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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2013-14. The appeal is directed against the order of the Commissioner of Income Tax-5, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the assessee read as under:
1. The CIT(A) erred in upholding the adhoc disallowance of 5% of Miscellaneous Expenses of Rs.62,579/- without taking into consideration the supporting documents on records.
2. The CIT(A) erred in upholding the adhoc disallowance of 5% of Telephone and Fax Charges of Rs.1,31,069/- without taking into consideration the supporting documents on records.
The CIT(A) erred in levying interest u/s 234B of the Act. The appellant denies its liability to be charged interest u/s 234B of the Act. 4. The CIT(A) erred in levying interest u/s 234C of the Act. The appellant denies its liability to be charged interest u/s 234C of the Act. 3. Briefly stated, the facts are that the assessee filed its return of income for the assessment year (AY) 2013-14 on 30.09.2013 declaring total income of Rs.5,55,26,770/-. The assessee-firm is engaged in the practice of legal profession. The Assessing Officer (AO) disallowed 10% of the miscellaneous expenses of Rs.12,51,589/- on the ground that personal expenses cannot be ruled out and thus made a disallowance of Rs.1,25,159/-. Similarly, he made a disallowance of 10% of the telephone and fax charges of Rs.26,11,383/- on the reason that personal uses cannot be ruled out and thus made a disallowance of Rs.2,61,138/-. 4. In appeal, the Ld. CIT(A) restricted the disallowance to 50% of Rs.1,25,159/- made by the AO in respect of miscellaneous expenses and it comes to Rs.62,580/-. Similarly, he restricted the disallowance to 50% of Rs.2,61,138/- made by the AO and it comes to Rs.1,31,069/-. 5. Before us, the Ld. counsel of the assessee files a Paper Book containing (i) annual accounts for year ended 31st March 2013, (ii) computation of total income, (iii) details of telephone expenses, (iv) details of miscellaneous expenses, (v) assessment order of AY 2012-13 and (vi) statement of facts and grounds of appeal before Commissioner of Income Tax (Appeals).
It is submitted by him that during the course of hearing, the AO called for various details and those were submitted by the assessee- firm and the AO has made the addition without going through the supporting documents which were filed before him. On the other hand Ld. DR supports the order passed by the AO.
We have heard the rival submissions and perused the relevant materials on record. At para 2 and 3 of the assessment order dated 22.03.2016, the AO has mentioned that a notice u/s 142(1) was issued on 05.01.2016 and served upon the assessee asking to furnish various details and in response to it, Ms. Yanita Verlekar and Mr. Yazad Wadia, CA and AR of the assessee filed requisite details during the course of assessment proceedings and the same were verified and placed on record. As there is no adverse remark given by the AO regarding miscellaneous expenses and telephone and fax charges, the AO should not have resorted to ad-hoc disallowance @ 10% of the above expenses in view of the fact the assessee had filed the relevant details before him. Similarly, there was no material before the Ld. CIT(A) to restrict the disallowance to 50% of the amount made by the AO. Therefore, we delete the disallowance of Rs.62,580/- and Rs.1,31,069/- made by the Ld. CIT(A).