ADAM SMITH TRADING PRIVATE LIMITED,NEW DELHI V. .ACIT CENTRAL CIRCLE 5, NEW DELHI

ITA 2634/DEL/2023

AI Insights

The case involves Adam Smith Trading Private Limited appealing against the decision of the Commissioner of Income Tax (Appeals)-24, which upheld the disallowance of certain travel expenses by the Assessing Officer. The expenses in question were related to foreign and domestic travel purportedly for business purposes. The Assessing Officer initially disallowed these expenses due to lack of sufficient documentary evidence to substantiate their business nature. The Assessee provided additional evidence and explanations during the appeal, which were not accepted by the CIT(A). However, the Tribunal found the provided evidence and explanations credible and reversed the CIT(A)'s decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 43606 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: HASNEETA MATTA; MAHAN KALRA
• Keywords: Additional evidence
• Section: 143(3); 132; 153A

Judgement Text

"I.T.A. No. 2634/Del/2023 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.2634/Del/2023 िनधा\tरणवष\t/Assessment Year: 2017-18 Adam Smith Trading Private Limited Office No.306 & 307, 3rd Floor, DLF Place, District Centre, South Delhi. बनाम Vs. ACIT Central Circle-5, Room No.345, ARA Centre, 3rd Floor, E-2, Jhandewalan Extension, New Delhi. PAN No. AAMCA0035A अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent िनधा\u0005\u0006रतीक\u000bओरसे /Assessee by Ms. Hasneeta Matta, CA & Shri Mahan Kalra, Adv. राज\u0010वक\u000bओरसे /Revenue by Sh. Javed Akhtar, CIT DR सुनवाईक\u000bतारीख/ Date of hearing: 17.12.2024 उ\u0016ोषणाक\u000bतारीख/Pronouncement on 17.12.2024 आदेश /O R D E R PER SHRI MAHAVIR SINGH, V.P. This appeal by Assessee is arising out of the order of Commissioner of Income Tax (Appeals)-24, in Appeal No. CIT(A), Delhi-24/10223/2019-20 dated 31.07.2023.The assessment was framed by ACIT, Central Circle-5, Delhi for the AY 2017-18 u/s 153A I.T.A. No. 2634/Del/2023 2 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as the “Act”) vide this order dated 16.12.2019. 2. The two interconnected issues raised by the Assessee are against the order of the CIT(A) confirming the action by the Assessing Officer (AO) in not allowing the foreign travel expenses and domestic travel expenses amounting to Rs.1,38,074/- and Rs.1,91,501/- respectively on the basis that the expenses are not for the business purposes. 3. Brief facts are that a search was conducted on the business premises of the Assessee u/s 132 of the Act on 28.11.2017 and consequently the notice u/s 153A of the Act was issued. The Assessee filed return of income in consequent to notice u/s 153A and accordingly assessment was framed u/s 153A r.w.s. 143(3) of the Act. The Assessing Officer (AO) during the course of assessment proceedings noticed from the Profit and Loss account that the Assessee has claimed domestic travel expenses of Rs.1,91,501/- and foreign travel expenses of Rs.1,38,074/-. The AO required the Assessee to substantiate these expenses by filing the bills and vouchers and the purpose of travel, and as the Assessee could not file any documentary evidence or could establish the business I.T.A. No. 2634/Del/2023 3 purpose, the AO disallowed both. Aggrieved Assessee preferred appeal before the CIT(A). 4. Before CIT(A) Assessee filed additional evidences in regard to domestic travel expenses and foreign travel expenses and also explained the purpose of business. The Assessee first of all filed the following details: - 1. “Copy of invoice of foreign travel for four days. 2. Bills and Duty Slips of Taxi Service Provider demonstrating domestic travel expenses of employees. 3. Copy of invoice of Mr. Murtaza.” The Assessee also explained the justification for these expenses and domestic travel expenses as under: - “(a) Employee related commute: The assessee company provides taxi services through Naman Tourist Services to facilitate its employees to carry out the following activities for the company, like: - Document execution, - Pick up and drop off papers & other documents at client place or banks - Gather information about client - Visit to client places with bankers I.T.A. No. 2634/Del/2023 4 Based on the task required to be executed, employees utilize the taxi services and at the end of the month, the taxi vendor i.e. Naman Tourist Services, sends the invoice to the appellant company. Typically, the taxi vendor is paid at month end.” (b) Service Providers, like, consultants, whose travel expenses are paid for by the assessee company. It may please be noted that Mr. Murtaza Nagaria is a Mumbai based consultant who visited Delhi in connection with advisory work and his travel was paid for by the company.” 5. The CIT(A) without admitting these evidences confirmed the action of the AO. Since Assessee could not file any documentary evidence to establish the genuineness of expenses or could not substantiate these expenses that these are for business purposes, he confirmed the action of the AO. Aggrieved Assessee is in appeal before the Tribunal. 6. We have heard rival contentions and gone through the facts and circumstances of the case. We noted from the facts narrated before the CIT(A) by Assessee and the evidences filed before the CIT(A). We noted that the Assessee undertook foreign travel expenses as the founder-Director Shri Ashish Madan who is M.Sc. Finance from S.O.A.S University of London and Master of Finance & Control (MFC) University of Delhi. He has experienced of about 25+ I.T.A. No. 2634/Del/2023 5 years in trade finance as he was working earlier with ANZ Grindlays Banking Group. Thereafter, he founded the assessee company which is mainly engaged in Trade & Finance. The Director for this purpose undertook travel to Singapore and Jakarta for meetings and conferences for the purposes of exploring business opportunities for business expansion. During the four days trip, the Director met various people back to back in Singapore and Jakarta to network, follow-up and engaged, evaluating market requirements and whether the company could expand in South Asia. The Assessee before us filed complete itinerary of foreign travel expenses which reads as under: Date Place Status From To 04.04.2017 (Tuesday) Delhi Singapore Departure 9.50 pm. In transit 05.04.2017 Singapore Met with: (i) Mano Singh & Andrew Fairbrother of Xangbo Capital Markets; (ii) K Sankar of Noble Resources International Pte Ltd; (iii) Holger Kebernik of China Trade Solutions; (iv) Gan Meng Chun 7 lee Nio Kwee Intercontinental Fats & Oils Ltd; I.T.A. No. 2634/Del/2023 6 (v) K.K. Agarwal of Indo Rama Group 06.04.2017 Singapore Jakarta Departure12.30 pm Part Day in transit 07.04.2017 Jakarta Attended some sessions on training, networking and discussions following the ICC Banking Commission Annual Event 3-6 April 2017; Met with Vincent O Brien, Member of the Executive Committee, ICC Banking Commission. Book launch of “Documentary letters of Credit – A review of cases from the courts of India” published by Lexis Nexis, co- authored by the Director with Vincent O Brien and SNG & Partners. 08.04.2017 (Saturday) Jakarta Singapore In transit. Departure 11.15 am 08.04.2017 Singapore Delhi In transit. Departure 4.25 pm 7. The Assessee also explained before us that these invoices indicate that travel is for back to back meetings and conferences and not for vacations. We noted that the explanation submitted by the Assessee is quite logical and reasonable and hence we delete the disallowance. 8. Coming to domestic travel expenses of Rs.1,91,501/- the Assessee has filed complete itinerary of travel expenses which comprises domestic travel by air and/or taxi of employees, clients, service providers, etc. The Assessee has filed complete details as under: I.T.A. No. 2634/Del/2023 7 Service provider Travelers Amount (in Rs.) %to Gross Revenue Air Cruise Travels (P) Ltd. (Domestic Air Travel) Mr. Murtaza, Software Engineer (a service provider based in Mumbai, not an employee of the Company) 46,638 0.48% Mr. Narender Singh Negi 30,900 0.31% Ms. Neetu Mehta (Senior Management of the Company) Naman Tourist Service (Taxi Provider) Taxis for employees carrying important documents; visits to clients with bankers; Taxis arranged on client request – pick- up/drop etc. 70,674 0.73% Others 44,099 0.46% Grand Total 1,91,501 1.98% 9. We noted that a travel cost is separate from the routine conveyance expenses incurred by the assessee company and mainly travelled by Sh. Murtaza who is a software engineer based in Mumbai working with IT Mines Technology Pvt. Ltd., whose services were engaged for software advisory work of the assessee company. As the domestic travel is also for the purpose of business, we find I.T.A. No. 2634/Del/2023 8 that the explanation given by the Assessee is quite logical and hence we delete this disallowance also. 10. In terms of the above, appeal of the Assessee is allowed. Order pronounced in the open court on 17/12/2024 Sd/- Sd/- (S RIFAUR RAHMAN) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT Dated: 17/12/2024 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi "