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TMI Blog2017 (10) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld. CIT(A) in this regard and direct the AO to delete the addition - Decided in favour of assessee Addition of entertainment expense - Held that:- Assessee before us failed to bring any evidence suggesting that the impugned expenses were incurred in connection of assessee’s business. The ld. AR simply produced the credit card statement and copies of ledger to justify the expense incurred by it. However, no business connection was established by Ld. AR. In this view of the matter, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We order accordingly. This ground of assessee is dismissed. Disallowance on account of inflated purchase - Held that:- AO has not pointed out any difference in the opening and closing balance of the party. Thus, the submission of Ld. AR that the difference has arisen on account of opening and closing balance do not hold good. As per the books of the assessee it has shown purchases during the year worth of ₹ 49,45,610/- whereas Pugalia Automobile has shown sales in its books during the year to the assessee worth of ₹ 47,92,625/-. Thus, it is clear that the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in facts in upholding the disallowance as made by the ld. DCIT of ₹ 2,10,364/- on account of entertainment expenses on the alleged ground that the appellant failed to prove the nexus between the expenditure incurred and the business requirement. Further the claim of the training and study group of the appellant is not found to be accepted as no evidence/documents to substantiate the claim was produced , and his such conclusions are contrary to the facts and material on record. 5. Because that the Ld. Commissioner of Income Tax (Appeals) was erred in law as well as in facts in upholding the disallowance as made by the ld. DCIT of ₹ 1,52,985/- on account of alleged inflated purchases on the alleged ground that the appellant could not reconcile the difference of figures of purchases/services shown for the year under consideration , and his such conclusions are contrary to the facts and material on record. 6. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. Shri Arvind Agarwal, Ld. Advocate appeared on behalf of assessee and Shri Sauarabh Kumar, Ld. Departmental Representative represented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee i.e. Matador Services --- 5,31,35,871.00 Sale to others --- 41,03,10,158.00 Since J.J. Automotive sold these items at a profit margin of 10% as already discussed above, cost of those items to J.J. Automotive which were sold to Matador is 5,31,35,871 x 100/110 = Rs.4,3,05,337/- Cost of all items purchased by JJ.J.Automotive --- 43,84,54,154.00 Less: Cost of items to it which were sold to Matador 4,83,05,337.00 Cost of items to it which were sold to others --- 39,01,48,817.00 Profit on items sold to others = 41,03,10,158 39,01,48,817 = 2,01,61,341/- The profit is 5.2% over the cost (all figures as above are exclusive of VAT). In view of the above, AO found that assessee has made purchases from JJA being a group company at a price which was excessive and unreasonable after considering the prevailing market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the items/products sold to the appellant are not the same as sold to the others. The appellant also relied upon various judgements of court/ITAT and claimed that there was no attempt to evade tax. After going through the facts and circumstances of the case, I find that though appellant claimed that the items sold to them and sold to the others by J.J. Automotive Ltd. were not the same business no details/documents to support their claim in this regard was produced for verification. Further, the cot to J.J. Automotive Ltd. which was presented to be 8.7% is also not acceptable. Before the AO the appellant made comparison of the cost with reference to the other parties to whom goods were sold by the J.J. Automotive Ltd. and the cost of the year under consideration was sonly taken into account. Moreover, the case laws relied upon by the appellant are not applicable in the present case as the facts in those cases are not identical with the facts of the present case as in the present case the AO arrived on the figures of purchase cost of the items with the facts/comparable cases by which it was proved that the cost of purchase shown by the appellant was inflated. Under these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made by Authorities Below on wrong figures of the goods sold by JJA. It was also observed that the ld. DR has not brought anything on record contrary to the argument of ld. AR. Thus, we reverse the order of Ld. CIT(A) in this regard and direct the AO to delete the addition. Hence, this ground of assessee s appeal is allowed. 8. Next issue raised by assessee in ground No.4 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹ 2,10,364/- on account of entertainment expense. 9. The assessee has claimed entertainment expense of ₹ 4,11,536/- only. Out of total sum of entertainment expense a sum of ₹ 2,10,364/- was incurred through credit card by the assessee. The AO on perusal of the credit card statement found that the expense have been incurred for the purchase of air tickets to Kathmandu, USA, Muscat, Hyderabad, New Delhi, Jaipur and Goa etc. Besides the air tickets expenses payment was also incurred for the Hotel bookings, refreshment bills and purchase of garments. 9.1 It was also observed that the assessee has also incurred expense of ₹ 6,35,980/- under the head travelling and conveyance which was inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement. Further, the claim of training and study group of the appellant is not found to be acceptable as no evidence/documents to substantiate their claim was produced. Further, the case law relied upon by the appellant in this regard is not applicable in the present case as in that case the appellant could prove that the expenses were incurred for foreign training, however, in the present case, the appellant could not prove with the supporting details/.documents the fact that there were training camps/study groups organized at particular place on particular date by the Hyundai Motor (India) Ltd. In view of above facts, the AO was justified to make disallowance. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 11. Before us Ld. AR submitted that all the expenses were incurred in connection with the business activity of assessee. He drew our attention on pages 57 to 59 of the paper book where the copies of ledger of entertainment expenses were placed. He requested the Bench to decide the issue in assessee s favour. On the other hand, Ld. DR heavily relied on the order of Authorities Below. 12. We have heard the rival contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Ld. CIT(A) disregarded the contention of assessee but confirmed the order of AO by observing as under:- 9- Ground No.(viii) relates to addition being inflated purchases shown by the appellant. The fact of the case is that to verify the figures of purchases, the AO issued notice u/s. 133(6) of the IT Act to M/s Pugala Automobile. On verification of the details filed, it is found by the AO that there was difference in figure of ₹ 1,52,985/- as shown by the appellant vis- -vis M/s Pugalia Automobile and thereby, a figure of inflated purchases was noticed. Though the appellant claimed that the difference was reconciled. However, from the facts and details it is found that the appellant could not reconcile the difference of figures of purchases/services shown for the year under consideration. After going through the facts and circumstances of the case and also submission the appellant, I find that the appellant could not explain the difference of figures for the year under consideration. Thereby, the AO had rightly made addition on account of inflated purchases. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 16. Before us L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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