Ujwal Fine Homes, Pune V. Deputy Commissioner of Income -tax, Pune

ITA 1247/PUN/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9234 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 18-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Depreciation
• Section: 80IB; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH , B PUNE VIRTUAL COURT BEFORE SH RI R.S. SYAL, VICE PRESIDENT AND SH RI S.S. VISWANETHRA RAVI , J UDICIAL MEMBER . / ITA NO . 1 247 / PUN /20 1 7 / ASSESSMENT YEAR : 201 3 - 14 UJWAL FINE HOMES, SHOWROOM NO.101, 102, HI BLISS, DHAYARI, NARHE ROAD, S.NO.23, DHAYRI, PUNE 411 041 PAN : AABFU7293E VS. DCIT, CIRCLE - 6, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 4, PUNE ON 0 2 - 01 - 2017 IN RELATION TO THE ASSESSMENT YEAR 201 3 - 14 . 2 . THE FIRST ISSUE IS AGAINST THE DISALLOWANCE OF DEPRECIATION O N CAR S FOR P ERSONAL USE. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM PURCHASED TWO MOTOR CARS DURING THE YEAR FOR RS.55,52,364/ - AND RS.58,03,706/ - RESPECTIVELY ON WHICH DEPRECIATION OF RS.21,17,839/ - WAS CLAIMED. THE ASSESSEE IN THE ASSESSEE BY SHRI SHEKHAR NANIWADEKAR REVENUE BY SHRI S.P. WALIMBE DATE OF HEARING 0 6 - 08 - 2021 DATE OF PRONOUNCEMENT 06 - 0 8 - 2021 ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 2 COMPUTATION OF INCOME SUO MOTU DISALLOWED A SUM OF RS.50,000/ - TOWARDS PERSONAL EXPENSES ON THE USE OF CAR. THE AO OBSERVED THAT THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE OF DEPRECIATION ON ACCOUNT OF PERSONAL USE OF VEHICLE S . HE, THEREFORE, DISALLOWED 20% OF DEPRE CIATION ON THESE TWO CARS AMOUNTING TO RS.4,23,567/ - . THE LD. CIT(A) SUSTAINED THE ADDITION , AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 3 . HAVING HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD , IT IS SEEN THAT THE ASSESSEE IS A PARTNERSHIP FIRM. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE DID USE THE VEHICLES FOR PERSONAL PURPOSE WHICH IS EVIDENT FROM THE FACT THAT A SUM OF RS.50,000/ - FROM TRAVELLING AND CONVEYANCE EXPENSES WAS VOLUNTARILY DISALLOWED BY THE ASSESSEE. SECTION 38(2) OF THE INCOME - TAX ACT , 1961 (HEREINAFTER CALLED `THE ACT) CLEARLY PROVIDES FOR MAKING DISALLOWANCE , INTER ALIA, OF DEPRECIATION ON ACCOUNT OF NON BUSINESS USE ALSO. WE, THEREFORE, HOLD , IN PRINCIPLE , THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF DEPRECIATION ON MOTOR CARS PURCHASED DURING THE YEAR. HOWEVER, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE PREVAILING IN THE INSTANT CASE, WE ARE SATISFIED THAT IT WOULD BE REASONABLE TO RESTRICT THE ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 3 DISALLOWANCE AT 10% OF DEPRECIATION INSTEAD OF 20% , WHICH WILL BE IN ADDITION TO THE DISALLOWANCE OF RS.50,000/ - OFFERED BY THE ASSESSEE ITSELF . THIS GROUND IS , THUS, PARTLY ALLOWED. 4 . THE NEXT ISSUE RAISED BY THE ASSESSEE IS AGAINST THE A DDITION OF RS.21,15,552/ - ON ACCOUNT OF CONSTRUCTION COST OF NON - 80IB PROJECT. THE FACTUAL MATRIX OF THIS GROUND IS THAT THE ASSESSEE UNDERTOOK TWO PROJECTS , NAMELY , H I B LISS AND G OLD E MBER . HI BLISS PROJECT WAS ENJOYING THE BENEFIT OF DEDUCTION U/S 80IB (10) OF THE ACT . THE ASSESSEE DECLARED PROFIT AT 59. 5 5% FROM HI BLISS PROJECT ENTITLED TO 80IB DEDUCTION AND 7.29% FROM GOLD EMBER, A NON - 80IB PROJECT. THE AO OBSERVED THAT THE ASSESSEE HAD SHOWN HUGE PROFIT IN 80IB PROJECT AT AROUND 60% AS AGAINST AR OUND 7% IN NON - 80IB PROJECT. ON BEING CALLED UPON TO EXPLAIN THE REASONS FOR SUCH A HUGE VARIATION IN THE PROFIT RATES, THE ASSESSEE MADE THREE BROADER SUBMISSIONS, NAMELY, D IFFERENCE IN LAND COST; D IFFERENCE IN SALE RATE PER SQ.FT.; AND D IFFERENCE IN CO ST OF CONSTRUCTION. THE AO ACCEPTED THE ASSESSEES CONTENTION REGARDING DIFFERENCE IN LAND COST AND DIFFERENCE IN SALE RATE PER SQ.FT. HE, HOWEVER, OBSERVED THAT THE RE COULD BE NO DIFFERENCE IN THE COST OF CONSTRUCTION PER SQ.FT. IN BOTH THE PROJECTS. I T WAS THUS FOUND THAT THE ASSESSEE SHOWED COST OF CONSTRUCTION ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 4 EXCLUDING THE LAND COST UNDER HI BLISS PROJECT AT RS.1483/ - PER SQ.FT. WHEREAS SIMILAR COST PER SQ.FT. IN GOLD EMBER WAS RS.1531/ - PER SQ.FT. THE DIFFERENTIAL AMOUNT OF RS.48/ - , I.E. 3.23% WAS MULTIPLIED WITH THE AREA CONSTRUCTED AT 44071 SQ.FT. TO WORK OUT THE ADDITION OF RS.21,15,552/ - . THE LD. CIT(A) SUSTAINED THE ADDITION AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 5 . HAVING HEARD BOTH THE SIDES AND GONE THROUGH T HE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE AO ACCEPTED THE ASSESSEES CONTENTION TOWARDS MORE PROFIT IN THE ELIGIBLE UNIT ARISING ON ACCOUNT OF DIFFERENCE IN LA ND COST AND DIFFERENCE IN SALE RATE PER SQ.FT. HE FOCUSED THE ADDITION ONLY TOWARDS TH E DIFFERENCE IN COST OF CONSTRUCTION PER SQ.FT. W HEREAS THE ELIGIBLE 80IB UNIT CARRIED COST OF CONSTRUCTION AT RS.1483/ - PER SQ.FT AND NON - ELIGIBLE UNIT CARRIED COST OF CONSTRUCTION AT R.1,531/ - PER SQ.FT. THERE IS DIFFERENCE OF JUST R.48/ - PER SQ.FT. , W HICH IS ONLY 3.23% . THERE CAN BE SEVERAL REASONS FOR SUCH A NOMINAL INCREASE IN THE COST OF CONSTRUCTION DEPENDING UPON THE QUALITY OF CONSTRUCTION ETC . THE AO HAS NOT POINTE D OUT ANY DEFECT IN THE DETAILS FURNISHED BY THE ASSESSEE SHOWING THE CONSTRUCTI ON COST P ER SQ.FT. COMPUTED IN GOLD EMBER PROJECT AT RS.1531/ - PER SQ.FT. N EITHER THE BOOKS OF ACCOUNT HAVE BEEN REJECTED. ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 5 A SIMPL E PLUS AND MINUS MECHANISM HAS BEEN FOLLOWED FOR SUSTAINING THE ADDITION OF RS.21,15,552/ - . IN OUR CONSIDERED OPINION, THIS TYPE OF EXERCISE FOR MAKING AND SUSTAINING THE ADDITION CANNOT BE COUNTENANCED IN VIEW OF THE FACT THAT THE ASSESSEE FURNISHED ALL THE NECESSARY DETAILS TOWARDS COST S INCURRED IN THE ELIGIBLE AS WELL AS NON - ELIGIBLE PROJECTS , WHICH WERE NOT FAULTED WITH A ND FURTHER T HE AO DID NOT REJECT THE BOOKS OF ACCOUNT BY POINTING OUT ANY MISTAKE THEREIN. WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION IS CALLED FOR ON THIS SCORE . THE ADDITION IS HEREBY DELETED. 6 . THE LAST ISSUE RAISED IN THIS APPEAL IS AGAINST T HE CONFIRMATION OF ADDITION OF R.30,77,616/ - TOWARDS LOSS ON ACCOUNT OF EMBEZZLEMENT. THE FACTUAL MATRIX OF THIS GROUND IS THAT THE ASSESSEE DEBITED A SUM OF RS.30.77 LAKH TO ITS PROFIT AND LOSS ACCOUNT TOWARDS LOSS DUE TO EMBEZZLEMENT. ON BEING CALLED UP ON TO FURNISH THE DETAILS OF THE PARTIES FROM WHOM THE CASH WAS COLLECTED WHICH WAS CLAIMED TO HAVE BE EN EMBEZZLED BY SHRI RAHUL KULKARNI, THE ASSESSEE SUBMITTED CERTAIN DETAILS BY PUTTING FORTH THAT SHRI RAHUL KULKARNI WAS WORKING AS MARKETING OFFICER FOR LAST THREE YEARS. HE COLLECTED CASH FROM VARIOUS CUSTOMERS BUT DID NOT GIVE IT BACK FULLY TO THE ASSESSEE - FIRM. A P HOTOCOPY OF LETTER DATED 14.03.2013 FILED WITH THE POLICE ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 6 INSPECTOR, HAVELI POLICE STATION IN