AOON TRAVELS,MUMBAI vs. ITO 19(2)(1), MUMBAI

First issue relates to the addition made out of unsecured loan. The Assessing Officer issued summons u/s. 131 of the Act to all the lenders who had lent the money to the assessee aggregating to ` 43,64,269/-. Sine some of the summons were returned back and some of the parties did not respond, the Assessing Officer assessed entire amount of ` 43,64,270/- as income of the assessee. In the appellate proceedings the assessee furnished certain details and hence learned CIT(A) remanded the matter to the file of the Assessing Officer. In the remand report, the Assessing Officer reported that the loan transactions aggregating to ` 36,24,269/- remained unverifiable. Accordingly, learned CIT(A) gave relief of ` 7,90,000/- and confirmed the addition to the extent of ` 36,24,269/-.

Learned counsel appearing for the assessee submitted that the addition confirmed by learned CIT(A) mostly consisted of loans taken in earlier years and hence addition, if any, could not have been made during the year under consideration. Learned AR also furnished a chart showing details of unsecured loans available with the assessee. Summary position of the said would read as under:-

Next issue relates to disallowance of interest expenses of ` 9,79,66/-. Since we have restored the issue relating to unsecured loan to the file of the Assessing Officer, corresponding interest disallowance also needs to be set aside to his file. Accordingly we set aside the order passed by learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for fresh consideration.

Last issue relates to adhoc disallowance of ` 46,27,556/- made by the Assessing Officer. The assessee has claimed various expenses aggregating to ` 1,85,10,225/-. Since the assessee did not furnish any details, the Assessing Officer disallowed 25% thereof and the learned CIT(A) also confirmed the same.

At the time of hearing learned AR submitted that the assessee has paid a sum of ` 17,07,628/- as Road tax to Government and the Assessing Officer has disallowed 25% there from also. He submitted that the payment made to the Government should not have been considered by the Assessing Officer for making adhoc disallowance. With regard to the disallowance made out of remaining expenses, learned AR submitted that disallowance of 25% is on higher side.

We have heard learned Departmental Representative and perused the record. We notice that the disallowance was warranted, since the assessee did not cooperate with the Assessing Officer by furnishing relevant details. Before us also, the assessee did not furnish the details and hence we are of the view that disallowance out of expenses is called for. However, we are of the view that the disallowance made by the AO at 25% is on the higher side. We also find merit in the submissions of the assessee that Road tax paid to the Government should not be subjected to ad-hoc disallowance. Accordingly, we set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to examine the nature of payment of Road tax of ` 17,07,628/- and allow the same fully if it has been paid to Government. In respect of remaining items of expenses, we are of the view that the disallowance may be restricted to 10%, and in our view, the same would meet the ends of justice. In case, the assessee was not in a position to prove the payment of Rs.17,07,628/- as the payment made to Government, the AO shall make disallowance of 10% of that expenses also. We order accordingly. The order passed by Ld CIT(A) on this issue stands modified accordingly.

In the result, appeal filed by the assessee is allowed for statistical purposes.