TaxTMI 
TaxTMI 
2024 (7) TMI 775
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....timate needs of the business. ii. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in while allowing expenses of Rs. 18,50,000/- disallowed by the Assessing Officer under various heads in simply following the decision of the earlier year without appreciating the facts of this year and without appreciating the fact that no bills were produced to support the expenditure and failed to show the purposes for which the expenditure were incurred." 2. i. On the facts and in the circumstances of the case and in law, the Ld. CST(A) has erred in deleting the disallowance of Rs. 16,21,955/- made by the Assessing Officer on account of interest paid to banks ignoring the fact that assessee's own funds reflected in balance sheet stand deployed in certain assets and cannot be said that assets and funds were available with the assessee for making advances to the sister concerns." ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the interest bearing loans were raised and interest free loans were advanced to sister concerns as established by the Assessing Officer in th....
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....Account. We find that this is a recurring issue from earlier years and Tribunal deleted such ad hoc disallowances for the assessment years 2004-05, 2005-06 & 2009-10. In the AY 2009-10 the Tribunal sustained the order of the Ld.CIT(A) and deleting the ad hoc disallowance observing as under: "12.4 Ground No.5 & 6 relate to disallowance of expenses under various heads amounting in all to Rs. 10,00,000/- which stands deleted by the Ld.CIT(A). The Ld. AO disallowed Rs. 2,00,000/- each out of (i) sales promotion (ii) marketing (iii) general expenses (iv) repair and maintenance and (v) vehicle repair and maintenance aggregating to Rs. 10,00,000/- for the reason that the assessee has not produced complete books of account; that it was not proved that expenses incurred were wholly and exclusively for the purpose of business and that these were not supported by bills. 12.5 On appeal, the Ld. CIT(A) noted that similar disallowance was made in preceding last five years which were deleted by the Ld. CIT(A) as the additions were made on ad-hoc basis and nothing adverse was brought on record by the Ld.AO. In AY 2009-10 also similar disallowance has been made by the Ld. AO without bringi....
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....nce was allegedly made by the assessee. The loans obtained by the assessee from Citi Bank and ICICI Bank were utilized for working capital of the assessee and from the balance sheet and details of loans and advances it is obvious that no loan or advance was made to any relative or sister concern. In the absence of any instance of utilization of borrowed fund for purposes other than business brought on record by the Ld. AO, the Ld. CIT(A) deleted the impugned addition. 12.9 Similar disallowance came up for our consideration in AY 2004-05 and AY 2006-07 and for the reasons recorded in our order of date, we have concurred with the findings of the Ld. CIT(A). Since the facts are similar, following our order for the AY 2004-05 and AY 2006-07, we agree with the view of the Ld. CIT(A) and reject ground No. 7 and 8 of the Revenue." 8. Facts being identical. Following the said order, we sustain the order of the Ld.CIT(A) and reject ground no.2 of Revenue. 9. Ground no.3 is in respect of deletion of salary received from Ozone Pharmaceuticals Ltd. It is observed from the assessment order that this disallowance was made stating that in the absence of any details filed by the ass....
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....of 10 assessment years commencing with initial assessment year 2002-03. The instant AY 2009-10 being the eighth year setting up of the unit, therefore, the Guwahati unit is eligible for 100% deduction u/s 80IC of the Act, provided, profits and gains are derived from manufacture or production of gnu article or thing and other conditions specified therein are fulfilled. 4.1.5 Under the new provision of sec 80IC, there is no restriction regarding number of workers to be engaged in the industrial undertaking. Therefore, disallowance of deduction u/s 80IC by the AO on the ground that required number of workers were not engaged in Guwahati unit, is erroneous and disallowance on this ground cannot be sustained. Although the number of workers being engaged is not a requirement, however, from the daily attendance register, Provident Fund, & ESI contribution forms, it is observed that more than 100 workers were engaged in Guwahati Unit in the relevant previous year. It is also note worthy that the appellant by its submission dt. 30.11.2011 produced the wages register of the writs at Guwahati along with certificates of EPF and Inspector of factories as an evidence of workers engaged ....
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....ue's appeal is dismissed. 13. Now we take up the appeal of the assessee for the AY 2012-13 and the grounds are as under: Grounds of ITA No.5420/Del/2017 (AY 2012-13): "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding that the jurisdiction was assumed in accordance with law and has erred that notice u/s 143(2) dated 07.08.2013 was served on the assessee. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order due to non-service of notice u/s 143(2) is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO for making disallowance of Rs. 5,08,43,220/- on account of selling & distribution expenses u/s 37 of the Income Tax Act, 1961 and that too without appreciating facts and circumstances of the case and that too by recording incorrect facts and findings. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the disallowance of Rs. 5,08....
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....course of assessment proceedings. The reason for making disallowance that the expenses are excessive in comparison to total turnover of the assessee is not at all justified in view of the above submissions. 17. On the other hand, Ld. DR submits that the assessee has not produced all the books of account before the Assessing Officer. Ld. DR strongly supported the orders of the Ld.CIT(A). 18. Heard rival submissions, perused the orders of the authorities below. 19. On perusal of the assessment order, it is noticed that the Assessing Officer disallowed 25% of selling and distribution expenses on ad hoc basis are primarily on the ground that these expenses are excessive in comparison to total turnover of the assessee and the observation of the Assessing Officer is as under: "3.2 While exploring the reasons for loss from business activities of the assessee, apart from other reasons it is noted that the assessee has incurred Rs. 20,33,72,877/- on account of selling & distribution expenses" and claimed deductions u/s 37 of the Act. As per the provisions of section 37 of the I.T. Act for claiming a deduction under this section following conditions must be satisfied:- ....
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....ss and is incidental to the operation. CIT Vs. Nainital Bank Ltd. (SC) 55 ITR 707, CIT Vs. Textool Co. Ltd. (Mad) 135 ITR 200 • Taxing authorities have right to consider whether expenditure was excessive. Lakshminarayan Madan Lai Vs. CIT (SC) 86 ITR 439, Swadeshi Cotton Mills Co. Ltd. Vs. CIT (SC) 63 ITR 57, Lakshmiratan Cotton Mills Co. Ltd. Vs. CIT (SC) 73 ITR 634. • Income tax authorities can examine reasonableness and genuineness of any pay merit like royalty even if such payment CIT Vs Nestle India Ltd. (Del) 199 Taxman (Mag)321 • The doctrine that the businessman is the best judge of business expediency does not affect the right, any duty, of the assessing authorities to know whether it was incurred for business purposes and not for other extraneous consideration. Jaipur Electro Pi Ltd, Vs. (Raj.) 134 CTR 237 • The adverb 'wholly' in the phrase 'laid out or expended .... For business' refers to the quantum of expenditure - The adverb 'exclusively has reference to the object or motive of the act behind the expenditure. Unless such motive is solely for promoting the business, the expenditure will not qualif....
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...., in spite of being given an opportunity. During appellate proceedings, however, the appellant has stated that complete books of accounts, bills and vouchers were produced before Assessing Officer. To verify the claim of the appellant, the assessment record was summoned. From the perusal of assessment record it was seen that on 11/03/2015 the Assessing Officer in his order sheet has recorded as under: "Sh H.P.S Gujral, CA/AR present for hearing and produced books of account, which test checked. ON examination of the details it is noticed that during the year assessee has claimed expenses on account of marking and sale promotion which approximately of 47% of total turnover. Previous year it was 31%. On examination the further details bills/vouchers and ledger related to these expenses, some bill book found not properly maintained, some found unsigned, some found not documented properly, unvouched. According the AR show cause on this issue that why not disallowance be made as assessee has failed to substantiate its claim and failed to produce enough evidences. Case adjourned for 18/03/2015 for explanation as well we complete books of accounts, bills vouchers for sup....
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....ies, in such a scenario, expecting the appellant to furnish the complete details, suo moto before Assessing Officer is not believable. The contention of the appellant to the contrary is rejected. This leads us to the second issue as to if the appellant did not furnish the complete information and evidence before Assessing Officer which was in his possession, then why should he be allowed to take advantage of his own failure before the appellate authorities. The argument of the appellant that no businessman can be compelled to maximize his profit, is well taken. However, it is also true that no expenditure can be allowed without cogent evidence. The appellant has been not able to bring on record the "cogent evidence" which could have enabled the assessing officer to allow such expenditure. Considering all the facts and circumstances, I am of the opinion that the Assessing Officer was not provided with sufficient details and evidence and therefore he had no option available with him but to estimate a disallowance. There could be an argument with regard to the quantum of disallowance but there should not be any hesitation in holding that such estimation was justified....