2020 (10) TMI 975 - AT - Income Tax

Disallowance of personal expenses - HELD THAT - When the assessee was asked to explain as to why these expenses should not be disallowed as the same is not added back in the statement of income, the assessee could not furnish any explanation before the assessing authority or before the ld. CIT(A) or even before the Tribunal. Disallowance of personal expenses made by the AO and confirmed by the ld. CIT(A) stands sustained. Thus, the ground raised by the assessee is dismissed. Disallowance of road repairs and maintenance - HELD THAT - Since the roads are being used by all general public and the same are generally maintained by the Government or local bodies, it is not clear as to whether the assessee has been permitted to carry out any repair work of the public road or not. In case, the local bodies/government claimed similar expenditures, then such expenditure would not be allowed to the assessee and thus, NOC from the local bodies is required for consideration. Moreover, it is required to be verified any similar expenditure incurred by the assessee in earlier year, and if so, whether it has been allowed or not. Case law filed by the assessee shall not come to his rescue since the assessee has not produced any agreement with the local bodies/Government for undertaking repair and maintenance work of public roads. However, as discussed above, we set aside the issue to the file of the AO for verification. Disallowance of professional fee - HELD THAT - Since the nature of service rendered by the consultant was purely personal and assessee has submitted before the authorities below that the above amount was paid for taking advice for investments made, and not related to the business activity of the assessee, the Assessing Officer disallowed the above expenditure and brought to tax. CIT(A) confirmed the disallowance. Before us, assessee could not explain anything and filed any written submission for incurring the above expenditure towards business activities of the assessee. Accordingly, the disallowance confirmed by the ld. CIT(A) stands sustained.

Summary

Issues Involved:
Confirmation of disallowance of personal expenses, confirmation of disallowance of road repairs and maintenance, confirmation of disallowance of professional fee, challenging levy of interest under section 234 of the Income Tax Act, 1961.

Confirmation of Disallowance of Personal Expenses:
The appeal concerned the disallowance of personal expenses by the Assessing Officer and confirmation by the ld. CIT(A). The Assessing Officer disallowed club expenses as personal in nature, adding it back to the total income. The assessee failed to provide a proper explanation before the authorities. The Tribunal upheld the disallowance, as the assessee could not furnish any explanation, leading to the sustained confirmation.

Confirmation of Disallowance of Road Repairs and Maintenance:
The issue revolved around the disallowance of road repairs and maintenance expenses. The Assessing Officer disallowed the claimed expenses, stating they were not directly related to the assessee's business as the road was public property. The ld. CIT(A) held that such expenditure could not be verified as genuine business expenditure and dismissed the claim. The Tribunal noted that the road repair works were carried out by the assessee on public property and set aside the issue for verification by the Assessing Officer.

Confirmation of Disallowance of Professional Fee:
The Assessing Officer disallowed the professional fee paid to a consultant, deeming it personal in nature and not related to the business activity of the assessee. The ld. CIT(A) confirmed the disallowance, which was sustained by the Tribunal as the assessee failed to provide any explanation or written submission justifying the expenditure towards business activities.

Challenging Levy of Interest under Section 234:
The Tribunal considered the levy of interest under sections 234B and 234C of the Income Tax Act as consequential and mandatory to the assessed income. Since the issue of quantum addition was remitted for fresh decision, the Tribunal did not adjudicate on the interest levy. The appeal was partly allowed for statistical purposes.

This judgment addressed various issues related to the disallowance of personal expenses, road repairs and maintenance expenses, and professional fee, along with the challenging of interest levy under the Income Tax Act. The Tribunal upheld the disallowances due to lack of proper explanations and verification of business-related expenditures. The decision highlighted the importance of providing adequate justification for claimed expenses and the need for verification of expenditure authenticity in accordance with the law.