Shri Ramku Raningbhai Patgir, Vadodara V. The DCIT, Circle-1(3), Vadodara

ITA 185/AHD/2023

AI Insights

The case involves Shri Ramku Raningbhai Patgir, the appellant, who contested the disallowance of certain business expenses by the Assessing Officer (AO) and upheld by the CIT(A). The expenses in question were related to petrol, telephone, and salary & bonus, which the AO disallowed by one-third, categorizing them as personal in nature. The appellant argued that these expenses were wholly incurred for business purposes, as he is engaged in land trading and real estate investment, and thus should be fully allowable under the provisions applicable to business income. The Tribunal found merit in the appellant's arguments, noting that the AO had accepted the business nature of the expenses by allowing two-thirds of them and thus, the disallowance of the remaining one-third was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129297 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 44AD; 250; 143(2); 44AB

Judgement Text

ITA No.185/Ahd/2023 Assessment Year: 2014-15 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.185/Ahd/2023 Assessment Year: 2014-15 Shri Ramku Raningbhai Patgir, F-302, Safaliya Park Lane, Behind Akash-1, Behind ITI, Gotri, Vadodara – 390 021. [PAN – AUXPP 5564 H] Vs. Dy. Commissioner of Income Tax, Circle – 1(3), Baroda. (Appellant) (Respondent) Assessee by Ms. Urvashi Shodhan, Advocate Revenue by Mr. N.J. Vyas, Sr. DR Da te o f He a r in g 03.08.2023 Da te o f P ro n o u n ce m e n t 08.09.2023 O R D E R This appeal is filed by the Assessee against order dated 26.08.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2014-15. 2. The Assessee has raised the following grounds of appeal :- “1. Ld. CIT(A) has erred in passing an order under section 250 of the Act ex-parte confirming the order of the Ld. AO of making an addition of Rs.3,00,620/- 2. Ld. CIT(A) has erred in confirming the action of the Ld. AO that Rs.3,00,620/- is disallowable being 1/3 rd expenses out of Vehicle, Telephone and Salary expenses as personal in nature”. 3. The assessee filed its e-return of income on 31.03.2015 declaring total income at Rs.23,21,380/-. The case was selected for scrutiny for the reason the sale consideration of the property in ITR is less than the sale consideration of property reported in AIR. Statutory notice under Section 143(2) of the Income Tax Act, 1961 was issued on 28.08.2015 and duly served upon the assessee. In response to the notices, the Ld. AR of the assessee attended the assessment proceedings and furnished the details. The Assessing Officer observed that the ITA No.185/Ahd/2023 Assessment Year: 2014-15 Page 2 of 4 assessee derives income from business, house property and other sources. During the year under consideration, the assessee sold a non-agricultural land for a consideration of Rs.90,00,000/-. On perusal of the computation of income furnished during the assessment proceedings the Assessing Officer observed that the assessee has shown the profit arising out of the sale of the said land under the head “Business Income”. The assessee claimed that the assessee is negated in land trading and investment in Real Estate and thus this profit is nothing but his business income. This income has been reflected under Section 44AD of the Act since he is a non-corporate assessee wherein provisions of Section 44AB is not applicable as per the observation of the Assessing Officer. The Assessing Officer made disallowance on account of petrol expenses amounting to Rs.3,79,500/-, Telephone expenses amounting to Rs.42,360/- and Salary & Bonus expenses amounting to Rs.4,80,000/-. 4. Being aggrieved by the Penalty Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. There is a delay of 148 days in filing the present appeal for which the assessee has filed delay condonation application alongwith affidavit thereby stating that the assessee had not received the order of the CIT(A) on his mail and, therefore, the appeal was filed belatedly. The delay appears to be genuine and, therefore, the delay in filing the present appeal is condoned. 6. The Ld. AR submitted that the assessee has filed all the details during the assessment proceedings and since the assessee is engaged into land trading and investment the consideration sale of Rs.90,00,000/- was considered as his business income. Since the assessee is having business income the expenses claimed by the assessee are genuine expenses and the same should have been allowed by the Assessing Officer. The Ld. AR further submitted that the CIT(A) has not given opportunity to the assessee and passed ex-parte order without taking cognisance of the details filed before the Assessing Officer. From the perusal of records, it can be seen that the assessee has incurred expenses relating to Vehicles, Telephone and Salary expenses which is in respect of business income itself. The evidences submitted by the assessee before the Assessing Officer was in respect of sale consideration of the property as the case ITA No.185/Ahd/2023 Assessment Year: 2014-15 Page 3 of 4 was selected for scrutiny for the said reason but the assessee has filed the income tax return declaring a total income at Rs,23,21,380/- and the treatment given by the Assessing Officer that the disallowance cannot be made in the case of income under Section 44AD appears to be contrary when the Assessing Officer himself has disallowed 1/3 rd expenses which was actually stating that the expenses are related to the business activities of the assessee. 7. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 8. Heard both the parties and perused all the relevant material available on record. The observation made by the Assessing Officer that there is no documentary proof in support of expenses relating to salary and bonus paid to the employees, petrol expenses and usage of vehicles for personal and business purpose as well as expenses relating to telephone appears to be incorrect as the assessee has given the details of expenses made by the assessee during the course of conducting the business. In fact, the Assessing Officer has disallowed 1/3 rd of the said expenses and accepted the remaining expenses and, therefore, the Assessing Officer partially admitted that the assessee has incurred expenses for its own business. Therefore, the Assessing Officer as well as the CIT(A) was not justified in making the disallowance for the expenses which were claimed by the assessee. Thus, appeal of the assessee is allowed. 9. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 8 th September, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 8 th September, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File ITA No.185/Ahd/2023 Assessment Year: 2014-15 Page 4 of 4 By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad