M/s. Best Sound System, Ahmedabad V. The Dy.CIT, Circle-6(1), Ahmedabad

ITA 156/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8506 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Business expenditure; Additional evidence; Onus to prove
• Section: 143(3)

Judgement Text

ITA NO. 156/AHD/2015 BEST SOUND SYSTEM VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO.156/AHD/2015 ASSESSMENT YEAR: 2011-12 M/S. BEST SOUND SYSTEM .............APPELLANT NR. VALLABH WADI,JAWAHAR CHAWK, BHAIRVNATH ROAD, MANINAGAR AHMEDABAD-380008 [PAN: AAAFB 8232 F] VS. DCIT .......................RESPONDENT CIRCLE 6(1), AHMEDABAD APPEARANCES BY: SN DIVATIA FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 21.09.2017 DATE OF PRONOUNCING THE ORDER : 25.09.2017 ORDER PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENGED CORRECTNESS OF THE ORDER OF THE LEARNED CIT(A)-XX, AHMEDABAD DATED 03.11.2014, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2011-12. 2. GRIEVANCE RAISED BY THE ASSESSEE-APPELLANT IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AND ON FACTS IN UPHOLDING DISALLOWANCE OF FOREIGN TR AVELLING EXPENSES OF RS.12,50,517/- OUT OF TOTAL FOREIGN TRAVELLING EXPENSES OF RS.22,26,975/-. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A FIRM ENGAGED IN THE BUSINESS OF PROVIDING SOUND AND LIGHT INFRASTRUCTURE AT THE VARIOUS SHOWS/PROGRAMMES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE GOING THROUGH THE PROFIT AND LOSS ACCOUNT, IT WAS FOUND BY THE ASSESSING OFFICER THAT AN AMOUNT OF RS.32,22,540/- WAS DEBITED UNDER THE HEAD OF TRAVELLING EXPENSES, OUT OF WHICH AN AMOUNT OF RS.22,26,975/- WAS TOWARDS FOREIGN TRAVELLING. ASSESSEE WAS ASKED TO SUBMIT THE DETAILS IN THIS REGARD. IN RESPONSE TO THE NOTICE OF ASSESSING OFFICER, VIDE REPLY DATED 08.01.2014, ASSESSEE SUBMITTED DETAILS REGARDING THE JOURNEYS CONDUCTED BY SHRI AMIEL R. BEST, MANAGING PARTNER, MRS. ESTHER AMIEL BEST, WIFE OF MR. AMIEL R. BEST, BROTHER OF MR. AMIEL R. BEST AND MRS. NILI SHALOSH BEST, WIFE OF MR. SHALOSH R. BEST. HOWEVER, ITA NO. 156/AHD/2015 BEST SOUND SYSTEM VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 2 OF 3 LEARNED ASSESSING OFFICER OBSERVED THAT, APART FROM MR. AMIEL R. BEST, NONE OF THE OTHER THREE PERSONS WERE RELATED TO THE ASSESSEE-FIRM AND HE ACCORDINGLY DISALLOWED RS.12,50,517/- OUT OF FOREIGN TRAVELLING EXPENSES SO CLAIMED. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- 5.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF THE FOREIGN TRAVELING EXPENSES OF RS.12,50,517/- FOR THE REASON THAT VARIOUS PERSONAL FOREIGN TRAVELING EXPENSES HAVE BEEN CLAIMED BY THE APPELLANT AS A BUSINESS EXPENDITURE IN ITS BOOKS OF ACCOUNTS. THE APPELLANT HAS CLAIMED THE TOTAL FOREIGN TRAVELING EXPENSES OF RS.22,26,975/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE APPELLANT TO SUBMIT THE NEXUS OF SUCH EXPENDITURE TO THE BUSINESS AS THE BUSINESS TURNOVER REMAINED ALMOST STATIC WHEREAS THE REVENUE EXPENSES INCREASED TO RS.32,22,540/- FROM RS.LL,97S662/- INCURRED DURING THE IMMEDIATELY PRECEDING YEAR. IT HAS BEEN SUBMITTED IN THE ASSESSMENT PROCEEDINGS THAT THE FOREIGN JOURNEYS WERE CONDUCTED BY MR. AMIEL R. BEST THE MANAGING PARTNER, MRS. ESTHER AMIEL BEST, WIFE OF MR. AMIEL R. BEST, MR. SHALOSH R. BEST, BROTHER OF MR. AMIEL R. BEST AND MRS. NILI SHALOSH BEST, WIFE OF MR. SHALOSH R. BEST. THE A.R. IN THE ASSESSMENT PROCEEDINGS SPECIFICALLY ADMITTED THAT APART FROM MR. AMIEL R. BEST NONE OF THE OTHER THREE PERSONS WERE IN ANY WAY RELATED TO THE ASSESSEE FIRM AND HENCE THE PROPORTIONATE EXPENDITURE FOR THEM HAS BEEN DISALLOWED BY THE A.O. THE AO WORKED OUT THE HEAD-WISE PROPORTIONATE DISALLOWANCE OUT OF THE FOREIGN TRAVELLING EXPENSES CONSIDERING THEM TO BE FOR NON-BUSINESS PERSONAL PURPOSES OF PARTNERS FAMILY MEMBERS. 5.4. IN THE APPELLATE PROCEEDINGS THE APPELLANT SUBMITTED THAT THE EXPENDITURES HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS AND THE FOREIGN JOURNEYS WERE UNDERTAKEN BY THREE UNCONNECTED PERSONS SO THAT PART OF THE EXPENSES HAVE BEEN WORKED OUT IN THE CHART OF THE A.O. IN SUPPORT , THE APPELLANT ENCLOSED THE E-MAIL EXCHANGES SHOWING THAT SHALOSH R. BEST ACTIVELY PARTICIPATED IN THE DISCUSSION OR OTHERWISE DURING THE ENTIRE TOUR. THESE MAIL EXCHANGES WERE CLAIMED TO BE WITH FOREIGN COUNTER PARTS. 5.5. THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN PERUSED BUT THE SAME DOES NOT ESTABLISH THAT THE E-MAIL EXCHANGES WERE MADE FOR THESE PURPOSES OF THE BUSINESS OF THE APPELLANT AND HOW THE FOREIGN TRIPS WERE REQUIRED TO BE UNDERTAKEN FOR UPGRADATION OF THE TECHNOLOGY USED BY THE APPELLANT. THE E- MAIL EXCHANGE COPIES DOES NOT ESTABLISH ANY BUSINESS EXIGENCIES WITH REGARD TO THE APPELLANT'S BUSINESS AND THOSE HAVE NEVER BEEN PRODUCED BEFORE THE A.O. IN THE ASSESSMENT PROCEEDINGS AND HENCE THE SAME ARE IN THE NATURE OF ADDITIONAL EVIDENCES FOR WHICH NO FORMAL WRITTEN REQUEST UNDER RULE-46A HAS BEEN MADE BY THE APPELLANT FOR ADMISSION THEREOF. HENCE THESE ADDITIONAL EVIDENCES ARE REJECTED AND NOT CONSIDERED FOR THE ISSUE INVOLVED. EVEN ON THE MERITS, THE E-MAIL EXCHANGES DOES NOT ESTABLISH THE REQUIREMENT OF THE OTHER THREE UNCONNECTED PERSONS FOR WHICH HUGE CLAIM FOR SUCH EXPENSES HAVE BEEN MADE. THEIR CONTRIBUTION AND THE TECHNICAL EXPERTISE IN THIS AREA OF WORK HAS NOT BEEN PLACED ON RECORD AND ALSO THE ACTIVITIES/ CORRESPONDENCE MADE ITA NO. 156/AHD/2015 BEST SOUND SYSTEM VS. DCIT ASSESSMENT YEAR: 2011-12 PAGE 3 OF 3 WITH THE FOREIGN PARTIES FOR THEIR FOREIGN VISIT HAVE NOT BEEN PLACED ON RECORD. IN VIEW OF THE ABOVE SAID DISCUSSION, THE CLAIM OF THE APPELLANT OF MAKING SUCH A UNRELATED BUSINESS EXPENDITURES IS DISALLOWED AND THE AO'S ACTION FOR MAKING THE DISALLOWANCE IS CONFIRMED. THUS, THIS GROUND OF APPEAL IS DISMISSED. 4. FURTHER AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 6. WE FIND THAT THE ASSESSEE-APPELLANT HAS CLAIMED THE TOTAL FOREIGN TRAVELLING EXPENSES OF RS.22,26,975/-; HOWEVER, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.12,50,517/- FOR THE REASON THAT PERSONAL ELEMENTS WERE INVOLVED IN INCURRING THESE EXPENSES. IT IS PERTINENT TO NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE LEARNED ASSESSING OFFICER, ASSESSEE SUBMITTED THAT THESE EXPENDITURES WERE INCURRED FOR THE PURPOSES OF BUSINESS. IT IS ALSO AN UNDISPUTED FACT THAT, APART FROM MR. AMIEL R. BEST, MANAGING PARTNER, NONE OF THE OTHER THREE PERSONS WERE RELATED TO THE ASSESSEE FIRM. BESIDES, ASSESSEE FAILED TO ESTABLISH THE NEXUS OF SUCH EXPENDITURE TO THE BUSINESS AS, RIGHTLY POINTED OUT BY THE LD. CITA(A), THE BUSINESS TURNOVER REMAINED ALMOST STATIC DURING THE IMMEDIATELY PRECEDING YEAR. MOREOVER, THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THESE EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR ITS BUSINESS PURPOSES AND ALSO FAILED TO DISCHARGE ITS ONUS TO PROVE THEREOF. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN CONFIRMING THIS DISALLOWANCE. WE THUS UPHOLD THE ORDER OF THE LD. CIT(A) IN THIS REGARD AND DISMISS THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 25 TH DAY OF SEPTEMBER, 2017. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 25 TH DAY OF SEPTEMBER, 2017 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD