K.NARAYANAN, MUMBAI v. INCOME TAX OFFICER, WARD 17(3)(3), MUMBAI

ITA 5685/MUM/2009 | 2006-2007
Pronouncement Date: 09-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 568519914 RSA 2009
Assessee PAN AAHPN3211H
Bench Mumbai
Appeal Number ITA 5685/MUM/2009
Duration Of Justice 8 month(s) 17 day(s)
Appellant K.NARAYANAN, MUMBAI
Respondent INCOME TAX OFFICER, WARD 17(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 09-07-2010
Date Of Final Hearing 07-07-2010
Next Hearing Date 07-07-2010
Assessment Year 2006-2007
Appeal Filed On 23-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI A L GEHLOT ACCOUNTANT MEMBER ITA NO 5685/MUM/2009 (ASSESSMENT YEAR: 2006-07) K NARAYANAN 906- A DEEPAK JYOTI TOWERS PAREL TANK ROAD MUMBAI -400 031 PAN: AAHPN 3211 H VS ITO -17(3)(3) MUMBAI APPELLANT RESPONDENT APPELLANT BY: MR K SRINIVASAN RESPONDENT BY: MR S K SINGH ORDER THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT (A) ON 21.08.2009 IN RELATION TO THE ASSESSMENT YEAR 20 06-07. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT ( A) ERRED IN CONFIRMING THE FOLLOWING ADHOC ADDITIONS BY AO WITHOUT ACCEPTING THE FACTS OF THE CASE 1 CONVEYANCE EXPENSES RS 20 000/- 2) TRAVELLING EXPENSE S RS 4 000/- 3) SALES PROMOTION & STAFF WELFARE EXPENSE S RS 15 000/- 4) TELEPHONE CHARGES RS 33 706/- MISCELLANEO US EXPENSES RS 5 000/-. 2. CIT (A) ERRED IN CONFIRMING THE ADDITIONS MADE BY AO OF SOCIETY CHARGES WITHOUT ACCEPTING THE FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN I NDIVIDUAL CARRYING ON BUSINESS OF SALES AGENT FOR BIRLA TYRES IN THE NAME O F PROPRIETORY CONCERN ITA 5685/M/2009 K NARAYANAN 2 VIZ M/S VVG SALES & DISTRIBUTION. THE ASSESSEE FILED RETU RN OF INCOME DECLARING THE TOTAL INCOME AT RS 3 20 430/-. 3. DURING THE ASSESSMENT PROCEEDINGS THE CASE WAS SELECTED F OR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE DID NOT FILE COMPLETE DETAILS OF VARIOUS EXPENSES. HE ACCORDINGLY DISALLOWED SOME PART OF EXPENSES ON ADHOC BASIS. THE DET AILS OF HIS RELEVANT EXPENSES ARE AS UNDER:- TOTAL CLAIM DISALLOWED BY THE AO 1) CONVEYANCE EXPENSES RS 2 18 804 RS 20 000 2) TRAVELLING EXPENSES RS 23 598 RS 7 000 3) SALE PROMOTION RS 66 015 RS 20 000 4) STAFF WELFARE EXPENSES RS 61 049 5) TELEPHONE EXPENSES RS 1 68 531 RS 33 706 6) MISCELLANEOUS EXPENSES RS 15 481 RS 5 000 4. THE CIT (A) ALLOWED PARTLY TRAVELLING AND STAFF W ELFARE EXPENSES AND SALE PROMOTION AND CONFIRMED THE BALANCE AGAINST WHICH THE ASSESSEE IS IN APPEAL. 5. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PA RTIES AND RECORD PERUSED. I FIND THAT THE ASSESSING OFFICER AND CIT (A) A RE NOT CORRECT IN UPHOLDING ADHOC / LUMPSUM DISALLOWANCE WITHOUT POINTI NG OUT ANY SPECIFIC REASONS EXCEPT IN CASE OF TELEPHONE EXPENSES WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON ACCOUNT OF PERSONAL EXPENSES IN ABSE NCE OF ANY ADHOC / LUMPSUM DISALLOWANCE WHICH CANNOT BE MADE UNLESS IT IS POINTED OUT THAT IT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ITA 5685/M/2009 K NARAYANAN 3 LIGHT OF ABOVE DISCUSSION I DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT (A) OUT OF CONVEYANCE EXPENSES OF RS 20 000/- TRAVELLING EXPEN SES OF RS 4 000/- SALE PROMOTION AND STAFF WELFARE EXPENSES OF RS 15 000 /- AND MISCELLANEOUS EXPENSES OF RS 5 000/-. IN RESPECT OF TELEPHONE EXPENSES I NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED 20% OF THE TOTAL EXPENSES O N ACCOUNT OF PERSONAL USE. 6. CONSIDERING THE FACTS AND NATURE OF BUSINESS OF THE A SSESSEE IT WILL BE FAIR AND JUST IF DISALLOWANCE IS REDUCED FROM 20% TO 10 % AS PERSONAL USE OF TELEPHONE EXPENSES CANNOT BE RULED OUT. TO THE EXTENT OF PERSONAL USE OF THE TELEPHONE EXPENSES. IT CANNOT BE SAID THAT THE EXPENDI TURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER @ 20% IS RESTRICTED TO THE 10% AND DIRECTE D ACCORDINGLY. 7. BRIEF FACTS OF THE SECOND GROUND IS THAT THE ASSESSEE CLA IMED RS 49 800/- AS SOCIETY CHARGES IN THE PROFIT AND LOSS ACCOUNT. ON PERUSAL OF DETAILS IT HAS BEEN NOTICED BY THE ASSESSING OFFICER THA T THE SOCIETY CHARGES AND MAINTENANCE CHARGES WAS PAID TO DEEPAK JYOTI C H S LTD PAREL TANK ROAD AMBEWADI KALA CHOWKI MUMBAI IN WHICH THE A SSESSEE HIMSELF WAS A RESIDENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE EXPENSES ARE PERSONAL EXPENSES THEREFORE HE DISALLOWED THE SAME. T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE C IT (A). 8. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THA T THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS AND NOT ON ACCOU NT OF PERSONAL EXPENSES. THE ASSESSEE CARRIED OUT THE BUSINESS FROM THAT P REMISES AND AS PER THE UNDERSTANDING THOSE SOCIETY CHARGES IS TO BE BOR NE BY THE ASSESSEE. THAT SAID PREMISES IS STATED IN THE NAME OF WIFE OF THE ASSESSEE. THE LEARNED ITA 5685/M/2009 K NARAYANAN 4 AUTHORISED REPRESENTATIVE SUBMITTED THAT THE EXPENSES AR E INCURRED FOR THE PURPOSE OF BUSINESS ARE NOT PERSONAL EXPENSES HE RELIED UPON IN THE CASE OF STATE OF MADRAS VS G J COELHO (SC) 53 ITR 186 AND IN THE CASE OF JASWANT LAL KUTHIALA VS ITO 8 ITD 827 (TM). THE LEARNED DEPARTM ENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 9. I HAVE HEARD REPRESENTATIVE OF BOTH THE PARTIES R ECORD PERUSED AND GONE THROUGH THE DECISIONS CITED. ACCORDING TO SECTION 3 7 OF THE ACT ANY EXPENDITURE NOT BEING IN NATURE OF CAPITAL EXPENDITU RE OR PERSONAL EXPENSES OF THE ASSESSEE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGE ABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE CASE UNDER CONSIDERATION THE ASSESSEE HAS COMPLETELY FAILED TO ESTABLISH THAT SUCH M AINTENANCE CHARGES PAID TO THE SOCIETY WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE DID NOT PAY ANY RENT TO THE SAID P ARTY FOR WHICH THE ASSESSEE HAS CLAIMED THE MAINTENANCE CHARGES. THERE IS NO MA TERIAL OR OTHER EVIDENCE ON RECORD NOR IT HAS BEEN PRODUCED BEFORE ME TO ESTABLISH THAT SUCH EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. IN ABSENCE OF MATERIAL THE EXPENSES CLAIMED SOCIETY MAINTENANCE CHARGES IS CLEARLY PERSONAL NATURE EXPENSES AND SUCH PERSONAL NATURE EXPENSES ARE NOT ALLOWAB LE U/S 37 OF THE ACT. 10. I AGREE WITH THE RATIOS LAID DOWN IN THE JUDGMEN TS CITED BY THE LEARNED AUTHORISED REPRESENTATIVE BUT SAME ARE NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE UNDER CONSIDERATION AND FAILED TO ESTABLISH T HAT THE SAID EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. TH E LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT SUCH EXPENSES ARE ALLOWED IN EARLIER YEAR OR SUBSEQUENT YEAR THIS CONTENTION IS ALSO DOES NOT HELP TO THE ASSESSEE. ITA 5685/M/2009 K NARAYANAN 5 THE ASSESSMENTS OF EARLIER YEARS WERE NOT SUBJECT TO SCRUTIN Y AND ASSESSMENTS WERE NOT MADE U/S 143(3) OF THE ACT. I THERE FORE CONFIRM THE ADDITION OF RS 49 800/-. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 9TH DAY O F JULY 2010. SD/- (A L GEHLOT) ACCOUNTANT MEMBER MUMBAI DATE: 9TH JULY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -XXVII MUMBAI. 4) THE CIT-CITY-17 MUMBAI. 5) THE D.R. SMC BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITA 5685/M/2009 K NARAYANAN 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 07.07.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 07.07.2010 SR.PS 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 SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER