2015 (5) TMI 1174 - AT - Income Tax

Appeal Dismissed: Genuine Gift, TDS Relief Upheld, Foreign Travel Expenses Restricted (A)

ACIT -24 (1), Mumbai Versus Mr. Mubarak Kasam Momin

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on the addition of unexplained cash credits as a genuine gift, relief granted on ... Unexplained cash credits as in-genuine gift received from brother - CIT-A deleted the addition - Held that:- The source of gift was maturity proceeds of tax free GOI relief bonds 1999 and 2001 respectively in which Mr. Zulfikar K. Momin had invested and against lien of which, M/s. Opal Stone Industries, the proprietorship concern of the assessee had taken revolving credit facilities of ₹ 4,00,00,000/- from ICICI Bank and loan of ₹ 80,00,000/- from Development Credit Bank. Consequent to lien, these bonds were transferred in the name of ICICI Bank and Development Credit Bank. On maturity the proceeds of these bonds were directly credited in the loan account of the assessee with ICICI Bank and Development Credit Bank and adjusted against the outstanding loans. Mr. Zulfikar K. Momin gifted the above/equivalent amount to the assessee. The Ld. CIT(A), relying upon the various case laws, observed that the ₹ 3,18,41,394/- made u/s 68 of the Act by the AO was not sustainable. Before us, ld. D.R. could not successfully point out any infirmity in the well reasoned order of the Ld. CIT(A). - Decided against revenue. Addition u/s 40(a)(ia) - TDS defaults - assessee not deposited the TDS before the due date as was prescribed u/s 40(a)(ia) - as per assessee he deposited the TDS before the due date of filing of return - Held that:- Since the challans representing the deposit of TDS were not produced before the lower authorities, hence, subject to the verification of the deposit of the TDS by the AO, we direct that the assessee's claim be allowed towards payment to the extent it exhibits payment of corresponding TDS by the due date of furnishing the return for the relevant year. So far the second part of the ground in relation to admission of additional evidence is concerned, since we have restored the matter to the file of the AO, this issue is disposed of accordingly with a direction that the assessee will be given proper opportunity by the AO to show/furnish evidence that the TDS was deposited before due date of filing and thereafter the AO to decide the issue in accordance with our above observations. Addition on account of foreign travel expenses - allowable business expenses - Held that:- The details of the expenditure were duly furnished during the assessment proceedings as well as appellate proceedings before the CIT(A) such as the name of person visited, name of the country, period of visit, detailed break-up of expenses etc. The detail of the customers and the country-wise business generated was also filed. It was also explained that the gifts and entertainment expenses were incurred for maintaining harmonious and cordial business relationship and personal rapport. The Ld. CIT(A), considering the overall facts and circumstances of the case, observed that since the details of the some of the expenditure was not fully verifiable and some personal element could not be ruled out, he therefore made an adhoc disallowance of ₹ 1 lakh out of foreign travelling expenses. No infirmity in the well reasoned order of the Ld. CIT(A) on this issue Issues Involved:1. Addition of unexplained cash credits as genuine gift.2. Relief granted on non-payment of TDS into government treasury.3. Restriction of addition on account of foreign travel expenses.Issue 1: Addition of Unexplained Cash Credits as Genuine Gift:The Revenue challenged the deletion of an addition of &8377; 3,18,41,394 made by the Assessing Officer (AO) as unexplained cash credits, claiming it was a genuine gift. The AO found discrepancies in the gift received by the assessee from his brother, Mr. Zulfikar K. Momin, a salaried employee of the assessee. The AO doubted Mr. Momin's capacity to gift such a large amount based on his income. However, the CIT(A) established the donor's identity, financial capacity, and creditworthiness through evidence like income tax returns and balance sheets. The transaction was deemed genuine as it occurred through proper banking channels, involving maturity proceeds of tax-free bonds. The CIT(A) dismissed the Revenue's appeal, upholding the genuineness of the gift.Issue 2: Relief Granted on Non-Payment of TDS into Government Treasury:The Revenue contested the relief given to the assessee on non-payment of TDS into the government treasury, arguing that the expenses were reimbursement in nature. The AR of the assessee claimed that TDS was deposited before the due date of filing the return. The ITAT considered the retrospective applicability of the amendment to section 40(a)(ia) of the Act, stating that if TDS was deposited before the due date of filing the return, disallowance under section 40(a)(ia) did not apply. The ITAT directed verification of TDS deposit by the AO and allowed the assessee's claim subject to proper evidence.Issue 3: Restriction of Addition on Account of Foreign Travel Expenses:The Revenue objected to the CIT(A)'s decision to restrict the addition on foreign travel expenses to &8377; 1 lakh, contrasting the AO's disallowance of &8377; 8,39,577. The AO disallowed a significant portion of the expenses due to lack of verifiable details and business outcomes. However, the CIT(A) acknowledged the necessity of foreign travel in the assessee's business, considering the competitive market and customer relations. An adhoc disallowance of &8377; 1 lakh was made to account for unverifiable elements. The ITAT upheld the CIT(A)'s decision, finding no fault in the reasoning provided.In conclusion, the ITAT dismissed the Revenue's appeal, upholding the decisions of the CIT(A) regarding the addition of unexplained cash credits, relief on non-payment of TDS, and restriction of foreign travel expenses, based on detailed analysis and legal interpretations of the relevant provisions.