KASHIKEY DIAMOND INDIA P.LTD,MUMBAI vs. DCIT 5(2)(1), MUMBAI

There is a delay of almost nine months in filing the present appeal. The assessee has filed an application accompanied by an affidavit seeking condonation of delay. It is submitted that since the assessee had closed down operations in India, it could not file the 2 Madhuri Suresh Rungta appeal in time. Subsequently, on legal advise, the appeal was filed. Thus, the learned Authorised Representative requested for condoning the delay.

The learned Departmental Representative opposed condonation of delay.

I have considered rival submissions and perused material on record. After going through the averments made in the affidavit, I am satisfied that the delay in filing the present appeal is due to reasonable cause, hence, condoning the delay, I admit the appeal for hearing on merit.

In ground no.1, the assessee has challenged disallowance of expenditure amounting to ` 32,83,062.

Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee had claimed expenditure under various heads amounting to ` 32,83,062. He noticed that in the course of survey operation conducted in case of M/s. London Star Diamond Co. Pvt. Ltd., from whom the assessee purchases diamond, it was found that the assessee for conducting its business activities uses the premises of M/s. Landon Star Diamond Co. Pvt. Ltd. and further, the said company provides some other services to the assessee such as assortment, advise, inspection of diamond, etc. Thus, on the basis of 3 Madhuri Suresh Rungta such information found at the time of survey operation, the Assessing Officer concluded that the expenditure incurred by the assessee is not allowable under section 37(1) of the Income–tax Act, 1961 (for short "the Act"). Accordingly, he added back the amount of ` 32,83,062, to the income of the assessee.

Though, the assessee challenged the aforesaid addition in appeal, however, learned Commissioner (Appeals) also confirmed the addition made by the Assessing Officer.

The learned Authorised Representative submitted, the assessee is an Indian subsidiary of a Japanese company and it had to incur certain expenditure towards the accommodation of directors who were non–residents. He submitted, the assessee has also incurred various other expenses for which separate evidences were produced before the Assessing Officer. In this context, he drew our attention to the copy of evidences furnished before the Assessing Officer. Further, he submitted, though, in the preceding as well as subsequent assessment years the assessee has claimed similar expenditure, however, the Assessing Officer has mostly allowed the expenditure claimed by the assessee in scrutiny assessments. In this context, he furnished the orders passed under section 143(3) of the Act for the assessment years 2007–08 to 2015–16. Thus, he submitted, no disallowance out of the expenditure claimed should be made.

The learned Departmental Representative relied upon the order of the learned Commissioner (Appeals) and the Assessing Officer.

I have considered rival submissions and perused material on record. It is evident, the Assessing Officer has disallowed the entire expenditure claimed by the assessee relying upon certain information found during the survey operation conducted in case of M/s. London Star Diamond Co. Pvt. Ltd. It is noticed that the Assessing Officer has himself stated that as per the information found during the survey, the assessee incurs expenditure for visit of their directors, salary to maid, travel expenses and house rent, motorcar expenses, etc. The information obtained during the survey only states that the assessee uses the premises of M/s. London Star Diamond Co. Pvt. Ltd. and avails some services like assortment, advise, inspection of diamond, etc. Therefore, the allegation of the Assessing Officer that the assessee does not incur any expenses is not borne out from the material on record. On a query from the Bench, the learned Authorised Representative submitted that the rent paid was towards the accommodation of directors during their visit and stay in India. It is also a fact on record that similar expenditure claimed by the assessee in the preceding and subsequent assessment years has mostly been allowed by the Assessing Officer in the scrutiny assessment except a part disallowance of expenditure under couple of heads in assessment

Ground no.2, is not pressed, hence, dismissed.

In the result, appeal is partly allowed. Order pronounced in the open Court on