INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “SMC-2”: NEW DELHI

BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER
A N D

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

ITA No. 5819/Del/2019
(Assessment Year: 2013-14)

M/s Creative Ideas, ITO,
Ward-28(4),
B-304, New Friends Colony, Vs. New Delhi

New Delhi-110 065. (Respondent)

PAN: AAGFC4306H

(Appellant)

Assessee by : Shri C. S. Aggarwal, Sr. Advocate;
Revenue by: Shri R. K. Gupta, Sr. D. R.;
Date of Hearing 04/11/2020
Date of pronouncement 02/12/2020

O R D E R
PER PRASHANT MAHARISHI, A. M.

1. This appeal is filed by M/s Creative Ideas, New Delhi (the Appellant) for Assessment Year
2013-14 against the order of the CIT (Appeals)-10, New Delhi dated 15.05.2017 in appeal
filed by the assessee against the assessment order passed under Section 143(3) of the Income
Tax Act, 1961 (the Act) by Income Tax Officer, Ward 28(4), New Delhi, dated 18.02.2016
was challenged wherein an addition of Rs.5,02,600/- was made and the ld. CIT (Appeals)
upheld the disallowance to Rs.3,85,548/-. This is the solitary ground of appeal.

2. The brief facts of the case show that assessee is a partnership firm engaged in the business of
export of high fashion ladies garments. It filed its return of income on 30.09.2013 declaring
total income of Rs.10,80,050/-. The case was fixed up for scrutiny and the learned Assessing
Officer noted that assessee has claimed the expenses of communication of Rs.2,97,001/-,
travelling and conveyance of Rs.45,44,356/-, depreciation on car Rs.1,72,986/- and insurance
on car of Rs.11,660/-. These expenses totaling to Rs.50,26,000/- was examined and held that
those are not fully allowable to the assessee. The ld. AO disallowed 10% of such expenses
amounting to Rs.5,02,600/- for the reason that it is ‘in the interest of Revenue and to avoid

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leakage of revenue”. Accordingly, total income of the assessee was assessed at
Rs.16,05,970/-.
3. Assessee preferred appeal wherein the ld. CIT (Appeals) deleted the disallowance partly, but
upheld to the extent of Rs.3,85,548/-. Therefore, assessee is in appeal before us.
4. We have heard learned Sr. Advocate, Shri C. S. Aggarwal on behalf of assessee and Shri
R. K. Gupta, Sr. DR on behalf of the Revenue.
5. We have carefully considered rival contentions and perused the orders of the ld. Assessing
Officer and ld CIT (A). Before the ld. AO the assessee appeared and furnished the details
required which were examined by the AO and placed on record. Such is the finding of the ld.
AO in para No. 1 of the assessment order. The ld. AO despite examining the requisite details
could not point out instances of expenses which are not allowable to the assessee. The AO
gave the reason to make an ad-hoc disallowance of 10% of the expenditure “in the interest of
Revenue and to avoid the leakage of revenue.” We do not find any such provision in the Act
for disallowing an expenditure for this reason. The ld. CIT (Appeals) looked at the ledger of
tour and travel expenditure and found that assessee has claimed expenditure of
Rs.38,55,479/-. He noted that there are several payments which are made in cash, besides,
there are several items of expenses in respect of travelling expenses of the partner to various
international destinations. Therefore, he upheld the disallowance of 10% of the expenditure
amounting to Rs.3,85,548/-. We are not agreeable with the finding of the ld. CIT (Appeals)
because unless there is a violation of provision of Section 40A(3) of the Act cash expenditure
cannot be disallowed and further assessee is engaged in the business of export therefore,
there can be travelling expenditure allowabale to foreign destination of partners. Therefore,
travelling expenditure of the partner to foreign destinations are allowable unless there is a
specific finding that those are personal expenditure, then same cannot be allowed. There is
no such finding by ld CIT (A). In view of this we reverse the findings of the lower
authorities and direct the ld. Assessing Officer to delete the disallowance of Rs.3,85,548/-.
Accordingly ground No. 1 of the appeal of the assessee is allowed.
6. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on : 02/12/2020.

Sd/- Sd/-
( H. S. SIDHU ) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 02/12/2020. Page | 2

*MEHTA*
Copy forwarded to :-

1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT

ASSISTANT REGISTRAR
ITAT, New Delhi

Date of dictation 27.11.2020
Date on which the typed draft is placed before the dictating member 27.11.2020
Date on which the typed draft is placed before the other member 02.12.2020
Date on which the approved draft comes to the Sr. PS/ PS 02.12.2020
Date on which the fair order is placed before the dictating member 02.12.2020
for pronouncement
Date on which the fair order comes back to the Sr. PS/ PS 02.12.2020
Date on which the final order is uploaded on the website of ITAT 02.12.2020
date on which the file goes to the Bench Clerk 02.12.2020
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the order

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