ANITA LAHU GHADGE,MUMBAI V. CIRCLE41(1)(1), MUMBAI

ITA 2623/MUM/2025

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The case involves Anita Lahu Ghadge, an individual engaged in business as a commission agent, who appealed against the order of the Commissioner of Income-tax (Appeals) which upheld the disallowances made by the A.O. under section 143(3) of the Income-tax Act, 1961 for the Assessment Year 2013-14. The disallowances were made on vehicle expenses, miscellaneous expenses, and a commission payment, which the A.O. presumed included personal use or lacked proper substantiation. The appellant argued that these expenses were necessary for her business and provided some evidence like TDS certificates and bank statements, but failed to convince the authorities about the exclusive business use of the expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633413 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: Sayaji Iron & Engg. Co. v. CIT [2002] 253 ITR 749 (Guj HC), CIT v. Dinesh Mills Ltd. [2002] 254 ITR 673 (Guj HC), CIT v. M.K. Brothers [1987] 163 ITR 249 (Guj HC), Schneider Electric India Ltd vs CIT(2008) 219 CTR 76(Del), Swadeshi Cotton Mills Co. Ltd. v. CIT 63 ITR 57(SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADITYA RAI
• Assessee Lawyers: SANJAY NIKAM
• Keywords: Business expenditure; Depreciation; Onus to prove; TDS; FORM 26AS
• Section: 143(3); 37

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 2623/MUM/2025 (A.Y. 2013-14) Anita Lahu Ghadge, Swapnapurti, 33-D, Kamgar CHS Ltd., S.G. Barve Marg, Near Nandkeshwar Mandir, Kamgar Nagar, Kurla East, Mumbai–400024, Maharashtra v/s. बनाम Assistant Commissioner of Income Tax, Circle – 26(1), Kautilya Bhavan, Bandra Kurla Complex, Bandra (East), Mumbai – 400051, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AFQPG3328A Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Sanjay Nikam, AR Respondent by : Shri Aditya Rai (Sr. DR) Date of Hearing 09.06.2025 Date of Pronouncement 13.06.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT (A) Kochi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 22.01.2016 as passed by the ACIT-26(1), Mumbai for the Assessment Year [A.Y.] 2013-14. P a g e | 2 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai 2. Grounds of appeal: 1. The Ld. A.O. has disallowed 20% of the total vehicle expenses amounting to Rs. 3,60,172/-, which includes petrol and diesel expenses and depreciation on vehicles, aggregating to Rs. 18,00,859/-. The disallowance was made on the assumption that the appellant had used the vehicle for personal purposes and failed to maintain a logbook. However, it is most humbly submitted that there exists no statutory requirement under the Income Tax Act mandating a logbook for business- related vehicle expenses. The appellant is engaged in business activities that require frequent travel, and the expenses incurred are wholly and exclusively for business purposes. The L.d. A.O. with due respect, did not fully appreciate the necessity of such expenses and made a disallowance without considering the factual matrix of the case. The appellant relies on the decision of Sayaji Iron & Engg. Co. v. CIT [2002] 253 ITR 749 (Guj HC), where it was held that if an expense is incurred for business purposes, a mere presumption of personal use cannot be a valid basis for disallowance. The Hon’ble Gujarat High Court emphasized that such disallowances must be supported by tangible evidence and not just an arbitrary estimate., which includes petrol and diesel expenses and depreciation on vehicles, aggregating to Rs.18,00,859/-. The disallowance was made on the assumption that the appellant had used the vehicle for personal purposes and failed to maintain a logbook. 2. The Ld. A.O. has also disallowed 20% of the expenses incurred under miscellaneous heads amounting to Rs. 1,06,315/- including telephone, travel, and conveyance expenses, aggregating to Rs. 5,31,577/- on the assumption that they might have an element of personal nature. The appellant relies on the decision of CIT v. Dinesh Mills Ltd. [2002] 254 ITR 673 (Guj HC), wherein the Hon'ble Gujarat High Court held that business expenses cannot be arbitrarily disallowed unless the revenue authorities establish a clear element of personal expenditure. In the present case, the Ld. A.O. has disallowed 20% of telephone, travel, and conveyance expenses, amounting to Rs. 1,06,315/-, solely on the assumption that they might include a personal component. The appellant respectfully submits that all such expenses are incurred wholly and exclusively for business purposes, essential for the smooth functioning of business operations, and duly recorded in the books of accounts. 3. The Ld. A.O. disallowed the commission payment of Rs. 1,50,000 made to Shri J. M. Shah on the grounds that he was not produced for cross- verification and had denied receiving such payment. However, the appellant submits that the payment was made for genuine business services, duly P a g e | 3 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai recorded in the books of accounts, and executed through legitimate banking channels. It is respectfully submitted that while making his statement, Shri J. M. Shah may not have fully disclosed the relevant bank transactions pertaining to the commission payment. Specifically, it appears that he failed to disclose his account held with Deccan Merchants Co-operative Bank, wherein the commission amount of Rs. 1,35,000/- (Rs. 1,50,000(-) TDS @10% i.e., 15000/- = Rs. 1,35,000) was duly credited. The appellant has, however, fully discharged its onus by furnishing documentary evidence, including the TDS certificate, which confirms that tax was duly deducted at source (TDS) on the commission payment. The denial by Shri J. M. Shah, under oath, therefore, amounts to misleading the authorities and not disclosing true and complete facts, thereby impacting the fairness of the assessment. His conduct raises serious doubts about the credibility of his statement. The appellant has also remitted TDS of Rs. 15,000/- on the said amount, which is reflected in Form 26AS for the Assessment Year 2013-14. The bank statement clearly substantiates that the payment was made through proper banking channels, specifically transferred from Κ.Ν.Σ. Bank Ltd., pertaining to the appellant, to the Deccan Merchants Co-operative Bank Ltd. account of Shri J. M. Shah. However, given the availability of banking records, Form 26AS, and other supporting documents, the genuineness of the transaction stands fully established, and any inference drawn solely from his denial is unwarranted. Given that the payment has been properly accounted for and made through banking channels, the disallowance by the Ld. A.O. may kindly be reconsidered. In support of this contention, the appellant places reliance on the decision of CIT v. M.K. Brothers [1987] 163 ITR 249 (Guj HC), wherein the Hon'ble Gujarat High Court held that mere non-production of a party or their denial of a transaction is insufficient to treat a payment as non-genuine if it is duly recorded in the books of accounts and made through legitimate banking channels. The court further emphasized that once the assessee furnishes relevant documentation and payment details, the burden shifts to the A.O. to prove that the transaction is not genuine. In the present case, the appellant has provided conclusive evidence, including banking transactions, proper accounting records, and TDS compliance, to substantiate the commission payment. In light of the above, the appellant humbly requests that the disallowance be reconsidered, and due relief be granted. 4. The Ld. A.O. has not fully considered the nature of the appellant's business, wherein expenses such as travel, conveyance, and commission payments are essential and customary. It is respectfully submitted that the assessment order, as well as the subsequent appellate order, do not fully account for the industry-specific requirements, which has led to a conclusion that may not accurately reflect the operational realities of the appellant’s business. P a g e | 4 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai 3. Brief facts of the case are that the assessee, is an individual taxpayer engaged in the business of a Commission agent for M/s. Royal Twinkle Star Club Private Limited, primarily operating in the state of Maharashtra. Subsequent to the return filed, her case was selected for scrutiny and order under section 143(3) of the Act was passed making disallowances and additions totalling Rs. 6,16,487/- which included Commission expenses of Rs 1,50,000/- and Miscellaneous and Vehicle expenses aggregating to Rs. 1,06,315/- and Rs. 3,60,172/- respectively. 4. Before the ld.CIT(A) in the subsequent appeal, it was submitted by the assessee that in so far as commission expenses are concerned, her business involved promoting various holiday plans for M/s. Royal Twinkle Star Club Pvt. Ltd. across Maharashtra. In this process, the she incurred commission expenses amounting to Rs. 7,24,826/-. The payments for these commissions were primarily made via account payee cheques, and TDS was duly deducted as per the provisions of section 194H of the Act and subsequently deposited with the Central Government. Out of the total commission expenses, Rs.1,50,000/- was paid to Mr. J.M. Shah via cheque, with TDS of Rs. 15,000 duly deducted and reflected in Form 26AS for A.Y. 2013-14. Though initially unable to appear due to health issues, Mr. Shah later denied receiving the payment, leading to its disallowance by the Ld. AO. P a g e | 5 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai It was submitted that Mr. Shah may have omitted to disclose his account with Deccan Merchants Co-operative Bank, where the net commission of Rs.1,35,000/- was credited. The assessee had discharged its onus by furnishing the TDS certificate, banking records, and payment proof through proper banking channels. In light of this documentary evidence, the genuineness of the transaction stood established. 4.1 As regard other expenses, it was contented that the Ld. A.O. has disallowed 20% of the total vehicle expenses amounting to Rs.3,60,172/-which included petrol and diesel expenses and depreciation on vehicles, aggregating to Rs.18,00,859/-. The disallowance was made on the assumption that the assessee had used the vehicle for personal purposes and failed to maintain a logbook. Further, the The Ld. A.O. has also disallowed 20% of the expenses incurred under miscellaneous heads amounting to Rs.1,06,315/- including telephone, travel, and conveyance expenses, aggregating to Rs.5,31,577/- on the assumption that they might have an element of personal nature. In this regard, it was argued that majority of these expenses were incurred through cheques, thereby ensuring transparency in the transactions. However, given the nature of the business, certain minor cash expenses were unavoidable particularly those related to daily P a g e | 6 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai travel and conveyance. It is practically not feasible to make such petty payments through cheques, as they are incurred on a day-to-day basis. These expenses are incidental to the business and, therefore, form an integral part of the total expenses claimed by the assessee. 4.2 The ld.CIT(A) in the course of appeal proceedings, had also called for remand report in respect of the commission payment as the agent could not be examined during assessment proceedings. In the remand report the AO reported that commission amount of Rs. 1,50,000/- stated to be paid by the assessee to Shri. J.M.Shah had been found to be not maintainable and was liable to be rejected, as the said person, had deposed and given a statement on oath before the A.O.in which he has categorically rejected having received any sum towards receipt of commission or any other receipt from the assessee during the F.Y.2012-13, and had also produced his bank statements for all the accounts held by him during the relevant financial year as a proof that nothing was received by him from the assessee. He also admitted that he no longer worked for the assessee. 4.3 The ld.CIT(A) taking note of the Remand report and also the contents of the assessment order on part disallowance of expenses observed that the AO had clearly stated detailed reasoning for the P a g e | 7 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai disallowances made in the said order Moreover, the assessee had not furnished any valid proof in respect of the various expenses as stated above for which disallowances had been made by the AO, to substantiate her claim made in Form 35, during the appellate proceedings also, inspite of the opportunities given to her by issuing hearing notices. Therefore, he upheld the additions and the grounds of appeal were dismissed. 5. In the course of hearing before us, the ld.AR reiterated the same contentions as made before the authorities below while the ld.DR placed reliance on them. 6. On careful consideration of all the relevant facts of the case emanating from the order of the authorities below, we do not find any reason for interference in the matter. As regards, the disallowance of commission, the ld.CIT(A) called for Remand report from the AO who duly examined the said person who, in turn, denied having received any commission from the assessee. The mere claim that payments were made through banking channels is not sacrosanct in view of complete denial by the alleged recipient himself. The assessee has failed to demonstrate the nature of actual service rendered by the said person for which such a substantial commission was supposedly made by the P a g e | 8 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai assessee who herself is stated to be a commission agent. Burden to prove that the payment was wholly and exclusively for the business is on the assessee. Evidently there was no agreement as well revealing terms and conditions, service rendered, basis for working out the commission amount etc. As held in the case of Schneider Electric India Ltd vs CIT(2008) 219 CTR 76(Del),no deduction could be allowed on the basis of few bills and the fact that the payments were made by account payee cheques. As held in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT 63 ITR 57(SC), the question whether an amount claimed as an expenditure was laid out or expended wholly and exclusively for the purpose of the business has to be decided on the facts and in the light of the circumstances in each case. It is still open to the Income-tax Officer to consider the relevant factors and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under section 37 of the Act. Accordingly, in this case, the assessee having failed to prove that the said payment was made wholly and exclusively for the purposes of business of the assessee in terms of the provisions of section, we uphold the disallowance. 6.1 With regard to the Miscellaneous expenses/Vehicle, Telephone expenses etc. also, the assessee has failed to demonstrate P a g e | 9 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai before both the lower authorities as also before us that these expenses were incurred wholly and exclusively for the purposes of her business and no personal element of user was not involved. Admittedly no log book was maintained for vehicle user as well. The citations relied upon by the assessee as stated in the grounds of appeal, we find that none of them are applicable to the facts of the case as these cases related to corporate entities and not an individual like assessee where there is high degree of probability of personal user involvement. No interference is called for and the appellate order is upheld. 7. In the result, all the grounds of appeal preferred by the assessee fail and the appeal is dismissed. Order pronounced in the open court on 13.06.2025. Sd/ Sd/- SANDEEP GOSAIN PRABHASH SHANKAR ( (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 13.06.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant P a g e | 10 ITA No. 2623/Mum/2025 A.Y. 2013-14 Anita Lahu Ghadge, Mumbai 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. "