THIS REGARD WAS ALSO FILED. THE ASSESSEE AL SO FURNISHED A PHOTOCOPY OF CONFIRMATION FROM SHRI RAHUL KULKARNI SHOWING CASH COLLECTED FROM THE CUSTOMERS , WHICH WAS NOT DEPOSITED WITH THE ASSESSEE FIRM . A TOTAL SUM OF RS.49,15,456 WAS COLLECTED BY SHRI RAHUL KULKARNI, OUT OF WHICH SUM OF RS. 2,98,700 LAKH WAS RECOVERED FROM THE CONTRACTOR AND SUM OF RS.15,39,140 WAS RECOVERED FROM SHRI RAHUL KULKARNI , LEAVING BALANCE OF RS.30.77 LAKH THAT WAS CLAIMED BY THE ASSESSEE AS DEDUCTION. THE AO MADE ADDITION FOR THE SAID AMOUNT ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE SHRI RAHUL KULKARNI AND THAT HIS WHEREABOUTS WERE ALSO NOT GIVEN. THE LD. CIT(A) AFFIRMED THE ADDITION. 7 . WE HAVE HEARD BOTH THE SIDES. PAGE 84 OF PAPER BOOK IS A SIGNED STATEMENT OF SHRI RAHUL KULKARNI ADMITTING RECEIPT OF CASH FRO M CERTAIN CUSTOMERS , WHICH WAS NOT HANDED OVER TO THE ASSESSEE FIRM. PAGE 105 IS AN ACCOUNT OF STAMP DUTY ETC. COLLECTED BY SHRI RAHUL KULKARNI WHICH WAS ALSO NOT HANDED OVER TO THE FIRM . THIS STATEMENT IS ALSO DULY SIGNED BY HIM ADMITTING THAT HE COLLECT ED THE CASH TO THAT EXTENT BUT DID NOT PASS IT OVER TO THE ASSESSEE . THUS , IT IS EVIDENT THAT SH. RAHUL KULKARNI COLLECTED THE AMOUNTS BUT DID NOT GIVE BACK TO THE ASSESSEE FIRM. THE ASSESSEE LODGED A POLICE COMPLAINT IN THIS ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 7 REGARD AND A COPY OF POLICE C OMPLAINT HAS ALSO BEEN PLACED ON RECORD. OUR ATTENTION WAS ALSO DRAWN TOWARDS ACCOUNTS OF THE PARTIES FROM WHOM CASH W AS COLLECTED BY SHRI RAHUL KULKARNI. THE AMOUNTS SO COLLECTED AND EMBEZZLED BY SHRI RAHUL KULKARNI HAVE BEEN CREDITED TO THE RESPECTIVE PARTIES ACCOUNTS WITH THE DEBIT TO LOSS ON EMBEZZLEMENT ACCOUNT. BEFORE SUCH ENTRIES , THE ASSESSEE DEBIT ED FULL AMOUNT OF SALES INCLUDING THE AMOUNT EMBEZZLED TO THE ACCOUNTS OF RESPECTIVE PARTIES ACCOUNTS, WHICH WAS CREDITED TO THE S ALE S ACCOUNT. IT ME ANS THAT THE AMOUNT EMBEZZLED BY SHRI RAHUL KULKARNI HAS BEEN ACCOUNTED FOR IN THE FIGURE OF S ALES OFFERED BY THE ASSESSEE AND SINCE THE AMOUNT WAS EMBEZZLED, THE ASSESSEE CLAIMED A DEDUCTION FOR THE SAME. ON A SPECIFIC QUERY, THE LD. AR SUBMITTED THAT WH EREABOUTS OF SHRI RAHUL KULKARNI WE RE NOT KNOWN AS HE LEFT THE PLACE AND THERE IS NO FURTHER INFORMATION ABOUT HIM. ON THE QUESTION OF STATUS OF THE POLICE COMPLAINT , THE LD. AR SUBMITTED THAT NOTHING HAS TRANSPIRED SO FAR TOWARDS RECOVERY OF ANY AMOUNT. THESE FACTS INDICATE THAT THE AMOUNT EMBEZZLED BY SHRI RAHUL KULKARNI HAS BECOME IRRECOVERABLE AND THE SAME SHOULD BE ALLOWED AS DEDUCTION. WE, THEREFORE, OVERTURN THE IMPUGNED ORDER AND GRANT DEDUCTION FOR THE AMOUNT ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 8 EMBEZZLED. IT IS CLARIFIED THAT AS AND WHEN THE RECOVERY IS MADE FROM SHRI RAHUL KULKARNI, THE SAME SHOULD BE OFFERED FOR TAXATION. 8 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST , 2021 . SD/ - SD/ - ( S.S. VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 6 TH AUGUST , 2021 /GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE CIT(A) - 4, PUNE 3. THE PR. CIT - 3, PUNE 4. 5. DR, ITAT, B BENCH, PUNE / GUARD FILE . / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO .1 247 /PUN/201 7 UJWAL FINE HOMES 9 DATE 1. DRAFT DICTATED ON 0 6 - 08 - 2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 0 6 - 08 - 2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6 . KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *