Aarti Aggarwal, Delhi V. ACIT, Special Range-11, New Delhi

ITA 8961/DEL/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2329 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 18-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Opportunity of being heard; Principle of natural justice; TDS; Set aside
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: SMC-1 NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO. 8961/DEL./2019 ASSESSMENT YEAR: 2016-17 MS. AARTI AGGARWAL, L-1/18, HAUZ KHAS ENCLAVE, DELHI VS. ACIT, SPECIAL RANGE-11, NEW DELHI PAN :ACEPA9904F (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 18/09/2019 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-11, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2016-17, RAISING FOLLOWING GROUNDS: 1. THAT LD CIT (A) HAS ERRED BOTH ON FACTS AND IN L AW WHILE DISALLOWING 1/5TH OF THE AMOUNT OF EXPENDITURE INCU RRED ON ACCOUNT OF ADVERTISEMENT EXPENSES AMOUNTING TO RS 2 ,14,956/-. THE ADDITION CONFIRMED BY LD CIT (A) WAS WITHOUT AN Y BASIS AND AGAINST THE PRINCIPAL OF NATURAL JUSTICE. APPELLANT BY SH. PIYUSH JAIN, CA RESPONDENT BY SH. R.K. GUPTA, SR.DR DATE OF HEARING 08.06.2021 DATE OF PRONOUNCEMENT 28.06.2021 2 ITA NO.8961/DEL/2019 2. THAT LD CIT (A) HAS ERRED BOTH ON FACTS AND IN L AW WHILE ADDING BACK THE FOREIGN TRAVELLING EXPENSES AMOUNTING TO R S. 3,84,170/- . THE BASIS OF CONFIRMING THE ADDITIONS MADE BY THE A SSESSING OFFICER IS NOT TENABLE AS ALL THE SUPPORTING DOCUME NTARY EVIDENCE RELATED TO FOREIGN TRAVELING TRAVELLING WERE SUBMIT TED DURING THE ASSESSMENT PROCEEDING. 3. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, VARY, AND / OR TO ADD TO ALL OR ANY OF THE GROUNDS OF APPEAL AND TO R AISE SUCH ADDITIONAL / FRESH GROUND(S) AS MAY BE CONSIDERED N ECESSARY OR REQUIRED AT ANY TIME THEREAFTER. 4. THAT THE ABOVE GROUNDS ARE IN THE ALTERNATIVE AN D WITHOUT PREJUDICE TO ONE ANOTHER. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE, AN INDIVIDUAL, FILED RETURN OF INCOME ON 14/10/2016 DE CLARING TOTAL INCOME OF 36,26,130/-. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE CARRIED ON BUSINESS ACTIVITY RELATING TO MANUFACTURING/TRADING OF WOODEN ARTICLES AND PROVID ING CONSULTANCY SERVICES RELATING TO DESIGNING ETC. THE ASSESSEE ALSO DERIVED INCOME FROM SALARY FROM M/S. GLOBE AUTOMOBI LE PRIVATE LIMITED, M/S JCBL INDIA PRIVATE LIMITED AND M/S JCB L MARREL TIPPERS PRIVATE LIMITED. 2.1 THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT. IN THE ASSESSMENT COMPLETED UN DER SECTION 143(3) OF THE ACT ON 16/12/2018, THE ASSESSING OFFI CER MADE CERTAIN DISALLOWANCES. ON BEING APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) ALLOWED PART RELIEF. AGGRIEVED WITH THE ADDITION SUSTAINED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, THE PARTIES APPEARED THROUGH VIDEO CONFE RENCING FACILITIES AND THE ASSESSEE FILED A PAPER-BOOK IN ELECTRONIC FORM. 3 ITA NO.8961/DEL/2019 4. IN SUPPORT OF GROUND NO. 1, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO ANNEXURE -1 OF THE PAPER-BOOK AND SUBMITTED THAT ALL THE DOCUMENTS IN RESPECT OF ADVERTISEMENT EXPENSES WERE ALREADY SUBMITTED BEFORE THE ASSESSING OFFICER. ACC ORDING TO HIM, LEARNED CIT(A) IS NOT JUSTIFIED IN DISALLOWING PART OF THE ADVERTISEMENT EXPENSES I.E. 1/5 TH EXPENSES ON THE AD-HOC BASIS IN TERMS OF SECTION 37(1) OF THE ACT. 5. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE ASSESSEE CLAIMED ADVERTISEMENT EXPENSES OF 10,74,782/- IN THE YEAR UNDER CONSIDERATION AS AGAINST 5,71,944/- CLAIMED IN THE IMMEDIATELY PRECEDING YEAR. ACCORDING TO THE ASSESS ING OFFICER, SALES OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR WERE HIGHER AS COMPARED TO THE PRESENT ASSESSMENT YEAR, AND THEREFORE HE DISALLOWED THE ENTIRE ADVERTISEMENT EXPENSES OF 10,74,782/-. THE LD. CIT(A) HAS SUSTAINED THE 1/5TH OF DISALLOWA NCE OBSERVING AS UNDER: 6.1.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLANT HAS SUBMITTED THAT ALL THE BILLS AND VOUCHERS RELATED T O ADVERTISEMENT EXPENSES WERE SUBMITTED DURING THE COURSE OF ASSESS MENT PROCEEDINGS. IT IS SEEN THAT ASSESSEE HAS SPENT RS. 10,74,782/- ON ADVERTISEMENT OF ITS PRODUCTS AND BRAND THROUGH M/S OGAAN MEDIA PVT. LTD.,' M/S CONDE NAST INDIA AND M/S LIVING MED IA INDIA PVT. LTD. ON PERUSAL OF THE BILLS AND VOUCHERS, IT IS SE EN PAYMENTS HAVE BEEN MADE FOR ADVERTISEMENTS. THOUGH THE BILLS ARE THERE, HOWEVER, THE COPY OF ENCLOSED ADVERTISEMENTS DO NOT ESTABLIS H THAT ALL THE EXPENDITURE WAS FOR ADVERTISING THE BRAND OF APPELL ANT. ACCORDINGLY, DISALLOWANCE IS RESTRICTED TO L/5TH OF THE AMOUNT O F EXPENDITURE INCURRED ON ADVERTISEMENTS. ACCORDINGLY, DISALLOWAN CE OF RS. RS.2,14,956/- IS SUSTAINED AND BALANCE AMOUNT OF RS .8,59,826/- IS DELETED. GROUND NO. 1 IS PARTLY ALLOWED. 4 ITA NO.8961/DEL/2019 6.1 IN OUR OPINION, THE LD. CIT(A) HAS ACCEPTED EXISTE NCE OF THE BILLS, HOWEVER, ACCORDING TO HIM, ENTIRE EXPENDITUR E OF ADVERTISEMENT WAS NOT FOR ADVERTISEMENT OF THE BRAN D OF THE ASSESSEE, AND THEREFORE, HE MADE OF DISALLOWANCE OF 1/5 TH OF THE EXPENSES. THE LEARNED CIT(A) HAS NOT POINTED OUT WH ICH IS THE SPECIFIC EXPENDITURE, NOT RELATED TO THE BRAND OF T HE ASSESSEE. WITHOUT POINTING OUT THE SPECIFIC DEFECTS IN THE BI LLS OR VOUCHERS OR POINTING OUT THAT SAME AS NOT BEEN INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, THE LD . CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE ON AD-HOC BASIS. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LD. CI T(A) ON THE ISSUE IN DISPUTE AND DELETE THE ADDITION SUSTAINED BY THE LEARNED CIT(A). THE GROUND OF THE APPEAL IS ALLOWED. 6.2 IN SUPPORT OF GROUND NO. 2, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO ANNEXURE 3 OF THE PAPER-BOOK A ND SUBMITTED THAT FOREIGN TRAVEL EXPENSES HAVE BEEN INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND ALL THE DOCUMENTS IN SUPPORT INCLUDING SALARY CERTIFICATES OF CONCERN ED EMPLOYEES WERE FILED BEFORE THE ASSESSING OFFICER. THEREFORE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWA NCE. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT MS. DIVYA BA JAJ AND MS. ANJU CHAUDHARY WERE EMPLOYEE OF THE ASSESSEE AND TR AVELLED TO MILAN (ITALY) FOR ATTENDING AN EXHIBITION. THE LEA RNED COUNSEL SUBMITTED THAT SALARY CERTIFICATES OF THE TWO PERSO NS WERE FILED BEFORE THE ASSESSING OFFICER AND THE ASSESSEE IS WI LLING TO FILE EVIDENCE OF DEDUCTION OF TAX AT SOURCE ON THE SALAR Y. THE LEARNED COUNSEL, ACCORDINGLY, REQUESTED TO RESTORE THE MATT ER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER 5 ITA NO.8961/DEL/2019 6.4 ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT NO EVIDENCE AS TO THE CONCERNED PERSONS, WHO TRAVELLED TO MILAN WERE EMP LOYEE OF THE ASSESSEE, I.E., EVIDENCE OF TAX DEDUCTED AT SOURCE ON THEIR SALARY OR THEIR ESI/PF REGISTRATION ETC., WERE FILED BY EI THER THE ASSESSING OFFICER OR LD. CIT(A) AND THEREFORE, THE LD. CIT(A ) IS JUSTIFIED IN SUSTAINING THE DISALLOWANCE. 6.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE ASSESSEE CLAIMED FOREIGN TRAVEL EXPENSES OF 3,84,170/- IN THE PROFIT AND LOSS ACCOUNT, HOWEVER, ON BEING ASKED BY THE ASSESSING OFFICER, THE ASSESSEE FAILED TO SUBSTANTIATE THE BU SINESS EXPEDIENCY OF THOSE EXPENSES AND THEREFORE, THE ASS ESSING OFFICER DISALLOWED THE SAID EXPENSES. THE LD. CIT(A) SUSTAI NED THE DISALLOWANCE OBSERVING AS UNDER: 6.3.1 IT IS SEEN THAT ONE MS DIVYA BAJAJ & MS ANJU CHAUDHURY HAVE TRAVELLED TO MILAN FROM 13.04.2015 TO 20.04.20 15. APPELLANT CLAIMS THAT IT WAS FOR ATTENDING EXHIBITION. HOWEVE R, NO DETAILS REGARDING THE EXHIBITION HAS BEEN SUBMITTED. 6.3.2 FROM PERUSAL OF THE DETAILS SUBMITTED, IT IS SEEN THAT TICKETS HAVE BEEN BOOKED FOR TRAVEL ON 13.04.2015 AND BACK ON 20.04.2015 FROM DELHI TO MILAN AND BACK. HOWEVER, THE COPY OF TICKETS AND HOTEL BOOKINGS HAVE NOT BEEN SUBMITTED. NO LETTER OR EVID ENCE REGARDING INVITATION TO BOTH MS DIVYA BAJAJ 86 MS ANJU CHAUDH URY FOR ATTENDING THE EXHIBITION AT MILAN HAS BEEN SUBMITTE D. ALSO, NO EVIDENCE HAS BEEN SUBMITTED THAT BOTH MS DIVYA BAJA J 85 MS ANJU CHAUDHURY ARE EMPLOYEES OF APPELLANT. AS SUCH, IT I S SEEN THAT THERE IS NO INVITATION, EXPLANATION GIVEN BY APPELLANT IS VAGUE AND GENERAL IN NATURE AND NO SPECIFIC DETAILS OF THE EVENT ARE GIVEN. THEREFORE, IN MY VIEW THERE IS NO DIRECT NEXUS BETWEEN THE EXPEND ITURE INCURRED FOR ATTENDING THE EXHIBITION AND THE BUSINESS OF AP PELLANT. AS SUCH, THE DISALLOWANCE MADE BY AO IS SUSTAINED. 6 ITA NO.8961/DEL/2019 6.6 WE FIND THAT LD. CIT(A) HAS SUSTAINED THE DISALLOW ANCE ON THE GROUND OF LACK OF EVIDENCE TO SUPPORT THE BUSIN ESS EXPEDIENCY. THE LEARNED COUNSEL OF THE ASSESSEE HAS EXPRESSED WILLINGNESS OF THE ASSESSEE FOR FILING DOCUMENTARY EVIDENCE IN SUPPORT OF BUSINESS EXPEDIENCY. IN VIEW OF THE ABOV E FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF SUBSTANTIAL JU STICE, WE SET ASIDE THE FINDING OF THE LEARNED CIT(A) ON THE ISSU E IN DISPUTE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH WITH THE DIRECTION TO THE ASSESSEE TO FILE FOLLOWING DOCUMENTARY EVIDENCES IN SUPPORT OF CLAIM OF BUSINE SS EXPEDIENCY: (I) NAME OF THE EXHIBITION PARTICIPATED OR VISITED BY T HE CONCERNED PERSONS AND RELEVANCY OF SAID EXHIBITION WITH THE BUSINESS CARRIED OUT BY THE ASSESSEE. (II) ANY LETTER FROM THE EXHIBITION MANAGEMENT AUTHORITY OR EXHIBITORS TO THE ASSESSEE INVITING TO THE EXHIBITI ON (III) EVIDENCE IN SUPPORT OF TAX DEDUCTED AT SOURCE ON TH E SALARY PAID TO MSDIVYA BAJAJ AND MS ANJU CHOUDHARY IN THE TDS RETURN FILED BY THE ASSESSEE RELEVANT QUARTERS OF THE FINANCIAL YEAR. (IV) DESIGNATION , TECHNICAL QUALIFICATIONS AND EXPERIEN CE ETC OF MS. DIVYA BAJAJ AND MS. ANJU CHOUDHARY MAKIN G THEM ELIGIBLE FOR VISITING THE EXHIBITION AND ANY R EPORT SUBMITTED BY THEM AFTER VISITING THE EXHIBITION (V) EVIDENCE IN SUPPORT OF THE CLAIM OF VISIT BY ABOVE MENTIONED TWO PERSONS BEING WHOLLY AND EXCLUSIVELY NECESSARY FOR THE PURPOSE OF THE BUSINESS. 7 ITA NO.8961/DEL/2019 (VI) ANY OTHER EVIDENCE WHICH MAY BE CALLED FOR BY THE ASSESSING OFFICER AS DEEMED FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 6.7 IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE AFFORDED ADEQUATE OPPORTUNITY OF BEING HEARD. THE GROUND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2021 SD/- SD/- (KUL BHARAT) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH JUNE, 2021. RK/- (DTDS) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI