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TMI Blog2014 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the due date of filing of the return of income – relying upon CIT Vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] - in view of the amended provisions of the Act, the expenditure on which the tax was due to be deducted and the same was deducted and deposited before the due date of filing of return, is to be allowed as an expenditure in the hands of the assessee - The second set of the disallowance was the items on which tax was not deducted at source - the payments were made to the franchises and not the employee directly and in the absence of any satisfactory explanation with regard to the nature of such payments booked under the head incentive and because of failure to deduct the tax at source, the amount is not allowable in the hands of the assessee – Decided partly in favour of assessee. Amount paid to ROC for increasing Authorised capital disallowed – Held that:- The expenditure having been incurred in the capital field is the capital expenditure in the hands of the assessee and is not allowable as revenue expenditure in the hands of the assessee – following the decision in Brook Bond India Ltd. Vs. CIT [1997 (2) TMI 11 - SUPREME Court] - Expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 relating to assessment years 2005 -06 and 2006-07 respectively against the order passed under section 143(3) of Income Tax Act, 1961 (in short the Act'). 2. Both the appeals filed by the same assessee relating to two different assessment years on similar issues were heard together and are being disposed off by this consolidated order for the sake of convenience. ITA No.409/Chd/2010 :: Assessment year 2005 -06: 3. The assessee in ITA No.409/Chd/2010 has raised following grounds of appeal : 1. That the order of Learned C.I.T. (A) is bad and against the facts Law. 2. That the Learned Commissioner of Income Tax (appeal) has wrongly confirmed addition amounting to ₹ 981548 on account of being Non Business Expenditure without appreciating the facts that all expenses were incurred through credit cards in ordinary course of business. 3. That the Learned Commissioner of Income Tax (Appeal) has wrongly confirmed the disallowance amount of 12235474 /-under section 40(a)(ia) without appreciating the facts that the provisions of TDS are not applicable also failed to appreciate the fact that the appellant has actually paid the expenses nothing is payable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cards which is incorporated under para 2.2 at page 3 of the assessment order that out of total expenditure of ₹ 17,14,011/ -the assessee could furnish breakup of only ₹ 10,24,588/ -and no information was furnished in respect of the balance expenditure of ₹ 6,89,423/-. The Assessing Officer on the analysis of the details and the information received from the banks found certain differences in the amounts as per the credit cards statement and the amounts as per the assessee. Further in the Annexure -A, which was attached to the assessment order, the Assessing Officer tabulated the transaction and considered the nature of each transaction whether the same was business expenditure and also took into consideration the non production of certain invoices and tabulated the same at ₹ 9,76,396/ -. Further the Assessing Officer also tabulated the details which as per him were mixed in nature i.e. personal expenditure of the Directors or for the business purpose and totaled the same at ₹ 1,50,238/-. The Assessing Officer allowed 20% of the said expenditure as business expenditure and remaining amount was treated as non business expenditure. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under different heads. The Assessing Officer further noted that many a times there was no co -relation at all i.e. expenses of ₹ 2841/-was booked on 16.7.2004 under the head canteen expenses ' including annual fee for the credit card of ₹ 810/ -. Further the expenditure incurred on purchase for kids made from Kapkids, Sector 17, Chandigarh, purchases made from various showrooms of branded items i.e. clothing and jewellery, expenses in beauty parlors have been booked as staff welfare expenses or business promotion expenses. The Assessing Officer then prepared detailed list of payments through credit cards and statement given by the bank, which is enclosed as Annexure-A-1 of the assessment order. After tabulating the details the Assessing Officer observed as under: (a) The details on the basis of credit card statements given by the banks has been prepared and is enclosed as annexure A-1 to this order. Total payments made through credit card are summarized as follows: - TABLE A B C Card Amount as per Credit Card Statement Amount as per assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit cards relate to personal expenses of the directors, so the probability of such expenses, categorized as mixed, being of similar nature i.e. non-business purpose, is very high. Considering this aspect only 20% of such expenses being Rs,30,048/ -are considered as for business purpose and remaining amount is treated as non - business expenditure. 9. The Assessing Officer vide para 2.4 thus calculated disallowance at ₹ 9,89,548/ -observing as under: 2.4 Total amount allowed as business expense is ₹ 7,Q7,655/-and total amount disallowed on account on being non-expenditure is ₹ 9,81,548/ - (Rs.9,76,396 + ₹ 1,20,190-Rs. 1,06,138).-A further allowance of ₹ 1,06,138/-has been given as expenses incurred through credit cards and debited to the profit and loss account during the year under consideration were ₹ 16,89,203/-only. Since assessee has tried to conceal its income by claiming non-business expenses, penalty proceedings u/s 271(1)(c) are initiated for concealing particulars of income. 10. The assessee before us has failed to produce any evidence to establish that the expenditure incurred under various heads of expenditure was relatab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that it was in dire financial crises and TDS could not be deposited in time. However, TDS deducted was deposited before the due date of filing of return of income and the credit for such payments should be allowed to the assessee. Reliance was placed on the decision of the Hon'ble Delhi High Court in CIT Vs. Naresh Kumar [362 ITR 256 (Del)] and in CIT Vs. Rajinder Kumar [362 ITR 241 (Del)] . 14. The learned D.R. for the Revenue placed reliance on the orders of the authorities below. 15. We have heard the rival contentions and perused the record. The issue raised in the ground of appeal is in relation to tax deduction at source. The assessee had made various payments under different heads of expenditure to which the provisions of Chapter XVII -B of the Act were applicable. The assessee had failed to deduct the tax at source out of the said payments and further where the tax was deducted at source, the same was not paid in time as required under the provisions of section 200(1) of the Act. The case of the assessee before us was that because of certain paucity of funds, tax deducted at source was deposited belatedly but before the due date of filing of the return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot furnished any evidence that the tax had been deducted out of the said payments to the faculty totaling ₹ 37,750/-. Further the assessee had made payments on account of incentive to Sri Ganesh Medical Training Centre totaling ₹ 92,483/ -and no tax was deducted at source before making the said payments. The plea of the assessee was that the said payments included the salary and other office expenses to be incurred at the franchises place but the franchise was not an employee of the assessee and even if any employee of the assessee was deputed to do the said work, evidence in respect thereof was not filed by the assessee. In any case, the payments were made to the franchises and not the employee directly and in the absence of any satisfactory explanation with regard to the nature of such payments booked under the head incentive and because of failure to deduct the tax at source, the said amount of ₹ 92,483/ -is not allowable in the hands of the assessee. Accordingly, we uphold the disallowance at ₹ 37,750 plus ₹ 92,483/ -. However, in respect of the balance expenditure, the Assessing Officer is directed to verify the stand of the assessee in line with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any expenditure is booked in cash over and above ₹ 20,000/-, then the provisions of section 40A(3) of the Act are to be applied and disallowance are to be worked out thereunder. In the facts of the present case, the assessee claimed that the imprest account was available with the directors from time to time and only remuneration at the end of the year was adjusted and hence no cash payment for the said expenditure of remuneration to the Directors. However, the stand of the assessee needs to be verified. In the interest of justice, we deem if fit to restore this issue back to the file of the Assessing Officer, who shall verify the claim of the assessee vis- -vis the payment through imprest account and adjustment of remuneration to the imprest account. In case the assessee had earlier paid certain cash through the imprest account, then no disallowance is warranted under section 40A(3) of the Act on the payment through imprest account and thereafter on adjustment of the remuneration through the said imprest account. However, in case the payment has been made in cash by way of remuneration to Directors or has been adjusted against the cash payment through imprest account on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by the CIT (Appeals). 27. The plea of the assessee before us was that no commission was paid to the doctors for reference of any patient. Further it was pointed out by the learned A.R. for the assessee that the addition in the case was made without any basis. 28. The learned D.R. for the Revenue placed reliance on the orders of the authorities below. 29. We have heard the rival contentions and perused the record. The statement of the employee of the assessee was recorded in the presence of the learned counsel for the assessee and was also signed by him. The assessee was confronted vide order sheet dated 23.11.2007 to explain as to why the addition should not be made to its income in view of the said statement. The assessee never asked for any cross examination even when he was confronted with the statement, except reply given by the assessee that no payments were made directly to the doctors for referring the patients to the hospital. In the said reply dated 20.12.2007 which is reproduced under para 13. 21 and 22 of the assessment order, the assessee made an alternate submission that if the Assessing Officer was not satisfied with the said reply, then it may be presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the appeal is finally heard and disposed off. 31. The ground of appeal No.1 raised by the assessee is general in nature and the same is dismissed. 32. The ground of appeal No.3 raised by the assessee is not pressed and hence the same is dismissed as not pressed. 33. The issue in ground No.2 raised by the assessee is in relation to the commission paid to the doctors for referring the patients to the hospital. The issue raised vide ground of appeal No.2 in assessment year 2006 -07 is identical to the issue raised vide ground No.9 in assessment year 2005 -06 which we have decided in the paras hereinabove. Following the same parity of reasoning we restrict the addition under section 69C of the Act to ₹ 6 lacs in assessment year 2006 -07. The ground of appeal No.2 raised by the assessee is thus partly allowed. 34. The issue in ground No.4 raised by the assessee is against the payments made through credit cards which is identical to the ground No.2 raised by the assessee in assessment year 2005 -06. The nature of expenditure through credit cards is similar to the expenditure debited in assessment year 2005 -06 and in view of our decision in the paras herein a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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