2021 (1) TMI 954 - AT - Income Tax

Disallowance of Printing Stationery expenses - Whether the payments (expenses) disallowed by AO were such that they violate the IRDA regulations and are therefore hit by the Explanation to Section 37(1) ? - Whether the expenses disallowed were indeed business expenditure with reference to the details of expenses and the benefits derived from them? - Whether the expenses disallowed, were also claimed by the sister concerns. And if the payments were in the nature of reimbursements, then whether the reimbursement and the related expenses were duly accounted in the books of the sister concerns. HELD THAT - Since the assessee has not furnished satisfactory explanations before the AO with regard to the manner of utilisation of printed materials, in the interests of natural justice, we are of the view that this issue may be restored to the file of AO so that the assessee may furnish explanations to the satisfaction of the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue in AY 2008-09, 2010-11 and 2012-13 and restore the same to the file of AO. We direct the assessee to furnish the details of manner of utilisation of printing and stationery expenses for the purposes of business of the assessee. After hearing the assessee, the AO may take appropriate decision in accordance with law.

Summary

Issues:
- Disallowance of Printing & Stationery expenses made by the AO in assessment years 2008-09 to 2013-14.

Analysis:
1. The appeals by the revenue were against the common order passed by Ld CIT(A)-11, Bangalore for assessment years 2008-09 to 2013-14. The primary issue contested was the deletion of the disallowance of Printing & Stationery expenses by the Ld CIT(A).

2. Despite the absence of representation from the revenue and a request for adjournment by the assessee's counsel, the Tribunal proceeded to dispose of the appeals due to the straightforward nature of the issue. The AO had fully disallowed printing expenses incurred by the assessee, leading to subsequent challenges and directions for examination by the Tribunal.

3. The core issue in all appeals was whether the disallowance of Printing & Stationery expenses by the Ld CIT(A) was justified. The AO had disallowed 50% of the expenses, contending that the assessee failed to satisfactorily explain the utilization of the printed materials for business purposes.

4. The Ld CIT(A) deleted the disallowance, citing lack of sufficient evidence for the AO's decision. The expenses were deemed genuinely incurred for business, duly vouched, and payments made through legitimate channels. The Tribunal found merit in the arguments presented and allowed relief to the appellant based on precedents and the nature of the expenses.

5. The revenue challenged the Ld CIT(A)'s decision for all years. However, the relief granted in certain years fell below the prescribed monetary limit for filing appeals, as per CBDT Circular No. 17/2019. Consequently, the appeals for those years were dismissed on grounds of low tax effect.

6. For the remaining years, where the disallowance was upheld, the Tribunal observed that the burden of proof regarding expenditure and its connection to business lies with the assessee. Since satisfactory explanations were lacking, the issue was remanded to the AO for further examination based on details provided by the assessee.

7. In conclusion, the appeals for the years where the disallowance was upheld were treated as allowed for statistical purposes, while those falling below the monetary limit were dismissed. The decision was pronounced on 18th Jan, 2021.