2010 (8) TMI 1166 - AT - Income Tax

Summary

Issues involved: Disallowance of salary paid to father of the appellant and disallowance of expenses on two-wheeler vehicles.

Issue 1 - Disallowance of Salary to Father:
The appeal was made by the Assessee against the order of the CIT(Appeals) confirming the disallowance of salary paid to the father of the Appellant. The Assessing Officer found the claim of Rs.84,000/- paid to the father to be bogus based on the report of an Inspector and the statement of an Accountant, Mrs. Ragini Thakkar. The CIT(A) upheld the disallowance, stating that the evidence provided was insufficient to prove the services rendered by the father. The ITAT upheld the disallowance under section 40A(2)(b) of the Income Tax Act, 1961, as the payment was deemed unreasonable and held as a bogus claim. The ITAT dismissed the appeal, confirming the disallowance.

Issue 2 - Disallowance of Expenses on Two-Wheeler Vehicles:
The Assessee challenged the disallowance of expenses amounting to Rs.1,16,106/- on two-wheeler vehicles used for business purposes. The CIT(A) confirmed the disallowance based on the statement of Mrs. Ragini Thakkar and without issuing a show cause notice to the Appellant. The ITAT found that the disallowance of expenses on motor vehicle and two-wheeler vehicles was not justified as the Assessing Officer failed to prove that the expenses were not for business purposes. The ITAT partially allowed the appeal, restricting the disallowance on motor car expenses to 1/5th of the total claim and deleting the disallowance on vehicle fuel and maintenance expenses. The disallowance in respect of insurance expenses was also partly allowed.

In conclusion, the ITAT partially allowed the Assessee's appeal, upholding the disallowance of salary paid to the father but overturning the disallowance of expenses on two-wheeler vehicles.