ACIT, CHENNAI V. Shri V.Rajendran, CHENNAI

ITA 2042/CHNY/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7423 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B NANDHA KUMAR
• Assessee Lawyers: G STANLY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 2042/MDS/2010 (ASSESSMENT YEAR : 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), CHENNAI - 600 034 . (APPELLANT) V. SHRI V. RAJENDRAN, AJ-81, 3 RD STREET, 9 TH MAIN ROAD, ANNA NAGAR, CHENNAI - 600 040. PAN : ADCPV3747N (RESPONDENT) APPELLANT BY : SHRI B. NANDHA KUMAR, JCIT RESPONDENT BY : SHRI G. STANLY DATE OF HEARING : 28.03.2012 DATE OF PRONOUNCEMENT : 28.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, IT IS AGGRIE VED THAT COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI, VI DE HIS ORDER DATED 23.8.2010 FOR IMPUGNED ASSESSMENT YEAR, RESTR ICTED THE DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE F OR EARNING CONSULTANCY INCOME, BY 50%. I.T.A. NO. 2042/MDS/10 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD RETURN ED A LOSS OF ` 2,00,620/- FOR THE IMPUGNED ASSESSMENT YEAR. ASSES SEE WAS ENGAGED IN THE BUSINESS OF RENDERING PROFESSIONAL C ONSULTANCY TO M/S PAHAPAR INDUSTRIES LIMITED. ASSESSEE HAD RECEIVED ` 12 LAKHS VIDE HIS CONSULTANCY CHARGES. IN HIS STATEMENT OF TOTAL INCOME FILED ALONG WITH RETURN OF INCOME, AGAINST SUCH RECEIPT, HE HAD CLAIMED EXPENDITURE OF ` 14,65,281/-. THIS RESULTED IN A LOSS. THOUGH THE ASSESSEE WAS REQUIRED TO JUSTIFY THE CLAIM OF EXPEN DITURE, IT SEEMS, NOTHING WAS PRODUCED BY THE ASSESSEE BEFORE THE ASS ESSING OFFICER. CONSEQUENTLY, HE DISALLOWED THE CLAIM OF EXPENDITUR E IN FULL. 3. BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSE E WAS THAT THESE WERE GENUINE EXPENSES IN CONNECTION WITH REND ERING OF SERVICES TO THE SAID COMPANY. IT SEEMS NECESSARY E VIDENCES WERE ALSO FURNISHED BY THE ASSESSEE BEFORE LD. CIT(APPEA LS). LD. CIT(APPEALS) SOUGHT A REMAND REPORT AND IN THE REMA ND REPORT, THE A.O. MENTIONED AS UNDER:- WITHOUT PREJUDICE TO THE ABOVE, ON MERITS ALSO, THE COPIES OF EVIDENCES FURNISHED WERE EXAMINED, AND FOUND THAT MOST OF THE EXPENSES ARE IN THE NATURE OF PERSONAL EXPENDITURE AND NOT RE L ATED TO THE CONSULTANCY WORK AS STATED BY THE ASSESSEE A S DETAILED BELOW : A) BROKERAGE: THIS AMOUNT WAS PAID TO M/S . GOLD STAR FOR GETTING A TENANT FOR I.T.A. NO. 2042/MDS/10 3 THE SHOWROOM AT DOOR NO . AD83/1 & 83/2 . B) ADVT: COPY OF BIN ENC L OSED F ROM M/S. THE HINDU SHOWS THAT THE ADVT . IS FOR HOSTEL/SHARED ACCOMMODATION AND LETTING FOR OFFICE/ GUEST HOUSE , ETC . C) CONSULTANCY CHARGES: THIS CONSU LT ANCY CHARGES WERE PAID TO M/S . SATISH RAJ , SLO SHRI V . RAJENDRAN AND IT WAS STATED THAT HE HAS ASSISTED TH E ASSESSEE TO CARRY OUT THE ASSESSEE ' S WORKS. HOWEVER , NO PROOF AS TO WHAT WAS THE CONSULTANCY SERVICE AVAILED HAD BEEN PRODUCED . NO CONTRACT HAS BEEN ENTE R ED BETWEEN THE ASSESSEE AND M/S . PAHARPUR INDUSTRIES FOR THE ABOVE CONSULTANCY INCOME . D ) ENTERTAINMENT EXPENSES: TH I S MAINLY CONSISTS OF CREDIT CARD EXPENSES . AND IT WAS STATED BY THE ASSESSEE THAT THE SAID AMOUNT WAS SPENT FOR TR AVELINQ , HOTEL ACCOMMODATION AND FOR OTHER CONSULTANCY RELATE D EXPENSES . ON GOING THROUGH THE CREDIT CARD STATEMENTS ENCLOSED , IT I S SEEN THAT T HE EXPENSES A R E MAINLY PERSONAL I N NATURE . AND THE ASSESSEE HAS NOT ESTABLISHED A NEXUS BETWEE N THE EXPENDITURE AND THE CONSULTANCY CHARGES RECEIVED . NO CONTRACT HAS BEEN ENTERED BETWEEN THE ASSESS E E AND M/S . PAHARPUR I NDUSTRIES FOR INCURRING SUCH EXPENSES FOR EARNING T H E CONSULTANCY INCOME . E ) INSURANCE: THIS AMOUNT REPR E SENTS T H E I NSURANCE FOR VEH I CLES . THIS A L SO I S IN THE N ATURE OF PERSONA L EXPEN D I TUR E . F ) TRAVELLING EXPENSES: ASSESS E E HAS STATED THAT THE T R AVEL I NG E X PE N SES H AVE BEEN I NCURRED FOR H I S CONSULTANCY WORK. THE B ILL S FU R N I SHED HAVE BEEN V E RI FIED . THE BILL ISSUED BY M/S . M I LESWORTH TRAVELS & TOURS P . LTD . DATED 12 . 7 . 2004 CONTAINS THE PAX NAME AS ' ARUN K SINGHAL IMR ' TOWARDS DEL - MAA-OEL TRIP F OR RS . 19 , 712/- , WHICH CANNOT BE TA K EN AS I NCURRED B Y A SSESSEE FOR H I S CONSULTANCY WORK . G ) BILLS ISSUED BY HOTEL GAJAPRIA: ASSESSEE HAS ENC L OSED A B I LL I SSUED BY M/S. HOT E L GAJAP R I A , TR I CH I RAPPALL I V IDE BILL NO . 023426 DATED 25. 1 0 . 2004 FOR RS . 1 045 . 70 1 - ON VE R IFICAT I ON OF THE SA I D BIL L , I T WAS ADDRESSED TO MR . V . KRI S HNAN . ' 4. LD. CIT(APPEALS) WAS OF THE OPINION THAT THE EXP ENSES WERE NOT SUFFICIENTLY PROVED, BUT, CONSIDERING THE EVIDENCE FURNISHED BY THE ASSESSEE, HE SCALED DOWN THE DISALLOWANCE BY 50%. I.T.A. NO. 2042/MDS/10 4 5. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT THE EVIDENCE FURNISHED BY THE ASSESSEE WAS IN THE NATURE OF PERSONAL EXPENDITURE AND THE A .O. HAD CLEARLY MENTIONED THIS IN HIS REMAND REPORT. THEREFORE, AC CORDING TO HIM, LD. CIT(APPEALS) OUGHT NOT HAVE CURTAILED THE DISALLOWA NCE BY 50%. 6. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS). 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR THAT ASSESSEE HAD FURNISHED EVIDENCE FO R EXPENSES AND THE ASSESSING OFFICER WAS OF THE OPINION THAT MOST OF T HE EXPENSES WERE IN THE NATURE OF PERSONAL EXPENDITURE AND NOT RELAT ED TO CONSULTANCY WORK. EVEN THE ASSESSING OFFICER HIMSELF HAD NOT S TATED THAT WHOLE OF THE EXPENSES WERE OF PERSONAL NATURE AND NOT REL ATED TO CONSULTANCY WORK. NO DOUBT, WHAT PART WAS USED FOR PERSONAL EXPENDITURE OUT OF THE CLAIM COULD NOT BE ASCERTAIN ED. NEVERTHELESS, IT REMAINS A FACT THAT ASSESSEE HAD EARNED ` 12 LAKHS BY RENDERING PROFESSIONAL SERVICE. THEREFORE, IT WOULD BE NAVE TO PRESUME THAT NO EXPENDITURE MIGHT HAVE BEEN INCURRED BY THE ASSESSE E WHILE RENDERING SUCH PROFESSIONAL WORK. IN SUCH A SITUAT ION, WE ARE OF THE OPINION THAT THE LD. CIT(APPEALS) WAS JUSTIFIED IN CONSIDERING 50% OF I.T.A. NO. 2042/MDS/10 5 THE CLAIM OF EXPENSES AS GENUINELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF SUCH PROFESSIONAL SERVICE. WE ARE OF TH E OPINION THAT THERE IS NOTHING SHOWN BY THE REVENUE TO INTERVENE IN THE ORDER OF LD. CIT(APPEALS). 8. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 28 TH MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 28 TH MARCH, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE