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TMI Blog2023 (10) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... income which was selected for scrutiny and ld. AO had made certain disallowances. 2.1 First disallowance was of business promotion expenses of the nature which assessee had claimed were necessary due to the nature of business. Ld. AO was not satisfied with the details furnished with regard to the distributors to whom the gifts and incentives were given and Ld. AO considered the expenditures were not wholly and exclusively for the purpose of business and that disallowance of expenses under this head has also been made in the previous years also. Accordingly, disallowance of 25% of business promotion expenses of Rs. 6,75,63,728/- for the year under consideration at Rs. 1,68,90,932/- was made. 2.2 Ld. AO has made disallowance of Rs. 3,00,000/- on account of package expenses which ld. AO considered were not supported by proper vouchers. 2.3 Ld. AO also made disallowance of Rs. 1,91,846/- on account of office expenses, again on the basis of non-production of its vouchers. 3. Ld. CIT(A) has deleted these additions on the basis of findings in A.Y. 2013-14 and the Revenue is in appeal raising following grounds :- "1. Whether on the facts and circumstances of the case & in law, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant before me. I have also considered the case laws referred by the AO in the impugned assessment order as well as the case laws as relied upon by the appellant in the written submissions filed. I find that it is not disputed by the AO that the books of accounts were not produced by the appellant during the course of assessment proceedings. This fact also cannot be over looked that the books of the appellant assessee were audited by the statutory auditors and there is no adverse observations of the statutory auditors. Assessee Company is engaged in the business of trading of FMCG (Fast Moving Consumer Goods) and home appliances. This business is being run by the assessee company through a chain of about 12000 agents and distributors spread over almost all over India who work as a pyramid. Ld. AR explained that this is unique business model where each of the persons in the chain has to be pampered and patronized so that his all out efforts are channelized for the expansion of the business of the assessee company. The persons so engaged in the multi level marketing business pattern of assessee are remunerated by way of payment of commission on sales made by them. Ld.AR explained t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifts were distributed by the assessee company. The AO stated that in some of the cases assessee failed to furnish compete detailed, however, he did not mention in how many cases no such details were filed by the assessee. No details are given by the AO in the impugned assessment order while making the adhoc disallowance of 25% of the Business promotion expenses. Therefore, the said case law cannot be compared with the case of the appellant assessee. The ratio of judgment in the case of Assam Pesticides & Agro Chemicals Vs. CIT (Gau) also does not apply to the case of the appellant assessee, as in that case the said company claimed deduction in respect of discount paid to its sister concern on the basis of agreement between them. In the case of M/s. Jaipur Electro Pvt. Limited Vs. CIT (Raj) 134 CTR 237, AO gave a clear finding after discussing each case that payments were not made out of any business expediency and expenditure incurred was not laid out wholly and exclusively for assessee's business. However, in present appeal before me, the AO has not mentioned even a single instance pointing out any name of any party to whom assessee claimed to have given the gift and that part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich shows an increase of approx. 10 crores for the year under consideration. The appellant has relied upon the following case laws :- * Commissioner of Income-tax v. C.B.K.R. Enterprises [2010] 186 Taxman 14 (Delhi)(HC); * Commissioner of Income-tax -VI v. Tupperware India (P.) Ltd. [2015] 53 taxmann.com 232 (Delhi)(HC); * Peari Farben Chem Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax- 9(2), ITAT Mumbai, Bench 'C; * Hughes Escorts Communications Limited Vs. Joint Commissioner of income Tax, ITAT, Delhi Bench 'C' Respectfully following the decisions of the Hon'ble ITAT and Hon'ble Delhi High Court as discussed above and in view of my above observations the addition made by the AO of Rs. 1,39,63,078/- is hereby deleted. These grounds of appeal are decided in favour of the appellant." 8. After taking into consideration the aforesaid, the bench is of considered view that Ld. CIT(A) has extensively dealt with the issue on the basis of nature of business of the assessee. The whole model of the business of assessee is dependent upon the agents or distributors who are given incentives and there is a business expediency with promotion of the business of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouchers. Accordingly he" disallowed an amount of Rs. 5,00,000/-. I have considered the observations made by the AO in the impugned assessment order as well as the submissions made by the appellant before me during the course of appellate proceedings, I find that while making the above disallowance the AO has not given any details of any such expenses as to which expenses were found by him unsupported with bills and vouchers. In the start of his observations, the AO has discussed about the packing expenses, and then the AO spokes about the Misc. and general expenses. This fact is not controverted that audited books of accounts with biiis and vouchers were produced before the AO during the course of assessment proceedings. In case there was any doubt to the AO about any of the bill or vouchers for any of the expense, AO was required to specifically ask the assessee about such expenses. However, no such specific details of any such expenses forms part of the impugned assessment order. I do not agree with the AO that because some vouchers were self made as such disallowance is to be made. In the business carried out by any business man, many times self made vouchers are prepared to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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