2019 (11) TMI 914 - AT - Income Tax

Tribunal restricts sales promotion expense disallowance to 20% citing lack of evidence

The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to restrict the disallowance of sales promotion expenses to 20% from the initially ... Disallowance of sales promotion expenses - CIT(A) restricting the estimated disallowance to 20% of the total expenditure claimed as against 50% disallowed by the AO - HELD THAT:- The assessee claimed sales promotion expenses. On perusal of the paper book, we find that most of the payments were made in cash even though the payments are within the monetary limits of section 40A(3) of the Act and while the details in respect of some schools were produced, the assessee could not produce official receipts for all the schools. In fact, the genuineness of the claim of the assessee was not disputed by the Revenue, the Assessing Officer allowed 50% of the claim as genuine and the balance expenditure was brought to tax. After considering the written submissions and since the assessee could not produce official receipts for all the schools, the ld. CIT(A) restricted the disallowance to 20% of the total claim of expenditure and partly allowed the ground raised by the assessee. No infirmity in the order passed by the ld. CIT(A), who has given reasonable relief to the assessee. Thus, the ground raised by the assessee stands dismissed. Issues:- Disallowance of sales promotion expenses- Condonation of delay in filing appealDisallowance of Sales Promotion Expenses:The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of sales promotion expenses. The Assessing Officer had disallowed 50% of the claimed expenditure due to lack of concrete evidence and confirmation on the quantum of expenditure incurred. The ld. CIT(A) restricted the disallowance to 20% after considering written submissions and facts of the case. The Tribunal noted that most payments were made in cash, within the monetary limits of the Act, and official receipts for all schools were not produced. The genuineness of the claim was not disputed, and the Assessing Officer allowed 50% as genuine. The ld. CIT(A) restricted the disallowance to 20% and partly allowed the ground raised by the assessee. The Tribunal found no infirmity in the ld. CIT(A)'s order, providing reasonable relief to the assessee, and dismissed the appeal.Condonation of Delay in Filing Appeal:The appeal was delayed by two days, and the assessee filed a petition for condonation of the delay, which was supported by an affidavit. The ld. DR did not raise serious objections, and the Tribunal, considering sufficient cause, condoned the delay and admitted the appeal for adjudication.This judgment highlights the importance of providing concrete evidence to support expenditure claims, the significance of official receipts, and the discretion of authorities in allowing or restricting disallowances based on the genuineness of claims. It also underscores the procedural aspect of condonation of delay in filing appeals.