The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that no addition is to be made u/s 68 to Deewali expenses on account of the assessee’s inability to substantiate the same for business purposes.
The aforesaid observation was made by the Tribunal when an appeal was preffered before it by the Revenue as against the Order of the Ld. CIT(A)-4, New Delhi, dated 20.07.2016 in Appeal No.18/15-16/CIT(A)-4 relating to the A.Y. 2012- 13.
The assessee company being a Private Limited Company engaged in the business of trading of Plastic Granules, had filed its return of income for the A.Y. 2012-13 on 25.01.2013 electronically, declaring it’s total income to be Rs.1,88,80,180/-.
The case of the assessee company being selected for scrutiny and thereafter, the assessment being framed under section 143(3) of the I.T. Act, 1961 vide order dated 26.02.2015, the total income of the assessee company was determined at Rs.8,14,10,824/, aggrieved by which the assessee carried the matter in appeal before the Ld. CIT(A) who vide order dated 20.07.2016 granted substantial relief to the assesse.
And it is due to the CIT(A’S) aforesaid order that the Revenue has now preferred an appeal before the Tribunal with the grounds of its appeal being the questions as to whether on the facts and circumstances of the case, the CIT(A) was correct in deleting the addition of Rs.2,74,42,000/- made u/s 68 of the Income Tax Act, and as to whether he was correct in restricting the addition of Rs.42,88,787/, made on account of disallowance of ‘business promotion expenses’ to Rs.4,28,787/, ignoring the fact that the assessee could not substantiate the said expenditure to be made wholly and exclusively for the purposes of its business.
Hearing the opposing contentions and perusing the materials on record, the Tribunal observed:
“We find that the Ld. CIT(A) after considering the detailed submissions made by the assessee before him, has given a finding that there is no doubt about the genuineness of the expenditure and there is no finding in the assessment order that the business promotion expenses and Diwali expenses were incurred for the personal purpose / extraneous nature of expenses in the hands of Directors.”
“The Ld. CIT(A), however, after considering that since the assessee could not give the full details, restricted the disallowance to the extent of 10% on business promotion expenses after considering the business and turnover of the assessee and similarly granted partial relief of Rs.26,09,082/- on account of ‘Diwali expenses’ against a sum of Rs.56,62,840/- claimed by the assessee on account of ‘Diwali expenses’”, the Tribunal pointed out.
Adding to its observation and finally dismissing the Revenue’s appeal, it concluded:
“Before us, the Revenue has not pointed out any fallacy in the finding of the Ld. CIT(A). We, therefore, find no reason to interfere with the order of the Ld. CIT(A).”
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