Dhir and Dhir Associates , New Delhi V. ACIT, Circle- 61(1), New Delhi

ITA 1246/DEL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4722 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Assessee Lawyers: VED JAIN ADV MS SURBHI GOYAL
• Keywords: Depreciation
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DLEHI BEFORE SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1246/DEL/2018 ASSESSMENT YEAR: 2014-14 DHIR & DHIR ASSOCIATES, VS. ACIT, CIRCLE 61(1), D-55, DEFENCE COLONY, NEW DELHI NEW DELHI PAN : AAAFD2462K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, ADV. MS. SURBHI GOYAL, CA RESPONDENT BY: SH. JAGDISH SINGH, SR. DR DATE OF HEARING: 14/10/2020 DATE OF ORDER : 20/10/2020 ORDER PER K. NARASIMHA CHARY, J.M. THIS IS AN APPEAL FILED BY DHIR AND DHIR ASSOCIATES (THE ASSESSEE) AGAINST THE ORDER DATED 29.12.2017 IN APPEAL NO. 10 433/2016-17 PASSED BY THE COMMISSIONER OF INCOME TAX-APPEALS-20, NEW D ELHI (LD. CIT(A), WHEREIN THE LD.CIT(A) HAS CONFIRMED THE ADDITION MA DE BY THE LD. AO ON 2 ACCOUNT OF AD-HOC DISALLOWANCE OF THE EXPENSES RELA TING TO (I) VEHICLE EXPENSES OF RS. 1,26,104/-, (II) DEPRECIATION CLAIM ED ON CARS OF RS. 1,71,294/-, (III) BUSINESS PROMOTION EXPENSES OF RS . 3,48,731/-, AND (IV) DISALLOWANCE OF TELEPHONE EXPENSES: RS. 11,205/-. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A LAW FIRM AND FOR THE AY 2014-15 HAD FILED ITS RETURN OF INCOME ON 30.11. 2014 DECLARING A TOTAL INCOME OF RS. 4,77,36,060/-. THE LD. AO, BY RELYING UPON THE AUDITORS REPORT IN FORM 3CD, SPECIFICALLY TO PARA 17(B) OF T HE AUDITORS REPORT IN FORM 3CD WHERE THE AUDITORS HAVE HELD THAT THEY ARE UNABLE TO COMMENT ON THE NATURE OF EXPENSES, SINCE NO LOG BOOKS REGAR DING THE USE OF TELEPHONE AND VEHICLES ARE MAINTAINED, OPINED THAT THE ASSESSEE HAS DEBITED PERSONAL EXPENDITURE TO THE P & L A/C AND THUS, DISALLOWED THE FOLLOWING EXPENSES AT AN AD-HOC RATE OF 10%: (I) VEHICLE EXPENSES : RS. 1,26,104/- (II) DEPRECIATION ON CARS: RS. 1,71,294/- (III) TELEPHONE EXPENSES: RS. 1,15,729/- LD. AO ALSO DISALLOWED A SUM OF RS. 3,48,731/- ON A D HOC BASIS FROM THE TOTAL EXPENSES TOWARDS 10% OF THE BUSINESS PROMOTIO N EXPENSES STATING THAT THE ELEMENT OF PERSONAL EXPENSES CANNOT BE RUL ED OUT. 3. AGGRIEVED BY SUCH AN ACT OF LEARNED ASSESSING O FFICER, ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THE PARTNERS MOBILE PHONE EXPENSE AMOUNTED TO RS. 1,12,051/-. L D. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, BY WAY OF IMPUGNED ORDER, PARTIALLY ALLOWED THE TELEPHONE EXPENSE TO THE EXTE NT OF 1,04,524/- AND RESTRICTED THE DISALLOWANCE IN RESPECT OF TELEPHONE EXPENSES TO RS. 3 11,205/- AND CONFIRMED THE ORDER OF THE LD. AO. AGG RIEVED BY THE IMPUGNED ORDER, ASSESSEE PREFERRED THIS APPEAL BEFO RE US. 4. IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE IS A LEGAL FIRM, ENGAGING A LARGE NUMBER OF LAWYERS AND PERSON NEL TO PROVIDE THE SERVICES IN THE AREA OF CORPORATE LITIGATION, CORPO RATE ADVISORY, ETC; THAT THE SAID LAWYERS AND PROFESSIONALS GO TO VARIOUS LE GAL FORUMS TO REPRESENT AND CONDUCT THE CASES OF THE CLIENTS OF THE ASSESSE E IN DELHI AS WELL AS IN OTHER STATES OF INDIA; THAT THE ASSESSEE HAS ALSO E NGAGED VARIOUS PROFESSIONALS ON RETAINERSHIP BASIS TO WHOM MONTHLY PROFESSIONAL FEE IS PAID AND REIMBURSEMENT IS MADE FOR THE TELEPHONE EX PENSES AND VEHICLE EXPENSES INCURRED BY THE SAID PROFESSIONALS; THAT T HE TELEPHONE EXPENSES ALSO INCLUDE THE DATA CHARGES INCURRED FOR THE INTE RNET USAGE; THAT FROM THESE THINGS IT IS EVIDENT THAT THE TELEPHONE AND V EHICLE EXPENSES ARE SOLELY INCURRED FOR THE BUSINESS PURPOSE AND WITHOU T SUCH EXPENSES THE FUNCTIONING OF THE ASSESSEE WILL GET AFFECTED; AND, THEREFORE, THERE IS NO CHARACTERISTIC OF PERSONAL NATURE IN THESE EXPENSES INCURRED BY THE ASSESSEE. 5. IT IS FURTHER SUBMITTED BY THE LEARNED AR THAT T HE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ORDER DATED 16. 06.2017 OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-1 1 IN ITA NO. 2169/DEL/2014, WHEREIN THE TRIBUNAL DELETED SIMILAR DISALLOWANCES. THERE IS NO DENIAL OF THIS FACT BY THE REVENUE. A COPY O F THE ORDER DATED 16.06.2017 IN ITA NO 2169/DEL/2014 IS PRODUCED BEFO RE US. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IN THE PAPER BOOK ASSESSEE FU RNISHED THE 4 ASSESSMENT ORDER, ORDER OF THE LD. CIT(A) AND ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2010-11. A PERUSAL OF THE ASSESSMEN T ORDERS FOR THE AY 2010-11 AND 2014-15 CLEARLY SHOW THAT THE OBSERVATI ONS OF THE AO IN THE ORDER PASSED FOR AY 2010-11 IS VERBATIM SAME AS IN AY 2014-15. IN ASSESSEES OWN CASE FOR THE A.Y. 2010-11 IN ITA NO. 2169/DEL/2014, VIDE ORDER DATED 16.06.2017, A COORDINATE BENCH OF THIS TRIBUNAL OBSERVED THAT, 3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE RECORD. ON GOING THROUGH THE SAME WE NOTE THAT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER MERELY ON ESTIMATE BASIS. THE LEARNED CIT (APPEALS) HAS ALSO CONFIRMED THE SAME HOLDING THAT THE ENTIRE EXPENSES ARE NOT ADMIS SIBLE AS PER THE PROVISIONS OF SECTION 37(1) OF THE ACT. THE DIS ALLOWANCE HAS BEEN MADE MERELY BY INDULGING INTO SURMISES. THE AP PELLANT HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS. THESE B OOKS OF ACCOUNTS HAVE BEEN AUDITED. NONE OF THE AUTHORITIES BELOW HAVE GIVEN ANY INSTANCE OF THE PERSONAL EXPENDITURE HAVI NG BEEN RECORDED OR ANY EXPENDITURE NOT BEING ALLOWABLE UND ER SECTION37(1) OF THE INCOME TAX ACT. IN THE ABSENCE OF ANY SPECIFIC FINDING, WE ARE OF THE VIEW THAT THE LEARNED CIT (A PPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER. 3.4 ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCES OF RS.2,47,906/- ON TELEPHONE AND VEH ICLE MAINTENANCE AND RS.93,374/- ON ACCOUNT OF THE BUSIN ESS PROMOTION EXPENSES. FURTHER, VIDE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS MS. SHEHNAZ HUSSAIN 267 ITR 572 (DEL.), SEASONS CAT ERING SERVICES P. LTD. VS. DCIT [2010] 127 ITD 50 (DELHI), AND LOT MANY DE CISIONS OF COORDINATE BENCHES OF THIS TRIBUNAL, IT IS A SETTLED LAW THAT WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE STATUTORILY MANDATED AUDITED BOOKS OF THE ASSESSEE, 5 AND WITH REFERENCE TO ANY SPECIFIC INSTANCES WHERE THE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE NOT FOR BUSINESS PURP OSES, ADHOC DISALLOWANCE MADE BY THE AO WITHOUT ANY BASIS COULD NOT BE UPHELD. 7. IN THE CASE ON HAND ALSO THE LD. AO MADE THE AD- HOC ADDITIONS WITHOUT REFERENCE TO ANY SPECIFIC INSTANCE WHERE TH E SAID EXPENSES WERE INCURRED FOR PERSONAL PURPOSE. SUCH DISALLOWANCE WI THOUT POINTING OUT ANY SPECIFIC DEFECT IN THE STATUTORILY MANDATED AUDITED BOOKS OF THE ASSESSEE, AND WITH REFERENCE TO ANY SPECIFIC INSTANCES WHERE THE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE NOT FOR BUSINESS PURP OSES, CANNOT BE SUSTAINED. WE, THEREFORE, WHILE RESPECTFULLY FOLLOW ING THE REASONING IN ORDER DATED 16.06.2017 OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE A.Y. 2010-11 IN ITA NO. 2169/DEL/2014, ARE OF THE CONSID ERED OPINION THAT THE ADDITIONS MADE BY THE LD. AO BY ALLEGING THAT THE S AID EXPENSES ARE NOT RELATED TO THE BUSINESS OF THE ASSESSEE WITHOUT BRI NGING ANY EVIDENCE ON RECORD ARE BAD IN LAW AND CANNOT BE SUSTAINED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/10/2020 SD/- SD/- (B.R.R. KUMAR) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/10/2020