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TMI Blog2017 (11) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... o vide order dt.29.11.2013 (in appeal No.SNL/83/11-12) granted partial relief to the assessee. Aggrieved by the order of Ld. CIT(A), assessee is now in appeal before us and has raised the following effective grounds : "1. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 18,70,360.00 made by the learned Assessing Officer exclusively on assumption / presumption basis of less profit shown and less disclosure during the survey action. The aforesaid addition being arbitrary, perverse, based on surmises and conjecture the learned CIT(A) ought to have deleted the said addition. The impugned addition may please be deleted. 2. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 8,50,000.00 and Rs. 3,20,000.00 made by the learned Assessing Officer merely on the basis of statement taken during the Search without any corroborative evidence. The aforesaid additions being arbitrary, perverse, based on surmises and conjecture the learned CIT(A) ought to have deleted the said additions. The impugned addition may please be deleted. 3. In the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted income from un-recorded sales of Rs. 22,09,393/-, excess cash of Rs. 75,501/-, investment in assets at Rs. 10,30,000/- and furniture material stock at Rs. 1,50,000/-. During the course of assessment proceedings on perusal of the Profit and Loss account filed by the assessee, AO noticed that assessee had disclosed net profit of Rs. 20,00,210/- and no trading account was filed by the assessee. AO was of the view that the unrecorded sales by the survey party was to the tune of Rs. 22,09,393/- could have formed part of Profit and Loss account but the cash disclosure and investments in assets and furniture should not have been disclosed in the Profit and Loss account as it was disclosed under deeming provisions of Secs.69A and 69B respectively as unaccounted income and unaccounted investment. He was of the view that had the amount of cash disclosure and investment in furniture and assets not considered while calculating the net profit, the net profit would have been Rs. 7,44,709/- which also included the profit on unrecorded sales of Rs. 22,09,393/-. He was further of the view that if the unaccounted income from unrecorded sales is reduced from the net profit, the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the investments and excess cash flow pertains to business income as such they were rightly included under the head 'income from business'. He further submitted that, though not admitted, at the most, including the disclosures made u/s 69 of the Act in the Profit and Loss account could be an error on the part of the assessee but it cannot be considered for rejection of books of accounts u/s 145(3) of the Act. He therefore submitted that the books of accounts should not have been rejected and therefore the AO should not have estimated the profits. Ld.D.R. on the other hand pointed to the various observations of AO and supported the order of AO and Ld. CIT(A). He further submitted that the printing stock of paper as on 01.04.2009 and on the date of survey is same which is not correct considering the nature of business carried out by the assessee more so when the assessee had admitted to unaccounted sales at the time of survey. He further submitted that assessee had wrongly included the disclosure account of investment, furniture and stock materials aggregating to Rs. 12,55,501/- in the Profit and Loss account while arriving at gross profit. He submitted that the same cannot be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edited to the Bank account. With respect to receipt of balance amount of Rs. 7,15,315/-, the submission of the assessee was that the agricultural produce was sold in open market to various customers and the cash memos and bills were not maintained. The submission of the assessee was not found acceptable to the AO. AO considering the net agricultural income of the assessee to be at Rs. 3,50,000/- and the balance net agricultural receipts of Rs. 3,21,575/- were treated as income from other sources. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A), who upheld the order of AO by holding as under : "9. Assessee had shown agricultural income of Rs. 6,71,575/-. Total agricultural receipts was Rs. 8,27,022/- and expenses were Rs. 1,55,447/-. Details of the income and expenditure relating to agricultural income were called for The assessing officer also asked to furnish details and evidences of expenditure incurred for earning the agricultural income i.e. evidences of seeds, fertilizer, pesticides, expenditure towards cultivation, tilling and harvest, expenditure towards labour payment and any other expenditure. The assessing officer also asked for details of ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that assessee owns 8 acres of land. He further submitted that assessee had shown net agricultural income of Rs. 4,70,000/- in A.Y. 2002-03, Rs. 5,20,000 in A.Y. 2003-04, Rs. 6,40,000/- in A.Y. 2004-05 and Rs. 6,71,575 in A.Y. 2005-06. He submitted that the land owned by the assessee is well irrigated and he grows crops like sugar cane, coconut on these lands. It was submitted that in such a situation, the income shown by the assessee from agricultural operations could not be doubted. Ld.D.R. on the other hand supported the order of AO and Ld. CIT(A). 9. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to the estimation of agricultural income. Before us, it is assessee's submission that the land owned by him is well irrigated and he raised crops like soyabean, sugarcane etc. Further the submission of the assessee that he has been showing agricultural income in earlier years which ranged from Rs. 4,70,000/- in A.Y. 2003-04 to Rs. 6,71,575/- in A.Y. 2005-06. The aforesaid submissions of assessee have not been controverted by Revenue. Before us, Revenue has also not placed any material on record, to show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce a relative inspires. However, these reasons cannot be accepted. I find that the assessing officer was justified in making disallowance of Rs. 50,000/- from the salary paid to assessee's wife. Appellant's ground is rejected." Aggrieved by the order of Ld. CIT(A) assessee is now in appeal before us. 11. Before us, Ld.A.R. reiterated the submissions made before AO and Ld. CIT(A) and further submitted that in earlier years the salary to the wife was Rs. 1,42,000/- and during the year it was increased to Rs. 1,56,000/- (i.e., 13,000/- per month). He submitted that for invoking provisions of Sec.40A(2)(b) it has to be shown as to how the amount is excessive or how the amount is not reasonable and the AO is required to assess fair market price and give comparative instances for payment. In the present case, he submitted that the services rendered by the wife of the assessee has not been doubted. In such circumstances, the AO was not justified in invoking provisions of Sec.40A(2)(b) of the Act. He therefore submitted that no disallowance was called for. Ld.D.R. on the other hand supported the order of AO ad Ld. CIT(A). 12. We have heard the rival submissions and perused the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the society."
Aggrieved by the order of AO, assessee carried the matter before us.
14. Before us, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and further submitted that assessee had incurred similar expenses in earlier years but no adhoc disallowance was made in assessee's case in earlier years. He therefore submitted that the disallowance of expenses is not warranted. Ld.D.R. on the other hand, supported the order of AO and Ld.CIT(A).
15. We have heard the rival submissions and perused the material on record. We find that AO had disallowed 20% of telephone and travelling expenses considering that the personal element of expenses is not being ruled out. Before us, assessee has stated that no such expenses have been disallowed by Revenue in earlier years. Considering the totality of the aforesaid facts, we are of the view that in the present case the ends of justice shall be met if the disallowance of expenses is restricted to 10% of the expenses. We thus direct accordingly. Thus the ground of assessee is partly allowed.
16. In the result, the appeal of the assessee is partly allowed.
Order pronounced on 15th day of September, 2017. X X X X Extracts X X X X X X X X Extracts X X X X
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