Imperial Auto Industries Ltd., New Delhi V. DCIT, Central Circle- 1, Faridabad

ITA 5924/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0200 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice
• Section: 80IC; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.5924/Del/2018 Assessment Year: 2013-14 Imperial Auto Industries Ltd., RRA Taxindia, D-28, South Extension, Part-I, New Delhi. PAN: AAAC10645J Vs DCIT, Central Circle-1, Faridabad. (Appellant) (Respondent) Assessee by : Dr. Rakesh Gupta, Advocate & Shri Somil Agarwal, Advocate Revenue by : Shri Kumar Padmapani Bora, Sr. DR Date of Hearing : 18.11.2021 Date of Pronouncement : .01.2022 ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 22 nd June, 2018 of the CIT(A)-3, Gurgaon, relating to assessment year 2003-04. 2. The grounds of appeal raised by the assessee are as under:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making an adhoc disallowance of Rs.5,00,000/- out of the total disallowance made by Ld. A.O. of Rs. 10,00,000/- on account of business promotion expenses holding the same to have been incurred allegedly for ITA No.5924/Del/2018 2 non business purpose that too without any basis and merely on the basis of surmises and conjectures. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making an adhoc disallowance of Rs. 5,00,000/- is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in not allowing the deduction u/s 80IC also in respect of additional disallowances made in the assessment. 4. That in any case and in any view of the matter action of Ld. CIT (A) in confirming the action of Ld. A.O in making the impugned disallowances are bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in passing the impugned order and that too without giving adequate opportunity and without observing the principle of natural justice. 6. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.” 3. Facts of the case, in brief, are that the assessee is a company and filed its return of income on 30.11.2013 declaring the total income at Rs.43,74,49,700/-. During the course of assessment proceedings, the AO noted that the assessee company has debited the following expenses in its P & L Account:- i. Conveyance Expenses Rs.1,44,02,274/- ii. Vehicle Running and Maintenance Expenses Rs.1,03,14,468/- iii. Business/Sales Promotion expenses Rs.1,03,60,369/- 4. He, therefore, asked the assessee to submit the details of these expenses and also explain as to how these expenses were incurred wholly and exclusively for the ITA No.5924/Del/2018 3 purpose of business. Rejecting the various explanations given by the assessee, the AO, apart from various other additions disallowed an amount of Rs.10 lakhs out of ‘business promotion expenses’ on the ground that part of such expenses were of such nature which has no direct nexus with the business of the assessee. 4.1 In appeal, the ld.CIT(A) restricted such disallowance to Rs.5 lakh by observing as under:- “5.7 Ground No. 5 relates to disallowance of business promotion expenses of Rs. 10,00,000/- out of business expenses claimed by the appellant. 5.7.1 It has been stated by the AO that during the assessment proceedings, the appellant was asked to submit the details of these expenses. On going through the details, it was found of out that part of the said expenses were of such nature which has no direct nexus with the business of the appellant. The AR was therefore asked to establish that the said expenses were incurred wholly and exclusively for business purpose. 5.7.2 In response thereto, the appellant had submitted that part of these expenses may be disallowing treating the same for non business purpose. Accordingly, a lumpsum amount of Rs. 10,00,000/- was added to the total income of the appellant. 5.7.3 During the appellate proceedings, the appellant has not denied that part of the expenses claimed under the head 'Business Promotion Expenses' were not wholly and exclusively for business purpose, as stated by the AO. However, the AO has not given any justification nor pointed any specific expense claimed by the appellant but not exclusively for business purpose. 5.7.4 The AO has disallowed Rs. 10,00,000/- out of business expenses of Rs. 1,04,24,994/- claimed which works out to nearly 10% of these expenses. In view of the above discussion, this disallowance is restricted to Rs. 5,00,000/- and appellant will get part relief on this account.” 5. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal. ITA No.5924/Del/2018 4 6. The ld. counsel for the assessee, at the outset, drew the attention of the Bench to the ground No.6 raised by the assessee before the CIT(A) and submitted that even though the addition of Rs.5 lakh was sustained by the CIT(A), however, he has not adjudicated the issue relating to enhanced deduction u/s 80IC of the Act in respect of such addition/disallowance. He accordingly submitted that he has no objection if the matter is restored to the file of the CIT(A). 7. The ld. DR, on the other hand, while supporting the order of the CIT(A) has no objection if the issue is restored to the file of the CIT(A) for adjudication which was not adjudicated by him although a ground was raised before him. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, made addition of Rs.10 lakhs on ad hoc basis out of the business/sales promotion expenses of Rs.1,03,60,369/- on the ground that the assessee could not explain the nexus between the expenditure vis-à-vis business of the assessee. We find, the ld.CIT(A) sustained an amount of Rs.5 lakhs, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that although a specific ground was raised before the CIT(A) regarding allowing deduction u/s 80IC in respect of the additions/disallowances made in the assessment, however, the same has not ITA No.5924/Del/2018 5 been adjudicated by the CIT(A). We find, before the CIT(A) the assessee has raised the following ground as per Ground of Appeal No.6:- “6. That having regard to the facts and circumstances of the case, ld. AO has erred in law and on facts in not allowing the deduction u/s 80IC also in respect of the additions/disallowances made in the assessment.” 9. However, a perusal of the order of the CIT(A) shows that he has not adjudicated the above ground raised before him regarding the allowability of deduction u/s 80IC in respect of enhanced business income on account of disallowance of adhoc expenditure. We, therefore, deem it proper to restore the issue to the file of the CIT(A) with a direction to adjudicate the ground raised before him. Needless to say, the CIT(A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. 10. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on .01.2022. (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: January, 2022. dk ITA No.5924/Del/2018 6 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Date 1. Draft dictated on 04.01.2022 2. Draft placed before the author 05.01.2022 3. Draft placed before the other Member 4. Approved Draft comes to the Sr.PS/PS 5. Order uploaded on 6. File sent to the Bench Clerk 7. Date on which file goes to the Head Clerk. 8. Date on which file goes to the AR 9. Date of dispatch of Order.