DR HEMANT V. BORGAONKAR, MUMBAI V. ACIT 11(2), MUMBAI

ITA 7731/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9356 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 10-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: DEEPAK TIKEKAR
• Keywords: Depreciation; Corroborative evidences; Capital expenditure

Judgement Text

, , H , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI SAN JAY ARORA, ACCOUNTANT MEMBER ITA NO. 7731 /MUM/201 2 ASSESSMENT YEAR: 200 8 - 09 DR. HEMANT V. BORGANKAR 43, SIDDHARTH APARTMENTS 100, BAL GOVINDDAS ROAD, MAHIM, MUMBAI - 400 016. / VS. ACIT - 11 (2) , AAYAKAR BHAVAN, MUMBAI - 400020 . ( / APPELLANT) ( / R ESPONDENT) P.A. NO. AAA PB 5619 G / ASSESSEE BY SHRI DEEPAK TIKEKAR / REVENUE BY SHRI JEETENDRA KUMAR SR. D R / DATE OF HEARING : 10 /03/2015 / DATE OF PRONOUNCEMEN T : /03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 17/9/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. 2 ITA NO. 7731 /MUM/201 2 THERE IS A DELAY OF EIGHT DAYS IN FILING THE APPEAL BEFORE THIS TRIBUNAL . AFTER HEARING THE RIVAL CONTENTION THE DELAY IS CONDONED. 2. THE FIRST GROUND PERTAINS TO CONFIRMING THE DISALLOWANCE OF THE RS.2,82,402/ - ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. THE CRUX OF ARGUMENT ADVANCED BY SHRI DEEP AK TIKEKAR, LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE IS A SPECIALIZED CHEMICAL ENG INEER IN PROCESS DEVELOPMENT AND N ANO T ECHNOLOGY. THE ASSESSEE CLAIMED TO HAVE VISITED VARIOUS INTERNATIONAL DESTINATIONS FOR THE PURPOSE OF MARKETING AND SOURCING N EW AGENCIES. THE ASSESSEE CLAIMED RS.2,82,402/ - AS FOREIGN TRAVELLING EXPENSES. THE LD. ASSESSING OFFICER ASKED FOR JUSTIFICATION WITH RESPECT TO PROFESSIONAL ACTIVITIES OF THE ASSESSEE WITH SUPPORTING EVIDENCES. THE ASSESSEE DID NOT FURNISH ANY EVIDENCE T O PROVE THAT THE FOREIGN VISITS WERE CARRIED OUT FOR THE PURPOSE OF PROFESSIONAL ACTIVITIES. IN THE ABSENCE OF ANY PROOF / DETAILS THE LD. ASSESSING OFFICER DISALLOWED THE CLAIMED EXPENSES AND ADDED TO THE INCOME. 2.1 ON APPEAL BEFORE THE LD. COMMISSIONE R OF INCOME TAX (APPEALS), ALSO THE ASSESSEE DID NOT FURNISH ANY EVIDENCE, CONSEQUENTLY, THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER WAS CONFIRMED. THE RELEVANT PORTION FROM THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS REPRODUCED HEREUNDER FOR APPRAISAL AND READY REFERENCE I HAVE CONSIDERED THE FACTS AND FIND THAT THE APPELLANT HAS FAILED TO PRODUCE SUPPORTING EVIDENCE TO PROVE THAT FOREIGN TRAVELING WAS CONDUCTED FOR THE PURPOSE OF PROFESSIONAL ACTIVITIES OF THE APPELLANT. THE EVIDENCE FILED DURING TH E COURSE OF APPELLATE PROCEEDINGS WERE NOT DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. THEREFORE, IT IS NOT KNOWN 3 ITA NO. 7731 /MUM/201 2 WHETHER THESE WERE FURNISHED BEFORE THE AO. THEREFORE, DISALLOWANCE MADE BY THE AO IS ACCORDINGLY UPHELD. 2.2 IF THE OBSERVATION MADE IN TH E ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, ON THE INSTANT ISSUE WE FIND THAT RIGHT FROM ASSESSMENT STAGE AND UNTIL BEFORE THIS TRIBUNAL THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCE IN SUPPORT OF ITS CLAIM PROVING THAT THE FOREIGN VISITS WERE INCURRED FOR PROFESSIONAL P URPOSES. WE ARE OF THE VIEW FOR AN ALLOWABLE EXPENDITUR E U/S.37(1), ANY AMOUNT EXPENDED MUST BE MADE OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESSION AND FURTHER MUST NOT BE (I) CAPITAL EXPENDITURE, (II) PERSONAL EXPENSES OR (III) AN ALLOWANCE OF THE CHARACTER DESCRIBED IN SECTIONS 30 TO 3 6 OR ANY OTHER RELEVANT PROVISION OF THE ACT. THE ASSESSING OFFICER HAS THE RIGHT AND THE DUTY TO ENQUIRE INTO THE PURPOSE OF EXPENDITURE. IN THE ABSENCE OF REQUISITE DETAILS, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS), CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT. 3. THE NEXT GROUND PERTAINS TO DISALLOWANCE OF RS.3,05,000/ - , BEING CONSULTANCY CHARGES, PAID TO RELATIVES OF THE ASSESSEE. THE CRUX OF THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE RELATIVES ARE QUALIFIED PERSONS AND RENDERED PROFESSIONAL SERVICES TO THE ASSESSEE. THE LD. DR CONTENDED THAT NO PROOF OF RENDERING OF SERVICES AND PROFESSIONAL QUALIFICATIONS WAS PRODUCED AT ANY STAGE. 4 ITA NO. 7731 /MUM/201 2 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE FACTUAL FINDING RECODED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS): I HAVE CONSIDERED THE FACTS AND FIND THAT THE APPELLANT HAS NOT B EEN ABLE TO JUSTIFY THAT WHAT TYPE OF INCOME FROM THAT SURVEY HAS BEEN EARNED. THE APPELLANT IS A CONSULTANT IN NANO TECHNOLOGY , WHICH IS HIS PERSONAL QUALIFICATION AND CANNOT BE SUBSTITUTED BY OTHERS. FURTHER, THE APPELLANT HAS ALSO FAILED TO FURNISH THE DETAILS OF QUALIFICATION OF THE FAMILY MEMBERS AND RELATIVES AS REQUIRED BY THE AO. THEREFORE, I AM INCLINED TO AGREE WITH THE FINDINGS OF THE AO THAT PAYMENT IN THE NAME OF RELATIVES IS ONLY SHOWN TO AVOID THAT INCIDENCE OF TAX BY ADOPTING EXPENSES IN THE NAME OF THIS FAMILY MEMBERS AND RELATIVES. ACCORDINGLY, DISALLOWANCE SO MADE IS THEREFORE, SUSTAINED. 3.2 WE HAVE PERUSED THE RECORD AND FOUND THAT THE ASSESSEE IN HIS INCOME AND EXPENDITURE ACCOUNT CLAIMED TO HAVE PAID RS.5,07,800/ - AS CONSULTANCY CHA RGES OUT OF WHICH THE AMOUNT OF RS.3,05,200/ - WAS PAID TO CLOSE RELATIVES AS CONSULTANCY CHARGES. ON ASKING BY THE LD. ASSESSING OFFICER THE ASSESSEE NEITHER PRODUCED THE EDUCATIONAL QUALIFICATION AND EXPERIENCE OF THESE RELATIVES NOR ANY PROOF OF RENDERIN G ANY PROFESSIONAL SERVICES. NO SUCH EVIDENCE WERE FILED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OR BEFORE THIS TRIBUNAL, THEREFORE, WE CANNOT FIND ANY FAULT IN THE FACTUAL FINDING RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , CON SEQUENTLY THIS GROUND OF THE ASSESSEE IS ALSO HAVING NO MERIT, RESULTANTLY, DISMISSED. 4. THE NEXT GROUND PERTAINS TO CONFIRMING THE DISALLOWANCE OF RS.68,812/ - OUT OF RS.3,44,058/ - , BEING THE EXPENDITURE INCURRED FOR BUSINESS PROMOTION. THE LD. AR CONTE NDED THAT THE EXPENSES WERE 5 ITA NO. 7731 /MUM/201 2 WRONGLY DENIED AS THE WHOLE EXPENSES WERE INCURRED FOR THE PROMOTION OF THE BUSINESS. ON THE OTHER HAND THE LD. DR DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE CLAIMED RS.3,44,053/ - ON ACCOUNT OF BUSINESS PROMOTION EXPENDITURE. THE LD. ASSESSING OFFICER FOUND THAT MOST OF THE EXPENSES WERE INCURRED FOR PURCHASE OF TEA, COFFEE, BISCUITS, COLD DRINK ETC . THEREFORE, HE DISALLOWED 1/5 TH OF THE EXPENSES RESULTING INTO ADDITION OF RS.68,812/ - . TOTALITY OF THE FACTS CLEARLY INDICATES THAT THE ASSESSEE HAS MERELY CLAIMED THE EXPENSES AND DID NOT PRODUCE ANY EVIDENCE ON WH OSE SUCH EXPENSES WERE INCURRED, THEREF ORE, WE ARE OF THE VIEW THAT MERE CLAIM IS NOT ENOUGH AND THE ASSESSEE IS EXPECTED TO JUSTIFY SUCH EXPENSES WITH EVIDENCE AND THE PROOF THAT SUCH EXPENSES WERE INCURRED FOR THE PROMOTION OF BUSINESS. IN THE ABSENCE OF SUCH DETAILS WE FIND NO INFIRMITY IN T HE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 5. THE NEXT GROUND PERTAINS TO DISALLOWANCE OF RS.9,652/ - OUT OF RS.48,260/ - BEING THE EXPENDITURE INCURRED ON ACCOUNT OF CAR INSURANCE. WE ARE NOT AGREEING WITH THE GENERAL PRESUMPTION OF THE LD. ASSESSING OFFICER AND DISALLOW THE PROPORTIONATE EXPENDITURE FOR INSURANCE. THE CAR WAS USED FOR BUSINESS PURPOSES, THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED BECAUSE, NO PROPORTIONATE DISALLOWANCE CAN BE MADE OUT OF THE INSURANCE EXPENSE S INCURRED ON HIS CAR. TH I S GROUND IS ALLOWED. 6 ITA NO. 7731 /MUM/201 2 6. SO FAR AS DISALLOWANCE OF RS.11,444/ - OUT OF RS.57,221/ - BEING THE EXPENDITURE INCURRED ON ACCOUNT OF INTEREST ON CAR LOAN IS CONCERNED WE NOTE THAT PROPORTIONATE DISALLOWANCE WAS MADE BY THE ASSESSING OFF ICER PRESUMING THAT THE CAR WAS USED BY OTHER FAMILY MEMBERS ALSO. WE ARE NOT AGREEING WITH THIS OBSERVATION BECAUSE INTEREST IS TO BE ALLOWED AS EXPENDITURE ON THE CAR LOAN TAKEN BY THE ASSESSEE, SPECIALLY WHEN THE CAR WAS USED FOR BUSINESS PURPOSES. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED. 7. SO FAR AS DISALLOWANCE OF RS.39,000/ - OUT OF RS.1,95,002/ - , BEING THE EXPENDITURE INCURRED ON DEPRECIATION OF MOTOR CAR IS CONCERNED IT HAS TO BE ALLOWED. THE ASSESSING OFFICER IS EXPECTED TO DECIDE IN ACCORDANC E WITH S/S.(2) TO SECTION 38 OF THE ACT AND IT HAS TO BE RESTRICTED IN A FAI R PROPORTION WITH REGARD TO USE, FOR THE PURPOSES OF BUSINESS OR PROFESSION. THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , CONSEQUENTLY IT IS AFFIRMED. 8. SO FAR AS INCURRING OF EXPENDITURE ON THE MOTOR CAR IS CONCERNED IN THE ABSENCE OF NECESSARY BILLS AND VOUCHERS THE PROPORTIONATE DISALLOWANCE WAS RIGHTLY MADE. THER E FORE, THIS GROUND WAS RIGHTLY REJECTED BY THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). 9. I DENTICAL IS THE SITUATION FOR MAKING THE DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES AS THE POSSIBILITY OF USE OF THE TELEPHONE BY THE FAMILY MEMBERS CANNOT BE RULED OUT. THEREFORE, WE FIND NO INFIRMITY IN 7 ITA NO. 7731 /MUM/201 2 THE CONCL USION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) . THIS GROUND OF THE ASSESSEE IS DISMISSED. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD . REPRESENTATIVES FROM BOTH SI DES AT THE CONCLUSION OF THE HEARING ON 13 /03/2015. 13 / 0 3 / 2015 SD/ - ( SANJAY ARORA ) SD/ - ( JOGINDER SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 13 /03/2015 JV, SR. P.S./ . . . / COPY OF T HE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A) - , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI .