2017 (2) TMI 410 - AT - Income Tax

Addition towards legal and professional charges - Held that - The assessee has neither submitted any evidence in support of proof of services rendered, nor any evidence in support of professional competency or experience of Sh. Rajkumar Jain in the field of coordination for getting refunds from the custom Department.In view of above discussion, we are of the considered opinion that the disallowance sustained by the learned Commissioner of Income-tax (Appeals) out of legal and professional expenses is reasonable and justified. - Decided against assessee Disallowance of 1/3 rd expenses out of travelling expenses - Held that - From the evidence filed by the assessee, it cannot be established that the expenses incurred, were wholly and exclusively for the purpose of business. The assessee has not filed any evidence from the importers that the persons travelled on behalf of the assessee company went to the respective country in business connection. The assessee has not filed any copy of Visa applications, which could explain whether the Visa was for business or tourist purpose. The assessee has also not filed any evidence in support of use of foreign currency taken by the persons during foreign travel and in such a situation , personal expenses on foreign travels by the persons travelled, cannot be denied. - Decided against assessee Disallowance of commission expenses - Held that - The assessee has neither furnished any evidence in support of services rendered by the persons to whom commission is paid, nor any evidence in support of professional competence of those persons. It was the onus of the assessee to submit the evidences which could justify that any such services were rendered by those persons and justify such high percentage of commission paid to those persons. The assessee has failed to discharge this onus. We have already discussed in earlier para that in the circumstances where no evidence in respect of services rendered by the parties is furnished, the ratio of the decision of the Hon ble Supreme Court in the case of Hero Cycles Private Limited (2015 (11) TMI 1314 - SUPREME COURT OF INDIA) is not applicable. - Decided against assessee Addition against household withdrawals - Held that - Commissioner of Income-tax (Appeals) has already analyzed the drawing Ledger account of the assessee and found that withdrawal from M/s. Fame Impax have been incurred through cheque which was utilized towards school fees, electricity, water charges, medical claim, telephone bills etc. and only cash withdrawal of ₹ 15,000/-has been made from this account. In respect of income of wife of the assessee, no evidence had been produced either before us or the lower authorities to substantiate that income was earned and utilized towards household withdrawals of the family. In view of above circumstances, we are of the opinion that the addition sustained by the learned Commissioner of Income-tax (Appeals) on the issue in dispute is reasonable - Decided against assessee

Issues Involved:
1. Addition of legal and professional charges as excessive payment.
2. Adhoc addition of 1/3rd out of traveling expenses.
3. Adhoc addition out of commission expenses.
4. Addition for alleged low household withdrawals.

Issue 1: Addition of Legal and Professional Charges
The assessee challenged the sustaining of an addition of ?4,00,000 towards legal and professional charges paid to Sh. Rajkumar Jain. The Assessing Officer (AO) disallowed ?4,00,000 out of ?7,81,623 claimed, citing that the expenses were not incidental to running the business. The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the disallowance, noting that Sh. Rajkumar Jain was not professionally or legally qualified to represent the assessee before the Custom Department. The Tribunal found that the assessee failed to provide evidence of services rendered or professional competence of Sh. Rajkumar Jain, and thus upheld the disallowance as reasonable and justified.

Issue 2: Adhoc Addition of 1/3rd Out of Traveling Expenses
The assessee contested the sustaining of disallowance of 1/3rd expenses out of traveling expenses amounting to ?1,56,301. The AO observed foreign traveling expenses of ?4,68,903 and disallowed 2/3rd of the total expenses due to lack of evidence supporting business-related travel. The CIT(A) reduced the disallowance to 1/3rd. The Tribunal upheld the CIT(A)'s decision, noting the absence of evidence from importers, Visa applications, and proof of business-related expenses, thereby dismissing the ground.

Issue 3: Adhoc Addition Out of Commission Expenses
The assessee challenged the sustaining of disallowance of ?10,00,000 out of commission expenses. The AO disallowed the entire commission of ?12,82,840, citing excessive payment and lack of evidence of services rendered. The CIT(A) allowed partial relief, sustaining ?10,00,000 of the disallowance. The Tribunal upheld the CIT(A)'s decision, noting the absence of evidence for services rendered, professional competence of the recipients, and justifiable business purpose, thereby dismissing the ground.

Issue 4: Addition for Alleged Low Household Withdrawals
The assessee contested the sustaining of an addition of ?1,50,000 for low household withdrawals. The AO made an addition of ?3,00,000, observing insufficient cash withdrawals for household expenses. The CIT(A) allowed relief of ?1,50,000, sustaining the balance. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence of household income and expenditure, thereby dismissing the ground.

Conclusion:
The appeal of the assessee was dismissed in entirety, with the Tribunal upholding the findings and disallowances made by the lower authorities on all contested grounds. The decision was pronounced in the open court on 18th Nov. 2016.

← Previous Next →