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2016 (1) TMI 1438 - AT - Income TaxDisallowance of Business Development Exp - allowable revenue expenses - HELD THAT:- Assessee has stated to have availed the services of Mrs. Vidya Ramanarayanan Iyer and the nature of services stated to have been rendered is being produced in the preceding para, however, the assessee has not proved the rendering of services by her wife with adequate evidences/documents. On going through the tax return, it is not clear that the income of ₹ 9,44,810/- was included in the said return of income for the assessment year 2006-07. Interest of justice will be best served if the issue is set aside to the file of A.O. for de-novo consideration of the issue, after considering the submissions and evidences filed by the assessee to support his contentions . The assessee is directed to file necessary evidences/documents before the AO to substantiate his claim with respect to allowability of business development expenses claimed as revenue expenditure by the assessee to have been incurred wholly and exclusively for the purposes of the business. Accordingly, we set aside this matter to the file of A.O. who will decide the issue afresh in the light of evidences and explanations filed by the assessee Disallowance of consulting charges - HELD THAT:- The assessee has stated that the said professionals shifted their address and hence it was time consuming to get the confirmations etc. but the primary and initial onus is on the assessee which the assessee has to discharge to get the benefit of allowability/deduction as business expenses u/s 37(1) of the Act of these expenses and in our considered view interest of justice will be best served, if this issue is restored to the file of the A.O. for denovo consideration and determination of the issue. Accordingly , we set aside this issue to the file of the A.O. for deciding the same afresh . Disallowance of entertainment expenses - HELD THAT:- Ad-hoc disallowance of 40% of entertainment expenditure of ₹ 8,81,488/- was made by the AO amounting to ₹ 3,36,595/- on ad-hoc basis , which disallowance was further reduced to 20% amounting to ₹ 1,68,298/- by the CIT(A) and again on ad-hoc basis whereby no specific defects has been pointed by the CIT(A) in the vouchers/books of accounts nor it is proved that these expenses are bogus expenses and also books of accounts have not been rejected by the CIT(A). The books of accounts are duly audited by a qualified chartered accountant. This disallowance of ₹ 1,68,298/- being 20% of total entertainment expenditure of ₹ 8,81,488/- cannot be sustained when no defect has been pointed by the authorities below nor are they been proven to be bogus expenses claimed by the assessee and the books of accounts have also not been rejected by the Revenue, thus this confirmation of disallowance by the CIT(A) of 20% of entertainment expenditure being ₹ 1,68,298/- out of total entertainment expenditure of ₹ 8,81,488/- on ad-hoc basis is ordered to be deleted. Expenses on ad-hoc basis @ 50% of the total expenses of travelling, vehicle expenses and telephone expenses for which proper books were not maintained - HELD THAT:- Ad-hoc disallowance of expenditure was made by AO which was further reduced to 20% by the CIT(A) which is again on ad-hoc basis without rejecting the books of account and without pointing out any specific defects in the vouchers or establishing that these expenses are bogus. Thus disallowance on ad-hoc basis of expenses cannot be sustained when no defect has been pointed nor is it proved that these are bogus expenses, thus this disallowance of expenses on account of travelling, vehicle expenses and telephone expenses as sustained by the CIT(A)is ordered to be deleted. Similarly, addition of ₹ 41,600/- to the income of the assessee being disallowance of depreciation on car being sustained by the CIT(A) is hereby ordered to be deleted. Similarly, with regard to new year expenses and Diwali expenses, the additions is ordered to be deleted. We order accordingly. Addition on account of expenditure claimed by the assessee for the office rent, salary and wages and staff welfare - HELD THAT:- Disallowance was made based on the Ward Inspector’s report. The copy of the said ward inspector report was not given to the assessee to rebut the allegation which is a serious breach of principles of natural justice. The assessee has duly submitted all the details of these expenses and accounts of the assessee are duly audited by a qualified chartered accountants. Revenue has not brought on record any cogent material to prove that these expenses are bogus expenses and are not allowable while the assessee on the other hand has duly given all details. The books of accounts of the assessee which are also audited were not rejected by the Revenue. In our considered view, the CIT(A) is quite right in allowing the claim of the assessee with respect to these expenses on account of expenditure for office rent , salary and wages and staff welfare as business expenses deductible as revenue expenditure under the Act and we confirm the orders of the CIT(A) dated 22.03.2010 with respect to this addition and we order the deletion of the same as we have not found any infirmities in the order of the CIT(A) with respect to the deletion of addition made by the AO. Hence, the ground raised by the Revenue is dismissed.
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