Addition u/s 69C for unexplained expenses on foreign tour along with spouse deleted by Tribunal as it was part of the sponsored dealership entourage
ABCAUS Case Law Citation:
ABCAUS 2725 (2019) (01) ITAT
The assessment was completed under section 153A read with section 143 (3) of the Income Tax Act, 1961 (the Act) by making inter alia an addition on account of unexplained expenditure on foreign tour.
The claim of the assessee was that such tour was organized by a company and as per the scheme, assessee and his wife were invited for a tour, where all the expenditure are incurred by that particular company.
The assessee submitted that such an offer was given only for the reason that assessee was a director in one of the company which was doing the business with that company as a dealer. The assessee also submitted the dealership certificate of that company which organized the tour.
However, the assessee could not get the certificate from that company. Though, the assessee submitted some of the copies of the email and itinerary of the program where the name of that particular company was mentioned.
Even otherwise the assessee stated that it had not incurred any expenditure on such tour. Despite search on the assessee no evidences of incurring of any expenditure on that tour was found.
The Assessing Officer (AO) rejected the contention of the assessee as assessee was not director of that company. Also the assessee was also asked to provide the certificate from that company which assessee failed. Therefore the AO held that onus was on the assessee to prove the genuineness of the expenses on his foreign trip along with his spouse and where the expenditure incurred had been accounted for the same.
According, the AO conducted a market enquiry to ascertain the estimated cost of the tour undertaken by the assessee and accordingly an addition was made under section 69C of the Act.
The assessee preferred an appeal before the CIT-A, who also confirmed the addition.
The Tribunal observed that despite search on the assessee, no evidences of incurring of any expenditure on that tour was found and the AO had also merely estimated the amount of expenditure which would have been incurred by the assessee based on the market survey.
The Tribunal opined that the whole addition made by the AO was on the estimate basis discarding the fact that assessee was part of an entourage of a company. AO also could not controvert the fact that assessee was a director of the company which was a dealer of the company who defrayed the expenditure for the foreign tour.
The Tribunal stated that merely because assessee could not obtain a certificate from a company that such expenditure had been incurred by that particular company for the foreign tour of the assessee and his wife who were part of the dealership entourage of that company, addition could not be made.
Further the Tribunal stated that the assessee was on a tour as a director of the company which was a dealer of the organizing company. Therefore even if the addition was required to be made on account of the value of benefit of such tour it was required to be made in the hands of that particular company and not in the hands of the assessee.
Accordingly, the Tribunal reversed the finding of the lower authorities and directed the AO to delete the addition made under section 69C on account of unexplained expenditure incurred by the assessee on foreign tour of assessee along with his spouse.