Shri P.Amarnath Reddy, CHENNAI V. ACIT, CHENNAI

ITA 926/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64212 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 24-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR MRS ANITA SUMANTH
• Keywords: Business expenditure; Reason to believe
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 926/MDS/2012 ASSESSMENT YEAR : 2005-06 SHRI P. AMARNATH REDDY, NO.1/1, KOTHARI ROAD, NUGAMBAKKAM, CHENNAI- 600 034. (PAN : AABPR9639) V. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-III(3), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.(MRS.) ANITA SUMANTH, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 18.07.2012 DATE OF PRONOUNCEMENT : 28.08.2 012 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21-02-2012 PASSED BY THE CIT(APPEALS)-XII, CH ENNAI FOR THE ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. ITA NO.926 /MDS/2012 2 3. GROUNDS 2 TO 6 RELATE TO THE DISALLOWANCE OF FO REIGN TRAVEL EXPENSES TO THE TUNE OF ` 3,36,739/- RELATING TO THE ASSESSEES WIFE, SMT. SWETHA REDDY AND ` 4,26,617/- RELATING TO SHRI AMARNATH REDDY. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE AGENCY BUSINESS OF LEATHER AND LEATHER PRODUCTS IN THE NAME AND STYLE OF M/S. SHOETEK AGENCIES, WHICH IS A PROP RIETARY CONCERN. HE WAS ALSO A PARTNER IN THE FIRM M/S. M ONDOPEL, WHICH IS INVOLVED IN LEATHER EXPORT BUSINESS WITH H IS WIFE, SMT. SWETHA A. REDDY, AS THE OTHER PARTNER. SUBSEQUENTL Y, THE FIRM WAS CONVERTED INTO A PROPRIETARY CONCERN OF THE ASS ESSEE, SHRI P. AMARNATH REDDY. THE ASSESSEE HAD FILED HIS RETU RN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING T OTAL INCOME OF ` 6,33,20,125/-. THE SAME WAS PROCESSED UNDER SECTI ON 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT FOR S HORT). SUBSEQUENTLY IT WAS SELECTED FOR SCRUTINY AND ASSES SMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED FROM THE BOOKS OF ACCOUNT OF M/S. SHOETEK A GENCIES THAT THE ASSESSEE, SHRI AMARNATH REDDY HAD VISITED FOREIGN COUNTRIES ALONG WITH HIS WIFE, SMT. SWETHA REDDY. THOUGH IT IS MENTIONED THAT SHE WENT ABROAD IN THE CAPACITY OF M ARKETING ITA NO.926 /MDS/2012 3 EXECUTIVE, THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE WHICH MAY PROVE THAT HER VISIT WAS EXCLUSIVELY FOR THE BUSINESS PURPOSES. THE AMOUNT SPENT ON HER FOREIGN TOUR OF ` 3,36,739/- AS A PERSONAL AND PRIVATE TOUR AND WAS NOT ALLOWED AS A BUSINESS EXPENDITURE. 5. AO FURTHER OBSERVED THAT SHRI AMARNATH REDDY, T HE ASSESSEE, HAD VISITED FOREIGN COUNTRIES FOR HIS BUS INESS PROMOTION AND THE TOTAL AMOUNT SPENT ON HIS FOREIGN TRAVEL AMOUNTED TO ` 21,33,,088/-. SINCE HIS WIFE HAD ACCOMPANIED HIM ON SEVERAL OCCASIONS, THE ELEMENT OF PERSONAL E XPENSES COULD NOT BE RULED OUT. HENCE ` 4,26,617/- (I.E. 1/5 TH OF ` 21,33,088/-) WAS DISALLOWED FOR HIS PERSONAL FOREIG N TOUR. 6. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(A). IT WAS SUBMITTED BEFORE THE LEA RNED CIT(A) THAT SMT. SWETHA REDDY WHO ACCOMPANIED HER HUSBAND, IS AN EXPERT IN THE BUSINESS OF LEATHER AND HENCE THE ASS ESSEE AVAILED HER SERVICES DURING THE FOREIGN TOUR . THE REFORE, THE FOREIGN TOUR EXPENSES OF SMT. SWETHA REDDY FORMED P ART OF THE BUSINESS EXPENSES. IT WAS FURTHER SUBMITTED BE FORE THE CIT(A) THAT SHRI AMARNATH REDDY VISITED FOREIGN COU NTRIES ONLY FOR THE PURPOSE OF THE BUSINESS AND, THEREFORE, NO DISALLOWANCE COULD BE MADE. THE LEARNED CIT(A) AFTER CONSIDERIN G THE ITA NO.926 /MDS/2012 4 SUBMISSIONS OF THE ASSESSEE HAS OBSERVED THAT SMT. SWETHA REDDY WAS NOT EMPLOYED/ENGAGED BY THE ASSESSEE FOR HIS BUSINESS ACTIVITIES DURING THE YEAR UNDER CONSIDERA TION. THERE WAS NO SALARY PAYMENT OR ANY OTHER PAYMENT BY WAY O F CONSULTANCY ETC. PAID TO HER. FURTHER SHE HAS NO S PECIALIZED QUALIFICATION IN THE FIELD OF LEATHER TECHNOLOGY OR INDUSTRY. WITH THE ABOVE OBSERVATION THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE AO. 7. INSOFAR AS 1/5 TH DISALLOWANCE MADE IN RESPECT OF SHRI AMARNATH REDDY, THE ASSESSEE, IS CONCERNED, THE CIT (A) HAS OBSERVED THAT THE ASSESSEE WAS ACCOMPANIED BY HIS W IFE ON SOME OCCASIONS. THEREFORE, THE PROBABILITY OF PERS ONAL EXPENSES WILL BE ON HIGHER SIDE. THEREFORE, THE AO HAS EVERY REASON TO BELIEVE THAT PART OF THE FOREIGN TRAVEL E XPENSES INCURRED BY THE ASSESSEE INVOLVED A PORTION OF PERS ONAL EXPENDITURE AND HENCE DISALLOWED A REASONABLE PORTI ON OF 1/5 TH OF THE EXPENSES CLAIMED. WITH THE ABOVE OBSERVATIO N HE CONFIRMED THE ORDER OF THE AO. 8. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE FILED WRITTEN SUBMISSIONS AND SUBMITTED THAT SMT. S WETHA REDDY IS AN EMPLOYEE OF THE ASSESSEE. SHE IS HAVIN G A ITA NO.926 /MDS/2012 5 MASTERS DEGREE FROM OSMANIA UNIVERSITY, HYDERABAD AND SHE IS EMPLOYED AS A MARKET EXECUTIVE OF THE ASSESSEES LEATHER BUSINESS. SHE RECEIVES PF AND ESI AND TO THAT EFFE CT PF RECEIPTS RELATING TO ASSESSMENT YEARS 1994-95 AND 2 004-05 WERE FILED. 9. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT THERE IS NOTHING ON RECORD TO PROVE THAT SMT. SWETHA REDD Y IS AN EMPLOYEE OF THE ASSESSEE. HE FURTHER SUBMITTED THA T NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE HAS FILED DETAILS IN RESP ECT OF PF AND ESI. THOUGH THE DETAILS HAVE BEEN FILED BEFORE THE TRIBUNAL, THE SAME CANNOT BE CONSIDERED AT THIS STA GE. HE STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORI TIES BELOW. 10. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CASE OF THE ASSESSEE IS THAT SMT. SWETHA REDDY IS THE WIFE OF THE ASSESSEE AND IS AN EMPLOYEE OF THE ASSESSEE WORKING AS A BUSINESS EXECUTIVE. THE ASSESSEE HAS NOT FILED ANY APPOINTMENT LETTER, PARTICULARS REGARDING THE SALAR Y PAID TO HER ETC. TO PROVE THAT SMT. SWETHA REDDY IS THE BUSINES S EXECUTIVE OF THE ASSESSEE. AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE FILED THE PF A ND ESI ITA NO.926 /MDS/2012 6 DETAILS RELATING TO THE ASSESSMENT YEARS 1994-95 AN D 2004-05. THESE DETAILS WERE FILED NEITHER BEFORE THE ASSESSI NG OFFICER NOR BEFORE THE LEARNED CIT(APPEALS). NO APPLICATIO N HAS BEEN FILED BEFORE US TO ADMIT THE SAME. EVEN THE EVIDEN CE FILED BEFORE US IS NOT SUFFICIENT TO PROVE THAT SMT. SWET HA REDDY IS AN EMPLOYEE OF THE ASSESSEE BECAUSE THERE IS NOTHIN G ON RECORD TO SHOW AS TO WHEN WAS SHE APPOINTED AND W HAT WAS HER SALARY ETC. THE ASSESSEE WAS NOT IN A POSITIO N TO EXPLAIN WHY THESE DETAILS IN RESPECT OF PF AND ESI RECEIPTS RELATING TO THE ASSESSMENT YEARS 1994-95 AND 2004-05 COULD NOT BE FILED BEFORE THE AUTHORITIES BELOW. IN OUR CONSIDERED OP INION, THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON HIM TO PROVE THAT SMT. SWETHA REDDY IS AN EMPLOYEE OF THE ASSESS EE. THEREFORE, THE LEARNED CIT(APPEALS), AFTER CONSIDER ING THE ENTIRE DETAILS, HAS RIGHTLY CONFIRMED THE ORDER PAS SED BY THE ASSESSING OFFICER. WE SEE NO REASON TO INTERFERE W ITH HIS ORDER. 11. SO FAR AS THE DISALLOWANCE MADE IN RESPECT OF 1/5 TH OF THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE IS CONCERNED, IT IS A FACT THAT THE ASSESSEE HAS TRAVE LLED ALONG WITH HIS WIFE AND THERE IS EVERY POSSIBILITY THAT T HE ASSESSEE MUST HAVE INCURRED SOME PERSONAL EXPENDITURE AND TH EREFORE ITA NO.926 /MDS/2012 7 THE LEARNED CIT(A) HAS RIGHTLY CONFIRMED THE 1/5 TH DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS CAST UPON HIM TO PROVE T HAT THERE IS NO POSSIBILITY OF INCURRING SOME PERSONAL EXPENDITU RE. THEREFORE, THE ORDER PASSED BY THE LEARNED CIT(A) I S FAIR AND REASONABLE. WE FIND NO INFIRMITY IN HIS ORDER AND THEREFORE NO INTERFERENCE IS CALLED FOR. IN THE CIRCUMSTANCES, THE GROUNDS OF APPEAL RELATING TO THE FOREIGN TRAVEL EXPENDITURE A RE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 28 TH OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (O. K. NARAYANAN) ( V.DURGA RAO ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 28 TH AUGUST, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE