2016 (3) TMI 1220 - AT - Income Tax

Addition of exhibition expenses - CIT(A) noted that no specific details of vouchers which were not produced by the assessee have been mentioned. Therefore it appears to be an addition on adhoc basis and accordingly restricted the addition to 20, 000/-- Held that - The assessee has specifically stated before the learned CIT (Appeals) that it is not possible to get each and every voucher of expenses incurred during the course of exhibition. However the learned CIT (Appeals) has already granted sufficient relief to the assessee. Therefore in the absence of production of complete vouchers of expenses the addition was rightly made of 20, 000/-. This ground of appeal raised by the assessee is therefore dismissed. Addition of telephone and petrol expenses - Held that - The addition is excessive in nature. The nature of business of the assessee is manufacturing of potato chips and assessee filed the return of income at 1, 61, 877/-. It is also admitted fact that the assessee has not maintained any details of these expenses. Therefore personal usage of these items cannot be ruled out. However considering the nature of the business of the assessee and return of income so filed I reduce the addition to 10, 000/- as against the addition of 30, 000/-. Addition on account of household expenses - Held that - Addition is still on excessive side. Even if no details of family contribution is filed but it admitted fact that the assessee is living in joint family and other family members would also contribute for household expenses. Considering the nature of the business of the assessee and return of income filed at very low amount the addition is restricted to 30, 000/- as against 60, 000/-. This ground is therefore partly allowed. Not allowing benefit of unabsorbed losses of earlier years - Held that - The assessee claimed set off of unabsorbed losses. Something different is mentioned in the assessment order of preceding assessment year 2007-08. The carry forward of loss or depreciation is notified in assessment year 2007-08 therefore it is to be seen whether late return for assessment year 2008-09 has any impact on carry forward of loss/depreciation. This fact has been looked into by the learned CIT (Appeals). Therefore it also requires verification of fact whether it was brought forwarded losses or brought forward depreciation. In view of the above I set aside the order of the learned CIT (Appeals) and restore this issue to the file of the learned CIT (Appeals) with direction to redecide this issue on merits strictly in accordance with law by verifying the factual facts from the record and shall also take into consideration the decision of the Hon ble Punjab & Haryana High Court in the case of Haryana Hotels Ltd. (2005 (2) TMI 63 - PUNJAB AND HARYANA High Court )

Summary

Issues:
1. Addition of exhibition expenses
2. Addition of telephone and petrol expenses
3. Addition of household expenses
4. Disallowance of benefit of unabsorbed losses of earlier years

1. Addition of Exhibition Expenses:
The assessee challenged the addition of Rs. 20,000 out of exhibition expenses claimed under the head 'exhibition expenses'. The Assessing Officer added Rs. 66,498 due to lack of documentary evidence. The learned CIT (Appeals) restricted the addition to Rs. 20,000, considering it an adhoc basis. The ITAT upheld the decision, stating that in the absence of complete vouchers, the addition was justified.

2. Addition of Telephone and Petrol Expenses:
The assessee contested the addition of Rs. 30,000 for telephone and petrol expenses. The Assessing Officer disallowed it due to lack of call details/log book. The ITAT reduced the addition to Rs. 10,000, acknowledging the nature of the business and the absence of expense details.

3. Addition of Household Expenses:
The Assessing Officer added Rs. 60,000 for household expenses, noting the joint family setup. The ITAT partially allowed the appeal, reducing the addition to Rs. 30,000, considering the joint family contribution and the low income filed.

4. Disallowance of Benefit of Unabsorbed Losses:
The assessee challenged the disallowance of unabsorbed losses benefit from earlier years. The ITAT noted conflicting decisions and remanded the issue to the CIT (Appeals) for reconsideration. It directed a review based on factual verification and relevant legal precedents, allowing the appeal for statistical purposes.

In summary, the ITAT upheld the addition of exhibition expenses but reduced the additions for telephone, petrol, and household expenses. The issue of unabsorbed losses benefit was remanded for further consideration by the CIT (Appeals) based on legal precedents and factual verification.