SHARAD KUMAR SARAF, MUMBAI V. ASST CIT 20(3), MUMBAI

ITA 7652/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9995 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: SHRIVIJAY MEHTA
• Keywords: Business expenditure; Additional evidence

Judgement Text

, J , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI RAVISH SOOD, JM ITA NO.7652/MUM/2014 : ASST.YEAR 2006-2007 SHRI SHARAD KUMAR SARAF A-25, MIDC STREET NO.3 MAROL INDUSTRIAL AREA, ANDHERI (EAST) MUMBAI 400 093. PAN : AAIPS1238A. / VS. ASST.COMMISSIONER OF INCOME - TAX CIRCLE 20(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI SHRI VIJAY MEHTA /RESPONDENT BY : MS.ARJU GARODIA / DATE OF HEARING : 21.06.2017 / DATE OF PRONOUNCEMENT : 30.06.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 14.11.2014 AND PERTAINS TO ASSESSMENT YEAR 2006-2007. 2. THE GROUNDS OF APPEAL READ AS UNDER:- GROUND NO. 1 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN UPHOLDING ADDITION MADE BY LD. AO AT 50% IN RESPECT OF PERQUISITES TAXED IN THE HANDS OF THE APPELLANT U/S 17(2)(IV) PERTAINING TO CREDIT CARD EXPENSES. THE APPELLANT PRAYS THAT THE ACTION OF HON'BLE CIT(A) IN SUSTAINING 50% OF THE ADDITION MAY KINDLY TO BE DELETED. GROUND NO. 2: WITHOUT PREJUDICE TO GROUND NO, 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 2 IN SUSTAINING 50% OF THE ADDITION ON AN AD-HOC BASIS AND ARBITRARY/PRESUMPTIVE MANNER WHICH IS BAD IN LAW AND NEEDS TO BE DELETED. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, OMIT ANY OF THE GROUNDS OF APPEAL BEFORE THE HEARING OF THE APPEAL, IF SO ADVISED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER:- 3.1 IN THIS CASE THE ASSESSING OFFICER ASKED THE ASSESSEES REPRESENTATIVE TO FURNISH THE DETAILS OF CREDIT CARD EXPENSES / STATEMENT FOR F.Y.2005-2006 (A.Y. 2006-2007). IN RESPONSE TO THAT, VIDE SUBMISSION DATED 04.09.2013, THE ASSESSEES REPRESENTATIVE FURNISHED THE COPY OF CREDIT CARD STATEMENT. 3.2 FURTHER THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE FOLLOWING DETAILS. (I) MONTH-WISE EXPENSES INCURRED THROUGH CREDIT CARD. (II) SOURCES OF PAYMENT OF CREDIT CARD BILLS AND (III) IF CREDIT CARD EXPENSES WERE PAID BY THE EMPLOYERS, THEN HOW MUCH EXPENSES WERE RECOVERED FROM YOU. 3.3 IN RESPONSE TO THAT, THE ASSESSEE' S REPRESENTATIVE FURNISHED THE REQUISITE DETAILS VIDE SUBMISSION DATED 06.01.2014. HOWEVER, IN REPLY TO HOW MUCH EXPENSES WERE RECOVERED FROM YOU BY THE COMPANY FOLLOWING REPLY WAS FURNISHED BY THE ASSESSEE : 'THE PAYMENT OF EXPENSES INCURRED THROUGH THE CREDIT CARD IS MODE BY M/S TECHNOCRAFT INDUSTRIES (INDIA) LTD. BY CHEQUE FROM THEIR ACCOUNT KINDLY ALSO NOTE THAT THE EXPENSES WERE RELATING TO ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 3 BUSINESS OF THE COMPANY AND ACCORDINGLY NO EXPENSES WERE RECOVERED FROM ME '. 3.4 FURTHER DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE'S REPRESENTATIVE WAS ASKED TO FURNISH THE COPY OF THE INVOICES IN RESPECT OF THE EXPENSES INCURRED THROUGH CREDIT CARD DURING F.Y .2005-06 (A.Y.2006-07) BY THE ASSESSEE IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE THAT ALL THE EXPENSES INCURRED ARE RELATED TO BUSINESS. BUT, THE ASSESSEES REPRESENTATIVE DID NOT FURNISH / PRODUCE EVEN A SINGLE BILL / INVOICE FOR VERIFICATION. IN THESE CIRCUMSTANCES, THE A.O. WAS OF THE OPINION THAT IN THE ABSENCE OF COMPLETE DOCUMENTARY PROOF, IT CANNOT BE HELD THAT THESE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. HENCE THE A.O. HELD THAT THE GENUINENESS OF SUCH EXPENSES HAS NOT BEEN SATISFACTORILY EXPLAINED. 3.5 SINCE THE ASSESSEE WAS UNABLE TO FURNISH THE COPY OF INVOICES / BILLS, THEREFORE, THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE A.O. AND RS.6,47,722.76 WAS HEREBY ADDED TO HIS INCOME AS PERQUISITE U/S 17(2)(IV) OF THE INCOME-TAX ACT, 1961. 4. UPON ASSESSEES APPEAL, LEARNED CIT(A) CONSIDERED THE ISSUE AND HELD AS UNDER:- 5.2 IN GROUND NO. 2, THE APPELLANT HAS CHALLENGED THE TAXATION OF PERQUISITES AMOUNTING TO RS. 6,47,722/- U/S 17(2)(IV) ON ACCOUNT OF CREDIT CARD EXPENSES. DURING THE RE-ASSESSMENT PROCEEDINGS, THE AO EXAMINED THE CREDIT CARD EXPENSES OF THE APPELLANT. THE APPELLANT SUBMITTED THAT CREDIT CARD EXPENSES INCURRED BY HIM WERE PAID BY THE COMPANY M/S TIIL BY CHEQUE FROM THEIR BANK ACCOUNT. THE AO OBSERVED THAT THE APPELLANT ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 4 HAD NOT PRODUCED DOCUMENTARY EVIDENCE TO SHOW THAT THE EXPENSES WERE FOR BUSINESS PURPOSES AND PROCEEDED TO DISALLOW THE AMOUNT OF RS. 6,47,722.76. IN APPEAL IT WAS SUBMITTED THAT DURING THE SCRUTINY PROCEEDINGS, THE APPELLANT HAD FURNISHED COPIES OF LEDGER ACCOUNT IN THE BOOKS OF M/S TIIL; COPIES OF CREDIT CARD STATEMENTS OF AMERICAN EXPRESS BANK; CLARIFICATION THAT PAYMENTS WERE MADE BY M/S TIIL SINCE THE EXPENSES WERE RELATED TO THE BUSINESS OF THE COMPANY ALONG WITH DATE-WISE STATEMENT OF EXPENSES GIVING DETAILS OF THE NATURE OF THESE EXPENSES. IT WAS STATED THAT AS MANAGING DIRECTOR (EXPORTS) OF M/S TIIL, THE APPELLANT WAS RESPONSIBLE FOR BUSINESS EXPANSION ABROAD AND THAT A MAJOR CHUNK OF THE COMPANY'S REVENUES IS FROM EXPORT TURNOVER. IT WAS FURTHER STATED THAT CREDIT CARD COMPANIES DO NOT ISSUE CARDS IN THE NAME OF CORPORATE ENTITIES HENCE EVEN FOR BUSINESS EXPENSES, CREDIT CARDS HAVE TO BE TAKEN BY THE INDIVIDUAL EMPLOYEES IN THEIR OWN NAMES. THE APPELLANT DREW ATTENTION TO THE FACT THAT THESE WERE DULY CLAIMED AND ALLOWED AS BUSINESS EXPENSES IN THE CASE OF THE COMPANY AND WERE NEITHER CLAIMED BY HIM AS EXPENSES NOR REIMBURSED TO HIM BY M/S TIIL. 5.2.1 ON CONSIDERATION OF THE FACTS AS THEY EMERGE FROM THE IMPUGNED ORDER AND THE SUBMISSIONS MADE IN THESE PROCEEDINGS, I FIND THAT THE APPELLANT VIDE SUBMISSIONS DATED 06/01/2014 FILED DURING SCRUTINY PROCEEDINGS HAD FURNISHED DETAILED BREAK UP OF EXPENSES INCURRED ON THE CREDIT CARD IN QUESTION. PERUSAL OF THE CHART ENCLOSED SHOWS THAT THESE PERTAINED TO SALES PROMOTION EXPENSES AND TRAVEL \ EXPENSES (BOTH WITHIN AND OUTSIDE THE COUNTRY). THE APPELLANT HAD ALSO FILED NAMES AND ADDRESSES OF CUSTOMERS LOCATED OUTSIDE INDIA IN HUNGARY, GERMANY, GREECE AND ITALY. IN APPEAL, THE SUBMISSIONS MADE BEFORE THE A.O. HAVE BEEN FURNISHED ALONG WITH SAMPLE BILLS. COPIES OF SAMPLE BILLS/INVOICES FILED BY THE APPELLANT SUCH AS BILL FOR STAY AT HOLIDAY INN, DOWNTOWN SHANGHAI FROM 31/08/2005 TO 04/09/2005 AT ROOM NO. 1559 SHOW THAT THE NAME OF THE OCCUPANT IS SHOWN AS MR. SARAF, SHAKUNTA/SHARAD. COPY OF SALE BILL DATED 03/09/2005 FROM ZHISANG AND BILL DATED 02/09/2005 FROM SETAN SHANGHAI NANJING XI LU ALSO SHOWS THE SIGNATURE OF THE CARD - HOLDER AS ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 5 SHAKUNTALA S. THE NAME OF THE APPELLANT'S WIFE IS SHAKUNTALA SARAF. THIS CLEARLY INDICATES THAT THE APPELLANT HAS TRAVELLED WITH FAMILY ALSO AND THUS THE CLAIM THAT ALL THE CREDIT CARD EXPENSES ARE ONLY BUSINESS EXPENSES CANNOT BE ACCEPTED. IN VIEW OF THESE FACTS, THE DISALLOWANCE MADE BY THE AO IS UPHELD AT 50% I.E. RS.3,23,861/- AND THE APPELLANT GETS RELIEF OF EQUIVALENT AMOUNT. ACCORDINGLY THE GROUND RAISED BY THE APPELLANT IS PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ON THE IMPUGNED AMOUNTS THE EMPLOYER COMPANY HAS PAID FRINGE BENEFIT TAX. HENCE HE SUBMITTED THAT NO DISALLOWANCE IS REQUIRED. IN THIS REGARD HE ALSO SOUGHT TO SUBMIT ADDITIONAL EVIDENCE BEING ORDER PASSED UNDER SECTION 115WE3 IN THE CASE OF EMPLOYER COMPANY FOR ASSESSMENT YEAR 2006 -2007. LEARNED COUNSEL FURTHER REFERRED TO THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF ITA NO.4866/MUM/2009 IN THE CASE OF BIPIN KOTAK V. ACIT VIDE ORDER DATED 29 JULY, 2011. REFERRING TO THE ABOVE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THESE AMOUNTS CANNOT BE ADDED AS PERQUISITE IN THE HANDS OF THE ASSESSEE AS FRINGE BENEFIT TAX THERE ON HAS BEEN PAID BY THE EMPLOYER COMPANY. 6. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASSESSEE HAS NOT FILED ANY APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES. SHE STRONGLY OBJECTED TO THE SUBMISSION OF THE ADDITIONAL EVIDENCE, SHE SUBMITTED THAT NO REFERENCE IN THIS REGARD HAS BEEN MADE BEFORE THE AUTHORITIES BELOW. HENCE SHE SUBMITTED THAT THIS IS AN AFTERTHOUGHT AND THE LEARNED COUNSEL OF THE ASSESSEE IS TRYING TO MAKE OUT AN ALTOGETHER NEW CASE. SHE SUBMITTED THAT ALL ALONG BEFORE THE AUTHORITIES BELOW IT HAS BEEN ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 6 THE STAND OF THE ASSESSEE THAT THESE ARE EXPENSES MEANT FOR THE PURPOSES OF THE COMPANY AND NOW FOR THE FIRST TIME IT IS BEING SUBMITTED THAT THESE ARE PERQUISITE IN THE HAND OF THE ASSESSEE WHICH WOULD NOT BE TAXED AS FRINGE BENEFIT TAX HAS ALREADY BEEN PAID. SHE FURTHER SUBMITTED THAT LEARNED CIT(A) INCOMPLETE VIOLATION OF RULE 46A ADMITTED ADDITIONAL EVIDENCE WITHOUT OBTAINING ANY REMAND REPORT FROM THE ASSESSING OFFICER. 7. UPON CAREFUL CONSIDERATION WE FIND OURSELVES IN AGREEMENT WITH THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT ASSESSEE IS TRYING TO MAKE OUT AN ALTOGETHER NEW CASE. THE ASSESSEE HAS ALSO NOT FOLLOWED THE TRIBUNAL RULES FOR SEEKING ADMISSION OF ADDITIONAL EVIDENCE. FURTHER ASSESSEES COUNSEL HAS TRIED TO PASS ON ADDITIONAL EVIDENCE WITHOUT ANY MENTION IN THIS REGARD IN A PAPER BOOK. IN OUR CONSIDERED OPINION, SINCE THESE ADDITIONAL EVIDENCES WERE NOT BEFORE THE AUTHORITIES BELOW, NOR ANY CASE WAS MADE OUT IN THIS REGARD BEFORE THE AUTHORITIES BELOW THESE ADDITIONAL EVIDENCES CANNOT BE ADMITTED. HENCE WE REJECT THE REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE. IN THIS REGARD WE PLACE RELIANCE UPON THE FOLLOWING CASE LAWS, FOR DECLINING TO ADMIT THE ADDITIONAL EVIDENCE. (I) VELJI DEORAJ & CO. V. CIT [(1968) 68 ITR 0708 (BOMBAY)] (II) CIT V. SMT.KAMAL C.MEHBOOBBANI [(1995) 214 ITR 0015 (BOMBAY)] (III) CIT V. RAO RAJA HANUT SINGH [(2001) 252 ITR 0528 (RAJASTHAN)] (IV) IAN PETER MORRIS V. ACIT [CIVIL APPEAL NO.11385-11386 OF 2016 (SC)] (V) MARUTI UDYOG LTD. V. ITAT [(2000) 244 ITR 303 (DELHI)] (VI) UOP LLC V. ADDL.DIRECTOR OF IT [(2007) 108 ITD 186 (DELHI)] 8. NOW COMING TO THE MERITS OF THE CASE WE FIND THAT NO DETAILS WHATSOEVER REGARDING THE CREDIT CARD EXPENSE WAS SUBMITTED BEFORE THE ASSESSING OFFICER. HENCE ADDITION OF THE IMPUGNED AMOUNT IN THE HANDS OF ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 7 THE ASSESSEE WAS FULLY JUSTIFIED. UPON ASSESSEE'S APPEAL LEARNED CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES AND THEREAFTER DESPITE NOT BEING FULLY CONVINCED BY THE ARGUMENTS OF THE ASSESSEE HE HAS GRANTED 50% RELIEF. WE FIND THAT LEARNED CIT(A) HAS ACCEPTED ADDITIONAL EVIDENCE WITHOUT PROPERLY FOLLOWING THE MANDATE OF RULE 46A OF INCOME TAX RULES. THESE RULES PROVIDE THAT LEARNED CIT(A) SHALL NOT ACCEPT ANY ADDITIONAL EVIDENCE UNLESS THE ASSESSING OFFICER HAS BEEN GIVEN AN OPPORTUNITY TO OFFER HIS COMMENTS THEREUPON. HENCE, THE ORDER OF LEARNED CIT(A), WHICH GRANTS 50% RELIEF TO THE ASSESSEE, IS NOT AT ALL SUSTAINABLE. 9. HOWEVER WE NOTE THAT REVENUE IS NOT IN APPEAL AND THIS IS AN APPEAL BY THE ASSESSEE, HENCE WE CANNOT DEPRIVE THE ASSESSEE OF THE BENEFIT ALREADY GRANTED BY THE LEARNED CIT(A). HENCE THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. 10. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE, 2017. SD/- SD/- ( RAVISH SOOD ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 30 TH JUNE, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI ITA NO.7652/MUM/2014. SHRI SHARAD KUMAR SARAF. 8 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.