MAHESH RAMDAS KANANI, MUMBAI V. DCIT 4(3), MUMBAI

ITA 866/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9243 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: D V LAKHANI LD
• Keywords: Business expenditure
• Section: 143(3); 37

Judgement Text

ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.7811/MUM/2010 & ./I.T.A. NO.866/MUM/2015 ( / ASSESSMENT YEARS: 2007-08 & 2008-09) MAHESH RAMDAS KANANI 16/18,1 ST FLOOR, BACK SIDE, GIRILILA BUILDING CHAMPA GALLI CROSS LANE, MUMBAI 400 002 / VS. A DDITIONAL COMMISSIONER OF INCOME TAX RANGE 4(3) MUMBAI -400 020 ! ./ ./PAN/GIR NO. AADPK-4968-J ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : D.V.LAKHANI, LD. AR REVENUE BY : SUMAN KUMAR, LD. DR / DATE OF HEARING : 09/08/2017 / DATE OF PRONOUNCEMENT : 04 /10/2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE TWO APPEALS BY ASSESSEE FOR ASSESSMENT YEARS [AY] 2007-08 & 2008-09 WHICH ASSAILS SEPARATE ORDERS OF FIRST APPELLATE ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 2 AUTHORITIES. SINCE, ISSUES ARE COMMON IN BOTH THE A PPEALS, WE DISPOSE- OFF THE SAME BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE AND BREVITY. FIRST WE TAKE UP ITA NO. 7811/MUM/2010 WHICH IS APPEAL FOR AY 2007-08 AND CONTEST THE ORDER OF LD. COMMISSIONE R OF INCOME TAX (APPEALS)-8 [CIT(A)], MUMBAI DATED 01/09/2010 QUA CONFIRMATION OF DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES , ADHOC DISALLOWANCE AGAINST TELEPHONE AND MOTOR CAR EXPENSES , AND ADDITION AGAINST CERTAIN COMMISSION INCOME. 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED IN WHOLESALE BUSINESS OF TEXTILE UNDER PROPRIETORSHIP CONCERN NAMELY MAHESH TRADING COMPANY AND IN THE BUSINESS OF SHARE TRADING WAS ASSESSED U/S 143(3) FOR IMPUGNED AY ON 16/12/2009 A T RS.2,08,75,810/- AFTER CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS. 1,96,31,796/- FILED BY THE ASSESSEE ON 31/10/2007. THE DISALLOWANCES / ADDITIONS, WHICH ARE SUBJECT MATTER OF THIS APPEAL, ARE AS FOLLOWS: 2.2 THE ADDITION AGAINST COMMISSION INCOME WAS MADE SINCE THE ASSESSEE CLAIMED TDS CREDIT OF RS.24,084/- DEDUCTED BY KURLON LIMITED ON COMMISSION OF RS.4,29,306/- WHEREAS THE ASSESSEE OFFERED ONLY AN AMOUNT OF RS.2,23,048/- AGAINST THE SAME ON THE PRE MISES THAT IT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND THE BALANCE AMOUNT WAS NOT RECEIVED DURING THE YEAR. HOWEVER, NOT CONVINCED, L D. AO NOTED THAT THE NO. NATURE OF ADDITION AMOUNT (RS.) 1. COMMISSION INCOME 2,06,258/- 2. FOREIGN TRAVELLING EXPENSES 3,38,859/- 3. TELEPHONE EXPENSES 1,09,966/- 4. MOTOR CAR EXPENSES 1,13,306/- TOTAL ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 3 ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING AND FULL TDS CREDIT WAS CLAIMED BY THE ASSESSEE AND THEREFORE, A DDED THE DIFFERENTIAL AMOUNT OF RS.2,06,258/- TO THE INCOME OF THE ASSESS EE. 2.3 THE ADDITION OF FOREIGN TRAVELING EXPENSES PERT AINED TO TRAVELLING EXPENSES OF THE ASSESSEE TO NEW YORK WHICH COMPRISED OF RS.1,72,291/- AS FARE EXPENSES AND RS.1,66,568 AS O THER EXPENSES. THE ASSESSEE EXPLAINED THAT THE TRIP WAS FOR A DURATION OF 11 DAYS AND UNDERTAKEN BY THE PROPRIETOR TO PROCURE THE EXPORT ORDERS AS WELL AS FACILITATING IMPORT OF FABRICS AND THEREFORE, ALLOW ABLE BUSINESS EXPENDITURE. HOWEVER, LD. AO NOTED THAT THE ASSESSE E VISITED LAS VEGAS, A WELL KNOWN TOURIST PLACE AND THEREFORE A PLEASURE TRIP ONLY AND FURTHER, THE ASSESSEE COULD NOT PROVE FULFILLMENT O F CONDITIONS OF SECTION 37 AND THEREFORE, NOT ALLOWABLE TO THE ASSESSEE. 2.4 FURTHER, THE ASSESSEE CLAIMED TELEPHONE EXPENSES OF RS.4,39,863/- AGAINST MULTIPLE TELEPHONE CONNECTION S FEW OF WHICH STOOD IN THE NAME OF ASSESSEES SON AND THEREFORE, LD. AO DISALLOWED 25% OF THE SAME TO ACCOUNT FOR PERSONAL ELEMENT IN THE SAM E. SIMILAR ADHOC DISALLOWANCE OF 25% WAS MADE AGAINST MOTOR CAR EXPENSES OF RS.4,53,226/- CLAIMED BY THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 01/09/2 010 WHERE THE ADDITION AGAINST FOREIGN TRAVELLING EXPENSES GOT CONFIRMED WHEREAS ADHOC DISALLOWANCE OF 25% AGAINST TELEPHONE AND MOTOR CAR EXPENSES WAS REDUCED TO 15% WITH CREDIT OF SUO-MOTO DISALLOWANCE OF RS.61,434/- MADE BY THE ASSESSEE. THE ADDITION AGAINST COMMISSION INCOME WAS CONFIRMED ON THE PREMISES THAT THE ASSESSEE WAS NOT CONSISTENTLY ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 4 FOLLOWING CASH METHOD OF ACCOUNTING IN RESPECT OF RECEIPTS AND EXPENDITURE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE [AR] WHI LE DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER BOOK , CONTENDED THAT FOREIGN TRAVELLING WAS UNDERTAKEN BY THE PROPRIETOR HIMSELF ONLY AND THE SAME PERTAINED TO TRIP TO NEW YORK ONLY AND NOT TO SINGAPORE AS WRONGLY NOTED BY LOWER AUTHORITIES. FURTHER, THE SON OF THE ASSESSEE NEVER ACCOMPANIED THE ASSESSEE ON THIS TRIP AND THE TRIP WAS UNDERTAKEN FOR BUSINESS PURPOSES SINCE THE ASSESSEE TOOK SAMPLES O F MATERIAL WITH HIM TO PROCURE EXPORT ORDER. THESES SAMPLES WERE DULY P ROCURED BY THE ASSESSEE AGAINST INVOICES AND THEREFORE THE EXPENSE S WERE ALLOWABLE IN TERMS OF SECTION 37(1). REGARDING ADDITION AGAINST COMMISSION INCOME, LD. AR CONTENDED THAT THE SAID COMMISSION WAS RECEI VED BY THE ASSESSEE IN THE NEXT AY I.E. 2008-09 AND OFFERED TO TAX IN THAT YEAR AND THEREFORE, ADDITION THEREOF IN THE IMPUGNED AY WAS NOT JUSTIFIED. THE LD. AR FURTHER CONTENDED THAT ADHOC DISALLOWANCE OF 15% AGAINST TELEPHONE AND MOTOR CAR EXPENSE WAS ON THE HIGHER SIDE. 5. PER CONTRA, LD. DR CONTENDED THAT ALL THE ISSUES HAVE FAIRLY B EEN SETTLED BY LD.CIT(A) ON FACTUAL MATRIX AND HENCE, D O NOT REQUIRE ANY FURTHER INTERFERENCE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE ADHOC DISALLOWANCE OF 15% AGAINST TELEPHONE AND MOTOR CAR EXPENSE IS CONCERNED, WE FIND THE SAME TO BE FAIR AND REASONABLE SINCE PERSONAL ELEMENT IN THE SAME COULD NOT BE RULED OUT. MOREOVER, THE CREDIT OF SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE HAS ALREADY BEEN GRANTED TO HIM BY LD. CIT(A). THER EFORE, THE SAME ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 5 BEING QUITE FAIR AND REASONABLE STANDS CONFIRMED. T HIS GROUND OF ASSESSEES APPEAL STANDS DISMISSED. 7. REGARDING ADDITION OF COMMISSION INCOME , THE ASSESSEE HAS CONTENDED THAT THE SAME HAS BEEN OFFERED BY THE ASS ESSEE IN IMMEDIATELY NEXT AY AND THEREFORE, ADDITION THEREOF IN THE IMPUGNED AY WOULD RESULT INTO DOUBLE TAXATION. WE AGREE WITH TH E SAID CONTENTIONS. HOWEVER, THE LOWER AUTHORITIES HAVE NOTED THAT THE ASSESSEE IS NOT CONSISTENT IN FOLLOWING CASH SYSTEM OF ACCOUNTING W ITH RESPECT TO RECEIPTS & EXPENDITURE AND THEREFORE, WE CONFIRM THIS ADDITION OF RS.2,06 ,258/- IN IMPUGNED AY. AS A LOGICAL CONSEQUENCE, THE SAME COU LD NOT BE TAXED IN AY 2008-09. THEREFORE, WHILE CONFIRMING THIS ADDITI ON, WE RESTORE THE MATTER BACK TO THE FILE OF LD. AO WITH A DIRECTION TO DELETE THE SAME FORM AY 2008-09 AFTER VERIFYING THE FACT THAT THE SAME H AS BEEN OFFERED IN AY 2008-09. TECHNICALLY, THIS GROUND OF ASSESSEES APP EAL STANDS DISMISSED BUT THE ASSESSEE WOULD GET RELIEF THEREOF IN AY 200 8-09 SUBJECT TO VERIFICATION BY LD. AO AND HENCE THE SAME IS, IN FA CT, TAX NEUTRAL. 