ITO 11 (3) (2), MUMBAI V. DR. RANJIT MUKHERJEE, MUMBAI

ITA 3788/MUM/2010

• Counselvise Citation: 378819914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Depreciation; Opportunity of being heard
• Section: 80C; 143(3); 142(1); 133A; 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B. RAMAKOTAIAH ( A.M ) ITA NO.3788/MUM/2010 (ASSESSMENT YEAR:2006-07) INCOME TAX OFFICER 11(3)(2), ROOM NO.448, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 DR.RANJIT MUKHERJEE, NAV BHARATIYA BHAVAN CHS LTD., PLOT NO.371/372, SS III, 10 TH ROAD, CHEMBUR, MUMBAI-400071. PAN: AAGPM4423P APPELLANT V/S RESPONDENT ITA NO.4005/MUM/2010 (ASSESSMENT YEAR:2006-07) DR.RANJIT MUKHERJEE, NAV BHARATIYA BHAVAN CHS LTD., PLOT NO.371/372, SS III, 10 TH ROAD, CHEMBUR, MUMBAI-400071. PAN: AAGPM4423P INCOME TAX OFFICER 11(3)(2), ROOM NO.448, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 23.8.2011 DATE OF PRONOUNCEMENT : 30.8.2011 REVENUE BY : SHRI C.G.K.NAIR ASSESSEE BY : SHRI VIJAY C.KO THARI O R D E R PER D.K.AGARWAL (JM) THESE CROSS-APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 19.3.2010 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEAR 20 06-07. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 2 BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A DOCTOR CONSULTING OPHTHALMOLOGIST. THE RETURN WAS FILED DECLARING TOTAL INCOME OF RS.6,84,417/- ALONG WITH COMPUTATION OF INCOME, PROFIT AND LOSS ACCOUNT, BAL ANCE SHEET, TAX AUDIT REPORT IN FORM NO.3CD AND 3CB. THE AO AFTER PROCESSING OF THE RETURN U/S 143(1) OF THE INCOME TAX (A), 1961( IN SHORT THE ACT) SELECTED THE CASE FOR SCRUTINY AND ACCORDINGLY ISSUED NOTICE U/S 143(2) OF THE OF THE ACT FOLLOWED BY NOTICE U/S 142(1) ISSUED ALONG WITH QUESTIONNAIRE. THE AO AFTER CONSIDERING THE MATERI AL FACTS, HOWEVER, COMPLETED THE ASSESSMENT AT AN INCOME OF RS.33,14,040/- INCLUDING THE ADDITION OF UNDERSTAT EMENT OF PROFESSIONAL INCOME RS.14,01,457/-, DISALLOWANCE OU T OF EXPENSES CLAIMED RS.4,43,620/- AND UNPROVED LOANS OF U/S 68 OF THE ACT RS.5,09,456/- VIDE ORDER DATED 24. 12.2008 PASSED U/S 143(3) OF THE ACT. ON APPEAL, THE LD. CI T(A) WHILE PARTLY ALLOWING THE APPEAL ALLOWED SUBSTANTIAL REL IEF TO THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE REVENUE AND ASSESSEE BOTH ARE IN APPEAL BEFORE US. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 3 ITA NO.3788/MUM/2010 (BY REVENUE) 4. GROUND NO. (A) AND (B) ARE AGAINST THE DELETION OF ADDITION OF PROFESSIONAL INCOME OF RS.14,01,457/- . 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT AO OBSER VED THAT THE ASSESSEE HAS SHOWN HIS PROFESSIONAL RECEIPT AT RS.42,04,370/- AND NET INCOME OF RS.8,78,327/-. T HE AO FURTHER OBSERVED THAT IN THIS CASE, SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 9.2.2007 AT THE CLINIC PREMISE S OF THE ASSESSEE AND HIS RESIDENTIAL PREMISES. DURING THE C OURSE OF SURVEY THE ASSESSEE WAS ASKED TO PRODUCE THE RELEVA NT RECORD OF THE PAST THREE YEARS AND AFTER CROSS CHEC KING WITH FEW BILLS PREPARED, THE ASSESSEE AGREED THAT BILLS WERE PREPARED IN THOSE CASES WHO DEMANDS THEM. THE ASSES SEE IS A SPECIALIST IN MICROSURGERY, INTRAOCULAR IMPLANT, VITERO RETINAL OCULOPLASTICS. IT WAS NOTICED THAT THE ASSESSEE CHA RGES RECEIPTS IN SEVERAL HEADS LIKE BED CHARGES, OPERATI ON CHARGES, ANESTHESIA, OPERATION THEATRE, TREATMENT A ND THAT THE ENTIRE CONTROL OF PATIENTS RECORD AND PRIMARY M AINTENANCE OF RECORDS IS LOOKED AFTER BY THE ASSESSEE HIMSELF. IT WAS FOUND THAT THE ASSESSEE FIRM HAD 3 BEDS, MOST OF TH E PATIENTS DISCHARGED ON THE SAME DAY, THE CORNEA AND REFRACTI VE SURGERY CHARGES RANGED FROM RS.15,000/- TO RS.30, 000/-, ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 4 THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AND THE VERIFICATION OF THE OPERATION REGISTER MAINTAINED B Y THE ASSESSEE SHOWED THAT FOR A NORMAL SURGERY RS.15,00 0/- TO RS.60,000/- WERE CHARGED. THE ASSESSEE ALSO ADMITTE D IN HIS DEPOSITION THAT HE HAS NOT HAVING ANY BOOKS OF ACCO UNTS LIKE CASH-BOOK AND LEDGER ACCOUNT COPY FOR VERIFICATION OF RECEIPTS AND EXPENSES. HE ALSO ADMITTED THAT THE R ECORDS OF PATIENTS AND ACCOUNTING IS NOT DONE UP TO DATE AND NO BOOKS OF ACCOUNTS WERE IMPOUNDED BY THE SURVEY PARTY. DU RING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE, VIDE QUESTION NO.10, THE ASSESSEE WAS POINTED OUT THAT O N VERIFICATION OF THE O.T.REGISTER, BILLS BOOK, CASH BOOK CONSULTING REGISTER, SUBSTANTIAL DIFFERENCE WAS FOU ND AND THAT THE RECORDS OF THE RECEIPTS ARE NOT PROPERLY MAINTA INED AND THEREFORE VIDE ANSWER TO THE SAID QUESTION, THE ASS ESSEE VOLUNTARILY OFFERED RS.30,00,000/- TO COVER THE DISCREPANCIES. THE AO FURTHER OBSERVED THAT ON BE ING ASKED, IT WAS EXPLAINED BY THE ASSESSEE THAT THE R ECEIPTS ARE RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED; T HAT EXTRACTS OF THE INCOME REGISTER AND BANK STATEMENTS ATTACHED AND THAT ANY ADDITION WILL BE ADHOC, UNFAIR AND WIT HOUT ANY BASIS AND WILL PUT THE ASSESSEE TO UNDUE HARDSHIP. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NOT ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 5 PRODUCED THE BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC . FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE WHICH SHO WS THAT THE ASSESSEE HAS SOMETHING TO CONCEAL. THE DECLARATION MADE BY THE ASSESSEE DURING THE SURVEY ACTION IS EVIDENC ED TO THE FACT THAT THE ASSESSEE IS NOT DECLARING THE ACTUAL RECEIPTS. EVIDENCE BY WAY OF DISCREPANCY FOUND DURING THE CO URSE OF SURVEY AND NON-AVAILABILITY DURING THE DAY OF SUR VEY OF THE EXTRACTS OF INCOME NOW FILED BY THE ASSESSEE SHOW T HAT THE SAME WAS PREPARED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE THE SAME CANNOT BE ACCEPT ED TO BE THE REAL AFFAIRS OF THE INCOME OF THE ASSESSEE. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED T DS OF RS.1,028/- BEING THE TAX DEDUCTED AT SOURCE BY SU RAJRATAN FATECHAND DAMANI JANHIT NIDHI, MUMBAI ON THE PROF ESSIONAL PAYMENT MADE TO THE ASSESSEE OF AN AMOUNT OF RS.20 ,147/-. IT IS ALSO SEEN FROM THE SO CALLED EXTRACT OF INCOM E REGISTER FILED BY THE ASSESSEE TO HAVE BEEN MAINTAINED THAT THE SAID INCOME IS NOT REFLECTED THEREIN. IN VIEW OF THIS THE AO ADDED 1/3 RD OF THE PROFESSIONAL RECEIPTS OF RS.42,04,370/- I.E. RS.14,01,457/-, TO THE TOTAL INCOME OF THE ASS ESSEE AS INCOME NOT DISCLOSED TO THE DEPARTMENT OUT OF THE PROFESSIONAL RECEIPTS. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 6 6. ON APPEAL, LD.CIT(A) OBSERVED THAT IN ABSENCE O F ANY ADVERSE EVIDENCE AVAILABLE IN THE POSSESSION OF TH E AO WHICH IS A FACT THAT HE HAS NO EVIDENCE FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION, ONE THING IS VERY CLEAR THAT HE WOULD NOT DISTURB THE RECEIPTS OF APPELLANT. THIS IS BECAUSE THERE WOULD BE NO BASIS OF DOING SO AND ACCORDINGLY DELETED THE ADHOC ADDITION MADE BY THE AO. 7. AT THE TIME OF HEARING, THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.14,01,457/- MADE BY THE AO. HE, THEREFORE, SUBM ITS THAT THE ADDITION MADE BY THE AO BE RESTORED. 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) AND IN R ELYING ON THE FINDINGS OF THE LD. CIT(A) FURTHER SUBMITS THAT SINCE THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS, E XTRACT OF THE INCOME REGISTER, BANK STATEMENT ETC. WERE FI LED DURING THE COURSE OF HEARING BEFORE THE AO. THE AO WITHOUT FINDING ANY DEFECT IN THE BOOKS OF ACCOUNT MERELY BECAUSE T HE SAID BOOKS OF ACCOUNTS WERE NOT FOUND DURING THE COURSE OF SURVEY ON 9.2.2007 DOES NOT MEAN THAT THE ASSESSEE HAS NOT ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 7 MAINTAINED THE BOOKS OF ACCOUNT WHEREAS THE ASSESS EE DURING THE COURSE OF SURVEY ON 9.2.2007 HAS PRODUC ED THE BOOKS OF ACCOUNT FOR THE CURRENT YEAR WHICH IS ALS O EVIDENT FROM THE ANSWER TO QUESTION NO.7 AND 10 OF THE S TATEMENT RECORDED AT THE TIME OF SURVEY PROCEEDINGS, APPEA RING AT PAGES 3 AND 4 OF THE ASSESEES PAPER BOOK. HE, TH EREFORE, SUBMITS THAT THE LD. CIT(A) WAS FULLY JUSTIFIED I N DELETING THE ADDITION MADE BY THE AO AND HIS ORDER BE UPHELD. 9. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS FIL ED THE RETURN ALONG WITH THE TAX AUDIT REPORT AND FINANCI AL STATEMENTS. IT IS ALSO NOT IN DISPUTE THAT THE ASS ESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS EXPLAINED THAT THE PROFESSIONAL RECEIPTS ARE RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED AND HAS FILED RELEVANT EXTRACTS THEREOF. THE AO WITHOUT BRINGING ANY MATERIAL ON RECORD TO S HOW THAT SUCH BOOKS OF ACCOUNTS ARE NOT MAINTAINED BY THE A SSESSEE IN THE REGULAR COURSE OF BUSINESS OR PROFESSION DI D NOT CONSIDER THE SAID BOOKS OF ACCOUNTS ON THE GROUND T HAT THE SAME WERE PREPARED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS OBSERVATION OF THE AO WITHOUT B RINGING ANY MATERIAL ON RECORD IS NOT VALID IN LAW. WE FUR THER FIND ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 8 THAT DURING THE COURSE OF SURVEY THERE IS NO QUER Y BY THE AO ABOUT THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YE AR UNDER CONSIDERATION INASMUCH AS IN ANSWER TO QUEST ION NO.7 AND 10 RECORDED AT THE TIME OF SURVEY ON 9.2.2007, WE OBSERVE THAT THE BOOKS OF ACCOUNT FOR THE CURRENT YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 WERE FOUND AND CONSIDERED BY THE AO. UNDER THESE CIRCUMSTANCES AND IN ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD B Y THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) WE A RE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING ADHO C ADDITION IN THE PROFESSIONAL RECEIPT OF THE ASSESSEE BY RS.1 4,01,457/- AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE SAME. THE ORDER PASSED BY THE LD.CIT(A) ON THIS ACCOUNT D OES NOT CALL FOR ANY INTERFERENCE. THE GROUNDS TAKEN BY TH E REVENUE ARE, THEREFORE, REJECTED. 10. GROUND NO.(C) AND (D) ARE AGAINST THE DELETION OF ADDITION OF RS.5,09,456/- MADE U/S 68 OF THE ACT. 11. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT H AS BEEN OBSERVED BY THE AO THAT AS PER BALANCE-SHEET THE ASSESSEE HAS SHOWN OUTSTANDING BORROWED LOANS IN THE ACCOUN T OF (A) MR.SUMIT DASGUPTA-RS.3,00,000/-, (B) MRS.V.SAVITRI- RS.2,00,000/- AND (C) DR.PRASAD BHIDE -RS.9,456/ - ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 9 AGGREGATING TO RS.5,09,456/-. IN ABSENCE OF ANY CON FIRMATION OF THE LOANS, THE AO ADDED THE AMOUNT OF RS.5,09, 456/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT . ON APPEAL, BEFORE THE LD.CIT(A) IT WAS ARGUED THAT TH ESE ARE OLD LOANS COMING FROM PAST SEVERAL YEARS. THE LD. CIT( A) WHILE OBSERVING THAT THE LOANS HAVE BEEN COMING FROM THE EARLIER YEARS AND HAVE NOT OBTAINED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION, DELETED THE ADDITION MADE BY T HE AO. 12. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 13. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD. CIT( A) SUBMITS THAT THESE ARE OLD LOANS AND THE ASSESSEE HAS DUL Y FILED HIS EXPLANATION BEFORE THE AO GIVING COMPLETE ADDRES SES AND PERMANENT ACCOUNT NUMBERS OF THE LOAN CREDITORS, A PPEARING AT PAGES 97-98 OF THE ASSESSEES PAPER BOOK. HE FUR THER SUBMITS THAT THE LOANS ARE OLD IS ALSO EVIDENT FROM PART-B OF ANNEXURE-I OF TAX AUDIT REPORT APPEARING AT PAGE 2 5 OF THE ASSESSEES PAPER BOOK. HE, THEREFORE, SUBMITS THA T NO SUCH ADDITION IS CALLED FOR. HOWEVER, HE SUBMITS THAT H E HAS NO OBJECTION, IF THE ISSUE IS SET ASIDE TO THE FILE O F THE AO TO EXAMINE THE SAME AFRESH. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 10 14. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE WAS ASK ED TO FILE CONFIRMATION LETTER BY THE AO. HOWEVER, THERE IS NO MATERIAL ON RECORD TO SHOW THAT SUCH CONFIRMATION LETTERS WE RE FILED BY THE ASSESSEE EITHER DURING THE COURSE OF ASSESSMENT PROCEEDING OR DURING THE APPELLATE PROCEEDINGS OR E VEN AT THIS STAGE. IN ABSENCE THEREOF AND IN THE ABSENCE OF ANY REFERENCE TO THE COPY OF ACCOUNTS OF THE LOAN CRED ITORS, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND ACCORDING LY WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) ON THIS A CCOUNT AND SEND BACK THE MATTER TO THE FILE OF THE AO TO EXAMINE THE SAME IN THE LIGHT OF OUR OBSERVATIONS HEREINABO VE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY T HE REVENUE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTI CAL PURPOSES. ITA NO.4005/MUM/2010 (BY ASSESSEE) 15. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF EXPENDITURE OF RS.4,43,620/-. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 11 16. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS CLAIMED EXPENSES TO THE TUNE OF RS.33,26,043/- THE BREAK UP OF WHICH IS APPEARING A T PAGE 4 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED BELOW : 1 RENT 2 TAXES 3 ELECTRICITY 4 MEDICAL SUPPLIES 5 TELEPHONE CHARGES 6 SALARIES AND WAGES 7 INSURANCE 8 REPAIRS AND MAINTENANCE 9 MOTOR CAR EXP. 10 BANK CHARGES 11 INTEREST ON MACHINERY LOAN 12 INTEREST ON CLINIC PREMISES LOAN 13 PROFESSIONAL FEES PAID TO ANESTHETICS 14 SUBSCRIPTION 15 PRINTING AND STATIONERY 16 MISCELLANEOUS 17 DEPRECIATION ON VEHICLE RS.60,000 RS.15,020 RS.1,00,570 RS.8,62,359 RS.1,19,114 RS.86,000 RS.19,656 RS.67.437 RS.86,804 RS.2,990 RS.5,47,758 RS.83,104 RS.1,99,588 RS.9,100 RS.1,080 RS.2,520 RS.32,172 ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 12 18 DEPRECIATION ON MEDICAL EQUIPMENT 19 DEPRECIATION ON EXABX SYSTEM 20 CLINIC PREMISES 21 CLINIC PREMISES -2 RS.8,74,417 RS.1,772 RS.51,798 RS. 1,02,784 TOTAL RS.33,26,043 THE AO OBSERVED THAT IT IS NOT KNOWN TO WHOM THE RENT OF RS.60,000/- WAS PAID, TAXES OF RS.15,020/- ARE REL ATED TO WHICH PREMISES I.E. RESIDENCE OR CLINIC, ELECTRICIT Y CHARGES OF RS. 1,00,570/- IS NOWHERE MENTIONED WHETHER IT IS RELATED TO RESIDENCE ALSO. REGARDING MEDICAL SUPPLIES OF RS.8 ,62,359/- NO PURCHASE BILLS PRODUCED. REGARDING TELEPHONE CHA RGES OF RS.1,19,114/- NOWHERE IT IS MENTIONED THAT WHETHER IT RELATED TO RESIDENCE, MOBILE AND THE EXPENDITURE OF PERSONA L USE. REGARDING SALARY AND WAGES OF RS.86,000/- NO DETAI LS HAVE BEEN PROVIDED WHETHER IT RELATES TO DRIVER OR OTHER WISE. REGARDING MOTOR CAR EXPENSES OF RS.86,804/-, PERSON AL USE OF MOTOR CAR CANNOT BE RULED OUT. REGARDING INTER EST ON MACHINERY LOAN OF RS.5,47,758/- AND INTEREST ON C LINIC PREMISES LOAN OF RS.83,104/- NO EVIDENCE OF LOAN , ITS USAGE AND THE PROPERTIES MORTGAGED ARE FILED. REGAR DING MISCELLANEOUS EXPENSES OF RS.2,520/- THERE IS NO EVIDENCE. REGARDING DEPRECIATION ON VEHICLES OF RS.32,172/- SINCE THE ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 13 PERSONAL USE OF THE MOTOR CAR CANNOT BE RULED OUT, TO CERTAIN EXTENT OF THE DEPRECIATION CLAIM IS DISALLOWABLE U/S 38(2) OF THE ACT. ACCORDING TO THE AO THE TOTAL OF THESE EX PENSES COMES TO RS.22,18,102/-. THE AO TAKING INTO ALL T HE FACTS OF THE CASE, HOWEVER, DISALLOWED RS.4,43,620/- BEING 20% OF RS.22,18,102/- AND ADDED THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A), HOWEVER, CONF IRMED THE SAME. 17. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS MAINTAINED R EGULAR BOOKS OF ACCOUNT AND HAS FILED COMPLETE DETAILS OF EXPENSES APPEARING AT PAGES 26 TO 94 OF THE ASSESSEES PAPE R BOOK, THEREFORE, NO SUCH DISALLOWANCE IS CALLED FOR. HE F URTHER SUBMITS THAT IN THE ASSESSMENT YEAR 2007-08 WHEREI N THE SURVEY WAS TAKEN PLACE I.E ON 9.2.2007, THE AO IN T HE SCRUTINY ASSESSMENT HAS DISALLOWED THE CAR EXPENSES WHICH INCLUDES VEHICLE LOAN INTEREST AND DEPRECIATION, RS .29,634, TELEPHONE EXPENSES FOR PERSONAL USE RS.22,397/- BEI NG 20% OF TOTAL EXPENSES AND NO OTHER DISALLOWANCE WAS MAD E. HE FURTHER SUBMITS THAT THE LD. CIT(A) WHILE OBSERVING THAT THE ASSESSEE HAS HIMSELF DISALLOWED 1/7 OF THE CAR EXPE NSES, DELETED THE ADHOC DISALLOWANCE MADE BY THE AO. RE GARDING THE DISALLOWANCE OF TELEPHONE EXPENSES, THE LD.CIT( A) ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 14 RESTRICTED THE SAME TO 15% AS AGAINST 20% MADE BY THE AO. IN SUPPORT, HE ALSO PLACED ON RECORD THE COPY OF THE ASSESSMENT ORDER AND THE COPY OF THE ORDER OF THE L D. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. HE, THEREFORE, SU BMITS THAT NO SUCH DISALLOWANCE IS CALLED FOR. 18. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE LD. CIT(A). 19. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS F ILED THE RELEVANT DETAILS OF ALL THE EXPENSES. THE AO WITH OUT BRINGING ANY MATERIAL ON RECORD TO SHOW THAT THE EX PENSES INCURRED BY THE ASSESSEE HAVE NOT BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROF ESSION OR PERSONAL IN NATURE HAS MADE ADHOC DISALLOWANCE OF T HE ABOVE EXPENSES. EVEN, IN THE FINANCIAL YEAR 2006-07 IN WHICH THE SURVEY WAS TAKEN PLACE NO SUCH ADHOC DISALLOWANCE WAS MADE BY THE AO IN RESPECT OF THES E EXPENSES EXCEPT CAR EXPENSES AND TELEPHONE EXPENSES . CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMST ANCES, OF THE CASE, AND KEEPING IN VIEW OF THE THAT ADHOC DI SALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE IN LAW, WE ARE O F THE VIEW ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 15 THAT THE 20% DISALLOWANCE MADE BY THE AO OTHER THA N CAR EXPENSES, CAR DEPRECIATION AND TELEPHONE EXPENSES IS NOT SUSTAINABLE AND ACCORDINGLY THE SAME IS DELETED. W ITH REGARD TO THE DISALLOWANCE OF CAR EXPENSES, CAR DEP RECIATION AND TELEPHONE EXPENSES, WE FIND THAT THE PERSONAL U SE HAS NOT BEEN RULED OUT BY THE ASSESSEE EVEN AT THIS STA GE AND ACCORDINGLY, WE DIRECT THE AO TO DISALLOW 1/6 TH OF THE SAME FOR PERSONAL USE AND DELETE THE BALANCE AMOUNT OF DISALLOWANCE. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 20. GROUND NO.2 IS AGAINST THE DISALLOWANCE OF DED UCTION OF U/S 80C OF LI C PREMIUM OF RS.97,342/-. 21. IT WAS DISALLOWED BY THE AO AS NO EVIDENCE IN SUPPORT THE PAYMENT OF THE LIC PREMIUM WAS FILED BEFORE HIM . DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HA S FILED THE SAME BEFORE THE LD. CIT(A). HOWEVER, THE LD. C IT(A) IN THE ABSENCE OF ANY REQUEST FOR ADMISSION OF ADDITI ONAL EVIDENCE REJECTED THE PLEA OF THE ASESEEE AND CONFI RMED THE DISALLOWANCE MADE BY THE AO. 22. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE ASSESSEE HAS PAID THE LIC PREMIUM, THEREFORE, DUE RELIEF BE ALLOWED TO THE AS SESSEE ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 16 AND THE ISSUE MAY BE RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATION . 23. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE LD. CIT(A). 24. AFTER CONSIDERING THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND I N THE INTERESTS OF JUSTICE WE FIND THAT IT IS NOT THE C ASE OF THE REVENUE THAT THE ASSESSEE HAS NOT PAID LIC PREMIUM. THE LD.CIT(A) REJECTED THE CLAIM ON THE TECHNICAL GROU ND. THIS BEING SO, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTE R TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LI GHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTE R PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE IS, THER EFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 25. GROUND NO.3 IS AGAINST THE LEVY OF INTEREST U/S S 234A, 234B, 234C AND 234D OF THE ACT. ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 17 26. IN THE ABSENCE OF ANY ARGUMENTS BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD, WE DIRECT THE AO TO ALLOW THE CONSEQUENTIAL RELIEF TO THE ASSESSEE IN T HIS REGARD. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PAR TLY ALLOWED. 27. GROUND NO.4 IS AGAINST THE INITIATION OF PENALT Y PROCEEDINGS U/S 271(1)( C ) OF THE ACT. 28. IN THE ABSENCE OF ANY PLEA TAKEN BY THE ASSESSE E IN THIS REGARD, AND KEEPING IN VIEW THAT THE GROUND T AKEN BY THE ASSESSEE IS PRE-MATURED, THE SAME IS, THEREFORE RE JECTED. 29. IN THE RESULT, THE REVENUES AND ASSESSEES APP EALS STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH AUGUST , 2011. SD SD (B. RAMAKOTAIAH) (D.K .AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30TH AUGUST, 2011 SRL: ITA NO.3788/MUM/2010 ITA NO.4005/MUM/2010 (AY:2006-07) 18 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI