M/s. Maratt Limited, Bangalore V. DCIT, Bangalore

ITA 1200/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57535 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Depreciation; Opportunity of being heard; Assessment record; Non passing of speaking order
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.1200/BANG/2010 ASSESSMENT YEAR : 2006-07 M/S. MARATT LIMITED, MARATT ESTATE, BANNERGHATTA ROAD, BANGALORE 560 076. PAN : AAACM 9350J VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK A. KULKARNI, ADVOCATE RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) DATE OF HEARING : 21.03.2012 DATE OF PRONOUNCEMENT : 21.03.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 06.09.2010 OF THE CIT(APPEALS)-VI, BANGALORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(AP PEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. ITA NO. 1200/BANG/10 PAGE 2 OF 11 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DECISION OF ASSESSING OFFICER IN DISALLOWING DE PRECIATION ON THE BUILDING. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DECISION OF ASSESSING OFFICE IN RESPECT OF DISA LLOWANCE OF DEPRECIATION ON OFFICE EQUIPMENTS, FURNITURE AND EL ECTRICAL FITTINGS AS CLAIMED. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE DEPRECIATION ON BUILDING, OFFICE EQUIPM ENTS, FURNITURE AND ELECTRICAL FITTINGS THEREBY REVERSING THE ASSESSING OFFICERS DECISION. 5. THE APPELLANT CRAVES FOR LEAVE TO ADD TO, DELET E FROM OR AMEND THE GROUNDS OF APPEAL. 3. FROM THE ABOVE GROUNDS IT IS GATHERED THAT THE O NLY GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF DEPRECIATIO N ON THE BUILDING, OFFICE EQUIPMENTS, FURNITURE AND ELECTRICAL FITTINGS. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF RUBBER GOODS AND PRO PERTY DEVELOPMENT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 22.11.20 06 DECLARING TOTAL INCOME OF RS.NIL. LATER ON THE CASE WAS SELECTED F OR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXAMINED T HE ASSESSEES CLAIM FOR DEPRECIATION AND NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION TO THE EXTENT OF RS.15,75,942. HE ASKED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM FOR DEPRECIATION ON SEVERAL ASSETS. THE AO N OTICED THAT THE WRITTEN DOWN VALUE OF THE BUILDING HAD BEEN TAKEN AT RS.1,4 6,38,563 AS ON 1.4.2005, THE SAID ASSET WAS ADDED DURING THE PREVI OUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. WHEN THE AO Q UESTIONED THE ASSESSEE ABOUT THE DETAILS WITH REGARD TO THE NEW B UILDING, IT WAS STATED THAT THE SAME REPRESENTED A RESIDENTIAL FLAT SITUAT ED AT CONVENT ROAD, OFF ITA NO. 1200/BANG/10 PAGE 3 OF 11 RICHMOND TOWN, BANGALORE, WHICH WAS USED FOR RESIDE NCE OF MANAGING DIRECTOR, WHENEVER HE HAPPENED TO BE IN BANGALORE. SINCE THE SAID FLAT WAS NOT USED FOR THE PURPOSE OF ASSESSEES BUSINESS , IT WAS PROPOSED TO DISALLOW THE CLAIM OF DEPRECIATION WITH RESPECT TO THE BUILDING, WHICH WAS ACCEPTED BY THE MANAGING DIRECTOR OF THE ASSESSEE C OMPANY. ACCORDINGLY A SUM OF RS.14,63,856 WAS DISALLOWED. 5. THE AO ALSO NOTICED THAT DURING THE YEAR UNDER C ONSIDERATION, THERE WERE CERTAIN OTHER ADDITIONS MADE TO THE ASSETS LIK E OFFICE EQUIPMENT, FURNITURE, ELECTRICAL FITTINGS, ETC. WHEN QUESTIO NED ABOUT THE NEED FOR PURCHASING THE ABOVE ASSETS, IT WAS STATED THAT ELE CTRICAL FITTINGS AND FURNITURE PURCHASED DURING THE YEAR HAD BEEN PROVID ED AT THE FLATS AT BANNERGHATTA ROAD WHICH HAD BEEN LET OUT AND THE AS SESSEE HAD CLAIMED DEPRECIATION IN RESPECT OF THE SAID FURNITURE AND E LECTRICAL FITTINGS. THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE BY STATING THAT NO INCOME FROM FLATS HAD BEEN OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, A SUM OF RS.67,004 WAS DISALLOWED OUT OF THE CLAIM OF DEPRECIATION ON THE SAID ASSETS. 6. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ), THE SUBMISSIONS MADE AS REGARDS TO THE DEPRECIATION ON BUILDING AS MENTIONED IN PARA 2.2.2 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UN DER: 2. THE DEPRECIATION OF RS 14,63,853/- CLAIMED RELA TED TO THE BUILDING WHICH WAS ADDED DURING THE PREVIOUS YEAR R ELEVANT TO THE ASSESSMENT YEAR 2005-2006 CAME TO BE DISALLOWED FOR THE FOLLOWING REASONS BY THE ASSESSING OFFICER: (A) THAT DURING THE COURSE OF ASSESSMENT PROCEEDIN G THE MANAGING DIRECTOR OF THE COMPANY HAD ACCEPTED THIS ADDITION. ITA NO. 1200/BANG/10 PAGE 4 OF 11 (B) THAT THE ASSESSEE COMPANY WAS NOT CARRYING ON BUSINESS ACTIVITY I.E. MANUFACTURING ACTIVITY OF RUBBER PROD UCTS DURING THE PREVIOUS YEAR 2005-2006 RELEVANT FOR THE A. Y. 06-07. (C) THAT THE ASSESSEE COMPANY HAD NOT USED THE BUI LDING FOR THE PURPOSE OF BUSINESS. 3. IT IS PERTINENT TO NOTE THAT THE DEPRECIATION W AS CLAIMED FOR THE FIRST TIME DURING THE FINANCIAL YEAR ENDING 31. 03.2005 I.E. FOR THE ASSESSMENT YEAR 2005-2006. THE ASSESSING OFFICE R HAD ALLOWED THE DEPRECIATION CLAIMED FOR THE SAID ASSES SMENT YEAR VIDE ITS ORDER U/S 143(3) DATED 28.11.2006. 4. AT THE OUTSET IT IS SUBMITTED THAT CONSENT GIVE N AT THE TIME OF ASSESSMENT PROCEEDINGS CANNOT BAR AN ASSESSEE FR OM CONTESTING AN ADDITION. THERE ARE COMPELLING CIRCUMSTANCES UND ER WHICH DEPOSITIONS ARE MADE DURING THE ASSESSMENT PROCEEDI NGS, WHICH CANNOT BE MADE A REASON TO DEBAR AN ASSESSEE FROM C ONTESTING THE DISALLOWANCE. THIS IS LEGALLY PERMISSIBLE UNDER LAW . A COPY OF THE SWORN DEPOSITION IS NOT WITH THE ASSESSEE WHICH IS OBVIOUSLY MADE DURING THE TIME OF THE ASSESSMENT PROCEEDINGS AND AT THIS STAGE WITHOUT A COPY THE APPELLANT IS NOT IN A POSI TION TO DEFEND ITSELF. 5. IN SUPPORT OF THE CONTENTION THAT THE MERE CONS ENT OR ACCEPTANCE CANNOT BAR AN APPELLANT FROM CONTESTING WHAT IS OTHERWISE LEGALLY RIGHT BEFORE THE APPROPRIATE AUTH ORITIES. THE RELIANCE IS PLACED ON 116 ITR 694, 91 ITR 18 AND 10 6 ITR 64. 6. THE ASSESSEE COMPANY IS THE OWNER OF THE SAID B UILDING. TAX PAID RECEIPT HAS ALREADY BEEN FURNISHED BEFORE YOUR HONOUR AND FORMS A PART OF YOUR RECORDS. OBVIOUSLY THE AO HAS NOT DOUBTED THAT THE APPELLANT COMPANY IS THE OWNER OF THE ASSET. THE ALLEGATION IS THAT A PART OF A BUSINESS BEING MANUF ACTURING OF RUBBER ACTIVITIES WAS NOT CARRIED ON BY THE APPELLA NT COMPANY. HENCE DEPRECIATION IS NOT ALLOWABLE. 7. THE COMPANY WAS INCORPORATED IN 1946 AND ONE OF ITS ACTIVITIES WAS MANUFACTURING RUBBER PRODUCTS. DURIN G THE PREVIOUS YEAR RELEVANT FOR THE ASSESSMENT YEAR 2005 -2006 THE COMPANY ENTERED INTO THE BUSINESS OF PROPERTY DEVEL OPMENT. MEMORANDUM AND ARTICLES OF ASSOCIATION CLEARLY EXHI BITS THE OBJECTS OF THE APPELLANT COMPANY. COPY OF THE SAME IS ALREADY FILED WITH YOUR HONOR. THE ACQUISITION OF THE BUILD ING IN QUESTION VERY MUCH SUPPORTS THE BUSINESS ACTIVITY ENVISAGED IN ITS OBJECTS, THE ASSESSING OFFICER CANNOT MAKE ADDITIONS WITHOUT LOOKING INTO ITA NO. 1200/BANG/10 PAGE 5 OF 11 THE ACTUAL FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE COMPANY HAS RETURNED A SUBSTANTIAL SUM AS ITS BUSIN ESS INCOME APART FROM RENTAL INCOME AND INCOME FROM OTHER SOUR CES. CLOSURE OF A PARTICULAR SOURCE OF INCOME FORMING PART OF IN COME FROM PROFIT AND BUSINESS CAN IN NO WAY BE CONSTRUED THAT THE ASSESSEE COMPANY IS NOT INTO BUSINESS OR ITS ASSET IS NOT US ED FOR THE PURPOSE OF BUSINESS. 8. IN THE ASSESSMENT ORDER IT IS STATED WHEN QUES TIONED ABOUT THE DETAILS WITH REGARD TO THE NEW BUILDING, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY STATED THAT THE SA ME REPRESENTED A RESIDENTIAL FLAT SITUATED AT CONVENT ROAD, OFF RI CHMOND TOWN, BANGALORE WHICH IS USED FOR HIS RESIDENCE WHENEVER HE HAPPENS TO BE IN BANGALORE AND IT IS FURTHER STATED SINCE THE SAID FLAT IS NOT USED FOR THE PURPOSE OF ASSESSEES BUSINESS, IT WAS PROPOSED TO DISALLOW THE CLAIM OF DEPRECIATION WITH RESPECT TO THIS BUILDING WHICH WAS ACCEPTED BY THE MD OF THE ASSESSEE COMPAN Y. THE MANAGING DIRECTOR OF THE COMPANY IS PAID SALARY FRO M THE COMPANY. THE FACT THAT A DIRECTOR/MANAGING DIRECTOR IS AN EMPLOYEE OF THE COMPANY DOES NOT REQUIRE ELABORATE ELUCIDATION. THE MANAGING DIRECTOR OF THE COMPANY HAS BEEN USING THE BUILDING AS HIS RESIDENCE AS AND WHEN HE WAS IN BAN GALORE. ANY ACCOMMODATION PROVIDED TO ITS EMPLOYEES MUST BE REG ARDED AS BUILDING USED FOR THE PURPOSE OF BUSINESS AND DEPRE CIATION SHOULD BE ALLOWED THEREON. THIS BECOMES MORE RELEVANT WHE N THE BUILDING ITSELF IS OWNED BY THE EMPLOYER AND THE OC CUPATION BY THE EMPLOYEE OF THE SAID BUILDING IS TO HELP IN FUR THERING AND IS NECESSARY FOR THE PURPOSE OF BUILDING OF THE PURPOS E OF THE EMPLOYEES DUTIES, THEN IT MUST BE REGARDED TO BE US ED FOR THE PURPOSE OF BUILDING. THE BUILDING IN QUESTION IS OW NED BY THE EMPLOYER I.E. THE APPELLANT COMPANY AND IS USED BY ITS EMPLOYEE IN FURTHERANCE OF HIS WORK AS AND WHEN IN BANGALORE . 9. THE ASSESSING OFFICER OUGHT TO HAVE, ALLOWED DE PRECIATION CLAIMED AND IS NOT CORRECT IN HOLDING THAT THE ASSE T IN QUESTION I.E. BUILDING IS NOT USED FOR THE PURPOSE OF BUSINESS. A CRYPTIC AND NON SPEAKING ORDER OF THE AO CAN NO WAY LEAD TO A L AWFUL CONCLUSION THAT THE ASSET WAS NOT USED FOR THE PURP OSE OF BUSINESS. THE ASSESSEE COMPANY IS ELIGIBLE TO CLAIM DEPRECIATION AS PER LAW AND HAS RIGHTFULLY DONE SO. THE DISALLOW ANCE MADE BY THE AO IS NOT IN ACCORDANCE WITH LAW AND THE FACTS OF THE CASE. HENCE IT IS PRAYED THAT THE ASSESSMENT ORDER BE CAN CELLED AND THE DEPRECIATION CLAIMED AS PER THE RETURN OF INCOME BE ALLOWED. 10. THE SECOND DISALLOWANCE RELATES TO ADDITION MA DE DURING THE RELEVANT PREVIOUS YEAR 2005-2006 IN CONNECTION WITH OFFICE EQUIPMENTS, FURNITURE, ELECTRICAL FITTINGS AND THE DEPRECIATION ITA NO. 1200/BANG/10 PAGE 6 OF 11 CLAIMED ON THESE ADDITION AMOUNTING TO RS.67,004/-. WHAT IS STATED ABOVE EQUALLY APPLIES TO THIS CLAIM OF THE A SSESSEE. II. THE ADDITIONS MADE BY THE ASSESSING OFFICER MA Y BE DELETED. ACCORDINGLY IT IS PRAYED. 7. THE LD. CIT(A) DID NOT FIND MERIT IN THE ABOVE S UBMISSIONS OF THE ASSESSEE BY OBSERVING IN PARA 2.2.3 OF THE IMPUGNED ORDER AS UNDER: (I) ON PERUSAL OF THE ASSESSMENT RECORDS, IT IS N OTICED THAT NONE OTHER THAN THE MANAGING DIRECTOR OF THE APPELL ANT COMPANY ATTENDED DURING THE ASSESSMENT PROCEEDINGS ON 30.10 .2008 (COPY OF THE ORDER SHEET ENCLOSED AS ANNEXURE 1 TO THIS O RDER) IN WHICH HE ADMITTED THAT THE RESIDENTIAL FLAT IS USED BY HI M FOR HIS RESIDENCE AND THEREFORE, THE APPELLANT WAS ASKED TO FURNISH THE EXPLANATION AS TO WHY THE DEPRECIATION CLAIMED ON T HE SAID RESIDENTIAL BUILDING SHOULD NOT BE DISALLOWED. THER EAFTER, THE CASE WAS FIXED FOR HEARING ON 01.12.2008, ON THE SAID DA TE THE MANAGING DIRECTOR OF THE COMPANY APPEARED AND AGREE D FOR THE DISALLOWANCE OF DEPRECIATION ON THE RESIDENTIAL BUI LDING (COPY OF THE ORDER SHEET ENCLOSED AS ANNEXURE 2). ONCE THE M ANAGING DIRECTOR OF THE COMPANY AFTER AVAILING ONE MONTHS TIME TO REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER AGREED TO THE FACT THAT THE RESIDENTIAL BUILDING IS NOT USED FOR THE P URPOSE OF THE BUSINESS BUT FOR HIS OWN RESIDENCE. (II) DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT FAILED TO PRODUCE EVIDENCE TO SUPPORT THAT THE RESIDENTIAL PR EMISES WAS USED FOR RESIDENCE BY MANAGING DIRECTOR AS PER THE TERM OF EMPLOYMENT. (III) THE ARGUMENT THAT THE CONSENT WAS GIVEN IN C OMPELLING CIRCUMSTANCES IS UNRELIABLE IN VIEW OF THE FACT THA T THE CONSENT WAS GIVEN DURING THE ASSESSMENT PROCEEDINGS AFTER O NE MONTH AFTER THE QUERY WAS RAISED BY THE ASSESSING OFFICER . (IV) THE ARGUMENT OF THE APPELLANT THAT IN THE PRE CEDING YEAR ON THE SAID PREMISES DEPRECIATION HAS BEEN ALLOWED AND THEREFORE ASSESSING OFFICER WAS NOT RIGHT IN DISALLOWING THE SAME FOR THE YEAR IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT EAC H OF THE ASSESSMENT YEAR IS SEPARATE FOR ASSESSMENT PURPOSE AND RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDING UNDER THE INCOME TAX ACT. THE ASSESSING OFFICER DISALLOWED THE DEPRECIAT ION WHEN DURING THE ASSESSMENT PROCEEDING OF THE ASSESSMENT YEAR, IT CAME ITA NO. 1200/BANG/10 PAGE 7 OF 11 TO HIS NOTICE THAT THE RESIDENTIAL PREMISES HAS NOT BEEN USED FOR THE PURPOSE OF BUSINESS CARRIED ON DURING THE YEAR. (V) ONCE THE ASSESSEE AGREED FOR THE DISALLOWANCE , THE ASSESSEE SHOULD NOT HAVE ANY GRIEVANCE FROM SUCH AD DITIONS , THIS VIEW FIND SUPPORT FROM THE FOLLOWING JUDICIAL PRONO UNCEMENTS :- (I) THE HONBLE SUPREME COURT IN THE CASE OF DEWAN BAHADUR SETH DAS MOHTA VS THE UNION OF INDIA & ORS (26 ITR 722) HELD THAT WHERE THE PETITIONER ENTERED INTO A VOLUNTARY SETTLEMENT WITH THE GOVERNMENT AND HIS LIABILITY TO PAY TAX AROSE FROM SUCH SETTLEMENT, HE CANNOT QUESTION THE SETTLE MENT - UNLESS AND UNTIL HE CAN ESTABLISH THAT HIS CONSENT WAS IMP ROPERLY PROCURED. (II) THE BOMBAY HIGH COURT IN THE CASE OF SRI RAME SHCHANDRA AND CO., V CIT (1987) (168 ITR 375) HELD THAT WHER E AN ASSESSEE HAS MADE A STATEMENT OF THE FACTS, HE CAN HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TAXES HIM IN ACCO RDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE, HE CAN FILE NO APPEAL. IN THE CASE OF THE APPELLANT ALSO, THE UNE XPLAINED INVESTMENT ADMITTED BY THE APPELLANT HAS BEEN ASSES SED IN HIS CASE AND THEREFORE, HE SHOULD NOT HAVE GRIEVANCE AG AINST SUCH ADDITIONS. ACCORDINGLY THE DISALLOWANCE MADE BY THE AO WAS CON FIRMED. 8. NOW THE ASSESSEE IS IN APPEAL. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF DEPRECIATION ON THE BUILDING WHICH WAS USED FOR THE PURPOSES OF RESIDEN CE OF THE MANAGING DIRECTOR. IT WAS FURTHER SUBMITTED THAT THE POWER OF THE AO AND THE LD. CIT(A) ARE CO-TERMINUS AND THE LD. CIT(A) CAN DO AL L THOSE THINGS WHICH THE AO OUGHT TO HAVE DONE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. COMMISSIONER OF INCOME-TAX [1991] 187 ITR 