Rohini Gandhi, New Delhi V. ACIT, New Delhi

ITA 1286/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3724 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 31-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: V K BAJAJ
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Reasonable cause; Set aside

Judgement Text

I.T.A. NO. 1286/DEL/2010 1/10 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH F BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO.1286 /DEL/2010 (ASSESSMENT YEAR 2004-05) ROHINI GANDHI VS. ACIT, CIRCLE 22(1), PROP. AESTHETICS NEW DELHI. A-234, NEW FRIENDS COLONY, NEW DELHI- 110 065 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAFPG 0531K APPELLANT BY: SHRI V. K. BAJAJ, CA RESPONDENT BY: MS. ANUSHA KHURANA, SR. DR ORDER PER A. K. GARODIA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XXIII, NEW DELHI DATED 21.01.2010 FOR THE ASSESSMENT YEAR 2004-05. THE GROUNDS OF APPEAL READ AS UNDER: I) THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DISALLOWING RS.1 LACS OUT OF FOREIGN TRAVELLING EXPENSES ON AN AD HOC AND ARBITRARY BASIS; 2. THE BRIEF FACTS ARE THAT IT IS NOTED BY THE A.O. ON PAGE 3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DEBIT ED RS.14.48 LACS ON ACCOUNT OF FOREIGN TRAVEL EXPENSES I.T.A. NO. 1286/DEL/2010 2/10 WHICH INCLUDES EXPENSES OF RS.11,49,381/- INCURRED ON PURCHASE OF FOREIGN CURRENCY FOR THE BUSINESS TOUR TO FOREIGN COUNTRIES. THE A.O. ASKED THE ASSESSEE T O SUBMIT COPIES OF ALL THE BILLS IN SUPPORT OF TRAVEL EXPENSES. IT IS FURTHER NOTED BY THE A.O. THAT HE ASSESSEE COULD NOT SUBMIT SUPPORTING BILLS IN RESPE CT OF EXPENSES INCURRED SPECIFICALLY AGAINST THE FOREIGN CURRENCY PURCHASED BY HER. SINCE NO BILLS AND VOUC HERS ETC. WERE PRODUCED BY THE ASSESSEE BEFORE THE A.O., IT WAS HELD BY THE A.O. THAT IT CANNOT BE RULED OUT TH AT THE EXPENSES INCURRED BY THE ASSESSEE MAY ALSO INCLUDE SOME PERSONAL EXPENSES. ON ESTIMATE BASIS, HE MADE DISALLOWANCE OF RS.1 LACS ON THE BASIS THAT THE SAM E IS NOT RELATING TO BUSINESS, UNVOUCHED AND PERSONAL IN NATURE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT IS SUBMITTED BY THE LD. A.R. FOR THE ASSESSEE TH AT HE ASSESSEE HAS UNDERTAKEN BUSINESS SOUR TO VARIOUS COUNTRIES AND HENCE, THE EXPENSES ARE BUSINESS EXPENSES, WHICH SHOULD BE ALLOWED IN FULL. A SPECI FIC QUERY WAS RAISED FROM THE BENCH AS TO WHY THE ASSES SEE IS NOT IN A POSITION TO FURNISH THE BILLS AND VOUCH ERS ETC. FOR BOARDING AND LODGING EXPENSES INCURRED BY THE ASSESSEE IN THE HOTELS OF THE FOREIGN COUNTRIES. TH E LD. A.R. COULD NOT POINT OUT ANY REASONABLE CAUSE FOR S UCH I.T.A. NO. 1286/DEL/2010 3/10 FAILURE OF THE ASSESSEE. IT WAS ALSO SUBMITTED BY THE LD. A.R. THAT THE DISALLOWANCE OF RS.1 LACS WAS MADE BY THE A.O. ON AD-HOC BASIS WITHOUT POINTING OUT ANY SPECI FIC ITEM OF PERSONAL EXPENSES. LD. D.R. FOR THE REVENU E SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE FIND TH AT ALTHOUGH THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.11.49 LACS ON PURCHASE OF FOREIGN CURRENCY FOR T AKING FOREIGN TOUR BUT THE ASSESSEE HAS NOT FURNISHED COP IES OF THE BILLS AND VOUCHERS ETC FOR THE EXPENSES INCURRE D BY THE ASSESSEE ON FOREIGN TOUR BEFORE THE AUTHORITIES BELOW OR BEFORE US. IT MAY BE TRUE THAT SUPPORTING BILLS AND VOUCHERS MAY NOT BE AVAILABLE FOR EACH AND EVERY IT EM OF EXPENSES INCURRED IN A FOREIGN COUNTRY ON TOUR B UT AT THE SAME TIME, IT CANNOT BE ACCEPTED THAT NO BILL O R VOUCHER ARE AVAILABLE WITH THE ASSESSEE EVEN FOR BOARDING & LODGING EXPENSES INCURRED BY THE ASSESSE E IN THE HOTEL OF FOREIGN COUNTRIES. WHEN THE ASSESSE E HAS NOT FURNISHED THE SUPPORTING BILLS AND VOUCHERS, TH E A.O. CANNOT PINPOINT A SPECIFIC ITEM OF DISALLOWANC E AND UNDER THESE FACTS, THE A.O. IS LEFT WITH NO OPT ION BUT TO ESTIMATE THE PERSONAL EXPENSES OF THE ASSESSEE W HILE ON TOUR TO FOREIGN COUNTRIES. IN THE ABSENCE OF EV IDENCE REGARDING EXPENSES INCURRED BY THE ASSESSEE, IT CAN NOT BE RULED OUT THAT SUCH EXPENSE MAY INCLUDE SOME PERSONAL EXPENSES ALSO. SINCE NO BILL OR VOUCHER E TC I.T.A. NO. 1286/DEL/2010 4/10 HAVE BEEN PRODUCED BEFORE THE AUTHORITIES BELOW, OR EVEN BEFORE US, WE DO NOT FIND ANY REASON TO INTERF ERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE SINCE THE DISALLOWANCE MADE BY THE A.O. IS LESS THAN 10% THE AMOUNT INCURRED BY THE ASSESSEE ON PURCHASE OF FORE IGN CURRENCY WHICH IS NOT EXCESSIVE ALSO IN VIEW OF THE FACTS OF THE PRESENT CASE. THIS GROUND OF APPEAL IS REJE CTED. 5. GROUND NO.2 READS AS UNDER: THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DISALLOWING RS.18,308/- OUT OF THE TELEPHONE EXPENS ES ON AD HOC AND ARBITRARY BASIS; 6. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. ON PAGE 4 OF THE ASSESSMENT ORDER THAT DURING THIS YEAR, THE ASSESSEE HAS INCURRED EXPENSES ON ACCOUNT OF TELEPHONE AND MOBILE ETC OF RS.1,83,032/-. IT IS F URTHER NOTED BY THE A.O. THAT AS PER THE DETAILS GIVEN BY THE ASSESSEE, IT IS SEEN THAT THE EXPENSES INCURRED BY THE ASSESSEE INCLUDE THE EXPENSE IN RESPECT OF THE TELE PHONE INSTALLED AT THE RESIDENCE OF THE PARTNERS AND MOBI LE PHONES ALSO. THE A.O. HAS OBSERVED THAT THE USE O F TELEPHONES AND MOBILE PHONES FOR THE PURPOSE OF OTH ER THAN ONLY FULLY AND EXCLUSIVELY FOR THE BUSINESS, C ANNOT BE RULED OUT. HE MADE DISALLOWANCE TO THE EXTENT O F 1/8 TH OF THE TOTAL EXPENSES IS RS.22879/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS REDUCED THE I.T.A. NO. 1286/DEL/2010 5/10 DISALLOWANCE TO THE EXTENT OF 1/10 TH OF THE TOTAL EXPENSES INCURRED BY THE ASSESSEE UNDER THIS HEAD. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US FOR THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A). 7. IT IS SUBMITTED BY THE LD. A.R. FOR THE ASSESSEE TH AT THIS OBSERVATION OF THE A.O. IS NOT CORRECT THAT THE EXP ENSES INCURRED BY THE ASSESSEE INCLUDE TELEPHONE EXPENSES OF THOSE TELEPHONES ALSO, WHICH ARE INSTALLED AT THE RESIDENCE OF THE PROPRIETOR OF THE ASSESSEE CONCERN . IN THIS REGARD OUR ATTENTION WAS DRAWN TO PAGES 25-29 OF THE PAPER BOOK WHICH IS CONTAINING DETAILS OF TELEP HONE EXPENSES INCURRED BY THE ASSESSEE OF RS.1.83 LACS A ND IT IS POINTED OUT THAT ALL THESE TELEPHONES WERE INSTA LLED AT THE FACTORY PREMISES OF THE ASSESSEE AND NONE OF TH ESE TELEPHONES IS INSTALLED AT THE RESIDENCE OF THE ASS ESSEE CONCERN. OUR ATTENTION WAS ALSO DRAWN TO PAGES 30- 33 OF THE PAPER BOOK WHICH IS CONTAINING THE DETAILS O F DRAWING OF THE ASSESSEE AND IT IS SUBMITTED THAT TH E EXPENSES OF RS.33,864/- INCURRED ON THE TELEPHONE INSTALLED AT THE RESIDENCE OF THE ASSESSEE HAS BEEN DEBITED TO DRAWING ACCOUNT. IT IS NOT INCLUDED IN THE TELEPHONE EXPENSES ACCOUNT AND HENCE NO FURTHER DISALLOWANCE IS CALLED FOR. WHEN IT WAS POINTED OUT THAT THE DETAILS OF EXPENSE INCURRED AVAILABLE ON PAGE 2 5 OF THE PAPER BOOK INCLUDE THE BILLS OF MOBILE PHONES A LSO OF RS.36,600/-. IT WAS SUBMITTED THAT THE SAME IS FOR I.T.A. NO. 1286/DEL/2010 6/10 BUSINESS PURPOSE ONLY. THE LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT HE A.O. HAS STATED IN THE ASSESSMENT ORDER THAT DEDUCTION IS CLAIMED BY THE ASSESSEE ON ACCOUNT OF TELEPHONE EXPENSES FOR TELEPHONES INSTALLED AT THE RESIDENCE OF THE ASSESSEE ALSO BUT WE FIND THAT AS PER THE DETAILS OF TELEPHONE EXPENSE AVAILABLE ON PAGE 25 O F THE PAPER BOOK, ALL THE FOUR TELEPHONES ARE STATED TO B E INSTALLED AT THE OFFICE PREMISES OF THE ASSESSEE AN D IN ADDITION TO THESE 4 TELEPHONES, THE ASSESSEE HAS IN CURRED AN AMOUNT OF RS.36,600/- ON MOBILE PHONES AND AN AMOUNT OF RS.9,551/- WAS INCURRED ON OTHER CALLS OU T OF OFFICE. SEPARATE DRAWING ACCOUNT AVAILABLE AT PAGE S 30- 33 OF THE PAPER BOOK AND FROM THIS, WE FOUND THAT T HE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.33864/- ON TELEPHONE NO.26843197 BUT COPY OF THE BILL OF THIS TELEPHONE IS NOT AVAILABLE IN THE PAPER BOOK AND HE NCE WE DO NOT KNOW AS TO WHERE THE TELEPHONE WAS INSTAL LED. AS PER THE DETAILS AVAILABLE AT PAGE 25 OF THE PAPE R BOOK, THE EXPENSES OF THIS TELEPHONE HAS NOT BEEN INCLUDED IN THE AMOUNT OF RS.1.83 LACS BEING THE TELEPHONE EXPENSE DEBITED BY THE ASSESSEE TO P & L ACCOUNT BUT THE ASSESSEE HAS NOT ENCLOSED THE COPIE S OF THE TELEPHONE BILLS FOR THOSE TELEPHONES ALSO FOR W HICH THE EXPENSES ARE INCLUDED IN THE AMOUNT OF RS.1.83 LACS I.T.A. NO. 1286/DEL/2010 7/10 DEBITED BY THE ASSESSEE TO P & L ACCOUNT. HENCE IT IS NOT CLEAR AS TO WHETHER THESE FOUR TELEPHONES ARE I N FACT INSTALLED AT THE FACTORY PREMISES OF THE ASSESSEE O R NOT. IN VIEW OF THESE CONTRADICTORY STANDS OF THE A.O. A ND THE ASSESSEE, WE FEEL THAT THIS MATTER SHOULD GO BA CK TO THE FILE OF THE A.O. FOR FRESH DECISION AFTER EXAMI NING THE FACTS OF THIS MATTER AND HENCE WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER TO THE FILE OF THE A.O. FOR FRESH DECISION. THE ASSESSEE SHOULD FURNISH COPIES OF THE TELEPHONE BILLS FOR ALL THE TELEPHONES, EXPENSES FOR WHICH HAVE BEEN DEBITED BY THE ASSESSEE IN TELEPHONE EXPENSES ACCOUNT. THE ASSESSEE SHOULD ALSO FURNISH THE TELEPHONE BILLS FO R THE TELEPHONES FOR WHICH THE EXPENSES ARE DEBITED BY TH E ASSESSEE IN DRAWING ACCOUNT. 9. REGARDING MOBILE PHONES EXPENSES OF RS.36,600/-, TH E ASSESSEE SHOULD FURNISH THE COPIES OF MOBILE PHONES BILLS AND THEREAFTER, THE A.O. SHOULD EXAMINE AS TO WHETHER THESE FOUR TELEPHONES FOR WHICH THE EXPENSE S WERE CLAIMED EXPENSES AS DEDUCTION ARE AT THE FACTO RY PREMISES OF THE ASSESSEE OR NOT. FOR MOBILE PONES EXPENSE ALSO, FROM THE BILLS OF MOBILE PHONES, IT C AN BE FOUND AS TO WHETHER THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSE OR FOR PERSONAL PURPOSE AND AFTER EXAMINING ALL THESE FACTUAL ASPECTS, THE A.O. SHALL PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE I.T.A. NO. 1286/DEL/2010 8/10 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE WOU LD LIKE TO MAKE IT CLEAR THAT UNDER NO CIRCUMSTANCES, THE A.O. SHALL MAKE DISALLOWANCE IN EXCESS OFRS.18,308/ - WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A) AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US BECAUSE T HE TRIBUNAL HAS NO POWER TO ENHANCE THE INCOME. IF IT IS FOUND THAT ALL THESE FOUR TELEPHONES ARE INSTALLED AT THE FACTORY/OFFICE PREMISES OF THE ASSESSEE, THEN IN OU R OPINION, NO DISALLOWANCE SHOULD BE MADE BECAUSE EVE N IF SOME PERSONAL CALLS ARE MADE FROM THESE FOUR TELEPHONES AND THE MOBILE PONE, THEN ALSO, IT CANNO T BE RULED OUT THAT SOME OFFICIAL CALLS COULD ALSO BE MA DE FROM THE TELEPHONES INSTALLED AT THE RESIDENCE OF T HE ASSESSEE AND HENCE NO DISALLOWANCE WILL BE JUSTIFIE D IF IT IS FOUND THAT ALL THESE FOUR TELEPHONES ARE INSTALL ED AT THE OFFICE/FACTORY PREMISES OF THE ASSESSEE. THIS GROU ND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 10. THE GROUND NO.3 OF THE APPEAL READS AS UNDER: THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DISALLOWING A SUM OF RS.35,517/- OUT OF VEHICLE RUN NING & MAINTENANCE EXPENSES & DEPRECIATION ON VEHICLE ON AN AD HOC AND ARBITRARY BASIS. 11. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. ON PAGE 4 OF THE ASSESSMENT ORDER THAT ASSESSE E HAS INCURRED VEHICLE MAINTENANCE EXPENSES OF RS.1,79,626/- AND DEPRECIATION ON CAR AT RS.1,04,51 0/-. THE A.O. HAS ASKED THE ASSESSEE TO FILE COPY OF LOG BOOK I.T.A. NO. 1286/DEL/2010 9/10 TO JUSTIFY THAT THE VEHICLE HAVE BEEN USED EXCLUSIV ELY FOR THE BUSINESS PURPOSES. IT WAS SUBMITTED BY THE ASS ESSEE BEFORE THE A.O. THAT THE ASSESSEE HAS NOT MAINTAINE D ANY LOGBOOK. THEREAFTER, IT WAS OBSERVED BY THE A.O. T HAT PERSONAL USE OF THE VEHICLE CANNOT BE RULED OUT. H E MADE DISALLOWANCE TO THE EXTENT OF 1/8 TH OF THE CAR RELATED EXPENSES AMOUNTING TO RS.35,517/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE CIT(A). HE CONFIRMED THE DISALLOWANCE IN FU LL. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 12. IT IS SUBMITTED BY THE LD. A.R. FOR THE ASSESSEE TH AT DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IS EXCESSIVE. THE LD. D.R. SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE OR DERS OF AUTHORITIES BELOW. WE FIND THAT THIS IS AN ADMI TTED POSITION THAT NO LOGBOOK WAS MAINTAINED BY THE ASSE SSEE REGARDING USE OF THE VEHICLE AND HENCE PERSONAL USE OF THE CAR CANNOT BE RULED OUT. NOW WE HAVE TO SEE AS TO WHETHER DISALLOWANCE TO THE EXTENT OF 1/8 TH OF THE CAR EXPENSES IS EXCESSIVE OR REASONABLE. WE FIND THAT CIT(A) HAS FOLLOWED THE TRIBUNAL DECISION RENDERED IN THE CASE OF HERALD ADVERTISING AGENCY VS ITO REPORT ED IN 39 TTJ 34 (DEL.). IN THAT CASE, THE TRIBUNAL AH S CONFIRMED THE DISALLOWANCE OUT OF CAR EXPENSES TO T HE I.T.A. NO. 1286/DEL/2010 10/10 EXTENT OF 1/5 TH OF THE EXPENSES. IN THE PRESENT CASE, IT IS ADMITTED BY THE LD. A.R. FOR THE ASSESSEE THAT THER E IS NO PERSONAL VEHICLE BEING SEPARATELY MAINTAINED BY THE ASSESSEE. CONSIDERING THE FACTS OF THE PRESENT CAS E, WE ARE OF THE CONSIDERED OPINION THAT DISALLOWANCE TO THE EXTENT OF 1/8 TH OF THE CAR EXPENSES AND DEPRECIATION IS NOT EXCESSIVE AND, THEREFORE, WE DO NOT INTERFERE I N THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.3 OF THE ASSESSEES APPEAL IS REJECTED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 15. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 8 TH JUNE, 2010. SD./- SD./- (RAJPAL YADAV) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:18 TH JUNE, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI