2015 (10) TMI 7 - AT - Income Tax

Addition made u/s 69C relating to marriage expenses - CIT(A) deleted the disallowance - Held that - We notice that the ld. CIT(A) has deleted the impugned addition by placing reliance on certain case laws cited by the assessee. Under these circumstances, we do not find any reason to interfere with the order of ld. CIT(A) on this issue - Decided against revenue Disallowance of part of sale promotion expenses - CIT(A) deleted the disallowance on the reasonings that the assessee has filed all the details of expenses, copy of bills before AO and further on the reasoning that these expenses were made through account payee cheques - Held that - AO has made adhoc disallowance of ₹ 1 lakh on the reasoning that the assessee could not furnish details to show that the gift articles purchased by him were actually distributed to its customers. The AO has also pointed out that the assessee has not maintain any register/record to substantiate the claim of distribution. We notice that the ld CIT(A) has not addressed this issue. However, distribution of gift articles to the local retailers are prevailing trade practice. Under these circumstances, we are of the view that this may ends of justice if the disallowance is restricted to 50,000/-. Accordingly, we modify the order of ld. CIT(A) and direct the AO to restrict disallowance to ₹ 50,000/-. - Decided partly in favour of revenue.

Summary

Issues:
1. Disallowance of sales promotion expenses.
2. Addition of marriage expenses under section 69C of the Act.

Analysis:

Issue 1: Disallowance of Sales Promotion Expenses
The Revenue appealed against the decision of the ld. CIT(A) granting relief in two aspects: disallowance of sales promotion expenses and addition made under section 69C of the Act. The AO had disallowed Rs. 1 lakh out of the total sales promotion expenses of Rs. 9,95,524 as the assessee failed to provide evidence of distribution of gift articles to clients. The ld. CIT(A) deleted the disallowance, but the ITAT found that the disallowance should be restricted to Rs. 50,000 due to lack of evidence proving full distribution. The ITAT noted that distribution of gift articles to local retailers was a common trade practice.

Issue 2: Addition of Marriage Expenses under Section 69C
The AO added Rs. 20 lakhs to the total income of the assessee under section 69C for marriage expenses without specifying the basis for this estimate. The assessee contended that the expenditure was incurred for a simple marriage ceremony at a Gurudwara and argued that the addition was based on guesswork. The ld. CIT(A) deleted the addition, citing the need for evidence to prove the expenditure incurred. The ITAT upheld the ld. CIT(A)'s decision, emphasizing that the AO failed to provide any evidence of the actual expenditure incurred by the assessee beyond what was recorded. The ITAT referred to previous judgments to support the position that additions under section 69C require concrete evidence of unexplained expenditure.

The ITAT concluded that the ld. CIT(A)'s decisions were justified based on the lack of concrete evidence provided by the AO to support the disallowance of sales promotion expenses and the addition of marriage expenses. Therefore, the appeal filed by the Revenue was partly allowed, with modifications made to the disallowance of sales promotion expenses.