M/s R. M. Industries, V. The ITO,

ITA 175/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0045 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 03-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: M C MEHTA; HITESH CHIMNANI CAS
• Keywords: Depreciation
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI M.L.GUSIA,A.M. PAN NO. : N.A. I.T.A.NO.175/IND/2008. A.Y. : 2004-05 M/S.R.M. INDUSTRIES, INCOME-TAX OFFICER, SHANWARA, C/O M. MEHTA & CO., VS BURHANPUR INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI M.C.MEHTA, C.A. AND SHRI HITESH CHIMNANI, CAS RESPONDENT BY : SMT. APARNA KARAN, ADDL. CIT DR O R D E R PER GUSIA, A.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE LD. CIT(A)-II, INDORE, ON 15.1.2008, FOR THE ASSESS MENT YEAR 2004-05. 2. THE FIRST GROUND OF THE APPEAL IS THAT THE LD. CIT( A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 71,000/- UNDER T HE HEAD -: 2 :- 2 MAINTENANCE AND SUPERVISION CHARGES PAID BY THE A SSESSEE TO ITS SISTER CONCERN M/S. RATILAL MANIKJI OF BURHANPUR WHEN THE SAID EXPENDITURE STANDS FULLY PROVED AS HAVING BEEN SPENT FOR THE BU SINESS OF THE ASSESSEE. 3. THE FACTS ARE THAT THE ASSESSEE CLAIMED A SUM OF RS . 71,000/- UNDER THE HEAD MAINTENANCE AND SUPERVISION PAID T O ITS SISTER CONCERN, M/S. RATILAL MANIKJI OF BURHANPUR. THE AO OBSERVED THAT THE ASSESSEE GOT THE PRESSING JOB WORK DONE FROM THIS FIRM, FOR WHICH PAYMENT @ RS.106/- PER BALES HAVE BEEN MADE AND HENCE PAYMENT OF MAINTENANCE, SUPERVISION CHARGES DID NOT APPEAR TO BE JUSTIFIABL E. THE ASSESSEE WAS ASKED TO JUSTIFY THIS PAYMENT TO WHICH NO CLARIFICA TION COULD BE MADE. THE CLAIM WAS, THEREFORE, DISALLOWED SINCE THE MAIN TENANCE SHOULD HAVE BEEN DONE BY THE FIRM, WHO HAS CARRIED OUT THE JOB WORK OF THE ASSESSEE. 4. IT IS CONTENDED BEFORE THE CIT(A) THAT THE MAINTEN ANCE AND SUPERVISION CHARGES WERE PAID ON ACCOUNT OF ELECTRI CITY CONSUMED BY THE ASSESSEE FIRM. THE LD.CIT(A) OBSERVED THAT THE AO CATEGORICALLY -: 3 :- 3 STATED IN HIS ORDER THAT NO JUSTIFICATION OF THIS C LAIM COULD BE MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS AND, THUS, THE ASSESSEE AS SUCH HAS NOT BEEN ABLE TO ESTABLISH THE JUSTIFICATION/REASONABLENESS OF THE PAYMENTS SO MAD E WITH THE HELP OF ANY INDEPENDENT EVIDENCE. THE LD.CIT(A) FURTHER OBS ERVED THAT IT IS AN ADMITTED FACT THAT THE APPELLANT PAID JOB CHARGES @ 106/- PER BALE TOWARDS PRESSING CHARGES. THEREFORE, ACCORDING TO H IM, IT IS NOT UNDERSTANDABLE THAT WHY THE ASSESSEE WAS OBLIGED TO PAY EXTRA SUPERVISION AND MAINTENANCE CHARGES OR ELECTRICITY CHARGES. IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER WAS CONFIRMED BY THE LD. CIT(A). 5. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE NOMENCLATURE OF THE EXPENSES DOES NOT CONVEY THE MEANING, WHICH IS CLAIMED TO BE BY THE A SSESSEE. ELECTRICITY CHARGES, IN FACT, WERE PAID TO THE SISTER CONCERN B UT WERE DEBITED AND CLAIMED UNDER THE HEAD MAINTEANCE AND SUPERVISION CHARGES, BECAUSE OF SUCH HEADING, THE AO COULD NOT APPRECIATE THE PU RPOSE FOR WHICH THE -: 4 :- 4 EXPENSES HAVE BEEN CLAIMED. IT IS FURTHER CONTENDED BY THE LEARNED COUNSEL THAT THE PRESSING FACTORY OF M/S. RATILAL M ANIKJI, WHICH IS A SISTER CONCERN OF THE ASSESSEE, IS ADJACENT TO PALA HOUSES OF THE ASSESSEE AND IS HAVING HIGH TENSION LOAD AND IS PROVIDING TH E ASSESSEE, ELECTRICITY FOR 45 H.P.MOTORS INSTALLED IN PALA HOUSE OF THE AS SESSEE FOR SUCKING MACHINE. SUCH ELECTRICITY PROVIDED BY M/S. RATILAL MANIKJI IS IN EXCESS OF ITS OWN REQUIREMENT. THE KAPAS PURCHASED IN GINN ED BY THE ASSESSEE IN ITS GINNING FACTORY AND AFTER THAT IT IS TRANSFE RRED TO PALA HOUSE OF THE ASSESSEE. THE ASSESSEE DOES NOT HAVE POWER CONNECTI ON IN ITS PALA HOUSES. THE GINNED COTTON IS SUCKED FROM PALA HOUSE S BY M/S. RATILAL MANIKJI IN ITS PRESSING FACTORY WHERE PRESSING OF C OTTON BALE IS DONE. FOR THIS PURPOSE, THE ELECTRICITY CONSUMED IS SUPPL IED BY M/S. RATILAL MANIKJI. THE ASSESSEE PAYS RS. 106/- FOR EACH COTTO N BALE OF THE ASSESSEE PRESSED BY M/S. RATILAL MANIKJI FOR WHICH SEPARATE BILL OF RS. 1,65,360/- WAS RAISED BY M/S. RATILAL MANIKJI, DEDU CTION FOR WHICH HAS BEEN ALLOWED BY THE LD. AO. IT IS CONTENDED THAT IN ADDITION TO THE PRESSING CHARGES, THE ASSESSEE WAS ALSO REQUIRED TO REIMBURSE M/S. -: 5 :- 5 RATILAL MANIKJI FOR USING ELECTRICITY TO SUCK THE G INNED COTTON FROM PALA HOUSES TO ITS FACTORY. FOR THIS PURPOSE, THE ASSESS EE REIMBURSED RS. 71,000/- TO M/S. RATILAL MANIKJI FOR COTTON SUCKED FOR PRESSING 1560 COTTON BALES. THIS WORKED OUT TO ABOUT RS.45/- TO 4 6/- PER BALE. SINCE IN THE BILL PREPARED BY M/S. RATILAL MANIKJI, THE SERV ICES RENDERED BY THEM HAS BEEN MENTIONED AS MAINTENANCE AND SUPERVISION C HARGES AND NOT TOWARDS SUPPLY ELECTRIC POWER FACILITY, THE SAME HA S BEEN DISALLOWED BY THE ASSESSING OFFICER AND MAINTAINED BY THE LD. CIT (A). 6. THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED THAT T HE LD. AO IS WRONG IN STATING THAT NO EXPLANATION TOWARDS JUS TIFICATION OF THE SAID EXPENDITURE WAS FILED BEFORE HIM. EVEN DETAILED EXP LANATION HAS ALSO BEEN FURNISHED BEFORE THE CIT(A). IT IS FURTHER SUB MITTED THAT NOT ONLY THIS PAYMENT MADE IS REASONABLE, CONSIDERING THE EL ECTRICITY EXPENSES, INCURRED BY M/S. RATILAL MANIKJI BUT ALSO THAT THE SAID FIRM IS SEPARATELY ASSESSED TO TAX, WHERE THE SAME RATE OF TAX ON THIS AMOUNT HAS BEEN PAID BY THE SAID FIRM. IT IS, THEREFORE, CONTENDED THAT THE EXPENDITURE SO -: 6 :- 6 INCURRED BEING REASONABLE AND GENUINE AND HAVING BE EN INCURRED FOR THE SMOOTH RUNNING OF BUSINESS, REQUIRES TO BE DELETED. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE CONTENDED THAT THE AO HAS SPECIFICALLY MENTIONED TH AT THE ASSESSEE HAS FAILED TO JUSTIFY THE CLAIM OF EXPENDITURE. 8. AFTER CONSIDERING THE RIVAL CONTENTION, WE NOTED THAT M/S. RATILAL MANIKJI, SISTER CONCERN OF THE ASSESSEE HAS ISSUED A BILL ON 30 TH JULY, 2003, FOR THE AMOUNT OF RS. 71,000/- BEING TH E AMOUNT OF MAINTENANCE AND SUPERVISION CHARGES. THERE IS NO DE SCRIPTION THAT THE BILL HAS BEEN RAISED FOR THE ELECTRICITY CONSUMED B Y THE ASSESSEE, WHICH CLAIMED TO HAVE BEEN SUPPLIED BY THE SISTER CONCERN M/S. RATILAL MANIKJI. WE ALSO NOTED THAT THE ENTIRE JOB WORK HAS BEEN CARRIED OUT BY THE SISTER CONCERN M/S. RATILAL MANIKJI @ RS. 106/- PER BALE. THE ASSESSEE FAILED TO PROVE THAT THE SISTER CONCERN, I N FACT, SUPPLIED THE ELECTRICITY FROM ITS ELECTRIC METER, WHICH WAS ACTU ALLY CONSUMED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES. NO DOCUMENTARY EVIDENCE WAS FURNISHED BEFORE US TO PROVE THE CONSUMPTION OF THE ELECTRICITY BY THE -: 7 :- 7 ASSESSEE FOR ITS OWN BUSINESS, WHICH WAS CLAIMED TO HAVE BEEN SUPPLIED BY THE SISTER CONCERN M/S. RATILAL MANIKJ. IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A). THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 9. THE SECOND GROUND OF APPEAL IS IN REGARD TO AD HOC DISALLOWANCE OUT OF NINE HEADS OF EXPENSES ON ESTIM ATE BASIS. BEFORE DEALING WITH THE ABOVE DISALLOWANCES, IT IS NECESSA RY TO MENTION THAT THE LEARNED AUTHORIZED REPRESENTATIVE CONTENDED BEF ORE US THAT BURHANPUR IS SITUATED ON THE BORDER OF THE MAHARASH TRA AND THE ASSESSEES BUSINESS DEPENDED ON COTTON BEING BROUGH T BY AGRICULTURISTS FROM MAHARASHTRA, SINCE THERE WAS MONOPOLY OF MAHAR ASHTRA FEDERATION IN MAHARASHTRA. THE MONOPOLY OF THE FEDE RATION WAS ABOLISHED DURING THE YEAR, BECAUSE OF THAT THE INFL OW OF COTTON FROM MAHARASHTRA TO BURHANPUR GOT STOPPED. THIS RESULTED IN A SEVEREST BACK IN THE BUSINESS OF THE ASSESSEE. IT, THEREFORE, BEC AME IMPERATIVE FOR THE ASSESSEE TO OPEN A BRANCH IN MALIKAPUR (MAHARASHTRA ). THIS RESULTED IN SUBSTANTIAL INCREASE IN TOTAL EXPENSES UNDER VARIOU S HEADS OF THE -: 8 :- 8 ASSESSEE, BECAUSE OF TWO SEPARATE ESTABLISHMENT BEI NG MAINTAINED BY IT. FURTHER, THOUGH THE TOTAL TURNOVER LAST YEAR WAS OF RS. 8.87 CRORES AND IN THIS YEAR WAS OF RS. 8.76 CRORES, BUT THE NATURE OF BUSINESS IN THESE TWO YEARS WAS DIFFERENT, WHEREAS IN THE LAST YEAR T HE TOTAL TURNOVER INCLUDED TRADING TURNOVER OF ABOUT 1.26 CRORES. THE SAME WAS NIL IN THIS YEAR, MOREOVER, BECAUSE OF TWO OFFICES AND THERE BE ING INCREASE IN THE MANUFACTURING ACTIVITIES OF THE ASSESSEE, THE EXPEN SES OF THE ASSESSEE WERE BOUND TO INCREASE. THE ASSESSEE FILED COMPLETE DETAILS OF EACH EXPENSES ACCOUNT IN RUPEES BEFORE THE AO AND CIT(A) . IT IS CONTENDED THAT THE BOOKS OF ACCOUNT AND ALL EXPENSES ARE DULY VOUCHED AND AUDITED BY THE INDEPENDENT CHARTERED ACCOUNTANT UND ER THE TAX AUDIT REQUIREMENTS. THE AO WAS NOT CORRECT IN COMPARING T HE FIGURES OF EXPENSES OF THE TWO YEARS WHEN THE FACTS OF BOTH TH E YEARS ARE COMPLETELY DIFFERENT. IT IS SUBMITTED THAT IN CASE MARGIN IS ALLOWED FOR THE REASONS OF INCREASE IN THESE EXPENSES, THE COMP ARATIVE FIGURE WILL STAND JUSTIFIED. NO PARTICULAR ITEM OF DISALLOWABLE NATURE HAS BEEN POINTED OUT AND, THEREFORE, DISALLOWANCE OF EXPENSE S AT CERTAIN -: 9 :- 9 PERCENTAGE OF THE INCREASE IN EXPENSES ON AD HOC BA SIS IS UNCALLED FOR. IT IS CLAIMED THAT THE ENTIRE EXPENSES HAVING BEEN INC URRED FOR BUSINESS PURPOSES ONLY AND, THUS, THE SAME ARE ALLOWABLE AND THE ADDITION MAINTAINED BY THE LD. CIT(A) IN TOTO REQUIRES TO BE DELETED. IN THIS BACKGROUND, NOW EACH DISALLOWANCE IS DISCUSSED SEPA RATELY AS UNDER :- 10. GROUND NO. 2(I) RELATES TO DISALLOWANCE OF RS. 14,2 76/- OUT OF TELEPHONE EXPENSES. 11. IN THIS REGARD, THE AO NOTED THAT IN THE YEAR UNDE R DISCUSSION, THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE INCURRED ON TELEPHONE AND MOBILE AT RS. 99,079/- AS AGAINST RS. 75,286/- IN T HE IMMEDIATELY PRECEDING YEAR. THE AO IS OF THE VIEW THAT PERSONAL USER OF TELEPHONE AND MOBILE BY THE PARTNERS OF THE FIRM CANNOT BE RU LED OUT AND FURTHER THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION ABOUT INCREASE OF THE EXPENDITURE BY RS. 23,793/- IN THIS YEAR. IN VIEW O F THE ABOVE, HE DISALLOWED 60 % OF THE INCREASED EXPENDITURE OF RS. 23,793/-, WHICH RESULTED IN DISALLOWANCE OF RS. 14,276/-. -: 10 :- 10 12. THE LD.CIT(A) HAS CONFIRMED THE SAME ADDITION ON T HE GROUND THAT THE ASSESSEE COULD HEAVE ESTABLISHED ITS CLAIM BEFORE THE AO BY SORTING OUT CALLS FOR BUSINESS AND PERSONAL USE, BU T NO SUCH EXERCISE WAS DONE BY THE ASSESSEE. THEREFORE, ACCORDING TO HIM, IN THE ABSENCE OF ANY PROPER JUSTIFICATION FOR INCREASE IN EXPENDITUR E WITH CORRESPONDING DECREASE IN TURNOVER AS COMPARED TO LAST YEAR AND A LSO KEEPING IN VIEW THE PERSONAL USE OF TELEPHONE BY PARTNERS, THE DISA LLOWANCE HAS RIGHTLY BEEN MADE. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED REL IANCE ON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 14. AFTER HEARING RIVAL CONTENTIONS, WE NOTED THAT THE AO HAS DISALLOWED ONLY RS. 14,276/- OUT O TOTAL CLAIM OF R S. 99,079/-. IN THE PRECEDING YEAR, THE CLAIM WAS MADE OF RS.75,486/-. DURING THE YEAR, THE INCREASE IN EXPENDITURE HAS BEEN WORKED OUT AT RS. 23,793/- AND OUT OF THAT 60 % HAS BEEN DISALLOWED, WHICH ARRIVED AT RS. 14,276/-. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, WE NOTED THAT THE AO HAS DISALLOWED 60 % OF THE INCREASED EXPENDITURE , WHICH APPEARS -: 11 :- 11 ON HIGHER SIDE. THE SAME IS RESTRICTED AT 30 % OF T HE INCREASED EXPENDITURE OF RS. 23,793/-. THUS, THIS GROUND OF A PPEAL IS PARTLY ALLOWED. 15. GROUND NO.2(II) IS IN REGARD TO DISALLOWANCE OF RS. 17,241/-, OUT OF OFFICE EXPENSES. 16. IT IS NOTED THAT THE ASSESSEE HAS CLAIMED OFFICE EX PENSES OF RS. . 48,258/- IN THE YEAR UNDER CONSIDERATION AGAINST RS. 2857/-IN THE PRECEDING ASSESSMENT YEAR. THE AO HAS DISALLOWED TH E EXPENSES TO THE EXTENT OF RS. 27,241/-. HOWEVER, THE SAME HAS BEEN REDUCED BY THE LD. CIT(A) AT RS. 1,7241/- WE NOTED THAT THE AO HAS SPE CIFICALLY MENTIONED IN THE ASSESSMENT ORDER THAT THE AUDITORS NOTE ATTACHED WITH THE AUDITED ACCOUNTS MENTIONED THAT CERTAIN EXPENDI TURE CLAIMED UNDER THIS HEAD ARE NOT SUPPORTED BY THE VOUCHERS. CONSID ERING THESE FACTS AND ALSO THAT THE LD.CIT(A) HAS ALREADY GIVEN RELIE F TO THE EXTENT OF RS.10,000/-, THEREFORE, THE SAME IS MAINTAINED. THO UGH NO EXPENDITURE IS DISALLOWABLE UNDER THE HEAD OFFICE EXPENSES, B UT IT CANNOT BE ALTOGETHER IGNORED THAT THIS YEAR, THE EXPENDITURE HAS BEEN CLAIMED AT -: 12 :- 12 RS. 48,258/- AS AGAINST RS. 2,857/- IN THE PRECEDIN G YEAR AND ALSO THAT SUPPORTING VOUCHERS ARE NOT COMPLETELY MAINTAINED B Y THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 17. GROUND NO. 2(III) IS REGARDING DISALLOWANCE OF RS. 12,224/- OUT OF STAFF WELFARE EXPENSES. 18. THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE IN THIS YEAR AT RS. 63,485/- AS AGAINST RS. 7,924/- IN THE PRECEDING YE AR. THE AO HAS DISALLOWED RS. 22,224/-, WHICH HAS BEEN RESTRICTED BY THE LD. CIT(A) AT RS. 12,224/-. IT IS NOTED THAT THIS YEAR THERE IS I NCREASE OF EXPENDITURE BY RS. 55,561/-. THE EXPENDITURE NOT FULLY SUPPORTE D BY THE VOUCHERS AS PER AUDITORS NOTE AND ALL THE VOUCHERS COULD ALSO NOT BE PRODUCED BEFORE THE CIT(A). THEREFORE, NO INTERFERENCE IS CA LLED FOR AT THIS STAGE. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 19. GROUND NO. 2(IV) IS IN REGARD TO DISALLOWANCE OF RS . 11,858/- OUT OF VEHICLE MAINTENANCE EXPENSES. 20. FACTS ARE THAT THE ASSESSEE HAS CLAIMED TOTAL EXPEN SES OF RS. 56,590/- AS AGAINST THE EXPENSES INCURRED IN THE PR ECEDING YEAR AT RS. -: 13 :- 13 36,826/-. THE AO HAS DISALLOWED RS. 11,858/- FOR TH E REASON THAT THE ASSESSEE FAILED TO OFFER ANY EXPLANATION ABOUT THE INCREASE IN EXPENDITURE AND ALL THE VOUCHERS OF THE EXPENDITURE HAVE NOT BEEN PRODUCED. FURTHER, THE AUDITOR HAS ALSO MENTIONED T HAT SOME OF THE EXPENDITURE ARE NOT SUPPORTED BY THE VOUCHERS. 21. CONSIDERING THE INCREASE IN PRICES, WE ARE OF THE V IEW THAT THE DISALLOWANCE IS ON HIGHER SIDE. THEREFORE, THE SAME IS RESTRICTED AT RS. 5,000/-. THUS, THIS GROUND OF APPEAL IS PARTLY ALL OWED. 22. GROUND NO.2(V) IS IN REGARD TO DISALLOWANCE OF RS. 5,803/- OUT OF PETROL AND OIL EXPENSES. 23. IN THIS YEAR, THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 68,019/- AS AGAINST RS. 60,281/- CLAIMED IN THE IMM EDIATELY PRECEDING YEAR. THUS, THERE IS INCREASE OF RS. 7,738/-. THE A O HAS NOTED THAT THE ASSESSEE IS HAVING THREE CARS, ONE MOTOR CYCLE AND A SCOOTER. THE ASSESSEE DID NOT MAINTAIN THE LOG BOOK AND POSSIBIL ITY OF THE PERSONAL USER OF THE ABOVE CARS AND TWO WHEELERS BY THE PAR TNER AND FAMILY MEMBERS OF THE PARTNER CANNOT BE RULED OUT. THEREFO RE, THE AO HAS -: 14 :- 14 DISALLOWED 75 % OF THE INCREASE IN EXPENDITURE OF R S. 7,738/-, WHICH COMES AT RS. 5,803/-. WE DO NOT FIND ANY INFIRMITY IN THIS REGARD AS PER THE ABOVE DETAILS DISCUSSED BY THE ASSESSING OFFICE R AND CIT(A). THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 24. GROUND NO.2(VI) RELATES TO THE DISALLOWANCE OF RS. 11,798/- OUT OF DEPRECIATION ON CAR, CYCLE & SCOOTER ETC. 25. THE ASSESSEE HAS CLAIMED TOTAL DEPRECIATION OF RS. 1,17,984/- AND OUT OF THAT RS. 11,798/- HAS BEEN DISALLOWED BY THE AO. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PL ACED RELIANCE ON THE DECISION OF THIS BENCH IN I.T.A.NO. 612/IND/2005 FO R THE ASSESSMENT YEAR 2001-02 DATED 26.12.2005 IN THE CASE OF MUNNA LAL PAWAR. CONSIDERING THE OBSERVATIONS MADE BY THIS BENCH IN THE ABOVE DECISION, THE ADDITION OF RS. 11,798/- IS DELETED. THUS, THIS GROUND OF APPEAL IS ALLOWED. 26. GROUND NO. 2(VII) RELATES TO THE DISALLOWANCE OF RS . 50,000/- OUT OF POWER EXPENSES. -: 15 :- 15 27. FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS CLAIME D RS. 1,43,627/- ON ACCOUNT OF POWER EXPENSES. THE AO NOT ED THAT RS. 50,000/- WAS PAID ON 30.4.2003 AS ADVANCE PAYMENT. ACCORDING TO THE AO, THE ASSESSEE COULD NOT EXPLAIN WHY THE ABOVE AD VANCE WAS MADE. THEREFORE, HE DISALLOWED RS. 50,000/-. HOWEVER, THE LEARNED AUTHORIZED REPRESENTATIVE INVITED OUR ATTENTION TO PAGE 14 OF THE PAPER BOOK, WHICH IS LEDGER ACCOUNT OF ELECTRICITY EXPENS ES. FROM THE ABOVE ACCOUNT, WE NOTED THAT RS. 50,000/- AND RS. 40,000/ - WAS PAID IN ADVANCE BY THE ASSESSEE ON 30.4.2005 AND 31.5.2003 RESPECTIVELY. THE ABOVE PAYMENT HAS BEEN MADE BY CHEQUE NO. 4301796 A ND 4306124. IT IS CONTENDED BEFORE US THAT THE ABOVE ADVANCES WERE MADE ON THE REQUEST OF THE M.P.E.B., WHICH WERE ADJUSTED AGAINS T THE SUBSEQUENT BILLS. CONSIDERING THE FACT THAT THE PAYMENT HAS BE EN MADE THROUGH ACCOUNT PAYEE CHEQUES TO THE ELECTRICITY BOARD, WHI CH WERE ADJUSTED AGAINST THE BILLS OF THE SUBSEQUENT MONTH. HENCE, T HIS ADDITION IS DELETED. CONSEQUENTLY, THIS GROUND IS ALLOWED. -: 16 :- 16 28. GROUND NO. 2(VIII) IS IN REGARD TO DISALLOWANCE OF RS. 42,026/- OUT OF RUI BUSIESS EXPENSES. 29. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED EXPENDIT URE OF RS. 4,20,265/- IN THE YEAR UNDER CONSIDERATION AS AGAIN ST THE EXPENDITURE CLAIMED AT RS. 4,58,865/- IN THE PRECEDING YEAR. AC CORDING TO THE AO, THE ABOVE PAYMENT RELATED TO THE HAMMALI AND WEIGHI NG EXPENDITURE. HE FURTHER NOTED THAT IN THIS YEAR TURNOVER REDUCED BY 33 % AND THE EXPENDITURE REDUCED ONLY BY 8 %, WHICH IS NOT PROPO RTIONATE. THEREFORE, HE DISALLOWED 10% I.E. RS. 42,026/-. WE NOTED THAT THE COMPARISON BETWEEN TURNOVER AND INCREASED RATE OF E XPENDITURE HAS NO RELATION. THEREFORE, THE SAME IS RESTRICTED TO RS. 20,000/- AND THE BALANCE AMOUNT IS DELETED. THUS, THIS GROUND IS PAR TLY ALLOWED. 30. GROUND NO. 2(X) IS IN REGARD TO DISALLOWANCE OF RS. 9,752/- OUT OF DEPRECIATION ON TRUCK. 31. THIS GROUND OF APPEAL IS ALLOWED IN VIEW OF THE REA SONS DISCUSSED, WHILE DEALING WITH GROUND NO.2(VI) IN FO REGOING PARAGRAPH. THUS, THIS GROUND OF APPEAL IS ALLOWED. -: 17 :- 17 32. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED ON 11TH AUGUST, 2009 . SD/- SD/- (BHAVNESH SAINI) (M.L.GUSIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH AUGUST, 2009. CPU* 2974D.8