BOBBY S. MUKHERJI, MUMBAI V. ADDL CIT RG 11(2), MUMBAI

ITA 1534/MUM/2009

• Counselvise Citation: 153419914 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: BEHARILAL SHRI A K NAYAK
• Keywords: Gift; Depreciation
• Section: 145; 133A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B : MUMBAI BEFORE SHRI D.K. AGARWAL, (JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.1534/MUM/2009 ASSESSMENT YEAR : 2005-06 SHRI BOBBY S. MUKHERJI B/7, 49, MIG COLONY, GANDHI NAGAR, BANDRA (E) MUMBAI-400 051. ..( APPELLANT ) P.A. NO. (AAHPM 2304 C) VS. ASSTT. COMMISSIONER OF INCOME TAX RANGE 11(2), AAYAKAR BHAVAN MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI BEHARILAL RESPONDENT BY : SHRI A. K. NAYAK DATE OF HEARING : 9.8.2011 DATE OF PRONOUNCEMENT : . AUGUST, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 17.11.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON SEVEN DIFFERENT GRO UNDS. ITA NO.1534/M/09 A.Y:05-06 2 2. THE DISPUTES RAISED IN GROUND NO. 1 AND 2 RELAT E TO THE ESTIMATED ADDITION MADE BY AO ON ACCOUNT OF FEE REC EIVED BY THE ASSESSEE. THE ASSESSEE WHO IS AN ARCHITECT AND INTERIOR DESIG NER HAD DECLARED TOTAL FEES OF RS.1,93,11,059/- IN P&L ACCOUNT ENCLOSED WITH R ETURNS FILED ON 31.10.2005. THERE WAS A SURVEY IN THIS CASE UNDER SECTION 133A OF THE INCOME TAX ACT (THE ACT) ON 26.9.2006 WHEN IT WAS F OUND THAT NO BOOKS OF ACCOUNT WERE AVAILABLE. THE ASSESSEE EXPLAINED THA T BOOKS HAD BEEN WASHED AWAY IN FLOODS ON 26.7.2005. THE AO, THEREFORE, AS KED THE ASSESSEE TO FILE DETAILS OF PROFESSIONAL FEE WHICH WAS GIVEN AS UND ER :- SR. NO. PARTY ACTUAL CONTRACT DATE AMOUNT(RS.) 1. HOTEL LE MERIDEN, NEW DELHI, 8, WINDSOR PALACE, JANPATH ROAD, NEW DELHI. 27.8.2004 49,18,350/- 2. SAHARA AIRLINES;GOMTI NAGAR; LUCKNOW, UP. 14.12.2004 60,80,500/- 3. SAHARA INDIA COMMERCIAL PVT. LTD.; GOMTI NAGAR; LUCKNOW, UP, 11.3.2003 41,96,400/- 4. P.P. JEWELERS; BD-23, VISHAKA ENCLAVE, PITAMPURA, NEW DELHI. 11.2.2005 16,53,000/- 5. OTHERS 24,62,809/- TOTAL PROFESSIONAL FEES 1,93,11,059/- THEREAFTER THE ASSESSEE VIDE ANOTHER LETTER DATED 3 .10.2007 GAVE THE COMPLETE DETAILS OF RECEIPT OF FEES AS UNDER :- PARTICULARS AMOUNT(RS.) RUNWAL CONSTRUCTION 79,385/- SAHARA INDIA COMMERCIAL 26,37,990/- TOPICANNA PROPERTIES 1,12,904/- MORARKA 27,000/- SAHARA AIRLINES 51,67,152/- AIRPORT AUTHORITY OF INDIA 15,000/- ITA NO.1534/M/09 A.Y:05-06 3 CI INTERNATIONAL 38,12,654/- LE MERIDIAN 4,48,298/- KAMDHENU CONSTRUCTION 2,80,342/- KJ SOMIYA COLLEGE OF ENGG. 5,36,687/- KOTAK MAHINDRA LIFE INSURANCE 99,900/- SAHARA HOSPITALITY 35,10,721/- SHARMILA FURNISHING P. LTD. 23,692 SATISH KAUSHIK 31,331/- SUBHASH RUNWAL 1,00,000/- NARENDRA K. MOHAN SINGH 30,000/- K. SOMAIYA INSTITUTE 2,84,310/- CRESCENDO ASSOCIATION 1,27,191/- LAKEVIEW DEVELOPERS 3,88,590/- HIRANANDANI PROPERTY 3,64,588/- KALPATARU POWER TRANSMISSION 3,16,578/- NIRAJ G. KAKAD 1,00,000/- AV INDUSTRIES 2,60,347/- WATA MANAGEMENT 10,000/- K.K. SOMAIYA MEDICAL TRUST 4,02,124/- HOTEL APOLLO 28,000/- WINDSOR AMGREEN HOLDING P. LTD. 26,275/- 1,93,11,059/- 2.2 THE AO OBSERVED THAT THE FIRST LIST SHOWED REC EIPTS OF RS.1,68,48,250/- FROM FOUR MAIN PARTIES AND THE BAL ANCE OF RS.24,62,809/- WAS FROM OTHERS. IN THE SECOND LIST, HOWEVER, THER E WERE 27 PARTIES. THEREFORE, IF THE RECEIPTS FROM MAIN PARTIES FROM T HE FIRST LIST I.E. HOTEL LE MERIDEN; SAHARA AIRLINES; SAHARA INDIA COMMERCIAL P VT. LTD.; AND P.P. JEWELERS WERE EXCLUDED, THE RECEIPTS FROM THE REMAI NING PARTIES IN THE SECOND LIST CAME TO RS.63,72,234/- WHEREAS THE GROS S RECEIPTS FROM THE OTHER PARTIES IN THE FIRST LIST WAS SHOWN AT RS.24, 62,809/-. ON BEING ASKED TO EXPLAIN, THE ASSESSEE SUBMITTED THAT THE FIRST LIST GAVE DETAILS OF CONTRACTS ENTERED DURING THE YEAR WHEREAS THE SECOND LIST WAS THE STATEMENT SHOWING THE FEES RECEIVED DURING THE YEAR. THEREFORE, BOTH THE LISTS COULD NOT TALLY SINCE FORMER PERTAINED TO ONLY CONTRACT ENTERED INT O AND NOT THE ACTUAL WORK ITA NO.1534/M/09 A.Y:05-06 4 DONE OR ACTUAL FEES RECEIVED. THE AO WAS HOWEVER N OT SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE TOTAL AMOUNT OF FEES RECEIVED SHOWN IN THE FIRST LIST TALLIED WITH THE F IGURE OF RS.1,93,11,059/- DECLARED IN THE P&L ACCOUNT AND THEREFORE, IT WAS N OT CORRECT TO SAY THAT THE FIRST LIST CONTAINED ONLY THE LIST OF CONTRACTS ENT ERED INTO AND NOT FEES RECEIVED. AS DISCREPANCY WAS NOT EXPLAINED PROPERL Y, THE AO REJECTED THE ACCOUNTS AND MADE AN ESTIMATED ADDITION OF RS .15.00 LACS TO THE TOTAL INCOME ON ACCOUNT OF FEES RECEIVED. THE ASSESSEE D ISPUTED THE DECISION OF AO AND SUBMITTED BEFORE THE CIT(A) THAT THOUGH THE BOOKS HAD BEEN WASHED AWAY IN THE FLOODS, THE ACCOUNTS WERE AUDITED AND T HEREFORE, THERE WAS NO JUSTIFICATION FOR INVOKING SECTION 145. THE ASSESS EE REITERATED THE EARLIER SUBMISSIONS THAT THE DISCREPANCY IN THE TWO LISTS W AS ONLY BECAUSE OF THE FACT THAT THE FIRST LIST CONTAINED DETAILS OF CONTRACTS ENTERED INTO AND NOT THE ACTUAL WORK DONE. CIT(A) WAS HOWEVER NOT SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE ASSESSEE FAI LED TO CO-RELATE THE ACTUAL RECEIPTS FROM THE VARIOUS PARTIES APPEARING IN THE SECOND LISTS SINCE BOOKS OF ACCOUNT WERE NOT AVAILABLE. THE AO WAS THEREFORE, JUSTIFIED IN MAKING ESTIMATION OF THE RECEIPTS. HOWEVER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , CIT(A) CONFIRMED THE ADDITION OF ONLY RS.10.00 LACS, AGGRIEVED BY WHICH, THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 2.3 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT ASSESSEE WAS A HIGHLY QUALIFIED AND RENOWNED ARCHITECT IN IN DIA WHO USED TO PAY TAXES ON TIME. HOWEVER, FOR THE RELEVANT YEAR, THE ASSESSE E COULD NOT PRODUCE THE ITA NO.1534/M/09 A.Y:05-06 5 BOOKS BECAUSE THE SAME HAD BEEN WASHED AWAY IN THE FLOODS WHICH OCCURRED ON 26.7.2005. HOWEVER, THE BOOKS WERE AUDITED BEFOR E FLOODS TOOK PLACE AND AUDITED ACCOUNTS WERE FILED BEFORE THE AO. THE DISCREPANCY IN THE TWO LISTS FILED BY THE ASSESSEE BEFORE AO WAS BECAUSE O F THE FACT THAT THE FIRST LIST GAVE DETAILS OF CONTRACTS ENTERED INTO WHEREAS THE SECOND LIST GAVE ACTUAL RECEIPTS. THE SUM RECEIVED BY THE ASSESSEE FROM T HE PARTIES HAD BEEN DEPOSITED IN BANK ACCOUNTS. THE LD. AUTHORISED REP RESENTATIVE REFERRED TO COPIES OF VARIOUS BANK ACCOUNTS IN WHICH AMOUNTS HA D BEEN DEPOSITED (PLACED AT PAGES 66 TO 95 OF THE PAPER BOOK). IT WA S ALSO ARGUED THAT SINCE BOOKS OF ACCOUNT WERE NOT AVAILABLE, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND IN INVOKING PROVISIONS OF SECT ION 145. IT WAS ACCORDINGLY URGED THAT THE ADDITION SHOULD BE DELET ED OR IT MAY BE RESTORED TO AO FOR FURTHER VERIFICATION OF THE RECEIPTS W.R. T. THE BANK ACCOUNTS OF THE ASSESSEE. THE LD. DR ON THE OTHER HAND SUBMITTED T HAT SINCE BOOKS OF ACCOUNT WERE NOT AVAILABLE AND THERE WERE DISCREPAN CIES IN ACCOUNTS, THE AO WAS JUSTIFIED IN MAKING ESTIMATION OF FEES. IT WAS ALSO SUBMITTED THAT NO USEFUL PURPOSE WOULD BE SERVED BY RESTORING THE MAT TER TO THE AO AS THE BOOKS WERE NOT AVAILABLE. 2.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ES TIMATED ADDITION MADE ON ACCOUNT OF FEES DECLARED BY THE ASSESSEE. THE ASSE SSEE IS AN ARCHITECT AND INTERIOR DESIGNER WHO HAD DECLARED TOTAL FEES OF RS .1,93,11,059/-. THERE IS NO DISPUTE THAT THE BOOKS OF ACCOUNT ARE NOT AVAILA BLE AS THE SAME HAD BEEN ITA NO.1534/M/09 A.Y:05-06 6 LOST IN FLOODS. THE ASSESSEE FILED DETAILS OF PROF ESSIONAL FEES IN WHICH A SUM OF RS.1,68,48,250/- WAS SHOWN FROM FOUR PARTIES AND THE BALANCE OF RS.24,62,809/- WAS SHOWN FROM DIFFERENT PARTIES DET AILS OF WHICH WERE NOT GIVEN. SUBSEQUENTLY THE ASSESSEE FILED ANOTHER LET TER IN WHICH PARTYWISE DETAILS OF THE RECEIPT WERE GIVEN WHICH CONTAINED 2 7 PARTIES. IN THE SECOND LIST THE FEES RECEIVED FROM THE FOUR MAIN PARTIES M ENTIONED IN THE FIRST LIST WAS SHOWN AT A VERY LOW FIGURE. THE ASSESSEE EXPLA INED THAT FIRST LIST CONTAINED ONLY THE DETAILS OF CONTRACT RECEIVED AND NOT ACTUAL FEES RECEIVED WHEREAS SECOND LIST GAVE THE DETAILS OF ACTUAL FEES RECEIVED. THE EXPLANATION HAS NOT BEEN ACCEPTED BY AUTHORITIES BELOW ON THE G ROUND THAT EVEN THE TOTAL FEES DECLARED IN FIRST LIST MATCHED WITH THE ACTUAL RECEIPT OF RS.1,93,11,059/- DECLARED BY THE ASSESSEE IN THE P&L ACCOUNT. AN ES TIMATED ADDITION HAD THEREFORE, BEEN MADE BY THE AO OF RS.15.00 LACS WHI CH HAS BEEN REDUCED BY CIT TO RS.10.00 LACS. 2.4 THE LD. AR HAS ARGUED THAT SINCE THE BOOKS WER E NOT AVAILABLE THE SAME COULD NOT BE REJECTED AND PROVISIONS OF SE CTION 145 COULD NOT BE APPLIED. THIS ARGUMENT CANNOT BE ACCEPTED. UNDER THE PROVISIONS OF SECTION 145(3), IN CASE, AO IS NOT SATISFIED ABOUT THE CORR ECTNESS OR COMPLETENESS OF THE ACCOUNTS OR THAT THE METHOD OF ACCOUNTING HAD N OT BEEN REGULARLY FOLLOWED, HE MAY MAKE AN ASSESSMENT AS PROVIDED IN SECTION 144. IN THIS CASE THERE IS NO DISPUTE THAT BOOKS OF ACCOUNT WERE NOT AVAILABLE AND THERE WERE DISCREPANCIES IN THE DETAILS SHOWN AND THEREFO RE, THERE CANNOT BE ANY SATISFACTION ON THE PART OF THE AO ABOUT THE CORREC TNESS OF TOTAL FEES DECLARED ITA NO.1534/M/09 A.Y:05-06 7 BY THE ASSESSEE. IN SUCH A SITUATION, AO WILL BE J USTIFIED IN MAKING ESTIMATE IF FULL DETAILS AND EVIDENCE ARE NOT GIVEN ABOUT TH E TOTAL FEES DECLARED. THE ASSESSEE HAD FILED TWO DIFFERENT LISTS CONTAINING D ETAILS OF FEES RECEIVED IN WHICH DISCREPANCY HAD BEEN FOUND. IN SUCH A SITUATI ON, THE ASSESSEE WAS REQUIRED TO FILE CONFIRMATION FROM THE PARTIES REGA RDING THE FEES SHOWN AGAINST THEM WHICH WAS NOT DONE. THE AO WAS ALSO R EQUIRED TO MAKE INDEPENDENT VERIFICATION WITH THE PARTIES CONCERNED WHICH HAS ALSO NOT BEEN DONE. THEREFORE, IN OUR VIEW THE ISSUE REQUIRES FR ESH CONSIDERATION BY THE AO AFTER NECESSARY ENQUIRIES WITH THE PARTIES CONCERNE D AND AFTER CALLING FOR CONFIRMING FROM THE PARTIES WHICH THE ASSESSEE MAY BE ASKED TO FILED. VERIFICATION MAY ALSO BE MADE WITH REGARD TO BANK A CCOUNT IN WHICH FEES HAS BEEN DEPOSITED. IN CASE AFTER NECESSARY EXAMINATION AND CROSS CHECKING WITH THE PARTIES DISCREPANCY IS STILL FOUND, AO WILL BE JUSTIFIED IN MAKING ESTIMATE AFTER CONSIDERING THE RELEVANT FACTORS. WE, THEREF ORE, RESTORE THIS ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECE SSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. THE DISPUTE RAISED IN GROUND NO.3 AND 4 IS REG ARDING THE DISALLOWANCE OF COMMISSION OF RS.31,48,083/- AND RS .15,42,800/- CLAIMED TO BE PAYABLE TO SNEHAL ROAD SAFETY PRODUCTS PVT. LTD . AND TRUTHFUL LEASING FINVEST (P) LTD. AS POINTED OUT EARLIER, A SURVEY UNDER SECTION 133A HAD BEEN CONDUCTED IN THIS CASE AND SUBSEQUENT TO SURV EY ON 26.9.2006, STATEMENT OF THE ASSESSEE WAS RECORDED. THE ASSESS EE WAS ASKED TO GIVE THE DETAILS OF ACTUAL SERVICES RENDERED AND THE BAS IS OF PAYMENT OF ITA NO.1534/M/09 A.Y:05-06 8 COMMISSION AS WELL AS DETAILS OF THE BILLS RAISED B UT THE ASSESSEE COULD NOT GIVE ANY DETAIL. IN RESPONSE TO QUES. NO.24 IN WHI CH THE ASSESSEE WAS ASKED TO GIVE DETAILS OF VARIOUS PROJECTS IN CONNECTION W ITH WHICH COMMISSION WAS PAID, ASSESSEE ONLY STATED THAT THERE WERE VARIOUS PROJECTS SOME OF WHICH MATERIALIZED AND SOME WERE STILL GOING. THE ASSESS EE IN Q.NO.25 WAS ASKED TO SPECIFY THE NAME AND NUMBER OF PROJECTS RELATING TO THE COMMISSION PAYMENT. THE ASSESSEE STATED THAT IT WAS A SERIOUS MATTER AND THAT HE WOULD LIKE TO CROSS CHECK BEFORE GIVING AN ANSWER. THEREAFTER IN Q.NO.26 THE ASSESSEE WAS ASKED TO SPECIFY THE SERVICES RENDERED AND THE NAME OF PROJECTS IN RELATION TO WHICH PAYMENT OF COMMISSION WAS MADE, TO WHICH THE ASSESSEE STATED THAT HE WOULD BE IN A BETTER POSITI ON TO ANSWER ONLY AFTER MEETING HIS CA. 3.1 THE AO ALSO NOTED THAT THE ENTIRE CLAIM OF COM MISSION WAS SHOWN AS OUTSTANDING TILL THE END OF THE YEAR. THE ENTIRE PAYMENT WAS SHOWN BY WAY OF DEBIT NOTE RAISED ON A SINGLE OCCAS ION. NO SUPPORTING DOCUMENTS WERE AVAILABLE ABOUT ACTUAL SERVICES REND ERED. A NOTICE UNDER SECTION 133(6) WAS ISSUED WHICH WAS RETURNED UNSERV ED IN CASE OF TRUTHFUL LEASING FINVEST PVT. LTD. NOTICE WAS SERVED IN CAS E OF SNEHAL ROADWAYS SAFETY PRODUCTS PVT. LTD. BUT NO REPLY WAS RECEIVED . THE ASSESSEE WAS CONFRONTED WITH THE ABOVE POSITION. THE ASSESSEE O NLY STATED THAT THE AGENTS HAD BEEN APPOINTED TO CO-ORDINATE VARIOUS ACTIVITIE S CONCERNING ASSESSEES BUSINESS WITH SAHARA GROUP AND THAT NATURE OF SERVI CES WAS MENTIONED IN THE DEBIT NOTE. THE DEBIT NOTE HOWEVER MENTIONED THAT COMMISSION WAS PAYABLE ITA NO.1534/M/09 A.Y:05-06 9 AGAINST WORK ORDER PROCUREMENT FROM SAHARA PROJECTS . THE AO OBSERVED THAT THE BURDEN WAS ON THE ASSESSEE TO PROVE THAT EXPEND ITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. NO DETAILS OF OFFICIALS DEPLOYED OR THE SITE AT WHICH WORK HAD BEEN DONE WA S GIVEN. AO FURTHER OBSERVED THAT THERE WAS NO TAX DEDUCTED UNDER THE P ROVISIONS OF SECTION 40(A)(IA) IN CASE OF TRUTHFUL LEASING FINVEST PVT. LTD. AND IN CASE OF SNEHAL ROADWAYS SAFETY PRODUCTS PVT. LTD. TAX WAS PAID ON LY AFTER DUE DATE I.E. ON 9.10.2009. THE, AO THEREFORE, DISALLOWED THE CLAI M. 3.2 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE PAYMENT FOR THE COMMISSION HAD BEEN MADE SUBSEQUENTLY BY CHEQUE. THE PAYMENT IN CASE OF SNEHAL ROADWAYS SAF ETY PRODUCTS PVT. LTD. WAS MADE DURING THE YEAR TO THE TUNE OF RS.8,36,533 /- AND THE BALANCE AMOUNT OF RS.23,11,500/- REMAINED PAYABLE WHICH WAS WRITTEN BACK IN ASSESSMENT YEAR 2007-08. SIMILARLY IN RESPECT OF T HE OTHER PARTY, TOTAL PAYMENT WAS MADE BY 31.3.2007. IT WAS ALSO SUBMITT ED THAT IN CASE OF SNEHAL ROADWAYS SAFETY PRODUCTS PVT. LTD., TAX OF RS .2,29,500/- HAD BEEN DEDUCTED. THE CIT(A) WAS HOWEVER NOT SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT SIMILAR CLAIM IN ASSESS MENT YEAR 2004-05 HAD BEEN DISALLOWED AND THE ORDER OF THE AO CONFIRMED B Y HIM. HE, THEREFORE, CONFIRMED THE DISALLOWANCE. AGGRIEVED BY WHICH, AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.1534/M/09 A.Y:05-06 10 3.3 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT THE TWO PARTIES HAD BEEN APPOINTED FOR COORDINATING ACTIVIT IES WITH SAHARA AIRLINE PROJECTS FOR SMOOTH RUNNING OF THE PROJECTS. HE RE FERRED TO LETTERS OF APPOINTMENT DATED 1.4.2004 PLACED AT PAGE 107 AND 1 09 OF THE PAPER BOOK. IT WAS POINTED THAT THE PAYMENTS HAD BEEN MADE BY C HEQUE AND IN CASE OF SNEHAL ROADWAYS SAFETY PRODUCTS PVT. LTD., THE OUTS TANDING BALANCE OF RS.23,11,550/- HAS ALREADY BEEN OFFERED BY THE ASSE SSEE AS INCOME IN THE ASSESSMENT YEAR 2007-08. IN CASE OF THE OTHER PART Y, THE ENTIRE AMOUNT HAD BEEN PAID SUBSEQUENTLY. THE LD. AR FURTHER POINTE D OUT THAT THE ISSUE OF ALLOWABILITY OF SIMILAR COMMISSION TO SOME OTHER PA RTIES HAD ALSO ARISEN IN ASSESSMENT YEAR 2004-05 AND THE TRIBUNAL HAD DECIDE D THE ISSUE VIDE ORDER DATED 21.12.2009 IN ITA NO.409 & 684/MUM/2008 AND THE ISSUE MAY BE DECIDED KEEPING IN VIEW THE SAID DECISION OF THE TR IBUNAL. 3.4 THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY S UPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE RESPECTIVE ORDERS. 3.5 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DI SALLOWANCE OF COMMISSION OF RS.31,48,083/- AND RS.15,42,800/- CLAIMED BY THE AS SESSEE AS PAYABLE TO SNEHAL ROAD SAFETY PRODUCTS PVT. LTD. AND M/S. TRUT HFUL LEASING FINVEST (P) LTD. RESPECTIVELY. IN THE MATTER OF ALLOWABILITY O F ANY EXPENDITURE ON ACCOUNT OF COMMISSION, IT IS A SETTLED LEGAL POSITION THAT BURDEN IS ON THE ASSESSEE TO ITA NO.1534/M/09 A.Y:05-06 11 PROVE THAT THE SERVICES HAVE BEEN RENDERED FOR PAYM ENT OF COMMISSION. MERE EXISTENCE OF AGREEMENT OR PAYMENT BY CHEQUE IS NOT ENOUGH AND THE REVENUE AUTHORITIES ARE ENTITLED TO LOOK INTO THE C IRCUMSTANCES TO FIND OUT IF THE PAYMENT IS ALLOWABLE. THIS VIEW IS SUPPORTED B Y THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LACHMINARAYAN MADAN L AL (86 ITR 439). IN THIS CASE DURING THE COURSE OF SURVEY, THE STATEMEN T OF THE ASSESSEE HAD BEEN RECORDED IN WHICH THE ASSESSEE DID NOT GIVE AN Y CLEAR REPLY IN RELATION TO THE SERVICES RENDERED OR THE PROJECT TO WHICH TH E PAYMENT RELATED. IN Q.NO.26, THE ASSESSEE WAS SPECIFICALLY ASKED TO SPE CIFY THE SERVICES RENDERED AND ALSO NAME THE PROJECTS IN RELATION TO WHICH PAY MENT OF COMMISSION WAS MADE BUT THE ASSESSEE ONLY STATED THAT HE WOULD BE IN A POSITION TO ANSWER THE QUESTION ONLY AFTER MEETING THE CA. THE ANSWER GIVEN BY THE ASSESSEE CANNOT BE CONSIDERED AS SATISFACTORY. THE ASSESSEE BEING OWNER WAS SUPPOSED TO KNOW AT LEAST BROAD DETAILS AS TO NATUR E OF SERVICES AND PROJECTS FOR WHICH THE AGENTS WERE ENGAGED. FURTHER, FOR TH E ENTIRE AMOUNT, A SINGLE DEBIT NOTE WAS RAISED ON A SINGLE OCCASION. THE AO HAD ISSUED NOTICE UNDER SECTION 136(6) WHICH HAD BEEN RETURNED UNSERVED IN CASE OF AND M/S. TRUTHFUL LEASING FINVEST (P) LTD. AND IN CASE OF S NEHAL ROAD SAFETY PRODUCTS PVT. LTD. NOTICE WAS SERVED BUT NO REPLY WAS RECEIV ED. THE ASSESSEE HAD BEEN CONFRONTED WITH THE POSITION. THE ASSESSEE EX PLAINED THAT THE AGENTS HAD BEEN APPOINTED FOR CO-ORDINATING VARIOUS ACTIVI TIES OF THE ASSESSEES BUSINESS WITH SAHARA GROUP. IT WAS ALSO SUBMITTED THAT THE NATURE OF THE SERVICES WAS MENTIONED IN THE DEBIT NOTE, A COPY OF WHICH HAS BEEN PLACED ON RECORD WHICH SHOWS THAT COMMISSION WAS PAYABLE A GAINST WORK ORDER ITA NO.1534/M/09 A.Y:05-06 12 PROCUREMENT. THE ASSESSEE HAD EARLIER STATED THAT C OMMISSION WAS FOR CO- ORDINATING VARIOUS ACTIVITIES. NO EVIDENCE HAD BEE N PRODUCED REGARDING RENDERING OF ACTUAL SERVICES. THE PAYMENTS ALSO RE MAINED OUTSTANDING AT THE END OF THE YEAR. THE PAYMENT IN CASE OF M/S. TRUTH FUL LEASING FINVEST (P) LTD. WAS MADE ONLY AFTER THE DATE OF SURVEY AND IN CASE OF SNEHAL ROAD SAFETY PRODUCTS PVT. LTD. SUBSTANTIAL AMOUNT OF RS. 23,11,500/- WAS WRITTEN BACK AS INCOME IN ASSESSMENT YEAR 2007-08. CONSIDE RING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, CLAIM OF COMMISSION CANNOT BE ALLOWED. 3.6 LD. AR FOR THE ASSESSEE REFERRED TO THE DECISI ON OF THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 IN ITA NO.409 & 684/M/08 IN WHICH SIMILAR ISSUE WAS RESTORED TO THE FILE OF THE AO. WE FIND FROM T HE PERUSAL OF THE SAID ORDER THAT THE CLAIM OF COMMISSION PAYMENT TO M/S. MILINN EUM CYBERTECH LTD. HAS BEEN RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO . IN THAT CASE THE ASSESSEE HAD GIVEN THE NAME OF THE PROJECT AS HOTEL SAHARA S TAR OF SAHARA HOSPITALITY LTD. FOR WHICH COMMISSION HAD BEEN PAID FOR TIMELY RELEASE OF PAYMENT AND OTHER SERVICES. THE TRIBUNAL HAD THEREFORE, RESTOR ED THE ISSUE FOR NECESSARY VERIFICATION OF ACTUAL SERVICES RENDERED. IN THE P RESENT CASE, SPECIFIC DETAILS OF PROJECT FOR WHICH THE COMMISSION HAD BEEN CLAIME D HAS NOT BEEN GIVEN. NO DETAILS WERE GIVEN AT THE TIME OF SURVEY. DURING THE ASSESSMENT, IT WAS SUBMITTED THAT COMMISSION WAS FOR CO-ORDINATION WIT H SAHARA AIRLINE PROJECTS WITHOUT NAMING THE SPECIFIC PROJECT. HOWEVER, IN TH E DEBIT NOTE, IT WAS SUBMITTED THAT COMMISSION WAS FOR PROCUREMENT OF WO RK ORDER WITHOUT GIVING DETAILS OF ORDERS PROCURED. THEREFORE, AS WE HAVE HELD EARLIER, THE CLAIM OF ITA NO.1534/M/09 A.Y:05-06 13 COMMISSION HAS BEEN RIGHTLY DISALLOWED. EVEN IN TH E ASSESSMENT YEAR 2004- 05, THE TRIBUNAL HAD CONFIRMED THE DISALLOWANCE OF COMMISSION IN RESPECT OF TWO PARTIES. THE ORDER OF CIT(A) IS, THEREFORE, UP HELD ON THIS POINT. 4. THE DISPUTE RAISED IN GROUND NO.5 IS REGARDING DISALLOWANCE OF RS.44,080/- MADE BY THE AO UNDER PROVISIONS OF SECT ION 40(A)(IA). THE LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING OF THE APPE AL DID NOT PRESS THIS GROUND. WE, THEREFORE, DISMISS GROUND NO.5 AS NOT P RESSED. 5. GROUND NO.6 IS REGARDING DISALLOWANCE OF MOTOR CAR EXPENSES. THE ASSESSEE HAD CLAIMED A SUM OF RS.1,29,925/- AS MOTOR CAR EXPENSES; RS.1,16,605/- INTEREST ON CAR LOAN; RS.18,785/- ON CAR INSURANCE AND RS.3,40,750/- AS DEPRECIATION ON CAR. THE AO OBSER VED THAT THE ASSESSEE COULD NOT PRODUCE DAY TO DAY VOUCHERS IN RESPECT OF CAR EXPENSES. HE THEREFORE, DISALLOWED 25% OF ENTIRE EXPENSES ON THE ABOVE GROUND AS WELL AS FOR PERSONAL USE. IN APPEAL, CIT(A) HELD THAT THE DISALLOWANCE ON ACCOUNT OF PERSONAL USE WAS JUSTIFIED BUT REDUCED THE DISALLOW ANCE TO 20% AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 5.1 WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RE CORDS AND CONSIDERED THE MATTER CAREFULLY. WE FIND THAT DISA LLOWANCE OF MOTOR CAR EXPENSES FOR PERSONAL USE HAD BEEN CONSIDERED BY TH E TRIBUNAL IN ASSESSMENT YEAR 2004-05 IN ORDER DATED 21.12.2009 I N ITA NO.409 & 684/M/2008. THE TRIBUNAL DELETED THE DISALLOWANCE OF RS .50,000/- OF MOTOR ITA NO.1534/M/09 A.Y:05-06 14 CAR EXPENSES OF RS.1,82,282/- MADE ON ADHOC BASIS W ITHOUT ANY VERIFICATION. THE TRIBUNAL, HOWEVER, CONFIRMED THE DISALLOWANCE O F MOTOR CAR DEPRECIATION TO THE EXTENT OF 10% FOR PERSONAL USE. THIS YEAR A O HAS ALSO DISALLOWED 25% OF INTEREST ON CAR LOAN AND CAR INSURANCE FOR PERSO NAL USES AND, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA), THE DISALLOWANCE OF MOTOR CAR DEPRECIATION, INTEREST ON CAR LOAN AND CAR INSURANC E IS CONFIRMED TO THE EXTENT OF 10%. 6. THE DISPUTE RAISED IN GROUND NO.7 IS REGARDING DISALLOWANCE OF TELEPHONE EXPENSES. THE ASSESSEE HAD CLAIMED TELEP HONE EXPENSES OF RS.5,47,627/- WHICH INCLUDED MOBILE EXPENSES OF RS. 2,36,551/- AND RS.38,808/- TOWARDS RESIDENTIAL PHONE. ASSESSEE DI D NOT FILE DETAILS OF THE ABOVE EXPENSES. CONSIDERING ALL FACTORS INCLUDING PERSONAL EXPENSES, THE AO DISALLOWED 50% OF MOBILE EXPENSES AND RESIDENTIAL P HONE EXPENSES. IN APPEAL ASSESSEE SUBMITTED THAT THE TELEPHONES WERE USED FOR PROFESSIONAL PURPOSES AND THEREFORE THERE SHOULD NOT BE ANY DISA LLOWANCE. CIT(A) HOWEVER OBSERVED THAT THE PERSONAL ELEMENT COULD NO T BE RULED OUT. HE HOWEVER, RESTRICTED THE DISALLOWANCE TO 20% AGGRIEV ED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6.1 WE HAVE HEARD BOTH PARTIES IN THE MATTER. WE FIND THAT THE SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBU NAL IN ASSESSMENT YEAR 2004-05 IN ITA NO.409 & 684/M/2008 IN WHICH THE TRI BUNAL IN THE ORDER DATED 21.12.2009 CONFIRMED THE DISALLOWANCE OF RS.3 0,000/- OUT OF TOTAL ITA NO.1534/M/09 A.Y:05-06 15 TELEPHONE EXPENSES OF RS.3,99,952/-. THIS YEAR THE TOTAL CLAIM OF TELEPHONE EXPENSES IS RS.5,47,627/-. WE, THEREFORE, CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.40,000/- THIS YEAR, CONSIDERING THE QU ANTUM OF DISALLOWANCE CONFIRMED IN ASSESSMENT YEAR 2004-05. 7. GROUND NO.8 IS REGARDING DISALLOWANCE OF CREDIT CARD EXPENSES. THE ASSESSEE HAD DEBITED A SUM OF RS.9,39,465/- UND ER THE HEAD CREDIT CARD EXPENSES. THE AO NOTED THAT OUT OF THE SAID EXPEND ITURE A SUM OF RS.7,30,521/- WAS SHOWN ON ACCOUNT OF TRAVELLING OV ERSEAS ABOUT WHICH NO COMPLETE DETAILS WERE GIVEN. THE EXPENDITURE HAD B EEN INCURRED MOSTLY ON PURCHASES, TICKETS, HOTEL, FOOD ETC. THE ASSESSEE COULD NOT ESTABLISH ANY NEXUS OF THE FOREIGN TRAVEL TO HIS PROFESSIONAL ACT IVITY. THE OTHER EXPENSES WERE ALSO MOSTLY ON HOTELS, PURCHASE OF LUXURY ITEM S, WATCHES, GIFTS AND ELECTRONIC ITEMS, SHOPPING IN NATIONAL AND INTERNAT IONAL MARKETS. AS THE ASSESSEE COULD NOT ESTABLISH THE NEXUS OF THESE EXP ENSES WITH PROFESSIONAL ACTIVITY AO DISALLOWED 60% OF TOTAL EXPENSES AMOUNT ING TO RS.5,63,679/-. IN APPEAL ASSESSEE SUBMITTED THAT VOUCHERS OF VARIOUS EXPENSES COULD NOT BE PRODUCED BUT CREDIT CARD STATEMENT CONTAINED THE DE TAILS OF EXPENSES WHICH WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS. CIT(A) CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 30% OF EXPENSES A GGRIEVED BY WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1534/M/09 A.Y:05-06 16 7.1 BEFORE US, THE LD. AR SUBMITTED THAT SIMILAR D ISALLOWANCE OF CREDIT CARD EXPENSES HAD BEEN CONSIDERED BY THE TRI BUNAL IN ASSESSMENT YEAR 2004-05 AND THE ISSUE MAY BE DECIDED BASED ON THE SAID DECISION. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 7.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE O F CREDIT CARD EXPENSES. THERE IS NO DISPUTE THAT THE VOUCHERS WERE NOT PROD UCED AND THE FULL DETAILS WERE ALSO NOT GIVEN. IN ASSESSMENT YEAR 2004-05, TH E ASSESSEE HAD CLAIMED BUSINESS PROMOTION EXPENSES OF RS.5,78,826/- OUT OF WHICH A SUM OF RS.2,78,826/- HAD BEEN DISALLOWED BY THE AO. IN TH E ABSENCE OF FULL DETAILS AND EVIDENCE, THE TRIBUNAL IN THE ORDER DATED 21.12 .2009 OBSERVED THAT THE ENTIRE EXPENSES COULD NOT BE ALLOWED WITHOUT SUPPOR TING MATERIAL. TRIBUNAL HOWEVER CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 10% OF BUSINESS PROMOTION EXPENSES. THIS YEAR HOWEVER, WE FIND THA T A SUM OF RS.7,30,521/- HAS BEEN CLAIMED FOR OVERSEAS TRAVELI NG AND AS PER FINDING OF AO ASSESSEE COULD NOT ESTABLISH ANY NEXUS OF FOREIG N TRAVEL WITH THE PROFESSIONAL ACTIVITY. THIS FINDING HAS NOT BEEN C ONTROVERTED BEFORE US. THE ASSESSEE IS ONLY AN ARCHITECT AND IT HAS NOT BEEN S HOWN AS TO HOW FOREIGN TRAVEL WAS RELEVANT FOR THE BUSINESS. NORMALLY IN SUCH CASES ENTIRE FOREIGN TRAVEL EXPENSES HAVE TO BE DISALLOWED. HOWEVER CIT(A ) HAS CONFIRMED DISALLOWANCE TO THE EXTENT OF 30% AND THE REVENUE I S NOT IN APPEAL. WE HAVE THEREFORE, TO CONFIRM THE DISALLOWANCE ONLY TO THE EXTENT OF 30% OF ITA NO.1534/M/09 A.Y:05-06 17 FOREIGN TRAVEL EXPENSES. AS REGARDS THE REMAINING E XPENSES, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 , WE RESTRICT THE DISALLOWANCE TO 10%. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.8.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30.8.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.