2017 (12) TMI 1624 - AT - Income Tax

Disallowance of Business Promotion Expenses - allowable busniss expenditure u/s 37 - non rejection of books of accounts - Held that - It is an undisputed fact that neither the Ld. AO not the Ld CIT(A) pointed out any discrepancy relating to the Business Promotion Expenses with reference to the books of accounts of the assessee. Books of accounts of the assessee are not rejected. Though, the Ld. AO and for that matter Ld. CIT(A) made the ad hoc disallowance, there does not appear to be any basis for the same. It is not in dispute that vide letter dated 26/09/2014 the assessee has always been maintaining that expenses are purely and comprehensively further business purpose. There is no dispute that any of these expenses are not for business purpose. It is not the case of the Revenue that any of these expenses is towards personal expense of any person relating to the assessee. Thus it is difficult to sustain the ad-hoc disallowance, in the absence of authorities pointing out any discrepancy in respect of these expenses - decided in favour of assessee.

Summary

Issues:
Assessment of business promotion expenses for AY 2012-13.

Analysis:
The appeal was filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeal) for the AY 2012-13, challenging the addition of ?10 Lacs made by the assessing officer on an ad hoc basis, which was restricted to ?5 Lacs by the Ld. CIT(A). The dispute centered around the classification of certain expenses claimed under "Business Promotion Expenses" by the assessee. The Ld. AR contended that the expenses were wholly and exclusively for business purposes, supported by a detailed categorization of the expenses incurred during the financial year 2011-12.

The Ld. AR argued that the authorities had no basis for making the disallowance of the expenses under the category of "Business Promotion Expenses" as neither the assessing officer nor the Ld. CIT(A) pointed out any discrepancy in the books of accounts of the assessee. The Ld. AR emphasized that without rejecting the books of accounts or identifying any irregularities, it was unjustified for the authorities to make an ad hoc disallowance. Conversely, the Ld. DR supported the decisions of the lower authorities.

Upon careful review of the records, the Tribunal noted that there was no discrepancy highlighted by the authorities regarding the "Business Promotion Expenses" in the assessee's books of accounts, which were not rejected. The Tribunal observed that the assessee consistently maintained that the expenses were solely for business purposes without any personal expenses involved. Given this, and in the absence of any discrepancies or quantifiable basis for the ad hoc disallowance, the Tribunal concluded that the disallowance was unwarranted. Consequently, the Tribunal directed the assessing officer to delete the disallowance, thereby allowing the appeal of the assessee.

In conclusion, the Tribunal found in favor of the assessee, emphasizing the lack of basis for the ad hoc disallowance of the business promotion expenses. The decision highlighted the importance of substantiating any disallowance with concrete evidence of discrepancies in the books of accounts, which was absent in this case.