PRIMARY REAL ESTATE ADVISORS P.LTD,MUMBAI vs. ITO WD 2(2)(4), MUMBAI

आदेश / O R D E R

PER SHAILENDRA KUMAR YADAV, JM

3. Assessee is a private limited company, engaged in the business of advisory and consultancy services in real estate industry. First issue is with regard to disallowance of travelling expenses. During the year assessee incurred travelling expenses of `11,40,768/-. The concerned Assessing Officer disallowed 40% of such expenditure on adhoc basis amounting to `4,56,308/- considering the same as non-business expenses. The Assessing Officer stated that the details regarding travelling expenses such as persons travelled, places of visit and the purpose of travel were not provided during the assessment proceedings.

3.1 In appeal, the same was restricted to 20% amounting to 2,28,154/-. The same has been opposed on behalf of the assessee, inter alia, submitting that the CIT(A) erred in treating the travelling expenses of `2,28,154/- being in the nature of personal expenses and disallowing the same. According the assessee disallowance of `2,28,154/- is contrary to the spirit of the Act therefore the impugned disallowance be set aside. On the other hand, the learned D.R. supported the order of the CIT(A).

3.2 After going through the rival submissions and material on record we find that the Assessing Officer has disallowed `4,56,308/- out of the travelling expenses. During the course of assessment proceedings assessee was asked to substantiate its claim. According to the Revenue authorities no supporting documentary evidence was filed. Therefore the Assessing Officer disallowed 40% which was restricted by CIT(A) to 20%. We find that in the case the assessee has not given any supporting evidence to justify its claim, i.e. travelling expenses so the Assessing Officer was at liberty to make whole disallowance but he has not done so which shows that he has accepted the genuineness of part expenses. Again the CIT(A) has restricted the same to 20% on the same basis following same line. This adhoc approach of Revenue is not justified. They should match each disallowance vis-à-vis expenses. This work has not been done by them so the addition in question cannot be justified and the same is directed to be deleted.

4.1 Again we find that the Revenue authorities have made this disallowance on the ground that assessee could not substantiate its claim and could not establish the nature of services rendered by the Director so as to receive substantial amount of commission. Once the Revenue authorities had allowed expenses out of the claim made by the assessee on this regard. It means that they have accepted the services. Coming to the reasonableness as envisaged by provisions of section 40(2)(b) the disallowance under the provisions can be made only with regard to excessive payments and excessive payments can be ascertained only after analyzing the market conditions, which has not been done in this case. In sum and substance the Assessing Officer has not based his findings vis-à-vis genuineness of the expenses. Not increasing turnover vis-à-vis increase in commission cannot be basis for making such disallowance. Such approach of making disallowances is not justified so the same is directed to be deleted.