ACIT, Circle-23(1),, v. Brij Bhandari,,

ITA 2030/DEL/2004 | 2000-2001
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 203020114 RSA 2004
Assessee PAN UGUST2008A
Bench Delhi
Appeal Number ITA 2030/DEL/2004
Duration Of Justice 7 year(s) 5 month(s)
Appellant ACIT, Circle-23(1),,
Respondent Brij Bhandari,,
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 30-09-2011
Date Of Final Hearing 25-08-2011
Next Hearing Date 25-08-2011
Assessment Year 2000-2001
Appeal Filed On 30-04-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE G.E. VEERABHADRAPPA HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO.2030/DEL/2004 ASSESSMENT YEAR: 2000-01 ASSISTANT COMMISSIONER OF I.T. VS. LATE SHRI BRIJ BHANDARI L/H CIRCLE 23(1) 1. RATNA PARSHAD NEW DELHI. 2. SHIV BHANDARI 3. SAMIRA ALI 4. SMT. PIA KAPOOR C-6 G.K. ENCLAVE-I NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RS NEG I SENIOR DR RESPONDENT BY: NONE ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 09.02.2004 PASSED FOR ASSESSMENT YEAR 2000-01. IN RESPONSE TO THE NOTICE OF HEARING SHRI SANJEEV R. MEHRA PARTNER OF MEHRA AND JASTANI WROTE A LETTER ON 11.1.L2007 STATING T HEREIN THAT SHRI BRIJ BHANDARI HAS EXPIRED ON 20.8.2004 LEAVING BEHIND FO LLOWING LEGAL HEIRS: 1. RATNA PERSHAD D/O LATE BRIJ BHANDARI; FLAT NO. B-67 EDEN TOWER PLOT NO.20 SEC. 5 DWARKA PHASE I NEW DELHI-1100 75 2 2. SHRI SHIV BHANDARI S/O LATE BRIJ BHANDARI 4456 OAKDALE VININGS LANDING SAMYRNA GA 30080 KOLKATA-19 3. SAMIRA ALI D/O LATE BRIJ BHANDARI 501 HEMADRI BU IDG. 22 BALLYGUNJ PARK ROAD KOLKATA-19 4. SMT. PIA KAPOOR W/O SSHRI KAPIL KAPOOR BEACON EDU CATION JUMERIAH CENTRE JUMERIAH ROAD P.O. BOX 76691 DUB AI UAE 2. HE HAS ALSO ENCLOSED THE DEATH CERTIFICATE ISSUE D BY THE MUNICIPAL CORPORATION DELHI. HE HAS FILED A POWER OF ATTORNE Y ON BEHALF OF RATNA PERSHAD D/O LATE SHRI BRIJ BHANDARI. THE APPEAL WAS LISTED ON 09 TH AUGUST 2008 AND AN ADJOURNMENT WAS SOUGHT BY SHRI SANJEEV MEHRA. HEARING WAS ADJOURNED TO 16 TH OCTOBER 2008 HOWEVER THEREAFTER NO ONE HAS APP EARED ON BEHALF OF THE ASSESSEE. THE DEPARTMENT IS ALSO N OT ABLE TO EFFECT THE SERVICE UPON THE OTHER LEGAL REPRESENTATIVES NAMEL Y SHRI SHIV BHANDARI SAMEERA ALI AND SMT. PIA KAPOOR. THIS APPEAL WAS PR ESENTED IN THE ITAT ON 2.6.2004. ALMOST MORE THAN THREE YEARS HAVE EXPIRED AFTER THE DEATH OF SHRI BRIJ BHANDARI AND THE DEPARTMENT IS UNABLE TO EFFEC T THE SERVICE UPON THE LEGAL REPRESENTATIVE. IT IS ASKING ADJOURNMENT FOR ONE OR THE OTHER REASONS. HOWEVER WE ARE NOT INCLINED TO GRANT FURTHER ADJOU RNMENT TO THE DEPARTMENT 3 AND PROCEED TO DISPOSE OF THE APPEAL. ASSESSING OFF ICER IS DIRECTED TO COMPLETE THE EXERCISE OF TAKING LEGAL HEIRS ON THE RECORD. 3. IN THE APPEAL GROUND NOS. 1 AND 2 ARE INTER-CON NECTED TO EACH OTHER THEREFORE WE TAKE THEM TOGETHER. THE BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE AT THE RELEVANT TIME WAS WORKING AS A CONS ULTANT. HE USED TO PROVIDE SPECIAL TYPE OF CONSULTANCY I.E. ON ACCOUNT OF SALE OF NUCLEAR DETECTION EQUIPMENT WHICH IS MAINLY SOLD TO DEFENCE AUTHORITIES AND PARTY DEALING WITH NUCLEAR ACTIVITIES. HE HAS FILED HIS R ETURN OF INCOME ON 30 TH OCTOBER 2000 DECLARING AN INCOME OF RS.6 13 350. A SURVEY UNDER SEC. 133A OF THE ACT WAS CARRIED OUT ON THE BUSINESS PRE MISES OF THE ASSESSEE ON 11.5.2001. HIS STATEMENT WAS ALSO RECORDED. IT EMER GES OUT FROM THE RECORD THAT ASSESSEE WAS PAYING RENT OF RS.6 LACS FOR THE PREMISES C-6 GK-I NEW DELHI. THIS PREMISES WAS BEING USED BY HIM AS A RES IDENTIAL-CUM-BUSINESS PURPOSES. ASSESSING OFFICER SOUGHT TO DISALLOW 90% OF RENT PAID BY THE ASSESSEE ON ACCOUNT OF PERSONAL USER. SIMILARLY HE DISALLOWED 90% OF ELECTRICAL EXPENSES ON THE GROUND THAT PREMISES WAS USED FOR PERSONAL PURPOSES. 4 4. ON APPEAL LEARNED CIT(APPEALS) HELD THAT 70% OF THE PREMISES IS TO BE CONSTRUED AS USED FOR THE BUSINESS PURPOSES AND ONLY 30% EXPENSES ARE TO BE DISALLOWED. 5. THE GRIEVANCE OF REVENUE IN GROUND NOS. 1 AND 2 IS THAT THE DISALLOWANCE TO THE EXTENT OF 90% OF RENT AS WELL A S ELECTRICITY EXPENSES OUGHT TO HAVE BEEN CONFIRMED BY THE LEARNED CIT(APP EALS). 6. NO ONE APPEARED ON BEHALF OF THE ASSESSEE INSPIT E OF SERVICE OF NOTICE UPON MRS. RATNA PARSHAD. THEREFORE WE HEARD THE LE ARNED DR AND PROCEED TO DECIDE THE APPEAL. ON DUE CONSIDERATION OF THE A SSESSMENT ORDER AS WELL AS ORDER OF LEARNED CIT(APPEALS) WE ARE OF THE VIEW T HAT THERE IS NO EVIDENCE AVAILABLE WITH THE ASSESSING OFFICER FOR HARBORING A BELIEF THAT ONLY 10% OF THE PREMISES WAS USED BY THE ASSESSEE FOR BUSINESS PURPOSES. LEARNED FIRST APPELLATE AUTHORITY WHILE ACCEPTING THE 70% OF PREM ISES AS USED FOR THE PURPOSE OF THE BUSINESS HAD MADE REFERENCE TO CIRCU MSTANTIAL EVIDENCE. THE FIRST CIRCUMSTANCES ASSIGNED BY THE ASSESSING OFFIC ER IS THAT AT THE TIME OF SURVEY A ROUGH SITE PLAN WAS PREPARED WHICH DEMONS TRATES USER OF THE PREMISES FOR THE PURPOSE OF THE BUSINESS AT 10%. HO WEVER THIS SITE PLAN WAS NOT FOUND IN THE SURVEY FOLDER. LEARNED FIRST APPEL LATE AUTHORITY HAS 5 RECORDED A SPECIFIC FINDING. HE OBSERVED THAT A REF ERENCE OF SUCH A SITE PLAN IS BEING MADE IN THE SURVEY REPORT BUT SITE PLAN IS NOT AVAILABLE IN THE FOLDER. ON THE OTHER HAND LEARNED CIT(APPEALS) OBSERVED TH AT IN THE STATEMENT ASSESSEE HAS DISCLOSED 60% OF THE SPACE BEING USED FOR THE PURPOSE OF THE BUSINESS. IN THIS BACKGROUND LEARNED CIT(APPEALS) HAS MADE FOLLOWING ANALYSIS: NOW THE QUESTION IS HOW MUCH OF THE C-6 G.K. ENCL AVE PREMISES WAS BEING UTILIZED FOR RESIDENTIAL PURPOSE S DURING THE PERIOD 1.4 .. 99 TO 3 1.03.2000 WHICH IS PERIOD MUCH PRIOR TO SURVEY WHICH WAS CONDUCTED ON 1105.2001. THIS QUESTION HAD TO BE FURTHER ANSWERED IN THE LIGHT OF THE FACT THAT AS ON THE DA TE OF THE SURVEY THE APPELLANT HAS HIRED ANOTHER HOUSE S-148 G.K.PAI1-1 I @ RS. 28 000/- PER MONTH W.E.F 10.8.2000 EXCLUSIVELY FOR THE BUSIN ESS PURPOSES. FOR THE ACCOUNTING PERIOD 1999-2000 THE APPELLANT HAD O NLY ONE HOUSE WHILE AT THE TIME OF SURVEY THE APPELLANT HAD AN AD DITIONAL HOUSE ON RENT FOR EXCLUSIVELY FOR BUSINESS PURPOSES. FURTHER THE SIZE OF THE FAMILY IS ALSO VERY RELEVANT I.E. THE APPELLANT IS A SINGLE PERSON AND HIS DAUGHTER HAD A SEPARATE HOUSE. THE NUMBER OF EMPLOY EES OF THE APPELLANT WAS AROUND 10. EVEN IF IT IS ASSUMED THAT THE DAUGHTER OF THE APPELLANT WAS STAYING WITH HIM DURING THE PERIOD 19 99-2000 STILL THE APPELLANT MUST BE USING MORE SPACE FOR BUSINESS PUR POSES PERTAINING TO C-6 G. K. ENCLAVE-I NEW DELHI DURING THE PERIO D 1999-2000 AS COMPARED TO THE DATE OF SURVEY BECAUSE AT THAT TIME THE APPELLANT HAD ONLY ONE PROPERTY ON RENT WHICH WAS USED BOTH FOR O FFICE AND RESIDENTIAL PURPOSES. IF ON THE DATE OF SURVEY THE USE FOR RESIDENCE IS 6 TAKEN AT 50% WHICH IS AS PER THE OBSERVATION OF THE OFFICER WHO CONDUCTED THE SURVEY THEN IT IS DIFFICULT TO DISBEL IEVE THE CLAIM OF THE APPELLANT THAT ONLY 25% PORTION WAS BEING USED AS R ESIDENCE DURING 1999-2000. HOWEVER KEEPING IN VIEW THE ABOVE SEQUE NCE OF FACTS AND ALSO THAT NO DEFINITE MEASURE OF THE RESIDENTIA L USE IS POSSIBLE FOR ACCOUNTING PERIOD 1999-2000 IT IS CONSIDERED REASON ABLE THAT 30% OF PREMISES C-6 G. K. ENCLAVE WAS USED FOR RESIDENTI AL PURPOSES AND THE BALANCE 70% WAS USED FOR BUSINESS PURPOSES. ACC ORDINGLY OUT OF THE TOTAL RENT PAID FOR C-6 G.K ENCLAVE AT RS. 6 0 0 000/- PER ANNUM THE DISALLOWANCE IS RESTRICTED TO RS. 1 80 000/- AG AINST THE DISALLOWANCE MADE BY THE AO AT RS. 5 40 000/- .. AC CORDINGLY THE APPELLANT GETS A RELIEF OF RS. 3 60 000/-. 7. ON DUE CONSIDERATION OF THE ABOVE FINDINGS WE DO NOT FIND ANY ERROR IT. IT IS AN OPINION FORMED BY THE LEARNED FIRST AP PELLATE AUTHORITY ON AN ANALYSIS OF THE SURROUNDING CIRCUMSTANCES. LEARNED DR WAS UNABLE TO POINT OUT ANY PERVERSITY WITH THE FORMATION OF THE ABOVE OPINION. THERE IS NO EVIDENCE POSSESSED BY THE ASSESSING OFFICER INDICAT ING THAT 90% OF THE SPACE WAS USED FOR RESIDENTIAL PURPOSES. IT IS AN O PINION BASED ON ESTIMATE AND WE DO NOT FIND ANY REASON TO REPLACE A REASONAB LE OPINION FORMED BY THE LEARNED FIRST APPELLATE AUTHORITY BY ONE MORE ESTIM ATED OPINION. THEREFORE BOTH THE GROUNDS ARE EJECTED. 7 8. IN GROUND NO.3 THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS DELETED THE DISALLOWANCE OF INTERE ST EXPENSES AMOUNTING TO RS.11 066. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER HAS DISALLOWED THE INTEREST PAID BY THE ASSESSEE ON PUR CHASE OF A CAR. THE CONTENTION OF THE ASSESSING OFFICER IS THAT ASSESSE E HAS ADVANCED A SUM OF RS.4.5 LACS TO THE OWNER OF THE PREMISES WITHOUT CH ARGING ANY INTEREST. LEARNED CIT(APPEALS) HAS OBSERVED THAT INTEREST FRE E SECURITY DEPOSIT WAS GIVEN IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT Y EAR 1998-99 WHEREAS CAR WAS PURCHASED IN FINANCIAL YEAR 1999-00. THE ASSESS EE HAS PAID THE INTEREST FREE ADVANCE FROM HIS OWN SAVINGS WHEREAS THE CAR W AS PURCHASED FOR THE PURPOSE OF THE BUSINESS. ON DUE CONSIDERATION OF T HE FACTS AND CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ASSES SING OFFICER FAILED TO ESTABLISH ANY DIVERSION OF INTEREST BEARING FUND FO R PERSONAL PURPOSES WHICH CAN AUTHORIZE HIM TO DISALLOW THE INTEREST EXPENSES . LEARNED CIT(APPEALS) HAS RIGHTLY DELETED THE DISALLOWANCE. 9. IN THE NEXT GROUND OF APPEAL GRIEVANCE OF THE R EVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN RESTRICTING THE DISALLOWA NCE OF TRAVELLING EXPENSES TO RS.50 000 AS AGAINST RS.2 24 786 DISALLOWED BY T HE ASSESSING OFFICER. 8 10. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS DEBITED A SUM OF RS.11 23 629 ON ACCOUNT OF TOUR AND TRAVELLING. ASS ESSING OFFICER ON AN ESTIMATE BASIS DISALLOWED 25% OF SUCH EXPENDITURE AND MADE AN ADDITION OF RS.2 24 786. ON APPEAL LEARNED CIT(APPEALS) HAS PA RTLY DELETED THE DISALLOWANCE BY RECORDING THE FOLLOWING FINDINGS: THE APPELLANT IS EARNING COMMISSION FROM A VERY SP ECIAL TYPE OF CONSULTATION I.E. ON A/C OF SALE OF NUCLEAR DETE CTION EQUIPMENT WHICH IS MAINLY SOLD TO DEFENSE AUTHORITIES AND PAR TIES DEALING WITH NUCLEAR ACTIVITIES THE APPELLANT IS A WIDOWER AND H IS DAUGHTER IS ASSISTING HIM IN DAY TO DAY BUSINESS AND HAS BEEN T RAVELLING TO COUNTRIES ABROAD. BEFORE ME THE APPELLANT HAS FILED THE COMPLETE DETAIL OF DOMESTIC VISIT THROUGH AIR AND THE FOREIGN VISIT S AND THE NAMES OF THE PERSONS WHO VISITED. AS FAR AS THE FOREIGN VISI TS ARE CONCERNED I DO NOT FIND ANY ELEMENT OF PERSONAL USE INVOLVED IN SU CH VISITS BECAUSE THESE ARE MAINLY BY SHRI BRIJ BHANDARI AND ARE FOR BUSINESS PURPOSES ONLY. REGARDING THE DOMESTIC VISITS THESE II ARE AL SO MAINLY UNDERTAKEN BY THE APPELLANT EXCEPT ONE OR TWO VISIT S BY ONE OF THE EMPLOYEE MR. KELKAR AND HIS DAUGHTER. THE AO HAS NO T DOUBTED THE FACTUM OF JOURNEY UNDERTAKEN. MOST OF THE DOMESTIC JOURNEYS HAVE BEEN PERFORMED TO BOMBAY MADRAS & CALCUTTA WHERE T HE APPELLANT HAS PUT HIS EMPLOYEES FOR CONDUCTING THE BUSINESS T HEREFORE SUCH VISITS CANNOT BE TREATED AS PERSONAL VISITS. THERE ARE ONLY ONE OR TWO VISITS WHICH HAVE BEEN TO GOA VIA BOMBAY WHICH CAN BE SAID TO HAVE SOME PERSONAL ELEMENT. ALL BILLS & VOUCHERS WERE I N THE POSSESSION OF THE AQ AND NO EXPENDITURE ON THE VISITS HAVE BEE N POINTED OUT 9 WHICH IS NOT FOR OFFICIAL PURPOSES IN THE GIVEN CI RCUMSTANCES AD HOC DISALLOWANCE OF 20% IS HIGHLY EXCESSIVE. LOOKING TO THE FACT THAT SUBSTANTIAL TRAVELING IS REQUIRED IN THE NATURE OF THE BUSINESS OF THE APPELLANT IT WILL BE REASONABLE TO DISALLOW RS. 50 000/- OUT OF THE EXPENSES MAINLY INCURRED IN HOTELS ETC. DURING THE DOMESTIC VISITS WHICH CAN BE CONSIDERED FOR PERSONAL USE AND ACCOR DINGLY THE ADDITION IS RESTRICTED TO 50 000/- AND APPELLANT GE TS A RELIEF OF RS. 174786/-. 11. ON DUE CONSIDERATION OF THE ABOVE FINDINGS WE ARE OF THE VIEW THAT THE ASSESSEE WAS MAINTAINING COMPLETE DETAILS IN RE SPECT OF HIS VISITS. HE WAS IN A PECULIAR LINE OF BUSINESS. ASSESSING OFFICER H AS NOT POINTED OUT ANY DEFECT IN THE DETAILS MAINTAINED BY HIM. HE MADE TH E DISALLOWANCE ACCORDING TO HIS UNDERSTANDING THAT PERSONAL ELEMENT IN SUCH TOUR MUST BE INVOLVED. LEARNED FIRST APPELLATE AUTHORITY HAS REAPPRECIATED THE FACTS AND CIRCUMSTANCES AND RESTRICTED THE DISALLOWANCE TO RS .50 000. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED FIRST APPELLA TE AUTHORITY. 12. IN GROUND NO.5 GRIEVANCE OF REVENUE IS THAT LE ARNED CIT(APPEALS) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF DEPREC IATION ON CAR OF RS.22 852 AS AGAINST RS.45 705. ASSESSING OFFICER HAS DISALLO WED 20% OF EXPENDITURE AND DEPRECIATION ON THE CAR ON THE GROUND THAT PERS ONAL USER OF THE CAR 10 CANNOT BE RULED OUT. LEARNED FIRST APPELLATE AUTHOR ITY HAS RESTRICTED SUCH DISALLOWANCE TO 10%. ON DUE CONSIDERATION OF THE F ACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THERE CANNOT BE ANY STRAIT JACKET FORMULA FOR MEASURING PERSONAL USER OF SUCH FACILITY. IT DEPEND S UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT IS AN ESTIMATED DIS ALLOWANCE. LEARNED CIT(APPEALS) AFTER CONSIDERING ALL THE FACTS AND CI RCUMSTANCES AND USER OF THE CAR RESTRICTED SUCH DISALLOWANCE TO 10%. WE DO NOT FIND ANY ERROR IN IT. THEREFORE THIS GROUND OF APPEAL IS REJECTED. 13. IN GROUND NO.6 GRIEVANCE OF THE REVENUE IS THA T LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.12 46 644. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS RECEIVE D A SUM OF RS.12 46 644 FROM M/S. EUROSIS MEASURES. ASSESSING OFFICER WAS O F THE OPINION THAT ASSESSEE HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTI NG THEREFORE ANY RECEIPT RECEIVED BY HIM IS TO BE TREATED AS COMMISS ION. THE CASE OF THE ASSESSEE IS THAT HE HAS RECEIVED TOTAL RECEIPT AT R S.57 68 182 OUT OF WHICH A SUM OF RS.12 46 644 IS AN ADVANCE WHICH WAS GIVEN T O MEET THE EXPENSES FOR LAUNCHING OF A NEW ITEM. HE HAS SHOWN THIS RECE IPT AS A LIABILITY. THE NEW PRODUCT WAS NOT LAUNCHED. THIS RECEIPT WAS RECE IVED IN JANUARY 2000 AND IT WAS PAID BACK IN THE NEXT YEAR. IN OTHER WOR DS IT WAS ADJUSTED AGAINST 11 THE COMMISSION RECEIPT OF THE NEXT YEAR. LEARNED AS SESSING OFFICER HAS REJECTED THIS CONTENTION OF ASSESSEE AND INCLUDED T HE AMOUNT OF RS.12 46 446 IN THE TOTAL RECEIPT. ON APPEAL LEARNED CIT(APPEAL S) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE DISALLOW ANCE. 14. WITH THE ASSISTANCE OF LEARNED DR WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE NATURE OF THE RECEIPT RECEIVED BY H IM HAS BEEN CATEGORIZED AS AN ADVANCE FOR MEETING THE EXPENSES. HE HAS NOT REC EIVED THE AMOUNT IN LIEU OF ANY SERVICES WHICH COULD ATTAIN THE CHARACTER OF COMMISSION. IT IS AN AMOUNT WHICH REPRESENTED THE WORK REQUIRED TO BE DO NE BY THE ASSESSEE HENCE ON RECEIPT OF THIS AMOUNT IT WOULD NOT ATTA IN THE CHARACTER OF AN INCOME. EVERY AMOUNT CANNOT BE OF REVENUE NATURE. I T COULD BE INCLUDED IN THE TOTAL RECEIPT OF COMMISSION IF IT HAS A CHARAC TER OF COMMISSION. LEARNED FIRST APPELLATE AUTHORITY HAS CONSIDERED ALL THESE ASPECTS BEFORE DELETING THE ADDITION AND WE DO NOT HAVE ANY HESITATION TO CONCU R WITH HIS CONCLUSION. THEREFORE THIS GROUND OF APPEAL IS REJECTED. 15. GROUND NOS. 7 TO 10 ARE BASED ON COMMON REASONI NG THEREFORE WE TOOK THEM TOGETHER. THE GRIEVANCE OF REVENUE IN THE SE GROUNDS IS AS UNDER: 12 7. REDUCING THE DISALLOWANCE OUT OF ENTERTAINMENT EXPENSES FROM RS. 1 14 262 MADE BY THE A.O. TO RS.30 076 IGNORING THE VOUCHERS FOUND BY SURVEY TEAM WERE DISPROPORTIONATE TO THE E XPENSES CLAIMED BY THE ASSESSEE. FURTHER FOR MANY OF THE EXPENSES NO VOUCHER OR BILL WAS PRODUCED. 8. REDUCING THE DISALLOWANCE OUT OF TELEPHONE & MOB ILE EXPENSES FROM RS.1 00 000 TO RS.27 088 IGNORING THAT ASSESSE E HAS USED COMMON PREMISES FOR RESIDENCE & OFFICE PURPOSE. 9. DELETING THE DISALLOWANCE OF RS.50 000 OUT OF SA LARY & WAGES IGNORING THAT ASSESSEE HAS USED COMMON PREMISES FOR RESIDENCE AND OFFICE PURPOSE. 10. REDUCING THE DISALLOWANCE TO RS.20 000 FROM RS. 50 000 ON ACCOUNT OF OFFICE EXPENSES IGNORING THAT ASSESSEE HAS USED COMMON PREMISES FOR RESIDENCE & OFFICE PURPOSE. 16. BEFORE ADVERTING TO GIVE OUR REASONING WE WOUL D LIKE TO MAKE A REFERENCE TO THE FINDINGS OF THE LEARNED CIT(APPEAL S) RECORDED IN PARAGRAPH NOS. 8.3 AND 9.4 IN RESPECT OF GROUND NOS. 7 & 8. T HEY READ AS UNDER: 8.3 I HAVE GONE THROUGH THE REASONING GIVEN BY THE A.O. AND THE ARGUMENTS OF THE APPELLANT CAREFULLY. I HAVE ALSO P ERUSED THE DETAILS OF THE ENTERTAINMENT EXPENSES. MAJORITY OF THE EXPENSE S HAVE BEEN INCURRED THROUGH THE CREDIT CARDS FOR WHICH COMPLET E DETAILS WERE 13 AVAILABLE. PERUSAL OF THE DETAILS INDICATE THAT MOS T OF THE EXPENDITURE RELATE TO PAYMENTS MADE TO STAR HOTELS. THE TOTAL E NTERTAINMENT EXPENSES DEBITED TO THE P & L A/C ARE RS.300764. LO OKING TO THE NATURE OF ACTIVITIES OF THE APPELLANT WHICH ARE MAI NLY FOR EFFECTING THE SALE OF THE PRODUCTS OF THE FOREIGN SUPPLIER RELATI NG TO NUCLEAR DETECTION EQUIPMENT. THE ENTERTAINING OF PROSPECTIV E BUYER IS ONE OF THE ESSENTIAL ACTIVITY AND INCURRING OF SUCH EXPENS ES IS MAINLY FOR THE BUSINESS PURPOSES. THE A .O. HAD ALL THE BILLS & VO UCHER IN HIS POSSESSION PERTAINING TO SUCH EXPENSES STILL NOT EV EN A SINGLE VOUCHER WAS DETECTED OR POINTED OUT BY THE A.O. WHICH WAS E ITHER BOGUS INFLATED OR NOT FOR BUSINESS PURPOSES. THE A.O. HAS NOT SUBSTANTIATED HIS ASSERTION THAT DURING THE COURSE OF SURVEY THE VOUCHERS FOR EXPENSES AVAILABLE WITH THE ASSESSEE WERE DISPROPOR TIONATE TO THE EXPENSES CLAIMED IN THE BOOKS OF ACCOUNTS BY BRING ING ON RECORD WHAT WERE THE EXPENSES BOOKED IN THE BOOKS OF A/CS. AND FOR HOW MUCH THE VOUCHERS WERE FOUND AND WHAT WAS THE EXCES S VOUCHER FOUND. IN SUCH A SITUATION THE DISALLOWANCE HAS NO T BEEN MADE BY THE A.O. BY BRING OUT ANY COGENT MATERIAL ON RECORD. S INGH THE EXPENDITURE IS MAINLY FOR FOOD ETC. IN THE STAR HOT ELS THE ELEMENT OF PERSONAL USE CANNOT BE RULED OUT. IT IS CONSIDERED FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO 10% OF THE TOTAL EX PENSES FOR ENTERTAINMENT FOR PERSONAL USE AND ACCORDINGLY THE DISALLOWANCE IS RESTRICTED TO 30076 AND APPELLANT GETS A RELIEF OF RS.84 186. 9.4 THE APPELLANT HAS GIVEN A DETAILED BIFURCATION OF EXPENSES PERTAINING TO ALL THE FIVE LAND LINE TELEPHONES AND THE MOBILE PHONE OF 14 AIRTEL AND THESE ARE FURTHER CATEGORIZED INTO LOCAL CALLS STD CALLS AND ISD CALLS. EXPENSES OF RS.176879 ARE ON A/C OF ISD CHARGES WHICH ARE MAINLY TO THE PRINCIPALS WHO ARE LOCATED ABROAD AND THERE CANNOT BE ANY ELEMENT OF PERSONAL USE IN SUCH EXPENSES. EXPEN SES OF RS.144078 PERTAINING TO STD CALLS MADE WITHIN THE COUNTRY. LO OKING TO THE FACT THAT THE APPELLANT HAS ITS EMPLOYEES LOCATED IN DIF FERENT TOWNS AND ITS BUYERS ALSO LOCATED IN DIFFERENT TOWNS THE STD CHAR GES CANNOT BE CONSIDERED AS PERSONAL CALLS. THE BALANCE EXPENSES ON LOCAL CALLS ARE RS.126809 WHICH COULD INCLUDE SOME ELEMENT OF PERSO NAL USE. THE APPELLANT HAS HIMSELF TREATED 12000 OUT OF SUCH EXP ENSES FOR PERSONAL USE WHICH IS APPROXIMATELY 10% OF THE LOCAL CALLS. LOOKING TO THE OVERALL ACTIVITIES OF THE APPELLANT THAT MOST OF TH E BUSINESS IS CONDUCTED THROUGH TELEPHONE OR TRAVELLING THE DISAL LOWANCE OUT OF LOCAL CALLS AIRTEL CALLS AND STD CALLS AT 10% FOR PERSONAL USE WOULD BE QUITE REASONABLE AND ACCORDINGLY THE DISALLOWANCE I S RESTRICTED TO RS.27088 (WHICH IS 10% OF RS.270887 (126809 LOCAL C ALLS + RS.144078 STD CALLS) AND THE APPELLANT GETS RELIEF OF RS.72912/-. 17. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER HAS MADE A DISALLOWANCE OF RS.1 14 262 OUT OF ENTERTAINMENT EXPENSES. SIMILARL Y HE DISALLOWED RS. 1 LAC OUT OF TELEPHONE AND FAX EXPENSES. THESE DISALL OWANCES HAVE BEEN NOTICED BY THE ASSESSING OFFICER IN THE COMPUTATION OF INCOME. HE HAS NOWHERE MADE ANY DISCUSSION ABOUT THE TOTAL AMOUNT DEBITED BY THE ASSESSEE 15 AND HOW THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THO SE EXPENSES WITH THE EVIDENCE. ON THE OTHER HAND LEARNED FIRST APPELLAT E AUTHORITY IN THE FINDINGS EXTRACTED SUPRA HAS OBSERVED THAT TOTAL EN TERTAINMENT EXPENSES DEBITED TO THE P & L ACCOUNT ARE RS.3 00 764. MOST OF THE PAYMENTS WERE MADE THROUGH CREDIT CARDS IN STAR HOTELS. ASSESSEE HAS PRODUCED BILLS AND VOUCHERS. IN SUCH CIRCUMSTANCES TO DISALLOW ALMOST 30% OF THE EXPENSES IS AN ARBITRARY EXERCISE OF THE POWER AT THE END OF TH E ASSESSING OFFICER. SIMILARLY ASSESSEE HAS FURNISHED THE DETAILS OF EX PENSES IN RESPECT OF LOCAL CALLS STD CALLS AND ISD CALLS. ASSESSING OFFICER H AS NOT MADE ANY DISCUSSION ON THIS ISSUE. AS FAR AS THE DISALLOWANC E OF RS.50 000 OUT OF SALARY AND WAGES AND RS.50 000 OUT OF OFFICE EXPENS ES ARE CONCERNED WE FIND THAT ASSESSEE HAD A STAFF OF MORE THAN 10 EMPL OYEES. HE HAD INCURRED EXPENDITURE OF RS.5 74 977 ON SALARY AND WAGERS AND RS.2 26 265 TOWARDS OFFICE EXPENSES. THE DETAILS OF THESE EXPENSES AND THE DETAILS OF EMPLOYEES WERE SUBMITTED BY THE ASSESSEE. ASSESSING OFFICER H AS NOT RECORDED ANY CATEGORICAL FINDING ON THESE EXPENSES THAT THEY ARE BOGUS OR EXCESSIVE. LEARNED FIRST APPELLATE AUTHORITY ON AN ANALYSIS OF ALL THE DETAILS DELETED THE DISALLOWANCE OUT OF SALARY EXPENSES AND RESTRICTED THE DISALLOWANCE OUT OF OFFICE EXPENSES AT RS.20 000. AFTER TAKING INTO CON SIDERATION THE FINDINGS OF THE LEARNED CIT(APPEALS) IN PARAGRAPHS 9.5 AND 9.6 OF THE IMPUGNED ORDER 16 WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDI NG. ALL THESE GROUNDS OF APPEAL ARE REJECTED. 18. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30.09.2011 SD/- SD/- ( G.E. VEERABHADRAPPA) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 30/09/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR