2010 (2) TMI 892 - ITAT, AGRA

Disallowance of telephone and car expenses - AO disallowed 1/4th of the total expenses - CIT(A) has reduced this disallowance to 1/6th - Held that:- These additions are simply ad hoc but still in the case of the assessee as an individual non-business user of the expenses cannot be ruled out. But the disallowances in question are on higher side. In the interest of justice we reduce the disallowances to 1/7th in telephone account and 1/10th in car account.

Addition in the account of household expenses - Held that:- As before making ad hoc disallowance AO is bound to bring some concrete basis on which he can make additions in the account of house-hold expenses. The reply of the assessee comes thereafter only. This addition being simply ad hoc and based on guess work cannot be sustained in the eyes of law. The entire addition is, therefore, ordered to be deleted.

Sale of shares - Undisclosed income - Capital Gain vs. Income from other sources - assessee had acquired the shares, the purchase of which was duly declared by the assessee in earlier years which stand accepted by the revenue - assessee contended that decision of the lower authorities are influenced by the general observation of the Investigation Wing that arose a suspicion turned into conclusive proof in the minds of the authorities that everybody who has sold the shares at a high price has converted his unaccounted money through accommodation entries - Held that:- It was the duty of the AO to bring on record sufficient evidences and material to prove that the documents filed by the assessee were bogus, false or fabricated and the long-term capital gain shown by him was actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the observation that the assessee could not prove the transaction to be genuine one. This is the settled law in view of the decision of CIT v. Daulat Ram Rawatmull [1972 (9) TMI 9 - SUPREME Court] that the apparent is real. It is undisputed that assessee has supplied all the evidence regarding the purchase. Entire approach of the lower authorities are based on suspicion, surmises and conjectures, the same cannot be approved. CIT(A) has erred on facts as well as in law in upholding the order of the Assessing Officer treating the income under the head 'Long Term Capital Gain' as sham and bogus and taxing the same under the head 'income from other sources' - appeal of the assessee is partly allowed.