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Tax department must have respect of taxpayers -estimated disallowance of expenses in case of professionally managed companies- a serious issue.

Income Tax - By: - DEV KUMAR KOTHARI - Dated:- 6-3-2018 - The Assistant Commission of Income Tax, Company Circle IV (2) , Coimbatore Versus M/s. Lakshmi Machine Works Ltd. 2015 (8) TMI 358 - ITAT CHENNAI Other Citation: [2015] 38 ITR (Trib) 61 (ITAT [Chen]) About the assesse company: Before discussing the issue of estimated disallowance, with reference to a reported judgment, it is desirable to know about the assesse in the case M/s. Lakshmi Machine Works Ltd, which is a well-known, popular, ver .....

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justed) 3,638.00(22/02/2017) Month H/L 6,299.00/5,500.00 Week H/L 6,190.00/5,794.00 Recent corporate actions, as seen on BSE website are as follows: 28/07/2017 Dividend 35.00 07/11/2016 Buy Back of Shares 27/07/2016 Dividend 40.00 31/07/2015 Dividend 37.50 30/07/2014 Dividend 30.00 As per annual reports of company for 2016-17, it has good corporate governance and company is professionally managed company. The prompter s stake is about 30%. This shows that it is in fact widely held public company .....

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rised payment and made the same, it is expenditure of company, in such a situation, the tax authorities must have due regard to the decision making process and spending made by company through its human agents who acted on behalf of company. Even if there is mistake of judgment on part of agent, company has to honour it. Only in rare cases of frauds, company can deny liability incurred by its agents. Companies must have reasonable documentary evidence for expenses incurred. Reasonableness can be .....

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appears that the assesse had not challenged disallowance confirmed by the CIT(A) either by filing independent cross appeal or appeal by way of cross objections. The case was represented by assesse and the A/R has not pointed out any such related appeal which should have been clubbed. Therefore, it can be safely assumed that the assesse has not challenged disallowan On appeal of revenue, Tribunal has confirmed order of CIT(A) allowing some relief and has also reversed order of CIT(A) and disallo .....

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concerned persons in not making proper representation and then in not filing appeal. For the assesse the amount may not be large, but larger aspect is that how expenses have been incurred without proper details and supporting. This also raises doubt about internal check, control and efficiency of audit system in vogue in the assesse company which includes statutory financial audit, Cost audit, and internal under the Companies Act and Tax audit under the Income-tax Act. The AO has found that any .....

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incentives/gifts given to the representatives of customer companies to maintain cordial business relations. However, the assessee has not placed on record the details of the persons to whom such incentives were given. We do not find any reason in allowing even 50 per cent. of such expenditure in the absence of any document or any other evidence. Thus Tribunal decided the issue against assessee. It appears to be a case of gross negligence on part of concerned persons. If order of CIT(A) was chall .....

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