Mrs. Kinty Suri, New Delhi V. ITO, New Delhi

ITA 900/DEL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3067 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Additional evidence
• Section: 69C; 153A

Judgement Text

PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH -SMC NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 900/DEL/201 7 ASSESSMENT YEAR : 2012-13 MRS. KINTY SURI C/O SANJIV SAPRA & ASSOCIATES, CAS, C-763, NEW FRIENDS COLONY NEW DELHI 110 025 PAN ARTPS3829B VS. ITO WARD-10(1) NEW DELHI. (APPELLANT) (RESPONDENT) PER BHAVNESH SAINI, JUDICIAL MEMBER ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A) -35, NEW DELHI DATED 30 TH JANUARY, 2017 FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS :- 1. THAT THE LD. CIT(A) HAD ERRED ON FACTS AND UNDER T HE LAW IN CONFIRMING THE ADDITION OF RS. 5,00,000/- ON ACCOUN T UNEXPLAINED PERKS U/S 17(2)(III) OF I.T. ACT AS MAD E BY THE AO. 2. THAT THE LD. CIT(A) HAD ERRED ON FACTS AND UNDER TH E LAW IN CONFIRMING THE ADDITION OF RS. 3,00,000/- ON ACCOUN T OF UNEXPLAINED EXPENDITURE INCURRED ON FOREIGN TRAVELS AS MADE BY THE AO. 3. THAT WITHOUT PREJUDICE TO GROUND NO. 1 & 2 ABOVE, T HE ADDITIONS AS MADE BY THE AO AND CONFIRMED LD. CIT(A ) ARE VERY EXCESSIVE. ASSESSEE BY : SHRI SANJIV SAPRA, CA DEPARTMENT BY: MS. BEDOBANI, SR. DR DATE OF HEARING 25/05/2017 DATE OF PRONOUNCEMENT 08/06/2017 ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 2 OF 7 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING AS SESSMENT PROCEEDINGS, THE AO OBSERVED THAT IN THE RELEVANT Y EAR THE ASSESSEE HAD UNDERTAKEN FOREIGN TRAVEL TOUR TO UAE, SINGAPORE ET C. HOWEVER SHE COULD NOT FURNISH THE REASONS/ PURPOSE FOR UNDERTAKING SU CH VISITS. THE ASSESSEE COULD NOT PRODUCE ANY CORRESPONDENCE/WORK CONTRACT OR INVITATION LETTER FROM THE COUNTRIES WHICH COULD J USTIFY HER CLAIM THAT THESE VISITS WERE UNDERTAKEN FOR THE PURPOSE OF BUS INESS AND HENCE SHOULD BE ALLOWED AS A BUSINESS EXPENSE. THE AO ALS O FOUND THAT THE EXPENDITURE FOR THE FOREIGN VISITS WAS BORNE BY M/S . DESIGN & DEVELOPMENT INDIA (PVT.) LTD., A COMPANY WHERE ASSE SSEE WAS A DIRECTOR. THE AO THUS DISALLOWED THE EXPENSE CLAIME D OF RS. 5 LACS U/S 17(2)(III) ON ACCOUNT OF UNEXPLAINED PERKS. SIMILAR LY AO NOTED THAT ASSESSEE HAS ALSO UNDERTAKEN FOREIGN VISIT ON 1 ST JULY, 2012, DETAILS OF WHICH HAVE NOT BEEN FURNISHED BY THE ASSESSEE. THE ASSESSEE SIMPLY EXPLAINED THAT SHE HAD UNDERTAKEN JOURNEY WITH HER HUSBAND AND EXPENDITURE HAS BEEN BORNE BY HER HUSBAND. THE AO, THEREFORE, DISALLOWED ESTIMATED EXPENDITURE U/S 69C AT RS. 3 L ACS AND ADDED TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE SUBMITTED ADDITIONAL EVIDENCES BEFO RE LD. CIT(A) LIKE COPY OF BOARD RESOLUTION OF THE COMPANY ETC. TO WHICH THE AO OBJECTED AND SUBMITTED IN THE REMAND REPORT THAT AD DITION WAS MADE FOR FOREIGN VISIT TO UAE AND SINGAPORE BECAUSE THE PURP OSE OF VISITS REMAINED UNVERIFIED AND ASSESSEE ALSO STATED THAT E XPENSES ARE BORNE ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 3 OF 7 BY HER HUSBAND. IT WAS ALSO STATED THAT ASSESSEE HA S NOT PRODUCED ANY EVIDENCE OF PURPOSE OF VISITING FOREIGN COUNTRY AN D FAILED TO EXPLAIN ANY OFFICIAL PURPOSE. IT WAS ALSO SUBMITTED THAT WITH R EGARD TO ADDITION OF RS. 3 LACS U/S 69C, THE PASSPORT SHOWS THAT ASSESSEE HA S UNDERTAKEN FOREIGN VISITS ON 1 ST JULY, 2011 INSTEAD OF 1 ST JULY, 2012 MENTIONED IN THE ASSESSMENT ORDER. 4. THE ASSESSEE IN THE REJOINDER SUBMITTED BEFORE T HE LD. CIT(A) THAT SHE IS BACHELOR OF ARTS FROM DELHI UNIVERSITY. SHE HAD BECOME A PARTNER OF FIRM M/S. DESIGN & DEVELOPMENT IN ASSE SSMENT YEAR 2008- 09. THE ASSESSEE WAS INVOLVED IN THE BUSINESS ACTIV ITIES OF PROVIDING DESIGN AND INTERIOR WORK SERVICES TO ITS CLIENTS AN D USED TO TRAVEL FOR MEETING AND DEVELOPING BUSINESS RELATIONS. THE FIRM WAS TAKEN OVER BY COMPANY BY THE NAME OF M/S. DESIGN & DEVELOPMENT IN DIA PVT. LTD. IN WHICH ASSESSEE IS A SHARE HOLDER / DIRECTOR . THE A SSESSEE CONTINUED TO BE INVOLVED IN THE BUSINESS ACTIVITIES AS WERE DOIN G EARLIER. NO TRAVEL EXPENSES HAVE BEEN DISALLOWED EARLIER. THE FOREIGN TRIP TRAVEL EXPENDITURE OF THE ASSESSEE WERE BORNE BY M/S. DESI GN & DEVELOPMENT INDIA PVT. LTD. AND SUCH EXPENDITURE HAVE BEEN ACC EPTED BY THE AO U/S 153A DATED 29 TH FEBRUARY, 2016. THEREFORE, NO PART OF SUCH EXPENDI TURE CAN BE CONSIDERED TO BE A PERK IN THE HANDS OF ASSE SSEE. SECTION 17(2)(III) AS INVOKED BY THE AO IS NOT APPLICABLE T O THE FACTS OF THE CASE. NO FOREIGN TRAVEL EXPENDITURE HAVE BEEN CLAIMED IN THE HANDS OF THE ASSESSEE BECAUSE SAME HAVE BEEN INCURRED BY THE COM PANY. THEREFORE, BOTH THE ADDITIONS ARE LIABLE TO BE DELETED. ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 4 OF 7 5. LD. CIT(A) NOTED THAT ASSESSEE HAS NOT GIVEN AN Y EVIDENCE LIKE PROJECT REPORT AND OTHER DOCUMENTS TO SHOW THAT SH E WAS DOING ANY OFFICIAL WORK. THE BACHELOR DEGREE IN ARTS DOES NO T QUALIFY THE ASSESSEE AS A DESIGN EXPERT. THE ADDITION WAS THEREFORE, CON FIRMED. AS REGARDS ADDITION OF RS. 3 LACS IT WAS CONFIRMED BECAUSE NO EVIDENCE HAS BEEN FILED. 6. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. LD. COUNSEL FOR ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND REFER RED TO CERTIFICATE OF THE COMPANY, AND DETAILS OF TRAVELLING EXPENSES BOR NE BY THE COMPANY, BOARD RESOLUTION AND IT WAS SUBMITTED THAT PROVISIO NS OF SECTION 17(2)(III) OF THE I.T. ACT DOES NOT APPLY TO THE AS SESSEE AS SHE WAS NOT AN EMPLOYEE OF M/S. DESIGN & DEVELOPMENT INDIA PVT. LTD. AND WAS ONLY ITS DIRECTOR AND SHARE HOLDER WHEREAS SUCH PRO VISIONS APPLIES TO EMPLOYEE DIRECTOR. THE ASSESSEE HAS NOT RECEIVED AN Y SALARY AND ANY MEETING FEES FROM THE COMPANY. LD. COUNSEL FOR ASS ESSEE RELIED UPON ORDER OF ITAT DELHI BENCH IN THE CASE OF SMT. SHILP A PASARI VS. ITO IN ITA NO. 3204/DEL/2009 DATED 14 TH DECEMBER, 2011 IN SUPPORT OF CONTENTION THAT PROVISION OF SECTION 17(2)(III) WOU LD NOT APPLY IN THE CASE OF THE ASSESSEE. LD. COUNSEL FOR ASSESSEE FURTHER S UBMITTED THAT THE AO ACCEPTED IN THE REMAND REPORT THAT TRAVELLING OF 1 ST JULY, 2012 IS ACTUALLY 1 ST JULY, 2011 WHICH IS PART OF THE ENTIRE FOREIGN TRA VEL UNDERTAKEN BY THE ASSESSEE. THEREFORE, NO SEPARATE ADDITION OF RS. 3 LACS SHOULD HAVE BEEN MADE. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 5 OF 7 BELOW AND SUBMITTED THAT IN THE ORDER OF THE COMPAN Y THE FACTS HAVE NOT BEEN DISCUSSED AND THAT TRAVEL OF 1 ST JULY, 2011 DO NOT MATCH WITH FOREIGN JOURNEY UNDERTAKEN BY THE ASSESSEE. 7. I HAVE CONSIDERED RIVAL SUBMISSIONS. THE AO MAD E ADDITION OF RS. 5 LACS U/S 17(2)(III) OF THE ACT ON ACCOUNT OF UNEX PLAINED PERKS. SECTION 17(2)(III) OF THE ACT READS AS UNDER :- (III) THE VALUE OF ANY BENEFIT OR AMENITY GRANTED OR PROVIDED FREE OF COST OR AT CONCESSIONAL RATE IN ANY OF TH E FOLLOWING CASES (A) BY A COMPANY TO AN EMPLOYEE WHO IS A DIR ECTOR THEREOF; (B) BY A COMPANY TO AN EMPLOYEE BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY ; (C) BY ANY EMPLOYER (INCLUDING A COMPANY) TO AN EMPLOYE E TO WHOM THE PROVISIONS OF PARAGRAPHS (A) AND (B) OF THIS SUB-CLAUSE DO NOT APPLY AND WHOSE INCOME [ UNDER TH E HEAD SALARIES (WHETHER DUE FROM , OR PAID OR ALLO WED BY, ONE OR MORE EMPLOYERS), EXCLUSIVE OF THE VALUE OF ALL BENEFITS OR AMENITIES NOT PROVIDED FOR BY WAY OF MONETARY PAYMENT, EXCEEDS [FIFTY] THOUSAND RUPEES:] [EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE USE OF ANY VEHICLE PROVIDED BY A COMPANY OR AN EMPLOYER FOR JOURNEY BY THE ASSESSEE FROM HIS RESIDENCE TO HIS OFFICE OR OTHER PLACE OF WORK, OR FROM SUCH OFFICE OR PLACE TO HIS RESIDENCE, SHALL NOT BE REGA RDED AS A BENEFIT OR AMENITY GRANTED OR PROVIDED TO HIM FREE OF COST OR AT CONCESSIONAL RATE FOR THE PURPOSES OF THE SUB-CL AUSE;] 8. THE AUTHORITIES BELOW WHILE INVOKING THE ABOVE P ROVISION AGAINST THE ASSESSEE HAS MENTIONED IN THE IMPUGNED ORDERS T HAT RS. 5 LACS HAS BEEN INCURRED BY THE COMPANY ON HER PERSONAL TOURS UNDERTAKEN OF FOREIGN COUNTRIES, SOURCE OF SUCH EXPENDITURE IS TH E COMPANY IN WHICH SHE HAS BEEN DIRECTOR. SECTION 17(2(III) OF THE I.T . ACT DOES NOT APPLY TO THE ASSESSEE AS ASSESSEE WAS NOT AN EMPLOYEE OF M/S . DESIGN & ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 6 OF 7 DEVELOPMENT (P) LTD.. THE ASSESSEE CLAIMED THAT SHE WAS ONLY DIRECTOR AND SHARE HOLDER WHEREAS THIS SECTION APPLIES TO AN EMPLOYEE DIRECTOR. LD. COUNSEL FOR ASSESSEE ALSO EXPLAINED THAT ASSESS EE HAS ONLY 14% OF THE SHARE HOLDING IN THE AFORESAID COMPANY WHICH WA S ALSO SPECIFICALLY SUBMITTED BEFORE THE AUTHORITIES BELOW TO SHOW ASSE SSEE HAS NO SUBSTANTIAL INTEREST IN COMPANY. THEREFORE, IN MY V IEW PROVISION OF SECTION 17(2)(III) WOULD NOT APPLY IN THE CASE OF T HE ASSESSEE. LD. COUNSEL FOR ASSESSEE RELIED UPON ORDER OF THE ITAT DELHI BENCH IN THE CASE OF SMT. SHILPA PASARI VS. ITO (SUPRA) IN WHICH IN PARA 10 IT IS HELD AS UNDER :- 10. APROPOS ASSESSEES APPEAL, IT HAS NOT BEEN DISPUTED THAT THERE WAS NO RELATIONSHIP OF EMPLOYER EMPLOYEE BETW EEN SKCSPL AND THE ASSESSEE. A PERQUISITE U/S 17(2)/17(3) CAN BE ADDED IN THE HANDS OF THE ASSESSEE ONLY IF THE EMPLOYER EMPL OYEE RELATIONSHIP IS ESTABLISHED. IN THE ABSENCE THEREOF , THE ADDITION IN THE HANDS OF ASSESSEE U/S 17(2)/17(3) CANNOT BE MAD E. IN VIEW THEREOF, WE ALLOW THIS GROUND OF APPEAL TAKEN BY TH E ASSESSEE. 9. SINCE THE AUTHORITIES BELOW SIMPLY NOTED THAT AS SESSEE WAS A DIRECTOR IN THE AFORESAID COMPANY THEREFORE CONDITI ONS OF SECTION 17 (2)(III) WOULD NOT APPLY IN THE CASE OF ASSESSEE. T HEREFORE, ON THIS REASON ITSELF THE ADDITION OF RS. 5 LACS WOULD BE D ELETED. IT MAY ALSO BE NOTED HERE THAT ASSESSEE FILED CERTIFICATE AND BOAR D RESOLUTION OF M/S. DESIGN & DEVELOPMENT INDIA PVT. LTD. IN WHICH IT I S CLARIFIED THAT BOARD HAS SENT THE ASSESSEE TO FOREIGN TRIP FOR BUSINESS PURPOSES AND ALL THE EXPENDITURE ARE BORNE BY THE COMPANY. IT IS ALSO CE RTIFIED THAT ASSESSEE WAS A NON-EMPLOYEE DIRECTOR AND SHARE HOLDER IN T HE COMPANY AND NO SALARY OR DIRECTORS FEES WAS PAID TO HER BY THE CO MPANY DURING THE YEAR ITA NO. 900/DEL/2017 MRS. KINTY SURI VS. ITO PAGE 7 OF 7 UNDER CONSIDERATION. THESE EVIDENCES ON RECORD CLEA RLY PROVE THAT ASSESSEE UNDERTAKEN FOREIGN VISITS FOR THE PURPOSE OF BUSINESS OF COMPANY AND IS NOT A PERQUISITE WITHIN THE MEANING OF SECTION 17(2)(III) OF THE I.T. ACT. FURTHER THE AUTHORITIES BELOW MADE ADDITION OF RS. 3 LACS IN RESPECT OF FOREIGN VISIT UNDERTAKEN BY ASSESSEE ON 1 ST JULY, 2011. LD. COUNSEL FOR ASSESSEE REFERRED TO PB 62 WHICH IS CER TIFICATE OF FOREIGN VISIT ISSUED BY THE COMPANY TO SHOW THAT ASSESSEE HAS VIS ITED FOREIGN COUNTRY FROM 30 TH JUNE, 2012 TO 1 ST JULY, 2011. THEREFORE, THIS VISIT WAS ALREADY PART OF THE FOREIGN VISIT OF THE ASSESSEE. THEREFOR E, NO SEPARATE ADDITION SHOULD HAVE BEEN MADE ON ESTIMATE IN A SUM OF RS. 3 LACS. 10. CONSIDERING THE ABOVE DISCUSSION AND IN THE LIG HT OF THE ABOVE PROVISIONS AND MATERIAL ON RECORD, I AM OF THE VIEW BOTH THE ADDITIONS OF RS. 5 LACS AND RS. 3 LACS ARE WHOLLY UNJUSTIFIED. I ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE BOT H THE ADDITIONS. 11. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT. SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER DATED: 08/06/2017 *VEENA* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. PRINCIPAL CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR