Expenses incurred to keep a business establishment alive and maintain its existence are allowable under Section 37(1) of the Income Tax Act even during a period of temporary business inactivity or lack of revenue, provided the expenditure is not personal or capital in nature.

O R D E R

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. This appeal is filed by the assessee against the order of the ld. Commissioner of Income-tax (Appeals)-24, New Delhi (for short ‘ld. CIT (A)) for the Assessment Year 2018-19.

2. Brief facts of the case are, this is second round of appeal after setting aside the appeal preferred by the assessee to the file of the AO by the coordinate Bench vide ITA No.1588/Del/2020 to verify the expenditures claimed by the assessee even though there was no business income declared by the assessee. The AO issued notice under section 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) to the assessee to furnish the following informations:-

“1. Mode of communication with Rajesh Narain Gupta, Advocate. Please furnish evidence of communication dated 04.05.2017 and 19.05.2017.

2. You have furnished as copy of document which shows outsourcing of domestic and international trade operation by JMC Project (India) P. Ltd. Please furnish copy of MOM signed by the directors of M/s JMC and copy of agreement made between you and JMC.

3. Evidence of payment of expenditure.

4. Electricity/water bills for FY 2017-18 - 2018-19 other utility bills.

5. Total asset of Rs.12.7 lac and security expenses of Rs.8.66 lacs justify that business produce evidence."

3. In response, assessee has submitted as under and observations of the AO are also reproduced below :-

“For query no.l dated 15.02.2022, the assessee submitted that "The discussions with Sh. Rajesh Narain Gupta were over the phone and meetings in person at his office premises."

Rebuttal: The assessee has not submitted any evidence with regard to such vast legal documentation and preparation like visit evidence, stay evidence, any email evidence, any postage evidence, etc to ascertain that the statement and submission of the assessee is justified. Therefore, the expenses Incurred is not found justified in absence of evidence and justification.

For query no.2 dated 15.02.2022, the assessee submitted that "It is respectfully submitted that during the year under consideration, a proposal was submitted to M/s. JMC Project (India) P. Ltd. and the work engagement was under discussion. Your goodself would appreciate that as evidenced, SNW was evaluating various business opportunities of which, proposal to JMC was one such pursuit. The same, however, did not materialize into a work engagement."

Rebuttal: In the query the 'assessee was asked to furnish copy of MOM signed by the directors of M/s JMC and copy of agreement made between you and JMC. The assessee could not submit any copy. of agreement or contract under which assessee is working and claiming expenditure. Without evidence and any suitable contract/agreement the assessee is not liable to claim expenditure.

Rebuttal for reply to the query no.3 dated 15.02.2022, the evidence and reply submitted by the assessee is not acceptable in view of the fact? that there was no such work happened in the subject year under consideration.

Rebuttal for reply to the query no.4 & 5 dated 15.02.2022, The assessee has not submitted any electricity bill/utility bills etc as evidence that the assessee's business was running during the year consideration. The assessee has submitted that it did not incur any rent/electricity/water charges for FY 2017-18 & FY 2018-19 as it was using a part of the business premises of its associate concern, viz., Basement of Thapar House. In this facts and circumstances, the security charges claimed by the assessee are not fount allowable.”

4. With the above observation, the AO sustained the additions originally made by the AO in the original proceedings to the extent of Rs.18,