ACIT 19(3), MUMBAI V. DEV NANIK WADHWANI, MUMBAI

ITA 5048/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9310 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 19-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-08-2012
• Court: TRIBUNAL
• Department Lawyers: LOV KUMAR
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 5048/M/2012 (AY:2008 - 2009) ACIT - 19(3), ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400 012. VS. DEV NANIK WADHWANI, FLAT NO.1B, SANJANA APTS, 66, CARTER ROAD, BANDRA (W), MUMBAI 400 050. ./ PAN : AAAIPW0562D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LOV KUMAR, DR / RESPONDENT BY : NONE / DATE OF HEARING : 19.2.2015 / DATE OF PRONOUNCEMENT : 11 .3.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 7.8.2012 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 21.5.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS. 25,90,311/ - BEING CARD PAYMENT MADE IN DEUTSCHE BANK IGNORING THAT THE ASSESSING OFFICER HAS EXHAUSTIVELY DISCUSSED THE FACTS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS NO DETAILS WERE SUBMITTED BY THE ASSESSEE TO ESTABLISH THAT M/S. QUEST NET DEPOSITED RS. 25,90,311/ - IN ASSESSEES CREDIT CARD ACCOUNT IN DEU TSCHE BANK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 10,46,911/ - ON ACCOUNT OF WITHDRAWAL MADE BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT NO EVIDENCE TO SUGGEST THAT THESE WITHDRAWALS REPRESENTS FOR LOAN REPAYMENT TO AMERICAN EXPRESS BANK AND DEUTSCHE BANK EVEN THOUGH THE ASSESSEE HAVING ACCOUNT IN THESE BANK AND THERE WAS NO NEED TO FIRST WITHDRAW CASH AND THEN AGAIN DEPOSIT IT IN THE SAME BANK FOR PAYMENT OF LOAN. 2 2. BRIEFLY STATED R ELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMMISSION AGENT IN THE SCHEME OF MULTI LEVEL MARKETING ORGANIZED BY A FIRM NAMED M/S. QUEST NET ENTERPRISES PVT LTD. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME FOR RS. 34,01,960/ - . ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 1,04,06,530/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE VARIOUS ADDITIONS WHICH INCLUDE ADDITION OF RS. 55,25,539/ - ON ACCOUNT CREDIT CARD PAYMENT S . DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT THE ASSESSEE HOLDS CREDIT CARDS ISSUED BY THE DEUTSCH BANK AND AMERICAN EXPRESS BANK LTD. USING THE SAID CREDIT CARDS, ASSESSEE INCURRED EXPENDITURE OF RS. 36,35,291/ - BY USING TH E CREDIT CARD OF DEUTSCH BANK AND RS. 49,67,248/ - INVOLVING AMERICAN EXPRESS BANK LTD. IN RESPONSE TO THE ASSESSING OFFICERS QUERY ABOUT THE USE OF THESE FUNDS FOR BUSINESS PURPOSES, ASSESSEE SUBMITTED THAT A SUM OF RS. 30,77,605/ - WAS REIMBURSED BY THE COMPANY. ASSESSING OFFICER CONSIDERED THE ABOVE REIMBURSEMENTS AND ADDED THE BALANCE OF CREDIT PAYOUT AMOUNTING TO RS. 55,25,539/ - (RS. 86,02,539 RS. 30,77,000/ - ). THE BREAKUP OF THIS AMOUNT IS AS FOLLOWS. REIMBURSEMENT FROM DEUTSCH BANK - RS. 25,90,311/ - EXPENDITURE THROUGH BANKING CHANNELS INVOLVING BOTH CREDIT CARDS - RS. 18,87,712/ - CASH WITHDRAWALS INVOLVING BOTH CREDIT CARDS - RS. 10,46,911/ - TOTAL - RS.55,25,539/ - 3. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE FILED WRITTEN SUBMISSION DATED 28.12.2010 INVOLVING THE LETTER FROM THE COMPANY I.E., M/S. QUEST NET ENTERPRISES PVT LTD. IN THE SUBMISSIONS DATED 16.11.2012, ASSESSEE MADE FURTHER SUBMISSIONS MENTIONING THE FOLLOWING PARTICULARS AND BREAKUP OF THE EXPENSES INV OLVING THE CREDIT CARD PAYMENTS. BANK TOTAL PURCHASE / REIMBURSEMENT EXPENSES THROUGH A/C WITHDRAWAL BY ASSESSEE DEUTSCHE BANK 36,35,291/ - 25,90,311/ - 2,66,846/ - 7,78,134/ - AMEX BANK 49,67,248/ - 30,77,605/ - 16,20,866/ - 2,68,777/ - 86,02,539/ - 56,67,916/ - 18,87,712/ - 10,46,911/ - FROM THE ABOVE IT IS EVIDENT THAT A SUM OF RS. 18,87,712/ - WAS SPENT BY THE ASSESSEE THROUGH BANKING CHANNELS. FURTHER, A SUM OF RS.10,46,911/ - WAS INCURRED 3 BY CASH WITHDRAWALS. THE TOTAL OF THESE AMOUNTS WORKS OUT T O RS. 29,34,623/ - . AFTER EXAMINING THE CLAIM OF THE ASSESSEE, AS SEEN FROM PARA 2.5 OF THE IMPUGNED ORDER, CIT (A) HELD THAT THE SUM OF RS. 25,90,311/ - IS ALLOWABLE AS THE SAME CONSTITUTES REIMBURSEMENT FROM THE DEUTSCH BANK. FURTHER, IN CONNECTION WIT H THE DISALLOWANCE AMOUNTING TO RS.18,87,712/ - , THE EXPENDITURE INCURRED THROUGH BANKING CHANNELS, CIT (A) HELD THAT THE SAID EXPENDITURE WAS INCURRED ON ACCOUNT OF TRAVELLING EXPENSES, BUSINESS PROMOTION EXPENSES, MOTOR CAR EXPENSES AND MISCELLANEOUS EXPE NSES. VIDE PARA 2.7 OF THE IMPUGNED ORDER, CIT (A) HELD THAT THE SAME EXPENDITURE CONSTITUTES BUSINESS EXPENDITURE THEREFORE, THE SAID EXPENSES HELD ALLOWABLE. REGARDING THE OTHER SUM OF RS. 10,46,911/ - BEING MET OUT OF THE WITHDRAWALS INVOLVING CREDIT C ARDS, THE ASSESSEE SUBMITTED THAT THE CASH WITHDRAWALS WERE NOT CLAIMED AS THE BUSINESS EXPENDITURE AS THE SAME CONSTITUTES CASH PAYMENTS MADE BY THE ASSESSEE TOWARDS REPAYMENT OF LOAN EXPENDITURE AND INTEREST TO DEUTSCH BANK AND AMERICAN EXPRESS BANK. AS PER THE DISCUSSION GIVEN IN PARA 2.11 OF THE IMPUGNED ORDER, CIT (A) DELETED THE SAME. AGGRIEVED WITH THE ABOVE RELIEF GRANTED BY THE CIT (A), REVENUE FILED THE PRESET APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. BEFORE US, NONE APPEARED TO REPRESENT THE CASE OF THE ASSESSEE. HOWEVER, CONSIDERING THE ISSUES INVOLVED AND THE SPEAKING ORDER OF THE CIT (A), WE FIND IT RELEVANT TO ADJUDICATE THIS APPEAL WITH THE HELP OF THE LD DR FOR THE REVENUE. IT IS THE SUBMISSION OF THE LD DR THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 55,25,539/ - , WHICH HAS THREE SEGMENTS NAMELY (I) SUM OF RS. 25,90,311/ - BEING REIMBURSEMENT BY THE DEUTSCH BANK; (II) RS. 10,46,911/ - BEING CASH WITHDRAWALS NOT DEBITED TO THE P&L ACCOUNT AND (I II) RS. 18,87,712/ - WHICH IS INCURRED THROUGH BANKING CHANNELS. LD DR MENTIONED THAT SO FAR AS THE SUM OF RS.18,87,712/ - IS CONCERNED, CONSIDERING THE RELIEF GRANTED BY THE CIT (A) ON EXAMINING THE BUSINESS CONNECTION OF THE EXPENSES, NO GROUND IS RAISED BY THE REVENUE ON THIS ACCOUNT. REGARDING THE RELIEF OF RS. 25,90,311/ - LD DR FAIRLY MENTIONED THAT THE CIT (A) GRANTED RELIEF IN THIS REGARD CONSIDERING THE FACT THAT THE SAME CONSTITUTES REIMBURSEMENT BY THE DEUTSCH BANK. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO PARA 2.7 OF THE IMPUGNED ORDER. WE HAVE PERUSED THE SAME AND THE FINDING OF THE CIT (A) IN THIS REGARD AND THE SAME READS AS FOLLOWS: 4 2.7.THE AMOUNT OF RS. 25,90,311/ - NEED TO BE ALLOWED ON THE SAME LINE AS THE AMOUNT OF RS. 30,77,605/ - W AS ALLOWED BY THE ASSESSING OFFICER. THEREFORE, IN MY VIEW, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE SUM OF RS. 25,90,311/ - BEING CREDIT CARD PAYMENT MADE IN DEUTSCH BANK. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITI ON OF RS. 25,90,311/ - OUT OF THE TOTAL ADDITION MADE OF RS. 55,25,539/ - . 5. ON PERUSAL OF THE ABOVE AND AFTER CONSIDERING THE FACT THAT THE DEPARTMENT HAS NOT BROUGHT ANYTHING CONTRARY TO THE ABOVE FINDING OF THE CIT (A), WE ARE OF THE OPINION THAT THE C ONCLUSION DRAWN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 6. REGARDING THE DISALLOWANCE OF RS. 10,46,911/ - , AS SEEN FROM PARA 2.11 OF THE IMPUGNED ORDER IT IS THE SUBMISSION OF THE ASSESSEE THAT THE SAID AMOUNT WAS NEVER DEBITED TO THE P&L ACCOUNT. THESE CASH WITHDRAWALS WERE ACTUALLY UTILIZED TOWARDS THE REPAYMENT OF LOAN INSTALLMENTS AND THE INTEREST CHARGED BY THE DEUTSCH BANK AND AMERICAN EXPRESS BANK. CIT (A) ACCEPTED THE SAID EXPLANATION OF THE ASSESSEE. BEFORE US, NOTING CONTRARY TO THE ABOVE FINDING OF THE CIT (A) IS BROUGHT BY THE LD DR. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE RELEVANT PARA 2.11 OF THE CIT (A)S ORDER IS EXTRACTED AS UNDE R: 2.11. AS REGARDS TO THE SUM OF RS. 10,46,911/ - ON ACCOUNT OF WITHDRAWAL MADE BY THE APPELLANT. IN THIS REGARD, IT HAS BEEN SUBMITTED BY THE LD AR OF THE APPELLANT THAT THIS SUM HAS NOT BEEN DEBITED IN THE P& L ACCOUNT AS IT IS THE WITHDRAWALS MADE BY THE APPELLANT FOR THE REPAYMENT OF LOAN INSTALLMENTS AND INTEREST TO DEUTSCHE BANK AND AMEX BANK. IN VIEW OF THIS, THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. THUS, THE TOTAL ADD ITION MADE BY THE AO OF RS. 55,25,539/ - (CORRECT FIGURE IS RS.55,24,934/ - ) IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ALLOWED. 7. FROM THE ABOVE, IT IS CLEAR THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE AFTER CONSIDERING THE SUBMISSIONS AS WELL AS THE FACTS OF THE CASE AND THE SAME CONSTITUTES A SPEAKING ORDER. CONSIDERING THE SAME, WE AGREE WITH THE SAID ORDER OF THE CIT (A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 1 T H MARCH, 2015. S D / - S D / - (D. MANMOHAN) (D. KARUNAKARA RAO) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 11/3/2015 5 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI