2009 (9) TMI 1058 - AT - Income Tax

2019 (12) TMI 1537 - AT

Issues Involved:
1. Addition of Rs. 38022 in respect of maintenance charges.
2. Disallowance at 1% of daily allowance of Rs. 14.75 lakhs.
3. Disallowance of Rs. 5209 on staff welfare and incidental charges.
4. Disallowance of Rs. 38247 in respect of certain expenses.
5. Disallowance of Rs. 10955 in respect of traveling expenses.
6. Disallowance of Rs. 5 lakhs being expenses on labours.
7. Disallowance of Rs. 1.03 lakhs being expenses on pooja materials.
8. Disallowance of Rs. 50000 on pooja expenses.
9. Disallowance of Rs. 4.14 lakhs being traveling expenses of partners.
10. Disallowance of Rs. 1.26 lakhs being expenses on security.
11. Disallowance of Rs. 1.22 lakhs being payments for undervaluation of apartment.
12. Relief of Rs. 1.19 lakhs subject to verification of AO.
13. Disallowance of Rs. 3.3 lakhs being pre-paid property tax expenses.
14. Addition of Rs. 82340 on free check-up camp expenses.
15. Verification and quantification of Rs. 15.26 lakhs towards risk insurance policy on contractor.
16. Recompute the actual work-in-progress of Rs. 43.30 lakhs.
17. Disallowance of Rs. 1 lakh as service compensation to Shri M.P. Shetty.
18. Addition of Rs. 95240 being DA paid to mechanical staff as excess.
19. Addition of Rs. 37150 being development expenses incurred on the land belonging to the lady members of RN Shetty group.
20. Addition of Rs. 129300 under the head general charges, temporary huts, business expenses etc.
21. Addition of Rs. 55645 being 5% of the traveling expenses by the directors.
22. Addition of Rs. 92746 towards non-business expenses.
23. Addition of Rs. 366262 being purchase of water heaters installed in the residence of chairman.
24. Disallowance of Rs. 203106 out of pooja expenses.
25. Disallowance of Rs. 55655 towards directors' traveling expense.
26. Disallowance of Rs. 719042 towards sales promotion expenses.
27. Disallowance of security expenses of Rs. 216179.
28. Disallowance of Rs. 123663 towards free check-up camp expenses.
29. Disallowance of Rs. 37500 being part of cash payments to administrative staff as a special promotional offer.

Issue-wise Detailed Analysis:

1. Addition of Rs. 38022 in respect of maintenance charges:
The assessee claimed Rs. 38022 as maintenance charges received from Naveen Hotels Limited. The CIT(A) confirmed the addition on the grounds that the charges should have been claimed by Naveen Hotels Limited, not the assessee. The Tribunal upheld this decision due to lack of evidence from the assessee to justify the disallowance only to the extent of Rs. 15000.

2. Disallowance at 1% of daily allowance of Rs. 14.75 lakhs:
The AO disallowed 2% of the daily allowance, citing no uniformity in payments. The CIT(A) reduced this to 1%, and the Tribunal upheld this decision, noting that the genuineness of the expenses was not in question, but the lack of uniformity justified the minor disallowance.

3. Disallowance of Rs. 5209 on staff welfare and incidental charges:
The AO disallowed Rs. 10418 due to lack of supporting evidence, which the CIT(A) reduced to Rs. 5209. The Tribunal upheld this, considering the volume of expenses and the reasonableness of the AO's approach.

4. Disallowance of Rs. 38247 in respect of certain expenses:
The AO disallowed 2% of the expenses due to self-made vouchers lacking details. The CIT(A) reduced this to 1%. The Tribunal deleted the disallowance, noting the adverse conditions under which the expenses were incurred and the lack of substantial evidence from the AO.

5. Disallowance of Rs. 10955 in respect of traveling expenses:
The AO disallowed 5% of the traveling expenses, which the CIT(A) reduced to 2.5%. The Tribunal upheld this, noting the personal usage element admitted by the assessee.

6. Disallowance of Rs. 5 lakhs being expenses on labours:
The AO disallowed Rs. 3348372 based on a proportionate method. The CIT(A) reduced this to Rs. 5 lakhs, and the Tribunal remanded the issue back to the AO for verification of the details provided by the assessee.

7. Disallowance of Rs. 1.03 lakhs being expenses on pooja materials:
The AO disallowed Rs. 103947 as non-business expenses. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of details and supporting evidence.

8. Disallowance of Rs. 50000 on pooja expenses:
The AO disallowed Rs. 252745 out of Rs. 455881 claimed for pooja expenses. The CIT(A) reduced this to Rs. 50000, which the Tribunal deleted, considering the cultural context and lack of evidence from the AO.

9. Disallowance of Rs. 4.14 lakhs being traveling expenses of partners:
The AO disallowed Rs. 414973 for a partner's travel to Mauritius. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of evidence linking the travel to business purposes.

10. Disallowance of Rs. 1.26 lakhs being expenses on security:
The AO disallowed Rs. 126063 for security expenses at partners' residences. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of direct business connection.

11. Disallowance of Rs. 1.22 lakhs being payments for undervaluation of apartment:
The AO disallowed Rs. 122720 as a penal payment for undervaluation. The CIT(A) upheld this, and the Tribunal agreed, noting it could not be claimed as revenue expenditure.

12. Relief of Rs. 1.19 lakhs subject to verification of AO:
The AO disallowed Rs. 119674 as loss on sale of asset. The CIT(A) directed the AO to verify the claim, and the Tribunal upheld this direction.

13. Disallowance of Rs. 3.3 lakhs being pre-paid property tax expenses:
The AO disallowed Rs. 333066 out of Rs. 552207 for expenses beyond the business period. The CIT(A) upheld this, and the Tribunal agreed, noting the proportionate allowance was judicious.

14. Addition of Rs. 82340 on free check-up camp expenses:
The AO disallowed 10% of the expenses due to lack of third-party vouchers. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of details provided by the assessee.

15. Verification and quantification of Rs. 15.26 lakhs towards risk insurance policy on contractor:
The AO allowed Rs. 563536 out of Rs. 2089805 claimed. The CIT(A) directed the AO to verify the details, and the Tribunal upheld this direction.

16. Recompute the actual work-in-progress of Rs. 43.30 lakhs:
The AO added Rs. 4330358 as undisclosed work-in-progress. The CIT(A) directed the AO to recalculate, and the Tribunal remanded the issue back to the AO for comprehensive verification.

17. Disallowance of Rs. 1 lakh as service compensation to Shri M.P. Shetty:
The AO disallowed Rs. 1 lakh as service compensation. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of commercial expediency.

18. Addition of Rs. 95240 being DA paid to mechanical staff as excess:
The AO disallowed 2% of Rs. 4761998 due to lack of uniformity. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of proper vouchers.

19. Addition of Rs. 37150 being development expenses incurred on the land belonging to the lady members of RN Shetty group:
The AO disallowed Rs. 3.71 lakhs due to lack of agreement. The CIT(A) reduced this to Rs. 37150, which the Tribunal upheld, noting the lack of supporting evidence.

20. Addition of Rs. 129300 under the head general charges, temporary huts, business expenses etc.:
The AO disallowed 2% of Rs. 6464000 due to self-made vouchers. The CIT(A) upheld this, and the Tribunal agreed, noting the reasonableness of the disallowance.

21. Addition of Rs. 55645 being 5% of the traveling expenses by the directors:
The AO disallowed 5% of Rs. 1112000 due to personal usage. The CIT(A) upheld this, and the Tribunal agreed, noting the personal element.

22. Addition of Rs. 92746 towards non-business expenses:
The AO disallowed Rs. 92746 as non-business expenses. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of explanation from the assessee.

23. Addition of Rs. 366262 being purchase of water heaters installed in the residence of chairman:
The AO disallowed Rs. 366262 as personal expenses. The CIT(A) upheld this, and the Tribunal remanded the issue back to the AO to verify the ownership of the property.

24. Disallowance of Rs. 203106 out of pooja expenses:
The AO disallowed Rs. 203106 as excessive pooja expenses. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of evidence.

25. Disallowance of Rs. 55655 towards directors' traveling expense:
The AO disallowed Rs. 55655 as non-business expenses. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of details.

26. Disallowance of Rs. 719042 towards sales promotion expenses:
The AO disallowed 10% of Rs. 1438084 due to lack of details. The CIT(A) reduced this to 5%, which the Tribunal upheld, noting the reasonableness of the disallowance.

27. Disallowance of security expenses of Rs. 216179:
The AO disallowed Rs. 216179 for security at partners' residences. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of business connection.

28. Disallowance of Rs. 123663 towards free check-up camp expenses:
The AO disallowed 10% of Rs. 1236630 due to lack of details. The CIT(A) upheld this, and the Tribunal agreed, noting the lack of details.

29. Disallowance of Rs. 37500 being part of cash payments to administrative staff as a special promotional offer:
The AO disallowed Rs. 37500 due to lack of supporting vouchers. The CIT(A) reduced this to 10%, which the Tribunal upheld, noting the reasonableness of the disallowance.

Conclusion:
The appeals were partly allowed, with several issues remanded back to the AO for verification and others upheld based on the reasonableness and lack of supporting evidence from the assessee. The Tribunal emphasized the need for proper documentation and justification for claims made by the assessee.

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