ACIT 2(3), MUMBAI vs. RADHIKA HOTELS P.LTD, MUMBAI

This is an appeal filed by the Revenue against the order of the learned Commissioner of Income Tax (Appeals)-6, Mumbai [hereinafter referred to as the “CIT(A)”] dated 20.09.2013 passed in appeal No.6/IT/107/Rg.2(3)/12-13 pertaining to assessment year 2010-11. The Revenue has in this appeal raised the following three grounds:

The Assessee’s main source of income is the income from house property and business income. The assessee submitted the audited balance sheet, profit and loss account etc. during the course of assessment proceedings. Thereafter in view of the details filed by the assessee, assessment of the appellant was concluded by virtue of order dated 30/01/2013. The AO disallowed the different expenses to the tune of Rs.15,56,400/- on the ground of that there was no business income to that extent. Subsequently, the assessee filed an appeal before the CIT(A)6, Mumbai and the appeal of the assessee was allowed and learned CIT(A) allowed the expenses to the tune of Rs.15,56,400/- by holding that the expenditure cannot be disallowed on the ground that even there was no business income. Being aggrieved the revenue has filed the present appeal before the Tribunal.

We have heard the learned representative of the parties and have gone through the record carefully. The departmental representative has argued that Ld. CIT(A) has wrongly allowed the expenditure to the tune of Rs.15,56,400/- while there was no proportionate the business income hence the said amount has wrongly been disallowed by the Ld. CIT(A), hence, the order of the CIT(A) in this regard is wrong against law and is liable to be set aside.

On the other hand, the learned representative for the assessee has refuted the said contentions and argued that the expenditure incurred by the assessee is not in dispute and the reason given by the CIT(A) is plausible reason, therefore the Ld. CIT(A) has rightly allowed the expenditure to the tune of Rs.15,56,400/- and also placed reliance upon the law settled in case of J.K.Wollen Manufacturers Vs CIT, 72 ITR 612 (SC). It is also argued that the assessee is a Assessment Year: 2010-11 corporate entity which has to incur some expenditure to maintain it even if it is not carrying on any business activity but the same is required to be allowed in the interest of justice. The learned representative of the assessee has also placed reliance upon the judgment delivered by the ITAT, Mumbai Bench in the case of Preimus Investment & Finance Ltd. Vs. DCIT,(171TTJ Mumbai 794). With due regards to the contentions raised by the representative of the parties &perusing the record carefully, it is apparent on record the Assessing Officer has disallowed the expenditure only on the ground that there was no business income to that extent. It is not necessary to earn the income proportionate to the expenditure. The AO did not dispute about the expenditure claimed by the assessee. Even, the genuineness of the expenditure were not doubted. It is also not the case of Revenue that the assessee did not conduct the business in the relevant assessment year. The assessee contended that he has to incur some expenditure to maintain the business in the market. The reasonableness of the expenditure is not required to be decided on the point of Revenue. The assessment is not required to be done on the basis of assumption and presumption. Atleast AO should have some substantial material with him to disallow the expenditure. It is required to decided on the basis of record and requirements of the business of the assessee. In this regard we also find of the support of law settled in case of J.K.Wollen Manufacturers Vs CIT, 72 ITR 612(SC) in which it has been held that:

In the result, the appeal of the revenue is hereby dismissed.