B. M. Kothari A.M.
This appeal by the assessee is directed against the order dated 22-9-1992, passed by the Deputy Commissioner (Appeals) for assessment year 1989-90.
2. The first ground relates to confirmation of disallowance of Rs. 7,000 out of telephone expenses. The learned counsel appearing on behalf of the assessee submitted that no specific instance of personal user of telephone has been brought on record by the assessing officer. In the absence of any specific finding about personal use of telephone such ad hoc disallowance is highly unjustified. The learned counsel placed reliance on the decision of Tribunal in the case of Rajasthan Automobiles in ITA No. 734/Jp/93, dated 18-11-1999.
2.1. I have gone through the said decision. In that case of disallowance of Rs. 500 made out of telephone expenses has been confirmed by the Tribunal. It is true that in that case an ad hoc disallowance of 4,000 made out of travelling and conveyance allowances was deleted on the ground that no instance of expenditure of disallowable nature was pointed out by the assessing officer. The element of personal user of telephone installed at residence, cannot be ruled out. However, considering the volume of business, I am of the view that disallowance of Rs. 7,000 made out of telephone expenses of Rs. 11,650 is excessive. The assessing officer is directed to restrict the said disallowance to Rs. 3,000.
3. The next ground relates to confirmation of disallowance of Rs. 3,245 and Rs. 4,192 out of petrol expenses and depreciation on motor car, respectively, on the ground of personal user of car for non-business purposes/personal purpose. The assessing officer disallowed 1/4th of car expenses and car depreciation on account of personal user of car. The Commissioner (Appeals) confirmed the action of the assessing officer, After considering the submissions made by the learned representatives of the parties and after going through the orders of the learned departmental authorities, I am of the view that disallowance at 1/4th of car expenses and car depreciation is excessive. The assessing officer is, therefore, directed to restrict the said disallowance at 1/7th of the car expenses and car depreciation.
4. Next ground raised by the assessee relates to confirmation of an addition of Rs. 5,640 on account of alleged excess cash found at the time of survey and surrendered by the employees of the assessee at the time of survey.
4.1. The learned counsel contended that survey was conducted at the assessee's business premises on 31-10-1988. During the course of survey alleged excess cash of Rs. 5,638 was found in a separate bag lying independently in the shop. This cash was not found along with the cash belonging to the shop. The officers of the Income Tax Department recorded the statement of one Shri Giriraj Ratan Kothari who was attending to the business at shop. The proprietor of the shop was not available at business premises during the course of survey. The officers of the department recorded the admission of Shri Giriraj Ratan Kothari in the said statement. Shri Giriraj Ratan Kothari in his statement dated 31-10-1988, admitted that the excess cash of Rs. 5,640.12 represents undisclosed income of the firm and he admits the same as undisclosed income. The learned counsel submitted that a perusal of Q. No. 11 of the said statement shows that the leading question was put to Shri Giriraj Ratan Kothari by the assessing officer. Such a leading question is not permissible in view of section 141 of Evidence Act. So-called surrender made by Shri Giriraj Ratan Kothari is not valid. The employee was not authorised to give any such statement on behalf of the assessee. The learned counsel also drew my attention to the decisions of Rajasthan Sales Tax Tribunal, Ajmer in Appeal No. 74/86/ST/Jd in the case of CTO v. M/s Om Prakash Ram Prakash wherein it was held that the brother of a partner is a stranger to the firm and on the basis of his statement or admission, penalty cannot be levied. He also relied on another decision of Sales Tax Tribunal in the case of Asstt. CTO v. M/s Ambadevi Store, Siwana in which it was held that penalty imposed for unaccounted for goods in the absence of proprietor without taking his explanation on the request of the accountant just at the time of survey is not valid. The learned counsel, therefore, strongly urged that the addition of Rs. 5,640 confirmed by the Deputy Commissioner (Appeals) should be cancelled.
4.2. The learned Senior Departmental Representative supported the order of the Deputy Commissioner (Appeals) and relied upon the reasons mentioned in the assessment order. He also submitted that provisions of Evidence Act do not apply to Income Tax proceedings. Shri Giriraj Ratan Kothari was looking after the entire business of the assessee in his absence and the version given by him at the time of survey admitting Rs. 5,640 as concealed income of assessee's business should be accepted as true and correct.
4.3. I have carefully considered the submissions made by the learned representatives of the parties and have perused the orders of the learned departmental authorities. The learned departmental authorities have not disputed the fact that a sum of Rs. 5,640 was found in a separate bag and was not found along with cash pertaining to the business amounting to Rs. 44,185 found during survey. The admission made by the employee during the survey cannot be treated as an binding admission made by the assessee. The assessing officer has not even recorded the statement of the assessee in relation to the aforesaid excess cash. Before making the aforesaid addition, the assessing officer could record the statement of the assessee and ascertain the true facts. It was contended on behalf of the assessee that Rs. 5,638 represents the amount of savings from withdrawals made for household expenses. The assessing officer has rejected the said explanation simply by saying that such an contention is not acceptable. The assessing officer has not mentioned in the order as to how much amount of withdrawal was made by the assessee for household expenses in the year under consideration as well as in the earlier years. Looking to the smallness of the amount, the assessee's explanation that this represents the savings from withdrawals made for household expenses, may also be probable. Such a matter has to be decided on the basis of preponderance of probabilities. On a careful consideration of the entire relevant facts I am of the view that there is no justification for sustaining such an addition of Rs. 5,640 on the basis of an admission made by an employee behind the back of the assessee. The assessing officer is directed to cancel the said addition of Rs. 5,640.
5. In the result, the appeal is partly allowed.