SMT.PRIYAMVADA H MERCHANT, MUMBAI V. INCOME TAX OFFICER 21(2)(5), MUMBAI

ITA 6028/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2186 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 22-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Keywords: Business income; Depreciation; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH MUM BAI BEFORE SHRI C.N.PRASAD, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6028/MUM/2018 ( ASSESSMENT YEAR: 2013-14 ) SMT. PRIYAMVADA H MERCHANT FLAT NO.1703 LODHA GRANDEUR BLDG SAYANI ROAD PRABHADVI MUMBAI-400 025 VS. ITO-21(2)(5) PIRAMAL CHAMBERS LALBAUG MUMBAI-400012 PAN/GIR NO. AA UPM7749N ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI. KUMAR PADMAPANI BORA, DR. ASSESSEE BY SHRI. MANDAR VAIDYA, AR DATE OF HEARING 19/11 /2019 DATE OF PRONOUNCEME NT 27 /1 1 /2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 48 , MUMBAI, DATED 30/08/2018 AND IT PERTAINS TO THE ASSESSMENT YEAR 2013-14. 2. THE ASSESEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL 1. A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED INCOME TAX OFFICER ERRED IN ADDING A SUM OF RS,5,38,947/- TO THE TOTAL INCOME OF YOUR APPELLANT ON THE GROUND TH AT SUCH EXPENSES WORE NOT WHOLLY AND EXCLUSIVELY EXPENDED FOR THE PU RPOSES OF THE EARNING THE REMUNERATION AND SHARE OF PROFIT FROM F IRM. B. THE LEARNED INCOME TAX OFFICER DISALLOWED THE TO TAL EXPENSES CLAIMED OF RS.5,38,947/- TO EARN THE REMUNERATION INCOME & SH ARE OF PROFIT FROM THE PARTNERSHIP FIRM M/S. SYSTEM REX WHERE THE APPELLAN T IS A PARTNER BY OBSERVING THAT' ALL THE EXPENSES CLAIMED BY THE ASS ESSEE ARE GENERAL IN NATURE AND NOT RELATING TO THE EXPENSES INCURRED FO R EARNING THE ITA NO.6028/MUM/2018 SMT. PRIYAMVADA H MERCHANT 2 REMUNERATION/SHARE OF PROFIT FROM THE PARTNERSHIP F IRM. THERE IS NO NEXUS BETWEEN THE INCOME EARNED AND EXPENSES INCURRED. C. THE LEARNED CIT (A)-48 OBSERVED IN HER ORDER ''T HESE GROUNDS ARE THE ONLY SUBSTANTIVE GROUNDS AND ARE INTER-RELATED AND COLLECTIVELY RELATE TO DISALLOWANCE OF RS 53S,947/. AFTER CONSIDERING THE FACTS, I FIND NO WEIGHT IN THE ARGUMENT OF THE ASSESSEE, ON FACTS AND IN JAW A ND UPHOLD THE DISALLOWANCE MADE BY AO IN THE VIEW OF THE FOLLOWIN G- EXPLANATION U/S 37(1) IS TO BE ALLOWED FOR THE EXPE NDITURE (NOT IN THE NATURE OF PERSONAL OR CAPITAL EXPENDITURE) LAID OUT OR EXP ENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND PROFESS ION, HOWEVER NEITHER BEFORE AO NOR IN APPEAL ASSESSEE HAS SUBSTANTIATED WITH PROPER EVIDENCE AS TO HOW / AND WHETHER EXPENSES CLAIMED UNDER DIFFERE NT HEADS WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS/ PROFES SIONAL INCOME. IN THIS CONTEXT, AO HAS STATED THAT ASSESSEE HAS NOT BEEN A BLE TO PROVE THE NEXUS BETWEEN INCOME AND CLAIMED EXPENSES. ASSESSEE HAS N OT BEEN ABLE TO BRING ON RECORD ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM. THE EXPENSES CANNOT BE ALLOWED SIMPLY BECAUSE NO SIMILA R EXPENSES ARE INCURRED BY FIRM'. THUS THE LEARNED CIT (A)-48 MUMB AI CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 2. THE APPELLANT SUBMIT THAT ACTION OF THE LEARNED INCOME TAX OFFICER- 21(2)(5) MUMBAI IS AGAINST THE WEIGHT OF NATURAL JU STICE AND EVIDENCE ON RECORD. 3. THE APPELLANT CRAVES HIS RIGHT TO ADD, ALTER, TO DELETE AND AMEND ANY GROUNDS OF GROUNDS OF APPEAL ON OR BEFORE THE TIMES OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS AN INDIVIDUAL, DERIVES INCOME FROM BUSINESS BEING REMU NERATION AND SHARES OF PROFIT FROM PARTNERSHIP FIRM AND INCOME F ROM OTHER SOURCES. THE ASSESEE HAS FILED HER RETURN OF INCOME FOR AY 2013-14 ON 28- 11-2013, DECLARING TOTAL INCOME OF RS. 5,33,770/-. THIS CASE HAS BEEN SELECTED FOR SCRUTINY AND DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE LD. AO NOTICED THAT THE ASSESEE HA S EARNED REMUNERATION INCOME FROM PARTNERSHIP FROM M/S. SYST EM REX OF RS. 10,39,040/- AND AS AGAINST THIS, SHE HAD CLAIMED VA RIOUS EXPENSES LIKE ACCOUNTING CHARGES, BANK CHARGES, DEPRECIATION , SALARY EXPENSES AND MOTOR EXPENSES ETC., AMOUNTING TO RS. 5,38,947/-. THEREFORE, HE CALLED UPON THE ASSESEE TO EXPLAIN, A S TO HOW THESE ITA NO.6028/MUM/2018 SMT. PRIYAMVADA H MERCHANT 3 EXPENSES ARE INCURRED IN RELATION TO EARNING OF BUS INESS INCOME. IN RESPONSE, THE ASSESEE STATED THAT SHE HAD INCURRED VARIOUS EXPENSES, IN RELATION TO BUSINESS INCOME OF REMUNER ATION FROM PARTNERSHIP FIRM, WHICH ARE IN THE NATURE OF DAY TO DAY EXPENSES AND HENCE, THE SAME NEEDS TO BE ALLOWED, AS DEDUCTION A GAINST BUSINESS INCOME. THE LD. AO AFTER CONSIDERING SUBMI SSIONS OF THE ASSESEE OBSERVED THAT THE EXPENSES CLAIMED BY THE A SSESEE ARE GENERAL IN NATURE AND DOES NOT RELATES TO EXPENSES INCURRED FOR EARNING REMUNERATION /SHARE OF PROFIT FROM PARTNERS HIP FIRM. FURTHER, THERE IS NO NEXUS BETWEEN THE INCOME EARNED AND THE EXPENSES INCURRED AND ACCORDINGLY, TOTAL EXPENSES CLAIMED AG AINST BUSINESS INCOME AMOUNTING TO RS. 5,38,947/- HAS BEEN DISALLO WED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESEE. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE, W HICH HAS BEEN REPRODUCED AT PARA 4 ON PAGE 3 TO 5 OF LD.CIT(A). T HE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESEE BEFORE THE LD .CIT(A) ARE THAT SHE HAD INCURRED VARIOUS EXPENSES AS PER THE O RAL ARRANGEMENTS BETWEEN THE ASSESEE AND THE PARTNERSHI P FIRM AND SAID EXPENDITURE HAS NOT BEEN ACCOUNTED IN FIRM BOO KS OF ACCOUNTS AND HENCE, THE DEDUCTION TOWARDS SAID EXPENDITURE N EEDS TO BE ALLOWED AGAINST REMUNERATION RECEIVED FROM PARTNERS HIP FIRM IN HER INDIVIDUAL CAPACITY. 5. THE LD.CIT(A) AFTER CONSIDERING RELEVANT SUBMISS ION OF THE ASSESEE OBSERVED THAT IN ORDER TO CLAIM, THE BENEFI T OF DEDUCTION TOWARDS EXPENDITURE U/S 37(1), THE ASSESEE NEEDS TO PROVE THAT SAID ITA NO.6028/MUM/2018 SMT. PRIYAMVADA H MERCHANT 4 EXPENDITURE WAS INCURRED OR EXPANDED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS AND PROFESSION. HOWEVER, THE AS SESEE NEITHER BEFORE THE AO, NOR IN APPEAL HAS SUBSTANTIATE WITH PROPER EVIDENCES, AS TO HOW AND WHETHER EXPENSES CLAIMED UNDER DIFFER ENT HEADS WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOS E OF BUSINESS OR PROFESSION. THEREFORE, HE OPINED THAT THERE IS NO E RROR IN THE FINDINGS RECORDED BY THE AO, WHILE DISALLOWING EXPENDITURE C LAIMED AGAINST BUSINESS INCOME AND ACCORDINGLY, CONFIRMED ADDITION S MADE BY THE AO TOWARDS DISALLOWANCES OF EXPENDITURE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESEE IS IN APPEAL BEFORE US . 6. THE LD. AR, FOR THE ASSESEE SUBMITTED THAT THE L D.CIT(A) WAS ERRED IN CONFIRMED DISALLOWANCES OF EXPENSES CLAIME D AGAINST BUSINESS INCOME BEING REMUNERATION AND SHARE OF PRO FIT FROM THE FIRM WITHOUT APPRECIATING THE FACT THAT AS PER ORAL UNDERSTANDING BETWEEN THE ASSESEE AND THE PARTNERSHIP FIRM, THE A SSESEE NEEDS TO INCUR THOSE EXPENDITURE IN HER INDIVIDUAL CAPACITY. FURTHER, SAID EXPENSES WERE NOT ACCOUNTED IN FIRM BOOKS OF ACCOUN TS AND HENCE, THE ASSESEE HAS RIGHTLY CLAIMED DEDUCTION FOR SAID EXPENDITURE AGAINST BUSINESS INCOME BEING REMUNERATION FROM PAR TNERSHIP FIRM. HE, FURTHER SUBMITTED THAT IF AT ALL, THE EXPENDITU RE NEEDS TO BE DISALLOWED A REASONABLE AMOUNT OF DISALLOWANCES MAY BE MADE. 7. THE LD. DR , ON THE OTHER HAND, STRONGLY SUPPORT ED ORDER OF THE LD.CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDER OF THE AUTHORITIES BELOW. IN ORDER TO CLAIM THE BENEFIT OF DEDUCTION OF ANY EXPENDITUR E AGAINST BUSINESS ITA NO.6028/MUM/2018 SMT. PRIYAMVADA H MERCHANT 5 INCOME, THE ASSESEE SHALL PROVE WITH NECESSARY EVID ENCES THAT SAID EXPENDITURE ARER LAID DOWN OR EXPANDED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS PROFESSION. IN THIS CASE, T HE LD. AO AS WELL AS, THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS TO TH E EFFECT THAT EXPENDITURE INCURRED AGAINST BUSINESS INCOME ARE I N THE NATURE OF GENERAL EXPENDITURE, WHICH DO NOT RELATES TO EXPENS ES INCURRED FOR EARNING BUSINESS INCOME BEING REMUNERATION FROM PAR TNERSHIP FIRM. WE FURTHER NOTED THAT THE LD. AO HAS BROUGHT OUT CL EAR FACTS TO THE EFFECT THAT THERE IS NO NEXUS BETWEEN THE INCOME EA RNED AND EXPENSES INCURRED. ALTHOUGH, THE LD. AR FOR THE ASS ESSEE CLAIMS THAT THERE WAS AN ORAL UNDERSTANDING BETWEEN THE ASSESSE E AND THE FIRM FOR SHARING EXPENDITURE OF FIRM, BUT SUCH CLAIM WAS NOT SUBSTAINTAITED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN FINDINGS RECORDED BY THE AO, AS WELL AS THE LD.CIT(A), WHILE DISALLOWING EXPENDITURE INCURRED AGAINST BUSI NESS INCOME AMOUNTING TO RS. 5,38,947/-. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND DISMISSED APPEAL FILED BY THE ASSESEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS DI SMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 /11/ 2019 SD/- ( C.N.PRASAD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 27/11/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : ITA NO.6028/MUM/2018 SMT. PRIYAMVADA H MERCHANT 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI DATE INITIAL 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//