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TMI Blog2016 (1) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeals in the absence of the assessee after hearing the ld. D.R. and considering the written submissions of the assessee and other material placed on record. 3. The grounds of appeal raised by the assessee in ITA No. 4830/Mum/2010 in memo of appeal filed with the Tribunal read as under:- "The Commissioner of Income Tax (Appeals) -33 Mumbai is not justified in : 1. Confirming the disallowance of Business Development Exp amounting to Rs. 9,44,810/- whereas as per the Facts & Circumstances it should be allowed. 2. Confirming the disallowance of consulting charges amounting to Rs. 5,57,004/-whereas as per the Facts & Circumstances it should be allowed. 3. Confirming the disallowance out of Entertainment expenses amounting to Rs. 1,68,298 /- on adhoc basis whereas as per the Facts & Circumstances it should be allowed. 4. Confirming the disallowance out of Motor car, travelling and conveyance expenses amounting to Rs. 2,10,022/- on ad hoc basis whereas as per the Facts & Circumstances it should be allowed. 5. Confirming the disallowance out of Depreciation on car amounting to Rs. 41,600/- on adhoc basis whereas as per the Facts & Circumstances it should be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9,78,410/- to M/s Sunrise Enterprises (Prop. Mrs. Vidya Ramnarayanan Iyer wife of the assessee) for the following reasons ; Suprasesh General Insurance Pvt. Ltd. is into providing the onshore and offshore oil & Gas Insurance Policy. The assessee submitted that the assessee did one project for the consultancy with M/s Suprasesh General Insurance Pvt. Ltd. for which he received consultancy in 2003 and in the current financial year his business was flourishing and he was busy in his routine work for oil and gas exploration/exploitation, tender preparation etc., so when Suprasesh General Insurance Pvt. Ltd. approached for further business, the assessee was unable to cater the same due to time constraints and took the decision to discuss with his wife Mrs. Vidya Ramnarayan Iyer and she gave suggestion that she would handle the said project and the assessee will pay 50% of service charges received from Suprasesh General Insurance Private Limited. After her introduction, she was handling the said project such as to look after liaison work and incurred all expenses including conveyance and traveling expenses, entertainment expenses and she also looked after arranging meeting etc. . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bidding winner and forward the same details to MI s. Suprasesh General Insurance Services. She also starts the initial interaction with the participant who wins the bid and then handover the further process to the executives of M/s. Suprasesh General Insurance Services." The CIT(A) after considering the submission of the assessee held that the contention of the assessee cannot be accepted on this issue. He held that on examination of return of income for the assessment year 2005-06 of Mrs. Vidya Ramanarayanan Iyer shows that income said to have received by her amounting to Rs. 9,78,410/- for providing service to the assessee is not included in the return of income filed with the Revenue even though a return of income has been filed showing income of Rs. 1,80,356/- received from one Keepwell Darefront and hence the assessee has not been able to explain this discrepancy. The CIT(A) held that if the assessee's concern had indeed utilized the services of Mrs. Vidya Ramanarayanan Iyer , the payments made by the assessee should have been reflected in her return of income filed with Revenue. The assessee was given several opportunities to submit the details of services rendered by Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer (Prop. of M/s Sunrise Enterprises and wife of the assessee) has provided service as under: "She enquires about the floated tenders in the companies, what is the scope of the tender, who are the participants in the bid process and who is the bidding winner and forward the same details to M/s. Suprasesh General Insurance Services. She also starts the initial interaction with the participant who wins the bid and then handover the further process to the executives of M/s. Suprasesh General Insurance services." Mrs. Vidya Ramanarayanan Iyer has made accounting on Cash Basis and shown the said income in the assessment year 2006-2007. It was also submitted that she has placed on record copy of return of income filed with Revenue for the assessment Year 2006-2007. The assessee relied upon the following decisions in support of his contention:- i) Addl. CIT v. Nestle India Limited. (ITAT Delhi Bench (2005) 94 TTJ (Del) 53. ii) Tally Solutions (P) Ltd. v. DCIT, ITAT Bangalore Bench (2010) 130 TTJ (Bang) 234: (2010) 37 DTR 310 (2011) 8 ITR 434. 9. The ld. D.R. relied upon the orders of authorities below. 10. We have considered the rival contentions and also perused the material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges and explained that engineering consultancy of underwater petroleum pipe line repairing work (Mechanical connectors/ROV) is done by these professional. Verification by the AO of annexure filed by the assessee reveals only a ledger account with names of various persons. The assessee submitted the name and address of the parties which is as under:- 1. S.S.Ship Services 43, Ashok Chambers, P.D'Mello Road, Masjid, Mumbai - 400 009 Rs. 3,25,000/- 2. Rajni Singhal Address as above Rs. 87,000/- 3. P. Nayyar Qrts. No.11, Lurah, Bakshi Nagar Jammu Tawi, J&K 180001 Rs. 1,75,000/- 4. Baljit Kaur No address Rs. 1,44,251/- 5. Silicon Vally International N-42, Jal Vayu Vihar, Powai, Mumbai - 72. Rs. 5,73,261/- The A.O. issued notices u/s 133(6) of the Act to parties 1,2 and 5 to verify the genuineness of the claim .As per Ward Inspector's report the party mentioned at Sr. No. 1 & 2 i. e. M/ s. S. S. Ship Services and Rajni Singhal could not be served with notices as the parties were not available on the given address and they left the place 2-3 years before. With respect to Sr. No. 4, i.e. Baljit Kaur the information could not be gathered as the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue's for the services rendered. The CIT(A) on perusal of the bank statement observed that it is not clear to whom the payments were made as it is not mentioned or ascertainable from the bank statement and also it is not sufficient proof or verification . The onus is on the assessee to prove the payments. The A.O. tried to establish the identity of the persons but his efforts did not yield results due to lack of information given by the assessee. The CIT(A) held that the assessee has failed to prove the genuineness of the payments. Even primary evidences such as PAN , confirmation, , return of income has not been furnished by the assessee. The CIT(A) held that the A.O.is quite right in disallowing the same and the CIT(A) upheld the orders of the AO and the additions made were sustained by the CIT(A) vide orders dated 22.03.2010 . 13.Aggrieved by the orders of the CIT(A) dated 22.03.2010 , the assessee is in further appeal before the Tribunal. Vide assessee's written submission it was contended that the details of the consultancy services were submitted and the A.O. was not justified in disallowing the expenses of Rs. 5,57,004/- on a mere ground that the notice cannot be served to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside this issue to the file of the A.O. for deciding the same afresh in the light of evidences and explanations filed by the assessee. The assessee is directed to file all the necessary evidences in connection with the services rendered by the said professionals to establish that these expenses are incurred wholly and exclusively for the purpose of business and the AO is directed to consider the same on merits and decide accordingly on merits. Needless to say that the assessee be granted sufficient opportunity of being heard by the AO in accordance with law in compliance with principles of natural justice. We order accordingly. 16. The next issue is regarding disallowance of entertainment expenses. During the year under consideration , the assessee has stated to have incurred entertainment expenses of Rs. 8,81,488/- out of which the A.O. has disallowed 40% i.e. Rs. 3,36,595/- on ad-hoc basis. The assessee was called upon by the AO to explain the nature of expenses claimed with the supporting evidences like bills and vouchers to prove that the expenses are genuine. In reply, the assessee explained that these expense are incurred on a routine basis for improvement of business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deleted. 20. The ld. D.R. supported the order of authorities below. 21. We have heard the ld. D.R. and also perused the material placed on record including the written submissions filed by the assessee. We have observed that the assessee has claimed expenses of Rs. 8,81,488/- towards entertainment expenses. The assessee is in the business of consultancy services whereby gross billing comes to Rs. 71,51,832/- as per the documents produced before us , which was offered for taxation by the assessee after claiming expenses. We have observed that ad-hoc disallowance of entertainment expenditure of 40% made by the A.O. was without pointing out any specific defect in the vouchers or proving the same to be bogus expenses but was an ad-hoc disallowance. The A.O. has also not rejected the books of accounts of the assessee. Thus, in nutshell the ad-hoc disallowance of 40% of entertainment expenditure of Rs. 8,81,488/- was made by the AO amounting to Rs. 3,36,595/- on ad-hoc basis , which disallowance was further reduced to 20% amounting to Rs. 1,68,298/- by the CIT(A) and again on ad-hoc basis whereby no specific defects has been pointed by the CIT(A) in the vouchers/books of accounts no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced any vouchers/bills and claimed these expense on an estimated basis. The CIT(A) keeping in view the interest of justice restricted the disallowance to 20% of the expenses incurred vide orders dated 22.03.2010. 24. Aggrieved by the decision of the CIT(A) vide orders dated 22.03.2010, the assessee is in appeal before the Tribunal. 25. Vide his written submissions, the assessee submitted that these disallowances are unjustified and based on mere conjectures and surmises. The assessee submitted that all the expenses incurred are fully and exclusively for the purpose of business and reasonable keeping in view the volume and nature of the business. The accounts of the assessee are audited and no ad-hoc disallowance could be made unless and until some specific item of expenditure is proven to be bogus.The assessee relied upon the decisions of Babu Jewellers v. ITO (2011) 141 TTJ (Chd.)(UO)73 and ACIT v. Allied Construction (2007) 106 TTJ 616(Del.) to contend that no ad-hoc disallowance can be made unless specific defects are pointed out and merely because the vouchers are self made no disallowance is warranted without pinpointing that the item of expenditure is un-verifiable. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,022/- is ordered to be deleted. Similarly, addition of Rs. 41,600/- to the income of the assessee being disallowance of depreciation on car being sustained by the CIT(A) is hereby ordered to be deleted. Similarly, with regard to new year expenses of Rs. 22,100/- and Diwali expenses of Rs. 24,785/- , the additions of Rs. 9,377/- is ordered to be deleted. We order accordingly. ITA No. 4730/Mum/2010 (Revenue's appeal) 28. In this appeal, the Revenue is aggrieved by the decision of the CIT(A) in deleting the addition of Rs. 7,78,254/- on account of expenditure claimed by the assesse for the office rent of Rs. 62,500/-, salary and wages of Rs. 5,05,000/- and staff welfare of Rs. 2,10,754/-. 29. On verification of the return of income of the assessee filed with the Revenue, the A.O. observed that the assessee has claimed total expenditure of Rs. 7,78,254/- towards office rent of Rs. 62,500/-, salary and wages of Rs. 5,05,000/- and staff welfare of Rs. 2,10,754/-. As per the A.O. there is no business done by the assessee from the address given by the assessee and also there is no office functioning from the said address and no other office address is given by the assessee, Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the accounts of the assessee are audited by a qualified chartered accountant, no ad-hoc disallowance can be made unless and until some specific item of expenditure is proven to be bogus. The office rent claimed by assessee has been paid through cheque's for small space at premises owned by ONGC, Mumbai for the period September-04 to January-05 @ Rs. 12,500/- per month for carrying out business activity from that premises, hence the same cannot be disallowed. Further the A.O.'s contention that the assessee does not carry business from any office and nor from residence and hence these expenses cannot be allowed is bad in law. It is submitted by the assessee that it is no where stated that a person cannot carry business from his residence and/or he has to display the name of proprietorship concern at his residence for conducting business. Further , the A.O. has misinterpreted the notes forming part of the accounts as ''the expenses for no supporting available are certified by proprietor as business expenses" while it is stated that ''the expenses for which no supporting were available, are certified by proprietor as business expenses" and it does not mean that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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