TaxTMI 
TaxTMI 
2016 (8) TMI 420
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.... 2. Regarding ground no. 1, briefly the facts of the case are that assessee has claimed various expenses of Rs. 10,70,610/- against the receipts of Rs. 21,42,500/-. The AO has disallowed the whole of the expenses however the ld CIT(A) has restricted the disallowance of expenses to Rs. 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, ....
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....that action is taken is itself unreasonable." Ld AR further submitted that the Ld. CIT(A) while allowing 60% of the expenditure has admitted that "it cannot be said that this income was earned without incurring any expenses as held 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 Rs. 1,37,175/-, Interest on Car Loan Rs. 19,613/-, Telephone Expenses Rs. 59,667/-, Audit Fees Rs. 12,500/- and Insurance Rs. 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....
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....students and for all these works, assisting staff and space is required. The expenses incurred on space are Rs. 7,000/- p.m. and on staff Rs. 30,000/- p.m. is very reasonable, looking to the technically 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 appa....
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....ff and related office space. Even though the appellant has access to the infrastructure and office space at the Institute, the appellant has submitted that he has maintained office and hired staff 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 Rs. 7000/- per month and on staff Rs. 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 Rs. 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 Rs. 7,05,500/- on different dates in the cash book. The assessee was specifically r....