MRS. JYOTI A. ISHARANI, MUMBAI v. ADDL.C.I.T. RANGE 17(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.6387/MUM/2008 ASSESSMENT YEAR : 2004-05 MRS. JYOTI A. ISHARANI 312 BLOCK NO.3 LAXMICHAND HOUSE TELANG ROAD MATUNGA MUMBAI-400 019. ..( APPELLANT ) P.A. NO. (AAAPI 0608 G) VS. ADDL. COMMISSIONER OF INCOME TAX RANGE-17 (2) PIRAMAL CHAMBERS 4 TH FLOOR OPP. LALBAUG POST OFFICE MUMBAI-400 012. ..( RESPONDENT ) APPELLANT BY : SHRI DHIRENDRA M. SHAH RESPONDENT BY : SHRI SU RENDRA KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.9.2008 PASSED BY THE LD. CIT(A) FOR THE ASS ESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL IS A PROPRIETOR OF M/S. JAICHEMIE FILED RETURN OF INC OME DECLARING INCOME FROM COMMISSION AND INTEREST RS.38 94 241/-. HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.45 04 709/- INCLUDING THE DISALLOWANCE OF ELECTRICITY EXPENSES RS.26 842/- FOREIGN TRAVELLIN G EXPENSES RS.64 798/- OUT OF GENERAL EXPENSES RS.1 78 392/- AND CONVEYANC E EXPENSES RS.1 71 593/- VIDE ORDER DATED 28.8.2006 PASSED U/ S. 143(3) OF THE INCOME TAX ACT 1961(THE ACT). ON APPEAL THE LD. CI T(A) WHILE UPHOLDING THE DISALLOWANCE OF ELECTRICITY EXPENSES FOREIGN TRAVE L EXPENSES CONVEYANCE ITA NO.6387/M/10 A.Y:04-05 2 EXPENSES REDUCED THE DISALLOWANCE OF GENERAL EXPENS ES TO RS.1 30 392/- AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US . 4. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALLO WANCE OF ELECTRICITY EXPENSES RS.26 842/-. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT W AS OBSERVED BY THE ASSESSING OFFICER THAT THE ELECTRICITY EXPENSES CL AIMED BY THE ASSESSEE ARE RS.33 553/ THE PREMISES ARE BEING USED MAINLY FOR THE RESIDENTIAL PURPOSES THEREFORE HE TREATED 80% OF THE EXPENSES FOR PERSO NAL USE AND ACCORDINGLY HE DISALLOWED RS.26 842/- FOR NON-BUSINESS PURPOSE S. ON APPEAL THE LD. CIT(A) IN THE ABSENCE OF ANY CONTRARY MATERIAL AGA INST THE FINDING OF FACT GIVEN BY THE ASSESSING OFFICER UPHELD THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THERE IS NO DISPUTE THAT THE ASSESSEE OPERATES BUS INESS FROM THE RESIDENCE THEREFORE THE ELECTRICITY EXPENSES CLAIMED BY THE ASSESSEE ARE FOR BUSINESS PURPOSES AND THEREFORE THE SAME BE ALLOWED IN FUL L. 7. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIV AL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS CARRYING ON BUSINESS FROM RESI DENCE THEREFORE THE ASSESSEE HAS CLAIMED ELECTRICITY EXPENSES RS.33 553 /- AS BUSINESS EXPENDITURE. HOWEVER THE ASSESSING OFFICER ON ESTIM ATE BASIS HAS DISALLOWED 80% OF THE ABOVE EXPENSES FOR PERSONAL USE. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS DEBITED ANY AMOUNT OF ELECTRICITY EXPENSES FOR PERSONAL USE WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ITA NO.6387/M/10 A.Y:04-05 3 MAKING DISALLOWANCE OF ELECTRICITY EXPENSES. HOWEVE R KEEPING IN VIEW THAT THE ASSESSEE IS CARRYING ON BUSINESS FROM THE RESID ENCE THEREFORE WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE IF 50% OF DIS ALLOWANCE IS MADE FOR PERSONAL USE AND ACCORDINGLY THE DISALLOWANCE OF R S.26 842/- IS REDUCED TO RS.16 776/-. THE ASSESSEE GETS A RELIEF OF RS.10 0 66/-. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED. 9. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLO WANCE OF FOREIGN TRAVEL EXPENSES RS.64 798/-. 10. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED TRA VELLING EXPENSES OF RS.64 797/-. ON BEING ASKED IT WAS STATED BY THE AS SESSEE THAT DURING THE YEAR SHE HAD UNDERTAKEN FOREIGN TRAVEL TO USA FOR B USINESS PURPOSES. SHE FURTHER STATED THAT HER HUSBAND HAD ALSO GONE TO US A AND HIS EXPENSES WERE BORNE BY THE EMPLOYER ANSUL AGENCY A FAMILY CONC ERN. THE ASSESSEE WAS FURTHER ASKED TO FILE THE DETAILS OF THE VISIT AND JUSTIFY THE SAME. IN THE ABSENCE OF ANY DETAILS AND KEEPING IN VIEW THAT THE ASSESSEE DOES NOT HAVE BUSINESS DEALINGS WITH THE PERSONS OF USA THE ASSE SSING OFFICER WAS OF THE VIEW THAT THE SAME WAS A PLEASURE TRIP UNDERTAKEN W ITH THE HUSBAND AND HENCE PERSONAL IN NATURE AND ACCORDINGLY HE DISALL OWED RS.64 797/- AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT DURING THE COURSE OF HEARING THE ASS ESSEE HAS ONLY FURNISHED THE FACT RELATED TO AIR TICKET AND OVERSEAS MEDICAL POLICY COULD NOT PROVE THAT THE TRIP WAS BUSINESS TRIP UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 11. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE ASSESSING OFFICER AND THE LD. CIT(A) ALSO FILED DETAILS OF COMMISSION RECEIVED TO SHOW THAT THE COMMISSION WAS RECEIVED FROM THE FOREIGN BUYERS OF GERMANY USA THEREFORE THE FOREIGN TRAVEL EXPENSES HAVE BEEN IN CURRED FOR BUSINESS PURPOSES AND THE SAME BE ALLOWED. ITA NO.6387/M/10 A.Y:04-05 4 12. ON THE OTHER HAND THE LD. DR WHILE RELYING ON T HE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMIT S THAT IN THE ABSENCE OF ANY DETAILS TO PROVE THAT THE TRIP WAS A BUSINESS T RIP THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. C IT(A) BE UPHELD. 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DET AILS OF TRAVELLING EXPENSES APPEARING AT PAGE-5 OF ASSESSEE'S PAPER BOOK ARE AS UNDER :- TRAVELLING EXPENSES A/C. LEDGER ACCOUNT 1-APR -2003 TO 31-MAR-2004 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 20-6- 2003 TO BANK OF BARODA A/C. 2271 MATUNGA CH. NO. :914051 ORIENTAL INSURANCE CO. LTD. FOR PREMIUM ON OVERSEAS MEDICAL POLICY FOR FOREIGN TOUR PAYMENT 9 5 497.00 1-7- 2003 TO BANK OF BARODA A/C. 2271 MATUNGA CH.NO. :914058 MAA AIR TICKET CENTRE P. LTD. AIR TICKET FOR EUROPE TOUR PAYMENT 1 59 300.00 BY CLOSING BALANCE 64 797.00 64 797.00 64 797.00 64 797.00 FROM THE ABOVE WE FIND THAT THE AIR TICKET WAS PURC HASED FOR EUROPE TOUR WHEREAS IT WAS STATED BY THE ASSESSEE VIDE LETTER D ATED 3.7.2006 THAT SHE HAD UNDERTAKEN FOREIGN TRAVEL TO USA FOR BUSINESS. IN THE ABSENCE OF ANY CLARIFICATION IN THIS REGARD AND KEEPING IN VIEW TH AT THE ASSESSEE HAS FAILED TO PLACE ON RECORD ANY MATERIAL TO SHOW THAT THE FOREI GN TRAVEL WAS UNDERTAKEN FOR BUSINESS PURPOSES TO MEET THE CONCERNED PARTIES WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF FOREIGN ITA NO.6387/M/10 A.Y:04-05 5 EXPENSES RS.64 797/- MADE BY THE ASSESSING OFFICER AND ACCORDINGLY THE GROUNDS TAKEN BY THE ASSESSEE ARE REJECTED. 14. GROUND NO.3 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF RS.1 30 392/- OUT OF GENERAL EXPENSES. 15. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED GEN ERAL EXPENSES RS.1 90 392/-. THE DETAILS FILED SHOW THAT THE EXP ENSES ARE INCURRED IN CASH ON ACCOUNT OF LUNCH TEA AND SNACKS. THE EXPENSES HAVE BEEN DEBITED ON MONTHLY BASIS. IT HAS BEEN EXPLAINED THAT THERE WA S NO BILL OF THE EXPENSES AND THE SAME WERE ACCOUNTED ON SELF MADE VOUCHERS. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE O BSERVED THAT THE ASSESSEE HAS RECEIVED COMMISSION FROM FIVE CONCERNS AND HAS NO INDEPENDENT BUSINESS PREMISES THERE CAN BE HARDLY ANY EXPENSE OF THIS NATURE AND THE EXPENSES HAVE BEEN CLAIMED WITHOUT SUPPORTING BILLS . THEREFORE CONSIDERING THE VOLUME AND NATURE OF BUSINESS THE ASSESSING OFF ICER ALLOWED RS.1000/- PER MONTH AS BUSINESS EXPENSES AND BALANCE OF RS.1 78 392/- WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE . ON APPEAL IT WAS CONTENDED BY THE ASSESSEE THAT THE TOTAL EXPENSES O F RS.1 90 392/- IS JUST ABOUT 6.6% OF TOTAL RECEIPTS AND THE EXPENSES ARE P ETTY EXPENSES INCURRED ON DAY TO DAY BASIS THEREFORE THE SAME BE DELETED . THE LD. CIT(A) WHILE OBSERVING THAT THE APPELLANT IS UNDER OBLIGATION TO PROVE THAT SO MUCH OF EXPENDITURE WAS WARRANTED ALLOWED EXPENSES OF RS.5 000/- PER MONTH AS REASONABLE AND HENCE SUSTAINED THE DISALLOWANCE O F RS.1 30 392/-. 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THE EXPENSE S HAVE BEEN INCURRED FOR BUSINESS PURPOSE THEREFORE THE DISALLOWANCE SUSTA INED BY THE LD. CIT(A)BE DELETED. ITA NO.6387/M/10 A.Y:04-05 6 17. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 18. AFTER CAREFULLY HEARING THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE NATURE OF EXPENSES IS MONTHLY LUNCH TEA AND SNACKS DIWALI GIFTS ST AMPS FOR DOCUMENTS AND EXPENSES INCURRED FOR KAILASH PARBAT HOTEL. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE EXPENSES INCURRED ON LUNCH TEA AN D SNACKS ARE FOR THE PURPOSE OF BUSINESS WE ARE OF THE VIEW THAT THE AS SESSING OFFICER WAS JUSTIFIED IN MAKING THE PART DISALLOWANCE OF EXPENS ES. HOWEVER KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE VIS-A-VIS NATURE OF ASSESSEE'S BUSINESS WHICH IS CARRIED ON FROM THE RESIDENCE WE ARE OF THE VIEW THAT IT WOULD BE FAIR AND REASONABLE IF WE TRE AT 50% OF THE TOTAL EXPENDITURE FOR BUSINESS PURPOSES AND BALANCE 50% F OR PERSONAL PURPOSE AND ACCORDINGLY THE WE SUSTAIN THE DISALLOWANCE O F RS.95 196/- OUT OF TOTAL EXPENSES OF RS.1 90 392/-. IN OTHER WORDS THE ASSE SSEE GETS A RELIEF OF RS.35 196/-. THE GROUNDS TAKEN BY THE ASSESSEE STA ND PARTLY ALLOWED. 19. GROUND NO.4 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF CONVEYANCE EXPENSES. 20. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED CON VEYANCE EXPENSES OF RS.1 83 593/- WHICH WERE ACCOUNTED FOR ON THE BASIS OF SELF MADE VOUCHERS. IN THE ABSENCE OF ANY BILLS / VOUCHERS THE ASSESSIN G OFFICER ALLOWED RS.1 000/- PER MONTH AS BUSINESS EXPENSES AND DISAL LOWED BALANCE EXPENSES OF RS.1 71 593/-. ON APPEAL IT WAS SUBMITTED BY TH E ASSESSEE THAT THE EXPENSES ARE JUST 6.37% OF THE TOTAL RECEIPTS. TH E COMPLETE DETAILS SUPPORTED BY VOUCHERS WERE PRODUCED. THESE ARE SMA LL EXPENSES ON LOCAL CONVEYANCE BY LOCAL TRANSPORT SUCH AS TAXI OR TRAIN FOR WHICH NO BILLS ARE AVAILABLE. THE LD. CIT(A) WHILE OBSERVING THAT THE GENERAL CLAIM MADE CANNOT BE ALLOWED WITHOUT PROPER BILLS AND VOUCHERS AND PU RPOSE OF SUCH TRAVELS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER . ITA NO.6387/M/10 A.Y:04-05 7 21. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT ALL THE EXP ENSES HAVE BEEN INCURRED FOR BUSINESS PURPOSES THEREFORE NO DISALLOWANCE I S CALLED FOR. 22. ON THE OTHER HAND THE LD. DR WHILE RELYING ON T HE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMIT S THAT IN THE ABSENCE OF ANY BILLS AND VOUCHERS THE DISALLOWANCE SUSTAINED B Y THE LD. CIT(A) BE UPHELD. 23. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS DERIVING INCOME FROM COMMISSION AND INTEREST AND CARRIED ON BUSINESS FROM HER RESIDENCE. NO MATERIAL HAS BEEN PLACED ON RECORD B Y THE ASSESSEE TO SHOW THAT THE EXPENSES HAVE BEEN INCURRED FOR BUSINESS P URPOSES. IN THE ABSENCE THEREOF AND KEEPING IN VIEW THAT THE EXPENSES HAVE BEEN CLAIMED ON LOCAL CONVEYANCE WE ARE OF THE VIEW THAT IT WOULD BE REA SONABLE IF A DISALLOWANCE OF 50% OF TOTAL CONVEYANCE EXPENSES OF RS.1 83 593/ - IS MADE AND ACCORDINGLY WE SUSTAIN A DISALLOWANCE OF RS.91 796/ - BEING THE EXPENSES INCURRED NOT FOR BUSINESS PURPOSES. THE ASSESSEE GE TS A RELIEF OF RS.79 797/-. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE P ARTLY ALLOWED. 24. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.9.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.9.2010. JV. ITA NO.6387/M/10 A.Y:04-05 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.