TaxTMI 
TaxTMI 
2018 (5) TMI 1261
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....s (Pvt.) Ltd., Rajahmundry 2. Ground No.1 and 8 are general in nature which does not require specific adjudication. 3. Ground No.2 and 3 are related to the disallowance of estimated expenditure of Rs. 13,68,796/- in respect of the following items: Sl. No. Head of expenses Amount claimed Amount disallowed Rs. 01. Marketing expenses 1,24,99,654/- 12,49,965/- 02. Godown expenses 7,02,426/- 70,242/- 03. Plant maintenance 4,85,893/- 48,589/- Total disallowances 13,68,796/- 3.1. During the assessment proceedings, the Assessing Officer (AO) found that the sales have been increased from Rs. 646.00 lakhs to Rs. 1398 lakhs, resulting in increase of 116.45%, where....
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....ore argued that the expenditure incurred was reasonable and genuine hence no disallowance is called for. M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry 6. We have heard both the parties and perused the material placed on record. The Ld.CIT(A) deleted the addition holding that the expenditure incurred by the assessee is reasonable and justified. The relevant part of the order of the Ld.CIT(A) is extracted as under: "4.3 I have considered the submissions and also perused the details filed. From theperusal of the Profit and Loss account, it is seen that the sales have increased to Rs. 13.98 crore from Rs. 6.46 crore in the earlier year. Correspondingly the operating expenses have increased from Rs. 6.52 crore to Rs. 14.92 c....
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....as a fact that the sales of the assessee company have increased from Rs. 6.46 crores in the earlier year to Rs. 13.98 M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry crores in the year under consideration and simultaneously, there was increase in the profit as well as rate of profit. The marketing expenditure cannot be in proportion to the sales, since the marketing initiatives would be beneficial to the company in the long run. Marketing expenditure has to be incurred as per the requirement of the company to improve the business and to make known the public regarding the brand image of the company. Therefore the expenditure cannot be in proportion to the sales. Similarly regarding godown expenditure and plant maintenance, the ....
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....hence held that the assessee company has introduced its own funds into business and accordingly made the addition of Rs. 40,00,000/-. 8. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the additions stating that the assessee has discharged its onus by furnishing the details and confirmations, but the M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry revenue failed to discharge its onus. The Ld.CIT(A) relied on the orders of the Hon'ble ITAT Vizag Bench in the case of M/s Merridian Promotors Pvt. Ltd. Vs. DCIT, the decision of Hon'ble Supreme Court in the case of Lovely Exports 251 ITR 263 and the decision of Hon'ble Delhi High Court in the case of CIT Vs. Stellar Invest....
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....se of four of the above investors. However, the AO was not convinced with their creditworthiness. The AO also disbelieved the genuineness of the investment as the transaction was in cash. Thus the AO concluded that the amount represent undisclosed income of the assessee. However, I find that such conclusion is not drawn with reference to any incriminating material information or records. On the other hand, the Return of share allotment filed in Form Nq.2 clearly indicate that shares have been allotted in favour of the above referred persons in lieu of the above referred amounts invested with the company. With such allotment theabove parties have become share holders of the company. Therefore, I do not find any basis to doubt the genuineness....
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....per explanation as to source for the impugned investments." M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry 10. In this case, the assessee has furnished the confirmation letters explaining the identity of the shareholder, address and sources of income of the contributor to the share capital along with the evidence for land holdings and copies of IT returns in 4 cases before the AO. The assessee has discharged its burden with regard to the identity, genuineness of share capital and also explained the source of share capital. The AO did not make any enquiry to verify the correctness of the information furnished by the assessee and bring any evidence to establish that the contributors to share capital does not have sufficient s....