of the Assessee correct, grant the relief accordingly. Consequently, ground No. 3(i) to 3(iii) stand allowed for statistical purposes.

In the result, the appeal filed by the Assessee stands partly allowed for statistical purposes.