ACIT CIR 2, MUMBAI V. RAMESH P. BUDHWANI, ULHASNAGAR

ITA 2801/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84243 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Gift
• Section: 69; 69C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.2801/MUM/2011 ( / ASSESSMENT YEAR : 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, CIR -2, RANI MANSION, MURBAD ROAD, KALYAN. / VS. RAMESH P BUDHWANI PROP M/S P K MARKETING, KAILASH COMPLEX, SHOP NO.1/2, NEAR BASHARAM SOCIETY, ULHASNAGAR-2 ( / APPELLANT) .. ( !' / RESPONDENT) ./ $% ./ PAN/GIRNO.:AATPB5167C & / APPELLANT BY : SHRI VIJAY KUMAR BORA, !' ' & /RESPONDENT BY : SHRI VIJAY MEHTA ( ) ' * + / DATE OF HEARING : 29.10.2014 ,- ' * + /DATE OF PRONOUNCEMENT : 10.11.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 14.12.2010 PASSED BY LD CIT(A)-II, THANE AND IT RE LATES TO THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN GRANTING RELIEF IN RESPECT OF FOLLOWING ITEMS MADE BY AO : ITA NO.2801/M/2011 2 A) ADDITION MADE U/S 69C OF THE ACT RELATING TO MA RRIAGE EXPENSES; AND B) DISALLOWANCE OF PART OF SALE PROMOT ION EXPENSES. 3. THE FACTS RELATING TO THE CASE ARE STATED IN B RIEF. THE ASSESSEE IS A PROPRIETOR OF M/S P.K.MARKETING, AND WAS CARRYING T HE BUSINESS OF WHOLE SALE TRADING IN THE BEER. HE FILED RETURN OF INCOME DEC LARING TOTAL INCOME AT RS.19,88,530/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS INCURRED A SUM OF RS.9,95,52 4/- TOWARDS SALES PROMOTION WHICH CONSISTS MAINLY OF EXPENDITURES INCURRED ON A CCOUNT OF GIFT ARTICLES. THE ASSESSEE SUBMITTED THAT THE GIFT ARTICLES WERE DIST RIBUTED TO HIS CLIENTS I.E. RETAILS PURCHASERS. THE AO ASKED THE ASSESSEE TO SUBSTANT IATE THE CLAIM THAT THE GIFT ARTICLES WERE FULLY DISTRIBUTED AMONGST THE CLIENTS OF THE ASSESSEE. SINCE THE ASSESSEE COULD NOT FURNISH THE NECESSARY DETAILS TO PROVE THE DISTRIBUTION OF GIFT ARTICLES, THE AO MADE ADHOC DISALLOWANCE OF RS.1 L AKH OUT OF THE ABOVE SAID EXPENDITURE. THE AO FURTHER NOTICED THAT THE ASSES SEE HAS DEBITED RS.1 LAKH TO HIS CAPITAL ACCOUNT TOWARDS MARRIAGE EXPENSES OF HIS DAUGHTER. THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF THE MARRIAGE EXP ENSES WITH DOCUMENTARY EVIDENCE IN ITS SUPPORT. THE ASSESSEE SUBMITTED T HAT THE MARRIAGE CEREMONY IN ULHASNAGAR AND IT WAS SIMPLE MARRIAGE CEREMONY. FUR THER, THE EXPENDITURE WHICH INCURRED BY THE ASSESSEE AS WELL AS THE BRIDE GROOM SIDE. THE ASSESSEE DID NOT FURNISH ANY OTHER DETAILS. HENCE, THE AO ESTIMATED MARRIAGE EXPENSES AT RS.20 LAKHS AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE U/S 69C OF THE ACT. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DELETED BOTH THE DISALLOWANCES AND HENCE REVENUE HAS FILED THIS APPE AL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF RS.1 LAKH MADE OUT OF THE SALES PROMOTION EXPENSES. WE NOTICE THAT THE LD. CIT(A) HAS DELETED THE DISALLOWANCE ON THE REASONINGS THAT THE ASSESSEE HAS FILED ALL T HE DETAILS OF EXPENSES, COPY OF BILLS BEFORE AO AND FURTHER ON THE REASONING THAT THESE EXPENSES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. HOWEVER, WE NOTICE THAT THE AO HAS MADE ADHOC DISALLOWANCE OF RS.1 LAKH ON THE REASONING THAT THE ASSESSEE COULD NOT FURNISH DETAILS TO SHOW THAT THE GIFT ARTICLES PURC HASED BY HIM WERE ACTUALLY DISTRIBUTED TO ITS CUSTOMERS. THE AO HAS ALSO P OINTED OUT THAT THE ASSESSEE ITA NO.2801/M/2011 3 HAS NOT MAINTAIN ANY REGISTER/RECORD TO SUBSTANTIAT E THE CLAIM OF DISTRIBUTION. WE NOTICE THAT THE LD CIT(A) HAS NOT ADDRESSED THIS IS SUE. HOWEVER, DISTRIBUTION OF GIFT ARTICLES TO THE LOCAL RETAILERS ARE PREVAILI NG TRADE PRACTICE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS MAY END S OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 50,000/-. ACCORDINGL Y, WE MODIFY THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO RESTRICT DISALLOWANCE T O RS.50,000/-. 5. THE NEXT ISSUE RELATES TO ADDITION OF MARRIAGE E XPENSES U/S 69C OF THE ACT. WE NOTICE THAT THE AO HAS MADE IMPUGNED ESTI MATE WITHOUT SPECIFYING THE BASIS ON WHICH HE ARRIVED AT ADDITION OF RS.20 LAK HS. THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT MARRIAGE OF T HE ASSESSEES DAUGHTER TOOK PLACE AT GURUDWARA AND AGAINST THE WISHES OF THE FAMILY. SINCE IT WAS OUT OF SAID MARRIAGE. FURTHER THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTIONS 69C CAN BE MADE APPLICABLE IF AND ONLY IF THE AO I S IN A POSSESSION OF THE PROOF THAT THE EXPENDITURE WAS INCURRED BY THE ASSESSEE. ACCORDINGLY, IT WAS CONTENDED BY THE ASSESSEE THAT THE ADDITION CANNOT BE MADE ON PURE GUESS WORK BASIS. 6. WE NOTICE THAT THE LD. CIT(A) HAS CONSIDERED T HE SUBMISSIONS OF THE ASSESSEE AND DELETED THE ADDITION WITH THE FOLLOWIN G OBSERVATIONS : 9. I HAVE GONE THROUGH THE ASSESSMENT ORDER OF THE AO AND HAVE ALSO THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT CAREFULLY. I AGREE WITH THE ABOVE CONTENTIONS OF THE APPELLANT THAT THE ASS ESSMENT CANNOT BE MADE ON PURE GUESSWORK OR ESTIMATION OF INCOME. THE AO HAS TO PROVE ON THE BASIS OF SOME EVIDENCE PLACED ON RECORD TO P ROVE THAT THE APPELLANT HAS INCURRED THE EXPENDITURE OVER AND ABO VE SHOWN BY HIM IN HIS BOOKS OF ACCOUNTS. THE ADDITION U/S. 69 CAN BE MADE IF THE AO IS IN POSSESSION OF PROOF THAT EXPENDITURE WAS IN FACT IN CURRED BY THE APPELLANT ON THE MARRIAGE OF HIS DAUGHTER 10. IN THE CASE OF CIT VS. LUBTEC INDIA LTD. 311 IT R 75 (DEL.), THE HON'BLE HIGH COURT HAS HELD THAT 'WHAT IS POSTULATED IN SECTION 69C IS THAT FIRST OF ALL THE ASSESSEE MUST HAVE INCURRED THAT EXPENDITURE AND THEREAFTER IF ANY EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE SOURC E OF SUCH EXPENDITURE IS NOT FOUND SATISFACTORY BY THE AO, TH E AMOUNT MAY BE ADDED TO HIS INCOME. IN THE PRESENT CASE, THERE IS NOTHING TO SHOW THAT THE EXPENDITURE WAS IN FACT INCURRED BY T HE ASSESSEE. THE ASSESSEE HAD DENIED HAVING INCURRED THE EXPENDI TURE AND ITA NO.2801/M/2011 4 HAD CONTENDED THAT IT DID NOT HAVE THAT KIND OF MON EY. THE TRIBUNAL NOTED THAT THE AO HAD NOT MADE ANY ENQUIRY WHATSOEVER TO FIND OUT WHETHER SUCH EXPENDITURE WAS DIRECTLY I NCURRED BY THE ASSESSEE. SINCE A PART OF THE EXPENDITURE RELATED T O ADVERTISEMENT A NEWSPAPER, IT COULD HAVE BEEN EASILY VERIFIED BY THE AO, BUT HE DID NOT DO SO. THERE IS NO FAULT IN THE VIEW TAKEN BY THE TRIBUNAL THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE EX PENDITURE WAS ACTUALLY INCURRED BY THE ASSESSEE NOR DID THE AO TA KE ANY ACTION TO FIND OUT WHETHER THE EXPENDITURE WAS DIRECTLY IN CURRED OR NOT' 11. THE ABOVE RATIO OF JUDGEMENT IS APPLICABLE TO T HE FACTS OF THE INSTANT CASE. THE AO HAS NOT PLACED ANY EVIDENCE ON RECORD TO PROVE THAT THE APPELLANT HAS INCURRED AN EXPENDITURE ON H IS DAUGHTERS MARRIAGE OVER AND ABOVE THE EXPENSES OF RS.1.00,000 /- WITHDRAWN FROM HIS PERSONAL CAPITAL ACCOUNT. THE AO HAS NOT CARRIE D OUT ANY INDEPENDENT INVESTIGATIONS TO PROVE HIS POINT OF UN EXPLAINED EXPENDITURE. IN THE ABSENCE OF ANY EVIDENCE PLACED ON RECORD REGARDING THE INCURRING OF EXPENSES APART FROM THE EXPENSES SHOWN AS WITHDRAWAL FROM THE PERSONAL CAPITAL ACCOUNT FOR DAUGHTERS MA RRIAGE, THE ACTION OF THE AO IS NOT JUSTIFIED IN ESTIMATING THE MARRIAGE EXPENSES ON ADHOC BASIS. 12. ON THE SIMILAR FACTS IN THE CASE OF INCOME TAX OFFICER VS. SURESH CHANDRA KOTHARI, ITAT, JODHPUR BENCH (2008) 118 TTJ (JD) 272 : (2008) 12 DTR 285 HAS HELD THAT 'UNDISPUTEDLY, THE ASSESSEE HAS CELEBRATED THE MARR IAGE OF HIS DAUGHTER DURING THE PERIOD UNDER CONSIDERATION AND HE DISCLOSED THE EXPENDITURE INCURRED BY HIM FOR THAT PURPOSE IN THE BOOKS OF ACCOUNT AS WELL AS IN THE RETURN FILED BY HIM BEFOR E THE DEPARTMENT. DURING THE COURSE OF THE ASSESSMENT PRO CEEDINGS THE AO HAS ASKED THE ASSESSEE TO GIVE THE PARTICULARS O F THE DETAILED EXPENDITURE INCURRED BY HIM UNDER VARIOUS HEADS OF ACCOUNTS WHILE PERFORMING THE MARRIAGE OF HIS DAUGHTER. ACCO RDINGLY, THE ASSESSEE HAS GIVEN THE HEAD-WISE DETAILS OF THE SAI D EXPENDITURE BUT AO WHILE EXAMINING THE SAID EXPLANATION HAS CON SIDERED THE REPORT OF THE INSPECTOR FILED BEFORE HIM AS A RESUL T OF ENQUIRY CONDUCTED BY HIM UNDER S. 133A(5), WHEREIN, HE HAS DETAILED THE NAMES OF VARIOUS PERSONS WHO ALLEGED TO HAVE PERFOR MED THE VARIOUS FUNCTIONS THAT ARE TAKEN BY THE ASSESSEE WH ILE CELEBRATING THE MARRIAGE OF HIS DAUGHTER, GIVEN THEIR NAMES ITE M-WISE. BUT NOWHERE IN THE SAID REPORT, IT WAS STATED BY HIM TH AT HE HAS ENQUIRED FROM ANY OF THOSE PERSONS NOR HE RECORDED THEIR STATEMENTS. HE ESTIMATED MERELY ON HIS ASSUMPTIONS AND PRESUMPTIONS OF THE PROBABLE EXPENDITURE THAT OUGHT TO HAVE BEEN INCURRED BY THE ASSESSEE FOR CELEBRATING THE MARRIA GE OF HIS DAUGHTER. AO HAS TOTALLY RELIED ON THE REPORT BY TH E INSPECTOR WHICH IS BASED ONLY ON ESTIMATION AND NO OTHER COLL ECTED EVIDENCES, MUCH LESS THE STATEMENT OF THE PERSONS W HO ALLEGED TO HAVE PERFORMED THE VARIOUS FUNCTIONS FOR THE CEL EBRATION OF THE ITA NO.2801/M/2011 5 MARRIAGE BY THE ASSESSEE OF HIS DAUGHTER. WHEREAS, THE ASSESSEE HAS GIVEN THE DETAILED ACCOUNTS FURNISHING THE PART ICULARS OF THOSE EXPENDITURES AND DISCLOSING THE SOURCES FOR MEETIN G THOSE EXPENSES BY GIVING DETAILED INFORMATION BUT THIS WA S REJECTED BY THE AO WITHOUT ASSIGNING ANY REASON SUCH AS, EITHER THEY ARE NOT GENUINE OR THEY ARE NOT PROPERLY SUPPORTED BY COGEN T EVIDENCE OR VOUCHERS. THE CIT(A) HAS FOUND THAT THE AO HAS NOT MADE OUT ANY OF THE INGREDIENTS AS REQUIRED UNDER LAW TO JUSTIFY THE ADDITION MADE UNDER S. 69C AGAINST THE ASSESSEE. THE ORDER P ASSED BY CIT(A) IS NOT INFIRM IN ANYWAY REQUIRING ANY INTERF ERENCE' 13. IN THE CASE OF HAKIM BRIJ LAL SHARMA VS. INCOME TAX OFFICER, (1981) 11 TTJ (DEL) 349, IT IS HELD BY THE ITAT THAT WE HAVE HEARD THE PARTIES AND ARE SATISFIED THAT THERE IS ABSOLUTELY NO JUSTIFICATION IN SUSTAINING ANY ADDIT ION ON THIS SCORE. THE DETAILS OF THE EXPENDITURE CLAIMED AND T HE EXTENT OF THE PROOF AS STATED ABOVE AND FOUND BY TH E DEPTL. AUTHORITIES, APPEARS TO US TO BE QUITE REASONABLE A ND ADEQUATE AND IN THE ABSENCE OF ANY EVIDENCE OR MATE RIAL BROUGHT ON RECORD BY THE DEPARTMENTAL AUTHORITIES, WHICH WOULD SHOW THAT THE ACTUAL EXPENDITURE WAS MUCH MOR E AND THERE ARE ITEMS OF EXPENDITURE INCURRED BY THE ASSESSEE AND NOT SHOWN BY HIM, WE ARE UNABLE TO SUS TAIN ANY ADDITION.' 14. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS ALSO FILED A CERTIFICATE FROM THE GURUDWARA SHRI GURNANI K DARBAR, SECTION 17, NEAR HIRA GHAT, ULHASNAGAR STATING THAT THE CEREMON Y OF LAWA' AND ROTI' OF NISHA, DAUGHTER OF RAMESH BUDHWANI WAS HELD THER E ON 25/12/2006 FROM 11 TO 5 PM AND THE CHARGES PAID WERE RS. 5,000 /- 15. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS MENTIONED ABOVE, IN MY OPINION, THE ACTION OF THE AO ESTIMATING THE MARRIAGE EXPENSES OF THE DAUGHTER OF THE APPELLANT AT RS.20,00,000/- IS PURELY ON ASSUMPTIONS AND PRESUMP TIONS WITHOUT PLACING ANY EVIDENCE ON RECORD OF HAVING INCURRED A NY EXPENDITURE ON MARRIAGE OVER AND ABOVE RS.1,00,000!-. THEREFORE, T HE ACTION OF THE AO IS NOT JUSTIFIED AND HENCE THE ADDITION MADE AT RS .20,00,000/- TO THE INCOME OF THE APPELLANT U/S 69C FOR THE YEAR UNDER CONSIDERATION. 7. WE NOTICE THAT THE LD. CIT(A) HAS DELETED THE IM PUGNED ADDITION BY PLACING RELIANCE ON CERTAIN CASE LAWS CITED BY THE ASSESSEE . UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE O RDER OF LD. CIT(A) ON THIS ISSUE. ITA NO.2801/M/2011 6 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10TH NOV, 2014 . ,- ( . /0 1 210TH NOV , 2014 - ' 7) 8 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI: 10TH NOV,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ( =* ( ) / THE CIT(A)- CONCERNED 4. ( =* / CIT CONCERNED 5. 6. >? 7 !*@ , + @ , / ( ) / DR, ITAT, MUMBAI CONCERNED 7 A ) / GUARD FILE. B ( / BY ORDER, TRUE COPY C $ (ASSTT. REGISTRAR) + @ , / ( ) /ITAT, MUMBAI