IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "B", MUMBAI
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.5612/M/2012
Assessment Year: 2009-10
ACIT-17(2), Shri Natrajan Venkatraman,
R.No.217, 2nd Floor, 1001/102, Mount Everest,
Piramal Chambers, Vs. A Wing, Wadala Link Road,
Mumbai Bhakti Park, Wadala (E),
Mumbai 400 037
PAN: ACUPV4686K
(Appellant) (Respondent)
Present for:
Assessee by : Dr. P. Daniel, A.R.
Revenue by : Dr. Yogesh Kamath, D.R.
Date of Hearing : 02.06.2015
Date of Pronouncement : 09.09.2015
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order
dated 07.06.2012 of the Commissioner of Income Tax (Appeals) [hereinafter
referred to as the CIT(A)] relevant to assessment year 2009-10. The Revenue
has taken the following grounds of appeal:
"1. On the facts and in the circumstances of the case and in law, the Ld. CJT(A) has erred in
disallowing the entire addition made by the AO on account of
commission/brokerage of Rs.10,75,373/- without appreciating the fact that the
assessee neither offered the same for taxation nor produced any evidence to
show that the deductors have reversed the entries wrongly made by them in this
respect in their original TDS returns by way of its revision.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in deleting the entire disallowances made by the AO out of business
promotion expenses of Rs. 15,78,532/-, electricity expenses of Rs.1,24,221/-
and rent payment of Rs. 1,04,750/- without appreciating the fact that the
expenses under these heads were incurred by the assessee in cash and also in
spite of sufficient opportunities has failed to produce bills / vouchers in
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Shri Natrajan Venkatraman
support of these expenses and other details like names and addresses of the
persons to whom the payment for these expenses were alleged to be made.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in restricting 25% disallowances made by the AO out of books &
periodicals expenses of Rs. 69,500/- and printing and stationery of
R5.4,39,966/- to 10% without appreciating the fact that the assessee inspite of
sufficient opportunities has failed to establish the co-relation between income
offered and expenditure claimed under these heads with supporting
documentary evidences.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in restricting 25% disallowances made by the AO out of entertainment
expenses of Rs. 6,58,692/- and miscellaneous expenses of Rs. 88,639/- to 10%
without appreciating the fact that the assessee inspite of sufficient
opportunities has failed to establish the co-relation between income offered
and expenditure claimed under these heads with supporting documentary
evidences.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in deleting the entire disallowances made by the AO out of salary
expenses of Rs.12,44,600/- without appreciating the fact that the assessee
inspite of sufficient opportunities has failed to produce salary register and
confirmation from the persons to whom the salary has alleged to be paid with
supporting documentary evidences.
6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in restricting the entire disallowances made by the AO out of meeting
expenses of Rs.10,91,632/- to 20% without appreciating the fact that the
assessee inspite of sufficient opportunities has failed to produce bills /
vouchers and other details showing the venue and purposes of the meeting in
respect of which such expenses have been claimed.
7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in deleting the addition made by the AO on account of commission/
brokerages of Rs.751636/- received from M/s. Anik Developers without
appreciating the fact that the assessee inspite of sufficient opportunity has
failed to furnish the proof for payment of his advance or any other evidence to
show that the said receipt is towards refund of personal advance given by the
assessee to the said concern for carrying out of interior decoration work in his
personal flat.
8. a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
has erred in deleting 25% disallowance made by the AO out of depreciation
expenses of Rs.1,34,672/- without appreciating the fact that the Ld. CIT(A) has
already restricted the disallowance made under this head to 10% in earlier part
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Shri Natrajan Venkatraman
of his order.
b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
has erred in restricting 25% disallowances made by the AO out of driver's
salary of Rs. 1,28,000/- to 10% without appreciating the fact that the assessee
inspite of sufficient opportunities has failed to produce supporting
documentary evidences in respect of the same.
9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in restricting 25% disallowances made by the AO out of travelling
expenses and conveyance expenses of Rs. 14,78,880/- to 10% of Rs. 3,69,720/-
without appreciating the fact that the expenses claimed under this head
amounted to Rs. 14,78,880/- and not Rs.3,69,720/- and also the assessee in
spite of sufficient opportunities has failed to produce proper documentary
evidences to substantiate the expenses claimed under this head.
10. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has
erred in restricting 25% disallowances made by the AO out of gift expenses of
Rs.1,07,665/- to 10% without appreciating the fact that the assessee even
failed to produce basic information like its nature, kind and proof/
confirmation of the recipient in respect of expenses claimed under this head."
2. Ground No.1: Facts relating to Ground No.1 are that the assessee
has been carrying on business of commission agent and commission
income was shown at Rs.1,64,06,455/- from Twinkle Envirotech Ltd. and
Rs.1,46,37,959/ from Royal Twinkle Star Club Ltd. As against the gross
commission receipt of Rs.3,10,44,414/- net profit before tax was declared
at Rs.2,28,56,539.68/-. From the details generated from ITS, it was found
by the Assessing Officer (hereinafter referred to as the AO) that the
assessee had received brokerage income of from Twinkle Envirotech
Ltd. Rs.1,64,19,419/- and Rs.1,57,02,958/- from Royal Twinkle Star
Club Ltd. Thus, total difference between the brokerage shown by the
assessee in her profit and loss account and details generated from the
system was computed at Rs.10,77,963/-.
3. The assessee was required to explain the same and it was submitted
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Shri Natrajan Venkatraman
that there were some double entries and that the income shown by the
assessee was correct. The assessee also submitted conformation letters
from both companies in respect of commission earned and TDS deducted
thereon in support of his contention. However, the AO did not accept
such submission of the assessee on the ground that the assessee had failed
to produce documentary evidence that the two companies from whom the
assessee had received commission had also reversed the entries wrongly
made in the original TDS return by way of filing of revised TDS return.
Therefore the AO disallowed the difference of Rs. 10,75,373/-.
4. In appeal before the CIT(A), the assessee reiterated his
submissions. Learned CIT(A), after going through the details submitted
by the assessee, observed that the aforementioned additions were made on
the basis of AIR information but the same were not sustainable as both
the companies had uploaded erroneous entries into 26AS system and they
had rectified/reversed the said entries. Correct payment of commission
had been uploaded into system. These figures tally with the commission
actually received by the assessee. The correct commission received from
Twinkle Envirotech Ltd. amounted to Rs.1,64,06,455//- and from Royal
Twinkle Star Club Rs.1,46,37,959/ -. Hence there was no discrepancy.
The confirmations in this respect were also received from M/s.Twinkle
Envirotech and M/s Royal Twinkle Star Club and the figures tallied with
the assessee's claim. Further the bank account of the assessee did not
reflect any additional commission receipts relating to these overstated
figures. The TDS credit claimed by the assessee was also proportionate to
the amount received as commission. The deductor had also filed copy of
16A from which tallied with the figures.
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Shri Natrajan Venkatraman
5. We have heard both the parties and their contentions have carefully
been considered. After careful consideration, we find that Ld. CIT(A) did
not commit any error in granting appropriate relief to the assessee. It was
the case of the assessee that he had earned total commission of
Rs.3,10,44,414/- from both the parties and confirmations were also
submitted. The assessee also produced the TDS certificate in which
correct amount was shown. In view of these evidences, we are of the
opinion that there is no infirmity in the order of the Ld. CIT(A). The
ground No.1 of the appeal is therefore dismissed.
6. Ground No. 2, 3, 4, 6, 8, 9 &10 are in respect of disallowance of
expenditure in relation to business promotion, electricity, rent payment,
Books and periodicals, printing and stationery, entertainment & misc.
expenses, meeting expenses, vehicle expenses, depreciation, vehicle
insurance, driver's salary, travelling expenses and gift expenses. The AO
observed that the assessee, during the assessment year under
consideration had debited the above stated various expenses to the P & L
Account. The AO called for ledger account of electricity payment, rent
payment and business promotion payment along with bills & vouchers.
On verification of the same, it was observed by the AO that the
expenditure amount of Rs.18,07,503.40/- incurred towards electricity
payment, rent payment and business promotion payment was in cash but
the documentary evidence for the same had not been produced. He
further observed that the Ld. A.R. of the assessee had submitted a list of
as many as 800 persons in respect of whom business promotion expenses
had been incurred but no addresses of the said persons was furnished.
Hence, the AO added the entire amount of Rs.18,07,503.40/- back to the
income of the assessee. He also disallowed the entire expenditure of
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Shri Natrajan Venkatraman
Rs.1,78,761/- in respect of telephone charges. He also disallowed 25%
of the expenses amounting to Rs.1,60,578/- out of the expenses incurred
in relation to vehicle expenses, vehicle insurance, driver's salary and
depreciation observing that involvement of personal element in these
expenses could not be ruled out. The AO also disallowed an amount of
Rs.3,14,204/- being 25% of the expenses incurred on books and
periodicals, printing and stationery, entertainment expenses and Misc.
expenses He further disallowed 25% amounting to Rs.3,69,720/- out of
the expenses incurred in respect of travelling and conveyance. He
disallowed an amount of Rs.1,07,665/- in respect of gift expenses and an
amount of Rs.10,91,632/- in respect of meeting expenses.
7. We have heard both the parties and their contentions have carefully
been considered. The AO had disallowed the above stated expenditure as
these were paid in cash and the assessee could not submit appropriate
evidence to prove incurrence of expenditure. The assessee submitted
before the Ld. CIT(A) that for earning commission in respect of fund
mobilizing, commission agents had been assigned certain responsibilities
for which the assessee had to maintain office at several places to offer
customer service and also to pay some portion of the commission back. It
was also submitted that the net profit declared by the assessee on the
entire receipt was 78.92%, therefore disallowance made by the AO was
not right.
From the details, the Ld. CIT(A) observed that so far as the expenses
incurred under the head `business promotion expenses' were concerned,
the AO had disallowed the expenses in their entirety. Learned CIT(A)
observed that the said amount could consist of initial membership fees
paid back or discount given to nearly 600 persons in respect of whose
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membership assessee had earned commission and these amounts range
from 1600 to 2100 and cannot be adequately vouched. The list of
members in respect of whom commission paid was already submitted to
the AO. On these facts Ld. CIT(A) observed that the entire expenses
could not be disallowed. The assessee had discharged his burden of proof
by submitting the name of the persons to whom such
incentive/discount/commission had been paid. After considering the
overall facts and circumstances of the case, the Ld. CIT(A) deleted the
disallowance made on account of business promotion expenses, rent and
electricity expenses. However, learned CIT(A) upheld the disallowance
at 20% of the expenses incurred in respect of telephone and 10% of
expenses incurred on account of vehicle, car depreciation and
periodicals/printing and stationery, travelling and conveyance,
entertainment & gift expenses. He also upheld the disallowance to the
extent of 20% in respect of meeting expenses. Learned CIT(A) had also
taken into consideration that according to the CBDT Instruction
No.225/26/2006-ITA-II(Pt.) dated 8.9.2010, wherein guidelines for
completion of scrutiny assessment selected on the basis of AIR
information laid down and if disallowances are made in excess of Rs.10
lakhs, then the AO has to obtain prior permission/approval of the
jurisdictional CIT to proceed with area of investigation other than AIR
based scrutiny assessment. He observed that such instructions have not
been followed and from the assessment record he noted that the AO did
not consider the aforementioned CBDT instructions while proceeding to
make other disallowable business expenses. It is in these circumstances,
Ld. CIT(A) has deleted the disallowance made by the AO to the extent
mentioned above.
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8. The Ld. AR of the assessee has brought our attention to the order
dated 25.3.2015 in I.T.A. No. 5613/Mum/2012 in the case of the wife of
the assessee namely Mrs. Vasanthy Natrajan wherein the Tribunal in
identical facts and circumstances has upheld the deletion of similar type
additions observing as under:
"14. After hearing both the parties, we are of the opinion that the
disallowance deleted by learned CIT(A) is on the submissions and explanation
submitted by the assessee and some of the disallowances have been upheld on
the basis of estimate. Keeping in view of the entirety of the facts mentioned
above and also fact that the assessee has shown net profit @ 78.92%and also
fact that the Assessing Officer did not follow the aforementioned Instruction
of CBDT, we are of the opinion that no interference is required in the order of
learned CIT(A) so as to it relates to Ground 2 to 5 of the Departmental appeal.
It may be mentioned here that the Department did not bring any material on
record to suggest that findings recorded by learned CIT(A), are contrary to
the facts narrated by learned CIT(A).
15. In view of the above discussion, we decline to interfere in the relief
granted by learned CIT(A) in respect of Ground No. 2 to 5 and they are
dismissed."
9. Since the facts in this case are identical, we do not find any reason
to interfere with the well reasoned order of the CIT(A) on the above
issues in the case of the assessee also. These grounds are accordingly
dismissed.
10. Ground No. 5: This Ground of appeal is in relation to the issue of
allowability of salary expense of Rs.12,44,600/-. The AO had disallowed
the entire expenses under this head stating that salary register and Form
No.16A, etc. were not submitted.
11. Before the CIT(A), the assessee submitted that the salary had been
paid to 13 employees for the entire year with a salary range of
Rs.60,000/- to Rs.1,20,000/- annually. There was no need to deduct tax
as the employees' remuneration was below taxable limit.
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The Ld. CIT(A) considering the facts and circumstances of the case
observed that an amount of Rs.12,44,600/- was the bare minimum to be
paid for a group of 13 employees for running the business. Huge income
under the head commission had been offered to tax by the assessee and it
could not be presumed that the establishment could be run without
employees. He therefore finding the salary expenditures as genuine,
allowed the same. After considering the reasoning given by the ld.
CIT(A), we do not find any infirmity in the same. The findings of the Ld.
CIT(A) on this issue are therefore upheld.
12. Ground No. 7 : The AO further observed that the assessee had
received commission/brokerage of Rs.75,636/- from Anik Development
Corporation and hence added the same to the total income of the assessee.
The assessee explained to the AO that Anik Development Corporation
had refunded Rs.75,636/- as extra labour work in flat purchase. The AO
however did not find this explanation as convincing and therefore added
the same into the income of the assessee.
13. In appeal before the CIT(A), the assessee stated that this particular
sum was advance for labour charges to Anik Developers for interior
decoration in the personal flat. Due to certain reasons the fund was
refunded to the assessee and TDS was deducted by the Anik Developers
by mistake. TDS certificate was also not issued by Anik Developers.
After considering the relevant facts and circumstances, the Ld. CIT(A)
observed that there was no income to the extent of Rs.75 636/-. It was a
personal advance for interior decoration work to the builder which had
been refunded by them to the assessee. He further observed that the
assessee was not a developer or in the development business and there
was no income to the extent of Rs.75,636-. He therefore deleted he
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Shri Natrajan Venkatraman
addition. We do not find any infirmity in the above given reasoning of the
CIT(A). This ground is accordingly decided in favour of the assessee.
14. In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 09.09.2015.
Sd/- Sd/-
(G.S. Pannu) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 09.09.2015.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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