Late Asha Aggarwal, New Delhi V. ITO, New Delhi

ITA 5913/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0094 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: PUNIT RAO
• Keywords: Gift; Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.5913 /DEL/2010 ASSESSMENT YEAR : 2006-07 LATE ASHA AGGARWAL, THROUGH LEGAL HEIR OF MR. ASHU AGGARWAL ITO, C/O SAMVAD ADVERTISING PVT. LTD., WARD-30 (20), 204, IST FLOOR, EMCA CHAMBERS, NEW DELHI. 51-DARYA GANJ, DELHI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAGPA AAGPA AAGPA AAGPA- -- -1736 1736 1736 1736- -- -K KK K APPELLANT BY : SHRI PUNIT RAO, ADVOCATE. RESPONDENT BY : MRS. ANUSHA KHURANA, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)- XXV, NEW DELHI DATED 20.10.2010 FOR ASSESSMENT YEAR 200 6-07. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING/RESTRICTING THE AD HOC DISALLOWANCE TO 25% OF THE TOTAL EXPENSES INCURRED UNDER THE HEAD ADVERTISEMENT AND SALES PROMOTION EXPENSES AND BUSINE SS PROMOTION EXPENSES. PAGE 2 OF 7 ITA NO5913./DEL/10 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD C IT(A) WAS NOT JUSTIFIED IN CONFIRMING/RESTRICTING THE AD HOC DI SALLOWANCE TO 25% OF THE TOTAL EXPENSES INCURRED UNDER THE HEAD GE NERAL EXPENSES. 3. BRIEF FACTS REGARDING GROUND NO.1 ARE THAT IT IS N OTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED TOTAL BUSINESS AND SALES PROMOTION EXPENSES OF `.6 9,488/- AND THE ASSESSEE DID NOT SUBMIT ANY REASON FOR CLAIMING THESE EXPENSES UNDER TWO SEPARATE HEADS NAMELY BUSINESS PROMOTION EXP ENSES AT `.23,987/- AND ADVERTISEMENT AND SALES PROMOTION EXP ENSES OF `.45,501/-. THE ASSESSING OFFICER MADE DISALLOWANCE OF `.45,000/- BY SAYING THAT SOME OF THE EXPENSES WERE UN-VOUCHED AND NO T VERIFIABLE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE LD CIT (A). IT IS NOTED BY THE LD CIT(A) THAT THE DETAI LS SUBMITTED BY THE ASSESSEE SHOWS THAT THE BUSINESS PROMOTION EXPENSES INCLUDE EXPENDITURE LIKE MARRIAGE GIFT, RESTAURANT BILLS AND OTHER GIFT ITEMS WHICH CANNOT BE CONSIDERED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HE HELD THAT SOME REASONABLE DISALLOWANCE IS NEC ESSARY. HE FURTHER HELD THAT THE LUMP SUM DISALLOWANCE OF `.45,0 00/- OUT OF `.69,488/- IS ON HIGHER SIDE. HE RESTRICTED THE DISALL OWANCE TO 25% OF TOTAL EXPENSES AND IN THIS MANNER, HE CONFIRMED THE DI SALLOWANCE OF `.17,372/- AND DELETED THE BALANCE AMOUNT OF DISALL OWANCE OF `.27,628/-. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFO RE US REGARDING DISALLOWANCE OF `.17,372/- CONFIRMED BY THE LD CIT(A ). 4. REGARDING GROUND NO.2, THE FACTS ARE THAT IT IS NO TED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED `.22,572/- UNDER THE HEAD GENERAL EXPENSES. I T IS ALSO NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT SUBMITTE D THE COMPLETE DETAILS OF THESE EXPENSES. IT IS ALSO NOTED BY T HE ASSESSING PAGE 3 OF 7 ITA NO5913./DEL/10 OFFICER THAT THE REMAINING DETAILS FURNISHED ARE NOT SUPPORTED BY ANY VOUCHERS AND BY MAKING THESE OBSERVATIONS, THE ASSESSING O FFICER MADE DISALLOWANCE TO THE EXTENT OF 50% THESE EXPENSES I.E. `.11,286/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE LD CIT (A) WHO HAS RESTRICTED THE DISALLOWANCE TO THE EXT ENT OF 25% OF TOTAL EXPENSES. SHE CONFIRMED THE ADDITION OF `.5643/ .- AND DELETED THE BALANCE AMOUNT OF `.5643/-. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US ON BOTH THESE ISSUES. 5. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT BOTH THESE DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER ON AD H OC BASIS WITHOUT ANY ADVERSE FINDING AND THE SAME WAS PARTLY C ONFIRMED BY THE LD CIT(A) ALSO ON AD HOC BASIS. IT IS HIS SUBMISSION THAT NO DISALLOWANCE IS CALLED FOR UNDER THESE FACTS. IT IS ALSO SUBMITTED BY HIM THAT THE DETAILS OF ADVERTISEMENT AND SALES PROMOTION E XPENSES OF `.45,501/- IS AVAILABLE ON PAGE NO.B-9 OF THE PAPER BOOK WHEREAS ON PAGE NO.B-10 OF THE PAPER BOOK IS THE BILL REGARDING CALENDARS OF `.45,136/- INCLUDED IN THE TOTAL AMOUNT OF `.45,501 /-. REGARDING BUSINESS PROMOTION EXPENSES OF `.23,897/-, IT IS SUBMITTED THAT A COPY OF LEDGER ACCOUNT IS AVAILABLE ON PAGES B1 TO B8 OF T HE PAPER BOOK. REGARDING GENERAL EXPENSES OF `.17,185/-, IT IS SUBMITT ED THAT THE DETAILS ARE AVAILABLE ON PAGE NO.B11-B12 OF THE PAPE R BOOK AND SOME OF THE BILLS ARE AVAILABLE ON PAGES B13-B14 OF THE PA PER BOOK. IT IS ALSO SUBMITTED THAT BOOKS OF THE ASSESSEE ARE AUDITED AND THE COPY OF TAX AUDIT REPORT IS ALSO AVAILABLE ON PAGES B15-B57 OF THE PAPER BOOK AND THERE IS NO ADVERSE OBSERVATIONS BY THE AUDITORS ALSO. LD DR OF THE REVENUE SUPPORTED THE ORDER OF LD CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. REGARDING FIRST GROUND , WE FIND THAT OUT OF TOTAL EXPENSES OF `.45,501/- UNDER THE HEAD ADVERTISEM ENT AND SALES PROMOTION, `.45,501/- HAS BEEN INCURRED BY THE ASSESSEE ON ACCOUNT OF PAGE 4 OF 7 ITA NO5913./DEL/10 1550 CALENDARS AND THE REMAINING AMOUNT OF `.365/- I S ON ACCOUNT OF ADVERTISEMENT FOR PEON. NO DISALLOWANCE CAN BE MADE O UT OF THIS EXPENDITURE OF `.45,501/- UNDER THE HEAD ADVERTISEME NT AND SALES PROMOTION. REGARDING EXPENSES OF `.23,897/- UNDER THE HEAD BUSINESS PROMOTION EXPENSES, WE FIND THAT IT INCLUDES `.7515/- ON ACCOUNT OF TEA, COLD DRINKS ETC., `.2100/- ON ACCOUNT OF MARRIA GE GIFT, `.3800/- ON ACCOUNT OF RESTAURANT BILLS AND `.10,572/- ON ACCOUNT OF GIFT ITEMS AS PER THE DETAILS SUBMITTED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS DATED 20.10.2010 SUBMITTED BY THE ASSESSEE BEFORE THE LD CIT(A). THE ASSESSEE HAS FURNISHED THE COPY OF RESTAURANT BILLS WHICH IS AVAILABLE ON PAGE NO.B8 OF THE PAPER BOOK BUT IT HAS NOT BEEN EXPLAINED AS TO HOW IT IS FOR BUSINESS PURPOSE. IN OUR CONSIDERED OPINION , THIS AMOUNT OF `.3800/- ON ACCOUNT OF RESTAURANT BILLS CANNOT BE ALLOWED AS EXPENSES FOR BUSINESS PURPOSE IN THE ABSENCE OF ANY DETAIL S ABOUT THE PURPOSE FOR WHICH THE SAME WAS INCURRED. SIMILARLY, T HE ASSESSEE HAS SUBMITTED A COPY OF PAYMENT VOUCHER ALONG WITH THE P HOTO COPY OF AN INVITATION OF A MARRIAGE FOR PAYMENT OF GIFT OF `.2 100/-. IT HAS BEEN STATED IN THE VOUCHER THAT THE AMOUNT IS PAID IN MARR IAGE OF CLIENTS DAUGHTER. THE INVITATION IS REGARDING MARRIAGE OF PR ERNA, DAUGHTER OF SMT. RANJANA AND SHRI PRAPHULL K. JAIN. NO DETAIL H AS BEEN FURNISHED AS TO WHETHER SHRI PRAPHULL K. JAIN IS A CLIENT OF THE ASSESSEE OR NOT AND IN THE ABSENCE OF THAT, THIS CLAIM OF THE ASSESSEE IS NOT AC CEPTABLE THAT THIS EXPENSES IS FOR BUSINESS PURPOSE OF THE ASSESSEE. REGARDI NG EXPENDITURE OF `.7515/- ON ACCOUNT OF TEA AND COLD DRINKS ETC., WE FEEL THAT THE SAME IS REASONABLE AND NO DISALLOWANCE IS CALLE D FOR OUT OF THE SAME. NOW, WE ARE LEFT WITH THE BALANCE AMOUNT OF `. 10,572/.