CHETAN M. TANNA, MUMBAI V. ITO 20(1)(2), MUMBAI

ITA 2704/MUM/2009

• Counselvise Citation: 270419914 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: G P TRIVEDI
• Keywords: Business expenditure; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, MUMBAI. BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.2704/ MUM/2009 ASSESSMENT YEAR: 2005-06 CHETAN M TANNA, .. APPELLANT PLOT NO.27/29, JANKIDEVI SCHOOL ROAD, BEHIND VERSOVATEL EXCHANGE, ANDHERI(W), MUMBAI.-400053 PA NO.AADPT 3562 F VS INCOME TAX OFFICER 20(1)(2) .. RESPONDEN T MUMBAI. APPEARANCES: ASHWIN CHHAG, FOR THE APPELLANT G.P.TRIVEDI , FOR THE RESPONDENT DATE OF HEARING : 26.7.2011 DATE OF PRONOUNCEMENT : 30.8.2011 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST CIT(A)S ORDER DATED 28.11.2008, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2004-05. GRIEVANCE O F THE ASSESSEE IS AS FOLLOWS: I.T.A NO.2704/ MUM/2009 ASSESSMENT YEAR: 2005-06 2 THE LD CIT(A) IS ERRED IN ENHANCING THE ASSESSMENT & ADDING A SUM OF RS.4,54,434 INSTEAD OF RS.63,757 AS ORIGINALLY DISA LLOWED BY THE LD AO AND FINALLY DISALLOWING A SUM OF RS.5,18,191. 2. IT IS A RECALLED MATTER. ORIGINALLY, THE APPEAL WAS SUMMARILY DISMISSED AS THERE WAS NO COMPLIANCE TO THE NOTICE OF HEARING IS SUED TO THE ASSESSEE. HOWEVER, AT THE REQUEST OF THE ASSESSEE, THE EXPARTE ORDER WAS RECALLED. THAT IS HOW, WE HAVE COME TO IN SESEIN OF THE MATTER AND PROCEED TO DISPOSE THE SAME ON M ERITS 3. BRIEFLY STATED, THE MATERIAL FACTS ARE LIKE THIS . THE ASSESSEE IS A STOCKIST AND DEALER IN GOVERNMENT LOTTERIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT TRAVELING EXPENSES OF RS.12,75,13, CLAMED AS A DEDUCTION BY THE ASSESSEE, ARE NOT PROPERLY SUPPORT ED, AND INCLUDE EXPENSES OF RS.5,18,191 ON ACCOUNT OF EUROPE TOUR OF CHETTAN TA NNA. IT WAS IN THIS BACKDROP AND HAVING NOTED THAT THE ASSESSEE DID NOT HAVE AN Y BUSINESS IN EUROPE, ASSESSING OFFICER DISALLOWED 5% OF ENTIRE TRAVELING EXPENSES. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL. LEARNED CIT(A) ENHANCED THE DISA LLOWANCE BY OBSERVING AS FOLLOWS: 2.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AR AS NOTED ABOVE AS WELL AS XEROX COPIES OF THE PASSPORT AND VISA FURNI SHED ALONGWITH WRITTEN SUBMISSIONS. THE AR HAS NOT FURNISHED ANY OTHER DE TAILS AND EVIDENCES REGARDING HIS CLAIM OF FOREIGN TRAVELING WHICH IS F OUND TO BE CONDUCTED IN VARIOUS EUROPEAN COUNTRIES FOR THE PERIOD 1.6.2003 TO 21.6.2003. NO EVIDENCE WHATSOEVER ARE AVAILABLE WITH THE APPELLAN T TO ESTABLISH THAT THE FOREIGN TRAVELING CONDUCTED BY THE APPELLANT IS NEC ESSITATED OR HIS BUSINESS REQUIREMENTS. THE MAIN CONTENTION FOR CLAIMING SUC H EXPENDITURE AS ARGUED BY THE AR IS FOR THE STUDY OF NEW ONLINE LOTTERY PR OJECT FOR WHICH MODERN TECHNOLOGIES WERE TO BE OBTAINED, TECHNICAL KNOW HO W WERE TO BE UNDERSTOOD, NEW COMPUTER SYSTEM INCLUDING PRINTERS WERE REQUIRED TO BE ORDERED AND WORLD LOTTERY SCHEMES WERE TO BE STUDIE S. IT WAS EXPLAINED THAT EXPENDITURE AS FOR THE DEVELOPMENT, BETTERMENT AND EXPANSION OF THE RUNNING BUSINESS. IT IS A FACT THAT THE APPELLANT IS IN THE LOTTERY BUSINESS, AT THE SAME TIME, IT IS ALSO A FACT THAT THE AR HAS SP ECIFICALLY EXPRESSED HIS INABILITY TO FURNISH ANY PIECE OF EVIDENCE REGARDIN G VARIOUS MEETINGS, CONFERENCES, SEMINARS, ETC ATTENDED BY THE APPELLAN T DURING THE FOREIGN TOUR REQUIRED FOR HIS BUSINESS PURPOSES. AS PER THE PAS SPORT AND VISA DETAILS FURNISHED BY THE APPELLANT HE HAS VISITED BELGIUM, FRANCE, UK AND OTHER PLACES IN THE EUROPE DURING THIS PERIOD. THE EXPEN DITURE INCURRED AS MENTIONED ABOVE IS MAINLY ON ACCOUNT OF AIR TICKETS , LOCAL TRAVELING, HOTEL, I.T.A NO.2704/ MUM/2009 ASSESSMENT YEAR: 2005-06 3 LODGING AND BOARDING, REGISTRATION FEES AND MISC. E XPENSES. THEREFORE, CAREFULLY PERUSING THE DETAILS AND SUBMISSIONS OF T HE APPELLANT, IT IS HELD THAT THE APPELLANT DID VISIT THESE PLACES FOR WHICH FORE IGN TRAVELLING EXPENDITURE IS INCURRED. HOWEVER, AT THE SAME TIME, IT HAS FAILED TO FURNISH ANY SINGLE PIECE OF DOCUMENTARY EVIDENCE SO AS TO ESTABLISH THAT THE FOREIGN TRAVEL WAS NECESSITATED FOR HIS BUSINESS PURPOSES. THE AR HAS SUBMITTED THAT THE TOUR WAS CONDUCTED TO CONVERT/EXPANSION OF BUSINESS INTO ONLINE FORMAT AND THEREFORE, TO UNDERSTAND TECHNICAL KNOW HOW TRADE M ECHANISM, INTERNATIONAL GAMING PATTERN AS WELL AS BETTER SOFTWARE UNDERSTAN DING ETC. HOWEVER, AS PER THE OPPORTUNITY PROVIDED TO THE APPELLANT TO S UBSTANTIATE HIS CLAIM IN THIS REGARD BY FURNISHING ANY PIECE OF DOCUMENTARY EVIDENCES, AR HAS EXPRESSED HIS INABILITY TO DO SO. IT WAS ADMITTED THAT NO SUCH EVIDENCE OF WHATSOEVER NATURE IS AVAILABLE WITH THE APPELLANT. IT IS ALSO NOT ESTABLISHED THAT ANY MAJOR CHANGES OR IMPROVEMENTS IN THE ONLIN E LOTTERY BUSINESS ALREADY BEING CARRIED OUT BY THE APPELLANT WAS UNDE RTAKEN BY THE APPELLANT, AS A RESULT OF THIS FOREIGN TOUR. NO NEW SOFTWARE, HARDWARE OR TECHNOLOGY IS ACQUIRED BY THE APPELLANT AS A RESULT THIS FOREIGN TOUR. THERE IS NO EVIDENCE WITH THE APPELLANT THAT HE HAS ACTUALLY DID ATTEND VARIOUS MEETINGS CONFERENCES, SEMINARS ETC, WITH CERTAIN FOREIGN COM PANIES AS CLAIMED IN HIS SUBMISSIONS MENTIONED ABOVE. IN THE ABSENCE OF ANY DOCUMENTARY OR CIRCUMSTANTIAL EVIDENCE, THIS EXPENDITURE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. IN THE CASE OF RAMANAND SAGAR VS DCI T, 256 ITR 134(BOM) THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE QUESTION RELATING TO ALLOW ABILITY OF EXPENDITURE INCURRED FOR BUSINESS PURPOSES AS NECESSITATED U/S.37(1) OF THE ACT, THE ONUS IS ON THE APPELLANT TO PROVE CASH OF THE FOLLOWING INGREDIENTS BEFORE THE SAME IS ALLOWED AS DEDUCTION. (A) AN ITEM OF EXPENDITURE NOT BEING OF THE NATURE DESC RIBED UNDER SECTION 30 TO 36 OF THE ACT. (B) THE ITEM OF EXPENDITURE MUST BE IN THE NATURE OF CA PITAL OR PERSONAL EXPENSES OF THE ASSESSEE; (C) THE EXPENDITURE MUST BE LAID OUT WHOLLY AND EXCLUSI VELY FOR THE PURPOSES OF BUSINESS OR PROFESSION. IF THE ASSESSEE FAILS TO SATISFY ANY OF THESE FACTS , THE EXPENDITURE CLAIMED IS NOT ALLOWABLE. THE AO IS DUTY BOUND TO CONSIDER RE ASONABLENESS OF THE EXPENDITURE INCLUDING THE BONAFIDES OF ANY ITEM OF EXPENDITURE AND/OR ITS QUANTUM TO THE EXTENT IT MAY THROW LIGHT ON THE BON AFIDE NATURE. 2.4.1 THE HONBLE COURT HAS ALSO FURTHER HELD THAT IF THE APPELLANT FAILS TO SATISFY ANY OF THESE TESTS, THE EXPENDITURE CLAIMED IS NOT TO BE ALLOWABLE,. IT WAS HELD THAT AO IS DUTY BOUND TO CONSIDER REASONAB LENESS OF THE EXPENDITURE INCLUDING THE BONAFIDE NATURE OF ANY IT EM OF EXPENDITURE AND/OR ITS QUANTUM TO THE EXTENT IT MAY THROW LIGHT ON THE BONAFIDE NATURE. IN THE INSTANT CASE, ASS DISCUSSED ABOVE, IT IS DULY ESTAB LISHED THAT THE APPELLANT COULD NOT SUBSTANTIATE HIS CLAIM BY PRODUCING ANY D OCUMENTARY EVIDENCES OR CIRCUMSTANTIAL EVIDENCE. THE ONLINE LOTTERY BUSINE SS IS ALREADY BEING I.T.A NO.2704/ MUM/2009 ASSESSMENT YEAR: 2005-06 4 UNDERTAKEN BY THE APPELLANT. NO NEW TECHNOLOGY OR SOFTWARE OR HARDWARE IS PURCHASED BY THE APPELLANT AFTER THE SAID FOREIGN T OUR. THE BUSINESS OF THE APPELLANT IS ONLY CONFINED TO THE DOMESTIC MARKET. THEREFORE, ON ACCOUNT OF THE AFORESAID REASONS, FACTS AND CIRCUMSTANCES OF T HE CASE AS WELL FINDINGS OF THE AO RECORDED IN THE ASSESSMENT ORDER THE ENTIRE CLAIM OF APPELLANT MADE ON THIS ACCOUNT IS DISALLOWED RESULTING INTO NET DI SALLOWANCE OF RS.5,18,191 I.E. CONFIRMATION OF DISALLOWANCE MADE BY THE AO OF RS.63,757 AND FURTHER ENHANCEMENT OF THE SAID DISALLOWANCE BY A SUM OF RS .4,54,434 AS DISCUSSED ABOVE. 4. THE ASSESSEE IS AGGRIEVED OF THE STAND SO TAKEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 6. WE FIND THAT IT IS AN ADMITTED POSITION THAT THE ASSESSEE DID NOT HAVE ANY BUSINESS OUTSIDE INDIA. THE ASSESSEE HAS, HOWEVER, SOUGHT TO JUSTIFY THE EUROPEAN TRIP BY GIVING A RATHER VAGUE AND GENERALIZED EXPLA NATION THAT THE ASSESSEE WAS VISITING EUROPEAN COUNTRIES TO UNDERSTAND THE GAMIN G PATTERN, PRIZE PAYOUT STRUCTURE AND THE METHOD OF PLAY SO FAR AS THE LOTT ERY BUSINESS IN THOSE COUNTRIES ARE CONCERNED. THERE WAS NO MATERIAL ON RECORD BEFORE THE AUTHORITIES BELOW AS ALSO BEFORE US TO DEMONSTRATE THAT THE ASSESSEE HAD ATTE NDED TO ANY BUSINESS WORK IN THESE COUNTRIES. WE HAVE ALSO NOTED THAT THE CIT(A ) HAD ONCE AGAIN GIVEN THE ASSESSEE A SPECIFIC OPPORTUNITY TO FURNISH ANY PIE CE OF DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CONTENTION BUT THE ASSESSEE EXPRESSE D HIS INABILITY TO DO SO. IN THESE CIRCUMSTANCES AND PARTICULARLY BEARING IN MIND THE FACT THAT THE ASSESSEE HAS NOT PLACED ANY COGENT MATERIAL ON RECORD TO DEMONSTRATE HAVING ATTENDED TO ANY WORK RELATING TO BUSINESS DURING HIS FOREIGN TRIP, WE DE EM IT FIT AND PROPER TO CONFIRM VERY WELL REASONED ORDER OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. AS WE DO SO, WE MAY ALSO MENTION HERE THAT DURING THE COU RSE OF HEARING BEFORE US, LEARNED COUNSEL PRAYED THAT THE MATTER BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION OF EVIDENCE IN SUPPOR T OF BUSINESS EXPEDIENCY OF I.T.A NO.2704/ MUM/2009 ASSESSMENT YEAR: 2005-06 5 FOREIGN TOUR AND GIVE THE ASSESSEE ONE MORE OPPORTU NITY TO PRODUCE THE EVIDENCE IN SUPPORT OF HIS CONTENTION THAT THE FOREIGN TRIP WAS WARRANTED ON ACCOUNT OF COMMERCIAL EXPEDIENCY. HOWEVER, WHEN WE ASKED LEAR NED COUNSEL TO PRODUCE ANY MATERIAL IN SUPPORT OF HIS CONTENTION BEFORE US, HE EXPRESSED HIS INABILITY TO DO SO BUT SUBMITTED THAT HE WILL MAKE ALL OUT EFFORTS TO PRODUCE THE SAME BEFORE THE AO IN CASE AN OPPORTUNITY IS GIVEN TO DO SO. WE ARE UNAB LE TO SEE ANY MERITS IN THIS KIND OF APPROACH. IF THE ASSESSEE HAS ANY MATERIAL TO SUBS TANTIATE HIS CONTENTION, HE HAS TO PRODUCE THE SAME BUT HE CANNOT SIMPLY REQUEST FOR R EMANDING THE MATTER TO THE FILE OF THE AO IN THE HOPE THAT BY THE TIME THE MATTER C OMES UP FOR FRESH EXAMINATION BY THE AO, HE WILL BE ABLE TO OBTAIN SUCH MATERIAL. T HE PLEA OF THE ASSESSEE FOR REMANDING THE MATTER IS, THEREFORE ALSO REJECTED. FOR THE REASONS SET OUT ABOVE, WE CONFIRM THE ACTION OF THE CIT(A) AND DECLINE TO INT ERFERE. 7. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2011 SD/- (D.MANMOHAN) VICE PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XX, MUMBAI 4. COMMISSIONER OF INCOME TAX,20 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI