The ITO, Ward-6(1), Ahmedabad V. Shriq Ambalal Narandas Mody,

ITA 1306/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6422 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 30-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D BAROT
• Assessee Lawyers: S V AGRAWAL
• Keywords: Depreciation; Audit objection; Question of law; Non passing of speaking order; Tax effect; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE SHRI MAHAVIR SINGH,JM & SHRI A N PAHUJA,AM] ITA NO.1306/AHD/2007 WITH C O NO.127/AHD/2007 (ASSESSMENT YEAR:- 2003-2004) THE INCOME-TAX OFFICER, WARD-6(1), AHMEDABAD V/S SHRI AMBALAL NARANDAS MODY, KHARA KUVA, AT: DHOLKA, DISTRICT: AHMEDABAD {PAN: ABDPM 8347 E} (APPELLANT) (RESPONDENT) REVENUE BY :- SHRI B D BAROT, DR ASSESSEE BY:- SHRI S V AGRAWAL, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE DIRECTED AGAINST AN ORDE R DATED 18-12-2006 OF THE LD. CIT(APPEALS)-XII, AHMEDABAD, RAISES THE FOLLOWING GROUNDS: 1 THE LD. COMMISSIONER OF INCOME-TAX (A)-XII, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES FROM RS.6,42,41 2/- TO RS.2,14,138/-. 2 THE LD. COMMISSIONER OF INCOME-TAX (A)-XII, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.66,000/- ON ACCOUNT OF DISALLOWANCE OF SALARY PA ID TO TWO PERSONS COVERED UNDER THE PROVISIONS OF SECTION 40A (2)(B) OF THE INCOME-TAX ACT, 1961. 3 THE LD. COMMISSIONER OF INCOME-TAX (A)-XII, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.54,294/- ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID AT A HIGHER RATE TO PERSONS COVERED UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME-TAX ACT, 1961. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME-TAX (A)-XII, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE AO. ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 2 5 IT IS THEREFORE PRAYED THAT THE ORDER OF THE THE LD. COMMISSIONER OF INCOME-TAX (A)-XII, AHMEDABAD MAY BE SET ASIDE A ND THAT OF THE AO BE RESTORED. 2. AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE POINTED OUT THAT THE TAX EFFECT IN THIS APPEAL FIL ED BY THE REVENUE IS BELOW THE LIMIT OF RS.2 LAKHS STIPULATED BY THE CB DT IN THEIR INSTRUCTION FOR FILING APPEALS. THE LD. DR APPEAR ING BEFORE US COULD NOT POINT OUT THAT THE CASE FALLS WITHIN ANY OF THE FOLLOWING EXCEPTIONS IN CBDT INSTRUCTION NO.279/MISC.-64/05-I TJ DATED 24.10.2005 OR EARLIER INSTRUCTION NO. 1979 DATED 27 .3.2000 AS CLARIFIED VIDE SUBSEQUENT INSTRUCTION NO. 1985 DATE D 29.6.2000 OR EVEN IN LATEST INSTRUCTION NO. 5 OF 2008 DATED 15.5 .2008: (A) WHERE THE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, (B) WHERE THE BOARD'S ORDER, NOTIFICATION, INSTRUCT ION OR CIRCULAR IS THE SUBJECT-MATTER OF AN ADVERSE ORDER, (C) WHERE PROSECUTION PROCEEDINGS ARE CONTEMPLATED AGAINST THE ASSESSEE, AND (D) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVIS IONS OF THE ACT IS UNDER CHALLENGE. 2.1 RECENTLY, HONBLE BOMBAY HIGH COURT IN TH EIR DECISION IN THE CASE OF CIT VS. MADHUKAR K INAMDAR(HUF),229 CTR(BOM.)77 WHILE R EFERRING TO THE CIRCULAR DATED 5.6.2007 ISSUED BY THE CBDT, THE RELEVANT P ROVISIONS OF SEC. 268A OF THE ACT AND THEIR OWN DECISION IN THE CASE OF CIT VS. P OLYCOTT CORPORATION,20 DTR(BOM.)16 HELD THAT INSTRUCTION NO. 5 OF 2008 DA TED 15.5.2008 IS APPLICABLE EVEN TO MATTERS FILED BEFORE THAT DATE I.E. PENDIN G BEFORE THE COURT. THE INSTRUCTION NO. 5 OF 2008 DATED 15.5.2008 SEEMS TO LIMIT THE ISSUES IN SO FAR AS THE SAME QUESTION OF LAW OR RECURRING ISSUE EXCEPT TO THE EXTENT PROVIDED IN PARA.5. ON A PROPER READING OF PARA.5 OF THE INSTRU CTIONS IT WOULD BE CLEAR THAT A DUTY IS CAST ON THE ASSESSING OFFICER THAT EVEN IF THE DISPUTED QUESTIONS ARISE FOR ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 3 MORE THAN ONE ASSESSMENT YEAR THEN AN APPEAL SHOULD BE FILED ONLY IN RESPECT OF THOSE YEARS WHERE THE MONETARY LIMIT EXCEEDS THE LI MITS AS SPECIFIED IN PARA.3 OF THE INSTRUCTIONS. 3. IN VIEW OF THE FOREGOING AND IN THE LIGHT OF AFORES AID INSTRUCTION DATED 24.10.2005 OF THE CBDT AND DECISION DATED 5.8.2008 OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CONCORD PHAMACEUT ICALS IN TAX APPEAL NOS. 1402 TO 1405 OF 2007 AS ALSO CONSISTENT VIEW TAK EN BY VARIOUS HIGH COURTS IN THE CASE OF CIT VS. MADHUKAR K INAMDAR(H UF),229 CTR(BOM.)77, CIT VS. POLYCOTT CORPORATION,20 DTR(BOM.)16,CIT VS. CHHAJER PACKAGING AND PLASTICS P.LTD., 300 ITR 180(BOM.),CIT VS. CAMC O COLOUR CO,254 ITR 565(BOM.), CIT VS. ZOEB Y TOPIWALA,284 ITR 379(BOM),& CIT VS. S.ANNAMALAI,258 ITR 675(MADRAS) AND HONBLE DELHI HIGH COURT IN THEIR ORDER DATED 1.8.2007 IN I TA NO. 683/2007 IN THE CASE OF CIT VS. MANISH BHAMBRI, THIS APPEAL CA N NOT BE ENTERTAINED. 4. RESPECTFULLY FOLLOWING THE AFORESAID DECISI ONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND OTHER HIGH COURTS, T HIS APPEAL BY THE REVENUE IS DISMISSED, IN LIMINE. C O NO.127/AHD/2007 5 IN THE CROSS-OBJECTION, THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS:- THE LEARNED. COMMISSIONER(APPEALS)-XII, AHMEDABAD H AS ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING DIS ALLOWANCES MADE BY THE AO: (1) IN CASE OF AMBALAL NARANDAS MODY, RS.2,14,138/- BEING 5% OF EXPENSES RS.42,82,747/- CONFIRMED AGAINST DISALLOWA NCE AT 15% BY AO. (2) IN CASE OF AMBALAL NARANDAS MODY, RS.64,713/- A RE CONFIRMED BEING 1/5 TH OF CAR EXPENSES, RS.1,70,969/-, CAR DEPRECIATION R S.1,14,223/- AND TELEPHONE EXPENSES RS.38,369/- (RS.1,70,969 + R S.1,14,223 + ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 4 RS.38,369 = RS.3,23,561, 1/5 TH RS.64,713/-) BY NOT DECIDING THE GROUND OF APPEAL RAISED BEFORE HIM;GROUND NO.3(B). (3) IN CASE OF AMBICA SERVICE STATION, DISALLOWANCE OF RS.28,090/- IS CONFIRMED BEING 1/5 TH OF TELEPHONE EXPENSES RS.16,526/-, MOTOR CAR EXPENSES RS.69,366/-, CAR DEPRECIATION RS.20,412/- & MISC. EXPENSES RS.34,146/- (RS.16,526 + RS.69,366 + RS.20,412 + R S.34,146 = RS.1,40,450, 1/5 TH RS.28,090/-). (4) IN CASE OF AGRICULTURAL INCOME BY TREATING 20% OF AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES. 6 ADVERTING FIRST TO GROUND NO.1 IN THE CROSS-OBJEC TION, FACTS, IN BRIEF, AS PER RELEVANT ORDERS THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE FOLLOWING EX PENSES WERE NOT SUPPORTED BY BY BILLS AND INSTEAD WERE CLAIMED ON THE BASIS OF S ELF VOUCHERS: AS PER SCHEDULE Q: (1) FUEL EXPENSES RS.29,42,164/- (2) REPAIRING & MAINTENANCE EXP. RS. 8,72,119/- TYRES, SPARE PARTS, OIL GREASE LABOUR, ETC. (3) MISCELLANEOUS EXPENSES RS. 1,50,346/- ---------------------- RS.39,64,629/- AS PER SCHEDULE S: 2. OFFICE & ADMINISTRATIVE EXPENSES RS. 3,18,118 /- ----------------------- RS.42,82,747/- ACCORDINGLY, THE AO DISALLOWED 15% OF THE AFORESA ID EXPENDITURE, RESULTING IN DISALLOWANCE OF RS. 6,42,412/-. 7 ON APPEAL, THE LEARNED CIT(A) RESTRICTED THE DISA LLOWANCE TO 5% OF THE EXPENDITURE WITH THE FOLLOWING OBSERVATIONS:- 4.2 BEFORE ME, THE LD. COUNSEL FOR THE APPELLANT S UBMITTED A SHEET SHOWING COMPARISON OF THE EXPENDITURE INCURRED IN R ELATION TO EARNING CARTAGE INCOMES DURING FYS 2000-01, 2001-02 AND 200 2-03 AS WELL AS REASON FOR FALL IN NET PROFITS OF TRANSPORTATION BU SINESS, WHICH WAS DULY FURNISHED BEFORE THE AO ON 24.03.2006. THE REASONS FOR DECLINE IN THE ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 5 PROFITS OF THE CONCERN WHEN COMPARED TO AGGREGATE A NNUAL CARTING INCOME FURNISHED BY THE APPELLANT IS AS UNDER: 'WE ARE HEREWITH ENCLOSING A SHEET SHOWING COMPARIS ON OF EXP. IN BETWEEN FINANCIAL YEARS 00-01, 01-02 & 02-03. AS ME NTIONED EARLIER, ALL THE TRUCKS USED FOR THE TRANSPORTATION BUSINESS WER E PURCHASED BEFORE APRIL, 1999. SINCE, THE TRUCKS WERE MORE THAN THREE YEARS OLD, THERE WAS A SUBSTANTIAL INCREASE IN DIESEL EXPENDITURE DUE TO I NCREASE IN THE AVERAGE DIESEL CONSUMPTION OF THE TRUCKS. ALSO, THERE WAS A N INCREASE IN MAINTENANCE, REPAIRING & SPARE-PART EXPENDITURE WHE N COMPARED WITH FINANCIAL YEAR 2001-02. THESE WERE ALL DUE TO OLD A GE OF THE TRUCKS. ALSO, THERE WAS INCREASE IN ENTRY PASS EXP. & M. PASS EXP . DURING THE YEAR UNDER CONSIDERATION. AS PER THE SHEET SHOWING PER L TR. DIESEL RATES FROM THE YEAR 1999 TO 2003, IT CAN BE SEEN THAT PER IT. DIESEL RATE HAS BEEN INCREASED FROM RS.18.99 AS ON 1.3.02 TO PER ITR.. R S. 20.55 AS ON 4.6.02. AS ON 16.03.03, THE RATE HAS RISEN AS HIGH AS TO R S. 25.10 PER ITR. AS AGAINST THIS, THE CARTING INCOME OF THE ASSESSEE IN CREASED JUST BY RS.1,13,810. AND HENCE, THERE WAS A NEGATIVE GROSS PROFIT DURING THE YEAR UNDER CONSIDERATION.' THE APPELLANT FURTHER FURNISHED THE IMPROVISED VERS ION OF THE OPERATIONAL GROSS PROFITS AND STATED THAT FROM WHERE IT COULD B E SEEN THAT THE ACTUAL ROSE PROFIT HAD THOUGH DECLINED FROM 10.32% IN FINA NCIAL YEAR 2001-02 TO 4% IN FINANCIAL YEAR 2002-03, IT WAS A POSITIVE. THE ID. COUNSEL CONTENDED THAT THE AO DID NOT FIND ANY DEFECT IN THE ABOVE EXPLANATION FURNISHED BY THE APPELLANT NOR RE BUT THE SAME AND EVEN, THE ASSESSMENT ORDER DOES NOT GIVE ANY COMMEN T ON THE ABOVE CRUCIAL AND VITAL EXPLANATION SUBMITTED BY THE APPE LLANT. HE FURTHER STATED THAT THE ORDER OF THE AO WAS NON SPEAKING ORDER IN RELATION TO DISALLOWANCE OF 15% OF THE ABOVE EXPENDITURE AND WA S BAD-IN-LAW. 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSION MADE BY THE ID. COUNSEL FOR THE APPELLANT AND ALSO GONE THR OUGH THE DETAILS FURNISHED BY THE APPELLANT. ON SCRUTINY, IT REVEALS THAT THE A.O. HAS DISALLOWED 15% EXPENSES CLAIMED BY THE APPELLANT. H OWEVER, THE A.O. HAS NOT BROUGHT ANY MATERIAL EVIDENCE WHILE MAKING THIS DISALLOWANCE IN HIS ORDER. HE MERELY MENTIONED THAT ALL SUCH EXPENSES A RE NOT SUPPORTED OR SUPPORTED BY SELF MADE VOUCHERS. HOWEVER, HE COU LD NOT SUBSTANTIATE HIS FINDINGS BY BRINGING OUT ANY COGENT AND SPECIFI C MATERIAL IN HIS ORDER. THE A.O. HAS ALSO NOT DENIED THE EXPLANATION MADE B Y THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXCEPT BRINGING OUT THAT EXPENDITURE ARE NOT FULLY VERIFIABLE OR SUPPORTED B Y SELF VOUCHERS. IN VIEW OF, FACTS AND CIRCUMSTANCES OF THE CASE STATED ABOV E, I AM .OF THE OPINION THAT LOOKING TO THE NATURE OF BUSINESS IT WILL BE R EASONABLE TO RESTRICT THE DISALLOWANCE TO 5% INSTEAD OF 15% DISALLOWED BY THE A.O. THE A.O. IS ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 6 DIRECTED TO RESTRICT THE ADDITION TO 5% ONLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. THE ASSESSEE IN HIS CROSS ONJECTION DISPUTED TH E AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED AR ON BEHALF OF THE ASSESSEE MERELY REITERATED THEIR SUBMISSIONS BEFORE THE AO WHILE THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO . 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO DISALLOWED 15 % OF THE TOTAL EX PENDITURE OF RS.42,82,787/- ON FUEL, REPAIRS AND MAINTENANCE, MISC. AND OFFICE ADMINISTRATION EXPENSES, WITHOUT PINPOINTING ANY SPECIFIC ITEM OF EXPENDITUR E, BEING NOT SUPPORTED BY THE BILLS/VOUCHERS WHILE THE LD. CIT(A) REDUCED THE DIS ALLOWANCE TO 5% ON ESTIMATE, LOOKING TO THE NATURE OF BUSINESS. CONSIDERING THE NATURE OF BUSINESS AND THE FACT THAT THE ENTIRE EXPENDITURE IS NOT SUPPORTED B Y BILLS AS ALSO THE SUBMISSIONS ON BEHALF OF THE ASSESSEE, WE ARE OF THE OPINION TH AT DISALLOWANCE MADE BY THE LD. CIT(A) IS REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. WE, ACCORDINGLY, UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD. THUS , GROUND NO.1 RAISED BY THE ASSESSEE IN THE CROSS- OBJECTION IS DISMISSED. 10. GROUND NOS. 2 & 3 RELATE TO CONFIRMATION OF D ISALLOWANCE OF RS.64,713/- BEING 1/5 TH OF CAR EXPENSES- RS.1,70,969/-, CAR DEPRECIATION-R S.1,14,223/- AND TELEPHONE EXPENSES-RS.38,369/- IN AMBALAL NARANDAS MODY DIVISION AND DISALLOWANCE OF RS.28,090/- BEING 1/5 TH OF TELEPHONE EXPENSES- RS.16,526/-, MOTOR CAR EXPENSES-RS.69,366/-, CAR DE PRECIATION- RS.20,142/- AND MISCELLANEOUS EXPENSES- RS.34,146/- IN THE AMBICA SERVICE STATION . SINCE THE ASSESSEE DID NOT PRODUC E RELEVANT BILLS WHILE PERSONAL USE OF CARS AND TELEPHONE WAS NOT DENIED , THE AO AFTER DISCUSSION WITH THE ASSESSEE,DISALLOWED 1/5 TH OF THE AFORESA ID EXPENDITURE 11 ON APPEAL, THE LEARNED CIT(A) DID NOT ADJUDICATE GROUND NO.3(B) OF THE APPEAL BEFORE HIM RELATING TO DISALL OWANCE OF ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 7 RS.64,713/- WHILE IN RESPECT OF DISALLOWANCE OF RS . 28,090/- THE LD. CIT(A) CONCLUDED AS UNDER :- 5.7 REGARDING DISALLOWANCE OF TELEPHONE EXPENSES AN D MOTOR CAR EXPENSES, THE A.O. STATED IN HIS ORDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO C LARIFY ELEMENTS OF PERSONAL EXPENSES INCLUDED THEREIN, BUT THE ASSESSE E COULD NOT EXPLAIN IT. THEREFORE, THE A.O, DISALLOWED L/5TH OUT OF THE TOT AL CLAIM OF ABOVE EXPENSES OF RS.1,40,450/- TO THE TUNE OF RS.28,090/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5.8 BEFORE ME, THE ID. COUNSEL FOR THE APPELLANT ST ATED AS UNDER: '(I). THE ASSESSSEE WAS A 73 YEARS OLD SENIOR CITIZ EN AND FOR BETTER COMFORT FOR HEALTH, HAD BEEN USED TO OPERATE AND CO NTROL THE BUSINESS, MAINLY FROM HIS RESIDENTIAL PREMISES AT RENTAL HOME AT AHMEDABAD; (II). THE PETROL & DIESEL ARE BEING PURCHASED FROM REFINERY AT INDIAN OIL CORPORATION, VADODARA AND HENCE, THE ASSESSEE HAS T O FREQUENTLY VISIT THE SAME AT VADODARA. HE HAS, TO FURTHER, VISIT HIS OFF ICE AT VADODARA FOR CONTROL & SUPERVISION PURPOSES. (III). AS MENTIONED HEREINABOVE, THERE WAS SUBSTANT IAL DISTANCE IN BETWEEN THE RESIDENCE OF THE ASSESSEE AND OFFICES FOR THE A BOVE PROPRIETARY CONCERNS. (IV). THE TRUCKS OF THE ASSESSSEE ARE MOVING IN STA TES OF GUJARAT, RAJASTHAN & MAHARASTHRA. HENCE, PROBLEMS LIKE ACCID ENT, BREAK DOWN ETC. ARE BEING FACED BY THE TRUCKS, THE MOTOR-CARS ARE B EING FREQUENTLY UTILIZED TO VISIT THE TRUCK AT THE RELEVANT DESTINATION. (V). THE CONTENTION OF THE ASSESSSEE THAT ONLY SELF -MADE VOUCHERS WERE BEING PRODUCED BEFORE THE AO IS PATENTLY WRONG SINC E, ALL THE VOUCHERS FOR ABOVE EXP, WERE DULY SUPPORTED BY RELEVANT EXTERNAL VOUCHERS (VI). FURTHER, ON THE ABOVE GROUND THAT THE AO HAD NOT MADE ANY DISALLOWANCE IN RESPECT OF THE ABOVE EXPENDITURE FO R A.Y. 2002-03. WE, THEREFORE, PRAY BEFORE YOUR HONOR TO DELETE THE ABOVE DISALLOWANCE.' 5.9 I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE ID. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORDS. THE USE OF THE TELEPHONE INSTALLED AT THE RESIDENCE OF THE PROPRIETOR FOR PE RSONAL AND NON-BUSINESS PURPOSE CANNOT BE RULED OUT. IN VIEW OF THE ADMITTE D POSITION THAT DETAILS OF THE CALLS MADE BY THE APPELLANT FROM THE RESIDENTIA L TELEPHONE WERE NOT MADE AVAILABLE BEFORE THE AO SUCH USE HAS TO BE EST IMATED. THE DISALLOWANCE OF L/5TH TELEPHONE EXPENSES, TO MY MIN D IS QUITE REASONABLE ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 8 AND IN THE ABSENCE OF NECESSARY DETAILS IT CANNOT H ELD TO BE EXCESSIVE. THE DECISION OF THE AO TO DISALLOW SUCH I/5TH EXPEN SES OUT OF TOTAL TELEPHONE EXPENSES IS, THEREFORE, UPHELD. REGARDING THE DISALLOWANCE OF MOTOR CAR EXPENSES, THE USE OF MOTOR CAR BY THE PROPRIETOR FOR PERSONAL USE OR FOR OTHER NON BUSINESS PURPOSES CANNOT BE RULED OUT. IN VIEW OF THE ADMITTED POSITI ON OF NOT MAINTAINING DETAILS IN THE FORM OF LOG BOOK, ETC OF SUCH EXPENS ES BY THE APPELLANT SUCH PERSONAL AND NON BUSINESS USE HAS TO BE ESTIMATED. COMING TO THE ISSUE OF DISALLOWANCE OUT OF DEPRECIA TION AS BROUGHT OUT IN SECTION 38(2) OF THE IT ACT, 1961, WHERE AN ASSET I S NOT EXCLUSIVELY USED FOR THE PURPOSE OF BUSINESS OR PROFESSION THE DEDUC TION ON ACCOUNT OF DEPRECIATION IS TO BE RESTRICTED TO FAIR PROPORTION ATE PART THEREOF, WHICH THE AO MIGHT DETERMINE HAVING REGARD TO THE USER OF SUC H PLANT OR MACHINERY ITEMS FOR THE PURPOSE OF BUSINESS OR PROFESSION. SE CTION 38(2) IS VERY MUCH IN THE STATUTE BOOK, EVEN AFTER THE CONCEPT OF BLOCK OF ASSETS HAS BEEN INTRODUCED. THEREFORE, L/5TH OF SUCH DISALLOWANCE OUT OF MOTORC AR EXPENSES AND OUT OF DEPRECIATION ON CAR EXPENSES MADE BY THE AO CANNOT BE SAID TO BE EXCESSIVE AT ALL AND THE SAME IS QUITE REASONABLE. THEREFORE, THE FINDINGS WITH REGARD TO SUCH DISALLOWANCE ARE UPHELD. ACCORD INGLY, THIS GROUND OF APPEAL IS DISMISSED. 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US IN THEIR CROSS- OBJECTION AGAINST THE AFORESAID FINDINGS OF THE LD . CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE LD . CIT(A) DID NOT ADJUDICATE THEIR GROUND NO.3 (B) OF THE APPEAL WHIL E UPHOLDING DISALLOWANCE ON ACCOUNT OF CAR AND TELEPHONE EXPEN SES IN THE AMBICA SERVICE STATION. HOWEVER, THE LD. AR APPEAR ING BEFORE US DID NOT MAKE ANY SUBMISSIONS IN RESPECT OF GROUND N OS. 2& 3 IN THE CROSSOBJECTION.IN NUTSHELL THE LD. AR , HAD NOTHIN G TO SAY IN THE MATTER. THE LEARNED DR, ON THE OTHER HAND, SUPPORTE D THE ORDER OF THE AO AND THE LD. CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AFTER HEARING BOTH THE PARTIES AND CONSI DERING THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HAS NOT REFERRED US TO A NY MATERIAL WARRANTING ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 9 INTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A). EVEN THE RELEVANT DETAILS OF MISC. EXPENSES WERE NOT PLACED BEFORE US. SINCE PERSONAL USE OF CAR AND TELEPHONE BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF HA S NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE ASSESSEE OR HIS FAMILY HAD ANY I NDEPENDENT VEHICLES OR TELEPHONES FOR PERSONAL USE, IN OUR OPINION DISALL OWANCE OF 1/5 TH OF THE EXPENSES ON TELEPHONE, MISC. AND RUNNING AND MAINTE NANCE OF VEHICLES, INCLUDING DEPRECIATION , IN THE LIGHT OF PROVISIO NS OF SEC. 38(2) OF THE ACT, IS REASONABLE . THEREFORE, GROUND NOS. 2 & 3 OF THE CR OSS-OBJECTION ARE REJECTED. 14. LAST GROUND NO.4 RELATES TO TREATING THE 20% OF AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES .DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKING AS TO WHY 20% OUT OF THE NET AGRICU LTURAL INCOME SHOWN OF RS.2,16,598/- SHOULD NOT BE ADDED TO THE T OTAL INCOME OF THE ASSESSEE AS OTHER INCOME DUE TO DISCREPANCY IN 7/12 EXTRACT AND AGRICULTURE ACCOUNT FILED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE NET TOTAL INCOME OF THE ASSESSE E IN AGGREGATION OF THE AGRICULTURE INCOME IS FALLING IN THE HIGHEST SLAB ( 30%) OF TAXATION. ANY VARIATION IN THE AGRICULTURE INCOME, AS FINALLY ASSESSED, IS NOT GOING TO MAKE ANY DIFFERENCE IN THE ULTIMATE INCOME TAX LIABILITY OF THE ASSESSEE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND CONCLUD ED THAT FROM THE EXPLANATION OF THE AUTHORIZED REPRESENTATIVE IT APPEARED THAT THE ASSESSEE HAD NO OBJECTION FOR THE ADDITION OF 20% O UT OF THE NET AGRICULTURE INCOME SHOWN OF RS.2,16,598/-. HE, ACCO RDINGLY, DISALLOWED 20% OUT OF THE NET AGRICULTURAL INCOME O F RS.2,16,598/- TO THE TUNE OF RS.43,320/- AS INCOME FROM OTHER SOURCE S. 15. ON APPEAL, THE LEARNED CIT(A) UPHELD THE AFORES AID TREATMENT WITH THE FOLLOWING OBSERVATIONS:- 9.2 BEFORE ME, THE ID. COUNSEL FOR THE APPELLANT S UBMITTED THAT THE APPELLANT HAD RETURNED NET AGRICULTURE INCOME OF RS .2,16,597/-DURING THE ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 10 YEAR UNDER CONSIDERATION. HE STATED THAT THE LEARNE D AO HAS TREATED 20% OF THE AGRICULTURE INCOME TO BE BOGUS ON THE GROUND THAT THERE WAS DISCREPANCY BETWEEN CROPS PRODUCED AS SHOWN IN THE ACCOUNTS AND RECORDS OF THE ASSESSEE AND THAT AS PER 7/12 EXTRAC T. THE ID. COUNSEL FURTHER CONTENDED THAT, THE ASSESSEE WAS DULY FURNI SHED THE COPY OF AGRICULTURE BILLS AND AGRICULTURE INCOME & EXPENDIT URE ACCOUNT AND THE AO DID NOT FIND ANY DEFECT THEREIN. THE APPELLANT HAD ALSO BEEN MAINTAINING REGULAR ACCOUNTS FOR BOOKING AGRICULTURE INCOME AND THE SAME WAS DULY PRODUCED FOR VERIFICATION BEFORE THE AO. THE AO EVE N DID NOT FIND ANY DEFECT IN THE REGULAR ACCOUNTS FOR RECORDING THE AG RICULTURE INCOME. THE RECORDS AND BILLS ABOUT AGRICULTURE INCOME WAS DULY FURNISHED DURING THE COURSE OF ASSESSMENT FOR AY 2002-03 AND THE AO DID NOT FIND ANY DEFECT WHILE MAKING ASSESSMENT FOR AY 2002-03. THE 7/12 AB STRACT IS A COMPUTERIZED SUMMARY BY TALATI OF THE RESPECTIVE VI LLAGE. IT FREQUENTLY HAPPENS THAT THE 7/12 EXTRACT MAY NOT BE UPDATED BY THE RESPECTIVE LOCAL AUTHORITY OF THE VILLAGE TO RECORD AND ACCOUNT LATE ST CROPS CULTIVATED BY THE ASSESSEE. THE ENTRIES IN 7/12 ABSTRACT ARE BEING MA DE WITHOUT REFERENCE TO ACTUAL CROPS CULTIVATED ON LAND. AND, HENCE, IT COULD NEVER BE A LEGITIMATE CRITERIA TO ASCERTAIN THE ACTUAL AGRICUL TURE CROP CULTIVATED AND SOLD BY THE ASSESSEE. HENCE, THE ABOVE ADDITION MAD E BY THE AO IS BASED MERELY ON GUESS WORK AND SURMISES. FURTHER, E VEN IF 20% OF THE AGGREGATE AGRICULTURE INCOME IS DISREGARDED BY THE AO, AT THE MOST, THE AGRICULTURE INCOME WOULD BE REDUCED TO THAT EXTENT BUT IN ANY CASE IT COULD NEVER BE REGARDED AS A PART OF OTHER SOURCE INCOME OF THE ASSESSEE IN THE ABSENCE OF ANY EVIDENCE STATING THAT THE BOOKS, RECORDS AND BILLS FOR THE AGRICULTURE INCOME WERE BOGUS. 9.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND SUBMISSION MADE BY THE ID. COUNSEL FOR THE APPELLANT. ON SCRUTINY, IT REVEALS THAT THE A.O. HAS DISALLOWED 20% OF AGRICULTURE INCOME ON THE BAS IS OF DISCREPANCY POINTED OUT BY THE A.O. IN 7 / 12. FURTHER, THE APP ELLANT HAS HIMSELF ADMITTED FOR DISALLOWANCE OF 20% OF NET AGRICULTURA L INCOME. THE APPELLANT COULD NOT EXPLAIN THE CORRECT POSITION OF THE AGRIC ULTURE INCOME. IN VIEW OF THE FACTS BROUGHT OUT BY THE A.O., I AM OF THE VIEW THAT THE AO WAS JUSTIFIED IN DISALLOWING 20% OF AGRICULTURAL INCOME AND ADDING IT TO THE TOTAL INCOME OF THE APPELLANT AS INCOME FROM OTHER SOURCE S. THIS GROUND OF APPEAL IS, THEREFORE, REJECTED. 16. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE L D. AR APPEARING BEFORE US DID NOT DISPUTE THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE COULD NOT EXPLAIN THE CORRECT POSITION OF THE AGRICULTURE INCOME AND THAT ASSESSEE HIMSELF ADMITTED FOR DISALLOWANCE OF 20% OF NET AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IM PUGNED ORDERS. ITA NO. 1306/AHD/2007 FOR AY 2003-04 WITH CO NO.127/AHD/2007 SHRI AMBALAL NARANDAS MODY 11 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, THE ASSESSEE HIMSELF AGREED BEFORE TH E AO FOR TREATING 20% OF THE AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES WH ILE NEITHER ANY DETAILS NOR EVEN THE RELEVANT 7/12 EXTRACTS OR ACCOUNT OF AGRIC ULTURAL INCOME HAVE BEEN PLACED BEFORE US. IN THE ABSENCE OF ANY BASIS FOR I NTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A), WE HAVE NO ALTERNATIVE BUT TO REJEC T THE GROUND NO.4 RAISED IN THE CO. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED IN LIMINE WHILE CROSS- OBJECTION FILED BY THE ASSEESEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-05-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 17-05-2010 COPY OF THE ORDER FORWARDED TO : 1. SHRI AMBALAL NARANDAS MODY, KHARA KUVA, AT: DHOL KA, DISTRICT: AHMEDABAD 2. THE ITO, WARD-6(1), AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XII, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR, ITAT, AHMEDABAD