Ashit Sud, New Delhi V. DCIT, New Delhi

ITA 5111/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81872 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Business expenditure; Residential status; Principle of natural justice
• Section: 143(3); 5(2); 68

Judgement Text

ITA NO. 5111/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER I.T.A. NO. 5 111 /DEL/ 12 A.Y. : 2008 - 09 AS HIT SUD, 2-A, SHANKARACHARYA MARG, CIVIL LINES, NEW DELHI110 057 (PAN AOGPS 7315Q) VS. DCIT, CIRCLE - 6 (1) C.R. BUILDING, NEW DELHI- 110 002. (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. V.K. BINDAL, CA , SHRI SANJEEV BINDAL, CA DEPARTMENT BY : Y. KAKKAR, DR O R D E R PER GEORGE GEORGE K, JM 1. THIS APPEAL, AT THE INSTANCE OF TH E ASSESSEE, IS DIRECTED AGAINST THE ORDER OF THE CIT (A)-IX, NEW DELHI, DATED 26.06.2012. TH E RELEVANT ASSESSMENT YEAR IS 2008-09 . 2. THE ASSESSEE HAS, IN HIS GROUNDS OF APPEAL, RAISED THREE ISSUES WHICH ARE AS FOLLOWS: (1) THAT THE CIT (A) WAS ERRED IN SUSTAINING THE AD DITION OF RS.11,48,640/- FOR THE EXPENSES INCURRED BY THE ASSESSEE THROUGH HIS C REDIT CARD ON BEHALF OF MAYAR INDIA LIMITED; (2) THAT THE CIT (A) WAS NOT JUSTIFIED IN SUSTAININ G THE ADDITION OF RS.13,18,000/- FOR THE EXPENSES INCURRED OUTSIDE IN DIA BY THE ASSESSEE THROUGH HIS CREDIT CARD ON BEHALF OF MAYAR (HK) LI MITED, HONG KONG; & (3) THAT THE CIT (A) WAS ALSO NOT JUSTIFIED IN CONF IRMING THE ADDITION OF RS.8,16,221/- MADE BY THE AO U/S 68 OF THE ACT. 2.1. HOWEVER, DURING THE COURSE OF HEARING BEFORE U S, THE LEARNED AR SUBMITTED THAT THE THIRD GROUND[GROUND NO.5]RAISED IN THE GRO UNDS OF APPEAL IS NOT PRESSED FOR ADJUDICATION. ACCORDINGLY, GROUND NO.3 IS DISMISSED AS NOT PRESSED. ITA NO. 5111/DEL/2012 2 3. BRIEFLY STATED, THE FACTS OF THE IS SUES ARE AS FOLLOWS: THE ASSESSEE, AN INDIVIDUAL, FURN ISHED HIS RETURN OF INCOME FOR THE AY UNDER DISPUTE, ADMITTING A TOTAL INCOME OF RS.12,75 ,590/- WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT AND, SUBSEQUENTLY, TOOK UP FOR SCRUTINY. AFTER SCRUTINISING THE DETAILS OF CREDIT CARD PAYMENTS FU RNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED T HAT EVEN THOUGH MAYAR INDIA LTD AND MAYAR (HK) LTD, HONG KONG HAVE MADE PAYMENT S OF RS.11,48,640/- AND RS.13,18,000/-RESPECTIVELY FOR THE EXPENSES INCURRE D BY THE ASSESEE THROUGH HIS CREDIT CARD OF CITY BANK BEING THEIR BUSINESS PROMO TION EXPENSES AS RECORDED IN THEIR BOOKS OF ACCOUNTS, IN FACT, THE EXPENSES INCU RRED BY THE ASSESSEE WAS HIS PERSONAL EXPENSES. ACCORDINGLY THE AO CONCLUDED TH E ASSESSMENT U/S 143(3) OF THE ACT BY DETERMINING THE TOTAL INCOME AT RS.69,62,58 0/-, BY ADDING, AMONG OTHER ADDITION, THE CREDIT CARD EXPENSES OF RS.24,66,640/ - [ RS.11,48,640 + 13,18,000]. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ABOVE ISSUES, AMONG OTHERS, BEFORE THE CIT (A). AFTER DUE CONSIDERATION OF THE CONTENTIONS PUT-FORTH BY THE ASSESSEE AS RECORDED IN HIS IMPUGNED ORDER AS WELL AS THE REMAND REPORT OF THE AO AND THE REJOINDER OF THE ASSESSEE, THE CIT (A) HAD CONFIRMED BOTH THE ADDITIONS FOR THE FOLLOWING REASONS, NAMELY: (A) ADDITION OF RS.11,48,640/- : 5.9. (ON PAGE 13)..AS PER THE ASSESSMENT ORDER, THE LD. AO HAS RECORDED A FINDING THAT THE APPELLANT ALONG WITH HIS FATHER, N AMELY, SRI AJIT SUD AND BROTHER SRI ABHIT SUD IS CONTROLLING MAYAR GROUP OF COMPANIES A S THE PROMOTER/DIRECTORS. ADMITTEDLY, THE APPELLANT INCURRED EXPENSES, AMOUNT ING TO RS.11,48,640/- AND THAT OF RS.13,18,000/- THROUGH HIS CREDIT CARD, THE PAYMENT S OF WHICH WERE MADE BY THE TWO GROUP COMPANIES, NAMELY, M/S. MAYAR INDIA LTD AND M /S MAYAR (HK) LTD. HONG KONG. THE LEARNED AO HAS ALSO RECORDED A FINDING A S PER THE ASSESSMENT ORDER THAT THE EXPENSES INCURRED THROUGH CREDIT CARE ARE OF TH E NATURE OF PERSONAL EXPENSES OF THE APPELLANT. THOUGH, AS PER THE NARRATION OF SUC H EXPENSES, THE TWO COMPANIES HAVE RECORDED THAT THE SAID EXPENSES ARE BUSINESS P ROMOTION EXPENSES, BUT, SUCH NARRATION IS HIGHLY MISLEADING AS FROM THE DETAILS, IT CAN BE SEEN THAT THE EXPENSES ARE CLEARLY PERSONAL IN NATURE AND THE TWO COMPANIE S HAVE TRIED TO GIVE THEM A COLOUR OF BUSINESS EXPENDITURE. DURING THE APPELLATE PROC EEDINGS, THE LEARNED AR REITERATED HIS CONTENTION THAT THE EXPENSES WERE INCURRED B Y THE APPELLANT ON BEHALF OF THE TWO ITA NO. 5111/DEL/2012 3 COMPANIES BEING BUSINESS PROMOTION EXPENSES AND WER E THEREFORE BORNE BY THE SAID TWO COMPANIES. HOWEVER, DURING APPELLATE PROCEEDIN GS, THE LD. AR FILED SUBMISSION DATED 2.12.2011 STATING THAT OUT OF THE PAYMENT OF RS.11,48,640/- MADE BY MAYAR INDIA LTD ON APPELLANTS BEHALF, THEY AGREE FOR ADD ITION OF RS.2,28,640/- TO HIS TOTAL INCOME WHEREAS THE BALANCE AMOUNT OF RS.9,20,004/- WHICH WAS ADDED BACK TO THE INCOME OF THE APPELLANT AND WAS ALSO SIMULTANEOUSLY DISALLOWED IN THE CASE OF THE SAID COMPANY VIZ., MAYAR INDIA LTD., WOULD NOT BE P RESSED FOR RELIEF IN THE APPEAL OF THE SAID COMPANY WHICH IS ALSO PENDING IN THIS OFFI CE. THE APPELLANT SIMULTANEOUSLY FILED A LETTER TO THIS EFFECT FOR THE RECORDS OF TH E APPEAL IN THE CASE OF MAYAR INDIA LTD. FOR THE ASSESSMENT YEAR 2007-08. IT IS, HOWEVER, S EEN THAT THERE IS NO DIFFERENCE IN THE NATURE OF EXPENDITURE TOTALLING TO RS.2,28,640/-/- AND THAT OF RS.9,20,004/-. BECAUSE OF THIS REASON, I AM OF THE CONSIDERED OPINION THAT IF THE AMOUNT OF RS.2,28,640/- IS TO BE TREATED AS THE INCOME OF THE APPELLANT, THE BALA NCE AMOUNT OF RS.9,20,004/- CANNOT BE TREATED DIFFERENTLY. THE FACT THAT THE LEARNED AR WHO IS ALSO THE AUTHORISED REPRESENTATIVE IN THE CASE OF MAYAR INDIA LTD., HAS FILED A LETTER ACCEPTING THE DISALLOWANCE OF RS.9,20,004/- IN THE HANDS OF THE S AID COMPANY, SHOWS THAT THE EXPENDITURE WAS ACTUALLY NOT BUSINESS EXPENDITURE O F THE COMPANY. THUS, THE PAYMENT OF EXPENSES BY THE COMPANY ON BEHALF OF THE APPELLANT CLEARLY ACQUIRES THE NATURE OF INCOME IN HIS HANDS AS PER THE PROVISIONS OF SECTION 17(1)(IV) READ WITH SECTION 17(2)(IV) OF THE ACT. ELABORATELY QUOTING THE PROVISIONS OF S. 17 OF THE ACT, THE CIT (A) HAD HELD THAT - 5.9.1. IN VIEW OF THE PROVISIONS OF THE LAW, I HO LD THAT NOT ONLY THE AMOUNT OF RS.2,28,640/- IS THE INCOME OF THE APPELLANT BUT AL SO THE SUM OF RS.9,20,004/- IS HIS INCOME OF THE YEAR UNDER CONSIDERATION. THE FACT THAT FBT ON THE SAID AMOUNT WAS PAID DOES NOT COME TO THE RESCUE OF THE APPELLANT A S MERE PAYMENT OF FBT CANNOT ABSOLVE THE APPELLANT FROM PROVING THE FACT THAT TH E AMOUNT PAID BY THE COMPANY WAS NOT FOR HIS INDIVIDUAL BENEFIT BUT WAS BUSINESS EXP ENDITURE OF SUCH COMPANY. THE VERY FACT THAT THE LD. AR HAS AGREED FOR ADDITION O F THE SAID AMOUNT OF RS.9,20,004/- IN THE HANDS OF THE COMPANY PROVES THAT THE SAID EX PENDITURE WAS NOT RELATED TO ITS BUSINESS. UNDER THE CIRCUMSTANCES, I UPHOLD THE AD DITION OF RS.11,48,640/- IN THE HANDS OF THE APPELLATE. (B) ADDITION OF RS.13,18,000/- : 5.10. IN ORDER TO VERIFY THE CONTENTION OF THE APP ELLANT THAT THE EXPENSES OF RS.13,18,000/- WERE INCURRED ON BEHALF OF MAYAR (HK ) LTD., HONG KONG AND WERE IN THE NATURE OF BUSINESS PROMOTION EXPENSES AND WERE THEREFORE NOT TAXABLE IN HIS HANDS, THE LD. AR VIDE ORDER SHEET NOTING DATED 9.5 .2012 WAS REQUIRED TO FURNISH THE DETAILS OF SUCH EXPENSES MENTIONING THE DATES, AMOU NTS, PURPOSE AND THE PLACE OF INCURRING THE EXPENDITURES. DESPITE REPEATED OPPOR TUNITIES, THE APPELLANT DID NOT FURNISH THE REQUIRED INFORMATION WHICH, IN MY CONSI DERED OPINION, IS CRUCIAL TO DECIDE ABOUT THE TAXABILITY OF THE AMOUNT UNDER CON SIDERATION. THE APPELLANT ONLY FILED A LETTER FROM MAYAR (HK) LTD., HONG KONG , ST ATING THAT THE EXPENDITURE WAS INCURRED THROUGH THE CREDIT CARD FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY. SINCE THE NECESSARY DETAILS OF THE EXPENSES LIKE TH E PURPOSE AND PLACE OF INCURRING ITA NO. 5111/DEL/2012 4 THE SAME WORK NOT SUBMITTED, THE APPELLANTS CONTEN TION THAT THE SAME WERE IN THE NATURE OF BUSINESS PROMOTION EXPENSES AND WERE INCU RRED ON BEHALF OF THE COMPANY REMAINED UNSUBSTANTIATED. AT THE SAME TIME, THE AP PELLANT COULD NOT SUBSTANTIATE HIS ALTERNATIVE ARGUMENT THAT SINCE HE WAS NON-RESIDENT THE AMOUNT CANNOT BE ADDED TO HIS INCOME IN VIEW OF THE PROVISIONS OF SECTION 5(2 ) OF THE ACT. IT IS IMPORTANT TO CONSIDER THE PROVISIONS OF THE SAID SECTION WHICH I S REPRODUCED HERE AS UNDER: (2) SUBJECT TO THE PROVISIONS OF THIS ACT, THE TOT AL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESIDENT INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH- (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE T O HIM IN INDIA DURING SUCH YEAR. AS PER THE PROVISIONS OF THE SECTION 5(2), THE INCO ME WHICH IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA FROM WHATEVER SOURCE DERIVED S HALL BE THE INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR. AS STATED ABOVE, THE APPELL ATE HAS FAILED TO ESTABLISH THAT THE AMOUNT UNDER CONSIDERATION WAS INCURRED OUTSIDE THE COUNTRY. APPARENTLY, SINCE THE EXPENDITURE WAS INCURRED THROUGH THE SAME CITIBANK CARD WHICH WAS USED FOR INCURRING EXPENDITURE ALLEGEDLY ON BEHALF OF MAYAR INDIA LTD., THE EXPENDITURE WAS INCURRED IN INDIA. THE APPELLANT HAS ALSO FAILED TO PROVE THE NEXUS OF THE EXPENSES INCURRED WITH THE BUSINESS OF THE COMPANY ON WHOSE BEHALF THE SAME WAS ALLEGEDLY INCURRED. THEREFORE, HIS BOTH THE CONTENTIONS THAT THE EXPENDITURE WAS IN THE NATURE OF BUSINESS PROMOTION EXPENSES OR THAT THE SAME IS NOT TAXABLE IN HIS HAND BEING NON-RESIDENT ARE LIABLE TO BE REJECTED. UNDER THE CIRCUMSTANCES, THE AMOUNT OF RS.13,18,000/- IS LIABLE TO BE TAXED AS THE APPELLA NTS INCOME AS PER THE PROVISIONS OF SECTION 5(2) READ WITH SECTION 17(1) (IV) AND 17(2) (IV) OF THE ACT. ACCORDINGLY, THE ADDITION OF RS.13,18,000/- MADE BY THE LEARNED AO I S CONFIRMED. 5. AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE US WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED AR REITER ATED MORE OR LESS WHAT HAS BEEN REPRESENTED BEFORE THE AUTHORITIES BELOW. IN FURTH ERANCE, THE SUBMISSIONS MADE BY THE LEARNED AR ARE SUMMARISED AS UNDER: > THAT THE ASSESSEE AND THE COMPANY WERE DIFFERENT ASSESSEE AND CANNOT BE REGARDED TO BE ONE AND THE SAME PERSON AND CORPORAT E VEIL CANNOT BE LIFTED WITHOUT BRINGING ANY EVIDENCE THAT THE ASSESSEE AND THE COM PANY WERE SAME PERSON; AND THAT IT WAS NOT THE CASE WHERE THE PROFIT/LOSS EARN ED/INCURRED BY THE COMPANY HAD BEEN ASSESSED IN THE HANDS OF THE ASSESSEE; >THAT THE ASSESSEE HAD VIDE LETTER DT. 7.12.2010 SU BMITTED THE DETAILS OF EXPENSES OF RS.9,20,004/- WHICH WAS INCURRED ON BEHALF OF MAYAR INDIA LTD PRIOR TO TAKING UP EMPLOYMENT BY THE ASSESSEE AT HONG KONG W.E.F. 12.8 .2007; > THAT THE EXPENSES THROUGH THE CREDIT CARD OF THE ASSESSEE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE OF MAYAR INDIA LIM ITED AND WAS DIRECTLY PAID BY IT AND CHARGED TO ITS P & L ACCOUNT AND, THUS, THOSE E XPENSES WERE NOT PERSONAL EXPENSES OF THE ASSESSEE AS ALLEGED BY THE AO; ITA NO. 5111/DEL/2012 5 > THAT THE ASSESSEE HAD ALSO INCURRED HIS PERSONAL EXPENSES OF RS.13,75,124/- THROUGH HIS CREDIT CARD WHICH WAS PAID OUT OF HIS S .B.ACCOUNT WHICH WAS SUFFICIENT FOR HIS PERSONAL PURPOSES, KEEPING IN VIEW THE SIZE OF HIS FAMILY; > THAT THE ASSESSEE LEFT INDIA ON 12.8.2007 FOR THE PURPOSE OF TAKING UP EMPLOYMENT OUTSIDE INDIA AND WAS A NON-RESIDENT W.E.F. 14.8.20 07 AS HE WAS AN EMPLOYEE OF MAYAR (HK ) LTD IN HONG KONG DURING THE AY 2008-09 AND THAT THIS FACT WAS ALSO CONFIRMED BY THE CIT (A); > THAT THE BUSINESS PROMOTION EXPENSES OF RS.13,18, 000/- WAS INCURRED BY THE ASSESSEE ON BEHALF OF MAYAR (HK ) LTD, HONG KONG AN D THE PAYMENT WAS ALSO DIRECTLY MADE BY IT FROM HONG KONG AND, THUS, IT WA S NOT TAXABLE IN INDIA IN THE HANDS OF THE ASSESSEE AS PER THE PROVISIONS OF S. 5(2) OF THE ACT; > THAT CONFIRMATION FROMMAYAR (HK ) LTD, HONG KONG DATED 19.5.12 STATING THAT THE EXPENSES OF RS.13.18 LAKHS HAVE BEEN INCURRED BY TH E ASSESSEE THOUGH HIS CREDIT CARD FOR BUSINESS PURPOSE OF MAYAR (HK ) LTD, HONG KONG AND DULY BOOKED IN THE BOOKS OF ACCOUNT OF MAYAR (HK ) LTD, HONG KONG UNDE R THE HEAD BUSINESS PROMOTION EXPENSES AND, THUS, DID NOT INVOLVE ANY P ERSONAL BENEFIT TO THE ASSESSEE; >THAT THE PAYMENT TOWARDS EXPENSES INCURRED THROUGH CREDIT CARD OF THE APPELLANT ON BEHALF OF THE COMPANY WAS NOT AN OBLIGATION AS DEFI NED U/S 17(2)(IV) OF THE ACT. THE EXPENSES WERE ACTUALLY INCURRED ON BEHALF OF MAYAR (HK ) LTD, HONG KONG AND, FURTHER, THAT THE ASSESSEE WAS A NON-RESIDENT DURIN G THE RELEVANT PERIOD. 5.1. IT WAS, THEREFORE, ARGUED THAT THE C IT (A) WAS NOT JUSTIFIED IN SUSTAINING BOTH THE ADDITIONS MADE BY THE AO. ON THE OTHER HA ND, THE LEARNED DR SUBMITTED THAT SINCE ISSUES HAVE BEEN DELIBERATED IN DETAIL DURING THE ASSESSMENT AS WELL AS IN APPELLATE PROCEEDINGS AND, ACCORDINGLY, ARRIVED AT A RIGHT CONCLUSION THAT THE EXPENSES INCURRED THROUGH THE CREDIT CARD OF THE AS SESSEE WERE IN THE NATURE OF PERSONAL AND NOT OF THE BUSINESS PROMOTION EXPENSES AS ATTRIBUTED BY THE ASSESSEE, IT WAS PLEADED THAT THE ISSUES RAISED BY THE ASSESS EE REQUIRE TO BE REJECTED. 6. WE HAVE CAREFULLY CONSIDERED THE SUBM ISSIONS OF EITHER OF THE PARTY, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO T HE EVIDENCES PRODUCED BY THE LEARNED AR DURING THE COURSE OF HEARING IN THE FORM OF A PAPER BOOK. THE ISSUES RAISED BY THE ASSESSEE ARE DEALT WITH CHRONOLOGICAL LY AS UNDER: (A) ADDITION OF RS.11,48,640/- BEING CREDIT CARD EXPENS ES IN THE CASE OF MAYAR INDIA LIMITED: 6.1. THE AO HAD RECORDED A FINDING THA T THE ASSESSEE ALONG WITH HIS FATHER AND BROTHER WERE CONTROLLING MAYAR GROUP OF COMPANI ES AS PROMOTERS / DIRECTORS. ADMITTEDLY, THE ASSESSEE HAD INCURRED EXPENSES TO T HE EXTENT OF RS.11,48,640/- THROUGH HIS CREDIT CARD, HOWEVER, THE PAYMENT OF WH ICH WAS MADE BY M/S. MAYAR ITA NO. 5111/DEL/2012 6 INDIA LIMITED. THE AO HAD, FURTHER, OBSERVED THAT THE EXPENSES INCURRED THROUGH THE CREDIT CARD WAS IN THE NATURE OF PERSONAL OF TH E ASSESSEE, THOUGH AS PER THE NARRATION OF SUCH EXPENSES, THE COMPANY HAD RECORDE D THAT THE EXPENSES WERE ITS BUSINESS PROMOTION. ACCORDING TO THE AO, SUCH NARR ATION WAS HIGHLY MISLEADING AS FROM THE DETAILS, IT COULD BE SEEN THAT THE EXPENSE S WERE PERSONAL IN NATURE AND THE COMPANY HAD TRIED TO GIVE IT A COLOUR OF BUSINESS E XPENDITURE. IT IS ALSO NOTICED FROM THE FINDING OF THE CIT (A) [REFER: PARA 5.9] THAT D URING THE APPELLATE PROCEEDINGS, THE AR SUBMITTED ON 2.12.2011 STATING THAT OUT OF THE PAYMENT OF RS.11,48,640/- MADE BY MAYAR INDIA LTD ON ASSESSEES BEHALF, THE A SSESSEE AGREED FOR ADDITION OF RS.2,28,640/- TO HIS TOTAL INCOME WHEREAS THE BALAN CE AMOUNT OF RS.9,20,004/- WHICH WAS ADDED BACK TO THE INCOME OF THE ASSESSEE AND SIMULTANEOUSLY DISALLOWED IN THE HANDS OF THE COMPANY [MAYAR INDIA LIMITED] W ILL NOT BE PRESSED FOR RELIEF IN THE COMPANYS APPEAL PENDING FOR DISPOSAL BEFORE THE CI T (A). ACCORDING TO THE CIT (A), THE ASSESSEE HAD ALSO FILED A LETTER AFFIRMING THE SAME FOR THE RECORD OF MAYAR INDIA LIMITED FOR THE AY 2007-08. TAKING THOSE FACTS INT O ACCOUNT, THE CIT (A) HAD OBSERVED THAT THERE WAS NO DIFFERENCE IN THE NATURE OF EXPENDITUR E TOTALLING TO RS.2,28,640/- AND THAT OF RS.9,20,004/- AND , ACCORDINGLY, OPINED THAT IF THE AMOUNT OF RS.2,28,.640/- WAS TO BE TREATED AS THE INCOME O F THE ASSESSEE AND THE BALANCE AMOUNT OF RS.9,20,004/- CANNOT BE TREATED DIFFERENT LY. THUS, THE CIT (A) HAD STRENGTHENED HIS OPINION BY OBSERVING THAT THE AR W HO WAS ALSO REPRESENTING M/S MAYAR INDIA LIMITED [MIL] HAD FILED A LETTER ACCEPT ING THE DISALLOWANCE OF RS.9,20,004/- IN THE HANDS OF THE COMPANY WHICH CLE ARLY AVERS THAT THE EXPENDITURE WAS NOT A BUSINESS EXPENDITURE OF THE COMPANY. THE ABOVE NARRATION CLEARLY ESTABLISHES THAT THE ENTIRE EXPENSES OF RS.11,48,64 0/- THROUGH THE CREDIT OF THE ASSESSEE WAS NOTHING BUT IN THE NATURE OF HIS PERSO NAL AND NOT THE BUSINESS PROMOTION EXPENSES OF THE COMPANY AS CANVASSED BY T HE ASSESSEE. 6.2. THE ASSESSEES ALLEGATION BEFORE U S THAT THE LETTER TO WITHDRAW THE GROUND [GROUND NO.5] IN THE CASE OF MIL FOR THE AY 2007-08 RAISED TOWARDS EXPENSES THROUGH CREDIT CARD OF THE ASSESSEE INCURR ED ON BEHALF OF MIL GIVEN UNDUE PRESSURE ETC., DOESNT CARRY ANY CONVICTION AS NO D OCUMENTARY EVIDENCE WAS FORTH- COMING TO SUBSTANTIATE SUCH A CLAIM. THE CLAIM OF THE ASSESSEE ON THIS POINT IS, THEREFORE, REJECTED. ITA NO. 5111/DEL/2012 7 6.3. TAKING INTO ACCOUNT ALL THE ABO VE FACTS AND CIRCUMSTANCES OF THE ISSUE AS ANALYSED (SUPRA) AND ALSO IN THE ABSENCE OF ANY EVIDENCE TO REBUT THE STAND OF THE CIT (A), WE ARE OF THE VIEW THAT THERE IS NO ME RIT IN THE CONTENTION OF THE ASSESSEE AND, ACCORDINGLY, THE FINDING OF THE CIT ( A) IS SUSTAINED. HENCE, THIS GROUND OF THE ASSESSEE IS DISMISSED. (B) ADDITION OF RS.13,18,000/- BEING CREDIT CARD EX PENSES IN THE CASE OF MAYAR(H K) LIMITED, HONG KONG: 7. THE AO HAD OBSERVED THAT MAYAR [H K] LIMITED, HONG KONG MADE PAYMENTS OF RS.13,80,000/- RELATING TO THE EXPENSES INCURRED BY THE ASSESSEE THROUGH HIS CREDIT CARD OF CITI BANK. THE AO HAD, FURTHER, OBSERVED THAT THE CREDIT CARD USED BY THE ASSESSEE WAS FOR HIS PERSONAL EXPE NSES WHEREAS MAYAR[HK ]LTD. RECORDED THE SAME IN ITS BOOKS OF ACCOUNT AS BUSINE SS PROMOTION EXPENSES WHICH WAS FOUND TO BE MISLEADING SINCE ALL THE EXPENSES W ERE FOUND TO BE INCURRED BY THE ASSESSEE FOR HIS PERSONAL PURPOSES AND THAT THE COM PANY HAD TRIED TO GIVE A COLOUR TO THAT TRANSACTIONS AS BUSINESS TRANSACTION. THE AO ALSO OBSERVED THAT THE ASSESSEE GOT THE PAYMENT OF RS.13,18,000/- AGAINST THE EXPENSES OF HIS CREDIT CARD FROM MAYAR [HD] LTD AND THAT THE PAYMENT RECEIVED A GAINST HIS PERSONAL EXPENSES WAS TAXABLE AS HIS INCOME SINCE HE HAD RECEIVED THE SAME FROM THE SAID COMPANY WHICH HE CONTROLLED AS DIRECTOR/SHARE HOLDER IN THE GARB OF BUSINESS PROMOTION EXPENSES WHEREAS THE EXPENSES WERE PURELY PERSONAL IN NATURE. 7.1. THE CIT (A) HAD ALSO REJECTED THE ASS ESSEES CONTENTION ON THE PREMISE THAT 5.10.. THE LD. AR VIDE ORDER SHEET NOTING DATED 9.5.2012 W AS REQUIRED TO FURNISH THE DETAILS OF SUCH EXPENSES MENTIONING THE DATES, AMOU NTS, PURPOSE AND THE PLACE OF INCURRING THE EXPENDITURES. DESPITE REPEATED OPPORTUNITIES, THE APPELLANT DID NOT FURNISH THE REQUIRED INFORMATION WHICH, IN MY CONSIDERED OPINION, IS CRU CIAL TO DECIDE ABOUT THE TAXABILITY OF THE AMOUNT UNDER CONSIDERATION. THE APPELLANT ONLY FIL ED A LETTER FROM MAYAR (HK) LTD., HONG KONG , STATING THAT THE EXPENDITURE WAS INCURR ED THROUGH THE CREDIT CARD FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY. SINCE THE NECESSARY DETAILS OF THE EXPENSES LIKE THE PURPOSE AND PLACE OF INCURRING THE SAME WORK NO T SUBMITTED, THE APPELLANTS CONTENTION THAT THE SAME WERE IN THE NATURE OF BUSINESS PROMOT ION EXPENSES AND WERE INCURRED ON BEHALF OF THE COMPANY REMAINED UNSUBSTANTIATED THE CIT (A) HAD, FURTHER, OBSERVED THAT 5.10 (AT THE COST OF REPETITION) . AS PER THE PROVISIONS OF THE SECTION 5(2), THE INCOME WHICH IS RECEIVED OR IS DEEMED TO BE RECEIVE D IN INDIA FROM WHATEVER SOURCE DERIVED ITA NO. 5111/DEL/2012 8 SHALL BE THE INCOME OF THE ASSESSEE FOR THE RELEVAN T YEAR. AS STATED ABOVE, THE APPELLATE HAS FAILED TO ESTABLISH THAT THE AMOUNT UNDER CONSIDERA TION WAS INCURRED OUTSIDE THE COUNTRY. APPARENTLY, SINCE THE EXPENDITURE WAS INCURRED THRO UGH THE SAME CITIBANK CARD WHICH WAS USED FOR INCURRING EXPENDITURE ALLEGEDLY ON BEHALF OF MAYAR INDIA LTD., THE EXPENDITURE WAS INCURRED IN INDIA. THE APPELLANT HAS ALSO FAILE D TO PROVE THE NEXUS OF THE EXPENSES INCURRED WITH THE BUSINESS OF THE COMPANY ON WHOSE BEHALF THE SAME WAS ALLEGEDLY INCURRED. THEREFORE, HIS BOTH THE CONTENTIONS THAT THE EXPENDITURE WAS IN THE NATURE OF BUSINESS PROMOTION EXPENSES OR THAT THE SAME IS NOT TAXABLE IN HIS HAND BEING NON-RESIDENT ARE LIABLE TO BE REJECTED. UNDER THE CIRCUMSTANCES , THE AMOUNT OF RS.13,18,000/- IS LIABLE TO BE TAXED AS THE APPELLANTS INCOME AS PER THE PROVI SIONS OF SECTION 5(2) READ WITH SECTION 17(1) (IV) AND 17(2)(IV) OF THE ACT . 7.2. WE HAVE DULY CONSIDERED THE ASSES SEES SUBMISSION, AVERMENT OF THE AO IN HIS REMAND REPORT DATED 20.3.2012 AND ALSO TH E FINDINGS OF THE CIT (A). AT THE OUTSET, WE WOULD LIKE TO POINT OUT THAT THE PARAMOUNT QUESTION FOR CONSIDERATION NOW IS: WHETHER THE ASSESSEE WAS LIAB LE TO BE TAXED IN INDIA WHEN, ADMITTEDLY, THE ASSESSEE WAS A NON-RESIDENT DURING THE RELEVANT PERIOD [FROM 14.8.2007 TO 31.3.2008]? ADMITTEDLY, THE AO HAD, IN HIS REMAND REPORT DATED 20.3.2012 TO THE CIT (A) CONCEDED THAT THE ASSESSEE WAS A NOT A RESIDENT, FOR THE YEAR UNDER CONSIDERATION. THE RELEVANT PORTION OF THE AOS SUBMISSION IN HIS REMAND REPORT IS REPRODUCED AS UNDER: 1. GROUND NO.1 TO 3 & 9: THESE GROUNDS ARE TAKEN AGAINST THE TREATMENT OF THE ASSESSEE AS RESIDENT IN PLACE OF NON-RESIDENT C LAIMED IN THE RETURN OF INCOME FILED. THE ASSESSING OFFICER ON THE BASIS OF THE PROVISION S OF SECTION 6(1) OF THE ACT HELD THAT SINCE THE ASSESSEE STAYED MORE THAN 60 DAYS IN INDIA DURING THE RELEVANT YEAR AND IN PRECEDING 4 YEARS HIS STAY IN INDIA EXCEEDED 365 DAYS, THEREFORE, HE IS A RESIDENT OF INDIA UNDER THE INCOME-TAX ACT. CONSEQ UENTLY, THE ASSESSING OFFICER TAXED SALARIES TO THE TUNE OF RS.24 LACS RECEIVED F ROM M/S. MAYAR (HK) LIMITED, HONG KONG. THE ASSESSEE IN ITS APPEAL HAS DRAWN AT TENTION TOWARDS EXPLANATION (A) BELOW SECTION 6(1) WHICH STATES THAT IN CASE OF AN INDIVIDUAL BEING CITIZEN OF INDIA WHO LEAVES INDIA IN ANY PREVIOUS YEAR FOR THE PURPO SE OF EMPLOYMENT OUTSIDE INDIA, THE PROVISIONS OF SUB-CLAUSE (C) OF THE WORDS SIXT Y DAYS OCCURRING THEREIN, THE WORDS, ONE HUNDRED AND EIGHTY TWO DAYS HAD BEEN SUBSTITU TED. THIS EXPLANATION DOES NOT SEEM TO HAVE BEEN CONSIDE RED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE CONDITIONS THAT THE INDI VIDUAL SHOULD BE AN INDIAN CITIZEN AND SHOULD STAY OUTSIDE INDIA FOR MORE THAN 182 DAY S FOR THE PURPOSE OF EMPLOYMENT ARE FULFILLED. THE APPOINTMENT LETTER, EMPLOYMENT VISA OF HONG KONG AND ENTRIES IN PASSPORT SUGGEST THAT HIS STAY WAS LESS THAN 182 DA YS IN INDIA AND HIS STAY OUTSIDE WAS ITA NO. 5111/DEL/2012 9 FOR THE PURPOSE OF EMPLOYMENT, THEREFORE, EXPLANATI ON TO SECTION 6(1) APPLIES IN THIS CASE AND THE ASSESSEE IS NOT A RESIDENT FOR THE YEA R UNDER CONSIDERATION. 7.2.1. MOREOVER, IT IS WORTHWHILE TO MENT ION HERE WITH REGARD TO THE TREATMENT OF THE SALARY OF RS.24 LAKHS RECEIVED FROM MAYAR [H K] LIMITED ACCRUED AND ARISEN OUTSIDE INDIA BY THE AO, THE CIT (A) HAD RECORDED H IS FINDINGS AS UNDER: 4.8. I HAVE CONSIDERED THE FINDINGS RECORDED BY TH E LD. AO AS PER THE ASSESSMENT ORDER, THE SUBMISSIONS MADE BY THE LD. AR AND THE F ACTS OF THE CASE ON RECORD. AS PER THE REMAND REPORT, THE LD. AO AFTER DUE VERIFICATIO N, HAS STATED THE STATUS OF THE APPELLANT TO BE NON-RESIDENT DURING THE YEAR UNDER CONSIDERATION IN VIEW OF THE EXPLANATION TO SECTION 6(1) OF THE ACT. THEREFORE, SINCE THE SALARY RECEIVED BY THE APPELLANT FROM MAYAR (HK) LTD., HONG KONG HAD ACCRU ED AND ARISEN IN HONG KONG AND WAS ALSO RECEIVED OUTSIDE INDIA, I AGREE WITH T HE LD. ARS THAT THE SAME WAS NOT TAXABLE IN INDIA AS THE RESIDENTIAL STATUS OF THE A PPELLANT WAS NON-RESIDENT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE PROVISI ONS OF SECTION 5(2) EXCLUDES THE SAID INCOME FROM TAXATION IN INDIA. THE AO IS, THE REFORE, DIRECTED TO DELETE THE SAME FROM THE INCOME OF THE APPELLANT. 7.2.2. SINCE IT IS CLEAR FROM THE FINDIN GS OF THE CIT (A) THAT THE RESIDENTIAL STATUS OF THE ASSESEE WAS NON-RESIDENT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW THAT DIFFERENT YA RD-STICK CANNOT BE APPLIED WITH REGARD TO THE CLAIM OF THE EXPENSES. HOWEVER, IN T HE INSTANT CASE, THE CIT (A) HAD RECORDED HIS FINDING AT PARA 5.10 AS UNDER: 5.10.THE LD. AR VIDE ORDER SHEET NOTING DATED 9.5.2012 WAS REQUIRED TO FURNISH THE DETAILS OF SUCH EXPENSES MENTIONING THE DATES, AMOUNTS, PURPOSE AND THE PLACE OF INCURRING THE EXPENDITURES. DESPITE REPEA TED OPPORTUNITIES, THE APPELLANT DID NOT FURNISH THE REQUIRED INFORMATION WHICH, IN MY C ONSIDERED OPINION, IS CRUCIAL TO DECIDE ABOUT THE TAXABILITY OF THE AMOUNT UNDER CON SIDERATION. THE APPELLANT ONLY FILED A LETTER FROM MAYAR (HK) LTD., HONG KONG , ST ATING THAT THE EXPENDITURE WAS INCURRED THROUGH THE CREDIT CARD FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY. SINCE THE NECESSARY DETAILS OF THE EXPENSES LIKE TH E PURPOSE AND PLACE OF INCURRING THE SAME WORK NOT SUBMITTED, THE APPELLANTS CONTEN TION THAT THE SAME WERE IN THE NATURE OF BUSINESS PROMOTION EXPENSES AND WERE INCU RRED ON BEHALF OF THE COMPANY REMAINED UNSUBSTANTIATED.. 7.2.3. WE HAVE ALSO DULY PERUSED THE LETT ER OF MAYAR [H K] LIMITED DATED 19.5.2012 WHEREIN IT HAS BEEN BARELY CERTIFIED THAT THIS IS TO CERTIFY THAT THE SUM OF RS.1318000/- HAS BEEN INCURRED BY MR ASHITSUD THROU GH CREDIT CARD FOR THE PURPOSE OF BUSINESS OF THE COMPANYTHESE EXPENDITURE DO ES NOT INVOLVE ANY PERSONAL BENEFIT TO MR.ASHITSUD. [SOURCE: PAGE 119 OF PB].IT IS A FACT THAT THE ASSESSEE HAS FAILED TO FURNISH EVEN AT THE TIME OF HEARING BEFORE US THE DETAILS OF ITA NO. 5111/DEL/2012 10 EXPENSES BY THE ASSESSEE THROUGH HIS CREDIT CARD B Y LISTING OUT THE DATES, AMOUNTS, PURPOSE(S) AND THE PLACE(S) OF INCURRING S UCH EXPENSES TO DETERMINE AS TO WHETHER THE EXPENSES HAVE, IN FACT, BEEN INC URRED OUTSIDE INDIA AND DURING THE PERIOD THE ASSESSEE HAD TAKEN UP EMPLOYMENT WITH MA YAR (H K) LTD. SO AS TO COME TO A DEFINITE CONCLUSION THAT THE SAME CANNOT BE TA XED IN THE HANDS OF THE ASSESSEE AS HE WAS A NON-RESIDENT AT THAT RELEVANT PERIOD ETC. KEEPING THE PRINCIPALS OF NATURAL JUSTICE IN VIEW AND ALSO TO FACILITATE THE ASSESSEE BY GIVING ONE MORE OPPORTUNITY TO FURNISH THE REQUIRED DETAILS [WHICH WERE REQUIRED TO BE FURNISHED BEFORE THE FIRST APPELLATE AUTHORITY AS PER ORDER S HEET NOTING DATED 9.5.2012(SUPRA)], THIS ISSUE IS RESTORED ON THE FILE OF AO WITH A SPE CIFIC DIRECTION TO VERIFY FROM THE DETAILS WHICH WILL BE FURNISHED BY THE ASSESSEE AS TO WHETHER THE EXPENSES WERE, IN FACT, INCURRED BY THE ASSESSEE THROUGH HIS CREDIT C ARD OUTSIDE INDIA ETC., AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISION S OF THE ACT. IN THE MEANWHILE, THE ASSESEE IS DIRECTED, THROUGH HIS LEARNED AR, TO FURNISH ALL THE RELEVANT DETAILS WHICH WILL FACILITATE THE AO TO IMPLEMENT THE DIREC TIONS OF THIS BENCH (SUPRA). IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT , THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATI STICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2014. SD/- SD/- [R. S. SYAL] [GEORGE GEORGE K] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 22 ND OCTOBER, 2014 VEENA COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES