Deputy Commissioner of Income Tax-12(1), Indore V. M/s CPR Distributors P.L., Indore

ITA 552/Ind/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9147 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-06-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: THRIBHUVAN SACHDEVA
• Keywords: Gift; Maximum Marginal Rate; Fair market value; Wrong claim; Commercial expediency
• Section: 143(3)

Judgement Text

CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.552/IND/2017 ASSESSMENT YEAR 2011-12 REVENUE BY SHRI K.G. GOYAL ASSESSEE BY SHRI THRIBHUV A N SACHDEVA, ADVOCATE DATE OF HEARING 19.06 .201 9 DATE OF PRONOUNCEMENT 09 .07.2019 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL PERTAINING TO THE ASSE SSMENT YEAR 2011-12 IS FILED AT THE INSTANCE OF THE REVE NUE FOR ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST THE ORD ER OF LD. DCIT - 2(1), INDORE VS. M/S. CPR DISTRIBUTORS PVT. LTD (M.P), 13, SNEH NAGAR, SAPNA SANGEETA, INDORE ( REVENUE ) (RESPONDENT ) PAN NO.AA BCC8324M CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 2 CIT(APPEALS)-I (IN SHORT CIT(A)), INDORE DATED 18 .05.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT 1961 (IN SHORT THE ACT) DATED 26.02.2014 FRAMED BY DCIT-5( 1), INDORE. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.67,00,000/- ON ACCOUNT OF COMMISSION EXPENSES BY IGNORING THE FINDINGS OF ASSESSING OFFI CER IN THE ASSESSMENT ORDER. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.43,27,751/- O N ACCOUNT OF VARIOUS EXPENSES BY IGNORING THE FINDINGS OF ASSESSING OFFI CER IN THE ASSESSMENT ORDER. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AME ND, MODIFY, SUBSTITUTE, DELETE AND OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING, IF NECESSITY SO ARISE. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYING OUT THE BUSINESS AS DEALER OF ELECTRONIC GOODS. E-RETURN OF INCOME FILED ON 8.9.2011 DECLARING INCOME OF RS.1,14,58,020/-. CASE SELECTE D FOR SCRUTINY FOLLOWED BY SERVING OF NOTICES U/S 143(2) AND 142(1 ) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O WHILE EXAMINING THE COMMISSION EXPENSES OBSERVED THAT A S UM OF CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 3 RS.67,00,000/- WAS PAID TO VARIOUS PERSONS COVERED UNDER THE CATEGORY OF RELATIVES U/S 40A(2)(B) OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE THAT COMMISSION PAID TO EMPLOYEES IS D IRECTLY RELATED TO THE EXTRA EFFORTS MADE BY THEM TO INCREASE THE S ALES BY AROUND 39% IN COMPARISON TO THE EARLIER YEARS. LD. A.O WA S NOT CONVINCED AND DID NOT ACCEPTED THE GENUINENESS OF THE COMMISS ION EXPENSES MERELY FOR THE FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE ANY OF THE COMMISSION PAYEE AND DISALLOWED THE COMMISSIO N EXPENSES OF RS.67,00,000/-. LD. A.O ALSO ON EXAMINING THE DETAI LS OF VARIOUS EXPENDITURE RELATING TO GENERAL PUBLICITY, SHOW ROOM, DIWALI FESTIVAL, INSURANCE DISALLOWED THE SAME AS THE ASSE SSEE FAILED TO PRODUCE VOUCHERS BEFORE HIM. ACCORDINGLY AFTER MAK ING DISALLOWANCE FOR COMMISSION EXPENSES AT RS.67,00,00 0/- AND DISALLOWANCE OF VARIOUS EXPENSES AT RS.45,90,961/-, INCOME ASSESSED AT RS.2,27,48,981/-. 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND SUCCEEDED. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ADDITIONS/DISALLOWANCE DELETED BY LD. CIT(A). CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 4 6. WE WILL FIRST TAKE UP GROUND NO.1 RELATING TO DI SALLOWANCE OF COMMISSION EXPENSES OF RS.67,00,000/- DELETED BY LD. CIT(A). LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DETAILED SUBMISSION FILED BEFORE THE LOWER AUTHORITIES AS WELL AS VARIOUS DOC UMENTARY EVIDENCES PLACED IN THE PAPER BOOK SUBMITTED THAT T HE COMMISSION EXPENSES HAS BEEN INCURRED AFTER MAKING DUE COMPLIA NCES OF THE NECESSARY FORMALITIES WHICH INCLUDED PASSING OF THE BOARD RESOLUTIONS, SPECIFIC WORK ASSIGNED TO EACH OF THE PAYEE AND COMMISSION CALCULATED ON THE BASIS OF SALES TARGET ACHIEVED. HE ALSO SUBMITTED THAT PAYMENT OF COMMISSION HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE AFTER DEDUCTING TAX AT SOURCE AND DULY OFFERED TO TAX BY RESPECTIVE PAYEES, WHO WERE SUBJE CT TO MAXIMUM MARGINAL RATE OF TAXATION SIMILAR TO THAT OF THE AS SESSEE AND THEREFORE THERE CANNOT BE A CASE OF PROVIDING ACCOM MODATION COMMISSION IN THE GARB OF REDUCING THE TAX LIABILI TY. HE FURTHER SUBMITTED THAT IN THE SUBSEQUENT YEARS THE CLAIM OF THE COMMISSION PAID TO SAME PAYEES HAS BEEN ALLOWED BY THE LD. A.O IN THE ASSESSMENT PROCEEDINGS AND NO DOUBT HAS BEEN RAISED ON THE GENUINENESS OF THE TRANSACTION. CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 5 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED AND SUPPORTING THE ORDERS OF LD. A.O SUBMITT ING THAT THE PAYMENT HAVE BEEN MADE TO RELATIVES/DIRECTORS OF TH E COMPANY WHICH ARE COVERED UNDER THE PROVISIONS OF SECTION 4 0A(2)(B) OF THE ACT AND THE LD. A.O HAS RIGHTLY DISALLOWED THE EXPE NSES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUES GRIEVANCE IN GROUND NO .1 IS AGAINST THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF COMMISSION EXPENSES OF RS.67,00,000/-. WE OBSERVE THAT THE ASS ESSEE IS A DEALER IN ELECTRONIC GOODS AND RUNNING SHOW ROOMS A T VARIOUS PLACES ACROSS MADHYA PRADESH FOR SALE OF ELECTRONIC GOODS. DURING THE YEAR UNDER APPEAL COMMISSION WAS PAID TO THE FO LLOWING PERSONS; S.NO. NAME COMMISSION 1 P.K. CHABRA RS.8,00,000 2 GAURAV PAHWA RS.8,00,000 3 ASHISH RAJE RS.8,00,000 4 SANJAY CHABRA RS.8,00,000 5 DEEPAK PAHWA RS.8,00,000 6 HEMANT PAHWA RS.8,00,000 7 MEGNA RAJE RS.3,00,000 8 RABINDRA RAJE RS.8,00,000 9 RAJENDRA RAJE RS.8,00,000 TOTAL RS.67,00,000 CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 6 9. ALL THE ABOVE PERSONS ARE EITHER DIRECTORS OR RE LATIVES/SHARE HOLDERS OF THE COMPANY AND FALLS UNDER THE CATEGORY OF RELATIVE U/S 40A(2)(B) OF THE ACT. WE FIND THAT THE LD. CIT(A) DELETED THE IMPUGNED DISALLOWANCE BY GIVING FOLLOWING FINDING O F FACT; 7. GROUND NO. 1:- THIS GROUND OF THE APPELLANT IS DIRECTED AGAINST THE ADDITION OF RS.6700000/ - BEING DISALLO WANCE OF COMMISSION EXPENSES. THE DETAILED FACTS OF THE CASE AS PER ORDER OF THE AO ARE REPRODUCED AT PARA NO. 2 ABOVE AND TH E DETAILED WRITTEN SUBMISSIONS OF THE APPELLANT ARE REPRODUCED AT PARA NO. 3 ABOVE. THE AO'S REMAND REPORT AND COMMENTS OF THE APPELLANT ON AO'S REMAND REPORT ARE REPRODUCED AT PARA NO.4 & PARA NO. 5 ABOVE. 7.1 FROM THE ABOVE IT IS SEEN THAT THE AO HAS DISALLOWE D THE ABOVE AMOUNT AS THE COMMISSION HAS BEEN PAID TO PER SONS SPECIFIED U/S 40A(2) (B) OF THE ACT AND DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE A NY DETAILS OF ANY EXTRA SERVICES RENDERED BY THESE PERSONS TO WHOM COMMISSION WAS PAID ALTHOUGH SEVERAL OPPORTUNITIES WERE PROVIDED. 7.2 DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPE LLANT CONTENDED THAT ADEQUATE OPPORTUNITY WAS NOT PROVIDE D TO FILE ALL DOCUMENTARY EVIDENCES AND THEREFORE FILED DETAILS O F COMMISSION PAYMENT AND THE COPY OF THE RESOLUTION PASSED PROVI DING THE BASIS FOR THE PAYMENT OF COMMISSION AND REQUESTED T HAT THESE BE ADMITTED UNDER RULE 46A OF THE RULE ACT. THE DOCUME NTS WERE FORWARDED TO THE AO AND THE REPORT OF THE AO DATED 03/05/2017 CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 7 IS ALREADY REPRODUCED ABOVE. A COPY OF THE REPORT W AS PROVIDED TO THE APPELLANT. THE DOCUMENTS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAVE BEEN DULY EXAMINED. COMMISSION HAS BEEN PAID TO THE FOLLOWING PERSONS AS P ER THE CHART GIVEN BELOW AND FROM THE COPY OF RESOLUTION PASSED IN THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY HELD ON 10/04/2010 IT IS SEEN THAT THE COMPANY DECIDED TO PAY A VARIABLE INCENTIVE TO THE TOP MANAGEMENT IN ADDITION TO THE FIX ED SALARY ACCORDINGLY COMMISSION WAS PAID AS PER BASIS SHOWN IN THE CHART BELOW:- S. NAME COMMISSION BASIS NO. 1 SHRI P.K. CHHABRA 800000 OVERALL GROUP SALES INCREASING BY 35% 2 SHRI GAURAV PAHWA 800000 AB. ROAD SHOWROOM SALES INCREASED BY 25%. 3 SHRI ASHISH RAJE 800000 PALASIA SHOW ROOM SALES INCREASED BY 25% 4 SHRI SANJAY CHHABRA 800000 SNEH NAGAR SHOW ROOM SALES INCREASED BY 20% 5 SHRI DEEPAK: PAHWA 800000 RAIPUR SHOWROOM SALES INCREASE BY 35% 6 SHRI HETNANT PAHUIA 800000 UJJAIN SHOWROOM SALES IN CREASE BY 20'% 7 MEGHNA RAJE 300000 PALASIA SHOWROOM SALES INCREASED BY 25% 8 I SHRI RABINDRA RAJE 800000 NNEW KOH -E- FIZA BH BHOPAL SHOWROOM SALES INCREASED BY 33% SHRI RAJEN.DRA RAJE 800000 I BHOPAL SHOWROOM SALES INCREASED BY 50%, I I TOTAL 16700000 I I CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 8 7.3 FURTHER, IT IS SEEN THAT VIDE BOARD MEETING DATED 31 ST MARCH, 2011 OF WHICH ALSO A COPY HAS BEEN FILED PAYMENT OF COMMISSION IS APPROVED IN VIEW OF THE STIPULATED INCREASE IN SALE. IT W AS ALSO EXPLAINED BY THE APPELLANT THAT ON SIMILAR BASIS COMMISSION WAS GIVEN FOR THE SUBSEQUENT FINANCIAL YEAR ALSO AND NO AD DITION HAS BEEN MADE DURING THE SCRUTINY PROCEEDINGS. IT HAS ALSO BE EN STATED BY THE APPELLANT THAT IN ALL CASES WHERE COMMISSION HAS B EEN PAID THE PERSONS ARE ASSESSED TO TAX AT THE HIGHEST RATE OF 30;( ) AND HENCE THERE WA S NO LOSS ON ACCOUNT OF PAYMENT OF COMMI SSION. APPELLANT HAS ALSO SUBMITTED A CHART DETAILING THE PERCE NTAGE OF GROWTH OF VARIOUS SHOWROOMS AND THE OVERALL GROWTH WH ICH ALSO SHOWS THAT THERE WAS STIPULATED INCREASE IN THE GROWTH. T HE ABOVE DETAILS WERE FORWARDED TO THE AO. AO HAS NOT GIVEN ANY ADVERSE FINDING ON THE FACTS GIVEN BY THE APPELLANT AND HAS ONLY STATED IN THE REPORT THAT THE APPELLANT HAS NOT COUNTERED THE FI NDINGS GIVEN IN THE ASSESSMENT ORDER AND INSTEAD OF PROVIDING PARTI CULARS OF CUSTOMERS ARID THE PARTICULAR AGENT LINKED TO THE IN CREASED SALE TO SUCH CUSTOMERS HAS GIVEN DOCUMENTS RELATING TO DIRECTO RS ONLY. 7.4 IN VIEW OF THE ABOVE DISCUSSION IT IS THUS SEEN THA T COMMISSION HAS BEEN PAID TO DIRECTORS/RELATED PERSO NS ONLY. SUCH COMMISSION PAYMENT HAS BEEN GIVEN AS A SALE IN CENTIVE TO THE MANAGEMENT TEAM ON THE BASIS OF APPROVED RESOLU TION BY THE BOARD OF DIRECTORS OF THE COMPANY. IT IS NOT TH E CASE THAT COMMISSION HAS BEEN PAID ON SALE TO INDIVIDUAL CUST OMERS BROUGHT IN BY THE SALES PERSONS. GENERAL INCENTIVE WAS DECIDED TO BE PAID ON PARTICULAR SALE PERCENTAGE ACHIEVED B Y THE VARIOUS SHOWROOMS. AO HAS NOT DENIED THE FACTS THAT THE STA TED SALE HAS BEEN ACHIEVED AND HAS NOT DOUBTED THE DECISIONS FOR GRANT OF INCENTIVE TO THE DIRECTORS AND RELATIVES AS PER THE RESOLUTION PASSED. IT HAS ALSO NOT BEEN HELD THAT THE PAYMENT WAS BOGUS. CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 9 IT IS ALSO TO BE NOTED THAT ALL THE PERSONS TO WHOM COMMISSION HAS BEEN PAID ARE ASSESSED TO TAX AND ARE FILING RE TURN OF INCOME AND ARE AT THE HIGHEST TAX BRACKET OF 30. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF COMMISSION OF RS. 670000 0/- IS THEREFORE DIRECTED TO BE DELETED. THIS GROUND OF TH E APPELLANT IS THEREFORE ALLOWED. RS. 6700000/- DELETED 10. GOING THROUGH THE ABOVE FINDING OF LD. CIT(A) A ND ON PERUSAL OF THE INFORMATION PLACED ON PAPER BOOK, WE OBSERVE THAT IN THE MEETING OF BOARD OF DIRECTORS HELD ON 10.4.2010 IT WAS RESOLVED THAT THE COMMISSION IS TO BE PAID TO THE VARIOUS PERSONS AS ENUMERATED IN THE PRECEDING PARAS WITH SPECIFIC MENTION OF VAR IOUS SHOW ROOMS RUNNING ACROSS MADHYA PRADESH INCLUDING SHOW ROOM A T PALASIA, A.B. ROAD, INDORE, RAIPUR, UJJAIN, BHOPAL AND SNEH NAGAR, INDORE. IT HAS ALSO SPECIFIED WITH REFERENCE TO EACH SHOW R OOM ABOUT THE CALCULATION OF THE COMMISSION PAR SE THE FIGURES OF SALES. DETAILS FILED AT PAPER BOOK PAGE 8 TO 11 ALSO PROVIDES THE INFORMATION FOR THE NATURE OF WORK GIVEN TO EACH OF THE COMMISSION AGEN T. 11. WE ALSO FIND THAT THE SALES GREW BY 38.95% AS T HE GROSS TURN OVER FOR ASSESSMENT YEAR2011-12 RAISED TO RS. 182.2 4 CRORES FROM RS.131.16 CRORES FOR ASSESSMENT YEAR 2010-11. IT I S ALSO OBSERVED CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 10 THAT THE PROFITS OF THE COMPANY HAVE ALSO INCREASED FROM RS.90.63 LAKHS DURING ASSESSMENT YEAR 2010-11 TO RS.123.08 L AKHS DURING ASSESSMENT YEAR 2011-12. SO THERE IS A POSITIVE CO -RELATION BETWEEN THE PAYMENT AND COMMISSION VIS--VIS INCREASE IN SA LES AS WELL AS INCREASE IN PROFITS. 12. LD. DEPARTMENTAL REPRESENTATIVE FAILED TO CONTR OVERT THE FACT THAT THIS ACTION OF THE ASSESSEE OF PAYING COMMISSI ON TO DIRECTORS/DIRECTORS RELATIVES IS NOT FOR LOWERING T HE TAX LIABILITIES. ALL THE COMMISSION PAYEES LISTED IN THE LIST OF COM MISSION PAID AT RS.67,00,000/- ARE ASSESSABLE TO TAX ON MAXIMUM MAR GINAL RATE OF TAXATION EXCEPT IN THE CASE OF MEGNA RAJE WHO WAS O FFERED THE TOTAL TAXABLE INCOME OFRS.9.30 LAKHS. ALL THE OTHER PERS ONS HAVE OFFERED FOLLOWING INCOME FOR TAX; S.NO. NAME AM OUNT IN LAKHS 1. P. CHHABRA 27.97 2 GAURAH PAHWA 23.92 3 ASHISH RAJE 26.15 4 SANJAY CHHABRA 28.55 5 DEEPAK PAHWA 22.10 6 HEMANT PAHWA 21.35 CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 11 7 RAVINDRA RAJE 14.63 8 RAJENDRA RAJE 22.45 13. SINCE THE ALLEGED COMMISSION EXPENDITURE HAS BE EN SUBJECT TO MAXIMUM MARGINAL RATE TAX IN THE HANDS OF RESPECTIV E PAYEES THERE IS NO LOSS TO THE REVENUE WITH REGARD TO THE TAX. THE ALLEGED AMOUNT HAS BEEN PAID THROUGH ACCOUNT PAYEE CHEQUES AFTER D EDUCTING TAX AT SOURCE. BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDI TED. ALL THE COMMISSION PAYEES ARE REGULARLY ASSOCIATED TO THE B USINESS OF THE ASSESSEE AND ARE SHARE HOLDERS/DIRECTORS OF THE COM PANY. REVENUE HAS ALSO NOT PLACED ANY CONTRARY MATERIAL TO PROVE THAT THE PAYMENT OF COMMISSION IS EXCESSIVE OR NOT REASONABLE HAVING REGARD TO FAIR MARKET VALUE OF THE SERVICES OR NOT FOR THE LEGITIM ATE NEED OR BENEFITS OF THE BUSINESS OF THE ASSESSEE. RATHER THE RECOR DS CLEARLY ESTABLISHES THAT WITH THE INCURRING OF COMMISSION E XPENSES THE ASSESSEE HAS BEEN ABLE TO ACHIEVE GROWTH AT 38.5% I N ITS GROSS TURNOVER AND THE PROFITS HAVE ALSO INCREASED BY ARO UND 38.80%, AS IT REACHED TO 123.08 LAKHS DURING ASSESSMENT YEAR 2 011-12 AS COMPARED TO RS.90.63 LAKHS DURING ASSESSMENT YEAR 2 010-11. CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 12 14. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND IN VIEW OF OUR DISCUSSION ABOVE FIND NO INCONSI STENCY IN THE FINDING OF FACTS BY LD. CIT(A) WHICH STANDS UNCONTR OVERTED BY THE DEPARTMENTAL REPRESENTATIVE BY PLACING ANY CONTRARY MATERIAL. IN THE RESULT FINDING OF LD. CIT(A) DELETING THE DISAL LOWANCE OF COMMISSION EXPENSES OF RS.67,00,000/- IS CONFIRMED AND REVENUES GROUND NO.1 IS DISMISSED. 15. NOW WE TAKE UP GROUND NO.2 RAISED BY THE REVENU E AGAINST THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS.43,27,751/- ON ACCOUNT OF VARIOUS EXPENSES. LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT ALL THE NECESSARY DETAILS WITH DOCUM ENTARY EVIDENCES WERE PLACED BEFORE THE LD. A.O BUT FOR THE REASON BEST KNOWN TO THE REVENUE OFFICER DISALLOWANCE WAS MADE FOR RS.45,90, 961/-. HE ALSO SUBMITTED THAT REMAND REPORT WAS CALLED FOR BY LD. CIT(A) BUT NO ADVERSE RATHER GENERAL REMARKS HAVE BEEN MADE. ALL THE RELEVANT MATERIAL WERE PLACED BEFORE LD. A.O AND WITHOUT POI NTING OUT ANY MISTAKE IN THE CLAIM OF EXPENSES DISALLOWANCES HAS BEEN MADE. HE ALSO CONTENDED THAT THE ASSESSEE IS INTO THE BUSINE SS OF SALE OF ELECTRONIC GOODS AND EXPENDITURE IS INCURRED FOR PU BLICITY, SALES AND CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 13 PROMOTION, GIFTS AND VARIOUS SCHEMES TO ATTRACT THE CUSTOMERS. THEREFORE HE PRAYED THAT THE FINDING OF LD. CIT(A) MAY BE CONFIRMED. 16. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED AND SUPPORTED THE ORDERS OF LD. A.O. 17. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUES GROUND NO.2 CHALLENGE S THE LD. CIT(A) FINDING DELETING THE DISALLOWANCE OF EXPENSES OF RS .45,90,961/-. ASSESSEE INCURRED VARIOUS EXPENDITURE TOWARDS GENER AL PUBLICITY, SHOW ROOM EXPENSES, DIWALI FESTIVAL; AND INSURANCE TOTALLING TO RS.45,90,961/-AS MENTIONED IN THE LD. A.O IN ITS OR DER AT PARGE 6 & 7. LD. A.O DISALLOWED THESE EXPENSES FOR WANT OF V ERIFICATION OF DETAILS AND VOUCHERS RELATING TO THE EXPENSES CLAIM ED BY THE ASSESSEE. WHEN THE MATTER CAME UP BEFORE LD. CIT(A ) HE PARTLY SUSTAINED THE DISALLOWANCE OFRS.2,63,210/- THEREBY DELETING THE DISALLOWANCE OF RS.43,27,751/- OBSERVING AS FOLLOWS ; 8. GROUND NO. 2:- THIS GROUND OF THE APPELLANT IS DIRECTED AGAINST THE DISALLOWANCE OF EXPENSES OF RS.4590961/ -. THE DETAILED FACTS OF THE CASE AS PER ORDER OF THE AO A RE REPRODUCED AT PARA NO. 2 ABOVE AND THE DETAILED WRITTEN SUBMIS SIONS OF THE APPELLANT ARE REPRODUCED AT PARA NO. 2 ABOVE. THE A O'S REMAND REPORT AND COMMENTS OF THE APPELLANT ON AO'S REMAND REPORT ARE REPRODUCED AT PARA NO.4 & PARA NO. 5 ABOVE. 8.1 FROM THE ASSESSMENT ORDER IT IS SEEN THAT CERTAIN E XPENSES HAVE BEEN DISALLOWED BY THE AO ON THE GROUND THAT V OUCHERS IN CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 14 RESPECT OF THESE EXPENSES WERE NOT PRODUCED EVEN AF TER SEVERAL OPPORTUNITIES WERE PROVIDED. DURING THE COURSE OF A PPELLATE PROCEEDINGS, THE APPELLANT CONTENTED THAT ALL BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCED AND THESE WERE ALSO EXAM INED AND VERIFIED BY THE INCOME TAX INSPECTOR DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, HOWEVER AO FOR NO REASONS A ND WITHOUT PROVIDING ANY OPPORTUNITY MADE THE DISALLOW ANCE. APPELLANT THEREFORE FILED COPIES OF ALL BILLS AND V OUCHERS WHICH WERE FORWARDED TO THE AO. AO IN THE REPORT HAS STAT ED THAT THESE WERE NOT PRODUCED DURING ASSESSMENT PROCEEDIN GS AND HENCE DISALLOWANCE WAS JUSTIFIED. 8.2 IT IS SEEN THAT THE ACCOUNTS OF THE APPELLANT ARE D ULY AUDITED AND AUDIT REPORT HAS BEEN FILED. NO LACUNAE HAVE BEEN POINTED OUT IN THE AUDIT REPORT. DURING THE COURSE O F APPELLATE PROCEEDINGS, ALL THE BILLS HAVE BEEN PRODUCED WHICH HAVE BEEN TEST CHECK AND VERIFIED. MOST OF THE BILLS PERTAIN TO PUBLICITY EXPENSES, SHOWROOMS EXPENSES, INSURANCE ET.C. AND FR OM THE BILLS AND VOUCHERS PRODUCED IT .CANNOT BE SAID THAT THESE ARE FOR NON BUSINESS PURPOSES EXCEPT FOR EXPENSES OF RS. 94 000/- AND RS. 169210/- BEING SHOWN AS DIWALI FESTIVAL EXPENSE S CONSISTING OF PURCHASE OF 400 PIECES OF BED SHEET AND 105 PIEC ES OF COINS. APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THE BUSINE SS/ COMMERCIAL EXPEDIENCY/BUSINESS PURPOSE IN INCURRING SUCH EXPENSES. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF RS. 4590961/- IS THEREFORE REDUCED TO RS. 263210/-. THIS GROUND OF THE APPELLANT IS THEREFORE PARTLY ALLOWED. RS.4327751/- DELETED 18. THE ABOVE FINDING OF LD. CIT(A) HAS NOT BEEN CO NTROVERTED BY LD. DEPARTMENTAL REPRESENTATIVE. IT IS ALSO OBSERV ED THAT THE CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 15 ASSESSEE IS REGULARLY CLAIMING SUCH EXPENSES. THE TURNOVER DURING THE YEAR AT RS.182.24 CRORES AND PROFIT OF RS.123.0 8 LAKHS HAS BEEN DECLARED, BOOKS OF ACCOUNTS ARE AUDITED AND THE SAM E ARE NOT REJECTED BY THE LD. A.O. IN THE REMAND REPORT LD. A .O FAILED TO POINT OUT ANY SPECIFIC INSTANCES OF WRONG CLAIM OF THE EX PENDITURE. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE ARE OF THE CONSIDERED VIEW THAT NO INTERFERENCE IN THE FINDING OF LD. CIT(A) DELETING THE EXPENSE OF RS.43,27,751/- IS CALLED FO R. IN THE RESULT GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 19. IN THE RESULT BOTH THE GROUNDS OF APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2011-12 ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.07.2019. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 09 JULY, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. CPR DISTRIBUTORS PVT. LTD (M.P) ITA NO.552/IND/2017 16 BY ORDER ASSTT.REGISTRAR, I.T.A.T., INDORE