Business expenses treated as personal expenses for lack of proof
Business expenses treated as personal expenses for lack of proof
AO found that expenses for foreign travel claimed by assessee were actually incurred on travel by relatives of the partners of the assessee-firm. Assessee's claim that foreign trips for the purpose of its business was disallowed for lack of documentary evidence. AO treated those expenses as assessee's personal expenses. CIT(A) confirmed the addition. ITAT upheld the disallowance on phone and motor car expenses.-500180
1 Assessing Officer during the course of assessment proceedings found on perusal of the relevant details furnished by the assessee that the expenses of Rs.5,39,543/- claimed by the assessee on account of foreign travel expenses were actually incurred on the travel undertaken by the relatives of the partners of the assessee-firm. Although the assessee explained before the Assessing Officer that the said relatives had undertaken the foreign trips for the purpose of its business, the Assessing Officer found that there was no documentary evidence filed by the assessee to support and substantiate the same. He accordingly treated the foreign travel expenses claimed by the assessee to the extent of Rs.5,39,543/- as personal expenses and disallowed the same.
2 On appeal, the ld. CIT(Appeals) confirmed the disallowance made by the Assessing Officer on this issue observing that the details furnished by the assessee were not sufficient to establish that the concerned foreign visits had been undertaken by the relatives of the partners of the assessee-firm for business purpose.
3 On appeal the ITAT held as under:
"We, however, find ourselves in agreement with the authorities below that the said e- mails sent by the assessee are not sufficient to establish that the concerned relatives of the partners of the assessee-firm, who had undertaken the relevant foreign trips, were also involved in some official/ unofficial capacity in the business of the assessee-firm and the said foreign trips were undertaken by them for the business of the assessee-firm. In our opinion, the disallowance made by the Assessing Officer on this issue was fully justified and the impugned order of the ld. CIT(Appeals) confirming the same does not call for any interference. Ground No. 2 of the assessee's appeal is accordingly dismissed.
"out of total motor car expenses and telephone expenses made by the Assessing Officer and confirmed by the ld. CIT(Appeals), it is observed that no record in the form of Log Book or Call Register, etc. was maintained by the assessee to establish that the expenses claimed on account of telephone and motor car are fully and exclusively incurred for the purpose of its business. In the absence of such record, the disallowance on account of personal element is very much called for and having regard all the facts of the case, we are of the view that such disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) to the extent of 10% of the total expenses claimed by the assessee is quite fair and reasonable."
Case Reference-Before Shri P.M. Jagtap, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member Deputy Commissioner of Income Tax,........ ...........................Appellant Circle-52, Kolkata, -Vs.- M/s. A & A International,......................................................Respondent
IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA 'C' BENCH, KOLKATA
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