CHIRAG ANIL SHAH,MUMBAI vs. ASSTT COMM OF INCOME TAX -CIRCLE 2991), MUMBAI

Along with the appeal, the assessee has filed a petition seeking condonation of delay, supported by an affidavit dated 18.12.2025. The appeal, admittedly, has been filed with a delay of 690 days, inasmuch as it ought to have been instituted on or before 28.01.2024, but came to be filed only on 18.12.2025. It is deposed in the affidavit that, while passing the order dated 29.11.2023, the ld. CIT(A) failed to adjudicate the ground relating to the addition made on account of the alleged mismatch between the income reflected in Form No. 26AS and the income disclosed as per the books of account. Aggrieved by this omission, the assessee filed a rectification application under section 154 of the Act on 26.12.2023, pointing out the said mistake apparent from the record. It is further deposed that the assessee was under the bona fide belief that the order of the ld. CIT(A) could be challenged before this Tribunal only after the said rectification application was disposed of, and that no communication was received from the ld. CIT(A) in respect thereof till date. In the interregnum, the Assessing Officer (“ld. AO”) passed an order under section 271(1)(c) of the Act, which prompted the assessee to seek the assistance of a Chartered Accountant. It was only upon being advised by the Chartered Accountant that the order of the ld. CIT(A) dated 29.11.2023 could be assailed before this Tribunal notwithstanding the pendency of the rectification application, that the assessee deemed it appropriate to file the present appeal.

The learned Departmental Representative (“ld. Dr”) opposed the condonation petition, submitting that the assessee ought to have been vigilant in filing the appeal within the time prescribed under the Act, and that the delay ought not to be condoned.

We have considered the rival submissions. In our considered view, the explanation offered by the assessee constitutes a reasonable and sufficient cause for the delay in filing the appeal. The assessee was under the bona fide belief that the appeal could be filed only upon disposal of the rectification application by the ld. CIT(A), and the pendency of the said application, concerning a ground which admittedly remained unadjudicated in the appellate order, itself furnishes sufficient cause for the delay in filing the appeal. Accordingly, the delay of 690 days in filing the appeal is condoned, and the appeal is admitted for adjudication on merits.

Ground No. 1 assails the disallowance of Rs. 9,20,447/- made towards foreign travel expenses. In the assessment order, the ld. AO noted that the assessee had debited travelling expenses of Rs. 20,32,605/-, of which a sum of Rs. 6,42,409/- was paid to Smt. Rashi Chirag Shah, wife of the assessee, and was explained as a reimbursement made to her. Since no evidence was furnished in support of this claim, the ld. AO disallowed the said sum of Rs. 6,42,409/-. The ld. AO further observed that a sum of Rs. 1,49,237/-, paid in cash, was not fully verifiable, and accordingly disallowed 20% thereof, amounting to Rs. 29,847/-. A further disallowance of 20% was made on the balance foreign travel expenditure of Rs. 12,40,959/-, amounting to Rs. 2,48,191/-, on the ground that the assessee had failed to furnish details of the foreign travel expenses, including the particulars of the persons who travelled and the services rendered by them. Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A), NFAC, Delhi, who upheld the order of the ld. AO.

Before us, the ld. AR filed a paper-book containing details of the foreign travel expenses (at pages 138 to 145), aggregating to Rs. 20,52,155/-, along with a break-up of the said expenditure at page 146 thereof, extracted below:

The ld. AR submitted that the expenditure at Item Nos. 4 and 5 of the said table, being Rs. 3,97,706/- towards ‘Metal Expo, Russia’ and Rs. 4,94,310/- towards ‘CNR Expo, Istanbul, Turkey’, was paid using the debit card of Smt. Rashi Chirag Shah, and placed on record her bank account statement, forming part of the paper-book, evidencing the said payments. It was further submitted that no ad hoc disallowance could be made, in reliance upon the decision of the Coordinate Bench of this Tribunal, Mumbai, in Girish Raghavan, ITA No. 6955/Mum/2025, dated 04.03.2026. Relying on the same decision, the ld. AR also assailed the ad hoc disallowance of 10% on other expenses of Rs. 47,860/-, forming the subject-matter of Ground No. 3. The ld. DR relied upon the orders passed by the lower authorities.

We have given careful consideration to the rival submissions. The case of the ld. AO was that the assessee had failed to properly explain the necessity for the payment of Rs. 6,42,409/- to Smt. Rashi Chirag Shah. The ld. CIT(A), while acknowledging that the expenditure was incurred using the credit card of the assessee’s wife and was subsequently reimbursed to her, held that since the assessee is a separate individual, the reason for routing the payments through the credit card of his wife remained unexplained. The ld. CIT(A) also declined to accept the assessee’s submission that Smt. Rashi Chirag Shah was involved in the business at par with the assessee, and that the payments were, for this reason, routed through her account; and further observed that, if such services were indeed rendered by her, the assessee ought to have treated her as a separate assessee and deducted tax at source on the payments made to her for such services. The claim that Smt. Rashi Chirag Shah had incurred the foreign travel expenses on behalf of the assessee, and was thereafter reimbursed by him, was accordingly not accepted by the ld. CIT(A).

We are unable to sustain the above reasoning of the ld. CIT(A). There is nothing in law which precludes an assessee from incurring business expenditure through the credit card of his spouse and thereafter reimbursing the said expenditure to the spouse. In the present case, the expenses were, in fact, incurred by the assessee towards foreign travel, and were merely routed through the credit card of Smt. Rashi Chirag Shah, and later reimbursed to her; there is nothing untoward in such an arrangement for incurring business expenditure. The view of the ld. CIT(A), that this ought to be treated as a service rendered by the wife in her independent capacity, requiring deduction of tax at source on the reimbursement made to her, is, in our considered opinion, not correct. No payment was made towards any service rendered by Smt. Rashi Chirag Shah; the amount was merely reimbursed to her since her credit card had been utilised for incurring the expenditure. The addition on this count is, therefore, unwarranted and is directed to be deleted.

As regards the ad hoc disallowance of 20% on foreign travel expenses, the decision of the Coordinate Bench in Girish Raghavan (supra) squarely applies, wherein it was held that ad hoc disallowance cannot be made on hotel and travelling expenses. Following the said decision, the ad hoc disallowances of Rs. 29,847/- and Rs. 2,48,191/- made towards foreign travel expenses, and the ad hoc disallowance of Rs. 47,860/- made at 10% of other expenses (Ground No. 3), are directed to be deleted. In view of the foregoing, Ground Nos. 1 and 3 are allowed.

Ground No. 2 relates to the addition made on account of the alleged mismatch between the income reflected in Form No. 26AS and the income disclosed as per the books of account. As per the ld. AO, the income as per Form No. 26AS was Rs. 79,87,993/-, as against Rs. 75,51,593/- shown as per the books of account, and the resultant difference of Rs. 4,36,400/- was brought to tax, which addition was confirmed by the ld. CIT(A). Before us, the assessee has filed a reconciliation statement, and it is also noticed that this ground was not adjudicated by the ld. CIT(A) in the first instance. In these circumstances, the matter is restored to the file of the ld. AO for verification of the reconciliation statement filed by the assessee, and for passing a fresh order in accordance with law, after affording adequate opportunity of hearing to the assessee. Ground No. 2 is, accordingly, allowed for statistical purposes.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.