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Shri Manoj Mohanlal Mehta Versus Income Tax Officer Circle 19 (1) (1) , Mumbai

Adhoc disallowance of 20% - absence of verifiable vouchers - Conveyance, Telephone and Sundry Expenses - reasonable estimate - As assessee is unable to explain element of personal nature in above expenses AO disallowed 1/5th of the same and also confirmed by CIT(A). Held that:- 20% of disallowance on these type of expenses is on higher side and accordingly, we restricted the disallowance at 10%. - Assessee's appeal is partly allowed. - Disallowing interest paid to parties u/s 40A(2)(B) - cha .....

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AND SRI RAJESH KUMAR, AM For The Assessee : Shri Jayant R. Bhatt, AR For The Revenue : Shri Suman Kumar, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the order of CIT(A)-30, Mumbai, in appeal No. CIT(A)-30/ITO-19(1)(1)/IT-99/11-12 dated 19-02-2014. The Assessment was framed by ITO ward 19(1)(1), Mumbai for the A.Y. 2006-07 vide order dated 28-12-2011 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The first issue in this appeal of asse .....

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nfinity, brought on record from an audited account. 3. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has claimed conveyance expenses at 48,431/-, telephone expenses at ₹ 3,900/- and Sundry expenses at ₹ 62,811/-. As the assessee could not offer any explanation before AO whether there is element of personal in nature, the AO disallowed 1/5th of the same and added to the total income of the assessee. The CIT(A) a .....

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assessment made by AO by disallowing interest paid to parties under section 40A(2)(B) of the Act and charging notional interest of ₹ 3,33,345/- and CIT(A) enhancing the same to ₹ 9,47,460/-. For this assessee has raised following grounds: - 2) (a) Under the facts and circumstances of the case and in law CIT(A) has erred in confirming and enhancing the assessment by Rs.9.47,460/- by disallowing the interest paid to parties referred to in section 40A(2)(b) of the Income Tax Act which .....

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has erred in making the alleged enhancement without appreciating the fact that proceedings u/s 154 were already tinder way and hence order of enhancement passed by the CIT(A) should be annulled and in such a case the addition of notional interest made by the AO be also deleted. (d) In case if the enhancement made by the CIT(A) be deleted, as a consequence it is also prayed that notional income being interest changed on consequence it is also prayed that notional income being interest changed on .....

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and accordingly, he charged interest amounting to ₹ 3,77,345/- on loan advances to Smt. Daksha Mehta free of interest. For this AO has observed as under: - Considering the above explanation of the assessee s representative, the working of interest on funds available as loan in the hand of Smt. Daksha Mehta is as under:- Period Loans in the hand of Smt. Daksha Mehta Interest @ 18% 01.04.2008 to 31.07.2008 ₹ 20,07,832 ₹ 120,470 01.09.2008 to 31.01.2009 ₹ 34,25,000 ₹ 2 .....

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.1 I have duly considered the above submission of the appellant and find that it is not disputed that the appellant has taken loan from family members viz. Neetu Mehta & Manish Mehta and paid interest @18% to them, whereas to Tasneem Contractor, Mrs. Kanta P Parmar and Omkar Jewellers he has paid interest @ 12% and to Shubham Dev @ 15%. Interest @ 18% has been paid only to one party, viz: Monaco Export. Neetu Mehta is appellant s brother s wife and Manish Mehta is his brother. Therefore, the .....

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interest paid at higher rate, but also enhance the same, as per the notice for enhancement of income. The A.O is, therefore, directed to add Rs. 9, 47,460/- on the above a/c. instead of Rs.3,77,345/- only. Ground of appeal no. 1 is, therefore dismissed and income enhanced. 7.2 Ground of appeal no.2 is against disallowance of Rs. 29,028/- out of conveyance, telephone and sundry expenditure, which is @ 1/5th of above expenses of Rs.1,45,142/- on grounds of 1/5th amount being expenses on personal a .....

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before Tribunal. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. First of all, the AO has charged interest by invoking the provisions of section 40A(2)(b) of the Act. According to us, the interest cannot be charged rather interest can be disallowed on the loan taken and that also on the amount which has been diverted for interest free advances. Secondly, the CIT(A) was of the view that interest paid to family Members @ 18%, is higher and he restri .....

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d advocates appearing for both sides. W7e have also perused the order passed by the Tribunal dated 21st Oct., 1999 which is impugned by the Revenue in the present appeals. We find that the following facts were established before the Tribunal and the same have been accepted by the Revenue even before us. (i) That the assessee apart from paying handling charges @ 9 1/2 per cent to its sister concern, have paid handling charges at the same rate to other agents viz., M/s A.K.Travels, M/s Om Travels .....

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rutiny. For asst. yr. 1990-91 also the claim of the assessee @ 9 1/2 per cent has been allowed though the same has not been dealt with by the AO specifically in the order. (iv) For asst.yrs. 1993-94 and 1994-95 the assessment has been made by the AO under section 143(3) and handling charges paid to the sister concern @ 9.5 per cent have been considered to be reasonable and allowed. (v) The sister concern of the assessee M/s Middle East International is also assessed to tax and income assessed fo .....

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