ACIT 6(1), MUMBAI V. BLACKSTONE ADVISORS INDIA P.LTD, MUMBAI

ITA 4196/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9101 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIVEK BATRA
• Keywords: Principle of natural justice; Additional evidence

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./I.T.A. NO.4196/MUM/2012 ( / ASSESSMENT YEAR : 2007-08) DY.COMMISSIONER OF INCOME TAX -6(1), ROOM NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S BLACKSTONE ADVISORS INDIA PVT.LIMITED 5 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI-400021 ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./PAN/GIR NO. :AACCB7376D $ /: REVENUE BY SHRI GIRISH DAVE ! % $ / ASSESSEE BY: SHRI VIVEK BATRA & ' % () / DATE OF HEARING : 8.1.2015 *+ % () /DATE OF PRONOUNCEMENT : 8.1.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER DATED 27.3.2012 PASSED BY THE LD. CIT(A)-14, MUMBAI AND I T RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.21,31,011/- MADE OUT OF TRAVELLI NG EXPENSES AND FURTHER IN PARTIALLY GRANTING RELIEF AGAINST THE DISALLOWANCE MADE OUT OF LODGING EXPENSES. 3. THE FACTS RELATES TO THE CASE ARE STATED IN BRIE F. THE ASSESSEE IS CARRYING BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES TO THE AFFILIATED ENTITIES. THE ITA NO4196/M/2012 2 AO NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.1.94 CRORES AS TRAVELLING EXPENSES. THE AO OBSERVED THAT THE ASSESSEE HAS RE CEIVED ADVISORY INCOME FROM COMPANIES LOCATED IN NEW YORK AND LONDON. HOWE VER, ON EXAMINATION OF TRAVELLING EXPENSES, IT IS REVEALED THAT THE ASSESS EE HAS INCURRED TRAVELLING EXPENSES OF RS. 21,92,950/- FOR UNDERTAKING TRAVEL TO OTHER CITIES ALSO. ACCORDINGLY, THE AO TOOK THE VIEW THEY ARE NOT RELA TED TO THE BUSINESS AND ACCORDINGLY DISALLOWED THE SAME. THE AO FURTHER NO TICED THAT THE ASSESSEE HAS INCURRED LODGING EXPENSES OF RS.51,40,870/-. SINCE THE ASSESSEE COULD NOT FURNISH THE RELEVANT DETAILS, HE DISALLOWED 25% OF THE SAME. 4. IN THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT( A), THE ASSESSEE FURNISHED THE DETAILS RELATING TO THE TRAVELLING EXPENSES THA T WAS DISALLOWED BY THE AO. HENCE THE LD. CIT(A) CALLED FOR A REMAND REPORT FRO M THE ASSESSING OFFICER. AFTER CONSIDERING THE REMAND REPORT, THE LD. CIT(A) SUSTA INED THE ADDITION TO THE EXTENT OF RS.55,939/- ONLY AND DELETED BALANCE AMOUNT OF D ISALLOWANCE MADE OUT OF TRAVELING EXPENSES. IN RESPECT OF LODGING EXPENSE S, THE LD. CIT(A) NOTICED THAT THE ASSESSEE HAS FAILED TO FURNISH NECESSARY DETAIL S. HOWEVER, HE FELT THAT THE DISALLOWANCE OF 25% MADE BY THE AO WAS ON HIGHER SIDE. ACCORDINGLY, HE SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS.5,0 0,000/- AND DELETED THE BALANCE AMOUNT OF RS.7,85,200/-. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WITH REGARD TO THE DISALLOWANCE MADE OUT OF TRAVELLING EXPENSES , WE NOTICE THAT THE ASSESSEE HAS FURNISHED DETAILS OF TRAVELLING EXPENSES SUPPO RTED BY THE NAMES OF HOTELS, PLACES VISITED, PARTICULARS AND PURPOSE OF VISITS W ITH A COPIES OF INVITATION, BUSINESS SECURED ETC. THOUGH IN THE REMAND REPORT, THE AO STOOD BY DISALLOWANCE MADE IN THE ASSESSMENT ORDER, WE NOTIC E THAT THE LD. CIT(A) HAS OBJECTIVELY EXAMINED THE MATTER AND ACCORDINGLY RE NDERED HIS DECISION. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) ON THIS ISSUE : 4.10 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF T HE APPELLANT ALONG WITH ADDITIONAL EVIDENCES FURNISHED, REMAND REPORT OF THE AO AS WELL AS THE RESPONSE OF THE APPELLANT TO THE REMAND REPORT OF THE AO. THE ITA NO4196/M/2012 3 APPELLANT VIDE ITS LETTERS DATED OCTOBER,2009, NOVE MBER 9,2009 NOVEMBER 30, 2009 HAD PROVIDED THE DETAILS OF THE T RAVELLING EXPENSES AS REQUESTED BY AO. AS DISCUSSED ABOVE, DURING THE COU RSE OF APPELLATE PROCEEDINGS, THE APPELLANT FURNISHED FURTHER EVIDEN CES IN RESPECT OF ABOVE TRAVELLING EXPENSES AND THE SAME WERE MADE AVAILABL E TO THE AO FOR SENDING OF THE REMAND REPORT. THE APPELLANT IS ENGA GED IN THE BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES AND HENCE EM PLOYEES OF THE APPELLANT COMPANY HAVE TO ATTEND VARIOUS MEETINGS W ITH INVESTORS, SHAREHOLDERS OF TARGET COMPANIES, BANKERS, LAWYERS AND CONSULTANTS ETC. THESE MEETINGS ARE HELD AT VARIOUS PLACES DEPENDING ON LOCATION OF COUNTERPARTY AND BASED ON CONVENIENCE OF ALL PARTIE S. DURING THE APPELLATE AND REMAND PROCEEDINGS, THE APPELLANT HAS EXPLAINED THE NATURE AND PURPOSE OF TRAVELLING EXPENSES IN RESPECT OF ALL TH E INVOICES EXCEPT FOR INVOICE NUMBER 11679 AT S. NO. 5 AMOUNTING TO RS. 5 5,939/- AS OUTLINED IN PARA 4.2 ABOVE. THE APPELLANT IS HOWEVER TOTALLY SI LENT ABOUT THE PLACE, PURPOSE ETC OF THE VISIT IN RESPECT OF THE SAID ITE M NO. 5 ABOVE, AND NO DETAILS OF THIS EXPENDITURE HAVE BEEN FURNISHED EVE N AT APPELLATE STAGE. WHEN DISALLOWANCE HAS BEEN MADE IN RESPECT OF CERTA IN SPECIFIC ITEMS, IT WAS THE DUTY OF THE APPELLANT TO SUBSTANTIATE WITH EVIDENCE THE GENUINENESS OF THE CLAIM OF SUCH SPECIFIC EXPENDITU RE. THEREFORE, IN MY OPINION, THE DISALLOWANCE MADE BY THE AO TO THIS EX TENT OF RS.55,939!- IS JUSTIFIED. THE BALANCE OF DISALLOWANCE, HOWEVER DES ERVES TO BE DELETED AS IN MY OPINION, THE EXPLANATION AND EVIDENCE PRODUCE D ARE SATISFACTORY, AS STATED EARLIER, THE LD.CIT(A) HAS CONSIDERED THI S ISSUE IN THE PROPER PERSPECTIVE AND ACCORDINGLY DECIDED THE SAME. FRO M THE ASSESSMENT ORDER, WE NOTICE THAT THE AO HAS DISALLOWED THE CLAIM ONLY FOR THE REASONING THAT THE ASSESSEE DID NOT GENERATE ANY INCOME FROM THE CITIE S TO WHICH TRAVELLING WAS UNDERTAKEN. HOWEVER, IN OUR VIEW, THE CORRECT TEST IS WHETHER THE SAID TRAVELLING EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINE SS OR NOT. THE LD. CIT(A) HAS NOTICED THAT THE IMPUGNED TRAVELLING WAS UNDERTAKEN FOR ATTENDING VARIOUS MEETINGS WITH INVESTORS, SHAREHOLDERS OF TARGET COM PANIES, BANKERS, LAWYERS AND CONSULTANTS ETC. HENCE, THE LD. CIT(A) HAS GIVEN FI NDING THAT THE TRAVELLING EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUS INESS. BEFORE US, THE REVENUE DID NOT FILE ANY MATERIAL TO CONTROVERT THE FINDING SO GIVEN BY THE LD. CIT(A). UNDER THESE SET OF FACTS, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE. 6. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OU T OF LODGING EXPENSES FOR WANT OF PROPER EVIDENCES. AS STATED EARLIER, THE A O DISALLOWED 25% OF THE LODGING EXPENSES CLAIMED BY THE ASSESSEE, WHEREAS T HE LD.CIT(A) HAS RESTRICTED ITA NO4196/M/2012 4 THE SAME TO THE EXTENT OF RS.5 LAKHS. FOR THE SAK E OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OPERATIVE PORTION OF THE ORDER O F LD. CIT(A): 6.5 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF TH E APPELLANT ALONG WITH ADDITIONAL EVIDENCES. I HAVE ALSO CONSIDERED T HE APPELLANTS REPLY AGAINST THE REMAND REPORT AND HAVE EXAMINED THE FAC TS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT HAS SUBMI TTED SAMPLE COPIES OF INVOICES/SUPPORTING DOCUMENTS IN CONNECTION WITH TH E LODGING EXPENSES. BUT IT IS ALSO A FACT THAT HE COMPLETE DETAILS AS R EQUIRED BY THE AO HAVE NOT BEEN FURNISHED EVEN AT THE APPELLATE STATE. HO WEVER IN MY OPINION, THE DISALLOWANCE MADE BY THE AO IS ON A HIGHER SID E. THEREFORE, LOOKING TO THE OVERALL FACTS AND CIRCUMSTANCES OF T HE CASE, AS WELL AS IN VIEW OF MY OBSERVATIONS IN RESPECT OF GROUND NO.1 A ND 2 AND IN THE INTEREST OF NATURAL JUSTICE, I CONSIDER IT APPROPRI ATE TO SUSTAIN THE DISALLOWANCE TO THE EXTENT OF RS.5,00,000/-. THE B ALANCE AMOUNT OF RS.7,85,200/- IS DELETED. WE NOTICE THAT THE AO HAS MADE AD HOC DISALLOWANCE AT THE RATE OF 25% OF THE LODGING EXPENSES WITHOUT ANY BASIS. EVEN THOUGH TH ERE IS NO BASIS FOR THE DISALLOWANCE SUSTAINED BY LD CIT(A), YET WE NOTICE THAT THE LD CIT(A) HAS EXAMINED THE SOME OF THE VOUCHERS AND ACCORDINGLY C AME TO THE CONCLUSION THAT THE DISALLOWANCE MADE BY THE AO WAS ON THE HIGHER S IDE. ACCORDINGLY, HE RESTRICTED THE DISALLOWANCE TO RS.5 LAKHS. UNDER TH ESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS TAKEN A CONSCIOUS DEC ISION BY CONSIDERING THE FACTS CONCERNING THE ISSUE. HENCE, WE UPHOLD THE ORDER O F LD. CIT(A) ON THIS ISSUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8TH JAN, 2015 . *+ & , - . 8TH JAN, 2015 + % /' 0 SD SD ( . . /I.P. BANSAL ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & ' MUMBAI: 8TH JAN,2015. . . ./ SRL , SR. PS ITA NO4196/M/2012 5 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 3( ( ) / THE CIT(A)- CONCERNED 4. & 3( / CIT CONCERNED 5. 6. 45/ (6 , ) 6 , & ' / DR, ITAT, MUMBAI CONCERNED /7 8' / GUARD FILE. 9 & / BY ORDER, TRUE COPY : ' (ASSTT. REGISTRAR) ) 6 , & ' /ITAT, MUMBAI