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TMI Blog2024 (8) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2) as well as section 142(1) of the Act were issued and served on the assessee. In response to the notices issued during the assessment proceedings, the assessee filed the necessary details. Vide order dated 27/01/2014 passed under section 143(3) of the Act, the Assessing Officer ("AO") assessed the total income of the assessee at Rs. 6,29,88,800, after disallowing sampling/design expenses, foreign travel expenses, website designing expenses, and salary paid to directors and their relatives. During the appellate proceedings before the learned CIT(A), the assessee filed detailed submissions supported by documentary evidence. Accordingly, the learned CIT(A) sought comment/report on the submissions of the assessee from the AO. However, in the absence of any remand report from the AO, the learned CIT(A), vide impugned order deleted the additions made by the AO after considering the submissions and documentary evidence filed by the assessee. Being aggrieved, the Revenue is in appeal before us and has raised the following grounds: - "A. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in not insisting on the comments of the AO through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Further, with respect to website design expenses, the AO raised the same objection and further held that the assessee did not submit any explanation as to why the expenditure should not be treated as capital in nature. As regards the disallowance of salary paid to directors and their relatives, the AO was of the view that the assessee has not submitted any explanation or justification for the salary so paid. In the appellate proceedings before the learned CIT(A), the assessee filed a detailed written submission along with documentary evidence in respect of each of the aforesaid additions. It is discernible from the perusal of the impugned order that the learned CIT(A) requested the AO to offer his comments/report on the submissions of the assessee, in conformity with the provisions of Rule 46A of the Rules. However, the AO did not respond to such a request and did not file any remand report in response to the submissions filed by the assessee. Thus, it is evident from the record that a reasonable opportunity was allowed to the AO to respond to the written submissions of the assessee and since the AO chose not to file any remand report, the learned CIT(A) proceeded to adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the assessee did not explain how these expenses were for the purpose of the business disallowed the expenditure. 8. As per the assessee, during the collection of samples the sales team has to visit various places and fabric makers all over India and overseas, wherein out-of-pocket expenses are incurred by the sales team on behalf of the assessee, which are reimbursed based on actual proof furnished by the assessee. It is further the plea of the assessee that the sales team purchased samples directly and had also availed the service of local consultants for gathering information as to the latest trends and styles of the garment. According to the assessee, based on the market research and samples the assessee is able to procure huge orders overseas for its Indian customers on which it earned commission income amounting to Rs. 14.58 crores as against the sampling/designing expenditure of Rs. 89,98,290, during the year under consideration, which constitutes mere 6.17% of the business income. Thus, it is the submission of the assessee that these expenses were incurred for the purpose of the business of the assessee and form an integral part of its operations as a marketing suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company and was fully incurred for the advancement/expansion of the assessee's business. In support of the aforesaid claim, the assessee has placed on record documentary evidence containing ledger account, chart of expenses furnished by the employee, and invoices of boarding, lodging and currency purchase, which form part of the paper book from pages 427 - 445. No material has an brought on record by the Revenue to doubt the genuineness of the claim of the assessee that the said expenditure was incurred for the purpose of the business. Accordingly, we find no infirmity in the impugned order in allowing the foreign travel expenses amounting to Rs. 1,91,438 incurred by the assessee. As a result, ground no. D raised in Revenue's appeal is dismissed. 13. The issue arising in ground no. E, raised in Revenue's appeal, pertains to the deletion of addition on account of website design expenses. 14. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee debited Rs. 5,28,000 towards website designing expenses and claimed the same to be revenue expenditure. During the assessment proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is having business transactions. Accordingly, we find no infirmity in the impugned order in allowing the website designing expenses amounting to Rs. 5,28,000 incurred by the assessee. As a result, ground no. E raised in Revenue's appeal is dismissed. 17. The issue arising in ground no. F, raised in Revenue's appeal, pertains to the deletion of addition on account of excess salary paid to directors and their relatives. 18. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee paid remuneration/salaries to the following directors/employees: - Name of the person Position Remuneration (in Rs. ) Ms. Manjul Uberoi Managing Director 1,20,00,000 Mr. Bikram Uberoi Chief sales and Marketing Officer 53,62,500 Ms. Kiran Sharan Executive Director 3,72,000 Mr. Nishikant Sharan Vice President 64,62,315 Mr. Vivek Chopra Buying controller 15,40,000 19. The AO compared the salary of Ms. Manjul Uberoi with the salary of Ms. Kiran Sharan and held that Ms. Kiran Sharan is also the founder and director of the assessee to whom salary of Rs. 3,72,000 is paid whereas the salary of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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