2012 (10) TMI 757 - AT - Income Tax

Revenue v/s capital expenses - Vehicle running and maintenance, Traveling Conveyance, Depreciation on Car, Telephone expenses,Household expenses, Household expenses - Held that - The assessee did not produce the relevant bills and vouchers before the AO or the CIT(A) nor could justify the expenses with any other material - He also did not deny that expenditure on Deck and fittings of speaker and Air Conditioners in car is capital in nature. Moreover, since personal use of cars and telephones by the assessee and her family members or staff has not been denied nor it was claimed that the assessee or her family members had any independent vehicles or telephones for personal use, thus disallowance of 1/4th of the expenses on running and maintenance of vehicles as also expenses on telephones/mobiles, in the light of provisions of sec. 38(2) is reasonable. Regarding disallowance of expenses for want of relevant bills and vouchers & that books of account were not required to be rejected since trading results have nowhere been disputed by the AO or the CIT(A) estimated disallowance made by the AO has been found by the CIT(A) fair and reasonable - Also the addition on expenditure towards house hold expenses has been made by the AO, considering status of the assessee and totality of facts and circumstances and the said estimate has not been found unreasonable by CIT(A) while not an iota of evidence regarding sources of meeting household expenses nor even break up of expenses under broad heads has been brought to notice, thus addition made by the AO & upheld by CIT(A), is justified - against assessee.

Summary

Issues Involved:
1. Disallowance of vehicle running and maintenance expenses.
2. Disallowance of traveling and conveyance expenses.
3. Disallowance of depreciation on car.
4. Disallowance of telephone expenses.
5. Addition on account of household expenses.
6. Disallowance of various expenses due to lack of supporting bills and vouchers.

Detailed Analysis:

1. Disallowance of Vehicle Running and Maintenance Expenses:
The Assessing Officer (AO) disallowed Rs. 43,760/- claimed under vehicle running and maintenance expenses, treating them as capital in nature since they were not current repairs. The CIT(A) allowed expenses on seat covers and central locking system as current repairs but upheld the disallowance for expenses on Deck, fittings of speaker, and air conditioners as capital in nature. The Tribunal upheld this decision, agreeing that these expenses were capital in nature.

2. Disallowance of Traveling and Conveyance Expenses:
The AO disallowed Rs. 7,500/- for personal use of the car as no log book was maintained, and the assessee did not claim to have a separate car for personal use. The CIT(A) upheld this disallowance, noting that no detailed working was provided by the assessee. The Tribunal found the disallowance reasonable, given the lack of evidence for exclusive business use.

3. Disallowance of Depreciation on Car:
The AO disallowed Rs. 11,194/- of depreciation on the car for personal use. The CIT(A) deleted this disallowance, stating that depreciation is a statutory allowance and must be fully allowed as per prescribed rules. The Tribunal agreed with the CIT(A) and deleted the disallowance.

4. Disallowance of Telephone Expenses:
The AO disallowed 25% of telephone expenses, amounting to Rs. 8,111/-, for personal use. The CIT(A) upheld this disallowance, noting that the assessee did not provide a working basis for the claimed expenses. The Tribunal found the disallowance reasonable, given the lack of evidence for exclusive business use.

5. Addition on Account of Household Expenses:
The AO added Rs. 36,000/- to household expenses, estimating them at Rs. 60,000/- based on the assessee's status and family composition. The CIT(A) upheld this addition, noting that the withdrawals were not substantiated with supporting evidence. The Tribunal found the addition justified, as the assessee did not provide any evidence regarding household expenses or sources of meeting them.

6. Disallowance of Various Expenses:
The AO disallowed Rs. 55,185/- for various expenses due to lack of supporting bills and vouchers. The CIT(A) upheld this disallowance, finding it reasonable given the lack of proper details. The Tribunal agreed with the CIT(A), noting that the books of account were not required to be rejected as the trading results were not disputed. The estimated disallowance was found fair and reasonable.

Conclusion:
The Tribunal upheld the CIT(A)'s findings on all disallowances and additions, dismissing the assessee's appeal. The Tribunal found the disallowances reasonable and justified, given the lack of supporting evidence and proper details provided by the assessee.