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Vishandas S Lakhani and Vijaykumar S Lakhani Versus The Income Tax Officer Ward 22 (3) -4, Mumbai

2016 (8) TMI 993 - ITAT MUMBAI

Disallowance of expenditure as claimed by the assessee in the profit and loss account - treatment of the ‘business income’ as ‘income from other sources’- Held that:- As from the perusal of the paper book submitted before us, it is seen that assessee had furnished copy of Ledger account of medical income giving date wise details and income earned along with the copy of certificate of Life Membership of IMA and Registration Certificate allotted by MCI. Thus, the factum of income from Medical Prof .....

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her, from the nature of expenses debited it is quite evident that these expenditures are purely for the purpose of earning of business incomes shown, like in the nature of audit fees, bank charges, interest on loan, insurances, payments made for professional fees, telephone expenses, car repairs etc. All these expenses have been incurred by way of account payee cheques barring one minor item of ₹ 11,712/-, which is in cash. Thus, neither the genuineness of the expenditure is doubted nor it .....

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earned and expenditure incurred. Looking to the nature of expenditure and also the fact that the same has been incurred mostly through account payee cheques, it cannot be held that either the expenses are unverifiable or they had not been incurred for the purposes of the earning of the income shown by the assessee. In any case, the AO himself has computed the income from business which is in the form of remuneration from the firm. However, he has treated the business income at ₹ 5,78,500/- .....

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BER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Appellant : Mrs. Ritika Agarwal For The Respondent : Shri S Pandian ORDER PER AMIT SHUKLA, JM: The aforesaid appeals have been filed by the above named assessees against separate impugned order of even date, 31.03.2014, passed by Ld. CIT (Appeals)-33, Mumbai for the quantum of assessment passed under section 143(3) for the assessment year 2009-10. Since the issues involved in both the appeals are common, arising out of identical set of facts .....

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Sources and disallowing the total expenses claimed. 3. The Learned AO erred in disallowing the expenses claimed in the business account against the business income. 4. The Learned CIT(A) erred in confirming the action of the AO in disallowing the expenses as per the P/L account consisting of various expenses such as audit fee, bank charges, conveyance expenses, depreciation, Car Insurance Charges, interest on loan and other expenses without any valid or cogent reasons . 3. The facts in brief are .....

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11,030 2 Bank charges 16,665 3 Conveyance 1,16,838 4 Depreciation 3,03,839 5 Car Insurance charges 22,973 6 Interest on loan 8,25,985 7 Int. on capital (UMP) 3,77,550 8 Loan expenses 32,243 9 Membership & Subscription ch. 7,000 10 Professional Fees 50,000 11 Rep. & Maintenance 27,644 12 Telephone charges against Remuneration and medical Income & share in profit from firm 10,809 4. In response to the show cause notice as to why the expenses claimed against the remuneration income fro .....

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come from other sources and also disallowed the expenses except the bank interest of ₹ 13,55,724/-. 5. Before the ld. CIT(A), the assessee s submissions was that assessee was a Doctor by profession and had earned income from medical practice at ₹ 5,56,100/-. The assessee is also a partner in a firm, which is engaged in the field of construction from which he had received remuneration, which is chargeable under the head income from business and profession . Thus, both the streams of i .....

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der the head Income from other sources as against Business Income declared by the appellant in the return of income. However, neither before me nor before the AO, appellant did not file any material to show that appellant was engaged in the profession of medical practice. Appellant did the Life Membership Certificate issued by Indian Medical Association dated 31.03.2001. This does not itself support appellant s claim that appellant was engaged in medical practice during the year under considerat .....

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is claim, the Assessing Officer has allowed the deduction. However, as regards all other expenses claimed by the appellant, in the absence of any material produced either before the AO or before me, I do not find any reason to vitiate the order of the AO. Secondly, appellant was shown income of meager amount of ₹ 5,00,000/- against which he has claimed huge expenses like conveyance, depreciation etc. which has in turn an effect to reduce the taxable remuneration chargeable to tax. Thus, wh .....

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Before us, Ld. Counsel, Mrs. Ritika Agarwal submitted that, first of all, assessee in support of his medical income had filed copy of Ledger account not only before the AO as well as before the Ld. CIT(A), which are appearing from pages 25 to 32 of the paper-book. The assessee had also furnished copy of certificate of Life Member of Indian Medical Association (IMA) as well as registration certificate allotted by Medical Council of India (MCI). Unless the assessee is conducting medical professio .....

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ssee, she submitted that, same is incorrect observation, because during the course of the appellate proceedings specific details for the earning of medical profession and details of expenses were submitted before the ld. CIT(A) in response to query raised by him. This is evident from the order sheet entries of the Appellate proceedings which has been obtained under the RTI Act. To demonstrate, she filed copy of order under section 7(1) of the RTI Act, 2005 along with the photo-copy of order shee .....

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Ld. DR strongly relied upon the order of the CIT(A). 8. We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as materials placed before us. The main dispute relates to disallowance of expenditure as claimed by the assessee in the profit and loss account and also treatment of the business income as income from other sources . The main allegation of the Ld. CIT(A) for disproving the medical income as business income is that, the assessee c .....

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e us, it is seen that assessee had furnished copy of Ledger account of medical income giving date wise details and income earned along with the copy of certificate of Life Membership of IMA and Registration Certificate allotted by MCI. Thus, the factum of income from Medical Profession cannot be disregarded once these facts have been brought on record and no adverse material has been brought or enquiry whatsoever has been done by AO. The AO has treated this income as income from other sources , .....

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ces, payments made for professional fees, telephone expenses, car repairs etc. All these expenses have been incurred by way of account payee cheques barring one minor item of ₹ 11,712/-, which is in cash. Thus, neither the genuineness of the expenditure is doubted nor it is the case of the revenue that these are unverifiable. Thus, we do not find any reason to hold that these expenditures are to be disallowed. Accordingly, we allow the expenditure claimed by the assessee which has been deb .....

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Construction from where he has received remuneration for his services. All these incomes are assessable under the head income from business and profession . Authorities below have disallowed expenditures on the ground that, firstly, the assessee could not establish the expenses claimed against the business income and secondly, details of business income have not been shown. Accordingly, it was treated as income from other sources and expenses were disallowed by the AO and confirmed by Ld. CIT(A) .....

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No. Details of Expenses Bank Cash Journal Entries Total 1 Audit Fees 11,030 - 11,030 2 Bank Charges 14,525 - 14,525 3 Bank interest 12,59,405 - 12,59,405 4 Conveyance 2,44,427 - 2,44,427 5 Depreciation - 1,76,999 1,76,999 6 Insurance Car 24,517 - 24,517 7 Interest on Loan 15,14,310 - 2,112 15,14,310 8 Loan processing charges 17,595 - 17,595 9 Car Maintenance - 24,141 - 24,141 10 Membership Fees 26,000 - 26,000 11 Professional Fees 65,000 - 65,000 12 Telephone Expenses 34,874 - 34,874 Total 32,11 .....

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