TaxTMI 
TaxTMI 
2016 (8) TMI 760
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....rred in deleting the disallowance of Rs. 1,07,87,411/-, made by the AO as the assessee failed to justify the 'rebates and discounts' given to its related party, entirely relying on the submission of the assessee, as the onus of establishing the genuineness of any expenditure is on the assesee which the assessee failed to discharge? 4. That the grounds of appeal are without prejudice to each other. 5. The appellant craves leave to add, to alter, to amend or to forgo any grounds of the appeal either before or at the time of the hearing of the appeal." 2. The facts in brief are that the assessee company is engaged in the business of trading of electronic goods. The ereturn of income for the AY 2009-10 was filed on 21.9.2010 declaring an income of Rs. 19,74,830/-. This return was processed initially u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred as the Act) and subsequently selected for scrutiny and the assessment was completed on 20.12.2011 u/s. 143 of the Act at an income of Rs. 1,34,21,680/- by making addition of Rs. 1,86,397/- u/s. 14A, Rs. 51,650/- u/s. 40A(3), Rs. 4,21,394/- as sales promotion expenses and Rs. 1,07,87,411/- u/s. 40A(2)(b) of the Act. Aggri....
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....allowed. The entry did not pass through the bank book since these items were purchased through an associated concern and were transferred by a debit note. Under the circumstances there is no reason to disallow the purchase of complimentary gift items purchased for the purpose of business promotion. Ld. CIT(A) has observed that the AO has not been able to brought any fact contrary to what is claimed by the assessee. Ld. CIT(A) has relied upon the case law in the case of Upper India Publishing House Vs. CIT (1979) 117 ITR 569 (SC) wherein, it has been held that whether payment is excessive or reasonable is a question of fact. Since the transactions are recorded in the books of accounts of the assessee, unless there is a fact to contradict such transactions, disallowances cannot be made on the basis of certain assumptions. It is a normal practice in business that expenses are incurred as incentive to the dealers against bulk orders to push sales. Such endeavor of the assessee can be seen as successful in increase of the turnover. The action of the AO to make the addition just for the sake of the addition ignoring all the material facts brought into the assessment proceedings by the as....
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....h the documentary evidence that how much it would have cost to the assessee if same services were to be availed either by employing whole time employees on its role or obtaining the services of the independent consultants on these areas. The company could not give better justification than this. However, the AO has proceeded on altogether different reasoning and even not attempted to specify by taking an independent view of the matter and has rather disallowed the amount. There is no doubt as to the judicial proposition as to whether the payment is excessive or reasonable is a question of fact. How the fact of excessive or reasonable is required to be established is only by knowing as to what would be reasonable amount for the services obtained. The assessee explained as to how the payment m de was reasonable and justified. It was for the AO to dispute the claim on some cogent evidence and material which has not been done by him. Hence, the judicial decisions cited by AO does not support AO's findings. The judgments mentioned by the AO in his order simply suggest the principles which are laid down by Section 40A(2)(a)/(b) of the Act. 8.4 As per the provisions of Section 4....
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.... that the AO is required to be pragmatic and not pedantic. The Apex Court also observed that Revenue cannot be allowed to flip-flop on the issue and it ought let the matter raised rather than spend the tax payers money in pursuing litigation for the sake of it. In the similar facts and circumstances of the case, the Apex Court observed that "It is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present A.Y. as well as in the subsequent A.Y. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers." Respectfully following the judicial pronouncements discussed above and also because the nature of transaction is genuine and in the absence of any revenue loss, the disallowance made by AO is deleted. This ground of appeal is allowed." 8. After perusing the aforesaid finding of the Ld. CIT(A), we are of the view that assessee has already explained with the do....