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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Talpady Umashankkar Shenava Dy. Commissioner of Income Tax, Flat No. 1401 A Wing, 14 th Aayakar Bhavan, Floor, Lady Rattan Towers, Mumbai Dainik Shivker Marg, Off DR. Vs. A.E. Moses RD Worli Mumbai-400 018 PAN No. AGLPS5429C .. Appellant Respondent Assessee by .. Shri Mandar Vaidya. AR .. Shri Naveen Gupta, DR Revenue by Date of hearing .. 03-05-2017 .. Date of pronouncement 12-05-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT(A)-14 Mumbai, in appeal No. CIT(A)-14/IT-76/DCIT-6(1), Mumbai dated 25-09-2013. The Assessment was framed by DCIT Circle 6(1), Mumbai for the A.Y. 2009-10 vide order dated 12/02/2013 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of business expenses. For this assessee has raised following three grounds: -
“1. The Ld CIT(Appeals) erred in upholding the disallowance of regular business expenditure by not appreciating that the Appellant/assessee's business was in a state of lull and the Appellant could not generate sales/revenue due to reasons beyond his control.
Talpady Umashankkar Shenava; A.Y:10-11
The Ld. ClT(A) failed to note that the Appellant/assessee had regular business operations in the past, the business was continuing one and the assessee had every intention to continue the business.
3. The Ld. CIT(A) fell in error of law in not appreciating that regular business expenditure incurred to keep the business going, is allowable expenditure notwithstanding the fact that the assesee might have failed to generate any sales during the relevant period. ”
Briefly stated facts are that the AO noted that the assessee has not disclosed any sales or purchases in its trading account but disclosed same opening stock and closing stock on same amount of Rs. 6,45,090/-. According to AO, the assessee has not conducted any business activity but claimed expenditure of Rs. 10,28,161/- which was disallowed by AO. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO by observing in Para 6 as under: -
“6. 1 have carefully perused the facts of the case, the submission of the appellant and the order &s.143(3) of the Act. It is an admitted fact that during the year, there is neither trading nor manufacturing activity. From the assessment order, it is observed that the AO has not questioned the issue of set-up of business. The expenses has been disallowed by the AO on the fact that there was no business activity during the year. Therefore, the AO has concluded that the expenditure debited by the assessee is not incurred for the Purpose of business. At the time of appellate proceedings, the appellant has not produced any evidence to show that the expenditure has been incurred wholly and exclusively for the purpose of business. Even the details and purpose of expenditure and how they are related to his business is not filed. No evidence of past production and trading is filed. There is Talpady Umashankkar Shenava; A.Y:10-11 no evidence on record to depict that assessee has the intention to indulge in business operation for which the company was started. Since there is no business activity during the year, the AO has rightly disallowed the expenses claimed as they have not been incurred for the purpose of business. The Hon'ble Bombay High Court in the ease of Mount Finance Ltd. of 2010 dtd. 28th July, 2011 has held as under:-
The ITAT in para 11 of its order has recorded a finding of facts that no supporting evidence in support of the claim Were filed either before the Assessing Officer or before the CIT('A) or even before ITAT. The Tribunal has further recorded that when the details of electricity expenses were asked for. the assessee merely stated that the said charges must have been paid. Therefore, in absence of any evidence to support the claim of the assessee, the decision of the ITAT in rejecting the claim of the assessee cannot be faulted"”
Aggrieved, now assessee is in appeal before us.
We have heard the rival contentions and gone through the facts and circumstances of the case. We have perused the return of income, computation of income profit and loss account for AYs 2010-11 and 2011-12. The common feature in both the years is that the assessee has salary income of 18,00,000/- income from house property at Rs. 4,20,000/-, capital gain of Rs. 1,32,384/- and bank interest of Rs. 32,50,000/- and claimed this loss from business at Rs. 10,00,000/- after disallowing inadmissible expenditure and depreciation debited to the P&L account at Rs. 6,46,703/-. The Learned Counsel for the assessee before us stated that there is lull in the business during the year and in future year also and business expenditure are genuine. We find that the assessee neither before AO nor before CIT(A) filed any supporting evidences for claim of business expenditure. The pattern of expenditure claimed in the P & L A/c and Page 3 of 4
Talpady Umashankkar Shenava; A.Y:10-11 trading A/c by the assessee clearly reveals that the same is created just to reduce the other income of salary, capital gains and income from other sources i.e. bank interest. Going into the facts in entirety including the accounts of the assessee and pattern of other income set off by assessee against the claim of business expenditure clearly reveals that the same is make believe story. The learned Counsel for the assessee relied on the decision of Hon’ble Bombay High Court in the case of Western India Vegetable Products Ltd. Vs. CIT (1954) 26 ITR 151 (Bom). But we find that the issue is not of setting of business or institution of business before us now, which is before Hon’ble Bombay High Court, but here the very existence of business is in doubt. The assessee is unable to prove the claim of business expenses, hence, we are of the view that the lower authorities have rightly disallowed the expenses and we confirm the same.
In the result, appeal of assessee is dismissed. Order pronounced in the open court on 12-05-2017.