THE INFORMATION COMPANY P.LTD, NAVI MUMBAI V. ITO 10(3)(4), MUMBAI

ITA 4050/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G N MAKAWANA
• Assessee Lawyers: DIGESH RAMBHIA
• Keywords: Business expenditure; Opportunity of being heard; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER ITA NO . 4050 / MUM./ 2014 ( ASSESSMENT YEAR : 20 10 11 ) THE INFORMATION COMPANY PVT. LTD. 65/66 CHANDRAMUKHI ESTATE AGRAWAL TRADE CENTRE TOWER A SECTOR 11, CBD B ELAPUR NAVI MUMBAI 400 614 PAN AABCT0070H .. APPELLANT V/S INCOME TAX OFFICER WARD 10(3)(4), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI DIGESH RAMBHIA REVENUE BY : SHRI G.N. MAKAWANA D ATE OF HEARING 1 6 .0 7 .2015 DATE OF ORDER 31.07.015 O R D E R PER G.S. PANNU, ACCOUNTANT MEMBER TH E PRESENT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 6 TH MARCH 2014 , PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 22 , M UMBAI, FOR THE ASSESSMENT YEAR 20 10 11 . THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS : ' ADHOC DISALLOWANCE OF ONE - FIFTH OF CERTAIN EXPENSES 1. IN CONFIRMING THE DISALLOWANCE OF RS 3,05,833/ - MADE BY THE AO, BEING ONE FIFTH OF CERTAIN EXPE NSES INCURRED FOR THE PURPOSE THE INFORMATION COMPANY PVT. LTD. 2 OF BUSINESS AND PROFESSION WHICH WERE DEBITED TO PROFIT AND LOSS ACCOUNT OF THE APPELLANT. 2. IN REJECTING THE EXPLANATION AND DOCUMENTS PROVIDED BY THE APPELLANT RELATING TO JUSTIFICATION OF REQUIRED HEADS OF EXPENSES AS TO THE VIABILITY OF THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND PROFESSION AND MAKING DISALLOWANCE ON AD HOC BASIS. IN NOT GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT THEREBY MAKING DISALLOWANCE ON AD HO C BASIS OF ONE FIFTH OF EXPENSES WITHOUT SEEKING COMPLETE DOCUMENTATION NOR VERIFYING THE DOCUMENTARY EVIDENCE SO SUBMITTED FOR THE INVOLVEMENT OF PERSONAL OR NON BUSINESS EXPENSES. IN IGNORING THE JUDGMENTS OF THE HIGHER AUTHORITIES WHEREIN IT IS HELD T HAT THE COMPANY BEING A FICTITIOUS PERSON CANNOT HAVE ANY PERSONAL EXPENSES AND THAT DISALLOWANCE IS NOT WARRANTED UNLESS THE AO HAS CONCRETE EVIDENCE WHICH MAY CATEGORICALLY PROVE THAT THE APPELLANT HAS WRONGFULLY CLAIMED ANY PERSONAL EXPENSES IN THE GUI SE OF BUSINESS EXPENSES . RELIEF CLAIMED THE AO BE DIRECTED TO TREAT THE AMOUNT OF RS . 305,833/ - INCURRED FOR THE PURPOSE OF BUSINESS AND PROFESSION AS ADMISSIBLE REVENUE EXPENDITURE AND ALLOW IT AS SUCH. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE BENCH OF THE INCOME - TAX APPELLATE TRIBUNAL TO DECID E THIS APPEAL ACCORDING TO LAW. 2. THE ISSUE RELATES TO THE DISALLO WANCE OF 1/5 OF CERTAIN EXPENSES AGGREGATING TO ` 3,05,833. 3. THE ASSESSEE IS IN THE BUSINESS OF EARNING INTERNAL WEB SITE (BUSINESS PORTAL) AND PROVIDING WEB SOLUTION DURING THE ASSESSMENT YEAR. THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE UNDER THE FOLLO WING HEADS: THE INFORMATION COMPANY PVT. LTD. 3 BUSINESS PROMOTION EXPENSES ` 42,352 TELEPHONE CHARGES ` 2,38,860 CAR HIRE CHARGES & EXPENSES ` 2,18,240 OFFICE EXPENSES ` 1,30,341 CONVEYANCE EXPENSES ` 5,50,928 TRAVELLING EXPENSES ` 3,48,445 TOTAL ` 15,29,166 4. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE EVIDENCE AND DETAILS REGARDING THE EXPENDITURE INCURRED IN CASH . AS PER THE ASSESSING OFFICER, ASSESSEE COULD NOT PRODUCE PROPER VOUCHERS AND NOT BEING SATISFIED WITH THE EVIDENCES PRODUCED, DISALLOWED 1/5 OF THE TOTAL EXPENDITURE OF ` 15,29,167, AND HENCE, THE DISALLOWANCE AGGREGATED TO ` 3,05,833, CONSIDERING THAT INCURRENCE OF PERSONAL AND NON BUSINESS EXPENSES CANNOT BE RULED OUT. 5. AGGRIEVED BY THE DECISION OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A). THE ASSESSEE WAS ONCE AGAIN ASKED TO PRODUCE THE PROPER DOCUMENTARY EVIDENCE AND DETAILS BY THE LEARNED CIT(A). HOWEVER, THE ASSESSEE AGAIN FAILED TO PRODUCE PROPER DOCUMENTARY EVIDENCE AND DETAILS RATHER THE ASSESSEE TRIED TO JUSTIFY T HAT IN THE CASE OF COMPANY, THERE IS NO POSSIBILITY OF PERSONAL USAGE FOR THE EXPENSES INCURRED AND RELIED UPON THE FOLLOWING CASE LAWS. 1. AGARWAL TRADING CO. VS. ITO [111 TTJ 589J DELHI BENCH OF ITAT 2. D CIT VS. GYMKHANA CLUB [2010) (006 I TR (TRIB) 80 8 ITAT (DEL). THE INFORMATION COMPANY PVT. LTD. 4 3. DCIT V. SOPHISTICATED MARBLES AND GRANITE IND . 