SHRI RAJESHBHAI GUNVANTILAL SHAH,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-10(4), AHMEDABAD

These two appeals filed by two different assessees for A.Y. 2010-11, arise from order of the CIT(A), Ahmedabad-5, dated 19-05-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.

The solitary issue in the grounds of appeal filed by assessee against the decision of ld. CIT(A) are against confirming the disallowance on various revenue expenses to the amount of Rs. 13,44,624/- in the case of Sh. Rajeshbhai G. Shah and Rs. 5,22,373/- in the case of other assessee, Sh. Snehal G. Shah and both the assessees are brothers. Since identical issues on similar facts are involved in both the cases therefore these cases are adjudicated together by taking the case of Sh. Rajeshbhai G. Shah vide as lead case and its findings will be applicable to the other case.

The fact in brief is that assessee has filed return of income on 31st July, 2010 declaring total income at Rs. 2,06,118/-. The case was subject to scrutiny and notice u/s. 143(2) of the act was issued on 29th August, 2011. During the course of assessment, the assessing officer noticed that assessee has shown losses from the business of trading of shares and securities in the proprietary concern namely M/s, Adishwar Enterprise and M/s. Idea Concern. In the case of Adishwar Enterprises and M/s. Idea Concern the assessee has shown loss of Rs. 11,58,847/- and Rs. 10,386/- respectively.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the asssessee holding that claim of loss made by the assesee was not in the nature of business losses and also justified the rejection of books of account after invoking the provision of section 145 of the act considering the various defects pointed out by the assessing officer.

We have heard the rival contentions and perused the material on record. The assessee is engaged in the business of trading of shares. During the course of assessment on verification of the bill and voucher the assessing officer has noticed that assessee has claimed following expenses in the case of proprietary concerns:- (i) Adishwar Enterprises Rs. 11,63,911/- (ii) M/s. Idea Concern Rs. 1,80,713/- and claimed losses without showing major transactions in the business of trading in shares.

However, in respect of disallowance of 100% of various expenses claimed by the assessee, it is observed that without any reason the assessee has debited specific expenses like household expenses, capital expenses, and loss from sale of Nikki Ford Car for want of nexus with the business of the assessee. Therefore, we justify the action of the assessing officer in disallowing 100% of such specific unrelated expenses to the business of the asssessee. However, the assessing officer has not disproved the fact with any further investigation that assessee has not carried out any business or trading in shares, therefore, we of the view that it will be appropriate to restrict the disallowances upto the expenditure 50% of such expenses in the case of Adishwar Enterprise and M/s. Idea Concern. Accordingly, in the case of Adishwar Enterprise, the disallowance of following expenses at 100% are sustained (i) home expenses Rs. 2,53,187/- (ii) Club expenses Rs. 9081/-, (iii) Travelling expenses Rs. 2,09,207/-, (iv) Petrol expenses Rs. 1,90,745. In respect of remaining expenses, the assessing officer is directed to restrict the disallowance up to 50% of such expenses. Similarly in the case of Idea Concern the claim of expenses on account of loss from sale of Nikki Car to the amount for Rs. 170327/- is fully disallowed as assessee has failed to furnish any relevant supporting evidences to substantiate that these expenses and losses was incurred for the purpose of business of the assessee. In respect of remaining expenses, the assessing officer is directed to restrict the disallowance upto 50% of such expenses. In the case of other assesssee who is brother of the assessee Shri Snehal G. Shah on similar fact the assessee has claimed various expenses in the business of trading in shares. On similar basis assessing officer has also disallowed total expenses to the amount of Rs. 5,22,573/- treating the same as of the nature of personal expenses and capital expenses and the detail of such expenses has been reported by the assessing officer at page no. 7 & 8 of the assessment order. We have gone through the detail of such expenses and observed that similar to other cases as adjudicated above vide , the disallowances of the following expenses are fully sustained as the assessee has failed to substantiate with relevant evidences of their nexus to the business of the assessee i.e. Nikki Ford Car Rs. 1,14,273/- , travelling expenses of Rs. 18,629/- insurance for Corrala Altis 27364/-, Electricity expenses of Residence Rs.71,445/-, corporation tax Rs. 27361/- and legal fees Rs. 5000/- In respect of the remaining expenses, the assessing officer is directed to restrict the disallowance to the extent of Rs. 50% for the reasons discussed in the case of Sh. Rajeshbhai C. Shah as above in this order. Accordingly, this appeal of the assessee is partly allowed.