DCIT 4(1)(1), MUMBAI vs. ASIT C.MEHTA INVESTMENT INTERMEDIATES P.LTD, MUMBAI

2 Asit C. Mehta & 1920/M/2015 O R D E R PER D. T. GARASIA, JM:

These are cross appeal against order of CIT(A)-9 dated 14/01/2015 for Assessment Year 2011-12. Since issues raised in the appeals are connected to each other, we dispose for the sake of convenience. We dispose them by this common order.

The assessee has filed Return of Income for AY 2011-12 on 22/09/2011 declaring total income of Rs.51,79,175/-. The assessee is Corporate Member of NSE, BSE & MCX Stock Exchange and engaged in the business of trading & investment in shares & securities, dealing in Capital Market and F&O segment, Currency Derivatives and depository participant of Central Depository Services (India) Ltd., Merchant Banking & Portfolio Management Services. During the year under consideration the assessee company has debited following expenses under “Administration and Operation”:-

S.No. Particulars Amount in Rs. 1 Office Maintenance charges 87,60,495 2 Marketing Expenses 72,02,693 3 Travelling and Conveyance expenses 36,95,746 4 Repairs & Maintenance 1,16,03,307 5 Postage and Courier expenses 1,01,43,957 5 Miscellaneous expenses 1,03,07,840 Total: 5,17,14,038/-

The Ld. A.O., made the following observations:-

“6.1. During the course of assessment proceedings, vide order sheet entry dated 20.12.2013, the assessee was asked to justify its claim and asked to substantiate these expenses with proof of supporting bill/vouchers and also to explain that the same were expended wholly and exclusively for the business purposes.

3 Asit C. Mehta & 1920/M/2015 6.2. In response to the same, the AR of the assessee has not preferred to submit any details in support of its claim. Therefore, the same is not found to be acceptable due to the reason that the same is very general and casual in nature and is not supported by any cogent evidence or strong nexus for inclination to say that the expenses has got a business incidence. On verification of details filed, it is observed that these expenses are not fully supported by proper bills / vouchers and certain expenses are incurred through self made vouchers in cash. Further, the jurisdictional High Court in its judgment reported in 256 ITR 134 (Born) has laid down that the burden of proof is on the assessee to establish beyond doubt that the expenditure has been solely incurred for the purpose of business. Further, the assessee has not maintained any log book / record for the use of these expenses for the use of business as well as non- business purposes separately. Further, the personal element embedded in these heads of expenditure cannot be ruled out for want of itineraries, log book and finer details.”

The assessee was asked to justify the claim and substantiate expenses supporting bills/ voucher and also explain that the same were wholly and exclusively for business purpose. The assessee filed the detail in support of claim and on verification of the detail filed, the Assessing Officer of the view that these expenses are not fully supported by proper bill/vouchers and certain expenses were booked through self-made vouchers in cash. The assessee has furnished some of the ledger account of the said expenses. However, the assessee had not furnished sufficient detail to substantiate the claim of the expense incurred for business and non-business purposes. Therefore, the Assessing Officer disallowed 10% of the entire expenses and made the addition of Rs.51,71,403/-. Matter carried to CIT(A) and CIT(A) has partly allowed the claim by observing as under:-

4 Asit C. Mehta & 1920/M/2015 “3.2 I have considered the assessment order passed by the AO, written submissions and details filed by the appellant. It is seen that AO has disallowed 10% of entire Administration & Operation expenses on ad-hoc basis. The disallowance has been made by the AO on account of the fact that AO was of the view that certain expenses were incurred in cash, these expenses were not fully supported by the bills/ vouchers and ledger account of the expenses submitted by the appellant were huge and bulky and appellant could not substantiate the claim of that expenses to have been incurred for the purpose of business. On the other hand, appellant argued that similar expenses have been claimed in AYs 2008-09, 2009-10 and 2010-11 and no disallowance was made by the AO in these years. It is further seen that in AY 2010-11, an amount of Rs.4.68 crores was claimed under the head 'Administration & Operation Expenses' which has increased to Rs.5.17 crores during this year. The brokerage income for the AY 2010-11 was of Rs.58.43 crores which during the present year was shown at Rs.49.64 crores. The disallowance made by the AO is not supported by any material or evidence brought on record by the AO. However, the claim of the entire expenses could not be substantiated by the appellant during the course of assessment proceedings. Considering entirety of fact, I am of view that disallowance made by the AO is on a higher side. To be just and fair, the AO is directed to restrict the disallowance to 10,00,000/- as against 51,71,403/- made by the AO. The appellant gets relief of Rs.41,71,403/-. With these observations, this ground of appeal is treated as partly allowed.” Aggrieved, the assessee as well as Revenue is in appeal before us. The assessee has contested the addition of Rs.10 lakhs whereas Revenue has contested the relief permitted by Ld. CIT(A).