Keshavlal Lakhamsibhai, Kalol V. The Income tax Officer, Mehsana

ITA 255/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5974 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERISR
• Assessee Lawyers: K I THAKKAR
• Keywords: Unexplained expenditure; Depreciation; Income from undisclosed sources; Search and seizure; Fair market value; Bad and doubtful debts
• Section: 143(3); 234B; 64

Judgement Text

ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL, V.P. AND SHRI MUKUL SHRAWAT, J.M. ITA. NO.255/AHD/2008 (ASSESSMENT YEAR:2005-06) SHRI KESHAVLAL LAKHAMSIBHAI PROP. AMBICA TIMBER MART, NEAR BALIDEV TEMPLE, HIGHWAY, KALOL VS INCOME TAX OFFICER, WARD -3, MEHSANA. (APPELLANT) (RESPONDENT) PAN: ABIPP 8158 M APPELLANT BY : SHRI K.I. THAKKAR,ADVOCATE. RESPONDENT BY : DR. JAYANT JHAVERI,SR.D.R. ( (( ( )/ )/)/ )/ ORDER PER SHRI MUKUL SHRAVAT,J.M. THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF THE C.I.T.(A) GANDHINAGAR, AHMEDABAD D ATED 26-11-2007. SEVERAL GROUNDS HAVE BEEN RAISED WHICH ARE BEING DECIDED AS FOLLOWS:- GROUND NO.1. THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE ON ACCOUNT OF BAD DEBT OF RS.2,07,536/- IN RESPECT OF TWO PARTIES NAMELY; UMIYA INDUSTRIES (RS.80,643/-) AND MARUTI INDUSTRIES (RS. 1,26,893/-). DEBTS HAVE BEEN WRITTEN OFF AND AS SUCH IN VIEW OF THE AMENDED PROVISIONS THE SAME SHOULD HAVE BEEN ALLOWED. 1.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) DATED 20-8-2007 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING OF TIMBER. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.2,07,536/- AS BAD DE BTS. IN ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 2 THIS REGARD A QUERY WAS RAISED AND IN COMPLIANCE THE REA SONS OF TREATING THE SAID AMOUNT AS BAD DEBT WAS ANSWERED AS F OLLOWS:- I HAD SUPPLIED TIMBERS TO THE FOLLOWING PARTIES. DATE. BILL NO . NAME OF PARTY. AMOUNT. 7-05-01 10 UMIYA INDUSTRIES RS. 3,80,643/- 2-02-02 64 MARUTI INDUSTRIES RS. 2,48,204/- ALL THE ABOVE TRANSACTIONS ARE VERY OLD I.E. OF 200 1-02 AND I HAVE TRIED MY LEVEL BEST TO RECOVER THE DUES FROM THE ABOVE PARTI ES BY PERSONAL REQUEST AND REPEATEDLY ON TELEPHONE. AS A RESULT OF CONTINU ED PERSUASION AND WARNING OF LEGAL ACTION, THEY HAVE PAID PART OF THE AMOUNT AND LATER THE PARTIES LEFT THEIR BUSINESS I.E. MARUTI INDUSTRIES, SOJITRA LEFT SINCE 1 YEAR AND 4 MONTHS AND UMIYA WOODEN INDUSTRIES, MEHSANA HAD L EFT SINCE SINCE 1 MONTH. I HAVE LOST THEIR CONTRACT AS THEIR WHEREABOUTS ARE NOT KNOWN AND THE POSSIBILITY OF ANY RECOVERY IS UNCERTAIN. THEREFORE , SINCE THE DEBTS BECAME BAD AND ALSO BOTH THE SALES WERE CONSIDERED FOR ARR IVING AT THE INCOME IN THE CONCERNED PERIOD, I HAVE WRITTEN OFF THE ABOVE DEBTS AS IRRECOVERABLE AND THE EFFECT IS GIVEN IN MY BOOKS WHICH ARE AUDIT ED. HOWEVER, I ASSURE YOU, THAT IF ANY RECOVERY IS MADE IN FUTURE, THEN T HE SAME WILL BE SHOWN AS MY INCOME IN THE RELEVANT YEAR. THE COPY OF ACCOUNT S OF THE ABOVE PARTIES ARE ENCLOSED FOR KIND PERUSAL WITH A REQUEST TO ALL OW THE CLAIM OF BAD DEBTS. 1.2. THE A.O. WAS NOT CONVINCED AND THE CLAIM OF BA D DEBT WAS DISALLOWED. BEING AGGRIEVED THE MATTER WAS CARRIED OUT BEFORE T HE FIRST APPELLATE AUTHORITY. 1.3. AFTER HEARING THE SUBMISSIONS; LD. C.I.T.(A) W AS OF THE VIEW THAT THE APPELLANT HAD NOT BROUGHT ON RECORD ANY EVIDENCE OF ISSUANCE OF LEGAL NOTICE FOR THE RECOVERY OF THE OUTSTANDING DUES OR ANY EFFORTS HAVE BEEN MADE TO RECOVER THE IMPUGNED DUES. IN HIS OPINION THE AMOUNTS WERE PRE-MATURED TO WRITE OFF IN THE BOOKS OF ACCOUNTS. 1.4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES A ND IN THE LIGHT OF THE ABOVE FACTUAL BACKGROUND, THE ISSUE OF CLAIM OF BAD DEBT APPEARS TO BE DIRECTLY COVERED ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 3 BY A DECISION OF HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. C.I.T. (2010) 323 ITR-397 (SC) WHEREIN IT IS HELD AS UNDER : THE POSITION IN LAW IS WELL-SETTLED. AFTER APRIL 1 , 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESE NT CASE, THE A.O. HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WR ITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, T HE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE A.O. HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THE REOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEE N UNDERTAKEN BY THE A.O. HENCE, THE MATTER IS REMITTED TO THE A.O. FOR DE NOVO CONSIDERATION OF THE ABOVE MENTIONED ASPECT ONLY AND THAT TOO ONLY T O THE EXTENT OF THE WRITE-OFF. ONCE THE CONTROVERSY OF ALLOWANCE OF BAD DEBT HAS NOW BEEN SETTLED BY THE HONBLE APEX COURT IN FAVOUR OF THE ASSESSEE AS PER THE ABOVE CITED DECISION HENCE RESPECTFULLY FOLLOWING THE ABOVE DECISION WE HEREBY DIRECT TO ALLOW THE CLAIM. THIS GROUND THUS GOES IN FAVOUR OF THE ASSES SEE. 2. GROUND NO.2. THE LD. C.I.T.(A) ERRED IN CONFIRMING THE ADDITION OF RS.71,500/- IN RESPECT OF HOUSEHOLD EXPENSES. THE APPELLANT SUBMITS THAT T HE APPELLANTS FAMILY IS A JOINT FAMILY AND WITHDRAWALS OF ALL THE MEMBER , NAMELY FATHER AND BROTHER SHOULD HAVE BEEN TAKEN INTO CONSIDERATION. IF THE SAME IS TAKEN INTO CONSIDERATION THERE IS NO EXCESS EXPENSES. IT IS THEREFORE, SUBMITTED THAT THE ADDITION MAY KINDLY BE DELETED. 2.1. ON VERIFICATION OF THE CAPITAL ACCOUNT IT WAS NOTICED BY THE A.O. THAT ONLY A SUM OF RS.30,500/- WAS WITHDRAWN TOWARDS HOUSEHOLD EXPENSES FOR THE YEAR UNDER CONSIDERATION. IT WAS ALSO NOTED BY THE A.O. THAT THE ASSESSEE WAS LIVING IN A JOINT FAMILY CONSISTING SELF, WIFE, 3 CHILDREN, F ATHER AND MOTHER AND BROTHER. HOWEVER, IT WAS ALSO NOTED BY THE A.O. THAT THE TOT AL WITHDRAWAL OF THE FAMILY WAS SHOWN AT RS.1,09,500/-. THE A.O. HAS MADE SEVERAL I NQUIRIES AND COMPUTED THE ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 4 UNEXPLAINED EXPENDITURE TOWARDS HOUSEHOLD EXPENSES VIDE FOLLOWING CONCLUDING PARAGRAPH :- SO, THE NET WITHDRAWAL WHICH COULD BE CONSIDERED F OR HOUSEHOLD EXPENSES COMES TO RS.79,500/- ONLY FOR A FAMILY OF 7 MEMBERS AND INCLUDES ELECTRICITY EXPENSES OF RS.14,801/-, MUNIC IPAL TAXES OF RS.4282/-, EDUCATIONAL EXPENSES OF THREE CHILDREN ETC. OWNING TWO CARS SANTRO AND QUALIS AND ALL OTHER MODERN AMENITIES. THE ASSESS EE IS ALSO A MEMBER OF A LEADING CLUB LIONS CLUB OF KALOL. CONSIDERIN G THE COST OF LIVING, STATUS OF THE ASSESSEE, NUMBER OF FAMILY ME MBERS, ETC., THE JOINT WITHDRAWAL OF RS.79,500/- AS WORKED OUT ABOVE, FOR HOUSEHOLD EXPENSES IS TOO LOW AND HENCE THE SAME IS ESTIMATED AT RS.15,00 0/-PER MONTH. THE DIFFERENCE OF RS.1,00,500/- (1,80,000 79,500) IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE TREATING THE SAME AS INCURRE D OUT OF UNACCOUNTED INCOME. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 2.2. THE FIRST APPELLATE AUTHORITY HAS CONSIDERED T HE FACTS OF THE CASE AND THEREAFTER VIDE PARAGRAPH 3.1 HAS ARRIVED AT THE CO NCLUSION AND GRANTED A PART RELIEF AS FOLLOWS :- BEFORE ME,. THE ARGUMENTS MADE BEFORE THE ASSESSIN G OFFICER ARE REPEATED. IN MY VIEW, THE ASSESSING OFFICER HAS QUI TE ADEQUATELY PROVED THAT THE APPELLANTS WITHDRAWALS ARE OF ONLY RS.79, 500/-. ON THE OTHER HAND THE SIZE OF THE FAMILY, AS BROUGHT OUT IN THE ASSES SMENT ORDER STANDS ADMITTED BY THE ASSESSEE. IN THAT KIND OF SITUATION THE HOUSEHOLD EXPENSES SHOWN ARE POSITIVELY ON THE LOWER SIDE. I THINK ENDS OF JUSTICE WILL BE MET IF THE TOTAL EXPENSES ARE ESTIMATED AT RS.1, 50,000/-, WHICH WOULD MEAN AN ADDITION OF RS.71,500/- ONLY. THE APPELLANT WILL GET A RELIEF OF RS.28,750/-. 2.3. WE HAVE HEARD BOTH THE SIDES AND ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE PERUSED A REPLY IN WRITI NG SUBMITTED BEFORE THE LD. CIT(A) AND THROUGH VIDE PARAGRAPH-2 IT WAS INFORMED BY THE APPELLANT THAT THE FAMILY CONSISTED OF 12 PERSONS OUT OF WHICH SIX CHI LDREN WERE BELOW 16 YEARS. THROUGH SAID SUBMISSION IT WAS CLAIMED THAT THE HOU SEHOLD EXPENSES OF ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 5 RS.1,87,800/- WERE MORE THAN SUFFICIENT. HOWEVER, T HE AUTHORITIES BELOW HAVE DULY CONSIDERED THE OTHER ASPECTS SUCH AS ASSESSEE S MEMBERSHIP WITH PRESTIGIOUS CLUB AND THE RELATED EXPENDITURE OF THE FAMILY. CONSIDERING THE OVERALL CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT PLACED SUFFICIENT MATERIAL TO PROVE THAT HE HAS MANAGED TO LIVE ON THE AMOUNT AS CLAIMED TOWARDS HOUSE-HOLD EXPENDITURE. OTHERWISE ALSO FROM THE SIDE OF THE REVENUE IT WAS VEHEMENTLY ARGUED THAT CONSIDERING THE HIGH STA NDARD OF LIVING, INFLATION OF PRICES AND HIGH COST OF LIVING DUE TO HIGH PRICE IN DEX, THE CLAIM OF THE ASSESSEE WAS INADEQUATE. IN OUR OPINION, THE AUTHORITIES BEL OW HAVE TAKEN A VERY REASONABLE VIEW. WE ENDORSE THE ARGUMENTS OF THE RE VENUE. THE OVERALL CIRCUMSTANCES OF THE CASE DO NOT SUPPORT THE CONTEN TIONS OF LD. A.R. AND HENCE DISMISSED. THE VIEW TAKEN BY LD. C.I.T.(A) IS A REA SONABLE APPROACH HENCE HEREBY CONFIRMED. THIS GROUND IS ACCORDINGLY DISMIS SED. 3. GROUND NO.3. THE LD. C.I.T.(A) HAS ERRED IN MAKING AN ADDITION OF RS.72,000/- IN RESPECT OF RENT EXPENSES. IT IS SUBMITTED THAT THE APPELLANT HIRED TWO PLOTS FROM SMT. PRAMILABEN K. PATEL AND SMT. ANSUYABEN RA MESHCHANDRA. THE PAYMENT IS FOR THE PURPOSE OF BUSINESS AND THE AMOU NT OF RENT IS REASONABLE. THE LD. C.I.T.(A) CAST OBLIGATION U/S. 40A(2)(B) OF THE INCOME TAX ACT. IN FACT IT IS FOR THE DEPARTMENT TO PROVE THAT THE RENT PAID IS UNREASONABLE U/S. 40A (2)(B) OF THE INCOME TAX ACT. 3.1. THE FACTS IN BRIEF ARE THAT ASSESSEE HAS DEBIT ED AN AMOUNT OF RS.72,000/- UNDER THE HEAD RENT EXPENSES. THE A.O. ISSUED A S HOW CAUSE NOTICE DT.16.4.2007 AND ASKED THE ASSESSEE TO FURNISH CERT AIN DETAILS. THE ASSESSEE VIDE HIS LETTER DT.26-4-2007 HAS SUBMITTED THE DETA ILS REQUIRED BY THE A.O. HE HOWEVER, AFTER EXAMINING THE SUBMISSION OF THE ASSE SSEE FOUND THEM TO BE PRIMA FACIE INCORRECT AND MISLEADING. THE A.O. AFTER CON SIDERING THE AUDIT REPORT U/S.44AB WAS OF THE VIEW THAT ASSESSEE HAS WITH AN ULTERIOR MOTIVE DEVISED A METHOD TO DIVERT THE TAXABLE INCOME TO THE HANDS TO NON-TAXABLE/LESS TAXABLE ENTITIES. BY DOING SO THE ASSESSEE HAS TRIED TO REA P THE BENEFIT AS UNDER:- (I) DIVERT THE INCOME TO LESSEN THE TAX BURDEN ON THE ASSESSEE. ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 6 (II) UTILISE THE FUND SO DIVERTED AS DEPOSIT/UNSECU RED LOANS WITH HIS OWN CONCERN AS HAS BEEN DONE DURING THE YEAR. (III) PAY LESS OR NIL TAX ON THE INCOME SO DIVERTED BY CLAIMING 30% DEDUCTION ON RENT AND ALSO INCREASED LIMIT OF EXEMP TED INCOME BEING WOMEN ASSESSES. THE A.O. HAS ALSO HELD THAT ASSESSEE HAS NOT EVEN C LAIMED SUCH EXPENSES IN THE EARLIER YEARS ALSO AND THEREBY DISALLOWED THE C LAIM OF RENT EXPENSES OF RS.72,000/-. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3.2. THE FIRST APPELLATE AUTHORITY AFTER CONSIDERIN G THE SUBMISSIONS HELD AS UNDER: THE MATTER HAS BEEN GIVEN DUE CONSIDERATION AND I AM AFRAID THAT IN THE MANNER THE PAYMENT HAS BEEN MADE AND RECORDED, IT C ANNOT BE ALLOWED AS A DEDUCTION. THE PLOT IN QUESTION IS NOT IN THE NAME OF THE LADIES. THERE MAY HAVE BEEN A FAMILY ARRANGEMENT BUT SUCH FAMILY ARRANGEMENT NEEDS TO BE PROPERLY DOCUMENTED FOR ANY AUTHORITY TO SEE ITS VERACITY AND ITS LEGALITY. FROM WHATEVER HAS BEEN DESCRIBED, IT IS N OT AT ALL CLEAR AS TO WHAT ARE THE TERMS AND CONDITIONS OF THE FAMILY ARRANGEM ENT AND WHO IS THE REAL OWNER OF THE PLOT. SINCE THE OWNERSHIP OF THE ASSET HAS NOT BEEN PROVED, PAYMENT OF A CONSIDERATION FOR USING THE SAME TO TH E WIFE AND SISTER-IN-LAW POINTS TO THE POSSIBILITY OF EXPENSES BEING FOR OTH ER THAN BUSINESS CONSIDERATION. THE FACT THAT BOTH THE LADIES WERE C OVERED BY THE PERSONS DEFINED U/S. 40A (2)(B) WOULD CAST FURTHER OBLIGATI ON ON THE APPELLANT TO PROVE THAT NOT ONLY THE TRANSACTIONS ARE COMMERCIAL BUT THEY ARE ALSO AT AN ARMS LENGTH. I THINK THE ACTION OF THE ASSESSING O FFICER WAS QUITE JUSTIFIED IN NOT ALLOWING THE EXPENSES. HENCE, OVERALL THE DI SALLOWANCE OF RS.72,000/- IS CONFIRMED. 3.3. THE ORDERS OF THE AUTHORITIES BELOW WERE PERUS ED. ON ONE HAND THE ALLEGATION OF THE REVENUE DEPARTMENT IS THAT THE MA NNER IN WHICH THE RENT ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 7 EXPENDITURE WAS SHOWN BY THIS ASSESSEE HAS DEMONSTR ATED THAT THE ASSESSEE HAS DIVERTED HIS INCOME TOWARDS THE LADIES HAVING L ESSER TAX BURDEN AND ANOTHER ALLEGATION WAS THAT IN THIS MANNER THE FUNDS OF THE ASSESSEE HAVE ALSO BEEN DIVERTED. ON THE OTHER HAND VEHEMENT CONTENTION OF LD. A.R. WAS THAT THE PROVISIONS OF SEC.40A(2)(B) WERE NOT APPLICABLE ON THE PRESENT FACTS AND SECONDLY THE ASSESSEE AS WELL AS BOTH THE LADIES AR E SEPARATELY ASSESSED TO TAX. THEREFORE, THERE WAS NO DIVERSION OF TAXABLE INCOME IN THE HANDS OF NON TAX ENTITY. THE LD. A..R. HAS ALSO EMPHASIZED THAT THER E WERE NUMBER OF EVIDENCES TO DEMONSTRATE THAT THE PAYMENT OF RENT WAS MADE TO THESE LADIES WHO WERE ACTUALLY THE OWNERS OF THE PROPERTY. IT COULD BE PO SSIBLE THAT AT THE TIME OF ASSESSMENT THAT EVIDENCE WAS NOT IN THE POSSESSION BUT NOW IT IS AN UNDISPUTED FACT THAT ON ACCOUNT OF FAMILY SETTLEMENT THE PLOT S IN QUESTION HAD GONE IN FAVOUR OF SMT. PRAMILABEN K. PATEL AND ANUSUYABEN RAMESHCH ANDRA. FOR ALL PRACTICAL PURPOSES THE TITLE OF THE PROPERTY BELONGS TO THESE TWO LADIES IT WAS AREGUED. BUT THE BASIC FACT IS THAT THE A.O. HAS NOT DEMONSTRATE D THAT THE AMOUNT OF RENT WAS NOT SATISFACTORY IN HIS OPINION OR NOT IN ACCORDANC E WITH FAIR MARKET VALUE OF THE PROPERTY. FIRST OF ALL, THE CONDITIONS AS LAID DOWN IN SECTION 40A(2)(A) WERE NOT FULFILLED AND SECONDLY THERE WAS NO EVIDENCE THAT T HE AMOUNT IN QUESTION WAS NOT AT PAR WITH THE FAIR MARKET VALUE OF THE PROPERTY. NOW THE APPELLANT WANTS TO DEMONSTRATE THE NATURE OF THE TRANSACTION AND THE G ENUINENESS OF THE TRANSACTION BY FILING A CURRENT LEDGER ACCOUNT. DUE TO THESE RE ASONS WE HEREBY RESTORE THIS GROUND BACK TO THE STAGE OF A.O. TO BE DECIDED DE-N OVO AS PER OUR DIRECTIONS SO AS TO CORRECTLY DEMONSTRATE THE REASONABLENESS OF T HE AMOUNT PAID AS ALSO THE GENUINENESS OF THE TRANSACTION IN QUESTION. SINCE W E ARE RESTORING THIS GROUND BACK TO THE A.O., THEREFORE, FOR PRACTICAL PURPOSES THIS GROUND MAY BE TREATED AS ALLOWED BUT ONLY FOR STATISTICAL PURPOSE. 4. GROUND NO.4 . THE LD. C.I.T.(A) ERRED IN RESTRICTING THE ADDITIO N IN RESPECT OF VEHICLE EXPENSES TO THE EXTENT OF RS.24,179/-. THE APPELLAN T SUBMITS THAT THE PERSONAL EXPENSES OF VEHICLE IS VERY LIMITED AND NO MINAL AMOUNT SHOULD HAVE BEEN DISALLOW. ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 8 4.1. IT WAS NOTICED BY THE A.O. THAT IN PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS DEBITED RS.22,172/- TOWARDS CAR INSURANCE, RS.1,59, 723/- TOWARDS DEPRECIATION ON CAR AND RS.59,362/- AS PETROL EXPENSES. THE A.O. WAS OF THE VIEW THAT THE USAGE OF VEHICLE BY THE FAMILY MEMBERS COULD NOT BE RULED OUT. THEREFORE, 1/5 TH OF THE TOTAL EXPENSES AMOUNTING TO RS.48,359/- HAS BEE N ADDED IN THE TAXABLE INCOME OF THE ASSESSEE. 4.2. THE FIRST APPELLATE AUTHORITY HAS RESTRICTED T HE SAME AT 1/10 TH OF THE TOTAL EXPENSES.. 4.3. ON HEARING BOTH THE SIDES, WE HAVE NOTICED THA T AS AGAINST THE 1/5 TH OF DISALLOWANCE MADE BY A.O; THE LD. C.I.T.(A) HAS RE STRICTED THE SAME TO 1/10 TH OF THE TOTAL EXPENSES. IN NUMBER OF SUCH TYPE OF DECIS IONS THIS TRIBUNAL HAS CONSISTENTLY HELD THAT ONCE THE REVENUE DEPARTMENT AS ALSO THE ASSESSEE BOTH HAVE NO INDEPENDENT MATERIAL IN SUPPORT OF THE TOTA L CLAIM, THE REVENUE DEPARTMENT THUS LEFT WITH NO OPTION BUT TO ESTIMATE THE EXPENDITURE. IN OUR OPINION A VERY CONSIDERATE AND REASONABLE PROPORTION OF DIS ALLOWANCE WAS ADOPTED AT 1/10 TH OF THE TOTAL EXPENSES BY LD. C.I.T.(A). WE HEREBY AFFIRM THE VIEW TAKEN BY THE LD. C.I.T. (A). THIS GROUND IS DISMISSED. 5. GROUND NO.5 . THE LD. C.I.T.(A) ERRED IN CONFIRMING THE TELEPHON E EXPENSES TO THE EXTENT OF 1/10 TH IN RESPECT OF BUSINESS PREMISES AND 50% IN RESPECT OF RESIDENCE. IT IS SUBMITTED THAT IT IS ON THE HIGHER SIDE AND THE SAME BE REDUCED REASONABLY. 5.1. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.25,57 4/- TO THE P & L ACCOUNT UNDER THE HEAD TELEPHONE EXPENSES. THE AO HAS DIS ALLOWED 1/3 RD OUT OF THE TOTAL TELEPHONE EXPENDITURE AMOUNTING TO RS.8525/- AND ADDED TO THE INCOME OF THE ASSESSEE TREATING THE SAME AS INCURRED FOR NON BUSINESS PURPOSES. ITA NO.255/AHD/08 A.Y.2005-06 SHRI KESHAVLAL LAKHAMSIBHAI 9 5.2. ON APPEAL, THE LD. C.I.T.(A) HAS AFTER CONSIDE RING ALL THE FACTS OF THE CASE AND KEEPING IN VIEW THE CIRCUMSTANCES HAS DIRECTED THAT 50% OF THE EXPENSES OF THE RESIDENTIAL TELEPHONE, AND 1/10 TH OF THE EXPENSES OF THE TELEPHONE AT BUSINESS PREMISES BE DISALLOWED. 5.3. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AFTER CONSIDERING THE ORDERS OF THE LOWER AUTHORITI ES WE ARE OF VIEW THAT NO INTERFERENCE IS CALLED FOR AND ACCORDINGLY THIS GRO UND IS DISMISSED. 6. GROUND NO.6 . THE LD. C.I.T.(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S. 234B AND 234C OF THE INCOME TAX ACT. 6.1. SINCE CHARGING OF INTEREST IS CONSEQUENTIAL HE NCE NO INDEPENDENT ADJUDICATION IS REQUIRED. THIS GROUND IS DISMISSED . 7. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11/06/2010. SD/- SD/- (G.D. AGARWAL) (MUKUL S HRAVAT) VICE PRESIDENT. JUDICIAL MEMBER. AHMEDABAD. DATED:11/06/2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.