688 (SC) . IT WAS FURTHER SUBMITTED THAT NO DISALLOWANCE COULD HAVE BEEN MADE IN THE HANDS OF THE ITA NO. 1200/BANG/10 PAGE 8 OF 11 ASSESSEE FIRM, AT THE MOST IT COULD HAVE BEEN CONSI DERED AS PERQUISITES IN THE HANDS OF THE MANAGING DIRECTOR. RELIANCE WAS P LACED ON THE FOLLOWING CASE LAWS:- (I) SAYAJI IRON & ENGG. CO. V. CIT [2002] 253 ITR 749 ( GUJ) (II) CIT V. M. PYNGROPE [1993] 200 ITR 106 (GAU) IT WAS FURTHER SUBMITTED THAT IN THE ANNUAL GENERAL MEETING OF THE ASSESSEE COMPANY, IT WAS RESOLVED IN PURSUANCE TO SECTION 26 9 OF THE COMPANIES ACT THAT THE ACCOMMODATION IN THE COMPANY OWNED HOU SE WAS PROVIDED TO THE MANAGING DIRECTOR, WHO SHALL PAY TO THE COMPANY BY WAY OF RENT @ 10% OF THE SALARY. COPY OF THE SAID RESOLUTION WA S FURNISHED WHICH IS PLACED ON RECORD. IT WAS ACCORDINGLY SUBMITTED THA T THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCES MADE BY T HE AO. 10. IN HER RIVAL SUBMISSIONS, THE LD. DR STRONGLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E MANAGING DIRECTOR OF THE ASSESSEE HIMSELF AGREED FOR THE ADDITION BEFORE THE AO WHEN A PARTICULAR QUESTION WAS ASKED REGARDING THE DEPRECI ATION OF THE BUILDING WHICH WAS NOT USED FOR BUSINESS PURPOSES AND THEREA FTER THE AO DID NOT ASK ANY OTHER QUESTION AND DID NOT MAKE ANY ENQUIRY REGARDING THE GENUINENESS OF THE CLAIM OF THE ASSESSEE BECAUSE TH E ADDITION HAD BEEN ADMITTED BY THE ASSESSEE. THEREFORE THE LD. CIT(A) RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. RELIANCE WAS PLACED O N THE DECISION OF THE ITAT, BANGALORE BENCH A IN THE CASE OF DR. D.K. R AJASEKHAR SETTY & ANR. V. ITO IN ITA NOS. 384 & 385/BANG/2010 FOR THE A.Y. 2005-06, ORDER DATED 07.02.2011, COPY OF THE SAID ORDER WAS FURNISHED. IT WAS FURTHER SUBMITTED ITA NO. 1200/BANG/10 PAGE 9 OF 11 THAT SINCE THE MANAGING DIRECTOR OF THE ASSESSEE CO MPANY HAD NOT DISCLOSED THE PERQUISITES ON ACCOUNT OF HOUSE ACCOM MODATION IN HIS RETURN OF INCOME, HE PERHAPS THOUGHT IT BENEFICIAL TO SURR ENDER THE DEPRECIATION ON THE BUILDING USED FOR HIS RESIDENCE, FOR TAXATION I N THE HANDS OF THE ASSESSEE COMPANY AND THEREAFTER THE AO STOPPED FURT HER ENQUIRIES AND ACCEPTED THE OFFER OF THE M.D. OF THE ASSESSEE. IT WAS CONTENDED THAT WHEN THE ASSESSEE ITSELF AGREED FOR ADDITION, THE D ISALLOWANCE WAS RIGHTLY MADE BY THE AO AND THE LD. CIT(A) WAS FULLY JUSTIFI ED IN CONFIRMING THE SAME. THEREFORE, THE ASSESSEE COULD NOT HAVE HAD A NY GRIEVANCE. RELIANCE WAS PLACED ON THE JUDGMENT OF RAMANLAL KAMDAR V. CIT [1977] 108 ITR 73. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THAT THE MANAGING D IRECTOR OF THE ASSESSEE WAS RESIDING IN THE FLATS OF THE ASSESSEE COMPANY A T BANGALORE AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE AO AS KED A SPECIFIC QUERY TO THE MANAGING DIRECTOR REGARDING USE OF THE FLAT FOR BUSINESS PURPOSES, IT WAS STATED THAT THE SAID FLAT WAS NOT USED FOR BUSI NESS PURPOSES. IT IS ALSO NOTICED THAT THE AO DID NOT ASK THE ASSESSEE AS TO WHETHER THE SAID FLAT WAS USED FOR RESIDENTIAL PURPOSES. IN THE PRESENT CASE, IT IS NOTICED THAT AS PER THE RESOLUTION, COPY OF WHICH WAS FURNISHED BY THE LD. COUNSEL FOR THE ASSESSEE AND AVAILABLE ON RECORD, THE MANAGING DIRE CTOR WAS REQUIRED TO PAY 10% OF HIS SALARY FOR THE COMPANY OWNED HOUSE, HOWEVER, NOTHING IS BROUGHT ON RECORD AS TO WHETHER THE SAID RENT WAS R ECOVERED BY THE ASSESSEE COMPANY. IT IS ALSO NOT CLEAR AS TO WHETH ER THE MANAGING ITA NO. 1200/BANG/10 PAGE 10 OF 11 DIRECTOR DECLARED PERQUISITES ON ACCOUNT OF HOUSE A CCOMMODATION IN HIS INDIVIDUAL RETURN OF INCOME. IT IS TRUE THAT THE A SSESSEE COMPANY BEING JURIDICAL PERSON CANNOT USE THE FLAT AS ITS OWN, BU T IT CAN BE USED BY ITS EMPLOYEES FOR THEIR RESIDENTIAL PURPOSES, IN THAT C ASE, PERQUISITES CAN BE ADDED IN THE HANDS OF THE EMPLOYEES. HOWEVER, IN T HE PRESENT CASE, IT IS NOT CLEAR AS TO WHETHER THE MANAGING DIRECTOR OF TH E ASSESSEE COMPANY WHO WAS OCCUPYING THE FLAT IN QUESTION FOR HIS RESI DENTIAL PURPOSES HAD OFFERED INCOME AS PERQUISITES IN HIS RETURN OF INCO ME. IT IS ALSO NOT CLEAR WHETHER THE ASSESSEE RECEIVED THE RENT AS PROVIDED IN THE RESOLUTION OF THE ASSESSEE COMPANY RESOLVED IN THE ANNUAL GENERAL MEE TING. IN THE INSTANT CASE THE AO WHILE FRAMING THE ASSESSMENT U/S. 143(3 ) ALLOWED THE CLAIM OF THE ASSESSEE IN THE PRECEDING YEAR, HOWEVER, WHILE DISALLOWING THE SIMILAR CLAIM FOR THE YEAR UNDER CONSIDERATION, IT IS NOT B ROUGHT ON RECORD AS TO WHETHER THERE WAS ANY CHANGE IN THE FACTS. WE THER EFORE DEEM IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE O F THE ASSESSING OFFICER, TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, AFTER PRO VIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 12. AS REGARDS TO THE ANOTHER ISSUE RELATING TO DEP RECIATION ON FURNITURE, ELECTRICAL FITTINGS, ETC. AMOUNTING TO RS.67,004 IS CONCERNED, IT IS NOTICED THAT SUFFICIENT MATERIAL IS NOT BROUGHT ON RECORD A S TO WHETHER THE MANAGING DIRECTOR WHO WAS OCCUPYING THE FLAT HAD PAID THE RE NT @ 10% OF HIS SALARY AS PROVIDED IN THE RESOLUTION OF THE ASSESSEE COMPA NY IN THE ANNUAL GENERAL MEETING, SO THIS ISSUE IS ALSO SENT BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW, AFTER PR OVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. ITA NO. 1200/BANG/10 PAGE 11 OF 11 13. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF MARCH, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 21 ST MARCH , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.