BAXI FREIGHTWINGS, MUMBAI v. ASST CIT 12(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI SANJAY ARORA ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN JUDICIAL MEMBER ITA NO. 2496/MUM/2012 ASSESSMENT YEAR: 2007 - 08 BAXI FREIGHTWINGS 2 ND FLOOR READYMONEY MANSION 4 3 VEER NARIMAN ROAD MUMBAI - 400 001 PAN :AAHFB 8305 J VS. ACIT - 12(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARSH SHAH RESPONDENT BY : SHRI ASHWANI SINHA DATE O F HEARING : 22.10.2013 DATE OF PRONOUNCEMENT : 30 . 10 .2013 O R D E R PER DR . S.T.M. PAVALAN J M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - 10 MUMBAI DATED 31.01.2012 FOR THE ASSESSMENT YEAR 2007 - 08. 2. IN THIS APPEAL THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) CONFIRMING THE AD HOC DISALLOWANCE OF RS.1 80 013/ - MADE BY THE AO ON ACCOUNT OF GIFT EXPENSES CLAIMED BY THE ASSESSEE. 3. BRIEFLY STATED THE ASSESSEE A FIRM WHILE DECLARING A TOTA L INCOME AT RS.70 96 367 / - IN THE P&L A/C HAD DEBITED AN AMOUNT OF RS.3 60 029/ - UNDER THE HEAD OFFICE AND ADMINISTRATION EXPENSES THAT IT HAD ALLEGED INCURRED OUT OF GIFT EXPENSES. HOWEVER IN THE ASSESSMENT FRAMED U/S 143(3) OF THE INCOME TAX ACT THE AO MA DE AN AD HOC DISALLOWANCE OF 50% OF THE SAID EXPENSES I.E. RS.1 80 013/ - ON THE REASON THAT NO DETAILS OF GIFT ITEMS PURCHAS ED AND THE RECIPIENTS OF THE GIFTS WERE NOT PROVIDED. ACCORDING TO THE AO IN THE ABSENCE OF SUCH DETAILS THE ENTIRE EXPENSES COULD NOT BE SAID TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. ITA NO. 2496/MUM/2012 BAXI FREIGHTWINGS ASSESSMENT YEAR : 2007 - 08 2 ON APPEAL THE LD.CIT(A) CONFIRMED THE ADDITION/DISALLOWANCE MADE BY AO AS THE ASSESSEE HAD FAILED TO ESTABLISH THE BUSINESS EXPEDIENCY FOR THE ENTIRE EXPENDITURE AND TH EREBY HELD THE DISALLOWANCE OF 50% MADE BY THE AO AS REASONABLE. AGGRIEVED BY THE IMPUGNED ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECO RD IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS NOT DISCHARGED ITS ONUS OF PROVIDING THE NECESSARY DETAILS OF THE GIFT EXPENSES DURING THE ASSESSMENT/APPELLANT PROCEEDINGS. AT THE SAME TIME IT CANNOT BE DENIED THAT THE ASSESSEE HAS INCURR ED CERTAIN EXPENSES ON THIS COUN T WHICH MUST NECESSARILY BE INCURRED BY HIM FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS BROUGHT TO OUR NOTICE THAT THE SAID EXPENSES INCUR RED BY THE ASSESSEE CONSTITUTE ONLY 0. 68% OF THE TOTAL BUSINESS RECEIPTS. CONSIDERING THE FACTS IN TOTO WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITI ES BELOW ARE JUSTIFIED IN MAKING THE SAID AD HOC DISALLOWANCE AT 50% WHICH IN OUR VIEW IS EXCESSIVE AND IT WOULD BE JUST AND PROPER IF THE AD HOC DISALLOWANCE ON THIS COUNT IS RESTRICTED TO 20% OF THE EXPENSES OF RS.3 60 026/ - WHICH WORKS OUT AT RS.72 005 / - . WE ORDER AND DIRECT ACCORDINGLY. 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN CO URT ON THIS 30 TH DAY OF OCTOBER 2013. SD/ - SD/ - ( SANJAY ARORA ) (D R. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 30 .10 . 2013. * S RIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT ( A) CONCERNED MUMBAI THE DR B BENCH // TRUE COPY // BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.