2021 (7) TMI 308 - HC - Income Tax

Disallowance of 50% of credit card expenses - AO held that the assessee has not adduced any evidence that drawings made by the Directors through their personal credit card are in fact, incurred for the purpose of business of the company - of Income Tax (Appeals) as well as tribunal held that no evidence has been adduced by the assessee to show that expenses are incurred for purposes of business by assessee - HELD THAT - As pertinent to note that before the tribunal the assessee had filed the documents with regard to the claims made by the assessee - tribunal has rejected the aforesaid application on the ground that the documents annexed with the application are neither certified nor have been filed before the tribunal and the Assessing Officer. It has further been held that no application for admission of additional evidence along with documents was filed. As held by the tribunal that no cognizance can be taken of the document along with the documents filed by the assessee. Thus, in the absence of any document on record, all the authorities have rightly disallowed the credit card expenses. Similarly, in the absence of any evidence on record, the disallowance of business development expenses and disallowance of foreign travel expenses has been upheld. Whether the assessee has added a sum as provision for wealth tax in income is a question which has to be ascertained after remand and after giving an opportunity of being heard to the assessee. The findings of fact have been recorded by the Assessing Officer, Commissioner of Income Tax (Appeals) and the tribunal do not suffer from any infirmity. The aforesaid findings are also not demonstrated to be perverse. Substantial question of law are answered against the assessee and in favour of the revenue.

Summary

Issues:
1. Disallowance of credit card expenses
2. Disallowance of business development expenses
3. Disallowance of foreign travel expenses
4. Disallowance of traveling expenses
5. Disallowance under Section 40(a)(ii) of the Act

Analysis:

Issue 1 - Disallowance of Credit Card Expenses:
The Assessing Officer disallowed 50% of credit card expenses, amounting to ?6,50,921, as the assessee failed to prove that these expenses were incurred for business purposes. The Commissioner of Income Tax (Appeals) and the tribunal also upheld this disallowance, noting the lack of evidence provided by the assessee. The tribunal rejected additional documents submitted by the assessee as uncertified and not filed before the tribunal or the Assessing Officer. As a result, all authorities rightly disallowed the credit card expenses.

Issue 2 - Disallowance of Business Development Expenses:
The Assessing Officer disallowed business development expenses of ?7,61,200, and this disallowance was upheld by the Commissioner of Income Tax (Appeals) and the tribunal due to the absence of evidence supporting the business purpose of these expenses. The lack of documentation led to the rejection of the claim by the authorities.

Issue 3 - Disallowance of Foreign Travel Expenses:
Similarly, the disallowance of foreign travel expenses amounting to ?37,18,705 was upheld by the authorities as the assessee failed to provide evidence that these expenses were incurred wholly and exclusively for earning income. The tribunal's decision was based on the lack of documented proof submitted by the assessee.

Issue 4 - Disallowance of Traveling Expenses:
The disallowance of traveling expenses under Section 40(a)(ii) of the Act was remitted to the Assessing Officer by the tribunal for further examination. The necessity of incurring such expenses was questioned, but the matter was left for reassessment after remand.

Issue 5 - Disallowance under Section 40(a)(ii) of the Act:
The tribunal remitted the issue of disallowance made under Section 40(a)(ii) of the Act, amounting to ?96,247, to the Assessing Officer for review. The tribunal's decision to remand this specific issue was based on the need for further assessment and an opportunity for the assessee to be heard.

In conclusion, the High Court dismissed the appeal, upholding the decisions of the lower authorities on all issues. The court found no merit in the appeal as the findings of fact by the authorities were deemed appropriate and not shown to be perverse. The substantial questions of law were answered against the assessee, resulting in the dismissal of the appeal.