DCIT, New Delhi V. Mr. Ankur Mahalwala, New Delhi

ITA 3775/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2184 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK K SAROHA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI DEEPAK R SHAH, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO. 3775/DEL/09 ASSTT. YEAR 2006-07 DCIT, CIRCLE - 31 (1), C.R. BUILDING, I.P. ESTATE, NEW DELHI. VS. MR. ANKUR MAHALWALA PROP. SAFEGUARD, 220, 1 ST FLOOR, CYCLE MKT. JANDEWALAN, NEW DELHI. . (APPELLANT) (RESPONDENT) AND CO. NO. 351/DEL/09 (IN ITA NO. 3775/DEL/09) ASSTT. YEAR 2006-07 MR. ANKUR MAHALWALA, VS. DCIT, CIRCLE 31, PROP. SAFEGUARD, C.R.BUILDING, 220, 1 ST FLOOR, CYCLE MKT. I.P. ESTATE, JANDEWALAN, NEW DELHI. NEW DELHI. APPELLANT BY : SHRI ASHOK K SAROHA, DR RESPONDENT BY : SHRI R.S. SINGHVI, SHIR MUKESH DUA , CAS ORD ER PER DEEPAK R SHAH, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XXVI NEW DELHI DATE D 12.6.2009 IN AN APPEAL AGAINST ASSTT. FRAMED U/S 143(3) OF THE INCOME TAX ACT (THE ACT). ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 2 2. THE FACTS ARE THAT THE ASSESSEE IS PROPRIETOR OF M/S. SAFEGUARDS. HE IS CARRYING ON BUSINESS OF SUPPLY OF MANPOWER BOTH TEC HNICAL AND NON TECHNICAL AND SECURITY PERSONNEL TO VARIOUS ENTITIES. THE MAI N CLIENTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE BSES, RAJD HANI POWER LTD. BSES YAMUNA POWER LTD. INDRAPRASTHA GAS LTD., RAILTEL CO RPORATION OF INDIA LTD., KATAK MAHINDRA BANK LTD. THE ASSESSEE EMPLOYEES VAR IOUS TYPES OF MANPOWER AS REQUIRED BY HIS CLIENTS. ALL THE EMPLOYEES ARE O N THE PAYROLL OF THE ASSESSEE. THESE EMPLOYEES ARE ASSIGNED TO SITES/WORK PLACE OF CLIENTS. AT THE END OF EACH MONTH ASSESSEE RAISES BILLS TO ITS CLIENTS ON THE B ASIS OF NO. OF EMPLOYEES WHO HAVE WORKED FOR THE CLIENTS. THIS BILL CONTAINS THE AMOUNT PAID TO EMPLOYEES PLUS ASSESSEES SERVICES CHARGES AND SERVICE TAX THEREON . HENCE IN A WAY ALL THE EXPENSES INCURRED ON SALARIES, WAGES & ALLOWANCES B Y THE ASSESSEE ARE GET REIMBURSED BY HIS CLIENTS. THE ASSESSEE FILED HIS R ETURN FOR ASSESSMENT YEAR 2006-07 ON 27.10.2006 ALONG WITH AUDIT REPORT U/S 4 4AB DECLARING AN INCOME OF RS. 38,80,071/-. 3. THE ASSESSEE PAID WAGES TO THE PERSONS EMPLOYED TO BE PLACED AT SITE CLIENTS WERE ABOVE RS. 12.61 CRORES. THE AO NOTED T HAT OUT OF THE ABOVE PAYMENT SALARY PAID IN CASH IS RS. 36,00,341/-. THE ASSESSEE FILED SALARY RECEIPT REGISTER, BONUS RECEIPT REGISTER AND ATTENDANCE REG ISTER. ON EXAMINATION OF THE ABOVE, THE AO NOTED THAT ATTENDANCE REGISTER HAS N OT BEEN MAINTAINED ON ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 3 REGULAR BASIS AND HAVE BEEN PREPARED IN ONE GO. IN SALARY RECEIPT REGISTER, SAME PERSON HAS SIGNED DIFFERENTLY IN DIFFERENT MONTH. 