2017 (9) TMI 1584 - AT - Income Tax

Addition of expenditure incurred on Venue Management expenses, venue expenses, stage decoration expenses and miscellaneous expenses - assessee failed to submit the details in time and for want of verification - Held that - Merely because the expenses were allowed in subsequent year is also not sufficient to hold that these expenses are allowable in this year also, The assessee has to submit evidences and justifications for incurring of these expenses to fall with in mandate and provisions of the 1961 Act. The assessee has claimed these expenses in return of income filed with the Revenue and the onus is on the assessee to prove and substantiate its allowability within provisions and mandate of the 1961 Act. The issue of allowability of expenses is purely factual matter which requires investigation of facts at the first stage and thereafter it is to be allowed or disallowed by weighing in the context of provisions and mandate of the 1961 Act. The assessee filed details at the fag end of assessment proceedings when assessment proceedings were going to be barred by law of limitation preventing AO to conduct necessary verification and enquiry for want of time. Thus, keeping in view entire factual matrix of the case, this matter need to be restored back to the file of the AO for de-novo adjudication of all the issues on merits

Summary

Issues Involved:
1. Disallowance of 10% of Venue Management expenses.
2. Disallowance of 5% of Venue expenses.
3. Disallowance of 5% of Stage Decoration expenses.
4. Disallowance of 10% of Miscellaneous Event expenses.
5. Initiation of penalty proceedings under section 271(1)(c) of the Act.

Detailed Analysis:

1. Disallowance of 10% of Venue Management expenses:

The assessee claimed ?1,12,70,643/- under venue management expenses. The AO disallowed 10% of these expenses due to the assessee's failure to submit complete details in time, preventing verification. The CIT(A) upheld this disallowance. The tribunal noted that similar disallowances were made in the preceding year and upheld to the extent of 3% by the tribunal for AY 2005-06, considering the assessee had provided necessary details and the AO did not dispute the factum of payment. The tribunal directed the AO to re-assess the disallowance after proper verification.

2. Disallowance of 5% of Venue expenses:

The assessee claimed ?1,42,08,131/- under venue expenses. The AO disallowed 5% of these expenses for similar reasons as the venue management expenses. The CIT(A) upheld this disallowance. The tribunal referenced its previous decision for AY 2005-06, where a 3% disallowance was upheld, and directed the AO to re-assess this disallowance after proper verification.

3. Disallowance of 5% of Stage Decoration expenses:

The assessee claimed ?2,22,81,096/- under stage decoration expenses. The AO disallowed 5% of these expenses due to the late submission of details, preventing verification. The CIT(A) upheld this disallowance. The tribunal referenced its previous decision for AY 2005-06, where a 3% disallowance was upheld, and directed the AO to re-assess this disallowance after proper verification.

4. Disallowance of 10% of Miscellaneous Event expenses:

The assessee claimed ?41,32,370/- under miscellaneous event expenses. The AO disallowed 10% of these expenses due to the late submission of details, preventing verification. The CIT(A) upheld this disallowance. The tribunal referenced its previous decision for AY 2005-06, where a 3% disallowance was upheld, and directed the AO to re-assess this disallowance after proper verification.

5. Initiation of penalty proceedings under section 271(1)(c) of the Act:

The CIT(A) dismissed the ground of appeal regarding the initiation of penalty proceedings under section 271(1)(c) on the assumption that the ground is premature. The tribunal did not provide a specific ruling on this issue, focusing instead on the disallowance of expenses.

Conclusion:

The tribunal noted that the disallowances were made on an adhoc basis due to the late submission of details by the assessee, preventing proper verification by the AO. It referenced its previous decision for AY 2005-06, where a 3% disallowance was upheld, and directed the AO to re-assess the disallowances after proper verification and enquiry. The appeal was allowed for statistical purposes, and the matter was restored to the AO for de-novo adjudication.