MR. VIRENDRA SINGHVI,KOLKATA vs. ACIT, CIRCLE - 31, KOLKATA, KOLKATA

The assessee has raised the following grounds of appeal:- “1.For that the Honorable Commissioner of Income Tax (Appeal) - 9 was quite unjustified by confirming the addition of Rs. 278177/- (Rupees Two Lakh Seventy- Eight Thousand One Hundred Seventy-Seven) U/S 14 A though the appellant had submitted that there was no expenditure incurred by the appellant. Assessment Year: 2012-13 VIRENDRA SINGHVI 2 That AO has to examine the account of appellant first and then if he is not satisfied with the correctness of the claim, only than he can invoke Rule 8D. Here The Assessing Officer has not considered the claim of the appellant at all and he has straightway embarked upon computing disallowance under Rule 8D. Disallowance under section 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance under section 14A could not stand. The A.O. has not verified the audited statement of accounts of appellant to find out the exact expenditure which is attributable for earning exempt income or common to both exempt and non-exempt income. He dismissed the claim of the appellant that all the expenditures shown in audited profit and loss account are business expenditures and arbitrarily and hypothetically concluded that the assesse has incurred expenditure which is not directly attributable to any particular income or receipt.

For that the Honorable Commissioner of Income Tax (Appeal) - 9, has confirmed disallowance of Rs. 210309/- (Rupees Two Lakh Ten Thousand Three Hundred Nine only) against foreign travelling expenses disallowed on estimation bases on the ground that the copy of visa and bill of the air ticket agent it was not mention that how many persons have travelled. In the appeal proceeding the appellant had submitted foreign travel expenses details required by the Honorable Commissioner(appeal)-9, but the CIT (Appeal) has confirmed the addition on the ground that the bill submitted relates to Mr. Shreyansh Singhvi amounting to Rs. 63327/- (Rupees Sixty- three thousand three hundred twenty-seven) on different dates and to Mrs. Vidhi Singhvi Rs. 8425/- (Rupees Eight Thousand Four Hundred Twenty- Five). In this regard the appellant write to inform that Mr Shreyansh Singhvi & Mrs Vidhi Singhvi are employees of the firm. M/s. Singhvi International having degree of Masters in Accounting & Finance from London School of Economics and Masters in Finance and Investments from University of Nottingham respectively and this being a wholly export firm they travelled in behalf of the firm to procure/ promote the business. In this connection A.O. in his order wrote that the copy of visa and bills of air tickets agent were produced before him but he could not find from these documents the number of persons travelled. More over respectfully I submit that the appellant is engaged in 100% export business and carry out frequent foreign travels in relation to his business activities. These foreign travels are a compulsive part of his business activities as his whole business depends and survives on these foreign travel. The visa and travel agent bill all contain the name of the person travelled and details of travelling. It is surprising that how come AO concluded that from these documents number of persons travelled could not be verified and based on this finding arbitrarily disallowed Rs. 210309/- on estimation basis.

For that the Assessment order is bad in fact as well as in law and hence it is liable to be quashed. 4.For that appellant craves leave to add / alter / amend / Any other ground/ grounds / on or the hearing of the appeal to add further elucidation to any or all of the grounds which may be submitted on or before the hearing of the appeal. the correctness of the claim, only he can invoke Rule 8D. The Assessing Officer has Assessment Year: 2012-13 VIRENDRA SINGHVI 3 straightway embarked upon 14 A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance under section 14A could not stand.”

The first issue that arises for our consideration is regarding the disallowance u/s 14A of the Act at Rs.2,78,177/-. Brief facts regarding this issue are that the assessee is an individual and runs a sole proprietorship concern, namely, M/s. Singhvi International, which is engaged in the business of manufacturing and trading goods. Case selected for scrutiny under CASS and notices were served u/s 143(2) and 142(1) of the Act. The ld. Assessing Officer on going through the details noticed that the assessee had made investment in shares and mutual funds and other tax free bonds but disallowance u/s 14A of the Act has not been made in the computation of income. Thus, the ld. Assessing Officer made disallowance at Rs.2,78,177/-, applying Rule 8D of the Income Tax Rules, 1962 (‘Rules’) and the said disallowance stands confirmed by the ld. CIT(A) also. Before us, the ld. Counsel for the assessee submitted that he prepared a separate balance sheets for individual and for the proprietorship concern and the investments made in the equity shares, mutual fund and tax free bonds have been shown in the individual balance sheet and no expenditure has been claimed therein.

On the other hand, the ld. D/R, supported the orders of the lower authorities.

We have heard rival contentions and perused the record placed before us.

The assessee is aggrieved with the disallowance of Rs.2,78,177/- made u/s 14A of the Act by the ld. Assessing Officer and confirmed by the ld. CIT(A). On going through the details filed by the assessee, we note that the assessee runs a sole proprietorship concern M/s. Singhvi International. Assessment Year: 2012-13 VIRENDRA SINGHVI 4 Books of accounts are audited and financial statements are prepared and in the audited balance sheet as on 31/03/2012, no investments are appearing and only the business transaction carried out in the course of export business are mentioned. As far as the investments made in equity shares and mutual funds and tax free bonds are concerned, we notice that they are appearing in the personal balance sheet of the assessee and no expenditure has been claimed against any of the income shown in the individual account. Since no expenditure has been claimed in the individual balance sheet, also since no investment are shown in balance sheet of proprietorship concern and also considering the fact that the Assessing Officer failed to record proper satisfaction, as to whether disallowance u/s 14A of the Act was required to be made in the case of the assessee, we are inclined to hold that no disallowance u/s 14A of the Act is called for. We thus, reverse the finding of the ld. CIT(A) and the ground raised by the assessee is allowed.

The second issue for our consideration is disallowance of foreign travel expenditure of Rs. 2,10,309/-. We notice that in the course of assessment proceedings, the assessee filed various details relating to foreign travel made by the representatives of the assessee like, copy of VISA and bills of tickets, arrears deducted etc.. However, the ld. Assessing Officer without indicating any discrepancy in such documents completed the proceedings in making adhoc disallowance of 10% for which the assessee could not find any relief from the ld. CIT(A). We, on considering the fact that the assessee’s main business is export of goods, turnover during the year is around Rs. 15.53 Crores and the net profit offered to tax by the assessee is approximately 14%. Books of accounts are duly audited and no discrepancy has been found in the expenditure so claimed by the assessee on foreign travel, we find no justification in the finding of the ld. CIT(A) and Assessment Year: 2012-13 VIRENDRA SINGHVI 5 reverse the same. Accordingly, this ground raised by the assessee is allowed.

In the result, appeal of the assessee is allowed. Order pronounced in the Court on 22nd February, 2023 at Kolkata. (SANJAY GARG) ACCOUNTANT MEMBER Kolkata, Dated 22/02/2023 *SC SrPs

"वभागीय ""त"न"ध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाड" फाईल /Guard file.