TMI Blog2002 (10) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... 2590/Jp/1994 and CO 9/Jdpr/1999 being both in respect of asst. yr. 1991-92, for the reason that the main order has been passed along with elaborate discussion by AO in asst. yr. 1991-92, which has been followed in other assessment years. 6. Ground No. 1 in Revenue s appeal disputes the deletion of disallowance of Rs. 33,600 made by AO under s. 40(b) on account of fixed amount of conveyance allowance paid to partners. The learned Departmental Representative of Revenue has relied upon the orders of AO contending that the AO had rightly made the disallowance. The learned authorised representative of assessee has relied on his written submissions. In the written submissions of assessee it has been contended that under s. 40(b) it is only any payment of salary, interest, bonus commission or remuneration or whatever name called, which has been made disallowable but the said provision does not make any and every payment to partners as disallowable. It has been contended that the legislative intent is not to disallow any or all sorts of payments made to partners irrespective of their nature. It has been contended that the AO has not questioned the reasonableness of the sums paid as conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary given by the firm to the partner and would be deductible as expenditure. It has also been contended that as regards the mentioning of Rs. 15,171 on account of petrol, etc., debited to the P L a/c, the same comprises of Rs. 6,075 towards repairs and maintenance, Rs. 9,095 towards petrol. It has been contended that this petrol expenditure is after 12th Sept., 1990, the date of search, and the same was incurred on a car which was used by the assessee s counsel after the incident of search, for visiting IT Department in connection with the proceedings under s. 132(5), taking copies of orders of seized material, proceedings under s. 131, etc. In para 2 on p. 19 of paper book, being assessee s written submissions before CIT(A), it has also been contended that as regards the other conveyance expenses debited to P L a/c of assessee, the same are expenses incurred by employees for the purpose of business. 7. I have considered the rival contentions, the relevant material on record as also the cited decisions. In my considered opinion, the contentions of the learned authorised representative of assessee have substance. From the perusal of record I find that all the three partners, to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the disallowance has been the statements but the same were recorded at the back of the assessee and the assessee has not been given opportunity to cross-examine these employees, neither at the time of recording of the statements, nor during the course of assessment proceedings. It has also been contended that there are apparent discrepancies in the statements recorded, the salary register seized and the amount debited to the salary account. It has been contended that the assessee has regular books of accounts and has also duly receipted vouchers, and an explanation for the alleged difference. It has been contended that the so-called salary register was used to record payments made to employees from time to time even during the course of month. It has been contended that the employees of the assessee are very low paid clerks, shift incharge and sweepers, etc. who take salary in piecemeal at an interval of 7 to 10 days. It has been contended that the many of the room boys, shift incharge and sweepers, etc. take food or tea or refreshment depending upon the timings of their duties. It has been contended that the learned CIT(A) has casually upheld 50 per cent of the disallowance. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e balance addition out of disallowance made out of assessee s claim for salary payment to be quite proper and justified. I, therefore, decline to interfere with the same. 10. Ground No. 3 of Revenue disputes the allowing of relief of Rs. 23,140 out of the disallowance of Rs. 46,295 made by AO out of assessee s claim for Rs. 96,295 under the head washing charges. Ground No. 2 in assessee s CO also contains the ground disputing the sustaining of disallowance of Rs. 23,155 under the head washing charges. The learned Departmental Representative of Revenue has relied on the orders of AO. The learned authorised representative of assessee has relied on his written submissions. In the written submissions of assessee, it has been contended that the statement having been recorded at the back of assessee and the opportunity to cross-examine the employees in respect of their statements having not been afforded to the assessee, the said statements cannot be relied upon against the assessee. This contention of the assessee has substance and I accept the same as has already been held above. In the written submissions of assessee it has further been contended that the books of accounts, details, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper because the assessee has shown Rs. 67,000 towards repairs at residence. It has also been contended that this building was built in 1940 and so the expenditure on building repair has to be quite high. As against this, the learned Departmental Representative of Revenue has supported the orders of authorities below. 13. I have considered the rival contentions as also the relevant material on record. From the perusal of record, I find that the AO has found that for these expenses, complete vouchers are not available with the assessee. The AO has also found that large number of blank signed vouchers pertaining to these repair works were found with the assessee and the same were seized during search. As such, considering all the facts and circumstances of the case, I find the sustenance of disallowance of Rs. 20,000 in aggregate out of expenses, claimed under five heads, to be quite proper and in no way unreasonable or excessive. As such, I find no fault with the impugned order of learned CIT(A) on this count and so I decline to interfere with the same. 14. The next issue in ground No. 2 in assessee s CO disputes the sustenance of disallowance of Rs. 7,500 out of assessee s clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of assessee in assessee s CO disputes the sustenance of disallowance of Rs. 5,000 out of assessee s claim under the head daily wages. Considering the rival contentions, the facts of the case, and, in particular, the fact that the AO has noted that details regarding the names of persons to whom the payments have been made are not mentioned in the books of accounts and that there is no supporting evidence to prove the genuineness of these payments, and discrepancies that the non-co-relation between monthly payments of daily wages and the lodge receipts, I find no fault with the impugned order of learned CIT(A) in sustaining the above disallowance which seems to be neither excessive nor unreasonable; and so I decline to interfere with the same. 18. The next grievance of assessee in assessee s CO pertains to sustenance of disallowance of Rs. 5,000 out of assessee s claim for Rs. 52,980 under the head telephone charges. Considering the rival contentions, the facts of the case and, in particular, the fact that personal user and non-business user cannot be ruled out, I find no infirmity in the above disallowance. As such, there being nothing laconic in the learned CIT(A) s impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative of assessee has contended that this disallowance has been made without any specific finding for the year under appeal. He has contended that in asst. yr. 1991-92, search had taken place and in that year on the basis of material found during search some defects in books of accounts had been pointed out pertaining to the salary payment whereas there is no such factual finding for asst. yrs. 1984-85 to 1988-89, but the AO has applied the findings of asst. yr. 1991-92, and made the disallowance of salary, washing expenses and various other expenses, without showing that those findings of fact were present in those assessment years also. I have considered the rival contentions as also the relevant material on record. From the perusal of record, and, in particular, the AO s assessment order, it is revealed that the AO has not pointed out any specific defects in respect of assessee s accounts pertaining to salary payment for the year under appeal in para 3.2.1 on p. 3 of assessment order. In that view of the matter, the fact situation containing the defects, as found in asst. yr. 1991-92, being not present in the asst. yr. 1984-85 under consideration, though following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pointed out any specific defect in assessee s accounts pertaining to coolie commission charges in para 3.2.4 on p. 4 of his assessment order, I find the disallowance sustained by learned CIT(A) to be not proper and so I delete the disallowance sustained by him. 27. The next issue in ground No. 2 of assessee s CO disputes the sustenance of disallowance of Rs. 5,000 in aggregate out of assessee s claim for expenses under four heads, namely, staff welfare expenses, daily wages, telephone and lodge expenses. Considering all the facts and circumstances of the case, the rival contentions, and, in particular, the AO s finding that complete vouchers for these expenses are not available with the assessee, together with the nature of expenses, I find the disallowance of Rs. 5,000 sustained by learned CIT(A) to be quite proper and neither unreasonable nor excessive; and so I decline to interfere with the same. 28. The next issue in ground No. 2 of assessee s CO disputes the disallowance of Rs. 586 under the head vehicle expenses. The next issue in ground No. 2 of assessee s CO disputes the disallowance of Rs. 2,287 out of depreciation on vehicle. Considering the rival contentions, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, uphold the relief allowed by learned CIT(A) and delete the disallowance sustained by learned CIT(A). The assessee thus gets relief in respect of the whole addition made by AO under the head salary payments. 33. Ground No. 3 of Revenue s appeal disputes the allowing of relief of Rs. 5,000 from the disallowance made by AO under the head washing charges. Assessee s ground No. 2 in CO also contains similar issue disputing the sustenance of disallowance of Rs. 5,000 under the head washing charges. The rival representatives have made their same contentions as made by them above on similar issue contained in similar ground in asst. yr. 1984-85 in Revenue s appeal No. 2585/Jp/1994 and CO No. 4/Jdpr/1999. The facts and circumstances being identical, I follow my aforesaid decision rendered on similar ground in asst. yr. 1984-85, wherein I have held that no specific defects having been pointed out by the AO in the year under appeal, the conclusion drawn in asst. yr. 1991-92, cannot be applied in this year, and in turn, no justification for making/sustaining any disallowance under the head washing charges. I accordingly hold similarly in the year under appeal being asst. yr. 1985-86 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim for depreciation of vehicle. Considering the rival contentions, the facts of the case and the fact, in particular, that the use of vehicle for personal and non-business purposes cannot be ruled out, as has also been specifically found by AO, I find no fault with the impugned order of learned CIT(A) in sustaining the above disallowance. I, therefore, decline to interfere with the same. 38. In the result Revenue s appeal No. 2586/Jp/1994 is allowed in part as indicated above; and assessee s CO No. 5/Jdpr/1999 is also allowed in part as indicated above. 39. Now, I take up Revenue s appeal No. 2587/Jp/1994 for asst. yr. 1986-87 and assessee s CO 6/Jdpr/1999 for asst. yr. 1986-87. 40. Ground No. 1 of Revenue s appeal disputes the deletion of disallowance of Rs. 17,700 made by AO under s. 40(b) on account of fixed amount of conveyance allowance paid to the partners. The rival representatives have made their same contentions as made by them above on similar issue contained in ground No. 1 in asst. yr. 1991-92 in Revenue s appeal No. 2590/Jp/1994, wherein I have upheld the deletion of disallowance. The facts and circumstances being identical, I follow my decision rendered above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. yr. 1986-87 and so I uphold the relief allowed by learned CIT(A) and I delete the disallowance sustained by learned CIT(A); and thus there is deletion of the whole disallowance made by AO under this head in the year under appeal. 43. The next grievance of assessee in assessee s CO disputes the sustenance of disallowance of Rs. 5,000 in aggregate out of assessee s claim for expenses under three heads, namely, building repairs, electric repairs and sanitary repairs. Considering the rival contentions, the facts and circumstances of the case and, in particular, the fact that the assessee is not having complete vouchers for these expenses as specifically found by AO vide para 3.2.3 on p. 3 of his assessment order, and which finding I do not find to have been shaken, I find no fault with the impugned order of learned CIT(A) in sustaining the aforesaid disallowance. I, therefore, decline to interfere with the same. 44. The next grievance of the assessee in his CO is the sustenance of disallowance of Rs. 2,500 under the head coolie commission charges . Considering the rival contentions, the fact of the case as also the fact, in particular, that the AO has not pointed out any defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue s appeal disputes the allowing of relief of Rs. 7,240 from the disallowance made by AO out of salary claimed. The same issue is also involved in assessee s CO, wherein the assessee s grievance pertains to the sustenance of disallowance of Rs. 7,240 out of salary payment. Considering the rival contentions, the facts of the case and, in particular, the fact that the AO has not pointed out any defect or discrepancy in the accounts of assessee pertaining to salary payment, in the year consideration, I find no justification for any disallowance under the head salary payments. I, therefore, delete the disallowance sustained by learned CIT(A) and uphold the relief already allowed by learned CIT(A). 51. Ground No. 3 of Revenue s appeal disputes the allowing of relief of Rs. 6,000 from the disallowance made by AO under the head washing charges. In assessee s CO also there is a ground disputing the sustenance of disallowance of Rs. 6,000 under the head washing charges. Considering the rival contentions, the facts of the case as also the fact, in particular, that the AO has not pointed out any discrepancy or defect in assessee s accounts pertaining to washing charges as revealed from p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper and justified and suffering from no infirmity. I, therefore, decline to interfere with the same. 56. The assessee s next grievance in assessee s CO disputes the sustenance of disallowance of Rs. 6,430 out of assessee s claim for expenses pertaining to valuation of hotel building. Considering the rival contentions, the facts of the case and also the fact, in particular, that the assessee s explanation/plea regarding this expenditure is found to be not convincing inasmuch as the loan from RFC had been taken long back, i.e., in asst. yr. 1985-86 whereas this expenditure on valuation of hotel building pertains to asst. yr. 1987-88, I do not find any other evidence on record to support assessee s plea regarding the expenditure to have been incurred for business purposes during the year under consideration. As such, considering the rival contentions, as also the facts and circumstances of the case, I find no fault with the action of learned CIT(A) in sustaining the disallowance. I, therefore, decline to interfere with the same. 57. In the result Revenue s appeal No. 2588/Jp/1994 is dismissed whereas the assessee s CO 7/Jdpr/1999 is allowed in part as indicated above. 58. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained by learned CIT(A). I order accordingly. 61. The next grievance of assessee in assessee s CO disputes the sustenance of disallowance of Rs. 34,500 out of assessee s claim for building repairs. Pertaining to the issue of building repairs the Revenue has raised ground No. 4 in Revenue s appeal which disputes the deletion of disallowance of Rs. 32,500 out of the building repairs. The learned Departmental Representative of Revenue has supported the orders of the AO. As against this, the learned authorised representative of assessee has contended in his written submissions, that the details of current repairs to the building were furnished before AO. It has been contended that the increase in current repair expenses as compared with those of the earlier asst. yr. 1987-88 has been due to the fact that major repairs, renovation and provision of amenities to the rooms was under taken during the year. It has also been contended that the provision of toilet cannot be treated as capital expenditure. It has also been contended that a sum of Rs. 27,238 was spent on providing attached bathrooms to the existing rooms and that no occupancy capacity of the assessee hotel has increased du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Besides, the construction of toilet/bathroom does result in new benefit/advantage of enduring nature. In that view of the matter, considering all the facts and circumstances of the case, and also taking a circumspect view of the entire fact situation, I find the assessee s claim for deduction in respect of the said building repairs to be neither allowable under s. 30 nor under s. 37(1). In the result the learned CIT(A) s order on this count is reversed and the entire addition made by AO is upheld. This decides the issue of building repairs as contained in the ground of Revenue as also in the ground of assessee in CO. 63. The next grievance of assessee in assessee s CO disputes the sustenance of disallowance of Rs. 5,000 in aggregate out of assessee s claim for three expenses, namely, electric repairs, sanitary repairs and furniture repairs. Considering the rival contentions, the facts of the case and, in particular, the fact that the complete vouchers are not available with the assessee in respect of these expenses as has been specifically noted by the AO in para 3.2.4 on p. 5 of his assessment order, I find no fault with the sustenance of amount of Rs. 5,000 as disallowance out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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