4. THE AO CITED FOUR INSTANCES ABOUT THE DIFFERENCE IN SIGNATURE. THE ASSESSEE WAS ASKED TO EXPLAIN. THE ASSESSEE FILED H IS REPLY ON 22.12.2008 EXPLAINING THE DETAILS AND THE MANNER IN WHICH RECO RDS ARE MAINTAINED AND THE FUNCTION OF PAYMENT OF WAGES IN THIS REGARD. THE OR IGINAL RECORD WAS ALSO PRODUCED. IT WAS SUBMITTED THAT SINCE THE PERSONS A RE TO WORK AT DIFFERENT CITES AND IT IS DIFFICULT TO COLLECT THE SALARY LEAVING T HE WORKING PLACE, GENERALLY ONE OF THE EMPLOYEES OUT OF THE GROUP OF THE EMPLOYEES, EM PLOYED AT PARTICULAR SITE IS COLLECTING SALARY FROM THE OFFICE OF THE ASSESSEE A ND SIGNING THE SALARY REGISTER ON BEHALF OF OTHERS. THIS MAY BE THE REASON FOR DIF FERENCE IN SIGNATURE. IT WAS EXPLAINED THAT THE ASSESSEE IS BEING REIMBURSED ALL THESE PAYMENTS BY HIS CLIENTS AND FORMS PART OF GROSS INCOME SHOWN ON THE CREDIT SIDE OF THE P& L A/C AND VARIOUS STATUTORY DUES ARE ALSO DEDUCTED AND DE POSITED FORM TIME TO TIME WITH THE CONCERNED AUTHORITIES. THE P.F. RECORDS WE RE ALSO PRODUCED BEFORE THE LEARNED ASSESSING OFFICER. HOWEVER THE LEARNED ASSE SSING OFFICER ONLY EMPHASIZED THAT IN SOME CASES SIGNATURE OF THE EMPL OYEES HAVE DIFFERED AND CAME TO THE CONCLUSION THAT THE RECORDS MAINTAINED BY THE ASSESSEE ARE NOT RELIABLE AND IT WAS ALLEGED THAT THE EXPENSES BOOKE D ARE BOGUS AND SUPPORTED BY FABRICATED DOCUMENTS. THE ASSESSING OFFICER ALSO HE LD THAT THE PAYMENT OF P.F. IS NOT A CONCLUSIVE EVIDENCE THAT THE EMPLOYEE HAS ACTUALLY WORKED FOR THE ASSESSEE. THE AO DISALLOWED THE SUM OF RS. 36,00,34 1/- BEING THE WAGES PAID IN CASH. ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 4 5. BEFORE LD. CIT(A) IT WAS CONTENDED THAT THE ASSE SSEE DERIVES INCOME FROM BUSINESS OF SUPPLY OF MANPOWER BOTH TECHNICAL AND NON-TECHNICAL AND SECURITY PERSONNEL TO VARIOUS ENTITIES. THE MAIN CL IENTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE BSES RAJDHANI POW ER LTD., BSES YAMUNA POWER LTD., INDRAPRASTHA GAS LTD. AND KOTAK MAHINDR A BANK LTD. THE ASSESSEE EMPLOYEES VARIOUS TYPES OF MANPOWER AS REQUIRED BY HIS CLIENTS. ALL THESE EMPLOYEES ARE ON THE PAYROLL OF THE ASSESSEE. THESE EMPLOYEES ARE ASSIGNED TO SITES/WORK PLACES OF CLIENTS. ALL THESE EMPLOYEES R EPORT FOR THEIR DUTIES AT THE WORK PLACE OF CLIENTS. THEIR ATTENDANCE IS MARKED B Y THE CLIENTS WHO IS ASSIGNING THEM THEIR WORK. AT THE END OF EVERY MONTH THIS ATT ENDANCE RECORD IS RECEIVED BY THE ASSESSEE AND ON THAT BASIS SALARY REGISTER IS P REPARED. THE ASSESSEE PAYS ALLS THE SALARY, WAGES AND OTHER ALLOWANCES AS PER THE NORMS FIXED / AGREED WITH THE CLIENTS. THIS IS BASED ON THE ATTENDANCE RECORD BY THE CLIENTS. AT THE END OF EACH MONTH ASSESSEE RAISES BILLS TO HIS CLIENTS. TH IS BILL CONTAINS THE AMOUNT PAID TO EMPLOYEES PLUS ASSESSSEES SERVICES CHARGES AND SERVICE TAX THEREON. HENCE ALL THE EXPENSES INCURRED ON SALARIES, WAGES AND AL LOWANCES BY THE ASSESSEE ARE REIMBURSED BY THE CLIENTS. THE AMOUNT SO BILLED TO THE CLIENTS IS SHOWN AS BUSINESS RECEIPTS IN THE PROFIT & LOSS ACCOUNTS OF THE ASSESSEE. IN ADDITION TO THE ABOVE ASSESSEE HAS ALSO EMPLOYED CERTAIN NO. OF EMPLOYEES AT HIS OWN OFFICE TO CARRY ON HIS BUSINESS ACTIVITIES AS EXPLA INED ABOVE. 5.1. IT WAS FURTHER CONTENDED THAT FOR ALL THE EMP LOYEES, THERE IS ATTENDANCE REGISTER. FOR THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF MANPOWER SUPPLY, THE EMPLOYEES ARE EMPLOYED AT VARIOUS DIFFERENT SIT ES INCLUDING NCR REGION. ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 5 THESE EMPLOYEES ARE REQUIRED TO REPORT TO THEIR POI NT OF ASSIGNED DUTIES. THE ATTENDANCE IS BEING KEPT AT THE POINT OF DUTY BY TH E CLIENT OF THE ASSESSEE. THIS IS BASIC DOCUMENT BASED ON WHICH THE ASSESSEE IS ISSUI NG THE INVOICES. ALL THE ATTENDANCE RECORDS ARE BEING KEPT BUT THEY ARE AT T HE CLIENT PLACE AND AT ASSESSEES PLACE THERE ARE DETAILS OF THE PRESENT O R ABSENCES OF THESE EMPLOYEES ON A MONTHLY BASIS. IT IS NOT UNDERSTOOD HOW THE LEARNED ASSESSING OFFICER REACHED THE CONCLUSION THAT ATTENDANCE REGI STER IS NOT BEING MAINTAINED IN THE NORMAL COURSE. THE ASSESSEE HAS FULLY EXPLAINED THE MAINTENANCE OF RECORDS AND THERE IS NOTHING TO SHOW THAT THE THESE RECORDS HAVE NOT BEEN MAINTAINED IN NORMAL COURSE OF THE BUSINESS. IN REPLY TO THE OBSE RVATIONS AND DIFFERENCES IN SIGNATURE THE ASSESSEE HAS REPLIED AND EXPLAINED TH AT THESE EMPLOYEES ARE STATIONED ALL OVER THE NCR REGION AND ASKING ALL OF THEM TO COME TO OFFICE FOR DISBURSEMENT OF SALARY IS NOT FEASIBLE AT ANY GIVEN POINT OF TIME DUE TO CLIENTS WORK CONSTRAINS. IN SUCH A CASE THE EMPLOYEE WHO IS COMING TO THE OFFICE FOR COLLECTION OF HIS SALARY ALSO TAKES WITH HIM SALARY OF HIS FELLOW EMPLOYEES AND SIGNS FOR HIMSELF AND FOR OTHERS. THESE EMPLOYEES ARE ENGAGED AS SECURITY GUARDS AND ARE SEMI LITERATE. WHENEVER ONE OF THEM IS COLLECTING PAYMENT OF SALARY ON BEHALF OF THEM HE HAS SOME TIMES SIGNED I N OWN SIGNATURES AND SOME TIME MIGHT HAVE SIGNED IN THE NAME OF THE EMPLOYEES FOR WHOM HE HAS RECEIVED THE PAYMENT. IT WAS EXPLAINED THAT THIS PAYMENT TO EMPLOYEES IS DULY CONFIRMED BY THE CLIENT BY WAY OF PAYMENT OF HIS BILL, WHICH IS SENT TO HIM BY ASSESSEE ON MONTHLY BASIS. THEREFORE IT IS SUBMITTED THAT THE P AYMENT TO ALL THESE EMPLOYEES IS CONFIRMED BY THE RECEIPT OF THE PAYMENT FROM THE CLIENTS WHO HAVE USED THE ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 6 SERVICES OF THESE EMPLOYEES. COPIES OF SOME OF THE BILLS RAISED AND LEDGER A/CS OF THESE CLIENTS WERE PRODUCED BEFORE THE ASSESSIN G OFFICER. FURTHER, OUT OF THE TOTAL PAYMENT OF RS. 12,61,04,068/- ONLY RS. 36,00, 341/- WERE PAID IN CASH. THESE CASH PAYMENTS ARE MADE TO EMPLOYEES WHO HAVE WORKED ONLY FOR VERY SHORT PERIOD AND ARE GENERALLY ONE TIME PAYMENTS. M OREOVER CASH IS PAID ONLY IN THOSE CASES WHERE THE EMPLOYEES ARE EMPLOYED FOR SM ALL JOBS AND THEY DO NOT HAVE BANK ACCOUNTS. THAT ASPECT HAS NOT BEEN CONSI DERED BY THE AO AND JUST HAS BASED HIS OPINION ONLY ON SMALL DISCREPANCY WHI CH WAS FULLY EXPLAINED BEFORE HIM. THE TWO EMPLOYEES VIZ.SUBHASH SHARMA & GURMEET SINGH WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER WHICH IS CLEA R FROM THE LETTER DATED 22.12.2008. HOWEVER THE ASSESSING OFFICER DID NOT T AKE NOTICE OF THEM. ALL THESE EMPLOYEES ARE COVERED UNDER THE PF RULES AND PF CON TRIBUTION IN RESPECT ALL EMPLOYEES IS BEING REGULARLY PAID TO PF AUTHORITIES AND RELEVANT STATUTORY RETURNS ARE BEING FILED. HE HAS OBSERVED IN HIS ORDER THAT IT IS COMMON KNOWLEDGE THAT WHEREVER NAMES OF CERTAIN NONE EXISTING EMPLOYEES A RE ENTERED IN THE RECORDS, IN CASE WHERE PF IS APPLICABLE, PF IS ALWAYS SHOWN TO HAVE BEEN PAID FOR THESE PERSON ALSO, OTHERWISE IT AMOUNTS TO A SERIOUS VIOL ATION OF P.F. LAWS. THUS, THE PAYMENT OF PF IN THE NAME OF A PERSON IS NOT A CONC LUSIVE EVIDENCE THAT HE IS ACTUALLY WORKING FOR THE ASSESSEE. 5.2. LD. CIT(A) CONSIDERING THE SUBMISSION AND EVID ENCE ON RECORD HELD THAT THE CASH PAYMENT OF SALARY IS ONLY 2.86 % OF THE TO TAL EXPENDITURE UNDER THE HEAD SALARY AND WAGES. THE PERSONS EMPLOYED BY ASSESSES ARE SUPPLIED TO VARIOUS CLIENTS MADE THE PAYMENT ON THE BASIS ATTENDANCE R EGISTER MAINTAINED BY THEM. ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 7 THUS FOR THE STAFF EMPLOYED BY THE CLIENTS, THE ASS ESSEE COULD NOT HAVE RECEIVED THE PAYMENTS. THE BILLS ARE RAISED ONLY ON THE BASI S OF ATTENDANCE REGISTER MAINTAINED BY THE CLIENTS AS ALSO MAINTAINED BY THE ASSESSEE. EVEN THE SERVICE TAX IS PAID BY THE CLIENTS. THE DIFFERENCE OF SIGNA TURE IS DULY EXPLAINED. THE PERSONS ENGAGED ARE ONLY SECURITY GUARDS WHO ARE SE MI LITERATE AND IN SUCH CASES SIGNATURES ARE LIKELY TO VARY. DEDUCTION OF P F AND OTHER CONTRIBUTION IS ALSO PROOF OF HIRING THE PERSONS AND PAYMENT OF SALARY. THE PROPORTION OF CASH PAYMENT TO TOTAL PAYMENTS HAS REDUCED CONSIDERABLY. TAX IS DEDUCTED AT SOURCE BY THE CLIENTS. WHAT HAS BEEN FOUND BY THE AO ARE O NLY MINOR DISCREPANCIES WHICH HAS BEEN ADEQUATELY EXPLAINED. HOWEVER SINCE THE ASSESSEE HAS CONCEDED THE ERRORS POINTED BY THE AO, UPHELD THE DISALLOWANCE OF RS. 1 LAC AS AGAINST RS. 36,00,341/- MADE BY THE AO. 6. AGAINST THE DELETION OF DISALLOWANCE REVENUE IS IN APPEAL WHEREAS AGAINST SUSTENANCE OF DISALLOWANCE THE ASSESSEE HAS FILED C ROSS OBJECTION. 7. WHEREAS LD. DR SOUGHT TO RELY UPON THE OBSERVAT ION OF AO, LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND THE FINDING OF COMMISSIONER. HE SUBMITTED THAT WHEN THE ERRORS AND DISCREPANCIES ARE MINOR AND WHICH HAVE BEEN ADMITTEDLY ADEQUATELY EXPLAINED AS NOTED BY COMMISSIONER (A) IN PAGE 25 OF HIS ORDER, EVEN THE DISALLOWANCE OF RS. 1 LAC WITHOUT ANY BASIS IS NOT JUSTIFIED. 8. WE HAVE CONSIDERED RIVAL SUBMISSION. CONSIDERING THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF SUPPLY OF MANPOWER T O VARIOUS CLIENTS AND THE FACT THAT THE PAYMENT RECEIVED BY THE ASSESSEE INCLUDING HIS SERVICES CHARGES ARE ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 8 FROM THE CLIENTS ITSELF, THE ASSESSEE COULD NOT HAV E RECEIVED THE PAYMENT BUT FOR THE EMPLOYMENT OF MAN POWER AND SUPPLYING THE SAME TO THE CLIENTS. THE CLIENTS ALSO MAINTAINED THE RECORDS AS TO THE ATTENDANCE OF VARIOUS PERSONS AT THEIR SITE. THE ADDITION IS ON THE GROUND THAT 1) ATTENDANCE REGISTER HAS NOT BEEN MAINTAINED ON REGULAR BASIS AND 2) IN SALARY / BONU S RECEIPT REGISTER SAME PERSON HAS SIGNED DIFFERENTLY IN DIFFERENT MONTH. 8.1 IN OUR OPINION BOTH THESE REASONING ARE ADEQUAT E TO UPHELD THE DISALLOWANCE OF THE AMOUNT PAID IN CASH. THE ATTEND ANCE REGISTER IS NOT ONLY MAINTAINED BY THE ASSESSEE BUT ALSO BY THE CLIENT AND ONLY ON THE BASIS OF SUCH ATTENDANCE REGISTER. THE ASSESSEE WAS REIMBURSED T HE SALARY OF VARIOUS EMPLOYEES AND HIS SERVICE CHARGERS THEREON. EVEN IF THE ATTENDANCE REGISTER IS NOT MAINTAINED ON REGULAR BASIS BUT SO FAR AS IT IS REVEALING THE TRUE PICTURE THE SAME DO NOT CALL FOR THE DISALLOWANCE OF ENTIRE WAG ES PAID IN CASH. SIMILARLY THE DIFFERENCE IN SIGNATURE HAS ALSO BEEN EXPLAINED PRO PERLY. THE ASSESSEE IS EMPLOYING VARIOUS PERSONS BUT THESE PERSONS COULD N OT ATTEND THE WORK PLACE OF ASSESSEE AS THEY ARE SUPPOSED TO WORK AT THE CLIENT S WORK PLACE. THE PERSONS ARE REQUIRED TO REPORT TO CLIENTS SITE AND HENCE TH E SALARY WAS COLLECTED ON BEHALF OF THE EMPLOYEES BY THE HEAD OF THE GROUP DEPUTED I N THIS BEHALF. THIS WAS REQUIRED SO AS NOT TO DISTURB THE WORKING SCHEDULE OF THESE EMPLOYEES. THE EMPLOYEES IN RESPECT OF WHOM DISCREPANCIES WERE NOT ICED WERE ALSO PRODUCED BEFORE AO. AO HAS CHOSEN TO REMAIN SILENT ON THE EX AMINATION. THIS LEADS US TO BELIEVE THAT NO DISCREPANCY IS NOTICED ON THEIR EXA MINATION. THE DISALLOWANCE IS ONLY IN RESPECT OF CASH PAID BUT THE REASONS FOR PA YMENT OF CASH HAS ALSO BEEN ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 9 EXPLAINED AND PAYMENT BY CASH ITSELF DO NOT CALL FO R ANY DISALLOWANCE. WE, THEREFORE, NOT ONLY UPHOLD THE DELETION OF DISALLOW ANCE BY COMMISSIONER (A) BUT ALSO DELETE DISALLOWANCE SUSTAINED BY COMMISSIONER (A). AS RIGHTLY CONTENDED BY SHRI SINGHVI, WHEN THE COMMISSIONER (A) ON PAGE 25 OF HIS ORDER ADMITS THAT THE ERRORS AND DISCREPANCIES ARE NOTHING MORE THAN MINOR WHICH HAS BEEN ADEQUATELY EXPLAINED, NO PART OF DISALLOWANCE CAN BE SUSTAINED. THERE IS NO FINDING THAT SUCH EXPENSES WERE NOT INCURRED FOR T HE PURPOSE OF BUSINESS,. ON THE CONTRARY THE ASSESSEE HAS FILED ALL THE EVIDENC E TO SUGGEST THAT THE EXPENSES ON WAGES PAID TO THE EMPLOYEES IN CASH WERE ADEQUAT ELY EXPLAINED AND HENCE THE DISALLOWANCE IS TO BE DELETED. 9. IN THE CROSS OBJECTION THE NEXT GROUND IS AGAINS T DISALLOWANCE OF RS. 88,356/-OUT OF TELEPHONE EXPENSES. 9.1. THE ASSESSEE INCURRED TOTALLY TELEPHONE EXPENS ES OF RS. 17,67,132/-. AO DISALLOWED 10% OF SUCH EXPENSES. 9.2. BEFORE COMMISSIONER(A) IT WAS SUBMITTED THAT F ROM THE DETAILS OF TELEPHONE EXPENSES FILED , ONLY A SUM OF RS. 7875/- PERTAINS TO BE RESIDENTIAL TELEPHONE OF THE ASSESSEE. ALL OTHER EXPENSES ARE E ITHER FOR THE OFFICE TELEPHONE OR FOR THE MOBILE CONNECTION PROVIDED TO EMPLOYEES OR MOBILE TELEPHONE ALLOWANCE ARREARS PAID TO EMPLOYEE. THUS DISALLOWA NCE IS NOT JUSTIFIED. LD. COMMISSIONER (A) REDUCED THE DISALLOWANCE FROM 10% TO 5%. 10. ON CONSIDERATION OF RELEVANT FACTS, WE FIND THA T OUT OF THE TOTAL TELEPHONE EXPENSES, A SUM OF RS. 12.25 LACS PERTAINS TO MOBIL E TELEPHONE ALLOWANCE ARREARS PAID TO EMPLOYEES. RS. 4.39 LACS IS ON THE MOBILE TELEPHONE CONNECTION ITA NO.3775/DEL/09 & CO NO. 351/DEL/09 ASSTT. YEAR 2006-07 10 PROVIDED TO EMPLOYEES. THEREFORE, THESE TWO PAYMENT S CANNOT BE CONSIDERED AS PERSONAL EXPENSES OF THE ASSESSEE. THE REST ARE EIT HER FOR THE OFFICE TELEPHONE OR FOR THE RESIDENTIAL TELEPHONE OR MOBILE TELEPHON E OF THE PROPRIETOR. CONSIDERING THESE FACTS WE UPHOLD THE DISALLOWANCE TO THE EXTEN T OF RS. 10,000/-. 15. IN THE RESULT, THE APPEAL IS DISMISSED AND CROS S OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2009. [RAJPAL YADAV] [DEEPAK R SHAH] JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA DATED : 18.12.2009 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT