Verifone India Sales Pvt. Ltd., Noida V. ACIT, New Delhi

ITA 3319/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7053 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MANONEET DALAL
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 3319 /DEL/ 2013 ASSESSMENT YEAR: 2008 - 09 M/S. VERIFONE INDIA SALES PVT. LTD., B - 1, SECTOR - 4, NOIDA. VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 17(1), NEW DELHI GIR/PAN : AABCL1063E (APPELLANT) (RESPONDENT) APPELLANT BY SH. MANONEET DALAL, ADV. RESPONDENT BY SH. AMIT JAIN, SR.DR DATE OF HEARING 18.05.2016 DATE OF PRONOUNCEMENT 29.06.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 28/02/2013 OF THE LD. COMMISSIONER OF INCOME - TAX( APPEALS) - 19, NEW DELHI FOR ASSESSMENT YEAR 2008 - 09 RAISING FOLLOWING GROUNDS: 1. ERRED IN UPHOLDING THE ADHOC ADDITION OF RS 4 ,35,345 MADE BY THE ASSISTANT COMMISSIONER OF INCOME TAX. CIRCLE 17(1), NEW DELHI ( LD. AO ) ON ACCOUNT OF INCREASE IN TRAVELLING AND CONVEYANCE EXPENSES WITHOUT PROVIDING ANY COGENT AND GERMANE REASONS AND ALSO WITHOUT APPRECIATING THE FACT THE SAID EXPEN SES WERE INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS. 2. WITHOUT PREJUDICE TO THE ABOVE, LD. CIT(A)/ LD. AO FAILED TO ENVISAGE THE COMMERCIAL EXPEDIENCY OF INCURRING TRAVELLING AND CONVEYANCE EXPENSES BY THE APPELLANT FRO M THE DETAILS OF TRAVELLING AND CONVEYANCE EXPENSES PLACED ON RECORD BEFORE THEM. 3. WITHOUT PREJUDICE TO THE ABOVE, LD. CIT (A)/LD. AO FAILED TO APPRECIATE THE TRITE LAW THAT ESTIMATED ADDITIONS WITHOUT ANY BASIS ARE UNSUSTAINABLE AND HAS FURTHER ERRED IN NOT CORRECTLY APPRECIATING THE JUDICIAL PRECEDENTS PLACED ON RECORD BY THE APPELLANT. ALL OF THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE AND NOTWITHSTANDING EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. ANY CONSEQUENTIAL RELIEF, TO WHICH THE APPELLANT MAY BE ENTITLED UNDER THE LAW IN PURSU ANCE OF THE AFORESAID GROUNDS OF APPEAL, OR OTHERWISE, MAY BE THUS GRANTED. 2. T HE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN MARKETING AND DISTRIBUTION OF VARIOUS PRODUCTS MANUFACTURED BY THE VERIFONE 2 ITA NO. 3319/DEL/2013 AY: 2008 - 09 GROUP, I.E. , POS TERMIN ALS, INTEGRATED TERMINALS, ATMS, ELECTRONIC C ASH REGISTER ETC. AND IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) , 10% OUT OF TRAVELLING EXPENSES AMOUNTING TO RS. 4,35, 345/ - WERE DISALLOWED ALONG WITH OT HER DISALLOWANCES. THE ASSESSING OFFICER OBSERVED INCREASE IN TRAVELLING AND CONVEYANCE EXPENSES FROM RS. 26,34, 794/ - IN PRECEDING YEAR TO RS. 43,53, 444/ - IN CURRENT YEAR, WHICH IN PERCENTAGE TERMS WAS 65.23% INCREASE AS COMPARED TO INCREASE OF 12% IN REVE NUE. THE REASON FOR INCREASE IN THE TRAVELLING AND CONVEYANCE EXPENSES WAS STATED BY THE ASSESSEE AS DUE TO INTERNATIONAL TRAVELLING FOR TAKEOVER OF THE VERIFONE ISRAEL BY VERIFONE INC . , WHICH ACCORDING TO THE ASSESSING OFFICER WAS NOT BUSINESS EXPEN DITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE. 3. THE LD. COMMISSIONER OF INCOME - TAX( APPEALS) UPHELD THE DISALLOWANCE WITH THE OBSERVATION THAT THE ASSESSEE FAILED TO PRODUCE RELEVANT BILLS AND VOUCHERS NOT ONLY DURING ASSESSMENT PROCEEDING BUT ALSO DURING THE REMAND PROCEEDING. AGGRIEVED, THE ASSESSEE IS IN APPEAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 4. IN THE GROUNDS OF APPEAL RAISED, SOLE GRIEVANCE IS IN RE SPECT OF DISALLOWANCE OF RS. 4,35, 345/ - ON ACCOUNT OF TRAVELLING AND CONVEYANCE SUSTAINED BY THE LD. COMMISSIONER OF INCOME - TAX( APPEALS). 5. THE LD. AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE INCREASE IN TRAVELLING EXPENSES WAS MAINLY DUE TO THE INCREASE IN INTERNATIONAL TRAVELLING RELATED TO THE TAKE OVER OF VERIFONE ISRAEL BY VERIFONE INC . , EXPENDITURE OF RS. 6.5 LAKH ON ACCOUNT OF TRAININGS IN BUSINESS MEET ING ABROAD AND INCREASE OF RS. 6 LACS IN DOMESTIC TRAVELLING. HE FURTHER SUBMITTED THAT DUE TO TAKEOVER OF THE LIPMAN INC . BY VERIFONE INC . , NAME OF ALL GROUP COMPANIES INCLUDING THE ASSESSEE WERE CHANGED FROM LIPMAN TO VERIFONE AND IN ORDER TO UNDERSTAN D THE NEW GLOBAL POLICIES AND STRUCTURE, WHICH WAS REQUIRED TO BE ADHERED BY ALL GROUP COMPANIES, THE ASSESSEE WAS REQUIRED TO INCUR SUCH TRAVELLING EXPENSES. 3 ITA NO. 3319/DEL/2013 AY: 2008 - 09 6. ON THE CONTRARY, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE RELYING ON THE ORDERS OF THE AUTH ORITIES BELOW SUBMITTED THAT LOOKING TO THE FAILURE OF THE ASSESSEE IN PRODUCING BILLS AND VOUCHERS OF THE EXPENSES, THE DISALLOWANCE OF 10% OF THE EXPENSES WAS JUSTIFIED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND T HAT THE DISALLOWANCE WAS SUSTAINED MAINLY DUE TO THE ABNORMAL INCREASE (65%) AS COMPARED TO THE INCREASE IN REVENUE (12%) AND FAILURE OF THE ASSESSEE IN PRODUCING BILLS AND VOUCHERS BEFORE THE ASSESSING OFFICER NOT ONLY IN THE ASSESSMENT PROCEEDINGS BUT IN THE REMAND PROCEEDING ALSO . THOUGH THE ASSESSEE HAS ATTEMPTED TO JUSTIFY THE INCREASE IN EXPENSES WAS INCURRED FOR THE PURPOSE OF THE BUSINESS BUT IN ABSENCE OF BILLS AND VOUCHERS , IT CANNOT CONCLUSIVELY BE HELD THAT ALL THE EXPENSES INCURRED WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT DISALLOWANCE AT THE RATE OF 5% OF THE TOTAL EXPENSES WILL BE REASONABLE TO COVER THE EXPENSES WHICH ARE NOT INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS AS AGAINST DISALLOWANCE AT THE RATE OF 10% SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND ACCORDINGLY, WE ALLOW RELIEF OF 50% OF THE DISALLOWANCE ON TRAVELLING AND CONVEYANCE EXPENSES. THE GROUNDS OF THE APPEAL ARE ALLOWED PARTLY. 8. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED PARTLY. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE , 2016 . SD/ - SD/ - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH JUNE , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI