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ACIT-17(2), R.No.217, 2nd Floor, Piramal Chambers, Mumbai Vs. Shri Natrajan Venkatraman, 1001/102, Mount Everest, A Wing, Wadala Link Road, Bhakti Park, Wadala (E), Mumbai 400 037
September, 11th 2015
                   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
                                      2                                ITA No.5612/M/2012
                                                                  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
                                           3                                ITA No.5612/M/2012
                                                                       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
                                     4                            ITA No.5612/M/2012
                                                             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.
                                        5                              ITA No.5612/M/2012
                                                                  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
                                    6                           ITA No.5612/M/2012
                                                           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
                                        7                                 ITA No.5612/M/2012
                                                                     Shri Natrajan Venkatraman



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.
                                         8                               ITA No.5612/M/2012
                                                                    Shri Natrajan Venkatraman



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.
                                    9                            ITA No.5612/M/2012
                                                            Shri Natrajan Venkatraman



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
                                              10                           ITA No.5612/M/2012
                                                                      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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