2012 (2) TMI 209 - AT - Income Tax

Car expense being personal in nature - Held That - When assessee himself disallowed 1/3rd of of car depreciation, contention of the assessee that no disallowance is called for out of expenses incurred towards interest, insurance and taxes do not sustain. Dis-allowance on Incomplete bills & vouchers - Assessee additions upto 28% on higher side - Held That - Additions of Rs 1,00,000 would meet end of justice. Annual value of property - Enhancement from 6000 pm to 6500 pm - Held That - Assessee had not produced any evidence to show that the fair market value has actually come down. Decided against assessee.

Summary

Issues:
1. Disallowance of car loan interest, car insurance, and taxes towards personal use.
2. Ad-hoc disallowance due to incomplete bills and vouchers.
3. Enhancement of rental income from Rs. 6000 to Rs. 6500 per month.
4. Claim of deduction from professional fee receipts.

Issue 1: Disallowance of car expenses:
The Assessing Officer disallowed a portion of car loan interest, insurance, and taxes towards personal use, despite the assessee disallowing 1/3rd of car depreciation for personal use. The Ld CIT(A) upheld the disallowance, stating that expenses must be apportioned for business and personal use. The ITAT concurred with the Ld CIT(A) and confirmed the disallowance, emphasizing that fixed expenses like car loan interest and insurance also need to be considered for personal use disallowance.

Issue 2: Ad-hoc disallowance for incomplete bills and vouchers:
In the assessment year 2004-05, the Assessing Officer disallowed Rs. 3,08,000 due to incomplete bills and vouchers. The ITAT reduced the disallowance to Rs. 1 lakh, considering it a fair amount. However, no interference was made for the Rs. 50,000 disallowed in the assessment year 2003-04 as it was not contested before the Ld CIT(A).

Issue 3: Enhancement of rental income:
The Assessing Officer increased the rental income from Rs. 6000 to Rs. 6500 per month, which the assessee disputed. The ITAT ruled that the fair market value should be considered if the actual rent is less. Since the assessee declared Rs. 6500 as rent in a previous year without evidence of a decrease in fair market value, the enhancement was upheld, rejecting the assessee's plea.

Issue 4: Claim of deduction from professional fee receipts:
The assessee raised an additional ground regarding a deduction from professional fee receipts based on a High Court order. The ITAT declined to interfere as it was a new issue not raised before the Ld CIT(A), advising the assessee to seek relief before the Assessing Officer as per the law.

In conclusion, the ITAT partially allowed the appeal for the assessment year 2004-05 and dismissed the other appeals, emphasizing the importance of proper documentation, fair market value considerations, and adherence to legal procedures in tax matters.