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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner (Appeals)-3 Mumbai and arises out of the order u/s 143(3) of the Income Tax Act 1961 (the Act).
There has been a delay of 20 days in filing the appeal by the assessee. We have gone through the affidavit filed by the assessee and find that she had genuine difficulties in filing the appeal in time. Therefore, we condone the delay of 20 days in filing the appeal.
The first ground raised by the assessee is against the disallowance of 1/3 of clothing expenses of Rs.4,55,860/- claimed by the assessee. It is stated that the AO has disallowed Rs.1,51,953/- despite production of bills before him.
3.1 The ld. DR supported the order passed by the ld. CIT(A) wherein it has been observed that the re-use of clothing and personal element cannot be ruled out and therefore, the disallowance of Rs.1,51,953/- has been sustained.
3.2 Having heard the rival submissions and perused the relevant material on record. We find that a similar issue arose before the ITAT ‘D’ Bench Mumbai in the case of the assessee for the A.Y. 2005-06 (ITA No.2911/Mum/2009). The Tribunal referred to the decision in the case of State of Madras vs. G. J. Coelho 53 ITR 186 (SC) and held the following:
“The Hon’ble Supreme Court has clearly observed that “personal expenses” included expenses on the person of the assessee or to satisfy his personal needs as such clothes, food, etc. Thus the expenses on medical is on personal nature and the expenses on clothes would clearly fall under the category of personal expenses. In these circumstances, we find nothing wrong in the order of ld. CIT(A) and, accordingly, confirm the same.” 3.3. As the facts are similar for the impugned assessment year, the disallowance of Rs.1,51,953/- upheld by the ld. CIT(A) is sustained.
The second ground of appeal raised by the assessee is against disallowance of 40% of car expenses of Rs.1,47,980/- made by the AO and upheld by the ld. CIT(A) which comes to Rs.59,192/-.
4.1 The ld. Counsel of the assessee submitted that supporting invoices for all the expenditure have been provided to the AO and in most of the cases either the vehicle no. or vehicle make has been mentioned on the bill.
4.2 The ld. DR supported the order passed by the ld. CIT(A) upholding the disallowance of Rs.59,192/- made by the AO on the reason that the assessee has failed to provide the details of expenditure relating to each vehicle.
4.3 Having heard the rival submissions and perused the relevant material on record, it is found that the disallowance of Rs.59,192/- made by the AO is purely on ad hoc basis without any supporting material. In view of the above, the order of the ld. CIT(A) on the above addition is set aside and the AO is directed to delete the addition of Rs.59,192/-.
The third ground raised by the assessee is against the disallowance of 50% of electricity expenses of Rs.20,111/- claimed by the assessee.
5.1 The ld. Counsel of the assessee submitted that the assessee vide letter dated 23.12. 2011 has explained that there were two premises C-12, and C-13 and they were both on different floor of the same building. While the assessee was using C-12 pre- dominantly for residence, C-13 has been exclusively used for the office purpose where staff of over seven people used to seat and operates. It was submitted that the bill of both the premises were submitted before the AO and that bill of C-12 total to Rs.2,900/- whereas bill of C-13 account for the balance and in spite of these details being available, 50% of the expenses have been disallowed by the AO.
5.2 The ld. DR supported the order passed by the ld. CIT(A) upholding the disallowance of 50% of the electricity expenses of Rs.20,111/- on the reason that the residential flat is being used by the assessee for the purpose for residence as well as professional activities.
5.3 Having heard the rival submissions and perused the relevant material on record, we find that the ad hoc disallowance of 50% of the electricity expenses made by the AO and upheld by the ld. CIT(A) is not based on any material evidence. In view of the above, the order of the ld. CIT(A) on the above addition is set aside and the AO is directed to allow the electricity expenses of Rs.20,111/- claimed by the assessee.
The fourth ground raised by the assessee is against the disallowance of 50% land line telephone expenses and 20% of the mobile telephone expenses claimed by the assessee.
6.1 The ld. Counsel of the assessee submitted that the total expenses claimed is Rs.22,767/- which works out to about Rs.950/- per month per phone. Removing the service tax element of 10.3% out of this, the usage bill works out to Rs.860/- per month out of which Rs.250/- is fixed charges, hence actual usage charges is about Rs.610/- per month. It is stated that the assessee has seven staff members employed with her who have to do the entire coordination with all external parties. The number of calls does commensurate with the size of operation and in view of this the disallowance made be deleted.
6.2 The ld. DR supported that the disallowance made by the AO and upheld by the ld. CIT(A) on the reason that the personal element in respect of usage of land line and mobile telephone cannot be ruled out 6.3 Having heard the rival submissions and perused the relevant material on record, we find that the disallowance made by the AO is an ad hoc basis without any material support. It is also found that the number of calls does commensurate broadly with the size of operation of the assessee. In view of the above, the order of the ld. CIT(A) on the above two disallowances are set aside and the AO is directed to allow the same.
The fifth ground of appeal raised by the assessee is against the interest charged by the AO u/s 234B and 234C of the Act. The AO is directed to charge interest u/s 234B and 234C after giving appeal effect and also as per the provisions of the Act.
In the result, the appeal assessee is partly allowed.
Order pronounced in the open court 23/09/2016