M/S. SUNITI PRINTS, MUMBAI V. ITO WARD, 18(3)(4), MUMBAI

ITA 5847/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2317 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 19-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Assessee Lawyers: AJAY R SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E: MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SHRI R.S. PADVEKAR (JM ) ITA NO. 5847/MUM/2008 (ASSTT. YEAR : 2005-06) M/S. SUNITI PRINTS APPELLANT MEHRA COMPOUND 402, PITAMBER LANE, MAHIM (W) MUMBAI 400 016 PAN : AAAFS4593G V/S. ITO, WARD 18(3)(4), MUMBAI RESPONDENT PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 013 APPELLANT BY :MR. AJAY R. SINGH RESPONDENT BY :MR. C.P. PATHAK : O R D E R : PER R.S. PADVEKAR, J.M IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IM PUGNED ORDER OF THE LD CIT(A)- XXIII, MUMBAI DATED 6.6.2008 FOR THE A .Y. 2005-06. 2. THE ONLY ISSUE IN THIS APPEAL IS THE DISALLOWANC E MADE BY THE A.O. OF RS. 5,89,314/- ON AD HOC BASIS OUT OF THE TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE. 3. THE FACTS PERTAINING TO THE CONTROVERSY ARE IN NARROW COMPASS. THE ASSESSEE FIRM IS IN THE BUSINESS OF PROCESSING AND IMPOSING OF CLOTHES. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE A SSESSMENT WAS COMPLETED U/S. 143(3). DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE A.O SOUGHT THE EXPLANATION IN RESPECT OF THE TRAVELLING EXPENS ES OF RS. 11,78,627/- DEBITED BY THE ASSESSEE. THE ASSESSEE CONTENDED T HAT THE MAJOR PORTION OF ITA NO.5847/MUM/2008 2 TRAVELLING EXPENSES IS ON THE FOREIGN TRAVEL. THE ASSESSEE HAS TO ATTEND VARIOUS TRADE FARES ABROAD TO KEEP HIMSELF WITH THE LATEST TREND OF BUSINESS. IT WAS CONTENDED THAT ALL THE PERSONAL TRAVELED ARE DI RECTLY RELATED TO THE ASSESSEES BUSINESS AND THOUGH THE ASSESSEE IS A FI RM, IN FACT, HIS BUSINESS IS RUN BY THE ENTIRE FAMILY. IT WAS FURTHER CONTENDED THAT EVEN IF THE PERSON WHO IS TRAVELED ABROAD IS NOT A PARTNER OR EMPLOYE E, THE SAID PERSON TRAVELED MAINLY TO HONG KONG AND FRANKFURT FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THE A.O WAS NOT SATISFIED WITH THE EXPLA NATION OF THE ASSESSEE. THE A.O HAS GIVEN THE DETAILS IN RESPECT OF THE NAM E OF THE PERSONS WHO UNDERTOOK THE FOREIGN TRAVELS ON PAGE NO.3 OF THE A SSESSMENT ORDER. THE A.O HAS ALSO NOTED THAT THERE WERE PERSONS WHO WERE NOT PARTNERS LIKE SHRI VIVEK MEHRA AND MRS. SUNITI MEHRA, WHO HAVE TRAVELED ABRO AD AND THEY ARE NOT PARTNERS OF THE ASSESSEE NOR THE EMPLOYEES. THE A. O MADE THE AD HOC 50% DISALLOWANCE OUT OF THE TOTAL EXPENDITURE OF RS. 11 ,78,627/- AND MADE THE ADDITION OF RS. 5,89,314/-. THE ASSESSEE CHALLENGE D THE SAID ADDITION BEFORE THE LD CIT(A) AND DID HIS BEST TO JUSTIFY THE CLAIM OF FOREIGN TRAVEL EXPENSES CLAIMED, BUT DID NOT FIND THE FAVOUR. NOW THE ASSE SSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES. THE A.O MADE THE DISALLOWANCE ONLY ON THE BASIS THAT SOME OF THE PER SONS, WHO TRAVELLED ABROAD WERE NOT THE PARTNERS OR THE EMPLOYEES OF THE ASSES SEE FIRM. IT IS NOT DISPUTED IN THIS CASE THAT THOUGH THE ASSESSEE IS A FIRM, BUT THIS BUSINESS IS RUN BY THE FAMILY MEMBERS. THE ARGUMENT OF THE LD COUNSEL CANNOT BE ACCEPTED IN FULL THAT ALL THE FOREIGN TRAVELLING W ERE UNDERTAKEN FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE FIRM. AT THE SAME TIME, IT IS SEEN THAT THE A.O IS ALSO HESITANT TO MAKE THE SPECIFIC DISALLOWANCE IN RESPECT OF THE PERSONS WHO ARE OTHERWISE NOT THE PERSONS OR EMPLOYEES OF T HE ASSESSEE FIRM, BUT PREFERRED TO MAKE THE AD HOC DISALLOWANCE OF 50%. IT MEANS THAT THE A.O ADMITS THAT THE PERSONS ON WHOM THE TRAVELLING EXPE NSES ARE INCURRED, EVEN THOUGH THEY ARE NOT PARTNERS OR EMPLOYEES OF THE AS SESSEE, SOME OF THE TOURS WERE RELATING TO THE BUSINESS OF THE ASSESSEE FIRM. THE ARGUMENT OF THE LD COUNSEL CANNOT BE ACCEPTED THAT ALL THE FOREIGN TRA VELLING WERE FOR THE PURPOSE OF THE BUSINESS UNDERTAKEN BY THOSE PERSONS WHO ARE OTHERWISE NOT HAVING ANY RELATION WITH THE ASSESSEE FIRM. AFTER GIVING CONSIDERATION TO THE ITA NO.5847/MUM/2008 3 TOTALITY OF THE FACTS, AND TO CLOSE THIS ISSUE AT O UR LEVEL, IN OUR OPINION, IF THE DISALLOWANCE IS SUSTAINED AT 25% OF THE TOTAL TRAVE LLING EXPENDITURE, THAT WILL BE SUFFICIENT TO MEET THE ENDS OF JUSTICE. WE, THE REFORE, DIRECT THE A.O TO SUSTAIN THE DISALLOWANCE AT 25% OF RS. 11,78,627/- AND ACCORDINGLY, SET ASIDE THE ORDER OF THE LD CIT(A) ON THIS ISSUE. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED PRO TANTO. ORDER PRONOUNCED IN ON 13TH DAY OF APRIL, 2010. SD/- SD/- (P.M. JAGTAP) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, ON THIS 13TH DAY OF APRIL, 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- XXVIII, MUMBAI 4.THE CIT - 18, MUMBAI 5.THE DR, E BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. ITA NO.5847/MUM/2008 4 US DATE INITIALS 1. DRAFT DICTATED ON 7/4/10 --------------- SR.P.S. 2. DRAFT PLACED BEFORE AUTHORITY 8/4/10 --------- ----- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----