DEEPAK RAMKUMAR THAKURANEY, MUMBAI V. ACIT- 24 (1), MUMBAI

ITA 5457/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6137 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Business income; Business expenditure; Opportunity of being heard; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENC H MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5457/MUM/2018 ( ASSESSMENT YEAR :2013-14 ) DEEPAK RAMKUMAR THAKURANEY FLAT NO.1, DEVPRAYAG, P-1 NEERA DESAI ROAD ANDHERI(W), MUMBAI-400 058 V S. ACIT-24(1) MUMBAI PAN/GIR NO. AABPT9778M APPELLANT ) .. RESPONDENT ) REVENUE BY AKHTAR H. ANSARI ASSESSEE BY RAJENDRA KUMAR JAIN DATE OF HEARING 1 5 /10 /2019 DATE OF PRONOUNCEME NT 15 /10/2019 / O R D E R PER BENCH : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)36, MUM BAI, DATED 27/04/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2013- 14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL. THE REASON FOR DISMISSAL ARE WRONG AND CONTRARY TO THE FACTS. 2) THE LD. CIT(A) ERRED IN CONFIRMING IN LAW AND ON FACTS THE AD-HOC DISALLOWANCE OF EXPENSES. 3) THE LD.CIT(A) HAD ERRED IN LAW AND ON FACTS IN NOT GIVING AN OPPORTUNITY OF BEING HEARD AND PROVIDING EVIDENCES IN SUPPORT OF CLAIM ITA NO.5457/MUM/2018 DEEPAK RAMKUMAR THAKURANEY 2 BY THE ASSESSE. ASSESSEE PRAYS TO GIVE AN OPPORTUNI TY TO PRODUCE FORWARD HIS CONTENTIONS AND EVIDENCES. 4) ASSESSE MAY BE AFFORDED AN OPPORTUNITY TO PRODU CE THE LEGAL AND FACTUAL POSITION BEFORE CONFIRMING THE ADDITIONS. 5) THE ASSESSES CRAVES LEAVE TO ADD, AMEND ALTER A MEND OR DROP ANY OR ALL GROUNDS OF APPEAL AT THE TIME OF THE APPEAL PR OCEEDINGS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF REAL ESTATE ADVISOR, FILED ITS RET URN OF INCOME FOR AY 2013-14 ON 01/10/2013, DECLARING TOTAL INCOME OF RS . 31,84,704/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSME NT HAS BEEN COMPLETED U/S 143(3) OF THE I.T.ACT 1961 ON 14/03/2 016, DETERMINING THE TOTAL INCOME AT RS. 39,05,630/-, BY MAKING ADDI TIONS TOWARDS 20% ADHOC DISALLOWANCE OF BUSINESS PROMOTION EXPENS ES, OFFICE EXPENSES, MOBILE EXPENSES AND TRAVEL EXPENSES AMOUN TING TO RS. 7,20,925/-, ON THE GROUND THAT THE ASSESSEE HAS FAI LED TO FILE COMPLETE DETAILS OF EXPENSES AND JUSTIFY THE CLAIM AGAINST BUSINESS INCOME WITH COGENT EVIDENCE. THE ASSESSEE CARRIED T HE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVE R, NEITHER APPEARED NOR FURNISHED ANY DETAILS. THEREFORE, THE LD.CIT(A) FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORDER, D ATED 27/04/2018 CONFIRMED ADDITIONS MADE TOWARDS ADHOC DISALLOWANCE OF EXPENSES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 4. IN GROUND NO.1 & 2 THE ASSESSEE HAS CHALLENGED THE DISALLOWED OF RS. 7,20,925/- @20% OF BUSINESS EXPENSES ON AD-HOC BASIS. THE AO DURING THE ASSESSMENT PROCEEDINGS REQUESTED THE ASS ESSEE TO PRODUCE SUPPORTING VOUCHERS TO SUBSTANTIATE THE EXPENSES CL AIMED. THE AR OF THE APPELLANT ASSESSEE HAS FURNISHED THE DETAILS/VOUCHE RS PARTLY FOR VERIFICATION. HOWEVER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, MOST OF THE BILLS AND VOUCHERS FOR THE SAID EXPENSE S HAVE NOT BEEN PRODUCED BY THE ASSESSEE. THEREFORE, THE AO MADE TH E DISALLOWANCE OF RS. 7,20,925/- @ 30% OF BUSINESS EXPENSES ON AD-HOC BASIS. 4.1 AS PER THE STATEMENTS OF FACTS FILED BY THE APP ELLANT, THE APPELLANT STATED THAT DURING THE YEAR UNDER CONSIDERATION THE APPELLANT IS A REAL ITA NO.5457/MUM/2018 DEEPAK RAMKUMAR THAKURANEY 3 ESTATE CONSULTANT AND HIS CLIENT ARE FOREIGN CONSUL ATES & MULTINATIONAL COMPANIES, HIS JOB IS TO ARRANGES HOUSE/OFFICE ETC. FOR THEM ON RENTAL BASIS. FURTHER, HE STATED THAT THE CLIENT BEING HIG H PROFILE AMBASSADOR, ENVOY, GROUP HEAD ETC., ALL THE BUSINESS MEETINGS A RE INVARIABLY CARRIED OUT AT FIVE STAR HOTELS/CLUBS, SO, HE HAS TO INCUR HUGE AMOUNT AT THESE RESTAURANTS. THE APPELLANT FURTHER STATED THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS NOT APPRECIATED THESE FACTS AND COMMERCIAL EXPEDIENCY OF THE BUSINESS. HOWEVER, TO SUBSTANTIATE THE ABOVE CLAIMS THE APPELLANT DID NOT PRODUCE ANY DOCU MENTARY EVIDENCE DURING THE COURSE OF APPELLATE PROCEEDINGS. FURTHE R, NO COGENT REASONING WAS MENTIONED REGARDING THE CONTENTION OF THE AO TH AT MOST OF THE BILLS AND VOUCHERS WERE NOT PRODUCED BEFORE HIM. APPELLAN TS ARGUMENT THAT BEING A CONSULTANT HE ARRANGES HIGH PROFILE MEETING S IN 5-STAR HOTELS AND CLUBS, HAS NO HELP TO THE APPELLANT, ON THE CONTRAR Y IT BECOMES MORE SIGNIFICANT TO PRODUCE BILL AND & VOUCHER IN SUPPOR T OF THESE BUSINESS MEETINGS WHICH INCUR HUGE AMOUNT OF MONEY AS PER TH E APPELLANT. THEREFORE IN LIGHT OF THE FOREGOING ARGUMENT AND LA CK OF EVIDENCE THE DISALLOWANCE MADE BY THE A.O. IS UPHELD AND THE GRO UNDS OF APPEAL ARE DISMISSED. 4. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) HAD CONFIRMED ADDITIONS TOWARDS ADHOC DISALLOWANCE OF E XPENSES WITHOUT AFFORDING PROPER OPPORTUNITY OF HEARING TO THE ASSESEE AND ALSO, IGNORING ALL EVIDENCES FILED BY THE ASSESSEE BEFORE THE LD. AO TO JUSTIFY EXPENSES DEBITED UNDER VARIOUS HEADS OF EXPENDITURE. HE FURTHER SUBMITTED THAT THE DISALLOWANCES MADE BY TH E AO IS ON HIGHER SIDE AND THEREFORE, MAY BE SCALED DOWN TO 5% OF SAID EXPENSES. 5. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. ALTHOUGH, THE LD. AO HAD MADE ADDITIONS TOWARDS 20% ADHOC DISALLOWANCE OF EXPENSES DEBITED UNDER THE HEAD BUS INESS PROMOTION EXPENSES, OFFICE EXPENSES, MOBILE EXPENSE S AND TRAVEL ITA NO.5457/MUM/2018 DEEPAK RAMKUMAR THAKURANEY 4 EXPENSES, BUT FAILED TO GIVE ANY REASONS FOR MAKING SUCH ADHOC DISALLOWANCE. WE, FURTHER, NOTED THAT THE LD. AO HA D MADE DISALLOWANCES BY MAKING ONE LINE OBSERVATIONS THAT THE ASSESEE HAS NOT ABLE TO JUSTIFY CLAIM OF EXPENSES AGAINST BUSIN ESS INCOME WITH COGENT EVIDENCES. IT IS THE CLAIM OF THE ASSESSEE T HAT EXPENSES DEBITED UNDER VARIOUS HEADS ARE FULLY SUPPORTED BY NECESSARY EVIDENCES AND HE HAS FURNISHED COMPLETE DETAILS BEF ORE THE LD. AO. THE ASSESEE, FURTHER CLAIMED THAT NO DOUBT, CERTAIN EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS. BUT, FACT REMAINS THAT IF, WE CONSIDER NATURE OF EXPENSES, IT IS DIFFICULT TO MAI NTAIN COMPLETE DETAILS OF SUPPORTING BILLS AND VOUCHERS. HE, FURTH ER SUBMITTED THAT ADDITIONS MADE BY THE LD. AO TOWARDS 20% ADHOC DISA LLOWANCE OF EXPENSES IS ON HIGHER SIDE AND HENCE, IT MAY BE RED UCED TO 5% OF SAID EXPENSES. 7. HAVING CONSIDERED ARGUMENTS OF BOTH THE SIDES, W E FIND MERITS IN ARGUMENTS OF THE LD. AR FOR THE ASSESSEE THAT AL THOUGH, THE LD. AO HAD DISALLOWED 20% EXPENSES UNDER THOSE HEADS, B UT FAILED TO ARRIVE AT PROPER CONCLUSION, AS TO HOW AND WHY HE H AS DISALLOWED 20% EXPENSES. THEREFORE, CONSIDERING FACTS AND CIRC UMSTANCES OF THIS CASE AND ALSO, TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS AGGRED FOR 5% DISALLOWANCES OF THOSE EXPENSES, WE D EEM IT APPROPRIATE TO SCALED DOWN DISALLOWANCE OF BUSINESS PROMOTION EXPENSES AND OTHER EXPENSES TO 10% AS AGAINST 20% DISALLOWED BY THE AO. HENCE, WE DIRECT THE LD. AO TO RESTRICT DIS ALLOWANCES TO 10% OF THOSE EXPENSES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ITA NO.5457/MUM/2018 DEEPAK RAMKUMAR THAKURANEY 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 /10/ 2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15/10/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//