2014 (6) TMI 395 - AT - Income Tax

Deductibility of expenses on foreign travel Burden to prove - Held that - Not only has the assessee been totally unable to prove the business purpose of the expenditure, his case stands thoroughly discredited by the adverse, definitive findings by the authorities below - it would have only being preceded by as telephonic conversations, e-mails, etc. to firm up the arrangements with them - no supplies from foreign suppliers during the entire year, and which could have in fact commenced since inception, as all that was required was to book the goods from the regular suppliers in the name of the assessee s firm. An IEC code is the first thing a person intending to import would obtain, which is a matter of simple procedure, while the assessee waits for years to do so - The other two trips during the year, i.e., in May and June, 2005 and December, 2005, expenditure on which is being claimed, are by the assessee s father, and toward which no explanation stands furnished at any stage - The assessee has also not advanced any reason toward admission of additional evidence - any credence to the assessee s claims cannot be made and the disallowance of the expenditure is upheld in-as-much as the assessee has clearly failed to prove the same as being incurred for business purposes, much less wholly and exclusively thus, the disallowance id sustained on the basis of the finding of a complete absence of the discharge of the burden of proof u/s. 37(1) of the Act Decided against Assessee.

Summary

Issues:
- Delay in filing the appeal
- Deductibility of expenditure on foreign travel

Delay in filing the appeal:
The appeal was directed against the Order by the Commissioner of Income Tax (Appeals)-32, Mumbai, dated 26.08.2010, partly allowing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 for the assessment year 2006-07. A delay of one day in filing the appeal was observed by the Bench, accompanied by a condonation petition and affidavit explaining the reason for the delay, which was found satisfactory. The hearing proceeded with, admitting the appeal.

Deductibility of expenditure on foreign travel:
The issue in the appeal was the deductibility of the expenditure on foreign travel incurred and claimed by the assessee in the sum of Rs.5,46,198. The assessee, engaged in trading in Fresh Cut Flowers, explained the trips to Thailand and Myanmar as being for prospecting buyers and expanding the business. However, the names of the parties met during the visits could not be furnished. The expenditure included car rental bills showing extensive travel while a convention hall was booked for a meeting with suppliers. The assessee's case for admission of additional evidence was based on emails sent for confirmation of meetings and import-export codes. The authorities found the assessee unable to prove the business purpose of the expenditure, discrediting his case. The firm M/s. CM, established in the trade, had organized a conference for meeting suppliers, but the assessee did not attend. The absence of supplies from foreign suppliers raised doubts about the business purpose of the trips. The disallowance of the expenditure was confirmed as the assessee failed to prove it was incurred for business purposes.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the disallowance of the expenditure on foreign travel. The decision was based on the assessee's failure to prove the business purpose of the expenditure, leading to the confirmation of the disallowance. The Tribunal found no merit in the assessee's claims and sustained the disallowance as the burden of proof under section 37(1) was not discharged. The reliance on case law was deemed irrelevant as no reference was made during the hearing.