3 I TR (TRIB) 220 (DEL). 4. DINESH MILLS LTD. V. C IT [2004) (268 ITR 502) (GUJ) 5. INTERSIL LNDIA LTD. VS ACIT [103 TTJ 345 ) 6. CIT VS. S. S. P . ( P ) LTD [202 TAXMAN 386] 6. THE FIRST APPELLAT E AUTHORITY HELD THAT THE ASSESSEE HAS NOT MADE ANY EFFORT TO FURNISH THE EVIDENCE TO PROVE THAT THE CASH EXPENDITURE INCURRED UNDER VARIOUS HEADS WAS GENUINE . T HE FIRST APPELLATE AUTHORITY HELD THAT POSSIBILITY OF CERTAIN NON BUSINESS EXPENDITURE BEING DE BITED AS BUSINESS EXPENDITURE CANNOT BE RULED OUT AND, HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER WAS SUSTAINED. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL AND REITERATED THE SUBMISSIONS MADE BEFORE T HE AUTHORITIES BELOW. THE ASSESSEE ONCE AGAIN SUBMITTED THAT THERE IS NO POSSIBILITY OF INCURRING OF PERSONAL EXPENSES BY THE COMPANY. THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS: 1. SAYAJI IRON & ENGINEERING CO. V/S CIT, [2002] 253 ITR 749 (GUJ.) 2. DINESH MILLS LTD. V/S CIT, [2004] 268 ITR 502 (GUJ.) 3. INTERSIL INDIA LTD. V/S CIT, 103 TTJ 345 4. CIT V/S SSP PVT. LTD., 202 TAXMAN 386 5. AGARWAL TRADING CO. V/S ITO, 111 TTJ 589 (DEL.) 6. DCIT V/S GYMKHANA CLUB, [2010] 6 ITR 808 (TRIB.) (DEL.) 7. DC IT V. SOPHISTICATED MARBLES AND GRANITE IND . 3 I TR (TRIB) 220 (DEL). 8. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE ALSO SUBMITTED THAT THERE WAS A FIRE IN THE OFFICE PREMISES OF THE ASSESSEE ON 19 TH AUGUST THE INFORMATION COMPANY PVT. LTD. 5 2013 , WHICH DESTROYED ASSESSEES COMPLETE OFFICE AL ONG WITH PAPERS AND DOCUMENTS INCLUDING THE ACCOUNTING PAPERS , DETAILS AND THE DOCUMENTS FOR THE RELEVANT ASSESSMENT YEAR. COPY OF FIR FILED WITH THE POLICE PA NCHANAMA AND NEWSPAPER EXTRACT CONTAINING NEWS OF FIRE HAS ALSO BEEN SUBMITTED. 9. LEARNED DEPARTME NTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE AND DETAILS EITHER BEFORE THE LEARNED CIT(A) OR BEFORE THE ASSESSING OFFICER. RATHER THE ASSESSEE IS TRYING TO JUSTIFY THAT NO DISALLOWANCE CAN BE MADE IN CASE OF COMPANY FOR PERSON USAGE BY THE DIRECTOR OR EMPLOYEE. 10. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW REVEALS THAT THE SOLE REASON F OR THE DISALLOWANCE IS NON FURNISHING OF THE REQUIRED DETAILS BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. 11. BEFORE THE CIT(A), ASSESSEE CONTENDED THAT ONLY SAMPLE PAYMENT VOUCHERS, BILLS, ETC., WERE FURNISHED TO THE ASSESSING OFFICER, AS THE MATERIAL WAS VOLUMINOUS. SO, HOWEVER, AS PER THE ASSESSEE, THE ASSESSING OFFICER DID NOT CALL FOR ANY FURTHER DETAILS. THE INFORMATION COMPANY PVT. LTD. 6 12. A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW REVEALS THAT THE DISALLOWANCE HAS BEEN MADE IN A ROUTINE MANNER WITHOUT PIN POINTING ANY PARTICULAR INFIRMITY IN THE DETAILS FURNISHED BY THE ASSESSEE. I HAVE PERUSED THE PAPER BOOK FILED BY THE APPELLANT, WHEREIN THE SUBMISSIONS MADE TO THE ASSESSING OFFICER AND CIT(A) HAS BEEN PLACED. IN MY CONSIDERED OPINION, THERE WAS NO JUSTIFICATION FOR MAKING AN AD HOC DISALLOWANCE @ 1/5 OF THE EXPENSES, WHICH IS ENTIRELY BASED ON MERE SURMISES AND CONJECTURE. ACCORDINGLY, I SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 3,05,833. 13. IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED AS ABOVE . ORDER PRONOUNCED IN THE OPEN COURT O N 31.07.2015 SD/ - G.S. PANNU ACCOUNTANT MEMBER MUMBAI, DATED : 31.07.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MU MBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI