2022 (11) TMI 821

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....c kitchen appliances products of Black & Decker. Gryphon & Hitkari. Return declaring Income of Rs. 32,52,680/- was filed on 26.11.2014. The same was processed u/s 143(1). The assessment has been completed u/s 143(3) by making certain additions as follows: S. No. Head of Expenditure Basis of Disallowances Disallowance by the Learned A.O. i) Disallowance of Commission Expenses Revenue Expenditure 33,27,279/- ii) Disallowances of Travelling Expenses Revenue Expenditure 13,91,270/- hi) Disallowance of Business promotion Expense Revenue Expenditure 8,94,933/- iv) Disallowance of Penalties- Contractual Revenue Expenditure 75,960/- v) Disallowance of Repair and Maintenance of car Revenue Expenditure 80,558/- Vi) Disallowance of Employee's contribution to PF. Revenue Expenditure 19,629/- 3. In appeal before the ld CIT(A) the assessee was able to get relief with regard to disallowances of travelling allowances, disallowances of canteen store department, disallowances on account of repair and maintenance of cars and disallowances on account of delay in deposit of employees contribution to EPF. 4. Ho....

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....014. 7. The ld AR referred to the settlement agreement dated 18.06.2012 available at page NO. 68 to 71 of the paper book and submitted that in terms of this settlement agreement vide letter dated 24.01.2014 available at page No. 72 of the paper book the amount lying with the Hitkari Potteries was forfeited. It was submitted that the amount of Rs. 33,27,279/- was not paid during the year but was lying the Hitkari Potteries ltd and same was forfeited for loss of commission of short sales and TDS was paid upon same. It was thus submitted that Tax Authorities below have fallen an error in considering it to be prior period expenses. The ld DR defended the order of the ld Tax Authorities below. 8. Now it can be appreciated from the matter on record that before the ld AO only settlement dated 18.06.2012 was filed and the other letter dated 24.01.2014 as filed was not settlement document or a bilateral document but a unilateral letter of the assessee. The ld CIT(A) in para 6.1.5 observes that appellant had submitted letter dated 24.01.2014. The amount has been forfeited by the Pr. Company under direction of this letter. The ld CIT(A) disbelieved this letter with following findings:- ....

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....ified. 12. The ld AR submitted that the Tax Authorities below have fallen in error in not appreciating that the personal expenditure of the directors were suo motto deducted while claiming the expenditure. Referring to page no. 83 of the Paper book, the ld AR submitted that a total sum of Rs. 89,1000/- was reduced from the credit card expenditure which included purchases date 06.05.2013 with Indusind Bank credit card at duty free shop of Rs. 9395.34, which has been referred by ld CIT(A) in para 6.3.2 as having booked as business expenses. It was submitted that as the nature of business required frequent travelling and credit card in the name of directors of the company were use to entertain the clients the same are allowable as business promotion expenses. The ld DR however supported the finding of the Tax Authorities below. 13. In regard to this ground it is relevant to reproduce section 37(1) of the Act along with explanation:- "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpos....

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.... credit card have been accounted as personal expenses out of total expenses of Rs 44,74,666/- :- ATEMENT DATE TRANSACTION DATE Particulars - v 0 ~ , ' -   Amounts 5-05-13 5-06-13 6-07-13 5-11-13 12-04-13 01-06-13 26-06-13 13-10-13 AMERICAN EXPRESS CREDIT CARD DAYAL OPTICALS NEW DELHI INDIA GREENWAYS SAREES CELEBRITY CRUISES MIAMI DELHI DUTY FREE-ins07 20000.00 f* 20000.00^ 69636.83^ 2805.71 03-06-13 03-06-13 06-05-13 03-09-13 03-11-13 22-02-14 25-02-14 25-02-14 INDUSIND BANK CREDIT CARD DUTYFREE Interest charges DUTY FREE DAYAL OPTICALS MINISREY OF COMPANY AF MINISREY OF COMPANY AF 9395.34 577.87 11338.41 100000.00 46227.23 263805.00 20-05-13 20-06-13 20-12-13 20-01-14 20-02-14 02-05-13 02-05-13 04-05-13 28-08-13 07-06-13 19-11-13 04-12-13 04-12-13 05-01-14 20-01-14 27-01-14 27-01-14   CITI BANK CREDIT CARD LOUIS VUITTON CHRISTIAN DIOR LOUIS VUITTON SERVICE TAX ROBERTO CAVALLI LONDON BG'S FASHIONS PVT. LTD .NEW DLEHI ZARA DELHI STEAVE MADDEN M MISSONI 103927158 HERMES NEW.DEL....