2016 (3) TMI 814 - AT - Income Tax

Addition towards conveyance expenses to partners, office maintenance and entertainment to clients - genuineness - bill not produced - Held that - Assessing Officer disallowed the claim of the assessee of ₹ 6,00,000/- on the ground that the bills of the expenses debited by Sh. U.A. Rana were not produced before him and in the absence of the bills, the said expenses could not be established incurred wholly and exclusively for the purpose of business or profession of the assessee firm. On perusal of the assessment orders of the preceding years, we find that this issue was not examined by the ld. Assessing Officer and thus the rule of consistency will not apply in the present facts. In our opinion, the expenses on car maintenance, office maintenance and entertainment to clients have been debited by Sh. U.A. Rana in his books of accounts and same have been reimbursed to him by the assessee firm claiming to have incurred for the purposes of the business and professions of the assessee firm, however, such bills were not produced before the ld. Assessing Officer for verification whether incurred wholly and exclusively for the purpose of the business or profession of the assessee firm. Therefore, in the interest of justice, we restore the matter to the file of the Assessing Officer to decide the issue afresh, in accordance with law, and also direct the assessee to produce all the said bills for verification and if the same are incurred wholly and exclusive for the purposes of the business/profession carried on by the assessee firm, the same should be allowed - Decided in favour of assessee for statistical purpose..

Summary

Issues:
1. Challenge to the order of the Commissioner of Income Tax (Appeals)
2. Disallowance of expenses claimed by the assessee
3. Restoration of the matter to the Assessing Officer for fresh decision

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The grounds of appeal included challenges to the order and the addition of certain expenses made by the Assessing Officer. The appellant contested that the order was bad in fact and in law, and the Commissioner did not properly appreciate the evidence on record.

2. The Assessing Officer disallowed expenses amounting to Rs. 6,00,000 claimed by the assessee for conveyance, car maintenance, upkeep of consultation room, and entertainment expenses. The appellant argued that the expenses were in accordance with the partnership deed and were actually incurred by the resident partner. However, the Assessing Officer found discrepancies in the submission as no actual bills/invoices were provided to support the expenses claimed. The Commissioner upheld the disallowance, prompting the assessee to appeal.

3. The Authorized Representative of the assessee contended that the expenses were paid to the partner as per the partnership deed and had been allowed in earlier years. The Departmental Representative supported the lower authorities' orders. The Tribunal noted that while vouchers were produced, actual bills/invoices were missing. The Tribunal directed the matter to be sent back to the Assessing Officer for a fresh decision, instructing the assessee to provide all bills for verification. The Tribunal emphasized that expenses must be incurred wholly and exclusively for business purposes to be allowed.

This judgment highlights the importance of substantiating claimed expenses with proper documentation to establish their business purpose. The Tribunal's decision to remand the matter for fresh assessment underscores the significance of adhering to legal requirements and providing necessary evidence in tax proceedings.