BHALLA CHEMICAL WORKS PVT. LTD.,DELHI vs. DCIT, CIRCLE- 4(2), NEW DELHI

3. In the light of submission made, remaining other grounds are dismissed and remaining grounds are adjudicated here under:-

Ground no. 3 relates to estimated disallowance of Rs. 2,32,707/- on account of personal user of the car. The Assessing Officer based on the observations in the tax audit report has estimated ad-hoc disallowance at the rate of 15% such car expenses including depreciation thereon. The aforesaid action of the estimated disallowance has been confirmed by the Ld. CIT(A) in the first appeal. 3.1 In this regard the assessee contends that the estimation has been made solely on the basis of observation in the tax audit report without examining the ground realities. The assessment framed u/s. 143(3) for A.Y.2010-11 was referred and it was submitted that no such disallowance was carried out on account of such estimation. 3.2 Having regard to the general observations made in the tax audit report read with assessment order for A.Y. 2010-11, the assessee contends that in all fairness the disallowance may be restricted to 10% instead of 15% carried out by the revenue. 3.3 The learned DR for the revenue although relies upon the order of the lower authorities submits that a benign view may be taken in the matter. 3.4 In the totality of the circumstances and having regard to the fact that there is a possibility of personal user and keeping in mind the observations of the tax auditor, the estimations of disallowance at the rate of 10% would be just and proper in the facts of [3] the case. The disallowance made on this score is therefore modified and restricted to 10% of car expenses including depreciation thereon. 3.5 The assessee thus gets partial relief on the point.

Ground no. 4 relates to disallowance of club expenses amounting to Rs. 2,04,234/- on the ground that such expenses have been incurred for personal benefit of the directors and does not involve any commercial expediency. The learned counsel for the assessee in defense submits that as per the assessment order for A.Y. 2010-11, the AO has estimated 5% of such expenses towards personal user. 4.1 In Keeping with the view taken by the AO in the earlier years the disallowances of club expenses in toto is not justified. Such disallowances of expenses are thus restricted to 5% on estimated basis in tune with the assessment order for A.Y. 2010-11. 4.2 The assessee thus gets partial relief on the issue.

We now advert to ground no. 6 of the appeal of the assessee concerning addition of Rs. 37,25,803/-on account of unverified creditors. 5.1 The Assessing Officer in the assessment order noted that the aforesaid amount of Rs. 37,25,803/- in aggregate represents outstanding amount in relation to four parties namely; M/s. Baba Haridas Oil Carriers, M/s. G-4 Securities Guarding Pvt. Ltd., Rajdhani Sales Corporation and M/s. Jayco Agencies Pvt. Ltd. The Assessing Officer invoked section 68 of the Act and disallowed the outstanding credits on the ground that either the notice u/s. 133(6) was unserved or un-responded or lower amount has been confirmed in one case i.e. M/s. Jayco Agencies Pvt. Ltd. 5.2 The learned counsel submits that in respect of M/s. Baba Haridas Oil Carriers, the outstanding amount of Rs. 6,79,523/- has been included in the P&L account of A.Y. 2014-15. Likewise in respect of M/s. G-4 Securities Guarding Pvt. Ltd. the outstanding of Rs. 7,72,632/- has been reversed and booked as income in A.Y. 2017-18. In respect of third party namely Rajdhani Sales Corporation, the assessee submits that Rs.

In the result, the appeal of the assessee is partly allowed.