SHARAD UTTAMRAO PATHARE,,PUNE vs. INCOME-TAX OFFICER,, PUNE

This appeal by the assessee against the order dated 22-12-2016 passed by the Commissioner of Income Tax (Appeals)-5, Pune [‘CIT(A)’] for assessment year 2013-14.

The assessee raised ground Nos. 1(i) and 1(ii) questioning the action of CIT(A) in not allowing the expenses of Rs.17,50,000/- claimed against the gross receipt of car hiring business and enhancing the net profit treating the entire receipt of Rs.29,20,500/- as net profit in the facts and circumstances of the case. Both the grounds are interrelated and can be disposed of as one issue.

Heard both the parties and perused the material available on record. We note that the assessee is an individual engaged in the business of development of property and also motor cars hire business. The assessee conducts its business under the name and style as “Viraj Developers”. According to the AO, the assessee shown details of cars owned by him in the Balance sheet and claimed net loss of Rs.16,47,682/- by debiting all expenses of Rs.20,95,436/- and depreciation of Rs.24,72,746/- against receipt of Rs.29,20,500/-. The AO observed that the assessee did not produce the books of account, supporting proof bills and vouchers of expenditure relating to diesel, petrol, driver salaries and conveyance etc. Further, he observed that the assessee could not substantiate the claim of depreciation on cars. In the absence of such evidences, the AO disallowed an amount of Rs.17,50,000/- by holding the expenditure not laid out wholly and exclusively for the purpose of business. The CIT(A) discussed the issue in Para No. 4.5 of the impugned order, wherein, we note that the car hiring business is a non-existent business as it was not substantiated by the assessee by furnishing valid evidences showing the same as genuine business. He held the entire receipt as income from other sources and directed the AO to add the said amount to the total income of the assessee.

The ld. AR, before us, submits that the assessee was into car hiring business who supplies cars but special occasions like marriages, car rallies etc. where, customers seek cars without yellow number plate. The assessee incurred genuine expenditure and claimed loss in the car hire business. The CIT(A) enhanced the same to an extent of total receipt of the said business as income from other sources which is bad under law. The ld. AR placed on record order of CIT(A) in First Appellate proceedings relating to A.Y. 2012-13 and submitted that in A.Y. 2012-13 the First Appellate Authority considered the issue and disallowed only Rs.1,00,000/- and given relief of Rs.14,00,000/- as against the head of disallowance made by the AO of Rs.15,00,000/-. The ld. DR relied on the order of CIT(A). We note that admittedly the AO disallowed Rs.17,50,000/- on the basis of estimation which was enhanced to an extent gross car higher charges Rs.29,20,500/- by the CIT(A). On perusal of the Frist Appellate order for A.Y. 2012-13, wherein, it is noted that the CIT(A) in order to meet the ends of justice disallowed only Rs.1,00,000/- and gave relief remaining amount as against Rs.15,00,000/- of disallowance. The CIT(A) held there can be no denial incurred various business expenses and a minimal disallowance is required and we concur with the same, therefore, in the present case also, we deem it proper to restrict the disallowance to Rs.2,00,000/- which is in our opinion reasonable disallowance and remaining amount of Rs.15,50,000/- is deleted. Thus, the order of CIT(A) is modified and accordingly, the order of CIT(A) in respect of enhancement becomes academic. Thus, the ground Nos. 1(i) and 1(ii) are allowed.

Ground Nos. 2(i) and 2(ii) raised by the assessee challenging the action of CIT(A) in confirming the order of AO of Rs.30,00,000/- as income from other sources as against the gross agricultural income of Rs.47,75,935/-.

Heard both the parties and perused the material available on record. The ld. AR submits that the assessee could not produce any evidences in support of agricultural income before the AO and CIT(A). The CIT(A) held vide Para No. 5.4 of the impugned order that the assessee failed to prove any agricultural activity and thereby no agricultural income. The assessee before us filed additional evidences in support of agricultural income. The ld. AR submits that if this Tribunal gives an opportunity to the assessee in remanding the issue to the file of AO, the assessee is ready to file all the evidences in support of agricultural income. We note that admittedly the assessee filed affidavits as not disputed by the ld. DR. In view of the same, we deem it proper to remand the issue to the file of AO for fresh adjudication. The assessee is liberty to file evidences, if any, in support of his claim. Accordingly, the ground Nos. 2(i) and 2(ii) raised by the assessee are allowed for statistical purpose.

In the result, the appeal of assessee is allowed for statistical purpose.