M/s. Swelore Engineering Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(2), Ahmedabad

ITA 4166/AHD/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7796 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 31-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI R.V. EASWAR, VICE PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 23.07.09 DRAFTED ON: 23.07 .09 ITA NO.4166/AHD/2008 ASSESSMENT YEAR : 2005-06 M/S.SELORE ENGINEERING PVT.LTD. PLOT NO.2109 PHASE-III,GIDC, VATVA AHMEDABAD VS. THE ITO WARD-8(2) AHMEDABAD PAN/GIR NO. : AADCS 8224 N (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N.DIVATIA, ADV. RESPONDENT BY: SHRI GOVIND SINGHAL, SR.DR O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-XIV, AHMEDABAD DATED 28/11/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT T HE LD. CIT(APPEALS) ERRED IN LAW AND IN FACTS IN RESTRICTI NG THE DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVELLING EXPEN SES TO ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 2 - 25% OF THE CLAIM OF RS.1,68,184/- AND DOMESTIC TRAV ELLING EXPENSES TO 20% OF THE TOTAL CLAIM OF RS.9,89,549/- IN PLACE OF RS.1,68,184/- AND RS.4,94,775/- MADE BY THE ASSESSI NG OFFICER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E ENGAGED IN THE BUSINESS OF MANUFACTURING OF PUMPS, DOSING PACKAGE UNITS, AND SPARE PARTS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE COPY OF ACCOUNTS AND TO SPECIFY NA TURE OF EXPENSES AND LINK UP THE SAME WITH THE BUSINESS PUR POSE IN RESPECT OF CLAIM OF FOREIGN TRAVELLING EXPENSES. I N RESPONSE THERETO, THE ASSESSEE SUBMITTED ONLY COPIES OF ACC OUNTS AND ON FURTHER QUERY, IT WAS EXPLAINED THAT SHRI ROHIT GAJJAR, MD AND SMT. GAJJAR VISITED SINGAPORE FOR ATTENDING AN EXHIBITION AND THE BUSINESS PURPOSE HAS TO BE DECIDED BY THE P ERSON WHO HAS INCURRED THE EXPENSES. ON VERIFICATION OF THE EXPLANATION, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE COULD NOT LINK UP THE EXPENDITURE WITH THE BUSINESS PURPOSES, ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 3 - AS THE ASSESSEE FAILED TO PROVIDE THE DETAILS, SUCH AS THE PLACES VISITED, PROOF OF BUSINESS WORK DONE AT FORE IGN COUNTRY, ETC. AND REGARDING THE SINGAPORE VISIT OF M.D., THE ASSESSEE COULD NOT PROVIDE ANY SUPPORTING EVIDENCE. THE AS SESSING OFFICER FURTHER OBSERVED THAT EVEN THOUGH THE COMME RCIAL EXPEDIENCY HAD TO BE DECIDED BY THE BUSINESSMAN, TH E GENUINENESS OF THE CLAIM WAS TO BE PROVED BY IT AND IT HAD FAILED TO PROVE THE SAME. THEREFORE, THE CLAIM OF RS.1,68,184/- WAS DISALLOWED BY THE ASSESSING OFFICER. AS REGAR DS THE DOMESTIC TRAVELLING EXPENSES, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS FAILED TO JUSTIFY BUSINESS PU RPOSE BY FILING ANY COGENT EVIDENCE, SO HE DISALLOWED 50% OF DOMEST IC TRAVELLING EXPENSES, I.E. RS.4,94,775/-. THE EXPEN SES HAVE BEEN INCURRED IN RESPECT OF TRAVEL UNDERTAKEN BY TO P MANAGEMENT AND DIRECTOR TO VARIOUS PLACES LIKE UDAI PUR, BOMBAY, DELHI, ETC. THE ASSESSING OFFICER ON FURT HER VERIFICATION OF BILLS, NOTICED THAT THE EXPENSES IN CURRED WERE ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 4 - MAINLY PERSONAL IN NATURE LIKE PURCHASE OF CLOTHES, VISIT TO A HOLIDAY RESORT AND OTHERS. 4. IN APPEAL BEFORE THE LD. CIT(APPEALS), THE LD. A UTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED COPIES OF PASSPORT, BILLS FOR PURCHASE OF FOREIGN EXCHANGE AND LEDGER A CCOUNT AND VOUCHERS FOR EXPENSES AND CONTENDED THAT THERE WAS NO JUSTIFICATION FOR ANY DISALLOWANCE IN THIS CONNECTI ON. REGARDING THE DOMESTIC TRAVEL EXPENSES TO THE TUNE OF RS.9,89,549/-, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THE LEDGER ACCOUNT OF TRAVELLING EXPENSES GIVING FULL NARRATION OF EACH ENTRY AND VOUCHERS, C OPIES OF HOTEL BILLS, ETC. AND ARGUED THAT IN VIEW OF THE NA TURE AND MAGNITUDE OF THE BUSINESS, MEETING WITH VVIP CUSTOM ERS AND FOREIGN PARTIES, THE DIRECTORS AND OTHER STAFF MEMB ERS HAD TO TAKE THEM TO SUCH SEVEN STAR HOTELS OR STAY THERE. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALSO FURN ISHED A CHART SHOWING THE PURPOSE OF VISIT IN RESPECT OF EA CH TRAVEL ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 5 - AND SUBMITTED THAT THE EXPENSES HAVE BEEN INCURRED FOR BUSINESS PURPOSE AND SHOULD BE ALLOWED. 5. THE LD. CIT(APPEALS), AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAS NOT BE EN ABLE TO PROVE THAT THE EXPENSES ON FOREIGN TRAVEL AS WEL L AS DOMESTIC TRAVEL EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE MAN AGING DIRECTOR MAY HAVE ATTENDED TRADE EXHIBITION AT SING APORE, BUT THE NECESSARY EVIDENCE REGARDING PARTICIPATION IN THE EXHIBITION HAS NOT BEEN SUBMITTED. SIMILARLY, DO MESTIC TRAVEL EXPENSES INCLUDE HOTEL EXPENSES AT FIVE-STAR HOTELS , THOUGH SOME OF THE EXPENSES HAD TO BE INCURRED FOR GETTING BUSINESS FROM THE CLIENTS, THE EXPENSES ARE HUGE AND JUSTIFI CATION FOR INCURRING THE SAID EXPENSES WHOLLY FOR THE PURPOSE OF BUSINESS IS NOT ESTABLISHED. THE LD. CIT(APPEALS), THERE FORE, CONFIRMED THE DISALLOWANCE OF FOREIGN TRAVELLING EX PENSES AT ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 6 - 25% OF CLAIM OF RS.1,68,184/- AND DOMESTIC TRAVELLI NG EXPENSES AT 20% OF CLAIM OF RS.9,89,549/-. 6. BEING AGGRIEVED BY THE SAID ORDER OF THE LD.CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE ONLY SUBMISSION MADE BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS THAT THE DISALLO WANCE OUT OF FOREIGN TRAVELLING EXPENSES AND DOMESTIC TRAVELL ING EXPENSES BY THE LD. CIT(APPEALS) WAS ON A HIGHER SI DE AND, THEREFORE, THE SAME SHOULD BE REDUCED. 8. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, VEHEMENTLY ARGUED AND SUBMITTED THAT THE LD. CIT(APPEALS) HAS GRANTED MAXIMUM RELIEF TO THE ASSE SSEE AND, THEREFORE, THE ORDER OF THE LD. CIT(APPEALS) S HOULD BE CONFIRMED. ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 7 - 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE ENGAGED I N THE BUSINESS OF MANUFACTURING OF PUMPS, DOSING PACKAGE UNITS, AND SPARE PARTS. THE ASSESSEE CLAIMED DEDUCTION OF FOREIGN TRAVELLING EXPENSES RS.1,68,184/- AND DOMESTIC TRAV ELLING EXPENSES OF RS.9,89,549/- IN THE RETURN OF INCOME F ILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FOUND THAT THE MANAGING DIRECTOR OF THE COMPANY TOG ETHER WITH HIS WIFE VISITED SINGAPORE. THE ASSESSEE EXPLA INED BEFORE THE ASSESSING OFFICER THAT THE VISIT WAS TO ATTEND TRADE EXHIBITION AT SINGAPORE BUT DID NOT FILE EVIDENCE O F PARTICIPATION IN THE TRADE EXHIBITION AND THEREFORE , THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE ON FOREIGN TRAVEL CONSIDERING IT TO BE A PERSONAL EXPENDITURE OF THE MANAGING DIRECTOR OF THE COMPANY. THE ASSESSING OFF ICER ALSO OBSERVED THAT EXPENDITURE ON DOMESTIC TRAVEL WHICH INCLUDED TRAVEL TO PLACES LIKE UDAIPUR, BOMBAY, DELHI, ETC. THE ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 8 - ASSESSING OFFICER ALSO FOUND THAT THE EXPENDITURE A LSO INCLUDED PURCHASE OF CLOTHES, VISIT TO HOLIDAY RESO RT. THE ASSESSEE EXPLAINED THAT THE EXPENDITURE WAS NECESSA RY FOR MEETING WITH CUSTOMERS AND FOREIGN PARTIES, THE DIR ECTORS AND OTHER STAFF MEMBERS HAD TO TAKE THEM TO SUCH SEVEN STAR HOTELS OR STAY THERE. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE FAILED TO JUSTIFY THAT THE EXPENDITURE WAS INCURRED FOR THE BUSINESS OF THE ASSESSEE. HE THEREFORE DISALLOW ED 50% OF THE EXPENDITURE AND MADE ADDITION OF RS.4,94,775/- TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(APPEA LS) ESTIMATED THE EXPENDITURE INCURRED ON FOREIGN AND D OMESTIC TRAVEL FOR NON-BUSINESS PURPOSE AT 25% OF THE FOREI GN TRAVELLING EXPENSES AND AT 20% OF THE DOMESTIC TRAVELLING EXPE NSES AND RESTRICTED THE DISALLOWANCE TO THAT EXTENT. THE REV ENUE HAS ACCEPTED THE ABOVE ESTIMATE BY THE LD. CIT(APPEALS) AND HAS NOT FILED ANY APPEAL THERE AGAINST. THE ONLY SU BMISSION MADE BY THE LD. AUTHORISED REPRESENTATIVE OF THE AS SESSEE WAS THAT THE DISALLOWANCE OF THE TRAVELLING EXPENSE S ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 9 - SUSTAINED BY THE LD. CIT(APPEALS) WAS EXCESSIVE AND HENCE THE SAME SHOULD BE REDUCED. WE FIND THAT THE LD. AU THORISED REPRESENTATIVE OF THE ASSESSEE COULD NOT PRODUCE AN Y MATERIAL BEFORE US TO SHOW THAT ENTIRE FOREIGN TRAV ELLING EXPENDITURE AND/OR DOMESTIC TRAVELLING EXPENSES WE RE INCURRED ONLY FOR BUSINESS PURPOSES. NO MATERIAL WA S FILED BEFORE US TO SHOW THAT THE ESTIMATE MADE BY THE LD. CIT(APPEALS) FOR NON-BUSINESS EXPENDITURE WAS EXCES SIVE. HENCE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) WHICH IS CONFIRMED AN D THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 31/07/2009. SD/- SD/- ( R.V. EASWAR ) ( N.S. SAINI ) VICE PRESIDENT ACCO UNTANT MEMBER AHMEDABAD; DATED 31/07/2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA NO . 4166/AHD/2008 M/S.SWELORE ENGINEERING PVT.LTD. VS. ITO ASST.YEAR 2005-06 - 10 - 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE G UARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD