Tribunal allows agricultural income exemption but upholds disallowances on expenses. Fresh verification ordered on legal charges.

The Tribunal allowed the assessee's claim for agricultural income exemption of Rs. 2,25,000 due to a previous favorable decision. Disallowances of various expenses including car maintenance, telephone expenses, and legal charges were upheld. The Tribunal directed fresh verification for legal charges. Disallowance of travelling expenses for the daughter and addition of a loan as deemed dividend were also upheld. The appeal for A.Y. 2004-05 was partly allowed, while the appeals for A.Y. 2005-06 were partly allowed for statistical purposes and dismissed.

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Issues Involved:
1. Exemption on account of agricultural income.
2. Disallowances of various expenses including car running and maintenance, telephone expenses, chamber maintenance, travel and conveyance, and provision for liability.
3. Disallowance of legal charges paid.
4. Disallowance of travelling and conveyance expenses.
5. Addition of loan received as deemed dividend under section 2(22)(e).

Issue-wise Detailed Analysis:

1. Exemption on Account of Agricultural Income:
The assessee claimed an exemption for agricultural income amounting to Rs. 2,25,000, which was disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO did not accept the assessee's explanation of receiving the agricultural income by cheque from ancestral land due to lack of documentary evidence. However, the Tribunal found that this issue was already settled in favor of the assessee in a previous year (A.Y. 2003-04), where the agricultural income was accepted by the Tribunal. Respectfully following the earlier decision, the Tribunal directed the AO to accept the claim of the assessee for the agricultural income of Rs. 2,25,000.

2. Disallowances of Various Expenses:
The AO made several disallowances due to the absence of proper records and potential personal use:
- Car Running and Maintenance: Rs. 48,895 disallowed for lack of logbook and personal use.
- Telephone Expenses: Rs. 27,035 disallowed for lack of call register and personal use.
- Chamber Maintenance: Rs. 7,895 disallowed as it included expenses for family use.
- Travel and Conveyance: Rs. 49,117 disallowed due to lack of documentary evidence.
- Provision for Liability: Rs. 1,560 disallowed for lack of documentary support.

The CIT(A) upheld these disallowances, and the Tribunal found no justifiable reason to interfere, considering the disallowances fair and reasonable.

3. Disallowance of Legal Charges Paid:
The assessee claimed Rs. 3,37,535 as professional fees paid to an advocate without deducting tax at source. The AO disallowed this amount under section 40(a)(ia) for non-deduction of tax. The CIT(A) confirmed this disallowance. The Tribunal noted that the assessee's new submissions regarding the payment to two advocates and the amounts not exceeding Rs. 20,000 require verification. Thus, the Tribunal restored the matter to the AO for fresh verification and decision.

4. Disallowance of Travelling and Conveyance Expenses:
The AO disallowed Rs. 67,267 out of the claimed Rs. 4,41,325 for the air-fare of the assessee's daughter, finding no professional nexus. The CIT(A) confirmed this disallowance. The Tribunal upheld the disallowance as the assessee failed to provide evidence showing the professional relevance of the daughter's travel.

5. Addition of Loan Received as Deemed Dividend under Section 2(22)(e):
The CIT observed that Rs. 6,55,000 received by the assessee from a company should be treated as deemed dividend under section 2(22)(e). The AO treated this amount as deemed dividend in the reassessment. The CIT(A) confirmed this addition. The Tribunal upheld the addition, noting the lack of evidence supporting the assessee's claim that the amount was an advance against property, and the absence of any cancellation of the stated agreement.

Conclusion:
- The appeal for A.Y. 2004-05 (ITA No. 1783/KOL/2014) was partly allowed.
- The appeal for A.Y. 2005-06 (ITA No. 1784/KOL/2014) was treated as partly allowed for statistical purposes.
- The appeal for A.Y. 2005-06 (ITA No. 1785/KOL/2014) was dismissed.

Order Pronounced:
The order was pronounced in the open Court on October 21, 2016.

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