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TMI Blog2019 (12) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... tel, New Delhi. The Assessing Officer(AO) obtained information u/s.133(6) from the Taj Palace Hotel, who replied vide letter dated 14.02.2014 that payment of Rs. 13,50,000/- has been made by the assessee in connection with pre-wedding function lunch on 23.01.2011 for 500 guests. Therefore, the AO held that the claim of the assessee that expenditure was for business conference is incorrect and the expenses are of a personal nature, hence, the amount of Rs. 13,50,000/- was disallowed. With regard to balance expenditure of Rs. 10,14,969/- debited under the head business promotion expenses, the AO noted that these includes personal element and several payments have been made through the credit cards and narration in 1this regard clearly shows that the payments have been made for the personal usage. Hence, the AO disallowed 1/5th out of these expenses which worked out to Rs. 2,02,993/-. In view of this, total disallowances out of business promotion expenses were made at Rs. 15,52,993/-. 5. Being aggrieved, the assessee carried the matter before the ld.CIT(A) who uphold the addition made by the AO by observing that the AO has investigated the case properly and collected the evidence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made disallowance of 1/5th of the remaining expenses, he has only pointed out the expenditure of Rs. 15,584/-, which is in the nature of personal expenditure. Therefore, without pointing out any specific instances of such personal expenditure no further disallowance is called-for. Further, ld.CIT(A) has not given any finding on this account. 7. The ld.CIT-(DR) submitted that the assessee is having income of Rs. 38 lakhs only whereas it is unlikely that the assessee would incur expenditure of Rs. 23 lakhs on business promotion. Further, the reply submitted by the Taj Palace Hotel is self-explanatory which specify prewedding function, the same is being third party, why they will give wrong information!, hence the AO and ld.CIT(A) has rightly disallowed the same. With regard to 1/5th disallowance of remaining expenses, the ld.DR relied on the AO, as the ld.CIT(A) has not given specified finding in this regard. 8. In rejoinder to the above, the ld.Counsel for the assessee submitted that the assessee is carrying proprietorship business in the name of Ram Kishore Chemicals and the net taxable income of Rs. 38.15 lakhs is shown as per Return of Income whereas, the turnover of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal element cannot be ruled out. Therefore, we are of the considered opinion that AO was justified in making disallowance of the remaining expenses @1/5th, accordingly the disallowance of Rs. 2,02,993/- confirmed. This ground of appeal is partly allowed. 10. Ground No.3 relates disallowance of Travelling Expenses being 1/4th of the total travelling expenses on account of personal element. 11. We have heard the rival submissions and perused the material available on record. We find that the assessee has debited a sum of Rs. 12,48,556/- under the head Travelling Expenses and considering the same of personal in nature and gave examples of the journey undertaken by the some of the family members which worked out to Rs. 38,379/-. The AO disallowed @1/4th Travelling Expenses debited to the profit and loss account. The ld.Counsel contended that the AO has only pointed out specific expenses at Rs. 38,379/-, therefore, whose disallowance at Rs. 3,12,139/- being 1/4th of the total travelling expenses is arbitrary without giving any reasoning, whereas the ld.DR relied on the order of the Lower Authorities. 12. After careful consideration of the facts, we are of the view that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that these expenses are in the nature of speculative transactions and the name of the Om Exim was not mentioned in the audit report. Therefore, the assessee was asked to show cause as to why these expenses should not be treated as speculative as per section 43(5) of the Act. It was submitted that the assessee in order to guard against loss through future prices fluctuation of such chemicals entered into the contract with the relevant dealer. Since, at the time of actual delivery of chemicals, the assessee noticed that the prices of the chemicals has fallen sharply than the booked amount and she was of bonafide belief that if the actual delivery of the said commodity was taken to make the assessee suffer enormous loss. The assessee paid the difference amount of actual day of delivery to safeguard the future loss of the said commodity. However, the AO observed that this argument of the assessee has no force as in her submissions, the assessee has not furnished any corresponding documentary evidence in supporting of his claim nor the copies of the agreement have been furnished nor details of business activity of Om Exim were furnished. There is no reference of Om Exim in the audit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has incurred business loss which is supported by copies of debit notes filed which are appearing at page 55 to 57. The learned, Counsel further referred the confirmation letter from the parties which are appearing at page 120 to 122. The ld.Counsel has also filed an affidavit dated 19.01.2017 of the assessee which is placed at paper book 132-13 wherein she has deposed that during the financial year relevant to A.Y. 2011-12, she has started a unit under the name and style of Om Exim at Bombay, a unit of Ram Kishore Chemical Company for which separate bank account number ending with 26689 with HDFC Bank was opened. However, the necessary information for the same was given to sales tax department, Mumbai and the name of OM Exim was also entered in the registration certificate issued by the Sales Tax Officer [C-110] registration branch, Mumbai. It was further stated in the affidavit that an oral agreement for purchase of various chemicals from Usha Chem, Sandeep Organics Pvt. Ltd., and Sanjay Chemicals, was entered into, however, due to sharp fall in the prices of the product to be procured by the above suppliers and in order to avoid further loss it was decided to cancel ..... 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