Dear Friends,
The AO has made the following additions on estimation basis in respect of two of my clients. One is a company and other is a partnership firm.
Ø Addition on account of personal use of vehicles by directors / partners. The AO has contended that there is no maintanence of separate log book in respect of these vehicles. And since the personal use by directors / partners cannot be denied the additions are made in respect of repairs and maintenance, petrol expenses and depreciation. What is the argument which can be put forward in front of CIT(A) in order to defend these claims? There is some personal use by directors but it is much less than the addition of 20% made by AO. Can the AO make such addition? If yes under which section?
Ø Addition on account of personal use of Telephone installed at residence of directors / partners. The case is similar to above. Though the telephones are installed at residence majority of the use is for official purpose. Since the company and partnership firm are engaged in export business and since the markets abroad open in night after office hours, it is necessary for directors / partners to talk over the telephone. However all directors have other telephone line at their respective residence. The AO has not accepted this argument and has contended that even though there is another personal line at all places, the personal use cannot be denied. What other argument can be made in this respect? Can the AO make such addition? If yes under which section?
Regards,
Chintan
CAclubindia
