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2021 (9) TMI 953 - AT - Income TaxRevision u/s 263 by CIT - disallowance of 40% of the Diwali expenses and interest on late deposit of service tax - HELD THAT - Observation of the ld. PCIT that there was no material to support the claim of the appellant and at AO accepted without verification is found to be contrary to the material available on record. AO is not expected to examine minutely the utilization of 150 wall clocks, 200 diaries and the calendars to whom they have been given and whether it is for business purpose or not, if so, what is the benefits derived thereof. PCIT has also not brought anything on record with regard to the prejudice or error in the assessment which led or indicate to loss of revenue by the way of bringing any cogent material on record. No material whatsoever has been brought on record by the Commissioner which shows that there was any discrepancy for falsity in submissions furnished by the assessee, the order of the Assessing Officer cannot be set aside for making deep enquiry in a heuristic way only on the presumption and assumption that something new may come out. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of China Tax. 2. Disallowance of Diwali expenses. 3. Disallowance of exhibition expenses. 4. Disallowance of business promotion expenses. 5. Disallowance of commission payments. 6. Disallowance of salary expenses. Detailed Analysis: 1. Disallowance of China Tax: The Principal Commissioner of Income Tax (PCIT) observed that the Assessing Officer (AO) did not make any inquiry about the nature of the China Tax paid by the assessee. The assessee clarified that the China Tax is deducted by Chinese manufacturers from the commission paid to the assessee. The tribunal found that the assessee had provided a detailed explanation and supporting documents to the AO, who had duly examined these submissions. Therefore, the tribunal concluded that the AO had appropriately addressed this issue. 2. Disallowance of Diwali Expenses: The PCIT noted that the AO did not verify the utilization of Diwali expenses, which included the purchase of 150 wall clocks and 200 executive diaries. The assessee argued that these items were distributed to maintain business relationships. The tribunal found that the AO had already disallowed 40% of the Diwali expenses and had examined the relevant details. The tribunal held that the PCIT's observation was not justified as the AO had made adequate inquiries. 3. Disallowance of Exhibition Expenses: The PCIT observed that the AO did not verify the utilization of exhibition expenses, which included the purchase of calendars and notepads. The assessee explained that these expenses were incurred to attract a wider customer base. The tribunal found that the AO had examined the details and had not found any discrepancies. Therefore, the tribunal concluded that the AO had appropriately addressed this issue. 4. Disallowance of Business Promotion Expenses: The PCIT noted that the AO did not inquire about the nature of business promotion expenses. The assessee provided detailed explanations and supporting documents to the AO, who had duly examined these submissions. The tribunal held that the AO had made adequate inquiries and that the PCIT's observation was not justified. 5. Disallowance of Commission Payments: The PCIT observed that the AO did not verify the genuineness of commission payments made to various individuals. The assessee provided detailed explanations, including the nature of services rendered by the agents, copies of agreements, and TDS certificates. The tribunal found that the AO had examined these details and had not found any discrepancies. Therefore, the tribunal concluded that the AO had appropriately addressed this issue. 6. Disallowance of Salary Expenses: The PCIT noted that the AO did not verify the linkage of salary expenses with the business. The assessee provided complete details, including appointment letters and ledger accounts, which were examined by the AO. The tribunal found that the AO had made adequate inquiries and that the PCIT's observation was not justified. Conclusion: The tribunal found that the AO had duly examined all the issues raised by the PCIT. The tribunal held that the PCIT's order under Section 263, which annulled the assessment and directed a de novo assessment, was not justified. The tribunal noted that the AO had made proper inquiries and that there was no material to support the PCIT's claim that the assessment order was erroneous and prejudicial to the interests of the revenue. The tribunal allowed the appeal of the assessee and set aside the PCIT's order. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 07/09/2021.
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