- ON ACCOUNT OF OTHER GIFT ITEMS. IN THE ABSENCE OF DETAIL ABOUT THE PERSON TO WHOM THESE GIFTS WERE GIVEN, DEDUCTION CANNOT BE ALL OWED IN FULL BECAUSE SOME PERSONAL ELEMENT CANNOT BE RULED OUT. WE FEEL THAT 25% DISALLOWANCE OUT OF THIS WILL MEET THE ENDS OF JUSTICE AND HENCE WE PAGE 5 OF 7 ITA NO5913./DEL/10 CONFIRM THE DISALLOWANCE OF `.2500/- OUT OF THIS EXPE NDITURE OF `.10,572/-. IN THIS MANNER, WE CONFIRM THE DISALLOWAN CE OF `.8400/- OUT OF BUSINESS PROMOTION EXPENSES. THE ASSESSEE GETS RELIEF OF ` .8972/-. GROUND NO.1 IS PARTLY ALLOWED. 7. REGARDING GROUND NO.2, WE FIND THAT AS PER PAGE N O.A-4 OF THE PAPER BOOK BEING PART OF WRITTEN SUBMISSIONS BY THE ASSESSE E BEFORE LD CIT(A), THE ASSESSEE HAS INCURRED AN EXPENDITURE OF ` .22,573/- IN THE PRESENT YEAR AGAINST TOTAL TURNOVER OF `.176.48 L AKHS WHEREAS IN THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 200 5-06, THE ASSESSEE HAS INCURRED ONLY AN AMOUNT OF `.2290/- AGAINST TOTAL TURNOVER OF `.153.50 LAKHS. SIMILARLY, IN ASSESSMENT YEA R 2004-05, THE ASSESSEE HAS INCURRED ONLY `.3720/- AGAINST TOTAL TURNOVE R OF `.145.58 LAKHS. THE PERCENTAGE OF BUSINESS EXPENSES OF TOTAL TURNO VER IN THE PRESENT YEAR IS WORKED OUT BY THE ASSESSMENT AT 0.13% AS AGAINST 0.02% IN ASSESSMENT YEAR 2005-06 AND IN ASSESSMENT YEAR 200 4-05. IT IS THE CLAIM OF THE ASSESSEE THAT AN AMOUNT OF `.7500/- PERTAINING TO DESIGN CHARGES WAS WRONGLY DEBITED TO GENERAL EXPENSES A ND A SUM OF `.10,910/- WAS SPENT WITH REFERENCE TO GETTING THE AC CREDITATION FROM INS DUE TO CHANGE OF NAME OF THE FIRM AND `.1540/- WAS SPENT FOR TRAVEL KIT. THESE EXPENSES TOTALED AT `.19,950/- ARE NOT REGULAR EXPENDITURE AND IF EXCLUDED, THE REMAINING AMOUNT I S ONLY `.2623/- WHICH IS IN LINE WITH THE EXPENDITURE IN EARLIER YEA RS. IN THE PAPER BOOK, THE ASSESSEE HAS SUBMITTED A COPY OF BILL OF THE INDIAN NEWS PAPER SOCIETY OF `.7,000/- TOWARDS ACCREDITATION CHARGES. H ENCE, ON ACCOUNT OF THIS EXPENDITURE, WE ARE SATISFIED THAT NO DISALLOWA NCE IS CALLED FOR BUT REGARDING THE PAYMENT OF `.10,910/- WHICH IS CL AIMED TO HAVE BEEN INCURRED ON ACCOUNT OF GETTING ACCREDITATION FROM I NS DUE TO CHANGE OF NAME OF THE FIRM, NO EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE IN THE PAPER BOOK. SIMILARLY, ON ACCOUNT OF EXPENDITUR E OF `.1540/-, ON PAGE NO.B-14 OF THE PAPER BOOK, THE ASSESSEE HAS FURNISHE D A COPY OF PAGE 6 OF 7 ITA NO5913./DEL/10 RETAIL INVOICE/CASH MEMO/BILL DATED 30.3.2005 BUT TH ERE IS NO NAME ON THE SAME AND THERE IS NO DETAIL ALSO AND HENCE, IT IS N OT ASCERTAINABLE AS TO WHETHER THE SAME IS FOR BUSINESS PURPOSE OR NOT. H ENCE, WE FEEL THAT THE DISALLOWANCE CONFIRMED BY THE LD CIT(A) OF `.5643/- DOES NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE BECAUSE THE D ISALLOWANCE CONFIRMED BY HIM IS LESS THAN THE AMOUNT OF EXPENDITUR E, WHICH COULD NOT BE ESTABLISHED BY THE ASSESSEE AS HAVING BEEN INCURRED FOR BUSINESS PURPOSE TO THE EXTENT OF `.1540/- AND `.10,910 /-, TOTAL OF `.12,450/-. FOR THIS, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE OR SUPPORTING WITH REGARD TO THE EXPENDITURE OF `.10,91 0/- AND THE SUPPORTING EVIDENCE SUBMITTED BY THE ASSESSEE IN THE PAPE R BOOK WITH REGARD TO THE EXPENDITURE OF `.1540/- COULD NOT ESTA BLISH THE BUSINESS PURPOSE OF THE ASSESSEE. HENCE, THIS GROUND OF THE ASSESSEE I S REJECTED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF MARCH, 2011. SD/- SD/- (R.P. TOLANI) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 18.3.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER PAGE 7 OF 7 ITA NO5913./DEL/10 (ITAT, NEW DELHI).