RONYD HEALTHCARE PVT. LTD., NEW DELHI V. ITO, WARD- 21(4), NEW DELHI

ITA 1684/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0045 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 09-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S THUING ALENG
• Keywords: Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE S H. R.K. PAND , ACCOUNTANT MEMBER ITA NO. 16 84 / DEL/201 8 ASSESSMENT YEAR: 20 14 - 15 R ONYD HEALTHCARE PRIVATE LIMITED, SHOP NO. 13 - 14, IST FLOOR, JMD REGENT ARCADE, M. G. R OAD, GURUGRAM HARYANA - 122001 PAN : AACCR6051R VS ITO WARD 21 (4) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. P.S. THUING ALENG , SR. DR DATE OF HEARING: 1 0 / 1 2 /2018 DATE OF PRONOUNCEMENT: 10 /12/2018 ORD ER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.12.2017 P A SSED BY THE CIT (A) - VII , N EW DELHI RELATING TO A. Y. 20 14 - 15 . 2 2 . NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. THEREFORE, I PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR. 3. F ACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA RKETING / TRADING OF MEDICINES UNDER ITS OWN BRAND. IT FILED ITS RETURN OF INCOME ON 26.12.2014 DECLARING INCOME OF RS.20,90,580/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S CLAIMED RS.4,72,89,613/ - ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. FROM THE DETAILS FURNISHED BY ASSESSEE JUSTIFY ING THE CLAIM SUCH EXPENSES , T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT FURNISH SOME OF THE BILLS FOR VERIFICATION. CERTAIN BILLS FURNISHED BY THE ASSESSEE REVEALED THAT SOME OF THE EXPENSES APPEAR TO B E PERSONAL IN NATURE. IN SOME OF THE BILLS EXPENSES INCURRED ON ACCOUNT OF TRAVELLING DOES NOT BEAR THE DATE/ SIGNATURE OF THE PARTY. HE FURTHER NOTED THAT SOME BILLS ON ACCOUNT OF BOARDING / LODGING S H O W THAT THESE ARE PAID IN CAS H ABOVE RS.20,000/ - IN VIOLATION OF PROVISION S OF SECTION 40A(3) OF THE IT ACT. IN VIEW OF THE ABOVE THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.11,82,240/ - BEING 2.5% OF THE TOTAL EXPENSES OF RS.4.73 CRORES ON ESTIMATE BASIS. 3.1 IN APPEAL THE LD. CIT(A) UPH E LD THE AC TION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : - 3.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND WRITTEN SUBMISSION FILED BY THE LD. AR. IN ASSESSMENT PROCEEDINGS, THE APPELLANT CLAIMED RS.4,72,89,613/ - ON ACCOUNT OF BUSINESS PROMOTIONA L EXPENSES. THE APPELLANT WAS ASKED TO FILE DETAILS OF THESE EXPENSES WITH DOCUMENTARY EVIDENCES AND TO JUSTIFY THE CLAIM OF EXPENSES FOR THE PURPOSE OF BUSINESS. I T HAS BEEN SUBMITTED THAT THE APPELLANT IS NOT SELLING ANY ESTABLISHED PRODUCT, 3 HENCE HAS TO SPEND LOT OF MONEY TO ADVERTISE ITS PRODUCTS , S O THAT DOCTORS AND CUSTOMER GET TO KNOW ABOUT THE PRODUCTS OF THE COMPANY. NECESSARY DETAILS, CONFIRMATIONS OF SOME PARTIES AND CERTAIN BILLS WERE FILED. THE APPELLANT SUBMITTED THAT THESE EXPENSES WERE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND WITH THESE BUSINESS PROMOTION EXPENSE, THE TURNOVER OF THE COMPANY HAS ALSO INCREASED. THE EXPLANATION OF THE APPELLANT WAS NOT WHOLLY ACCEPTABLE. IT IS SEEN FROM THE ASSESSMENT ORDER THAT S OME OF THE EXPENSES INCURRED ON TRAVELLING DOES NOT BEAR THE DATE/ SIGNATURE OF THE PARTY RAISING THE BILL. IN SOME BILLS (BOARDING/ LODGING) PAYMENT IN CASH ABOVE RS.20,000/ - HAS BEEN MADE WHICH IS CLEAR VIOLATION OF SECTION 40A(3) OF THE ACT. IN VIEW OF THIS, RS.11,82,240/ - WHICH IS 2.5% OF THE BUSINESS PROMOTION EXPENSES OF RS.4,72,89,613/ - WAS CORRECTLY DISALLOWED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITS TOTALITY, I HOLD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITIO N. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. THIS GROUND OF APPEAL IS REJECTED. 4. AGGRIEVED WITH SUCH ORDER OF THE C IT(A), THE ASSESSEE IS IN APPEAL BY RAISING FOLLOWING GROUND OF APPEAL : - 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING ADDITION OF RS.11,82,240/ - BEING 2.5% OF EXPENSE INCURRED UNDER BUSINESS PROMOTION FOR VIOLATION OF SECTION 40 A(3) OF INCOME TAX ACT, WHEREAS THE COMPANY HAS MADE ALL THE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES. 5. I H AVE HEARD THE ARGUMENTS BY THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THE ASSESSING OFFICER MADE ADDITION OF RS.11,82,240/ - ON ACCOUNT OF NON SUBMISSION OF CERTAIN BILLS, INCOMPLETE DETAILS IN SOME CASES AND VIOLATION OF PROVISI ON U/S 40A(3) ON ACCOUNT OF CASH PAYMENTS IN EXCESS OF RS.20,000/ - . IT IS THE CASE OF THE ASSESSEE AS PER GROUNDS OF APPEAL THAT ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND THEREFORE PROVISION OF SECTION 40 A(3) ARE NOT APPLICABLE. CONSI DERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE 4 I DEEM IT PROPER TO RESTORE TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE FINAL OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE I T S CASE BY PRODUCING THE RELEVANT DETAILS. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURP OSES. 6 . I N THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. THE O RDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF I.E. ON 1 0 .12.2018. SD/ - ( R. K. PANDA ) ACCOUNTANT MEMBER *NEHA* DATE: - . 1 2 .2018 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 DATE OF DICTATION 10.12.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.12.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 10.12.2018 DATE ON WHICH THE FAIR ORDER IS PLACED B EFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 10.12.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 10.12.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 10.12.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DA TE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER