Ikea Trading (India) Private Limited Vs DCIT (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi has ruled largely in favor of IKEA Trading (India) Private Limited, dismissing appeals by the Deputy Commissioner of Income Tax (DCIT) and upholding most of the company’s contentions regarding disallowances for the assessment year 2004-05. The cross-appeals, ITA No. 5568/Del/2011 filed by IKEA and ITA No. 5877/Del/2011 by the Revenue, addressed three primary areas of dispute: unconfirmed sundry creditors, unverified duty drawback reimbursements, and allegedly excessive director salaries.
Sundry Creditors Disallowance Reduced and Deleted
The first point of contention centered on a disallowance of INR 14,69,25,493/- made by the Assessing Officer (AO) due to non-receipt of confirmations from various sundry creditors. During scrutiny, the AO had issued notices under Section 133(6) of the Income Tax Act, 1961, but many parties did not respond or notices were unserved.
Before the Commissioner of Income Tax (Appeals) [CIT(A)], IKEA submitted additional evidence in the form of creditor confirmations. The CIT(A) sought remand reports from the AO, who, after two reports, confirmed approximately 85% of the outstanding balances (INR 12,47,30,552/-). Based on this, the CIT(A) deemed the creditors genuine and deleted most of the disallowance, except for two specific cases totaling INR 1,01,67,885/- (APL Delhi: INR 57,65,282/- and APL Mumbai: INR 44,02,603/-) where account details and pay-out specifics were not furnished.
