Sri. Regunathan Venkata Rajendran, Bangalore V. Assessing Officer, 7(2)(1), Bengaluru

ITA 2169/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9048 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER IT A NO. 2169/BANG/2019 ASSESSMENT YEAR: 2016 - 17 REGUNATHAN VENKATA RAJENDRAN, NO.14, BRUNTON ROAD 1 ST CROSS, RICHMOND TOWN, BANGALORE 560 025. PAN: AANPR 1095D VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(2)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI H. AN ANDA, ADDL. C IT(DR)(ITAT ), BENGALURU. DATE OF HEARING : 06 .0 8 .2020 DATE OF PRONOUNCEMENT : 07 .0 8 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F CIT(APPEALS)-7, BENGALURU DATED 28.06.2019 IN RELATION TO ASSESSMEN T YEAR 2016-17. 2. THE ASSESSEE IS AN INDIVIDUAL. HE FILED A RETU RN OF INCOME FOR THE AY 2016-17 DECLARING A TOTAL INCOME OF RS.45,94,340 . THE SOURCE OF INCOME OF ASSESSEE IS FROM SALARY, INCOME FROM HOUS E PROPERTY, BUSINESS AND OTHER SOURCES. THE CASE OF ASSESSEE WAS SELECT ED FOR LIMITED SCRUTINY THROUGH CASS FOR THE REASON THAT LARGE DEDUCTION WA S CLAIMED U/S. 57 OF THE ACT. AGAINST INTEREST INCOME OF RS.91,78,313, THE ASSESSEE HAD CLAIMED EXPENSES OF RS.70,28,281. OUT OF THE EXPEN SES CLAIMED, A SUM OF RS.50,69,372 WAS INTEREST PAYMENT TOWARDS BANK LOAN S AND FUNDS ITA NO.2169/BANG/2019 PAGE 2 OF 4 BORROWED FROM OTHERS. WITH REGARD TO REMAINING SUM OF RS.19,58,909. THE BREAK-UP OF THE EXPENSES WAS AS FOLLOWS:- SI. NO. PARTICULARS AMOUNT (RS) 1 TRAVELLING EXPENSES 53.352 2 BANK CHARGES 14,553 3 EVENT EXPENSES 5,97,325 4 LEGAL EXPENSES 54,000 5 E I GREEN MANAGEMENT LLP 4,74,126 6 OLIVE BAR AND KITCHEN PVT. LTD. 1,50,000 7 CREDIT CARD EXPENSES 6,15,553 19,58,909 AS THE EXPENSES OF RS. 19,58,909/- WAS NOT EXPENDE D TO EARN INCOME FOR WHICH DEDUCTION IS CLAIMED, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY, THE SAID EXPENSES BE DISALLOW ED. 3. THE AO WAS OF THE VIEW THAT THE AFORESAID EXPENS ES CANNOT BE CONSIDERED AS EXPENSES INCURRED FOR THE PURPOSE OF EARNING INTEREST INCOME AND HE THEREFORE DISALLOWED A SUM OF RS.18,3 7,004 OUT OF THE AFORESAID EXPENSES BY ALLOWING ONLY TRAVELLING EXPE NSES. 4. THE ASSESSEE WAS AGGRIEVED BY THE AFORESAID ACTI ON OF THE AO AND PREFERRED APPEAL BEFORE THE CIT(APPEALS). THE SPEC IFIC GROUND RAISED BY THE ASSESSEE WAS WITH REGARD TO DISALLOWANCE OF RS. 18,37,004 MADE BY THE AO. THE CIT(APPEALS), AFTER NOTICING THAT THE CLAI M OF ASSESSEE FOR DEDUCTION OF AFORESAID EXPENSES WAS ON THE BASIS TH AT THE ASSESSEE WAS REQUIRED TO MEET PEOPLE ON REGULAR BASIS TO RAISE I NVESTMENTS AND COLLECTING FUNDS AND THAT THE EXPENSES WERE NOT CAP ITAL IN NATURE, HELD THAT 50% OF CREDIT CARD EXPENSES AND OLIVER BAR AND KITC HEN PVT. LTD. SHOULD BE DISALLOWED. FOLLOWING WERE THE RELEVANT OBSERVATIO NS OF THE CIT(APPEALS):- THE SUBMISSIONS OF THE APPELLANT HAS BEEN CONSIDER ED. THE NEED OF THE APPELLANT TO MEET PEOPLE AND ENTERTAIN THEM FOR MOBILIZING INVESTMENT CANNOT BE DENIED. AT THE SAME TIME, USE OF CREDIT CARD FOR PERSONAL PURPOSES ALSO CANNOT BE RULED OUT. THE RE IS NOTHING ITA NO.2169/BANG/2019 PAGE 3 OF 4 ON RECORD TO SHOW THAT THE AO HAS CALLED FOR DETAIL S AND RAISED DOUBT ABOUT THE GENUINENESS OF INCURRING THESE EXPE NSES AND IT IS MERELY HELD THAT THESE EXPENSES ARE BEREFT OF JUSTI FICATION. CONSIDERING THE FACTS IN ENTIRETY, IT WOULD BE APPR OPRIATE TO DISALLOW 50% OF THE EXPENSES CLAIMED FOR OLIVE BAR AND KITCHEN OF RS.1,50,000/- AND CREDIT CARD EXPENSES OF RS.6,1 5,553/-. HENCE THE DISALLOWANCE WILL HE RS.3.82,776/-. THE GROUND OF APPEAL IS PARTLY ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL:- 6. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS FOLLOWS:- 1. CIT APPEAL'S ORDER IS OPPOSED TO THE LAW AND FA CTS OF THE CASE. 2. CIT APPEAL ERRED IN CONSIDERING ONLY PART OF EXP ENSES OF RS.6,15,553 WHEREAS RS.18,37,004 WAS THE ADDITION. IN THE GROUNDS OF APPEAL ADDITION OF RS.18,37,004 WAS CONT ESTED. 3. CIT APPEAL ERRED IN ALLOWING ONLY 50% OF THE EXP ENSES OF RS.6,15,553 UNDER PRETEXT THAT IT WOULD BE APPROPRI ATE TO DISALLOW 50% OF EXPENSES. CIT(A) DID IT ON SURMISE WITHOUT A DDUCING ANY REASONS. 4. CIT APPEAL ERRED IN NOT EXAMINING THE REMAINING EXPENSES OF RS.12,21,451 WHICH WAS SPENT FOR BUSINE SS EXPANSION. 5. HON'BLE ITAT MAY KINDLY ALLOW THE APPEAL AND REN DER JUSTICE TO THE APPELLANT. 7. AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND THA T THE ISSUE OF DISALLOWANCE OF EXPENSES REQUIRES DE NOVO CONSIDERATION BY THE CIT(APPEALS). ADMITTEDLY, THE ENTIRE ADDITION OF RS .19,58,909 MADE BY THE AO WAS CHALLENGED BY THE ASSESSEE BEFORE THE CIT(AP PEALS). THE CIT(A) HAD CONSIDERED ONLY 2 OUT OF 7 ITEMS OF EXPENDITURE LISTED BY THE AO IN THE ORDER OF ASSESSMENT. HE DID NOT CONSIDER THE SUBMI SSIONS WITH REGARD TO ITA NO.2169/BANG/2019 PAGE 4 OF 4 REMAINING ITEMS OF EXPENDITURE. THE ASSESSEE IN TH IS APPEAL HAS ALSO PROJECTED ITS GRIEVANCE AGAINST DISALLOWANCE OF 50% OF OLIVER BAR AND KITCHEN PVT. LTD. AND CREDIT CARD EXPENSES. IN OUR OPINION, THE ENTIRE ISSUE OF DISALLOWANCE NEEDS TO BE CONSIDERED AFRESH BY TH E CIT(APPEALS), AFTER TAKING A HOLISTIC VIEW OF THE BASIS OF DISALLOWANCE MADE BY THE AO AND THE CLAIM OF ASSESSEE THAT THE EXPENSES IN QUESTION WER E INCURRED FOR THE PURPOSE OF EARNING INTEREST INCOME. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(APPEALS) AND DIRECT THE CIT(APPEALS) TO DECIDE THE ISSUE OF DISALLOWANCE OF EXPENSES AFRESH IN ACCORDANCE WITH THE LAW, AFTER AFFORDING ASSESSEE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF AUGUST, 2020. SD/- SD/- ( B R BAS K ARAN ) ( N V VASUDEVAN ) ACCOUNTANT ME MBER VICE PRESIDENT BANGALORE, DATED, THE 07 TH AUGUST, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.