M/s. Chadha Auto Agencies, Hubballi V. The Income Tax Officer, Ward - 1(1), Hubbali

ITA 1201/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6474 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 27-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN , VICE PRESIDENT ITA NO. 1201/ BANG / 2019 ASSESSMENT YEAR : 2015 - 16 CHADHA AUTO AGENCIES, MOHAN PLAZA, DESHPANDE NAGAR, HUBBALLI 580 029. P AN: AACFC 2883M VS. THE INCOME TAX OFFICER, WARD 1(1), NAVANAGAR, HUBBALLI. APP ELLANT RESPONDENT APP ELLANT BY : S MT. SUMAN LUNKAR, CA RESPONDENT BY : SHRI GANESH R. GHALE, S T ANDING COUNSEL FOR DEPT. DATE O F HEARING : 10 . 1 0 .2019 DATE OF PRONOUN CEMENT : 1 6 . 1 0 .2019 O R D E R THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORD ER DATED 29.03.2019 OF THE CIT(APPEALS), HUBBALLI RELATING TO ASSESSME NT YEAR 2015-16. 2. THE ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL ARE TWO-FOLD VIZ., (I) WHETHER THE AO WAS JUSTIFIED IN DISALLOWI NG DEPRECIATION ON VEHICLES ON THE GROUND THAT THERE WOULD HAVE BEEN PERSONAL U SER OF THE VEHICLE?; AND (II) WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN DISALLOWING VEHICLE MAINTENANCE EXPENSES IN EXERCISE OF POWERS OF HIS E NHANCEMENT WITHOUT GIVING NOTICE OF ENHANCEMENT TO THE ASSESSEE? 3. THE ASSESSEE IS A PARTNERSHIP FIRM COMPRISING OF 5 PARTNERS. THE ASSESSEE CARRIES ON THE BUSINESS OF A DEALER IN TWO WHEELERS. THEY WERE IN ALL ABOUT ABOUT 7 CARS ON WHICH THE ASSESSEE CLA IMED DEPRECIATION. THE ITA NO.1201/BANG/2019 PAGE 2 OF 4 AO WAS OF THE VIEW THAT THE ASSESSEE COULD NOT ESTA BLISH BY PRODUCING LOG BOOK TO SHOW THAT THE VEHICLES WERE WHOLLY AND EXCL USIVELY USED FOR THE PURPOSE OF BUSINESS OF ASSESSEE. HE WAS OF THE VIE W THAT THE USAGE OF 4 CARS OUT OF 7 CARS FOR THE PURPOSE OF BUSINESS WAS NOT ESTABLISHED AND ACCORDINGLY 50% DEPRECIATION CLAIMED WAS DISALLOWED BY THE AO. THE DETAILS OF DEPRECIATION CLAIMED BY THE ASSESSEE AS PER BOOKS OF ACCOUNT WAS AS FOLLOWS:- SL NO CARS DEPRECIATION AMOUNT 1 TATA NANO 19,492 2 TATA NANO 40,299 3 INNOVA 1,38,826 4 SKODA 1,07,730 5 BMW 5,60,168 6 MARUTI RITZ 88,684 7 SWIFT 1,07,107 TOTAL 10,62,305 4. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ACTION OF THE AO AND FURTHER FOUND THAT VEHICLE MAINTENANC E EXPENSES BY THE SAME ANALOGY SHOULD HAVE ALSO BEEN DISALLOWED BY TH E AO. ACCORDINGLY, THE CIT(A) DIRECTED THE AO TO DISALLOW 50% OF THE V EHICLE MAINTENANCE EXPENSES OUT OF RS.1,77,847 CLAIMED AS VEHICLE MAIN TENANCE EXPENSES BY THE ASSESSEE. ADMITTEDLY, THERE WAS NO NOTICE OF E NHANCEMENT ISSUED BY THE CIT(APPEALS) BEFORE DOING SO. 5. AS FAR AS THE SECOND ISSUE, WHETHER THE CIT(APPE ALS) CAN MAKE AN ENHANCEMENT OF INCOME WITHOUT PROPER NOTICE, I AGRE E WITH THE SUBMISSION OF ASSESSEE BASED ON THE DECISION OF THE ITAT PUNE IN THE CASE OF NARESH SUNDERLAL CHUGH V. ITO [2018] 93 TAXMANN.COM 485 (P UNE TRIB.) WHEREIN THE TRIBUNAL TOOK THE VIEW THAT POWERS OF ENHANCEME NT CANNOT BE ITA NO.1201/BANG/2019 PAGE 3 OF 4 EXERCISED BY THE CIT(APPEALS) U/S. 251 OF THE INCOM E-TAX ACT, 1961 [THE ACT], WITHOUT AFFORDING THE ASSESSEE OPPORTUNITY O F SHOW CAUSE AGAINST SUCH ENHANCEMENT. IN VIEW OF THE ABOVE, I DIRECT T HAT THE DISALLOWANCE OF 50% OF TOTAL EXPENSES ON ACCOUNT OF VEHICLE MAINTEN ANCE EXPENSES CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED . 6. AS FAR AS THE FIRST ISSUE REGARDING DISALLOWANCE OF DEPRECIATION IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. FLUID CONTROLS MFG. CO., 280 ITR 86 (GUJ) WHEREIN IT WAS HELD THAT ONCE THE CONDITIONS LAID DOWN IN SECTION 32 ARE SATISFIED, THEN FULL DEPRECI ATION HAS TO BE ALLOWED. I HAVE PERUSED THE DECISION AND I FIND THAT THE SAME IS IN RELATION TO A CASE, WHERE DISALLOWANCE OF DEPRECIATION WAS NOT ON ACCOU NT OF PERSONAL USER OF THE VEHICLE. U/S. 38(2) OF THE ACT, THE CLAIM FOR DEPRECIATION CAN BE RESTRICTED TO A FAIR PROPORTION PART HAVING REGARD TO USER OF THE MACHINERY FOR THE PURPOSE OF BUSINESS OF ASSESSEE. CONSIDERING T HE REASONS GIVEN BY THE AO IN THE ORDER OF ASSESSMENT WHEREIN HE HAS DO UBTED ONLY THE USE OF 4 CARS WHOLLY FOR THE PURPOSE OF BUSINESS OF ASSESS EE AND ALSO TAKING NOTE OF THE NATURE OF BUSINESS OF ASSESSEE AND THE TURNO VER OF THE ASSESSEE IS MORE THAN RS.48 CRORES, I FEEL THE DISALLOWANCE ON ACCOUNT OF PERSONAL USER CAN BE REASONABLY ESTIMATED @ 25%. IT IS ORDER ED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF OCTOBER, 2019. SD/- ( N.V. VASUDEVAN ) VICE PRESIDENT BANGALORE, DATED, THE 16 TH OCTOBER, 2019. / D ESAI S MURTHY / ITA NO.1201/BANG/2019 PAGE 4 OF 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, I TAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.