MORESHWAR AJGAONKAR,MUMBAI vs. INCOME TAX OFFICER 16(3)(1), MUMBAI

Date of hearing 01-05-2018 Date of pronouncement 15-05-2018 O R D E R

Per G Manjunatha, AM :

2. The Learned Commissioner Income Tax (Appeals) erred in disallowing conveyance expenditure of Rs. 41,5887- incurred by the Assessee, wholly and exclusively for the purpose of business, on an adhoc basis.

3. The Learned Commissioner Income Tax (Appeals) erred in disallowing telephone expenses of Rs. 1,03,8187- on an adhoc basis incurred by the Assessee wholly and exclusively for the purpose of 2 ITA 251/Mum/2018 business.”

2. The brief facts of the case are that the assessee is a proprietor of M/s MR Ajgaonkar & Co, is engaged in the business of Consolidated Collection Services, RMS Associates & RMS Courier Services, filed his return of income for AY 2012-13 on 30-09-2012 declaring total income at Rs.17,48,090. The case has been selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished the details as called for. The assessment has been completed u/s 143(3) on 29-03-2015 determining the total income at Rs.13,23,839 interalia making addition towards adhoc disallowance of 5% mobile and telephone expenses of Rs.1,03,818, 20% adhoc disallowance of conveyance expenses for Rs.41,588 and disallowance of expenses incurred in relation to exempt income u/s 14A of the Act for Rs.10,000.

3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has filed elaborate written submissions on additions made by the AO towards adhoc disallowance of mobile and telephone expenses, conveyance expenses and disallowance of expenses u/s 14A of the Act, which has been reproduced by the Ld.CIT(A) at para 4 of his order on pages 2 to 4. The 3 ITA 251/Mum/2018 sum and substance of the arguments of the assessee before the Ld.CIT(A) are that the AO was erred in making adhoc disallowance of expenses when assessee has filed necessary evidence to justify expenses debited under the head ‘mobile and telephone expenses, conveyance expenses’. The CIT(A), after considering relevant submissions of the assessee observed that the assessee failed to prove before the AO that the said expenses were incurred wholly and exclusively for the purpose of business and also fact that the assessee had agreed before the AO for such addition. Accordingly, there is no reason to take a view of the matter different from the one taken by the AO and, therefore, confirmed addition made by the AO towards adhoc disallowance of mobile & telephone expenses and disallowance of conveyance expenses. Aggrieved by the order of CIT(A), assessee is in appeal before us.

4. The first issue that came up for our consideration is adhoc disallowance of conveyance expenses of Rs.41,588. The Ld.AR for the assessee submitted that the disallowance worked out by the AO is excessive and unreasonable, therefore, a reasonable amount of disallowance may be maintained. On the other hand, the Ld.DR strongly supported the order of the lower authorities.

4 ITA 251/Mum/2018 find merit in the argument of the assessee for the reason that the AO has made adhoc disallowance of 20% of conveyance expenses without any observation with regard to the bills and vouchers produced by the assessee. Therefore, considering overall facts and circumstances of the case and also to meet the ends of justice, we deem it appropriate to reduce the disallowance worked out by the AO to the extent of Rs.10,000 towards conveyance expenses and delete balance amount of Rs.31,588.

5 ITA 251/Mum/2018 expenses incurred under the head ‘mobile and telephone expenses’. Though certain amount of personal expenses can be attributable to mobile and telephone expenses, disallowing an amount of Rs.1,03,818 appears to be excessive and unreasonable. Therefore, we are of the considered view that to meet the ends of justice, we deem it appropriate to scale down disallowance worked out by the AO to Rs.25,000. Accordingly, we direct the AO to sustain addition to the extent of Rs.25,000 towards mobile and telephone expenses and delete balance amount of Rs.78,818.

Order pronounced in the open court on 15th May, 2018.