TMI Blog2020 (4) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as direct expenses on account of freight charges disallowed by the AO and confirmed by the ld. CIT (A) are deleted. Disallowance of direct expenses on account of freight charges - Addition restricted by the ld. CIT (A) to 50% - HELD THAT:- Except the car maintenance and telephone expenses, no other items of expenses could be attributed to personal use or element. Therefore, these small expenses of ₹ 29,848/- and ₹ 13,542/- are only in respect of telephone and car/scooter/mobile expenses. The rest of the expenses are only in respect of the Office and Administrative expenses as well as selling expenses and hence there cannot be any element of personal use in respect of those expenses. Hence taking the entire claim of expenses which includes salary, wages and other office expenses on rent, printing, insurance, computer as well as selling and marketing expenses, the AO has not applied his mind on the issue and just made an adhoc disallowance. CIT (A) has also not examined the nature of expenses so that the disallowance can be made on account of personal use or element. Accordingly, adhoc disallowance made by the AO and sustained by the ld. CIT (A) is deleted. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of ₹ 1,50,000/- out of Office Administrative Expenses and the learned CIT (A)-1, Jaipur had further erred in confirming and restricting the disallowance to ₹ 75,000/-. 5. That the learned A.O. had erred at law as well as on facts in making additions to the house-hold expenses of ₹ 1,04,500/- and learned CIT (A) had erred further in confirming the addition of ₹ 1,04,500/-. 6. That the appellant craves for the leave to add, alter or amend all or any of the grounds of appeal on or before the hearing. Ground nos. 1 to 3 are regarding rejection of books of account by the ld. CIT (A) by invoking the provisions of section 145(3) of the IT Act and confirming lump sum trading addition made by the AO as well as disallowance of direct expenses on account of freight charges. 2. The assessee is an individual and proprietor of M/s. Shah Champalal Jawaharlal engaged in the business of trading in various agricultural produce as well as commission agents. The assessee filed his return of income on 26th September, 2012 declaring total income of ₹ 6,23,390/-. During the scrutiny assessment, the AO asked the assessee to furnish the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and observed that the assessee has submitted two sets of details which are not matching. Thus the ld. A/R has submitted that the AO as well as the ld. CIT (A) proceeded on assumption of incorrect facts which are contrary to the record. Further he has contended that the result of the assessee s business for the year under consideration are better than preceding years and, therefore, even after rejection of books of account, no addition is called for. Thus the ld. A/R has submitted that the additions sustained by the ld. CIT (A) on account of lump sum trading addition as well as direct expenses of freight charges are unjustified and liable to be deleted. The ld. A/R relied upon the following decisions :- CIT vs. Gupta K.N. Construction Co. 371 ITR 325 (Raj. HC) CIT vs. Inani Marbles P. Ltd. 316 ITR 135 (Raj. HC) 4. On the other hand, the ld. D/R has relied upon the orders of the authorities below and submitted that the AO as well as the ld. CIT (A) has pointed out various infirmities and defects in the books of account maintained by the assessee. Therefore, the ld. CIT (A) has rightly rejected the books of account of the assessee by invoking the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter than the past history and, therefore, after rejection of books of account no trading addition is called for. Hence the trading addition made by the AO which is adhoc and the lump sum addition of ₹ 1,00,000/- as well as disallowance of direct expenses which is part of the trading account are not sustainable in law and liable to be deleted. Hence the lump sum addition of ₹ 1,00,000/- made by the AO as well as direct expenses on account of freight charges disallowed by the AO and confirmed by the ld. CIT (A) are deleted. Ground No. 4 is regarding disallowance of Office administrative expenses. 6. The AO has made disallowance of ₹ 1,50,000/- out of the office administrative expenses which were restricted by the ld. CIT (A) to 50% at ₹ 75,000/-. The ld. A/R of the assessee has submitted that the AO has taken up the various expenses including selling expenses as well as office administrative expenses and then made the disallowance of ₹ 1,50,000/-. The ld. A/R has pointed out that though the AO has made the disallowance on account of office administrative expenses, however, while taking the amount of the expenses he has also included selling e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of expenses so that the disallowance can be made on account of personal use or element. Accordingly, in the facts and circumstances of the case, the adhoc disallowance made by the AO and sustained by the ld. CIT (A) is deleted. Ground No. 5 is regarding the addition made on account of Low Household expenses. 9. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The assessee has shown the household expenses of ₹ 16,250/- per month. The AO found that having regarding to the joint family of the assessee and status as well as standing of the family of the assessee, the household expenses of ₹ 16,250/- is very low and accordingly the AO has estimated the reasonable household expenses at ₹ 25,000/- per month which has resulted an addition of ₹ 1,04,500/-. We find that the estimation of the AO of reasonable household expenses of the family of the assessee at ₹ 25,000/- per month is very reasonable and proper and does not require any interference. Even otherwise, if the status and standing of the assessee and his family is taken into account, the household expense of ₹ 25,000/- per month ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
