Manish Kumar Lath Vs CIT(A)-II (ITAT Indore)
Conclusion: Where assessee-director was able to establish the relation between expenditure incurred by credit card with the business of the company in which assessee was a director, the expenses incurred was allowable to that extent.
Held: Assessee was a director of M/s. I Private Limited and the credit card had been provided to meet the expenses. AO disallowed the expenditure on the ground that expenses were for the personal use. It was incumbent upon assessee to prove the nature of expenditure and purpose of the expenditure and correlate with the business of the company. In the present case, assessee had merely made a bald statement. The ledger account belonging to company so submitted spoke of cash credit which required verification by AO, whether such expenditure had any link with the business of company in which assessee was a Director. Therefore, the issue was set aside to the file of AO for a limited purpose to verify the link between the expenses and the business of the company where assessee was the Director. In the event if A.O. found that there was some relation with the business of company and expenditure incurred by assessee, he would allow such expenses and delete the addition to that extent.
FULL TEXT OF THE ITAT JUDGMENT
Appeal by the assessee is directed against order of the CIT(A)-II, Indore dated 12.7.2017 pertaining to the assessment year 2012-13. The assessee has raised following grounds of appeal:
1. That on the facts and in the circumstances of the case, the learned CIT(A)-II, Indore has erred in confirming the order pertaining to rejection of claim of Rs.23,79,120/- u/s 54F and also confirming the addition of Rs.23,79,120/- being capital gain arising from sale of plot.
2. That on the facts and in the circumstances of the case and law, the order dated 12.76.2017 as passed by the learned CIT(A)-II, Indore rejecting the claim of Rs.23,79,120/- u/s 54F of the I.T. Act and also confirming the addition of Rs.23,79,120/- is invalid and unlawful because while passing such order, the learned A.O. failed to consider the submission made by the appellant in course of appeal hearing.
3. That on the facts and in the circumstances of the case and law, the finding of the learned CIT(A) in his order are wholly wrong and injudicious and are opposed to the facts, and therefore, there is no justification in sustaining such assessment order.
4. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the assessing officer and not allowing the expenses through credit card of Rs.5,22,614/- and out of which Rs.4,16,039/- has fully proved.
5. That on the facts and in the circumstances of the case the learned CIT(A) failed to consider that these transactions were pertaining to the company and not to the appellant. Hence, the addition of Rs.5,22,614/- is unwarranted and deserves to be deleted.
6. The appellant craves leave to amend, alter or delete any of the above grounds of appeal.
2. The facts giving rise to the present appeal are that case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 31.3.2015. The A.O. during the course of assessment noticed that assessee had sold two plots on 27.2.2012 for a sale consideration of Rs.30,00,000/-. It was noticed that these plots were purchased on 9.5.1995 for a sale consideration of Rs.2,22,250/-. The A.O. sought explanation of the assessee as to why the capital gain arising from these sale of plots was not offered for tax. The explanation given by the assessee was not acceptable by the A.O. Therefore, he made addition of Rs.23,79,120/- on account of long term capital gain not offered for taxation. Before A.O., the explanation of the assessee was that the assessee is entitled for deductions u/s 54F of the Act. Therefore, no long term capital gain tax is payable by the assessee. The A.O. further made addition on account of credit card bills payment amounting to Rs.5,22,614/-. Against these two additions, the assessee preferred an appeal before the Ld. CIT(A), who did not interfere with the finding of the assessing officer and sustained both the additions. Now the assessee is in appeal before this Tribunal.
3. Ground Nos.1 & 2 are against denying the claim of deduction u/s 54F of the Act. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of clarity, the submissions of the assessee are reproduced as under:
May it please your honours,
The brief facts of the case are stated hereunder:-
The assessee is an Individual deriving income from manufacture and sale of cloth and income from salary as a director. The return of income is filed declaring the total income of Rs.12,29,580/-. There are two points involved in this appeal viz the deduction u/s.54-F and addition in respect of credit card payments.
GROUND No.! & 2:- Denial of exemption u/s.54F :
The assessee has sold the plots for Rs.30,00,000/- and purchased the residential house at Mumbai and claimed the deduction u/s.54F. The important dates are as under:-
