MUCHHALA MAGIC LAND P.LTD, MUMBAI V. JT CIT (OSD) 8(2), MUMBAI

ITA 7605/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9068 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: I C JAIN
• Keywords: Non-deduction of tax; Capital expenditure
• Section: 194C

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./7605/MUM/2012, / ASSESSMENT YEAR: 2009-10 M/S. MUCHHALA MAGIC LAND PVT. LTD. C/O., D.C. JAIN & CO. 75, BOMBAY MUTUAL BLDG. 293-DR. D.N. ROAD, FORT MUMBAI-400 101. PAN:AABCM 1017 B VS. JCIT-(OSD) RANGE-8(2), ROOM NO.209, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SAURABH KUMAR RAI-DR /ASSESSEE BY: SHRI I.C. JAIN / DATE OF HEARING: 30/11/2016 / DATE OF PRONOUNCEMENT: 06/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 09/10/2012 OF THE CIT ( A)-17,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN BUSINESS OF RUNNING AMUSEMENT PARK,FILED ITS RETURN OF INCOME ON 27/09/2009,DECLARING INCOME OF RS. 1,21,31,886/-.THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT U/S.143(3),ON 22.12.20 11,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1,54,07,290/-. 2. FIRST GROUND OF APPEAL IS ABOUT ADDITION OF RS.5,00 ,604/-.DURING THE ASSESSMENT PROCEED - INGS,THE AO FOUND THAT THE ASSESSEE HAD OWNERSHIP O F TWO FLATS,THAT IS IT WAS SHOWING THE FLATS UNDER THE HEADS CURRENT ASSETS AND AT COST, THAT IT HAD NOT OFFERED ANY INCOME UNDER THE HEADS INCOME FROM THE PROPERTIES,THAT IN THE EARLIER YEAR S THE SAID FLATS WERE RENTED OUT.HE DIRECTED THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD. TH E ASSESSEE REPLIED THAT IT WAS USING THE FLATS FOR OFFICE PREMISES.THE AO HELD THAT AS PER THE PRO VISIONS OF SECTION 23 (1) OF THE ACT,ANNUAL VALUE OF THE INCOME FROM HOUSE PROPERTY HAD TO BE W ORKED OUT HE MADE AN ADDITION OF RS. 5, 00,604/-TO THE TOTAL INCOME OF THE ASSESSEE UNDER T HE HEAD INCOME FROM HOUSE PROPERTY. 2.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND CONTENDED THAT IT HAD USED THE FLATS FOR PURPOSE OF OFFICE DURING THE YEAR UNDER CONSIDERATION, THAT IT HAD NO T EARNED ANY RENTAL INCOME. HOWEVER, THE 7605/M/12-MUCHHALA MAGIC 2 FAA HELD THAT ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THAT RENOVATION WAS CARRIED OUT FOR CONVERTING THE FLATS TO OFFICE PREMISES.HE UPHELD T HE ORDER OF THE AO. 2.2. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) ARGUED THAT THERE WAS REPAIR AND RENOVATION IN THE OFFICE PREMI SES OF THE ASSESSEE, THAT THE AO HIMSELF HAS TREATED THE REPAIR EXPENSES AS CAPITAL EXPENDIT URE,THAT HE DID NOT MAKE ANY ADDITION ON ACCOUNT OF RENTAL INCOME WHILE COMPUTING THE ASSESS MENT ORDER FOR THE AY. 2011-12, THAT IT HAD FILED AN AFFIDAVIT BEFORE THE AO IN THE ASSESSM ENT PROCEEDINGS OF THE SUBSEQUENT YEARS IN THAT REGARD AND HE HAD NOT MADE ANY ADDITION. HE RE FERRED TO PAGES NUMBER 13,70-76 AND 107 OF THE PAPER BOOK.THE DEPARTMENTAL REPRESENTATIVE ( DR) SUPPORTED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE WAS OWNER OF TWO FLATS, THAT SAME WERE REN TED IN THE EARLIER YEARS AND IT HAD OFFERED THE RENTAL INCOME IN ITS RETURNS,THAT BEFORE THE AO /FAA IT WAS CLAIMED THAT DURING THE YEAR UNDER CONSIDERATION REPAIR AND RENOVATION WAS CARRI ED OUT AND THE FLATS WERE NOT RENTED OUT, THAT IT WAS ALSO CLAIMED THAT THE FLATS WERE USED F OR OFFICE PREMISES,THAT IN THE SUBSEQUENT YEARS THE AO HAD NOT MADE ANY ADDITION UNDER THE HE AD BEINGS RENTAL INCOME. ONCE THE ASSESSEE HAD PRODUCED THE BILLS OF REPAIRS AND RENO VATION OF THE FLATS AND THE AO HAD TREATED THE SAID EXPENDITURE AS CAPITAL EXPENDITURE,THERE W AS NO JUSTIFICATION FOR MAKING ANY ADDITION UNDER THE HEAD HOUSE PROPERTY INCOME.BOTH THE AUTHO RITIES HAVE NOT PROVED THAT THE FLATS WERE RENTED OUT DURING THE YEAR UNDER APPEAL.AS PER THE SETTLED PRINCIPLES OF TAXATION IF ANY SUM HAS TO BE TAXED THE AO HAS TO BRING ON RECORD THE N ECESSARY FACTS FOR TAXING THE SAME. IN OUR OPINION,THE AO HAD NOT DISCHARGED THE ONUS IN THAT REGARD. THEREFORE, REVERSING THE ORDER OF THE FAA,WE DECIDE THE FIRST GROUND OF APPEAL IN FAV OUR OF THE ASSESSEE. 3. SECOND GROUND DEALS WITH ADDITION OF RS.12,500/- UN DER SECTION 14 A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (RULES). DURING THE ASSE SSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAD SHOWN INVESTMENT IN SHARES AMOUNTING R S.25 LAKHS, THAT IT HAD NOT MADE ANY DISALLOWANCE UNDER SECTION 14 A OF THE ACT. ON A QU ERY BY THE AO IN THAT REGARD, THE ASSESSEE STATED THAT IT HAD NOT EARNED ANY TAX-FREE INCOME D URING THE YEAR UNDER CONSIDERATION, THAT THEREFORE NO DISALLOWANCE WAS MADE. HOWEVER, THE AO MADE A DISALLOWANCE OF RS. 12, 500/- (OF PERCENT OF THE AVERAGE VALUE OF INVESTMENT). 3.1. BEFORE THE FAA,THE ASSESSEE ARGUED THAT IT HAD NOT INCURRED/CLAIMED ANY DIRECT/INDIRECT EXPENSES ON THE TAX-FREE INCOME, THAT THE AO WAS NO T JUSTIFIED IN MAKING THE DISALLOWANCE. AFTER CONSIDERING THE AVAILABLE MATERIAL, THE FAA U PHELD THE ORDER OF THE AO. 7605/M/12-MUCHHALA MAGIC 3 3.2. BEFORE US, THE AR STATED THAT ASSESSEE HAD MADE INV ESTMENT IN SHARES OF THE SUBSIDIARY/ ASSOCIATED COMPANY IN THE EARLIER YEARS, THAT THE I NVESTMENT WAS MADE FOR STRATEGIC PURPOSES ONLY, THAT IT WAS MADE FOR PURPOSE OF HOLDING CONTR OLLING STAKE IN THE GROUP CONCERN AND NOT FOR EARNING ANY DIVIDEND OR CAPITAL GAINS, THAT IT WAS NOT REQUIRED TO INCUR ANY EXPENDITURE. THE DR SUPPORTED THE ORDER OF THE F AA. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT AS SESSEE HAD NOT INCURRED ANY EXPENDITURE NOR HAD IT CLAIMED ANY EXPENDITURE WITH REGARD TO THE TAX-FREE INCOME DURING THE YEAR UNDER CONSIDERATION.THEREFORE,THERE WAS NO JUS TIFICATION OF ANY KIND TO MAKE ANY DIS - ALLOWANCE INVOKING THE PROVISIONS OF SECTION 14 A O F THE ACT. THE BASIC PRECONDITION FOR MAKING DISALLOWANCE UNDER THE SAID SECTION IS EARNI NG OF TAX-FREE INCOME AND INCURRING OF EXPENDITURE BY THE ASSESSEE.AS BOTH THE PRECONDITIO NS ARE ABSENT IN THE CASE UNDER CONSIDERA - TION THEREFORE, IN OUR OPINION,THE ORDER OF THE FAA HAS TO BE REVERSED. GROUND NUMBER TWO IS DECIDED IN FAVOUR OF THE ASSESSEE. 4. NEXT GROUND PERTAINS TO DISALLOWANCE OF RS. 1.31 LA KHS ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAIMED ADVERTISEMENT EXPENSES OF RS. 31.10 LAKHS AND BUSIN ESS PROMOTION EXPENSES OF RS.10.38 LAKHS. ON VERIFICATION OF THE EXPENSES HE FOUND THA T THE ASSESSEE HAD NOT DETECTED TAX AT SOURCE WHILE MAKING PAYMENTS TO 3 PARTIES HE DIRECT ED THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD. AFTER CONSIDERING THE SUBMISSION OF THE ASS ESSEE, THE AO HELD THAT THE ASSESSEE HAD INCURRED THE EXPENSES FOR PROMOTION OF ITS BUSINESS , THAT AS PER THE PROVISIONS SECTION 194C OF THE ACT THE ASSESSEE HAD TO DEDUCT TAX FOR ALL THE PAYMENTS EXCEEDING RS. 20,000/-. REFERRING TO THE PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT HE MADE A DISALLOWANCE OF RS. 1.31 LAKHS. 4.1. DURING THE COURSE OF APPELLATE PROCEEDINGS,BEFORE T HE FAA,THE ASSESSEE ARGUED THAT IT HAD DEDUCTED TAX AT SOURCE, AMOUNTING RS.637/-, FOR THE PAYMENT MADE TO SMART ADVERTISEMENT AGENCIES,THAT IN CASE OF OTHER TWO PARTIES THE ASSE SSEE HAD MADE PAYMENT OF TAX DEDUCTED AT SOURCE IN LATER YEAR, THAT DEDUCTION IN THAT REGARD WOULD BE MADE ACCORDINGLY. THE FAA,AFTER CONSIDERING THE MATERIAL ON RECORD, H ELD THAT AS PER THE PROVISIONS OF SECTION 194C THE ASSESSEE HAD TO DEDUCT THE TAX AT SOURCE,T HAT THE AO WAS JUSTIFIED IN MAKING THE DISALLOWANCE. 4.2. BEFORE US, THE AR CONTENDED THAT SECOND PROVISO TO SECTION 40 (A) (IA) OF THE ACT WAS INSERTED BY FINANCE ACT AT 2012, THAT AS PER THE PR OVISO WHEREVER PAYEE PAYS THE TAX THE PAYER IS NOT SUPPOSED TO DEDUCT THE TAX, THAT THE PARTIES TO WHOM THE ASSESSEE HAD MADE THE 7605/M/12-MUCHHALA MAGIC 4 PAYMENTS HAD PAID THE TAXES, THAT THE MATTER COULD BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION. THE DR LEFT THE ISSUE TO THE DISCRETI ON OF THE BENCH. 4.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF T HE OPINION THAT MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO. HE IS DIRECTED TO AFFORD A REASONABLE HEARING TO THE ASSESSEE TO PROVE ITS CLAIM THAT TAX WAS ACTUALLY P AID BY THE RECIPIENT. THE ASSESSEE IS DIRECTED TO PRODUCE ALL THE NECESSARY EVIDENCE BEFORE THE AO . GROUND NUMBER THREE IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 5. NEXT GROUND IS ABOUT ADDITION OF RS.79,722/- FOR NO N-DEDUCTION OF TAX ON PAYMENT OF INTEREST ON CAR LOAN TO MAHINDRA AND MAHINDRA FINAN CE COMPANY LTD. FOLLOWING OUR ORDER FOR THE EARLIER GROUND,WE RESTOR BACK THE ISSUE TO THE FILE OF THE AO FOR MAKING VERIFICATION, THAT THE RECIPIENT OF THE INCOME HAD PAID TAX ON TH E DISPUTED AMOUNT. THE ASSESSEE WOULD PRODUCE RELEVANT DOCUMENTS BEFORE THE AO.GROUND NUM BER FOUR IS PARTLY ALLOWED. 6. GROUND NUMBER FIVE IS ABOUT ADDITION OF RS.1.04 LAK HS, BEING THE PRE PAID EXPENSES.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSES SEE HAD PAID RS. 84,000/-TO BEEKAY LEGALS IN RESPECT OF THE BILL DATED 04/03/2008, THA T PETTY CASH EXPENSES AMOUNTING TO RS. 20, 531/-WERE ALSO DEBITED TO LEGAL EXPENSES. HE DIRECT ED THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD. IT WAS STATED THAT EXPENSES WERE BOOKED IN THE YEAR IN WHICH THEY WERE SETTLED FOR PAYMENT. THE AO HELD THAT IN THE MERCANTILE SYSTEM OF ACCOUNTING EXPENSES OF THE RELEVANT YEAR WERE ALLOWABLE, THAT EARLIER YEARS EXPENSES CO ULD NOT BE ALLOWED, THAT WHAT WAS IMPORTANT WAS ACCRUAL OR RELIABILITY TO PAY AND NOT THE ACTUAL PAYMENT, THAT THE EXPENSES WERE OF THE PRIOR PERIOD AND HENCE WERE NOT ALLOWABLE. A CCORDINGLY HE MADE AN ADDITION OF RS.1,04,531/-. 6.1. BEFORE THE FAA, THE ASSESSEE ARGUED THAT IT HAD MAD E PAYMENTS TO BEKAY ADVOCATES, AMOUNTING TO RS.84,000/- AFTER DEDUCTING THE TAX AT APPLICABLE RATES THE BILL DATED 4/03/2008 WAS SETTLED ON 08/08/2008, THAT THE PETTY EXPENSES FOR THE PERIOD 21/03/2008 TO 31/03/2008, AMOUNTING TO RS.20,531/- WAS SETTLED ON 01/04/2008, THAT THE ASSESSEE WAS FOLLOWING SIMILAR POLICY FOR THE EARLIER YEARS AND SUBSEQUENT YEARS.A FTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT A SSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THAT THE EXPENSES PERTAINING TO PRIO R PERIOD COULD NOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION. FINALLY, HE UPHELD THE ORDER O F THE AO. 7605/M/12-MUCHHALA MAGIC 5 6.2. BEFORE US,THE AR CONTENDED THAT AS PER THE ACCOUNTI NG POLICY, FOLLOWED BY THE ASSESSEE, EXPENSES WERE BOOKED IN THE YEAR WHEN THEY WERE SET TLED FOR PAYMENT, THE PAYMENT TO BEEKAY LEGAL WAS MADE ON 08/08/2008. THE DR SUPPORT ED THE ORDER OF THE AO AND THE FAA. 6.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT L EGAL PAYMENTS WERE MADE DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNTS IN QUESTIO N PERTAIN TO EARLIER YEAR. PRIOR PERIOD EXPENSES, AS PER THE TAXATION PRINCIPLES, CAN BE AL LOWED IF THEY ARE CRYSTALLISED DURING THE SUBSEQUENT YEAR. THE AO/FAA HAS NOT GIVEN ANY FINDI NG AS TO WHETHER THE ASSESSEE WAS FOLLOWING THE SAME ACCOUNTING POLICY IN THE EARLIER AND SUBSEQUENT YEARS OF CLAIMING PRE PAID EXPENDITURE ON ACCOUNT OF CRYSTALLISED EXPENDITURE IN THE LATER YEARS.THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE PAYMENT AND THEREFORE SAME H AS TO BE ALLOWED IN ONE OF THE YEARS. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT ASSESSEE HAD MADE THE PAYMENT AFTER THE RECEIPT OF THE BILLS IN THE SUBSEQUENT YEAR,WE ARE OF THE OPINION THAT GROUND NUMBER 5,FILED BY THE ASSESSEE ,SHOULD BE ALLOWED. 7. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF REM UNERATION PAID TO THE DIRECTORS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE A SSESSEE HAD PAID RS.6 LAKHS TO ONE OF THE DIRECTORS, NAMELY RITIKA MUCHALA(RM).HE DIRECTED TH E ASSESSEE TO EXPLAIN AS TO WHY THE REMUNERATION PAID TO RM SHOULD NOT BE DISALLOWED FO R THE REASON THAT SHE HAD NOT RENDERED ANY SERVICE TO THE COMPANY.IN ITS REPLY,THE ASSESSE E SUBMITTED THAT RM WAS DIRECTOR OF THE COMPANY SINCE INCEPTION AND WAS ACTIVELY INVOLVED I N THE DAY-TO-DAY MATTER OF THE BUSINESS ACTIVITIES, THAT SHE HAD DECLARED THE INCOME AND HA D PAID TAX THEREON. THE AO HELD THAT SUBMISSION OF THE ASSESSEE WAS OF GENERAL NATURE, T HAT IT WAS NOT BASED ON DOCUMENTARY EVIDENCES, THAT IT HAD NOT FILED EXPLANATION REGARD ING THE EDUCATIONAL QUALIFICATION OF THE DIRECTOR AND ABOUT THE SERVICES RENDERED BY HER, TH AT THE ONUS WAS ON THE ASSESSEE TO SHOW THAT EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. FINALLY, HE DISALLOWED THE DEMOLITION PAID TO RM, AMOUNTING RS. 6 LAKHS. 7.1. BEFORE THE FAA, THE ASSESSEE ARGUED THAT RM WAS ATT ENDING ALL DAY-TO-DAY AFFAIRS OF THE COMPANY,THAT SHE HAD GIVEN PERSONAL GUARANTEE TO BA NKS, THAT SHE HAD PAID TAX ON THE REMUNERATION RECEIVED FROM THE COMPANY.REFERRING TO THE ORDER OF THE FAA FOR THE AY. 2008-09, HE RESTRICTED THE DISALLOWANCE TO RS.3 LAK HS. 7.2. BEFORE US, THE AR ARGUED THAT REMUNERATION PAID TO RM(RS. 6 LAKHS) WAS ALLOWED BY THE ASSESSING OFFICER,WHILE PASSING THE ORDER FOR THE A Y. 2011-12, THAT THERE WAS NO BASIS TO HOLD THAT RM WAS NOT PROVIDING SERVICES TO THE ASSE SSEE. HE REFERRED TO THE PAGES 82 OF THE PAPER BOOK. THE DR SUPPORTED THE ORDER OF THE AO AN D THE FAA. 7605/M/12-MUCHHALA MAGIC 6 7.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. WE FIND THAT THE AO HAD DISALLOWED THE ENTIRE REMUNERATION PAID TO THE DIRE CTOR, THAT THE FAA RESTRICTED IT TO 50%, THAT THE DIRECTOR HAD OFFERED THE REMUNERATION INCOME IN HER INDIVIDUAL RETURN OF INCOME, THAT THE RETURN OF THE DIRECTOR WAS ACCEPTED BY THE DEPARTME NT, THAT THE AO HAD NOT MADE ANY ENQUIRY ABOUT THE ASSERTION MADE BEFORE THE ASSESSEE BEFORE HIM, THAT IT WAS CLAIMED THAT SHE WAS ATTENDING THE DAY-TO-DAY AFFAIRS OF THE COMPANY AND HAD STOOD AS GUARANTOR TO THE BANKS, THAT IN THE SUBSEQUENT YEAR THE AO HAD ALLOWED THE REMUN ERATION (RS. 6 LAKHS) PAID TO HER. CONSIDERING THESE FACTS WE ARE OF THE OPINION THAT THERE WAS NO JUSTIFICATION FOR RESTRICTING THE EXPENDITURE TO RS.3 LAKHS. REVERSING THE ORDER OF T HE FAA, WE DECIDE GROUND NUMBER SIX IN FAVOUR OF THE ASSESSEE. 8. LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RS.1 .66 LAKHS OUT OF THE BUSINESS PROMOTION EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS THE AO DISALLOWED 20% OF RS. 8.31 LAKHS HOLDING THAT PERSONAL ELEMENT IN INCURRING THE BUSI NESS PROMOTION EXPENDITURE COULD NOT BE DENIED. 8.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA.BEFORE HIM, IT WAS ARGUED THAT ASSESSEE WAS A P RIVATE LIMITED COMPANY, THAT EXPENSES WERE INCURRED DURING THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS, THAT THERE COULD NOT BE ANY EXPENSES FOR PERSONAL PURPOSES. THE FAA HELD THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO RULE OUT ANY PERSONAL EXPENSES OUT OF THE BUSINESS PROMOTION EXPENSES INCURRED THROUGH THE CREDIT CARD. HE UPHELD THE ORD ER OF THE AO. 8.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD HELD THAT ASSESSEE HAD INCURRED AN EXPENDITU RE OF RS.8.31 LAKHS THROUGH CREDIT CARDS, THAT HE DID NOT CALL FOR ANY DETAILS IN THAT REGARD , THAT HE HAD MADE AN AD HOC DISALLOWANCE AT THE RATE OF 20%, THAT THE FAA HAD CONFIRMED HIS ORD ER. IN OUR OPINION IN CASE OF CORPORATE ASSESSEES DISALLOWANCE ON ACCOUNT OF PERSONAL ELEME NT CAN BE MADE ONLY IF THE EXPENDITURE INCURRED WAS FOR THE PERSONAL USE OF ANY OF THE DIRECTORS/EM PLOYEE AND THAT EXPENDITURE DID NOT HAVE ANY RELATION WITH THE CARRYING OUT OF THE BUSINESS. WE DONT FIND THAT AO/FAA HAD CARRIED OUT ANY SUCH EXERCISE. IF THE AO HAD ANY DO UBT, IT WAS HIS DUTY TO MAKE FURTHER INVESTIGATION AND PINPOINT THE ACTUAL EXPENDITURE N OT INCURRED FOR THE BUSINESS OF THE ASSESSEE. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT MA KING AND UPHOLDING THE DISALLOWANCE WAS NOT JUSTIFIABLE.REVERSING THE ORDER OF THE FAA,WE D ECIDE THE LAST GROUND IN FAVOUR OF THE ASSESSEE. 7605/M/12-MUCHHALA MAGIC 7 AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2017. , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.