8. REGARDING ADDITION AGAINST FOREIGN TRAVELLING , IT IS THE PRIME CONDITION OF SECTION 37 THAT THE EXPENDITURE SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED OUT BY THE ASSESSEE. NOTWITHSTANDING THE PLACE OF VISIT OR THE PERSON WH O MADE THE VISIT, THE ONUS IS ON ASSESSEE TO SHOW FULFILLMENT OF THIS PRI ME CONDITION. THE CONTENTIONS RAISED BEFORE US BY LD. AR, IN THIS REG ARD, ARE MERELY BALD ASSERTIONS WITHOUT ANY COGENT MATERIAL OR DOCUMENTA RY EVIDENCES. THE ONUS WAS ON ASSESSEE TO ESTABLISH THAT THE FOREIGN TRAVELLING EXPENSES INCURRED WERE FOR THE PURPOSE OF BUSINESS, HOWEVER, THE SAME, IN INSTANT CASE HAS REMAINED UN-DISCHARGED . THEREFORE, THIS ADDITIONS STANDS ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 6 CONFIRMED AND RESULTANTLY, THIS GROUND OF ASSESSEE S APPEAL STANDS DISMISSED. 9. GROUND NO. 5 ASSAILS IMPOSITION OF INTEREST U/S 234B. THE SAME BEING MANDATORY AND CONSEQUENTIAL IN NATURE AND HEN CE, DO NOT REQUIRE OUR INTERFERENCE AND THEREFORE, DISMISSED. 10. IN NUTSHELL, THE ASSESSEES APPEAL STANDS DISMI SSED. 11. NOW, WE TAKE UP ITA NO. 866/MUM/2015 WHICH IS A PPEAL FOR AY 2008-09 AND CONTEST THE ORDER OF LD. COMMISSIONER O F INCOME TAX (APPEALS)-8 [CIT(A)], MUMBAI DATED 07/01/2011. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL IS ADDITION OF FOREIGN TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE. GROUND NO. 2 CONTESTS IMPOSITION O F INTEREST U/S 234B. THE SAME BEING MANDATORY AND CONSEQUENTIAL IN NATUR E DO NOT REQUIRE OUR INTERFERENCE AND THEREFORE, DISMISSED. 12. IN THIS YEAR, THE ASSESSEE, IN SIMILAR MANNER, CLAIMED FOREIGN TRAVELLING EXPENSES OF RS.7,01,509/- WHICH WERE DISALLOWED BY LD. AO AND CONFIRMED BY LD. CIT(A). THE ASSESSEE, ON SIMIL AR LINES, HAS ASSAILED ADDITION THEREOF BEFORE US. 13. UPON PERUSAL OF DOCUMENTS PLACED ON RECORD, WE FIND THAT IN THIS YEAR THE ASSESSEE HAS PRODUCED A LETTER DATED 11/07 /2007 FROM ONE OF HIS FOREIGN CUSTOMER NAMELY LINENS N ESSENTIALS, INC. NEW YORK. IN THE SAID LETTER ADDRESSED TO MAHESH TRADING COMPANY, THE CUSTOMER WHILE MAKING A REFERENCE TO RECENT VISIT OF ASSESSEE TO T HE OFFICE OF THE CUSTOMER, EXPRESSED INABILITY TO PLACE THE ORDER ON THE PREMISES THAT THE QUOTED PRICE WERE ON THE HIGHER SIDE. FURTHER, THE BREAK-UP OF FOREIGN TRAVELLING EXPENSES REVEALS THAT THE AMOUNT OF RS.3 ,48,176/- PERTAINS TO VISIT OF ASSESSEES SON TO USA FOR 16 DAYS AND THE BALANCE AMOUNT OF ITA NOS. 7811/MUM/2010 & 866/MUM/2015 MAHESH RAMDAS KANANI ASSESSMENT YEARS-2007-08 & 2008-09 7 RS.3,53,333/- PERTAINS TO VISIT OF ASSESSEE AND HIS SON TO MAURITIUS FOR 7 DAYS. THEREFORE, IN THIS CASE, THE ASSESSEE IS ABLE TO PRODUCE SOME DOCUMENTARY EVIDENCES, THOUGH FEEBLE , ON RECORD. THEREFORE, FROM THE POINT OF REASONABLENESS, WE ARE INCLINED TO ALLOW T HE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.3,48,176/- AND CONFIRM THE BALANCE ADDITIONS. THE LD. AO IS DIRECTED TO RE-COMPUTE THE ASSESSED INCOME IN TERMS OF THIS ORDER AND ALSO MAKE SUITABLE ADJUSTME NTS AS PER PARA-7, IF FOUND ADMISSIBLE AFTER VERIFICATION. 14. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTL Y ALLOWED. 15. TO SUM UP, ITA NO. 7811/MUM/2010 STANDS DISMISS ED WHEREAS ITA NO.866/MUM/2015 STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04. 10.2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. $'. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI