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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 ..... peals) was erred in law as well as in facts in upholding the addition on the alleged ground that, "no details/documents in support their claim in this regard was produced for verification", and his such conclusions are based on his surmises and guesses and are contrary to the facts and material on record. 3. Because that the Ld. Commissioner of Income Tax (Appeals) was erred in law as well as in facts in facts in holding that "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", and his such conclusions are based without any reasoning and/or distinguishing the judgments as relied upon by the appellant. 4. 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 Rs. 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 substantiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the AO observed that JJA was making profit on the sale made to other parties @ 5.22% over the cost incurred by it. The necessary details of the sale made by JJA to other parties are given below:- "Total sale --- 46,34,46,029.00 Less: sale to 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 rate of the spare parts. Thus, the AO opined that assessee has violated the provision of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious 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 circumstances, the appeal on this ground is dismissed." Being aggrieved by this order of Ld. CIT(A) assessee came in second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 Rs. 2,10,364/- on account of entertainment expense. 9. The assessee has claimed entertainment expense of Rs. 4,11,536/- only. Out of total sum of entertainment expense a sum of Rs. 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 Rs. 6,35,980/- under the head "travelling and conveyance" which was including the visits to various places such as Dubai, Cypraus, USA etc. In view of above, the AO was of the view that entertainment expense to the extent of Rs. 2,10,364/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 both the parties and perused the material available on record. In the instant case, the disallowance was made by Authorities Below to the extent of Rs. 2,10,364/- incurred by assessee under the head "entertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify 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 Rs. 1,52,985/- as shown by the appellant vis-à-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 Ld. AR submitted the reconciliation statement as detailed under:- Difference in opening & closing balance Opening balance Amount Pugalia automobile Difference Tiljala 216576 (page 76) 3,35,928(page 71) 1,19,353 Howrah 30,299 (p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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