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TMI Blog2016 (8) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the expenses incurred on space for ₹ 7000/- per month and on staff ₹ 30,000/- per month and other related travel and other expenses appears to be reasonable. Further, the ld. CIT(A) has not specified any specific transactions or the expenses which the appellant has claimed and the same has not found favour with the ld. CIT(A). In our view, it is clear case of adhoc disallowance of expenses which cannot be sustained in the eye of law. We accordingly delete the disallowance of 40% of the expenses of ₹ 5,28,250/- claimed by the appellant hence ground of the assessee’s appeal is allowed. Unexpalined source of cash - Held that:- On perusal of the capital account which is available on record, it is noted that the appellant has an opening balance of 11,34,013 and introduced fresh capital of ₹ 2,52,609/- during the year under consideration in his professional consultancy business. The appellant introduced a sum of ₹ 7,05,500/- in his profession on various dates and he has withdrawn a sum of ₹ 4,52,891 from his capital account on various dates. Thus the net capital amounting to ₹ 2,52,609/- was introduced in the profession consultancy acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricted the disallowance of expenses to ₹ 4,28,250/- i.e. 40% of the total expenses claimed and balance amount was allowed. 2.1 The Ld. AR submitted that the appellant was rendering his services as consultant to the one of the most prestigious institute at Kota M/S. Resonance. The Appellant declared his income under the head Income from Business Profession , whereas, Ld. A.O. while making the assessment, assessed his total receipts as salary income and consequently, disallowed the entire expenses claimed against the receipts from M/S. Resonance. Further, by giving finding also disallowed the entire expenditure saying without prejudice to his action of considering the entire receipt as salary. Under the facts, once, if a receipt has been taxed as salary income then there is no scope of allowing any deduction out of salary, therefore, disallowance of expenses separately does not have any meaning as far as action of the A.O. is concerned, and, hence, finding given in this respect is also not very much relevant since even if, all is proper in view of the A.O., no such expenditure can be allowed under the head Salary . LR AR further submitted that the Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO means requirement and incurrence of expenditure is not under doubt and have accepted by the department. As far as adhoc disallowance of 40% is concerned on whole sale basis, it was submitted that disallowance on whole sale basis at the rate of 40% on all the expenditure are grossly wrong, since the list of total expenditures contains various such expenditures which cannot be treated as inflated or wrong or bogus such as Depreciation ₹ 1,37,175/-, Interest on Car Loan ₹ 19,613/-, Telephone Expenses ₹ 59,667/-, Audit Fees ₹ 12,500/- and Insurance ₹ 7,485/-. Perusal of the above shows that once the purchases of the fixed assets are not under doubt, such adhoc whole sale disallowance cannot be made for depreciation. Similarly, once the loan has been accepted to be taken and bank balance have been accepted then no such disallowance can be made for interest. Similarly, for telephone expenses which have been paid to the Telephone Company and audit fees to the Auditors, who himself have certified the financial statements and insurance premium have been made to the Insurance Company. Under the facts and circumstances, at the outset, no such disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnically involved in the work of the Appellant. The other expenditure claimed, are also very reasonable, looking to the nature of expenditure and requirement in reference to the contract for service. LR AR further submitted that It is a fact that books of accounts of the appellant are Audited u/s 44AB of the Income Tax Act, further, during the assessment proceedings books and accounts were produced along with supporting, therefore, it is an undisputed fact that expenditure have incurred and after examining the same it is not the case of Ld AO that expenditure under consideration is bogus. Further, expenditure under consideration is not capital in nature. These expenditures have been incurred wholly and exclusively for the purpose of carrying out business activity. Under such circumstances, these expenditures are qualify for deduction in full. LR AR further submitted that Ld AO has not come out with any single specific instance which shows that expenditure are not deductible. It is apparent from the findings of the Ld. AO in most of these disallowances that expenditures are incurred in cash. It is important to note that payment in cash within prescribed limited is not debarred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff at his own cost to assist him in discharge of his consulting engagement which cannot be refuted in absence of any contrary evidence on record. In our view, the expenses incurred on space for ₹ 7000/- per month and on staff ₹ 30,000/- per month and other related travel and other expenses appears to be reasonable. Further, the ld. CIT(A) has not specified any specific transactions or the expenses which the appellant has claimed and the same has not found favour with the ld. CIT(A). In our view, it is clear case of adhoc disallowance of expenses which cannot be sustained in the eye of law. We accordingly delete the disallowance of 40% of the expenses of ₹ 5,28,250/- claimed by the appellant hence ground of the assessee s appeal is allowed. 3. Regarding next ground of appeal, briefly the facts of the case are that the AO required the assessee to explain the source of cash introduced by the assessee of ₹ 7,05,500/- on different dates in the cash book. The assessee was specifically required to explain the source of deposits in the cash book on different dates as the onus lies on the assessee to explain the individual deposits alongwith the source thereof whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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