TMI Blog2020 (2) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... been accepted by the AO as the share of revenue @ 60% of the hotel project at Jaipur. We, therefore, find merit in the submission of the ld. Counsel for the assessee that when the AO is not discarding the contribution of MGFD towards the completion of the project which is for the financing, implementation, providing brand name and other technical assistance for completion of the project, therefore, there is a commercial expediency in incurring the expenditure and the AO has no power to sit in the arm chair of the businessman and decide as to what would be the reasonable expenditure which is required to be incurred. - Decided in favour of assessee. - ITA No.3858/Del/2016 - - - Dated:- 7-1-2020 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri Rohit Jain, Adv., Ms. Deepashree Rao, CA For the Respondent : Shri Sankar Naskar, Sr.DR ORDER PER O.P. KANT, AM: This appeal by the assessee is directed against order dated 28/04/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-30, New Delhi, for assessment year 2011-12 raising following grounds: 1. That the Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from house property ₹ 1,77,89,974/- 2. Expenses disallowed under section 14A of the Act ₹ 3,99,055/- 3. Out of expenses ₹ 85,000/- 3. Subsequently, the Assessing Officer issued notice on 07/04/2014 under section 148 of the Act in view of reason to believe that the payment of ₹ 11 lakh made to Mrs. J.K. Lakshmi Cement Ltd., on account of hiring of a chartered flight was not incurred for business purposes. The assessee objected to the issue of notice under section 148 of the Act and also filed a letter dated 06/03/2014 stating that return of income filed on 29/09/2011 might be treated as return filed in response to notice under section 148 of the Act. The Assessing Officer completed assessment under section 143(3) read with section 147 of the Act on 05/05/2014 after making disallowance of hiring charges for chartered flight amounting to ₹ 11 lakhs. The assessee filed appeal before the Ld. CIT(A) and made detailed submissions objecting the legality of issuing notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the arguments of the appellant and therefore, I do not find any infirmity in the action of the A.O. for issuing notice u/s 148. Accordingly, ground no. 1, is hereby dismissed. 3.1 The ld. CIT(A) also rejected the contention of the assessee on merit of the addition observing as under: 5.4 Findings : The findings are as under:- 5.5 I have carefully considered the assessment order, written submissions, case laws relied upon and oral arguments of Ld. AR. The objections/arguments of the appellant are discussed as under: (i) In the re-assessment proceedings, the assessee was asked vide questionnaire dated 07.4.2014 to provide the details and justification to prove that the expenses on hiring of non-scheduled chartered flight (from Delhi to Tuticorin via Coimbatore and back to Delhi by same route),have been incurred wholly and exclusively for business purposes, which was used by the director and GM/DGM. In response to this query, the assessee filed written submission vide letter dated 14.4.2014 and relevant portion has been reproduced by the A.O. in the assessment order at para 4 at page 5 (supra). However, these submissions did not find favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from Head Office was fixed with BHEL, Eversendai, Edac Engineering, Essae Associates and many more. BHEL-Trichy and Eversendai engineering are big consumer of product of Modi Arc Electrodes and other Welding consumables of all types. Since the meeting was fixed with a very short notice and no regular flight was available, so as to reach the destination in time, a chartered plane had to be hired. The following Executives traveled to Coimbatore and Tuticorin in the plane on dt. 18/2/2011. 1. Mr. Manish Modi, Marketing Advisor 2. Mr. Sanjay Bhatia, CEO 3. Mr. Lajpat Yadav, GM Marketing 4. Mr. U.K. Sharma, DGMR D 5. Mr. Kapil Singh, GMHRD Meeting were held with the following parties of the nearby area:- 1. BLACKSMITH.COIMBATORE 1/314-B, HAPPY GARDEN COLONA METTUPALAYAMROAD, COIMBATORE,T.N COIMBA TORE-641031 PHONE-0422-2462480 2. ESSAE ASSOCIATES BHARATHIYAR RD..433.D. SUGUNABUILDING, NEAR WOMEN'S POLYTECNIC, PAPPANICHKEN PALAYAM COIMBATORE-641037 PHONE-0422-2240733/9344934855 3. JAYAHARI TRADERS 1/196-8, POORNIMA COMPLEX, KTVRENGG. COLLEGE ROAD, MADDAMPALAYAM COIMBATORE-641019 Phone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 2012-13 Remarks 1 B.H.E.L.-TRICHYFOSSIL BOILERS,BH.EL, BOILER, PLANT PROJECT P.O.TIRUCHIRAPALLI(T.N) TRICHY-620014 17,744,593 13,707,518 13,510,885 WELDING ELECTRODE 2 UNIVERSAL AGENCY-TRICY 45A/2C TANJORE ROAD OPPOSITE MARIAMMAN TEMPLETRICHY T.N. TRICHY-620008 13,263,516 17,787,115 19,425,932 WELDING ELECTRODE 3 SANDHYA ENGINEERING N0.4/123KJ2 MUTHAMMAL COLONY ETTAYA PURAM-ROAD TUTICORIN T.N TUTICORIN-628004 4,903,268 9,759,573 7,551,941 WELDING ELECTRODE 4 EDAC ENGINEERING LTD C/O COASTAL EN. P. LTD 2X600 MW MUTIARA T.P.P.VILLAGE MELAMARUDUR OTTAPR, TUTICORIN, TUTICORIN-628105 4,278,620 5,285,199 WELDING ELECTRODE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, on perusal of Journal voucher, the total amount of ₹ 11,00,000/-, has been debited, under 4 different heads, which includes service tax, education cess, secondary and higher education cess of ₹ 1,02,720/- also. Therefore, claim of the appellant is wrong, since total invoice amount of ₹ 11,00,000/-, has been paid and claimed in P L account. In view of the above, the alternate argument of the appellant, is not correct and accordingly, not acceptable. From the above, following facts emerged:- During assessment proceedings, appellant failed to prove before the A.O. that the alleged expenditure of ₹ 11,00,000/-, on account of hiring of chartered flight, were incurred for business purposes. During the appellate proceedings also the appellant was given adequate opportunity to substantiate its claim, by filing the documents of correspondence etc. prior to and/or subsequent to the date of travel to prove that tour to these destinations was exclusively for business purposes. However, only tour report dated 25.02.2011 was filed, in which it is claimed that the meeting was held on 18.02.2011 with 9 alleged parties and no other indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2011 12, the assessee company M/s Modi Industries Limited had availed the sendees of non-scheduled flights (chartered flights) as under: Date From - To Amount paid Date of payment Mode of payment Name of passenger 18.02.2011 DEL-CJB TCR-DEL Rs.l 1,00,000/- 04.03.2011 By cheque Mr. Modi It is also noticed that the above payment was made by the assessee company M/s Modi Industries Limited to M/s J.K. Lakshmi Cement Limited. This expense has been claimed as business expense by the assessee. It appears that the expenses in respect of such other non-chartered flights might have been claimed by the assessee company as business expenses in the profit and loss account which are not allowable under section 37 of the Income Tax Act, 1961. Besides above, enquiries in respect of other similar booked chartered flights may also have to be made in this case. In view of the above mentioned facts I have reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer stated was that in the light of the note attached to the return of income which was reproduced by him, it would also indicate possible escapement of income . In the circumstances, the impugned notice seeking to reopen could not be permitted to stand. The reasons recorded must disclose the material and the basis, which reflect the process by which the authority had formed belief. Even if sufficiency of such reasons could not be eone into. it is equally well established that the Court can always examine whether, on such material as disclosed in the reasons, there was a rational nexus for the formation of belief In other words, whether a reasonable person could have arrived at such a belief. The reasons recorded failed the objective test. The Assessing Officer was also not sure that any income had escaped assessment - only a possible escapement of u assume jurisdiction. [Para 63] 6.3 Respectfully, following the above decision, we are of the opinion that the notice issued for reopening of the assessment under section 148 of the Act was not validly issued by the Assessing Officer and it was based merely on suspicion without any tangible material and acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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