Sh. Pradip Baijal, Noida V. DCIT, New Delhi

ITA 879/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7149 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 10-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAKHI BIM AL
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SRI S.V.MEHROTRA, AM AND SRI C.M.GARG, JM ITA NO. 879/DEL./2014 : A SSTT. YEAR : 2010-11 PRADIP BAIJAL M/S. ADC LEGAL SERVICES PVT. LTD. A-105, FIRST FLOOR, SECTOR- 63 NOIDA VS DCIT CENTRAL CIRCLE- 25 NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFPB7139L ASSESSEE BY : SH. DEEPAK KAPOOR, ADV. REVENUE BY : MS. RAKHI BIM AL, SR. DR DATE OF HEARING : 10.05.2016 DATE OF PRONOUNCEMENT : 18.07.2016 ORDER PER C.M.GARG, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)--I, NEW DELHI DATED 16.12.2013 WAS IN FI RST APPEAL NO. 108/12-13 FOR AY 2010-11. GROUNDS RAISED BY THE ASSESSED READ AS UNDER :- ITA NO. 879/DEL/2014 PRADIP BAIJAL 2 1. BECAUSE ON FACTS AND IN LAW AND ON GROUNDS TAKEN AN D BASIS ADOPTED, THE ADDITION TO THE TOTAL INCOME OF THE AS SESSED ON ACCOUNT OF DISALLOWANCE TO THE EXTENT OF RS. 3,48,186/- IS TOT ALLY WRONG, UNJUSTIFIED AND ILLEGAL. 2. BECAUSE THE ASSESSED HAS INCURRED EXPENSES FOR THE PURPOSE OF HIS PROFESSION/ OCCUPATION TAXABLE UNDER THE HEAD BUSINESS AND PROFESSION . THE LD. CIT(A) HAS FAILED TO APPRECIA TE THE NATURE OF PROFESSION/OCCUPATION OF THE ASSESSED AND HAS NOT T AKEN INTO CONSIDERATION THE SUPPORTING DOCUMENTS INCLUDING TH E AUDITORS REPORT AND BOOKS OF ACCOUNTS OF THE ASSESSED. 3. BECAUSE THE DISALLOWANCE OF EXPENDITURE HAS BEEN M ADE ARBITRARILY AND WITHOUT REFERENCE TO ANY MATERIAL O N RECORD. 2. APROPOS GROUND NO. 1 : THE BRIEF FACTS AR E THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 10,97,582/- BY ALLEGING THAT THESE EXPENSES ARE INCURRED FOR PERSONAL PURPO SE BY THE ASSESSED FOR HIS FAMILY MEMBERS AND THE SAID AMOUNT S INCLUDES VARIOUS EXPENSES OF PERSONAL IN NATURE. THE FIRST A PPELLATE AUTHORITY AFTER CONSIDERING THE EXPLANATION AND SUBMISSIONS O F THE ASSESSEE GAVE PART RELIEF AND SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 3,48,186/-. 3. THE LD. COUNSEL OF THE ASSESSED POINTED OUT THAT THE ASSESSING OFFICER WITHOUT ANY JUSTIFIED REASON MADE DISALLOWANCE AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESS EE, THE CIT(A) GRANTED PART RELIEF TO THE ASSESSED. THE LD. COUNSE L FURTHER SUBMITTED THAT THE FOREIGN TRANSFER EXPENSES OF RS. 93727/- WAS INCORRECTLY DISALLOWED BY THE AUTHORITY BELOW AS TH E SAME WAS RELATED TO THE PROFESSION OF ASSESSEE. THE LD. COUN SEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE SUPPORTED CONS ULTANCY ITA NO. 879/DEL/2014 PRADIP BAIJAL 3 BUSINESS AS A DIRECTOR OF NOESIS STRATEGIC CONSULT ING SERVICES PVT. LTD. IN THE YEAR 2007 AND SUBSEQUENTLY THE ASSESSEE TOOK INDEPENDENT CONSULTANCY WORK FOR ITU AND WORLD BANK AND HE WAS GIVEN ADVISORY WORK BY VAISHNAVI ADVISORY SERVI CES (PVT.) LTD. AND OTHER CONSULTANCY FIRMS. THE LD. COUNSEL A LSO EXPLAINED THAT THE ASSESSEE TOOK WORK FROM MF GLOBAL CONSULTA NCY FIRM AND MADE PRESENTATIONS IN VARIOUS COUNTRIES REGARDING T HEIR INVESTMENTS IN POWER SECTOR IN INDIA AND THIS WORK INVOLVED LOT OF PREPARATION BY THE ASSESSEE AND THE TRAVEL EXPENSES AS WELL AS ADVISORY FEES PAYMENT BY ADVISORY GLOBAL. THE LD. C OUNSEL POINTED OUT THAT TRAVELLING ACCOUNT LEDGER PLACED THAT PAGE NO. 53-54 OF THE ASSESSEES PAPER BOOK SHOWS TRAVELLING EXPENSES INC URRED BY THE ASSESSEE AND REIMBURSED BY THE CLIENTS AND ALSO SHO WS REMAINING AMOUNT OF TRAVELLING EXPENSE HAS BEEN SHOWN AS CLOS ING BALANCE WHICH COULD NOT BE REIMBURSED BY THE CLIENTS AND TH E ASSESSED CLAIMED THE SAME AS PROFESSIONAL EXPENSES AND THERE IS NO ELEMENT OF PERSONAL USE OR USE BY THE FAMILY MEMBERS BY THE ASSESSEE. THEREFORE, THIS EXPENSE HAS TO BE ALLOWED TO THE AS SESSEE. 4. REPLYING TO THE ABOVE THE LD. DEPARTMENTAL REP RESENTATIVE STRONGLY SUPPORTED ACTION TO THE AO AND CONTENDED T HAT SINCE THE IMPUGNED AMOUNT WAS NOT REIMBURSED BY THE CLIENTS O F THE ASSESSED, THEREFORE, THE SAME WAS NOT PERTAINING TO HIS PROFESSIONAL ACTIVITY AND IN THIS SITUATION, THE AO WAS QUITE JU STIFIED IN TREATING ITA NO. 879/DEL/2014 PRADIP BAIJAL 4 THE SAME AS PERSONAL OF IN NATURE AND NOT LINKED TO THE ASSESSEES PROFESSIONAL RECEIPT. 5. ON CAREFUL CONSIDERATION ON ABOVE, WE OBSERVE TH AT THE ASSESSEE HAS SUBMITTED LEDGER ACCOUNT OF TRAVELLING EXPENSES INCURRED BY ASSESSEE FROM 28.4.2009 TO 28.3.2010, ( ASSESSEDS PAPER BOOK PAGE 53-54) WHICH SHOWS THAT THE ASSESS EE INCURRED TRAVELLING EXPENSES THROUGH HIS BANK CARD AND RECEI PT PAYMENTS HAVE BEEN PROPERLY RECORDED. WE ALSO OBSERVE THAT T HE ASSESSEE INCURRED TRAVELLING EXPENSES WHICH HAS BEEN REIMBUR SED BY THE CLIENTS AND AFTER RECORDING TOTAL AMOUNT OF REIMBUR SEMENT THERE WAS A BALANCE OF RS. 93.728/- WHICH COULD NOT BE RE IMBURSED AND THE SAME WAS CLAIMED BY THE ASSESSEE AS FOREIGN TRA VELLING EXPENSES LINKED WITH HIS CONSULTANCY PROFESSION. TH E AUTHORITIES BELOW HAVE NOT BROUGHT OUT ANY FACT TO SHOW THAT TH E IMPUGNED AMOUNT WAS INCURRED BY THE ASSESSEE FOR HIS PERSONA L USE OR FOR HIS FAMILY MEMBERS OR THE AMOUNT CLAIMED IS BOGUS OR IN CORRECT. 6. FROM RELEVANT OPERATIVE PART 3.1 OF THE ASSESSIN G OFFICER, WE OBSERVE THAT THE ASSESSING OFFICER MADE THIS ADDITI ON BY THE ONLY ALLEGING THAT TRAVELLING EXPENSES CLAIMED BY THE AS SESSED WHICH WERE NOT REIMBURSED TO HIM BY THE SAID COMPANIES CA NNOT BE ALLOWED AND THE AO TREATED THE SAME OF PERSONAL IN NATURE AND NOT LINKED TO THE ASSESSEES PROFESSIONAL RECEIPT. WE A RE NOT IN AGREEMENT WITH THIS CONCLUSION BECAUSE WHEN THE ASS ESSEE IS ITA NO. 879/DEL/2014 PRADIP BAIJAL 5 OFFERING TO TAX ENTIRE PROFESSIONAL RECEIPT FROM CO NSULTANCY PROFESSION AMOUNTING MORE THEN RS. 1.54 CRORES AND IF SOME AMOUNT OF TRAVELLING EXPENSES WHICH COULD NOT BE RE IMBURSED FROM THE CLIENTS AND WHICH IS NOT EXPRESSLY LINKED WITH HIS PERSONAL USE OR USED BY THE FAMILY MEMBERS THEN THE SAME DESERVE S TO BE ALLOWED AS PROFESSIONAL EXPENSES. THUS, WE INCLINED TO DEMOLISH CONCLUSION TO THE AUTHORITY BELOW AND DIRECT THE AO TO ALLOW THE SAME AS PROFESSIONAL EXPENSES. 7. THE LD. COUNSEL FURTHER POINTED OUT THAT TH E ASSESSING OFFICER DISALLOWED RS. 20,000/- WHICH WERE INCURRED BY THE ASSESSEE FOR CHARGES FOR PREPARATION AND FILING OF INCOME TAX RE TURN FOR RELEVANT AY 2009-10 TO M/S. MADHUR INVESTMENTS WITH OUT ANY JUSTIFIED REASON AND BASIS. THE LD. COUNSEL ALSO PO INTED OUT THAT ADMITTEDLY AND UNDISPUTEDLY ASSESSED SUBMITTED AUDI TED FINANCIAL STATEMENT OF HIS INCOME ALONG WITH AUDITORS REPORT IN FORM NO. 3CB BEFORE THE AO WHICH COULD NOT BE PREPARED WITHOUT A SSISTANCE OF A PROFESSIONAL, THEREFORE, THIS EXPENSES CANNOT BE DI SALLOWED. THE LD. DR STRONGLY OPPOSE THE CONTENTION OF THE LD. C OUNSEL OF THE ASSESSEE, HOWEVER, HE COULD NOT CONTROVERT THIS FAC T THAT THE ASSESSEE SUBMITTED AUDITED FINANCIAL STATEMENT ALON G WITH AUDITORS REPORT IN FORM NO. 3CB AND ALSO FILED INCOME TAX RE TURN SHOWING THE HUGE PROFESSIONAL CONSULTANCY INCOME. THEREFORE , THE ELEMENT OF THE EXPENDITURE INCURRED IN THIS REGARD IS ALLOW ABLE. ITA NO. 879/DEL/2014 PRADIP BAIJAL 6 8. IN OUR CONSIDERED OPINION WHEN THE ASSESSEE I S FILING AUDITED FINANCIAL STATEMENTS ALONG WITH AUDITORS REPORT IN FORM 3CB AND HAD ALSO FILED INCOME TAX RETURN THEN THE PROFESSIO NAL EXPENSES ON THIS ACCOUNT SHOULD BE ALLOWED AND WE DIRECT THE AO TO ALLOW THE SAME. 9. ON THE ISSUE OF ONE THIRD DISALLOWANCE OF RS. 2 ,22,974/- I.E. RS. 74,264/- FOR PERSONAL USES OF TELEPHONE, CAR MA INTENANCE AND CAR LEASE. THE LD. COUNSEL SUBMITTED THAT THERE WA S NO ELEMENT OF PERSONAL USE OF TELEPHONE AND CAR, THEREFORE, THIS DISALLOWANCE CANNOT BE HELD AS SUSTAINABLE. THE LD. DR STRONGLY SUPPORTED THE ACTION OF THE AO AND POINTED OUT THAT THE ASSESSEE HAS CLAIMED ENTIRE EXPENSES INCURRED ON TELEPHONE AND CAR AND T HE ELEMENT OF PERSONAL USE CANNOT BE RULED OUT. THEREFORE, THE AO WAS QUITE CORRECT IN MAKING DISALLOWANCE OF 1/3 RD OF CLAIMED EXPENDITURE. 10. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSI ONS, WE ARE OF THE VIEW THAT ON SPECIFIC QUERY FROM THE BENCH. THE LD. COUNSEL OF THE ASSESSEE COULD NOT SHOW US, THE ASSESSEE WAS HA VING ANY OTHER TELEPHONE OR CAR EXCLUSIVELY FOR HIS PERSONAL USE. THEREFORE, THE ELEMENT OF PERSONAL USE CANNOT BE RULED OUT AND PAR T DISALLOWANCE IN THIS REGARD IS OBVIOUS. HOWEVER, WE MADE POINTED OUT THAT THE 1/3 RD AMOUNT WAS DISALLOWED IS VERY HIGH AFTER CAREFUL CONSIDERATION AND ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE 15% OF THE CLAIMED EXPENDI TURE WOULD BE ITA NO. 879/DEL/2014 PRADIP BAIJAL 7 JUSTIFIED FOR MAKING DISALLOWANCE IN THIS REGARD FO R THE USE OF TELEPHONE AND CAR BY THE ASSESSEE FOR HIS PERSONAL AND FAMILY PURPOSES. THEREFORE, THE AO IS DIRECTED TO REDUCE T HE DISALLOWANCE TO THE 15% OF THE TOTAL CLAIM OF THE ASSESSEE ON TE LEPHONE, CAR MAINTENANCE AND CAR LEASE. ACCORDINGLY, THIS ISSUE IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 11. NEXT ISSUE FOR ADJUDICATION IS THE IMPUGNED ADDITION IS MADE BY THE AO ON ACCOUNT OF BUSINESS PROMOTION EXPENSES BY DISALLOWING RS. 1,60,194/- ON THE ALLEGATION THAT I N ABSENCE OF EXACT DETAILS AS TO LINK BETWEEN THESE EXPENSES AND PROFESSION OF THE ASSESSED. THIS EXPENDITURE CANNOT BE ALLOWED FO R TAX PURPOSES. 12. THE LD. COUNSEL POINTED OUT THAT THE ASSESSEE HAS TO MEET VARIOUS NATIONAL AND INTERNATIONAL CLIENTS ON VARIO US LOCATIONS INCLUDING HIS CONSULTANCY OFFICE SITUATED AT NOIDA , INDIA INTERNATIONAL CENTRE, DELHI GYMKHANA CLUB DELHI AN D NOIDA GOLF CLUB AND FOR THIS PURPOSE THE ASSESSEE HAS TO MAKE PAYMENTS TO THESE ENTITIES AS MEMBERSHIP FEE AND BILLS OF RESTA URANT. THE LD. COUNSEL ALSO POINTED OUT THAT WHEN THE ASSESSED IS OFFERING RS. 1.54 CRORES AS PROFESSIONAL FEES FOR TAX THEN THE A MOUNT OF RS. 1.60 LAKH IS VERY MEAGER AMOUNT TOWARDS MEETING WITH THE CLIENTS WHICH CANNOT BE DISALLOWED ON BALD AND VAGUE ALLEGA TIONS. ITA NO. 879/DEL/2014 PRADIP BAIJAL 8 13. THE LD. DR OPPOSE THE CONTENTIONS OF THE LD. CO UNSEL OF THE ASSESSEE AND SUPPORTED THE FIRST APPELLATE ORDER BY DRAWING OUR ATTENTION TO PARA 3.4 OF THE ORDER OF THE CIT(A). 14. ON CAREFUL CONSIDERATION ON ABOVE SUBMISSIONS, WE ARE OF THE VIEW THAT THE CONSULTANCY BUSINESS. THE ASSESSED IS REQUIRED TO MEET VARIOUS CLIENTS AT HIS OFFICE AND ALSO AT THE OTHER LOCATIONS AS PER CONVENIENCE OF HIS CLIENTS. FOR THIS PURPOSE, THE ASSESSED HAS USED INDIA INTERNATIONAL CENTRE, DELHI GYMKHANA CLU B, NOIDA GOLF CLUB FOR PROFESSIONAL MEETINGS AND THIS FACT HAS NO T BEEN DEMOLISHED BY THE AUTHORITIES BELOW. EVEN IN THE RE LEVANT PART OF 3.4, SECOND PART LAST PAGE OF THE IMPUGNED ORDER, W E OBSERVE THAT THE CIT(A) HAS NOTED THAT IT IS POSSIBLE THAT HE MA Y BE USING THESE FACILITIES, FURTHER, HIS PROFESSIONAL INTEREST BUT IN ABSENCE OF DETAILS TO LINK THESE EXPENSES WITH THE PROFESSION OF THE A SSESSEE THIS AMOUNT IS DISALLOWED. THE CIT(A) HAS NOT DOUBTED TH E QUANTUM OF AMOUNT INCURRED BY ASSESSED BUT ON THE POSSIBILITY OF PERSONAL USE THIS CLAIM HAS BEEN DISMISSED WHICH IS NOT A PROPER AND JUSTIFIED APPROACH OF A TAX AUTHORITY. IN TOTALITY OF FACTS A ND CIRCUMSTANCES OF THE CASE, WE SATISFIED THAT WHEN ON ONE HAND THE ASSESSEE OFFERING RS. 1.54 CRORE INCOME FROM CONSULTANCY BU SINESS AND IF AGAINST SAID HUGE AMOUNT THE ASSESSED IS CLAIMING 1,60,194/- AS BUSINESS PROMOTION EXPENSES WHICH WAS INCURRED FOR MEETINGS VARIOUS CLIENTS THEN THE SAME CANNOT BE DISALLOWED ON THE BASIS OF ITA NO. 879/DEL/2014 PRADIP BAIJAL 9 SURMISES AND CONJECTURES WITHOUT BRINGING OUT ANY A LLEGATION OR ELEMENT OR FACT OF PERSONAL USE. CONSEQUENTLY WE DI RECT THE AO TO ALLOW THE SAME AS BUSINESS AND PROMOTION EXPENSES O F THE ASSESSEE. 15. TO SUM UP THE ASSESSEES APPEAL IS ALLOWED ON THE ISSUE OF TRAVELLING EXPENSES, BUSINESS PROMOTION EXPENSES AN D PROFESSIONAL EXPENSES AND FURTHER THE ASSESSEES APPEAL IS PARTL Y ALLOWED ON THE ISSUE OF PART THIS DISALLOWANCE OF TELEPHONE, CAR M AINTENANCE, EXPENSES AND CAR LEASE. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 18/07/2016. SD/- SD/- ( S.V.MEHROTRA ) (C.M.GARG) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 18/07/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) AR, ITAT NEW DELHI ITA NO. 879/DEL/2014 PRADIP BAIJAL 10 DATE INITIAL 1. DRAFT DICTATED ON (HAND WRITTEN) 04.07.2016 2. DRAFT PLACED BEFORE AUTHOR 05.07.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. P