Disallowance of Business Promotion Expenses without Examination of Vouchers quashed: ITAT remands matter to AO [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that, business promotion expenses by the assessee as Proprietor of SJM Enterprises cannot be disallowed without examination of vouchers.

The assessee, Jasdeep Singh raised the issue that the Commissioner of Income Tax (Appeals) [CIT(A)] had erred in confirming the addition of Rs.10 lakhs on account of business promotion expenses.

The assessee is a proprietorship firm in the name of SJM Exports and engaged in the business of manufacture and exporter of leather garments. On the issue of business promotion expenses, the Assessing Officer made disallowance on ad-hoc basis after noticing the incomplete submission of vouchers by the assessee.

The CIT(A)’s observation, that the assessee has a full fledged agent overseas to manage the business and obtain orders in lieu of substantial commission earned from the assessee and deduction that the expenses sought to be allowed were overlapping in nature was set aside by the ITAT.

The Tribunal Bench of Shamim Yahya, Accountant Member and Anubhav Sharma, Judicial Member observed that, no other specific defect apart from the absence of vouchers could be pointed out in the assessee’s case and held that the total ad-hoc disallowance is not sustainable.

The absence of vouchers of Rs,.5,31,271/- had been pointed out by the Assessing Officer which the Counsel for the assessee disputed and submitted that it was placed before the Assessing Officer. Furthermore, the counsel for the assessee submitted that apart from export the assessee had some local customers also and this particular expenditure was in connection with a local lunch hosted by the assessee.

The AO was thus directed to examine the vouchers and examine allowability afresh, setting aside the impugned disallowances.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates