M/S. JAI SEANTO INDUSTRIES P. LTD, MUMBAI V. THE ITO WD8(2)(1), MUMBAI

ITA 3056/MUM/2005

• Counselvise Citation: 305619914 RSA 2005
• Duration Of Justice: 7 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 16-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 25-04-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: PRAMOD KUMAR PARIDA; SANJUKTA CHOUDHARY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIVEK V ARMA, J.M. ITA NO. : 3056/MUM/2005 ASSESSMENT YEAR : 2001-02 JAISEANTO INDUSTRIES (P) LTD. 55, SAKI VIHAR ROAD POWAI MUMBAI-400 072. PAN NO: AAECS 1372 C INCOME TAX OFFICER WARD NO.8(2)(1) AAYAKAR BHAVAN, 2 ND FLOOR M.K. ROAD, CHURCHGATE MUMBAI-400 072. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI PRAMOD KUMAR PARIDA & MS. SANJUKTA CHOUDHARY RESPONDENT BY : SHRI PARTHASARATHI NAIK DATE OF HEARING : 16.4.2012 DATE OF PRONOUNCEMENT : 27.4.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.3.2005 OF CIT(A) FOR THE ASSESSMENT YEAR 2001-02. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.6,82,000/- AS DEDUCTION ON ACCOUNT OF FOREIGN TRAVEL EXPENSES OF ITA NO. 3056/M/05 A.Y.01-02 2 SHRI VIKAS SARAF. THE ASSESSEE HOWEVER COULD NOT SUBMIT THE DETAILS OF AIR TICKET AND OTHER EXPENSES THOUGH IT WAS SPECIFICALL Y ASKED FOR AND ALSO COULD NOT GIVE ANY JUSTIFICATION FOR SUCH TRAVE L FOR THE PURPOSE OF BUSINESS. THE ASSESSEE INITIALLY EXPLAINED THAT EXPENSE S WERE INCURRED ON THE TRAVEL OF THE DIRECTOR SHRI ASHOK DEO RA BUT LATER ON IT WAS FOUND THAT THE TRAVEL WAS UNDERTAKEN BY SHRI VIK AS SARAF, A SALES EXECUTIVE. FURTHER M/S. INDO GULF GARMENT, UAE HAD M ADE ARRANGEMENTS FOR THE STAY AND TRAVEL OF SHRI VIKAS SAR AF, WHO STAYED IN DUBAI FOR 107 DAYS FROM 29.4.2000 TO 13.8.2000. THE TOTAL EXPENDITURE ON BOARDING, LODGING AND VEHICLE AMOUNTE D TO USD 15080 OUT OF WHICH USD 15,000 HAD BEEN PAID BY SHRI VIKAS SARAF HIMSELF. THE AO NOTED THAT THE ASSESSEE WAS NOT ENGAGED IN THE BU SINESS OF IMPORT AND EXPORT NOR WAS THERE ANY SUCH INCOME SHOWN I N THE SUBSEQUENT PERIOD. THE ASSESSEE ALSO COULD NOT GIVE PROPER JUSTIFICATION FOR THE BUSINESS TRAVEL. THE AO, THEREFOR E, DISALLOWED THE EXPENSES AS INCURRED FOR NON-BUSINESS PURPOSES. 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSIN ESS OF TRADING IN FABRIC, FOREIGN CURRENCY, GOLD AND DIAMON D STUDDED JEWELLERY AND THE MAIN SUPPLIER OF GOLD AND DIAMOND STUDDED JEWELLERY WAS M/S. DOLLY JEWELS PVT. LTD. ASSESSEE DURING THE YEAR WANTED TO EXPLOIT THE EXPORT MARKET FOR WHICH SHRI VIKAS SARAF HAD BEEN DEPUTED TO DUBAI FROM 29.4.2000 TO 14.8.2000. IT WAS ALSO SUB MITTED THAT THE VISA AND STAY HAD BEEN ARRANGED BY M/S. INDO GULF COR PORATION, DUBAI AND PAYMENT FOR TICKETS HAD BEEN ARRANGED BY M/S. SAN TOGEN TEXTILE MILLS PVT. LTD. THE ASSESSEE SUBMITTED COPY OF DEBIT NOTE RAISED BY M/S. SANTOGEN TEXTILE MILLS PVT. LTD. AND THE AIR TICK ET BILLS. CIT(A) HOWEVER OBSERVED THAT NEITHER IN THE ACCOUNTING YEAR U NDER ITA NO. 3056/M/05 A.Y.01-02 3 CONSIDERATION NOR IN THE NEAR FORESEEABLE FUTURE, THE ASSESSEE HAD ANY EXPORT OR IMPORT FROM DUBAI. THE DETAILS FILED SHOW ED THAT SHRI VIKAS SARAF AFTER STAYING FOR ALMOST 4 MONTHS DURING 29.4.20 0 TO 14.8.2000, AGAIN LEFT FOR DUBAI ON 14.9.2000 AND CAME BACK ON 11 .2.2001. THUS, HE WAS OUT FOR ABOUT 10 MONTHS WITHOUT ACHIEVING ANY R ESULT. CIT(A) ALSO NOTED THAT THE VARIOUS CORRESPONDENCES FILED BY THE ASSESSEE WERE ADDRESSED TO M/S. SANTOGEN INDUSTRIES LTD. AND NOT TO T HE ASSESSEE. THE AIR TICKET BILL HAD ALSO BEEN PAID BY THE OTHER CO MPANY AND NOT BY THE ASSESSEE AND ONLY AFTER ASSESSMENT ORDER WAS PASSED, ADJUS TMENT ENTRY HAD BEEN PASSED DEBITING THE AMOUNT TO THE ASSESSEE . CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) AGREED WITH THE AO THAT THERE WAS NO BUSINESS PURPOSE INVOLVE D IN THE FOREIGN VISIT OF SALES EXECUTIVE OF THE ASSESSEE COMPANY. HE, THEREFORE, CONFIRMED THE DISALLOWANCE AGGRIEVED BY WHI CH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE ARGUED THAT T HE ASSESSEE WAS ENGAGED IN GOLD AND DIAMOND STUDDED JEWELLERY AN D THE FOREIGN VISIT OF THE SALES EXECUTIVE HAD BEEN UNDERTAKEN TO EXP LORE THE EXPORT MARKET. THE ASSESSEE HAD FILED THE AIR TICKET BILL, COPY OF PASSPORT, DETAILS OF CUSTOMER ENQUIRY MADE BY SHRI SARAF AND R EPORT SENT WHICH ARE AVAILABLE AT PAGE 18-56 OF THE PAPER BOOK. THE FOREIGN VISIT HAD BEEN SPONSORED BY M/S. DOLLY JEWELLERY PVT. LTD., A BO MBAY BASED PARTY WHO WAS IN THE SAME BUSINESS AND WHO HAD ALSO GIVEN CERTIFICATE IN THIS REGARD A COPY OF WHICH WAS PLACED AT PAGE 59 OF THE PAPER BOOK. IT WAS ACCORDINGLY SUBMITTED THAT CLAIM SHOULD BE ALLOWED AS ASSESSEE HAD SUBMITTED SUFFICIENT EVIDENCE TO SUBSTANTIATE TH E CLAIM FOR THE PURPOSE OF BUSINESS. ITA NO. 3056/M/05 A.Y.01-02 4 3.1 THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. IT WAS POINTED OUT THAT THE ASSESSEE W AS NOT IN THE BUSINESS OF EXPORT AND NEITHER ANY EXPORT HAD BEEN MAD E IN THE COMING YEARS. IT WAS ALSO POINTED OUT THAT AIR TICKET B ILL HAD BEEN RAISED IN THE NAME OF M/S. SANTOGEN INDUSTRIES A RELATE D CONCERN OF THE ASSESSEE COMPANY. THE REPORT SENT BY SHRI SARAF COPIES OF WHICH HAVE BEEN PLACED AT PAGE 27-37 OF THE PAPER BOOK ARE ALSO ADDRESSED TO M/S. SANTOGEN INDUSTRIES PVT. LTD. THERE WAS THEREF ORE, NO JUSTIFICATION FOR CLAIMING THE EXPENDITURE IN CASE OF TH E ASSESSEE WHICH WAS NOT IN CONNECTION WITH ITS BUSINESS. IT WAS ACCORDING LY SUBMITTED THAT CLAIM HAD BEEN RIGHTLY DISALLOWED BY THE AO AND CONFIRMED BY CIT(A). 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLO WANCE OF FOREIGN TRAVEL EXPENSES OF RS.6,82,000/-. THE EXPENDITURE HAD BEEN CLAIMED IN RESPECT OF TRAVEL OF SHRI VIKAS SARAF, THE SALES EXEC UTIVE OF THE ASSESSEE TO DUBAI FOR EXPLORING THE JEWELLERY MARKET. THE EXPENDITURE HAD BEEN DISALLOWED BY THE AUTHORITIES BELOW ON THE GROUND THAT THERE WAS NO EVIDENCE TO PROVE THE BUSINESS PURPOSE OF THE VISIT . ON CAREFUL PERUSAL OF THE MATERIAL PLACED ON RECORD, WE SEE NO INF IRMITY IN THE CONCLUSION DRAWN BY THE AUTHORITIES BELOW. THE FOREIG N TRIP WAS SPONSORED BY M/S. DOLLY JEWELS PVT. LTD, A BOMBAY BASED PARTY WHICH WAS SUPPLYING GOLD TO THE ASSESSEE. THE PAYMENT FOR AIR TICKET OF SHRI VIKAS SARAF HAD BEEN MADE BY M/S. SANTOGEN INDUSTRIES LTD. A GROUP CONCERN OF THE ASSESSEE. ONLY AFTER THE AMOUNT HAD BEEN D ISALLOWED IN THE ASSESSMENT ORDER, THE SAID PARTY HAD DEBITED THE AMO UNT IN THE ACCOUNT FOR THE SAID PERIOD, WHICH CAN ONLY BE CONSIDERED AS AN AFTER THOUGHT. WE ALSO NOTE THAT REPORT SENT BY SHRI VIKAS SARAF HAS BEEN ITA NO. 3056/M/05 A.Y.01-02 5 ADDRESSED TO M/S. SANTOGEN INDUSTRIES LTD. COPIES OF WHICH HAVE BEEN PLACED AT PAGES 27 TO 37 OF THE PAPER BOOK. THE ASSESSEE ADMITTEDLY WAS NOT DEALING IN IMPORT AND EXPORT OF GOLD AND DIA MOND JEWELLERY AND EVEN AFTER FOREIGN VISIT OF SHRI VIKAS SARAF, ASSESSE E HAD NOT GOT ANY EXPORT ORDERS FOR MANY YEARS THOUGH HE HAD STAYED IN DUBAI FOR ABOUT 10 MONTHS DURING THE YEAR. CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE, PARTICULARLY THE FACT THAT FOREIG N TOUR HAD BEEN SPONSORED BY ANOTHER COMPANY, THE PAYMENT FOR TICK ETS HAD BEEN MADE BY A SISTER CONCERN AND SHRI VIKAS SARAF HAD A LSO SUBMITTED HIS REPORT TO THE SAID CONCERN, WE ARE CONVINCED THAT FOREIGN TRIP WAS NOT FOR THE BUSINESS PURPOSES OF THE ASSESSEE. IT IS A SETTLED LEGAL POSITION THAT ONLY EXPENSES INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS CAN BE ALLOWED AS BUSINESS EXPENDITU RE. IN THE PRESENT CASE THERE IS NO EVIDENCE TO SUBSTANTIATE BUSIN ESS PURPOSE. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) DISALLOWING THE CLAIM. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.04.2012 SD/- SD/- ( VIVEK VARMA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 27.04.2012. JV. ITA NO. 3056/M/05 A.Y.01-02 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.