News Laundry Media Private Limited vs The DCIT, Central Circle 1

PER RAMIT KOCHAR, AM:

This appeal in ITA No. 2995/Del/2026 for Assessment Year: 2022-23 has arisen form the learned CIT(A)’s appellate order u/s 250 of the Income-tax Act, 1961(in Short “Act”) dated 04.02.2026 in DIN & Order No: ITBA/APL/S/250/2025-26/1085554823(1), which in turn has arisen from the assessment order dated 31.03.2024 passed by the AO u/s 143(3) of the 1961 Act (DIN & Order No. ITBA/AST/S/143(3)/ 2023-24/1063794600(1)).

The brief facts of the case are that the assessee filed return of income for the impugned assessment year , on 02.11.2022 , declaring total income at Rs. Nil. The same was processed u/s 143(1). The assessee is primarily engaged in motion picture , radio, television and other media activities. A survey u/s 133A was carried out on 10.09.2021 at the premises of the assessee at B-113, Sarvodaya Enclave, Delhi-110017. The return of income was selected by Revenue for compulsory scrutiny. Statutory notices u/s 143(2) and 142(1) were issued by the AO. The assessee participated in assessment proceedings. The AO observed that the assessee has incurred expenses of Rs. 1,65,203/- relating to business meetings in restaurants , expenses of Rs.1,10,721/- and Rs. 2,15,279/- relating to Petrol Expenses and Tours and Travel Expenses respectively. The AO observed that purposes of incurring expenses could not be ascertained from these expenses and incurring of personal expenses are not ruled out . It was also enquired by the AO that if these expenses were personal in nature, whether the same are treated as perquisite in the salary and due taxes were deducted. The AO issued SCN to the assessee. The assessee responded to SCN. The assessee submitted that so far as business promotion expenses are concerned, the assessee has incurred expenses on meeting with freelance journalists, writers and other people in Media and technology space including common people having interest in country’s current affairs , reportage , demography , political and financial interest. These expenses also included meeting with various investors and subscribers for future growth and promotion. The assessee submitted that these expenses were incurred wholly and exclusively for the business activities of the assessee. The assessee submitted before the AO that vouchers , invoices and receipts for incurring expenses were duly submitted. The assessee submitted that it is not possible to give exact information as to who was met and why the meeting was called. So far as Petrol Expenses were concerned, the assessee submitted that the assessee reimbursed the amount incurred by the Directors namely Mr. Abhinandan Sekhri and Mr. Raman Kirpal wherever they used vehicle for official purposes. The vehicles are owned by Directors. The company is not paying for maintenance, repairs and insurance etc. . These expenses were incurred wholly and exclusively for the purposes of business. It was submitted that despite incurring of all the expenses by the Directors, the assessee company has reimbursed only Rs. 1,10,721/- to the Directors towards petrol expenses used for business meetings. It was submitted that the assessee has already provided the vouchers, bills and receipts for the expenses incurred. It was submitted that the expenses were incurred wholly and exclusively for the purposes of business. It was submitted that it is not possible to provide exact information whom they met and why the meetings took place. Regarding Tour and Travels Expenses, the assessee submitted that the assessee has incurred expenses for legitimate business purposes relating to journalistic activities etc. . It was submitted that reporters are sent on various assignments to gather information, conduct interviews, and report on stories. It was submitted that the expenses were incurred wholly and exclusively for the purposes of business. The AO rejected the contentions of the assessee, and observed that keeping in view facts and circumstances of the case, these expenses could not be fully verifiable and usage for personal purposes could not be ruled out. The AO disallowed an amount of Rs. 1,22,800/- being 25% of the above expenses u/s 37(1) of the 1961 Act.

Aggrieved , the assessee filed first appeal with ld. CIT(A). The assessee participated in appellate proceedings. The ld. CIT(A) observed that the assessee has indeed submitted extensive documentation, including ledger accounts and sample invoices for travel and restaurant bills . For example, “Tour and Travel” record show specific flight booking for employees like Atul Chaurasia and Manisha Pande . Business Promotion record include specific invoices for items like mugs and stickers with company taglines. The disallowance has been made purely on estimation without bringing any concrete defect on record. The ld. CIT(A) observed that disallowance of 25% of the expenses is excessive, and ld. CIT(A) restricted the disallowance to 10% of the aforesaid expenses. Thus, the appeal of the assessee was partly allowed by ld. CIT(A).

Still Aggrieved, the assessee has filed second appeal with ITAT. The ld. Counsel for the assessee submitted that adhoc disallowance was made by the authorities below wrt Business Promotion Expenses , Petrol Expenses and Tour & Travel Expenses. It was submitted that the AO made disallowance of 25% of these expenses, while ld. CIT(A) restricted the same to 10% of these expenses. It was submitted that these expenses were incurred wholly and exclusively for the purposes of business of the assessee. My attention as brought to the paper book filed by the assessee containing 118 pages. My attention was drawn to Page 29 wherein ledger account of Business Promotion Expenses is placed. My attention was also drawn to invoices for incurring of these expenses /page 30-46. It was submitted that total expenses towards business promotion was Rs. 7,20,535.58, out of which Rs. 1,65,203/- were incurred by Mr. Abhinandan Sekhri and Mr. Raman Kirpal, Directors wholly and exclusively for the purposes of business, which was reimbursed to them. My attention was also drawn to Petrol Expenses ledger account which is placed at Page 47/PB. The petrol invoices are placed in page 48-52/PB. Similarly , my attention was drawn to Page 53/PB wherein ledger account of Tour and Travel expenses are placed. The invoices related thereto are placed in paper book /page 54-81.It was submitted all these expenses were incurred wholly and exclusively for the purposes of assessee’s business.

I have considered rival contentions and perused the material on record. I have observed that the assessee is engaged in motion picture , radio, television and other media activities. The assessee has placed on record audited Balance Sheet and Profit and Loss account (page 10-22/PB). The business turnover of the company during the year under consideration is Rs.5.42 crores. The expenditure under dispute are Rs. 1,65,203/- relating to business meetings in restaurants , expenses of Rs.1,10,721/- and Rs. 2,15,279/- relating to Petrol Expenses and Tours and Travel Expenses respectively. I have observed that the assessee has explained that these expenses were incurred wholly and exclusively for the purposes of business. The assessee has submitted details of these expenses along with the invoices for incurring these expenses. However, the assessee could not explain these expenses to the minutest details such as to with whom meetings took place and why meetings took place.The AO made adhoc disallowance of 25% while ld. CIT(A) restricted to 10%. The ld. CIT(A) duly recorded in his order that the assessee has indeed submitted extensive documentation, including ledger accounts and sample invoices for travel and restarent bills . For example, “Tour and Travel” record show specific flight booking for employees like Atul Chaurasia and Manisha Pande . The ld. CIT(A) has recorded in its order that Business Promotion record include specific invoices for items like mugs and stickers with company taglines. The ld. CIT(A) further recorded in his order that disallowance has been made purely on estimation without bringing any concrete defect on record.The assessee has filed paper book with ITAT containing 118 pages. In my considered view, the assessee has discharged its primary onus , while the authorities below have not brought any incriminating material to prove that these expenses were incurred for personal purposes. Even no specific defect in incurring of these expenditure is pointed out by the authorities below. Books of accounts are also not rejected by the authorities below.The assessee has even explained that cars are owned by Directors , and only petrol is reimbursed for travel in car for business purposes. Petrol expenses for non business purposes visit are not paid , and further cars are owned by the Directors, for which even no maintenance, insurance and repairs are charged by the Directors. The assessee has furnished even the details of persons who travelled for business purposes as well purpose of their visit. No enquiry was made by the authorities below from such persons. Further, I have also observed that these expenses vis-a-vis scale of operations as is reflected in the turnover, is not exorbitant which could lead to conclusion that expenses are inflated on the touchstone of preponderance of probabilities nor are there allegation that these expenses are bogus or not incurred at all , while the assessee has duly submitted all the relevant details to discharge its primary onus.Thus, in my considered view, the adhoc disallowance as was upheld by ld. CIT(A) is not sustainable. I therefore delete the disallowance. I order accordingly.

In the result, the appeal filed by the assessee is allowed.