M/s. Polybond India Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 4, Pune

ITA 1012/PUN/2018

AI Insights

The case involves appeals by M/s. Polybond India Pvt. Ltd. against the orders of the Commissioner of Income Tax (Appeals)-3, Pune, which confirmed the ad-hoc additions made by the AO under section 143(3) of the Income Tax Act, 1961 for the assessment years 2013-14 and 2014-15. The additions were related to local conveyance, conveyance transport, and sales promotion expenses, which were alleged to have non-business use. The Tribunal found that the AO had not pointed out any specific defects in the vouchers and that the disallowances were made on an ad-hoc basis without concrete evidence of non-business use.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134161 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-10-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 06-06-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

आयकर अपीलीय अिधकरण “ए” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No’s.1012 & 1013/PUN/2018 िनधाᭅरण वषᭅ / Assessment Years : 2013-14 & 2014-15 M/s.Polybond India Pvt. Ltd., GAIA Apex, S.No.33/1/1/2, Plot D, First Floor, Viman Nagar, Nagar Road, Pune – 411014. PAN: AABCP 1261 E V s The Dy.CIT, Circle-4, Pune. Appellant/ Assessee Respondent /Revenue Assessee by Shri Kishor B Phadke – AR Revenue by Shri Ramnath P Murkunde – DR Date of hearing 19/10/2022 Date of pronouncement 13/01/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the Assessee are directed against the order of ld.Commissioner of Income Tax(Appeals)-3, Pune; both dated 26.04.2018emanating from the Assessment Orders dated 21/3/2016 and 26/12/2016 passed under section 143(3) of the Act, 1961 for the A.Y.2013-14 and 2014-15, respectively. The Assessee for A.Y. 2013-14 has raised the following grounds of appeal: “1. The learned CIT(A) erred in law and on facts in confirming the ad-hoc addition of Rs.1,88,786/-, being 50% of the addition made by the learned AO, amounting to Rs.3,77,562/- out of “local conveyance and “conveyance transport”, alleging the non-business use of the above expenses. 2. The learned CIT(A) erred in law and on facts in not appreciating that at the max, alleged non-business element included in the ITA No’s.1012& 1013/PUN/2018 (02 Appeals) M/s.Polybond India Pvt. Ltd.,[A] 2 disallowed travelling expenses will be in the nature of benefit to employees and such benefit will be a deductible expense for the appellant anyway.” 1.1 The Assessee for A.Y. 2014-15 has raised the following grounds of appeal: “1. The learned CIT(A) erred in law and on facts in confirming the ad-hoc addition of Rs.7,06,350/-, being 50% of the addition made by the learned AO, amounting to Rs.14,12,700/- out of “TRAVELLING EXPENSES:, alleging the non-business use of the above expenses. 2. The learned CIT(A) erred in law and on facts in confirming the ad- hoc addition of Rs.4,63,900/-, being 50% of the addition made by the learned AO, amounting to Rs.9,27,800/- out of “Sales promotion expenses”, alleging the non-business use of the above expenses. 3. The learned CIT(A) erred in law and on facts in not appreciating that at the max, the alleged non-business element included in the disallowed travelling expenses and sales promotion expenses will be in the nature of benefit to employees and such benefit will be a deductible expense for the appellant anyway.” 2. Brief facts of the case : The relevant part of the assessment order is reproduced here as under: “06. Disallowance out of Travelling Expenses. The assessee has debited Rs.39,92,592/- under the head Local Conveyance as against the previous year Rs.29,50,891/-. Further the assessee has deducted conveyance transport amount of Rs.1,14,70,056/- as against Rs.87,36,061/-. The assessee was requested to justify the increase in local conveyance and conveyance expense. The assessee was also requested to submit books of account alongwith vouchers for the said expenses. The assessee produces the vouchers for verification. On random Verification, it was observed that some vouchers are not supported by third party invoices. The preponderance of probability indicates that non business use of above expenses cannot be ruled out. In view of the above facts and circumstances, 10% out of difference of the previous year of local conveyance and conveyance expense Rs. Rs.3,77,572/-(10% of the Rs.3,77,572/-) is disallowed u/s37(1) and added to the total income.” ITA No’s.1012& 1013/PUN/2018 (02 Appeals) M/s.Polybond India Pvt. Ltd.,[A] 3 3. The ld.CIT(A) upheld the addition made by the Assessing Officer(AO). “7.3.3 The submission of the appellant has been considered. It is true that the AO has not pointed out any specific vouchers which he doubted, however, it is also true that non business use of above expenses cannot be ruled out.” 4. The ld.Authorised Representative(ld.AR) of the assessee submitted that the entire disallowance is based on surmises and conjectures. The Assessing Officer(AO) has not brought out any specific defect in the vouchers and not even mentioned which voucher is defective. The ld.AR also submitted that the assessee is a company, therefore, there cannot be any personal element in such expenditures. 5. The ld.Departmental Representative(ld.DR) for the Revenue relied on the orders of the Lower Authorities. 6. We have heard both the parties and perused the records. Both these appeals were heard together. It is observed that the AO had made the disallowance out of Travelling Expenses on ad-hoc basis stating that pre-ponderance of probability indicates that non-business use cannot be ruled out. However, the AO has not specifically mentioned which vouchers were defective and what kind of non- business use company indulged into. The assessee is a private limited company and the expenditure had been incurred for its ITA No’s.1012& 1013/PUN/2018 (02 Appeals) M/s.Polybond India Pvt. Ltd.,[A] 4 business purposes. In the absence of any specific defect, the disallowance made by AO is merely on surmises. There is no basis for the disallowance. Therefore, the AO is directed to delete the addition, accordingly grounds of appeal of the assessee are allowed. 7. In the result, appeal of the assessee is allowed. ITA No.1013/PUN/2018: 8. Brief facts of the case: The relevant part of the assessment order is reproduced here as under: “1. Travelling and conveyance Expenses: The assessee has booked Travelling expenses of Rs.2,82,54,000/- which involves travelling inland and foreign travelling for the sales promotion. But, the assessee has claimed sales promotion expenses under the separate head sales promotion to the tune of Rs.92,78,000/- and export promotion expenses to tune of Rs.1,26,000/-. Thus the quantum of promotional expenses is huge. The AR could not produce and asked supporting to the full as asked for the domestic conveyance. In the lack of the supporting and probability of non business purpose involved in it, the disallowance of 5% of travelling expenses is made. 2. Sales Promotion: Sales promotion expenses of Rs.92,78,000/- is booked. As stated above the quantum for the sales promotion expenses is huge. The supporting for the same are foreign tours bills and lunch expenses alongwith the seminar / exhibition expenses. Due to repetitive head and unjustified quantum, the disallowance of 10% of sales promotion expenses is made.” 9. The Ld.CIT(A) has confirmed the disallowance. 10. We have heard both the parties and perused the records. The Ld.CIT(A) has specifically mentioned in the order that the AO has not pointed out any specific vouchers which is doubted. Thus, it is an ITA No’s.1012& 1013/PUN/2018 (02 Appeals) M/s.Polybond India Pvt. Ltd.,[A] 5 admitted fact by the Ld.CIT(A) that no specific defect was pointed out by the AO. Thus, the disallowance is based on surmises. The AO has failed to prove that the expenditure was not incurred wholly and exclusively for business purpose. Hence, the AO is directed to delete the disallowance of Rs.7,06,350 and Rs.4,63,900/-. Accordingly, grounds of appeal of the assessee are allowed. 11. In the result, appeal of the assessee is allowed. 12. To sum up, both appeals of the assessee are allowed. Order pronounced in the open Court on 13 th January, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 13 th Jan, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “ए” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.