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TMI Blog2012 (9) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... same justified and accordingly, the delay is condoned and we entertain the appeal. The effective grounds of appeal are as under: "1. Ld. CIT (A) has grossly erred in law and on facts in confirming disallowance of Rs.3,60,000/- out of remuneration paid to the Director of Rs. 4, 80, 000/- made by AO u/s 40A(2)(b) of the Act. Both the lower authorities have erred in not appreciating the fact that the director has / rendered services and the same has been offered for taxes. Ld. CIT (A) ought to have allowed the total remuneration paid to the director for services rendered when AO has failed to establish the same as excessive or unreasonable by any comparative instances. 2. Ld. CIT (A) has erred in confirming disallowance of expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the same. As per the copy of the agreement entered with Red Chilly Entertain Pvt. Ltd., Mrs. Parekh has started working with Red Chilly From Nov. 2004 on a remuneration @ Rs.5,500/- total amount was Rs.50,000/-. It was also seen that she had been paid remuneration @ Rs.4,000/- for managing day to day affairs of the company during the same period. This agreement did not show that the suiting would take place in Ahmedabad from where the assessee company operates. Further, the A.O. observed at page 13 of the assessment order as under: "(x) As per detail submitted by the assessee the Assessee Company has paid salary to Bharti Shah, Vijay Vaghela and Servant totaling to Rs. 1,29,600/- out of the said, the Assessee Company has claimed only 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the appellant. The remuneration paid to her does not commensurate to the benefit derived by the appellant therefrom. Therefore, a disallowance is called for under the provisions of Sec. 40A(2)(b) of the Act. Keeping in view the totality of facts and surrounding circumstances the payment of remuneration to the extent of Rs. 1,20,000/- to Mrs. Neena Parikh is held to be justified. Therefore, the disallowance to the extent of Rs. 3,60,000/- made by the A.O is hereby confirmed." 4. Now, the assessee is in further appeal before us. 5. Ld. counsel for the assessee filed the paper book and contended that all the details of remuneration to the Director was given to the A.O. with PAN, designation, address and particulars of the A.O. Details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in income tax law, principle of res-judicata does not apply. The A.O. has discussed all the details in the assessment order in para 12 that Mrs. Neena Parekh has done nothing substantive for the appellant so as to make it entitle for the remuneration to the extent of Rs.4.80 lacs as the total income shown by the assessee company is 'nil' in its return of income. The remuneration paid to Mrs. Neena Parekh is excessive and unreasonable having regard to the services rendered by her to the appellant. The remuneration paid to her does not commensurate to the benefits derived by the appellant therefrom. As the disallowance made by the A.O. and confirmed by Ld. CIT(A) is excessive, we are of the considered view that the disallowance to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aveling to Delhi whereas the assessee's income is interest income earned from the companies stationed at Ahmedabad. Therefore, there was no justification to travel to Delhi and it has not been established before the A.O. that the same was for business purpose. Likewise, disallowance of entertainment expenses of Rs.2,188/- was made by the A.O. as the same was incurred by Mrs. Neena Parekh on self made vouchers for entertaining the guests in restaurants but before the A.O., the assessee could not establish business connection of these expenses. Therefore, the A.O. disallowed the entertainment expenses of Rs.2,188/- and added the same in the income of the assessee. Ld. CIT(A) has also confirmed the addition on the ground that the assessee cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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