ITA NO. 2927/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 2927/Del/2011
A.Y. : 2005-06
Income Tax Officer, vs. M/s Optimum Marketing Metrics P
Ward 13(4), New Delhi Ltd.,
R.No. 219, CR Building, B-44, GT Karnal Road Industrial
New Delhi Area,
Delhi 33
(PAN/GIR NO. : AACO 3928J)
(Appellant ) (Respondent )
Assessee by : Sh. Sanjiv Sapra, FCA
Department by : Sh. R.S. Negi, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM
This appeal by the Revenue is directed against the order of the
Ld. Commissioner of Income Tax (Appeals)-XVIII, New Delhi dated
25.2.2011 pertaining to assessment year 2005-06.
2. The grounds raised read as under:-
"1. On the facts and circumstances of the case and in
law the Ld. Commissioner of Income Tax (Appeals)
erred in deleting the disallowance of ` 8,00,000/-
made out of travelling and conveyance expenses
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including the foreign travelling expenses of ` 19.95
lacs.
2. On the facts and circumstances of the case and in law
the Ld. Commissioner of Income Tax (Appeals) failed
to appreciate the facts discussed in detail in the
remand report.
3. On the facts and circumstances of the case and in law
the Ld. Commissioner of Income Tax (Appeals) erred in
deleting the disallowance of ` 1,80,000/- made out of
business promotion expenses.
4. The appellant craves to be allowed to add any fresh
grounds of appeal and / or delete or amend any of the
grounds of appeal."
3. Apropos disallowance of ` 8,00,000/- towards travelling and
conveyance expenses.
On this issue Assessing Officer noted that out of sum of
26,05,132/- as claimed under the head `travelling and conveyance' of
` 19,97,452/- was incurred on foreign travelling and most of it was
towards reimbursement of expenses incurred by Mr. Prem Arjandas
Bhawnani who is neither an employee of the company nor its Director
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but happens to be a 51% share holder of the company and is based in
Singapore. Assessing Officer further observed that though the
purchases /imports have been made from Singapore and USA only but
the foreign trips of Mr. Prem A. Bhawnani are to other destination also.
Assessing Officer summarized the reasons as under for making the
disallowance.
a) Sh. Prem A. Bhawanani is neither an employee nor a
Director of the assessee company.
b) Assessee company has failed to establish that
expenditure of more than ` 19 lacs reimbursed to Mr.
Prem A. Bhawani for foreign travelling was incurred
wholly and exclusively for the business of the assessee.
c) That it failed to produce even bills and vouchers of
travelling and conveyance expenses, amounting to `
4,50,000/-.
4. Before the Ld. Commissioner of Income Tax (Appeals) assessee
submitted that complete details of travelling and conveyance
expenses and bills and vouchers for major expenses on foreign travel
alongwith date wise details of expenses etc. had been produced at the
time of assessment. It was further submitted that Sh. Bhawnani is the
majority shareholder of the company and for utilizing his vast
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ITA NO. 2927/Del/2011
experience and contacts for promoting the sales of the company he
had to undertake the said tours. The details of the said tours which
were to meet potential customers, suppliers and trade fairs /
exhibitions have already been submitted. It was further submitted
that the expenses have been carried out as per the Board Resolution
of the assessee company authorizing Shri Bhawanani to undertake the
tours for promoting the business of the assessee. It was further
submitted that similar expenses were incurred in the earlier years
and have been accepted by the department and no disallowance has
been made on this count in earlier years and there is no change in
the facts and circumstances of the case during this year. Ld.
Commissioner of Income Tax (Appeals) noted that assessee has by
way of additional evidences submitted the balance details of expenses
by arguing that since the major details had already been submitted,
the assessee was under the impression that the same was sufficient
for assessment and further details were not called for. Ld.
Commissioner of Income Tax (Appeals) further noted that in the
remand report Assessing Officer has not made any valid objection to
the assessee's argument and has not brought any adverse material on
record on independent enquiry. Ld. Commissioner of Income Tax
(Appeals) found that the arguments of the Assessing Officer that the
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assessee has made purchases mostly from Singapore and USA and
hence the travel expenses to other countries are not allowable, is
fallacious since so long as the visits have been made for the purpose
of business it is an allowable expenditure even though such visit has
not resulted in any immediately purchase from the said countries.
Ld. Commissioner of Income Tax (Appeals) further noted that attending
trade fairs and exhibitions in the line of the assessee's business in
other countries cannot be said to be not related with the assessee's
business. Accordingly, Ld. Commissioner of Income Tax (Appeals)
found that the disallowance of ` 8,00,000/- made by the Assessing
Officer on adhoc basis cannot be sustained. Accordingly, he deleted
the same.
5. Against the above order the Revenue is in appeal before us.
6. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that assessee has
submitted that all the necessary details of the travelling expenses
have been submitted. The expenditure have been carried out, as per
the Board Resolution of the assessee company authorizing Shri
Bhawnani to undertake the tours for promoting the business of the
company. We further note that similar expenditure incurred in
earlier years were accepted by the department. We agree with the
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finding of the Ld. Commissioner of Income Tax (Appeals) that
argument of the Assessing Officer that assessee had made purchases
mostly from Singapore and USA and hence the travel expenses to
other countries are not allowable is not correct. Further, attending
trade fairs and exhibitions in the line of the assessee's business in
other countries cannot be said to be not related with the assessee's
business. Under the circumstances, we find that there is no infirmity in
the order of the Ld. Commissioner of Income Tax (Appeals) in deleting
the addition of ` 8,00,000/- in this regard. Accordingly, we uphold the
same.
7. Apropos disallowance of ` 1,80,000/-
On this issue Assessing Officer held that assessee has incurred
this expenditure under the head `business promotion'. Assessing
Officer noted that assessee could not produce all the bills and
vouchers. He found that bills / vouchers of approx. ` 1,80,000/- were
not produced. So the Assessing Officer made the disallowance of `
1,80,000/- in this regard.
8. Before the Ld. Commissioner of Income Tax (Appeals), it was
submitted that all the vouchers and books of account were produced
before the Assessing Officer and Assessing Officer has not pointed
out any mistake in the account and has disallowed the above amount
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on adhoc basis. Ld. Commissioner of Income Tax (Appeals) noted
that although the matter had been remanded to the Assessing Officer,
the Assessing Officer has not given any comment on it. Considering
the above facts and circumstances, Ld. Commissioner of Income Tax
(Appeals) deleted the adhoc disallowance of ` 1,80,000/-.
9. Against the above order the Revenue is in appeal before us.
10. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that Assessing Officer
has made the disallowance on adhoc basis. It has been submitted by
the assessee's counsel that Assessing Officer has not pointed out
the deficiencies in the vouchers actually. Moreover, the matter was
remanded to the Assessing Officer, but the Assessing Officer has not
made any comment on it. Under the circumstances, in our considered
opinion, there is no infirmity in the order of the Ld. Commissioner of
Income Tax (Appeals). Accordingly, we uphold the same.
11. In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 25/5/2012.
Sd/- Sd/-
JAIN]
[A.D. JAIN] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 25/5/2012
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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