2020 (5) TMI 48 - AT - Income Tax

Disallowance of Commission Expenses - assessee has not furnished the required details i.e. the list of commission agents, PAN, Deduction of TDS, confirmation etc. - HELD THAT - It is noticed that assessee has not furnished basic detail i.e. bill/voucher, PAN, list of commission agents and detail of services rendered for which commission was provided; in spite of giving a number of opportunities. The assessee has also failed to furnish such basic detail before the ld. CIT(A). Even during the course of appellate proceedings before us, the assessee has not filed any such detail. Disallowance u/s. 37 - travelling and vehicle expenses - HELD THAT - Assessee has shown car hiring income to the amount of ₹ 3,34,626/- in the Schedule K placed in the paper book as business income, therefore, it is not justified to disallow 100% expenses incurred under the head travelling and food expenses. Considering the car rental income and the income earned from business we are of the view that it is reasonable to restrict the disallowance to the extent of 30% of such expenses for want of relevant proper bill and voucher. Accordingly, we restrict the disallowances under the head travelling and fuel expenses therefore, this ground of the appeal is allowed. Addition u/s. 2(22)(e) - HELD THAT - During the course of appellate proceedings before us, the ld. counsel has contended that these transactions of the assessee company with M/s. Omkara Concrete and Machineries Pvt. Ltd. was in the nature of rental current accommodation adjustment entries and he has referred page no. 5 of the paper book containing ledger account of the company in the books of account of the assessee demonstrating that there were number of debit and credit entries. After considering the above submission of the assesssee, it is noticed that there are large number of entries reflected in the ledger account of the company as pointed out by the ld. counsel as adjustment entries. After considering the nature of transaction being running account as of the nature of adjustment entries, we delete the impugned addition. Therefore, this ground of appeal of the assessee is allowed. Disallowance of Pre EMI Interest - HELD THAT - Assessee has made alternative plea before the assessing officer that expenditure in the form of Pre EMI interest i.e. capitalized, ld. CIT(A) has treated the EMI interest as capital expenditure instead of revenue expenditure as per the alternative plea of the assessee. After considering the above, we do not find any reason to interfere in the decision of ld. CIT(A), therefore, this ground of appeal stands dismissed.

Summary

Issues involved:
1. Disallowance of Commission Expenses
2. Disallowance of Travelling and Vehicle Expenses
3. Addition under section 2(22)(e) of the Act

Issue 1: Disallowance of Commission Expenses:
The assessing officer disallowed commission expenses of ?59,600 as the assessee failed to provide supporting details like list of commission agents, PAN, TDS deduction, and nature of services rendered. The CIT(A) upheld the disallowance. The ITAT found that the assessee did not furnish necessary details even during appellate proceedings. As a result, the ITAT dismissed the appeal, stating no reason to interfere with the CIT(A)'s decision.

Issue 2: Disallowance of Travelling and Vehicle Expenses:
The assessing officer disallowed ?2,36,986 claimed as travelling and vehicle expenses due to lack of evidence. The CIT(A) upheld the disallowance. During the appeal, the assessee presented ledger accounts audited under section 44AB, but failed to provide relevant supporting evidence. Considering the car hiring income and business income, the ITAT restricted the disallowance to ?72,000, allowing this ground of appeal.

Issue 3: Addition under section 2(22)(e) of the Act:
The assessing officer added ?56,89,201 as deemed dividend under section 2(22)(e) due to loans received from a company where the assessee held shares. The CIT(A) restricted the addition to ?39,527. The ITAT noted numerous entries in the ledger account as adjustment entries, indicating a running account nature. Consequently, the ITAT deleted the addition, allowing this ground of appeal.

In a separate appeal for the assessment year 2012-13, similar issues were raised. The ITAT dismissed the appeal regarding commission expenses due to lack of details. The disallowance of Pre EMI interest was upheld, and the disallowance of expenses was restricted to 30% for want of proper bills and vouchers. Regarding addition under section 2(22)(e) for funds received from specific companies, the ITAT deleted the disallowance for one company due to adjustment entries but sustained it for another company due to insufficient evidence. Overall, both appeals were partly allowed by the ITAT.