TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1261
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....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%, whereas, there was sharp increase in the expenses which according to the AO was unreas....
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....ance 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 crore. The net profit before taxation has increased to Rs. 21.96 Iakh from Rs. 9.04 lakh. ....
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.... 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 assessee has incurred the expenditure as per the business exigencies. The revenue's case is....
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....grieved 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 Investments Ltd. 192 ITR 287 and deleted the addition. Aggrieved by the order of the Ld.CIT(A) the revenue carried the matter to the Tribunal. 9. W....
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....estment 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 of the above referred investments made. As regards, creditworthiness of the parties also, I find that the assessee has discharged its onus in furni....