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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)- 3, New Delhi dated 04/11/2015 for the Assessment Year 2011-12. 2. The assessee has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case, the authorities below have erred both on facts and in law, in making/ sustaining illegal addition of Rs. 2926000/- out of travelling expenses ignoring the fact that the details required were duly furnished and the revenue nature of the business expenditure was explained and failure to properly appreciate the same, cannot justify the addition which is liable to be deleted as the expenditure is not also personal expenditure of the company.”
3. In this appeal the only issue involved is disallowance of travelling expenses.
Brief facts of the case is that the assessee is a company engaged in the business of manufacturing and selling of polyster chips, film and engineering plastics. It filed its return of income on 29.09.2011 declaring total income of Rs. 1,61,17,87,703/-. While making the assessment order Ester Industries Ltd Vs Addl. CIT (Assessment Year: 2011-12) u/s 143(3) of the Act on 18.03.2014 the ld AO made disallowance of Rs. 2926000/- vide para no. 3 of the assessment order as under:-
3. Disallowance on account of Travelling not for the purpose of business. 3.1 During the course of assessment proceedings, it has been noticed that the assessee company had incurred an expense of 38.61 lacs on account of travelling by chartered flights. The assessee company was asked to provide the details and the purpose of the traveling by chartered flights. It was submitted that out of 10 visits by chartered flights 5 visits are by Chairman & Managing Director of the company Sh. Arvind K Singhnnia to the manufacturing units at Khatima and these visits was entirely for the purpose of business. This contention of the assessee has been accepted. 3.2 But there are chartered flights which have been booked for going to the places, like Bangalore, Mumbai, Kanpur & Tirupati. It has been submitted by the assessee company that these visits are to meet the customers and Bank. The details submitted for these visits are as under: Details of Travelling (Chartered Plane) Place and date Person & Purpose Date of Rs. In travelling Lacs 21.03.2011 6.14 Visit to DEL-BLR-DEL, Arvind Kumar Singhania and Finance Team to 26.02.2011 to 28.02.2011 meet Senior Executive of a Bank. 19.01.2011 5.05 DEL-MUMBAI-DELHI Arvind Kumar Singhania and other Senior Executive to meet various customer and Bank. 06.01.2011 22.12.2010 5.00 Chairman & Managing Director of the Company DEL-MUM-DEL 02.12.2010 Arvind Kumar Singhania and Ashok Newala to 03.12.2010 (Director) has to undertake visit Khatima by Chartered Plane. DEL-KAN-DEL Arvind Kumar Singhania and other Senior 11.02.2011 1.80 25.01.2011 Executive to meet Customer. 31.08.2010 DEL-TIRUPATI-DEL Arvind Kumar Singhania (Chairman) with 11.27 customer & Senior Executive. 20.08.2010 Total 29.26 3.3 The onus is on the assessee to establish that the above travelling expense had been incurred for the purpose of business. Since, the assessee has failed to discharge this Page | 2 Ester Industries Ltd Vs Addl. CIT (Assessment Year: 2011-12) onus and could not establish that this travelling is for the purpose of business with any documentary evidence, an addition of Rs. 29.26 lacs is made to the total income of the assessee on account of travelling expenses. These expenses have been claimed to meet customers but no documentary evidence was furnished to substantiate this claim. Further, the assessee has all his banks at Delhi therefore, the purpose to meet Senior Executives of Banks at Bangalore and Mumbai is not acceptable and it is not supported by any proofs. The visit to Tirupati was entirely for the personal purpose and cannot be allowed as business expenditure. In light of the above facts, a disallowance of 29.26 is made out of travelling expenditure of the assessee company. I am satisfied that the assessee has furnished inaccurate particulars of income. Hence, penalty u/.s 271 (1) (c) is separately initiated for furnishing inaccurate particulars of income and concealment of income. (Disallowance of Rs. 2926000/-)
Consequently, total income of the assessee was assessed at Rs. 1612943525/-. The assessee preferred an appeal before the ld CIT(A) on the above issue, who confirmed the disallowance holding that as the assessee did not produce the bills, despite several opportunities granted, the disallowance of Rs. 29.26 lacs was confirmed. Therefore, the assessee is in appeal before us.
The ld AR submitted that the assessee has given complete details about the expenditure incurred on travelling expenditure. He stated that the expenditure have been incurred on chartered flight for various trips for the purposes of business. He stated that the expenditures have been incurred by the proper bills by the service provider and to whom the payments are made by the account payee cheques. He further referred to para No. 3.2 of the order and stated that the details are given of such expenditure stating the purpose. The ld AO has disallowed the above expenditure without pointing out that how the assessee has not proved the purposes of the expenditure as business expenditure. He therefore, submitted that above expenditure is allowable as business expenditure u/s 37(1) of the Act. Page | 3