2012 (11) TMI 582 - AT - Income Tax

Appeal allowed for delay, vehicle expenses remanded, interest ground dismissed, income addition partially reduced

The appeal was allowed due to the condonation of the delay in filing, remanding the matter for a fresh decision. The deduction for vehicle expenses was ... Condonation of delay in filling appeal – Delay of 86 days - CIT(A) has mainly dismissed the appeal on the point of limitation – Held that:- As the brother of assessee was under treatment for his accident at the relevant point of time so he could not file the appeal in time. It is possible that in case brother of assessee is fighting for his life after accident, his priority for filing the appeal in time may be disturbed. According to us, the assessee was prevented by reasonable cause in filing the appeal and so the delay is directed to be condoned. Issue remand back to AO - In favour of assessee Disallowance of petrol expenses of vehicle – Whether assessee can claim expense incurred in relation to income earned from partnership firm u/s 10(2A) - AO argued that there was absence of nexus of the expenditure with remunerations received by the assessee from partnership firm as a working partner – Assessee claim expense after deducting 20% of the vehicle expenses as personal expenses - Expenses on car are incurred u/s 37(1) for earning income in the form of remuneration and interest – Held that:- In such a situation, provision contained in section 14A will come into operation and any expenditure incurred in earning the share income will have to be disallowed. We find that the CIT(A) at relevant point of time was not having the benefit of the Special Bench decision in case of Shri Vishnu Anant Mahajan (2012 (6) TMI 297 - ITAT, AHMEDABAD). Issue Remand back to AO Disallowance of Depreciation on vehicle against income u/s 10(2A) – Held that:- Section 14A deals only with the expenditure and not any statutory allowance admissible to the assessee. A statutory allowance u/s 32 is not an expenditure, hence it cannot be subject matter of dis-allowance u/s 14A. Following the decision in case of Hoshang D. Nanavati (2011 (3) TMI 89 (Tri)) – Remand back to AO Addition on account of Agricultural Income – AO observed that books seems to have been written in one sitting, self-made bills – AO made reject agricultural income and consider the same as Income from other source - Held that:- The claim of the assessee has been rejected mainly on account that earning from the crops shown by the assessee were not tallying with the 7/12 extract which is the record of crop on the agricultural holding of the assessee. Thus, the assessee could not correlate the income from its agricultural holding by cogent reasoning. Addition justified. In favour of revenue Issues Involved:1. Dismissal of appeal on the grounds of limitation.2. Deduction of depreciation and petrol expenses of the vehicle.3. Disallowance of interest payment claimed as deduction under Section 57.4. Addition of unproved agricultural income.Detailed Analysis:1. Dismissal of Appeal on Grounds of Limitation:The appellant argued that the CIT(A) dismissed the appeal primarily due to the delay in filing. The appellant claimed that the delay of 86 days was due to unavoidable circumstances, including the severe medical conditions of his elder brother and father, which required his full attention and prevented him from complying with legal formalities. The Tribunal acknowledged the reasonable cause for the delay, given the critical health conditions of the appellant's family members. Consequently, the delay was condoned, and the matter was remanded to the CIT(A) to decide the appeal on its merits, ensuring the appellant is given an opportunity to be heard.2. Deduction of Depreciation and Petrol Expenses of Vehicle:The appellant sought a deduction of Rs. 1,78,582/- for depreciation and petrol expenses related to a vehicle used in connection with his partnership in M/s. S.P. Wines. The Assessing Officer disallowed the claim, citing a lack of nexus between the vehicle expenses and the remuneration received from the partnership firm. The CIT(A) upheld this disallowance, stating that the expenses were not incurred for earning the said income as the remuneration and interest were independent of the vehicle's usage. The Tribunal referred to the Special Bench decision in Vishnu Anant Mahajan vs. ACIT, which clarified that a firm and its partners are separate assessable entities and that expenses related to non-taxable income should be disallowed under Section 14A. The Tribunal restored the issue to the Assessing Officer for reconsideration in light of the Special Bench decision.3. Disallowance of Interest Payment Claimed as Deduction under Section 57:The appellant did not press this ground during the hearing, and hence, it was dismissed as not pressed.4. Addition of Unproved Agricultural Income:The appellant declared a net agricultural income of Rs. 2,09,805/-. The Assessing Officer found discrepancies in the books of accounts, which appeared to be written in one sitting and lacked genuine supporting documents for expenses like fertilizers, seeds, and labor charges. Additionally, the crops claimed to be sold did not match the 7/12 extracts. Consequently, the Assessing Officer accepted only Rs. 1,00,000/- as genuine agricultural income and added the remaining Rs. 1,00,000/- as income from other sources. The CIT(A) reduced this addition to Rs. 69,805/-. The Tribunal upheld the CIT(A)'s decision, noting that the appellant failed to correlate the agricultural income with the crop records accurately.Conclusion:The appeal concerning the delay in filing was allowed, and the matter was remanded to the CIT(A) for a fresh decision. The issue regarding the deduction for vehicle expenses was also remanded for reconsideration. The ground related to interest payment was dismissed as not pressed. The addition of unproved agricultural income was upheld, partially allowing the appeal.