TRAVELORG HOLIDAYS P.LTD,MUMBAI vs. ITO 9(3)(3), MUMBAI

The captioned appeals by assessee for Assessment Year [AY] 2007-08 & 2009-10 assail respective orders of First Appellate Authority. None has appeared on behalf of assessee despite being provided with sufficient opportunity of being heard on various occasions as per noting in the order-sheet, it appears that the assessee is not interested in pursuing these appeals. No adjournment applications have been filed on behalf of the assessee despite having been served with RPAD notice and therefore, we proceed to decide the appeals on the basis of material available on record and after hearing the departmental representative. First, we take up for AY 2007-08 where the assessee is aggrieved by addition of Rs.88,64,015/- as unexplained Share Application Money and Rs.8,00,000/- on account of certain marriage expenses incurred by the assessee.

Facts as emanating from the records are that the assessee, being resident corporate assessee engaged as Travel Agents / Tour operator, was assessed u/s 143(3) at Rs.54,98,750/- after certain adjustments / ITA Nos.3346/M/2011 & 949/M/2013 Travelorg Holidays Private Limited Assessment Years- 2007-08 & 2009-10 disallowances vide Assessing Officer’s [AO] order dated 30/12/2009 as against returned loss of Rs.55,49,089/- filed by assessee on 29/10/2007. The assessee reflected a sum of Rs.88,64,015/- as Share Application Money received from a non-resident namely Salim Dhanani but could not produce cogent material to substantiate the same and also could not submit any clearance under the provisions of Foreign Exchange Management Act in support of the same. AO further noted that the shares were never allotted in future, which led the AO to treat the same as unexplained cash credit u/s 68. Similarly, the assessee debited a sum of Rs.7.75 Lacs as certain marriage expenses in Profit & Loss Account and tried to correlate the same with a ledger account of Lodging & Boarding –Goa, where the assessee credited a sum of Rs.8,98,687/-, which inter-alia included Rs.8 Lacs received in cash from some Ashok Chandwani. However, the AO doubted the receipt of cash and treated the amount of Rs.7.75 Lacs as unexplained and added the same to the income of the assessee. 3. Aggrieved, the assessee contested both the additions without any success before Ld. CIT(A) vide impugned order dated 28/02/2011 and submitted additional evidences to support his claim, against which a remand report was called from the AO where the Ld. AO not only objected to submission of additional evidences but also noted that the assessee failed to prove the cash credit beyond doubt. After considering the contentions of the assessee, remand report and material available on record, Ld. CIT(A) dismiss both these claims by making following observations:- & 949/M/2013 Travelorg Holidays Private Limited Assessment Years- 2007-08 & 2009-10 “Unexplained share application money:- 4. As stated before, the appellant claimed to have received share application money of Rs. 8864015 from Shri Salim Dhanani. In course of the assessment the appellant furnished copies of the FIRC and passport of Shri Dhanani. The A.O observed that the FIRC did not reveal the name and address of Shri Dhanani and that the passport of Shri Dhanani also did not bear his address. He further observed that even after two years of receipt of money no shares had been issued to Shri Dhanani. He therefore concluded that the appellant failed to establish the identity of the person from whom the share application money had been received and added the same as unexplained cash credits u/s 68 of the act. Being aggrieved, the appellant submits that it has established the identity of Shri Dhanani by producing the copies of the FIRC, his passport and later by filling Overseas Citizen of India certificates and PAN card. He therefore seeks that the addition made of Rs. 88,64,015/- should be deleted. 5.I find no merits in the contention of the appellant. It has relied on the FICRs to show that entire share application money was received from Shri Salim Dhanani by way of foreign remittance. Two of the FIRCs issued by Punjab National bank on 04/04/2008 show the name of the appellant as beneficiary but do not bear the name and address of the remitter. They are for USD49989 each with rupee equivalent totaling Rs.44,72,015/-. The other two FIRCs are dated 17/3/2008 issued by ICICI bank for remittance of USD5000 each with rupee equivalent totaling Rs.43,93,000/-. They show the name ‘Salim’ as the remitter but do not bear address though the appellant’s name appears as beneficiary. No doubt the appellant has given the copies of PAN card or overseas citizen certificates in support of identity of Shri Salim Dhanani. But, it has failed to obtain a confirmation from him that the aforesaid foreign remittance were made by him and were made towards the impugned share application money with the appellant company. The fact that no shares have been issued so far also casts serious doubts over the claim that the impugned sum was remitted by Shri Salim Dhanani. I therefore decline to intervene. I confirm the addition made of Rs. 8864015. XXXX Marriage expenses:- 9.The appellant had claimed deduction of Rs.775000/- on account of marriage expenses incurred at Hotel Clarion, Goa. It claimed before the AO that these expenses were made out of Rs. 800000 received from Shri Ashok Chandwani for organizing marriage on his behalf. In the absence of any evidence, he treated the said sum as unexplained expenses and added to the income of appellant. 10.Being aggrieved the appellant submits that it had managed a marriage event on behalf of Shri Chandwani at Clarian Beach Hotels Goa, for which it received Rs. 8,00,000/- comprising Rs.4,00,000/- in cash on 19/01/2007 and Rs 4,00,000/- by cheque on 20/01/2007 from Shri Chandwani and paid for the said expenses. It furnished copies of receipts dated 20/01/2007 and 23/01/2007 for Rs.3,00,000/- and Rs.4,75,000/- obtained for making payment to the Clarian Hotels. The appellant pleaded that the addition made of Rs.7,75,000/- should be deleted. 11.I find no merit in the contention of the appellant. The reason for making the impugned addition given by the A.O was that the appellant failed to link the receipt & 949/M/2013 Travelorg Holidays Private Limited Assessment Years- 2007-08 & 2009-10 of Rs.8,00,000/- from Shri Chandwani with the payments made to Clarian Hotels. It has furnished copies of the receipt for having made the impugned payment to Clarian Hotels. No evidence has been furnished to support that they were made out of the receipts from Shri Chandwani. The A.O has rightly held them as unexplained expenses and added as Income of the Appellant.”

The Ld. Departmental Representative placed reliance on the findings of lower authority and contended that the assessee failed to discharge the onus of proving the impugned transactions and therefore, rightly suffered said disallowances.

We have heard the revenue’s contentions and perused relevant material available on record. We find that the onus to prove the cash credit u/s 68 squarely lied on the assessee and the assessee was required to substantiate his claim by satisfying the three ingredients viz. Identity of the donor, creditworthiness and genuineness of the transaction, which he has failed to satisfy. Mere submission of passport and other documents do not absolve assessee from discharging onus to prove the nature of the transactions conclusively. Further, the facts on records reveal that the said amount was received as Share Application Money whereas the shares were never allotted despite being lapse of considerable period of time, which cast serious doubt on the assessee’s claim. Similarly, the assessee reflected receipt of Rs.8 Lacs on account of marriage expenses but failed to relate the same with the expenditure incurred by the assessee. This being the factual position, we see no reason to interfere with the orders of Ld. CIT(A) and therefore, no hesitation, in dismissing assessee’s appeal. 6. In AY 2009-10, the assessee is aggrieved by similar addition of Rs.20,90,996/- u/s 68 received as Share & 949/M/2013 Travelorg Holidays Private Limited Assessment Years- 2007-08 & 2009-10 Application money from the same person. Therefore, there being no change in facts or circumstances, taking the same stand, we find no merit in assessee’s appeal and therefore dismiss Ground No.1. 7. In Ground No. 2, the assessee is aggrieved by adhoc addition of 2%, being Rs.2,24,000/- against aggregate sum of Rs.1,12,16,188/- claimed under the head Legal Expenses, Miscellaneous expenses, Travelling Expenses. The said disallowance was made by the Ld. AO on the premises that he said expenditure were not supported by valid bills / vouchers and the same, upon appeal, was confirmed by Ld. CIT(A). Therefore, noting that the assessee could not substantiate the same with proper evidences, adhoc disallowance of 2% thereof is quite fair and reasonable and hence, do not call for any interference which results into dismissal of this ground of appeal