RAJEEV VERMA,NEW DELHI V. ACIT CIRCLE- 54(1), NEW DELHI

MA 190/DEL/2020

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The case involves Rajeev Verma, the applicant, who sought rectification of an error in the Income Tax Appellate Tribunal's earlier order concerning the disallowance of business promotion expenses. The original disallowance was Rs.50,32,880, which was later contested. The CIT(A) had reduced this amount by Rs.11,19,135, acknowledging some of the expenses as legitimate business promotions. However, the Tribunal's earlier order did not reflect this reduction correctly. The rectification application argued that the Tribunal's order mistakenly upheld the higher amount, contrary to the CIT(A)'s decision, which was not challenged by the Revenue. The Tribunal agreed with the applicant, correcting the disallowance amount to Rs.39,13,747, thus aligning it with the CIT(A)'s relief and rectifying the apparent error in the record.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 23781 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-10-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 27-07-2020
• Laws Referred To: Income Tax Act, 1961, Income-tax (Appellate Tribunal) Rules, 1963
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: V. RAJA KUMAR
• Keywords: Gift
• Section: 254(2)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER Miscellaneous Application No.190/Del/2020 (ITA No.6143/Del/2016 Assessment Year: 2012-13 Rajeev Verma, 2/5, Gupta Market, Lajpat Nagar-4, New Delhi – 110 024. PAN: AABPV0413B Vs ACIT, Circle-54(1), 15th Floor, Civic Centre, J.L. Nehru Marg, New Delhi – 110 002. (Applicant) (Respondent) Assessee by : Shri V. Rajakumar, Advocate Revenue by : Ms Anupama Singla, Sr. DR Date of Hearing : 18.10.2024 Date of Pronouncement : 20.11.2024 ORDER PER ANUBHAV SHARMA, JM: The application in hand has been moved u/s 254(2) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) r.w. Rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963 (hereinafter referred to as ‘the Rules’). 2. On hearing the ld. AR, it comes up that the rectification is sought of the order dated 02.07.2020 of the coordinate Bench and in the context of same the ld. AR submits that there is mistake in mentioning of an amount MA No.190/Del/2020 2 of Rs.50,32,880/- in para 5.2 instead of Rs.39,13,745/-. The ld. AR has submitted that the relief which assessee has sought was in respect of the quantum of Rs.39,13,745/- as was reduced consequent to order of the ld.CIT(A) who had granted relief of Rs.11,19,135/-, from total addition of Rs.50,32,880/- and as the Revenue had not challenged the order of the CIT(A) to the extent of relief granted, the assessee could not have been put on a different liability. 3. The ld. DR, however, submitted that there is no error apparent from the record requiring interference u/s 254(2) of the Act. 4. Giving thoughtful consideration to the matter on record, we find that in the impugned order dated 12.03.2015, the AO had made a disallowance of Rs.50,32,880/- on the basis that 100% of Rs.2,56,726/- being the cash component of the business promotion expenses and 100% of Rs.36,57,019/- spent on precious items and 50% of Rs.22,38,289/- spent on other items disputed by the assessee under the head of business promotion expenses were disallowed and added to the income of the assessee. The ld.CIT(A) had accepted the explanation of the assessee and after examining the genuineness and purpose of the expenditure, upheld the disallowance of items of cash purchase of Rs.2,56,726/-and jewellery items of Rs.36,57,019/-, but as far as other expenditure was MA No.190/Del/2020 3 concerned, considering the same to be standard items of gifts and finding them to be reasonable, deleted the disallowance of Rs.11,19,135/-. 5. As we go through the order of the coordinate Bench dated 02.07.2020 of which the rectification is sought, we find that the coordinate Bench had partly allowed the appeal of the assessee with the following findings in para 5.2:- “5.2 Thus, a perusal of the observations made by the AO and the Ld. CIT (A) show that both the lower authorities have upheld the disallowance pertaining to jewellery items and semi precious items on the ground that the reasonableness of expenditure could not be established. Further, the Ld. CIT (A) also went to the extent of inferring that offering expensive gifts was a way to bribe of the employees of public sector undertakings. Thus, the Ld. CIT (A) has tried to add an altogether new dimension to the entire dispute. A perusal of the records would show that there is no denying that the gross turn-over of the assessee has been increasing. Even the profit returned by the assessee has shown the corresponding proportional increase. The only failure on the part of the assessee has been that he could not establish the business nexus of the impugned expenditure to the satisfaction of the lower authorities. It is the opinion of the lower authorities that the assessee could not establish a link between the gifts given and the sales orders received. However, it may not be practically possible for all businesses to maintain a complete list of the gifts given to their various customers and demonstrate that a particular sales order was received as a result of a particular gift. The Act also does not prescribe demonstrating such live linkage. In the present case, there is no denial b the department that the assessee has been carrying on business regularly, the department also does not allege that there is any personal element involved in the impugned expenditure. It is also an accepted business practice in India that customary gifts are usually handed out during festive occasions. Although, handing out gold items or semi-precious items may be frowned upon by the revenue authorities, all the same it cannot be a reason for disallowing the expenditure, especially when it is settled law that the revenue cannot step into the shoes of a businessman and direct how the business should be conducted. MA No.190/Del/2020 4 However, we also feel that the reasonableness of quantum of expenditure vis a vis the turnover would have to be justifiable. Accordingly, it is our considered opinion that interest of justice would be served if the disallowance is restricted to 40% of the initial total disallowance of Rs. 50,32,880/-. It is so directed accordingly.” 6. On going through the aforesaid findings of the coordinate Bench, we are of the considered view that although in para 5.2 a discussion has been made with regard to the justification of the expenditure pertaining to jewellery items of semi-precious items only and the discussion is very general in nature, the issue which the Bench had taken into consideration was whether CIT(A) was justified in partly confirming the disallowance made by the AO under the business promotion expenditure. Thus, where the Revenue was not in appeal, the issue under examination was only to see if the assessee was entitled to the relief for remaining part of the addition. In this context, if the concluding lines of para 5.2 as reproduced above ( highlights in bold ) are inferred, the intention of the Bench was to restrict the disallowance upheld by the CIT(A) to the extent of 40% and that would certainly mean, 40% of Rs.39,13,747/-. Accordingly, we consider the error cited to be a mistake apparent from record and allow the application in hand. 7. It is ordered that in concluding lines of para 5.2, the figure Rs.50,32,880/- shall be read as Rs.39,13,747/- and not Rs.50,32,880/-. MA No.190/Del/2020 5 Accordingly, the application is allowed and endorsement of this may also be made by the Registry in the original order of the coordinate Bench. Order pronounced in the open court on 20.11.2024. Sd/- Sd/- (M. BALAGANESH) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20th November, 2024. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "