IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "B" NEW DELHI
BEFORE SHRI J.SUDHAKAR REDDY, AM
AND SHRI GEORGE GEORGE K, JM
ITA No: 5140/Del/2012
AY : - 2009-10
Elca Cosmetics Pvt.Ltd. vs. DCIT, Circle 11(1), Room no.312
202-206, Tolstoy House CR bldg., IP Estate
15, Tolstoy Marg New Delhi 110 002
New Delhi 1
PAN: AABCE 1111 C
(Appellant) (Respondent)
Appellant by : Sh. Deepak Chopra, Adv.
Ms.Manasvini Bajpai, Adv.
Respondent by: Smt.Parwinder Kaur, Sr.D.R.
ORDER
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the assessee directed against the order
dt. 03.07.2012 of Ld.CIT(A)-XIII, New Delhi pertaining to the Assessment
Year 2009-10.
2. The assessee is a company and is engaged in the business of
importing cosmetics and deodorants from abroad and selling the same on
whole sale basis. It filed electronically its return of income for the AY
2008-09 on 26.9.2009 declaring loss of Rs.4,42,58,124/-. The AO assessed
the loss at Rs.4,27,59,362/- inter alia making disallowances on adhoc basis,
being 20% of the training expenses, 10% out of repair and maintenance,
25% out of general expenses and software expenditure.
ITA No. 5140/Del/2012
Elca Cosmetics Pvt.Ltd.
AY 2009-10
3. Aggrieved the assessee carried the matter in appeal. The First
Appellate Authority confirmed the order of AO. Further aggrieved the
assessee is before us on the following grounds.
"1.a) That the Commissioner of Income-tax(Appeals) has erred in upholding
the addition of Rs. 3,34,577/- made by the assessing officer by disallowing
20% of travelling expenses of Rs. 16,72,885/-.
b) That the Commissioner of Income-tax(Appeals) has erred in upholding
the disallowance by holding that only ledger account of these expenses has
been filed and that bills and vouchers for these expenses have not been
filed.
c) That the appellant was never called upon to produce the bills and
vouchers for these expenses and the appellant had expressly stated that all
the expenses are fully supported by the bills and the payments have been
made by cheques only and are allowable in full.
2.a) That the Commissioner of Income-tax(Appeals) has erred in upholding
the addition of Rs. 1,23,630/- made by the assessing officer by disallowing
10% of Repair & Maintenance expenses of Rs. 12,36,338/-.
b) That the Commissioner of Income-tax(Appeals) has erred in upholding
the disallowance by holding that only ledger account of these expenses has
been filed and that bills and vouchers for these expenses have not been
filed.
c) That the appellant was never called upon to produce the bills and
vouchers for these expenses and the appellant had expressly stated that all
the expenses are fully supported by the bills and the payments have been
made by cheques only and are allowable in full.
3.a) That the Commissioner of Income tax (Appeals) has erred in upholding
the addition of Rs. 88,596/- by disallowing 25% of general expenses of .
Rs. 3,54,385/-.
b) That the Commissioner of Income tax(Appeals) has erred in upholding
the disallowance by holding that only ledger account of these expenses has
been filed and that bills and vouchers for these expenses have not been
filed.
c) That the appellant was never called upon to produce the bills and
vouchers for these expenses and the appellant had expressly stated that all
the expenses are fully supported by the bills and the payments have been
made by cheques only and are allowable in full."
4. We have heard Mr.Deepak Chopra, the Ld.Counsel for the assessee
and Smt.Parwinder Kaur, the Ld.Sr.D.R. on behalf of the Revenue.
2
ITA No. 5140/Del/2012
Elca Cosmetics Pvt.Ltd.
AY 2009-10
5. After hearing rival contentions, on perusal of material on record, order
of lower authorities, case laws cited, we hold as follows.
6. The sum and substance of the assessee's submission is that the
disallowance in question is made on an adhoc basis, and without any basis
and such disallowances cannot be sustained. Reliance was placed on the
following case laws.
(i) JKH Export vs. ACIT (2013) 35 CCH 108 Mum Trib.
ITAT Mumbai `J' Bench in ITA no.137/Mum/2012 order dt. 31st
January, 2013
(ii) ACIT vs. Arthur Anderson & Co. (2005) 94 TTJ (Mum) 736 : (2006)
5 SOT 393 (Mumbai) - ITAT Mumbai `C' Bench in ITA
no.6192/Mum/2004 order dt. 31.12.2004
(iii) DCIT vs. Alidhara Texpro Engineers (P) Ltd., (2011) 43 SOT 1 (Ahd)
Ahmedabad `C' Bench of the ITAT in ITA nos. 1042 and
3591/Ahd/2007 for the AY 2003-04 and 2004-05.
7. The Ld.Counsel pointed out that the books of the assessee was not
rejected and the AO has not brought out anything on record in support of
his conclusion that the expenditure incurred was excessive.
7.1. The Ld.D.R. Smt.Parwinder Kaur on the other hand submitted that
the assessee could not justify the expenses before the AO. She further
submitted that bills and vouchers of these expenses have not been
presented before the AO. She relied on the order of the AO.
7.2. The AO has made disallowances on the ground that the assessee only
produced the ledger account of these expenses and has not produced bills
and vouchers of these expenses. The assessee contended before the First
Appellate Authority that its turnover has increased from Rs.12.73 crores to
Rs.24.24 crores during the impugned AY and correspondingly the salaries
have increased from Rs.1.8 to Rs.3.70 crores and training expenses have
increased from Rs. 9.31 crores to Rs.16.73 crores. He further submitted
3
ITA No. 5140/Del/2012
Elca Cosmetics Pvt.Ltd.
AY 2009-10
that the AO has not called upon the assessee to produce bills and vouchers
for the said expenses and pleaded that each and every expenditure is
supported by bills and that payments were made by cheques. On the issue
of repairs and maintenance expenditure, it was submitted that the bills and
vouchers were not called for by the AO and under such circumstances no
disallowance can be made, specifically when each and every payment is
supported by bills and vouchers and when payments were made by cheques.
Similar arguments were made on general expenses. The Ld.CIT(A) has not
considered any of these contentions.
7.3. In our view such adhoc disallowances, when the turnover of the
assessee company has doubled during the year, is not justified. The
disallowances have been made in a very casual manner without proper
justification. When the assessee has not been called upon to produce the
vouchers, bills etc., the question of drawing adverse inferences on the
ground that the same were not produced, does not arise. Be it as it may,
the payments were claimed to have been made by cheques and this claim
has not been contradicted by the Revenue authorities. On this factual
matrix, we uphold the contentions of the assessee and delete the adhoc
disallowance of 20% made on travel expenses, 10% made on repairs and
maintenance expenses and 25% made on general expenses.
7.4. In the result the appeal of the assessee is allowed.
8. In the result, the appeal by the assessee stands allowed.
Order pronounced in the Open Court on 11th December,2014.
Sd/- Sd/-
(GEORGE GEORGE K) (J.SUDHAKAR REDDY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: the 11th December, ,2014
*manga
4
ITA No. 5140/Del/2012
Elca Cosmetics Pvt.Ltd.
AY 2009-10
Copy of the Order forwarded to:
1. Appellant;
2.Respondent;
3.CIT;
4.CIT(A);
5.DR;
6.Guard File
By Order
Asst. Registrar
5
|
