Income Tax Appellate Tribunal - Mumbai
Dcit 2(1)(1), Mumbai vs Aditya Birla Insurance Brokers Ltd, ... on 26 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI
BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM
ITA No. 6720/Mum/2016
(Assessment Year: 2010-11)
Dy. CIT-2(1)(1), M/s. Aditya Birla Insurance Brokers
th
R. No. 561, 5 Floor, Ltd.
Aayakar Bhavan, M. K. Road, Vs. 2nd Floor, Appejay, Shahid Bhagar
Mumbai-400 020 Singh Road, Fort,
Mumbai-400 013
PAN/GIR No. AABCB8091 L
(Appellant) : (Respondent)
Appellant by : Shri Satishchandra Rajore
Respondent by : Shri Nitesh Joshi
Date of Hearing : 26.12.2018
Date of Pronouncement : 26.02.2019
ORDER
Per Shamim Yahya, A. M.:
This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-4, Mumbai ('ld.CIT(A) for short) dated 03.08.2016 and pertains to the assessment year (A.Y.) 2010-11.
2. The grounds of appeal read as under:
1. "On the facts and in the circumstanced of the case and in law, the Ld. CIT(A) erred in admitting additional evidence without giving opportunity to the Assessing Officer and therefore violated Rule 46A."
2. "On the facts and in the circumstanced of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO despite non-dischanrge of onus to establish that the entire expenses under various heads are wholly and exclusively for the purpose of business."
3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored.
3. Brief facts of the case are that the assessee is engaged in the business of general insurance broking and advisory services.
4. The Assessing Officer (A.O. for short) made an adhoc 20% disallowance out of the expenses, by noting that complete details and vouchers were not provided. He held as under:
2ITA No. 6720/Mum/2016
3. It is seen from the Profit & Loss Account, the assessee has debited inter alia following expenses:-
Staff Welfare expenses 4513775
Legal & Professional charges 9623362
Advertisement & business promotion 1540281
expenses
Travelling and conveyance expenses 5466241
Service charges 27561399
Miscellaneous expenses 2694137
Total 51399195
4. During the course of hearing on 22.02.2012, the assessee was asked to submit the details of the above expenses along with supporting evidences. In response to the same, the Authorized Representative of the Assessee by their letter dated 08.03.2013 had submitted details of travelling & conveyance expenses, staff welfare expense and miscellaneous expenses. Further, by letter dated 01.03.2013, the Authorized Representative of the Assessee submitted the details of legal and professional charges, advertisement & business promotion expenses and service charges. However, it is seen from the details submitted, it is noticed that the assessee has only submitted only few details in respect of the above expenses. The same is tabulated as under:
Nature of expenses Total Expenses Details
Claimed as per P submitted by
&L the assessee
Staff Welfare expenses 4513775 370636
Legal & Professional charges 9623362 2238911
Advertisement & business promotion 1540281 127198
expenses
Travelling and conveyance expenses 5466241 664542
Service charges 27561399 15351963
Miscellaneous expenses 2694137 571321
5. Further, from the vouchers / bills submitted, it is noticed that most of the bills are not supported with proper evidences to substantiate the assessee s claim.
Further, the assesses has failed to submit all the details in respect of its claim. Hence, as the assessee company has not discharged its onus of substantiating their claim that the above referred expenses were incurred wholly and exclusively for the purpose of business. In the absence of supporting evidences, 20% of such expenses of Rs.51399195/- amounting to Rs.1,02,79,839/- is hereby treated as expenses not incurred wholly and exclusively for the purpose of business and accordingly is disallowed and added back to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) are initiated separately for concealment of income.
5. Upon the assessee's appeal, the ld. CIT(A) deleted the addition by reference to submission before him and referring to the case laws that adhoc disallowance is not permissible. He held as under:
3.2. I have considered the findings of the Assessing Officer as well as rival submission of the appellant, carefully. I find that the Appellant has debited Staff Welfare Expenses, 3 ITA No. 6720/Mum/2016 Legal & Professional charges, Advertisement & business promotion expenses, Travelling & Conveyance Expenses, Service Charges and Miscellaneous Expenses, totaling to Rs.5,13,99,195/-. The Ld. Assessing Officer has disallowed 20% of such expenses for want of full details which cannot be sustained as the Assessing Officer has not pointed out any defect in bills and vouchers nor has issued any show-cause notice revealing the reasons as to why he was going to disallow 20% of such entire expenses. Obviously, during the course of assessment proceeding, the zerox copies of all the bills and vouchers are not produced unless the Assessing Officer demands for it. When the Assessee has submitted part of details and sample copy of the bills of such expenses, it was the responsibility of the Assessing Officer to further call for full information and supporting evidences. But the Assessing Officer has not done so, hence, disallowance of expenditure deserves deletion. Further, in the appellate proceeding, the Appellant has submitted the details & vouchers of such expenses in Annexure-1 to 6. The nature of expenses is that, it cannot be presumed that there is a personal element involved. Further, the Appellant gets support from the decision of Hon'ble ITAT, Mumbai Bench in the case of M/s. Johnson & Johnson Ltd. vs. ACIT, ITA No.9106/Mum/2004 dated 15.02.2013 and DCIT vs. Lyka Labs Ltd.(2009) 116 ITD 457 (Mum). Further, there is a plethora of judgements over this issue, disapproving adhoc disallowance of expenditure.
6. Against the above order, the Revenue is in appeal before us.
7. We have heard both the counsel and perused the records. The ld. Departmental Representative (ld. DR for short) relied upon the orders of the A.O. He submitted that the assessee has failed to produce all the necessary details required by the A.O. hence, adhoc disallowance has been done. Further, he referred to the ground raised that the ld. CIT(A) has erred in admitting the additional evidence without giving opportunity to the assessee.
8. Per contra, the ld. Counsel of the assessee submitted that the A.O. has made an adhoc disallowance without pointing out the specific defect in the details submitted. He referred to the several case laws for the proposition that the adhoc disallowance cannot be done. He referred to the following decisions:
1. DCIT vs. United Concept & Solution Pvt. Ltd. (in ITA No. 1768/Del/2016 vide order dated 8.12.2017);
2. Asst. CIT vs. Ganpati Enterprises Ltd. (2013) 142 ITD 118 (Del); and
3. Dy. CIT vs. Lyka Labs Ltd. (2009) 116 ITD 457 (Mum) 4 ITA No. 6720/Mum/2016 Further he submitted that after further examination the ld. CIT(A) has given a finding of the fact and hence he submitted that no disallowance should be done. Further, the ld.
Counsel of the assessee submitted the sample copies of the details.
9. Upon careful consideration, we find that there is no doubt that the A.O. has made an adhoc disallowance. It is settled that it has been held in a number of case laws that adhoc disallowance cannot be sustained de hors the A.O. pointing out specific irregularity. The main grievance raised by the Revenue is that the ld. CIT(A) has admitted additional evidence without giving any opportunity to the A.O. We find that this ground is misplaced, as the ld. CIT(A) has not mentioned that the assessee had submitted the details other than that was submitted before the A.O. Upon examination of the sample copies of the details submitted by the assessee, the ld. CIT(A) has observed that the nature of the expenses is that it cannot be presumed that there is a personal element involved. We find that the assessee is a corporate entity. Without pointing out a specific instance of expenditure incurred for personal element disallowance of expenses for personal uses in the hands of the corporate entity is not permissible. The case laws referred by the ld. CIT(A) are germane. Accordingly, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, we uphold the same.
10. In the result, this appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 26.02.2019
Sd/- Sd/-
(Ravish Sood) (Shamim Yahya)
Judicial Member Accountant Member
Mumbai; Dated : 26.02.2019
Roshani, Sr. PS
5
ITA No. 6720/Mum/2016
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT - concerned
5. DR, ITAT, Mumbai
6. Guard File
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai