INDEXONE TRADECONE PVT. LTD., JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 21/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3114 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 05-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Assessee Lawyers: G M MEHTA
• Keywords: Rejection of books of accounts; Depreciation; Corroborative evidences
• Section: 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 21/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 INDEXONE TRADECONE PVT. LTD., JAIPUR CUKE VS. DCIT, CENTRAL CIRCLE-2, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABC12248E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI G. M. MEHTA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/08/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/08/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- 01, JAIPUR DATED 17.11.2017 WHEREIN THE ASSESSEE HA S TAKEN THE FOLLOWING GROUNDS OF THE APPEAL:- (1) THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING ADDITION OF RS. 12,11,576/- ON ACCOUNT OF BROKERAGE PAID THROUGH CHEQUES (AFTER DEDUCTING APPLICABLE TDS) TO OUTSIDE RS, DIRECTORS AND THEIR RELATED PERSONS FOR SELLING AND COMPLETING AL L THE FORMALITIES OF SALE OF RESIDENTIAL FLATS CONSTRUCTED BY THE ASSESS EE COMPANY. (2) THAT LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING DISALLOWANCE OF : (I) RS. 3,22,197/- ON ACCOUNT OF DEPRECIATION ON NE WLY PURCHASED CAR PURCHASED ON 30 TH MARCH 2013, IGNORING THE ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 2 FACT THAT THE NEWLY PURCHASED CARS ARE ALWAYS DELIV ERED BY THE CAR-DEALERS FILLED WITH ABOUT 10 LITERS OF DIES EL/PETROL WHICH IS SUFFICIENT FOR LOCAL USE OF CAR FOR BUSINE SS PURPOSES FOR FEW DAYS. (II) RS. 1,56,000/- FOR MAINTENANCE OF FURNISHED GU EST-HOUSE MAINTAINED BY THE ASSESSEE COMPANY FOR THE REASON T HAT IT WAS ALREADY OWNING VACANT FLATS AS STOCK IN TRADE I GNORING THE FACT THAT THE UNSOLD FLATS CANNOT BE USED AS GU EST- HOUSE WHICH ARE UNFURNISHED ARE SUBJECT TO SELL AT ANY TIME AND IF USED, WILL RESULT IN HEAVY REDUCTION IN MARK ET SALEABLE PRICE OF THE FLATS. 2. FIRSTLY, REGARDING GROUND NO. 1, THE RELEVANT FA CTS AND FINDING OF THE ASSESSING OFFICER ARE AS UNDER:- 3.2 ON PERUSAL OF BOOKS OF ACCOUNT AND OTHER DOCUM ENT, IT IS SEEN THAT THE ASSESSEE COMPANY HAD PAID HEAVY BROKERAGE OF RS. 12 ,11,575/- TO FOLLOWING PERSONS: S. NO. BROKERAGE PAID TO PARTY BUYER NAME FLAT NO. BROKERAGE AMOUNT (RS) PROJECT NAME 1) ASHISH GATTANI RAKHI JAIN 101 & 102 7,00,000 SAP PHIRE GREEN 2) PRAVEEN SINGHI SHASHI BHARGAVA 702 87,000 SAPPHIRE GREEN 3) SUBHAS SINGHI KULDEEP BHARGAWA 601 91,500 SAPPHIRE GREEN 4) GAURAV SINGHI SHIKHAR BHARGAWA 602 91,500 SAPPHIRE GREEN 5) GAURAV SINGHI RAVI 701 87,000 SAPPHIRE ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 3 BHARGAWA GREEN 6) VIMAL SINGHI KAPIL SUKLA/ USHA SUKLA 202 102,000 SAPPHIRE GREEN 7) VIMAL SINGHI AMAN BHARDWAJ/ PREM PRAKASH BHARDWAJ B-1 15,075 SAPPHIRE EARTH 8) VIMAL SINGHI ANITA GOEL UNIT-3 37,500 SAPPHIRE MOON TOTAL 12,11,575 THE BROKERAGE CLAIMED BY THE ASSESSEE IS NOT JUSTIF IABLE ON ACCOUNT OF THE FOLLOWING REASONS: THE SELLER AND PERSONS TO WHOM BROKERAGE PAID ARE C LOSE RELATIVES. FURTHER, IT IS PERTINENT TO MENTION HERE THAT EFFOR TS DONE BY THE PERSONS TO WHOM BROKERAGE WERE IS NOT ASCERTAINABLE AND NOTHIN G TO SUPPORT ITS CLAIM HAS BEEN SUBMITTED BY THE ASSESSEE IN THIS REGARD. THEREFORE, GENUINENESS OF BROKERAGE PAID IS NOT PROVED. HENCE, THE MATTER OF PAYMENT BROKERAGE IS ONLY A SHAM CREATED TO REDUCE PROFIT OF THE COMPANY. IT IS WORTHWHILE TO MENTION HERE THAT ONLY SHRI VIM AL SINGHI, WHO IS IN CAPACITY OF DIRECTOR OF THE COMPANY APPEARED BEFORE THE DOCUMENT REGISTERING AUTHORITIES AS EVIDENT FROM THE CONVEYANCE DEEDS AN D NONE OF THE OTHER AGENTS TO WHICH BROKERAGE HAVE BEEN PAID WERE PRESE NT. HAD THEY BEEN PRESENT AT TIME OF REGISTRY, AT LEAST ONE EVIDENCE OF THE AGENTS COULD HAVE BEEN ENDORSED IN THE CONVEYANCE DEED. FURTHER, SHRI VIMAL SINGHVI WHO IS ALSO RECEIVING REMUNERATION AS DIRECTOR OF THE COMP ANY FOR EXECUTION OF WORK FOR THE COMPANY, HAS ALSO BEEN PAID BROKERAGE, WHIC H DEFICE LOGIC. ON PERUSAL OF CONVEYANCE DEEDS, IT IS OBSERVED THAT ORIGINALLY THE PLOT WHICH WAS DEVELOPED BY THE INDEXONE TRADECON PVT. L TD., WAS OWNED BY THE FATHER OF THE BUYERS SH. SHANIT PRASAD BHARGAVA UPO N WHOSE DEATH, HIS WIFE ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 4 SMT. RATAN DEVI BHARGAVA BECAME THE OWNER OF THE SA ID PLOT AND DURING THE FINANCIAL YEAR 2009-10, THE SAID PROPERTY WAS TRANS FERRED TO THE ASSESSEE COMPANY. AND AFTER DEVELOPMENT OF FLATS, MOST OF TH E FLATS SOLD DURING THE YEAR HAVE BEEN SOLD TO THE BHARGAVA FAMILY. THIS AL SO SHOWS THAT ALL ARE CLOSELY CONNECTED SINCE LONG AND PAYMENT OF BROKERA GE IS ONLY A SHAM FOR MANAGING THE ENTRIES TO REDUCE PROFIT OF THE COMPAN Y. FROM THE VARIOUS ARGUMENTS ABOVE, IT IS HELD THAT T HE ASSESSEE COMPANY HAS DIVERTED FUNDS TO THE DIRECTORS OF THE COMPANY AND OTHER CLOSELY RELATED PERSONS VIA BROKERAGE TO REDUCE THE TAX LIA BILITY OF THE COMPANY. THIS KIND OF TAX PLANNING IS NOTHING BUT A COLOURABLE DE VICE WHICH CANNOT BE ACCEPTED. RELIANCE IS PLACED ON DECISION OF APEX CO URT IN THE CASE OF MCDOWELLS WHICH CLEARS THAT A COLOURABLE DEVICE CAN NOT BE A PART OF TAX PLANNING. HENCE, THE BROKERAGE PAID OF RS. 12,11,57 5/- TO THE ABOVE PARTIES IS NOT SATISFACTORILY JUSTIFIED AND SAME IS HEREBY DIS ALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. WE NOW REFER TO THE RELEVANT FINDINGS OF THE LD. CIT(A) WHICH IS CONTAINED AT PARA 3.2.2 WHICH IS REPRODUCED AS UNDE R:- 3.2.2 I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE AO HAS DISALLOWED THE BROKERAGE EXPENDITURE BY OBSERVING T HAT THE BUYERS OF THE UNITS WERE KNOWN TO THE COMPANY AND THEREFORE, THERE WAS NO REQUIREMENT OF ANY BROKER. IT WAS FURTHER NOTED THA T THE APPELLANT AND THE BROKERS ARE RELATED ENTITIES AND NO EVIDENCE HA S BEEN PLACED ON RECORD ABOUT THE EFFORTS MADE BY THESE PERSONS IN R ESPECT OF BROKERAGE PAID TO THEM. IT WAS ALSO NOTED THAT SHRI VIMAL SIN GHI TO WHOM BROKERAGE PAID WAS ALSO A DIRECTOR OF THE APPELLANT COMPANY. DURING THE APPELLATE PROCEEDINGS, IT WAS STATED BY THE APPELLA NT THAT THE PAYMENT ON ACCOUNT OF BROKERAGE WAS MADE THROUGH BANKING CH ANNELS, TDS WAS DEDUCTED THEREON. IT WAS FURTHER SUBMITTED THAT THE ISSUE WAS, IN A WAY, ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 5 WAS DECIDED BY THE LD. CIT(A) IN APPELLATE ORDER FO R THE AY 2010-11 WHEREIN, THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT UPHELD AND THE REJECTION OF BOOKS OF ACCOUNTS WAS ALSO ON ACCOUNT OF BROKERAGE PAYMENTS. IT IS TO BE NOTED THAT THE APPELLANT DID NOT FILE ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE ME WHICH MAY JUSTIFY THE PAYMENT OF BROKERAGE TO THE PERSONS WHO ARE EITHER THE DIRECTO R(S) OF THE APPELLANT COMPANY OR THEIR CLOSE RELATIVES. IT IS FURTHER NOT ED THAT THE UNITS WERE SOLD TO THE ERSTWHILE OWNER OF THE LAND ON WHICH TH E PROJECT WAS COMPLETED AND THEREFORE, THE BUYERS AND SELLERS WER E ALREADY KNOWN TO EACH OTHER. THE CONTENTION OF THE APPELLANT THAT TH E PAYMENTS WERE MADE THROUGH BANKING CHANNELS DID NOT MAKE THE PAYM ENTS ON ACCOUNT OF BROKERAGE GENUINE AS IT HAS BEEN HELD IN A NUMBE R OF JUDICIAL PRONOUNCEMENTS THAT PAYMENTS THROUGH BANKING CHANNE LS IS NOT SACROSANCT. THUS, IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE AO WAS JUSTIFIED IN DISALLOWING EXPEN DITURE CLAIMED BY THE APPELLANT ON ACCOUNT OF BROKERAGE EXPENSES, HENCE, THE ADDITION MADE BY THE AO IS HEREBY SUSTAINED. 4. DURING THE COURSE OF HEARING, THE LD. AR HAS SU BMITTED AS UNDER:- (1) BROKERAGE OF RS. 12,11,575/- WAS PAID TO THE F OLLOWING PERSONS DURING THE YEAR: S. NO. NAME OF PERSON PAN SALE OF PREMISES AMOUNT 1. ASHISH KR. GATANI ADJPG2300D 101 & 102 SAPPHIRE GREEN 7,00,000 2. VIMAL SINGI AHNPS6542F 61 - SAPPHIRE EARTH UNIT-3, SAPPHIRE MOON 202, SAPPHIRE GREEN 1,54,575 3. SUBHASH SINGHI AHUPS6101P 601, SAPPHIRE GREEN 91,500 4. PRAVEEN SINGHI AHUPS6100N 702, SAPPHIRE GREEN 87,000 5. GAURAV SING H I BCJPS7334B 602, SAPPHIRE GREEN 701, SAPPHIRE GREEN 1,78,500 12,11,575 ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 6 IT WAS SUBMITTED THAT THE PAYMENT OF BROKERAGE OF T HE ABOVE REASONABLE SUM COULD BE JUSTIFIED FROM THE FOLLOWIN G FACTS:- FOR INTRODUCTION AND PERSUADING THE BUYERS TO PURCH ASE THE CONSTRUCTED PROPERTY AT THE RATES ACCEPTABLE TO BOT H THE SELLER AND BUYERS. THE BROKERS ARE RESPONSIBLE FOR COMPLIANCE OF FORMA LITY OF SALE LIKE COMPLETION OF CONSTRUCTED PROPERTY AS PER THE SATISFACTION OF BUYER, ITS TIMELY PAYMENT & POSSESS ION. BROKER IS RESPONSIBLE TO CHECK THE LEGALITY OF TITL E OF THE UNITS TO BE SOLD. IN CASE LOAN REQUIREMENT TO THE BUYER FOR PAYMENT O F PURCHASE CONSIDERATION EITHER FROM BANKS OR OTHER F INANCIAL INSTITUTION THE SAME IS ARRANGED BY BROKER ON COMPL ETION OF FORMALITIES OF LOAN. TIMELY REGISTRATION OF PROPERTY IN NAME OF NAME OF BUYER(S) IT WAS SUBMITTED THAT LIKE IN EARLIER YEARS, THE BR OKERAGE WAS PAID WITH REFERENCE TO SALE OF SPECIFIC FLAT, CONVE YING FULL ADDRESS OF RECIPIENTS & THEIR PAN TO AO. TDS @ 1% WAS DEDUCTED . IN CASE OF ANY DOUBT, THESE PERSONS COULD HAVE BEEN SUMMONED. EVEN IN LAST SCRUTINY ASSESSMENT FOR THE A.Y. 2010-11, THE DISALLOWANCE O F BROKERAGE TO DIRECTORS AND RELATIVES MADE BY THE LD. AO BY WAY O F ENHANCEMENT IN G.P. RATE WAS TOTALLY DELETED BY ID. CIT(A). 5. THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED THE MATTER AND RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS RIGHTLY STATED THAT FOR CLAIM O F THE BROKERAGE EXPENSES, EFFORTS DONE BY THE PERSONS TO WHOM BROKERAGE NEEDS TO BE ASCERTAINED, HOWEVER IN THE INSTANT CASE, THE SAME WERE NOT ASCE RTAINABLE AND NOTHING TO ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 7 SUPPORT ITS CLAIM HAS BEEN SUBMITTED BY THE ASSESSE E. THE AO HAS ALSO RETURNED A FINDING THAT ON PERUSAL OF CONVEYANCE D EEDS, IT IS OBSERVED THAT ORIGINALLY THE PLOT WHICH WAS DEVELOPED BY THE INDE XONE TRADECON PVT. LTD., WAS OWNED BY THE FATHER OF THE BUYERS SH. SHANIT PR ASAD BHARGAVA UPON WHOSE DEATH, HIS WIFE SMT. RATAN DEVI BHARGAVA BECA ME THE OWNER OF THE SAID PLOT AND DURING THE FINANCIAL YEAR 2009-10, TH E SAID PROPERTY WAS TRANSFERRED TO THE ASSESSEE COMPANY. AND AFTER DEVE LOPMENT OF FLATS, MOST OF THE FLATS SOLD DURING THE YEAR HAVE BEEN SOLD TO TH E BHARGAVA FAMILY. THIS ALSO SHOWS THAT ALL ARE CLOSELY CONNECTED SINCE LONG AND PAYMENT OF BROKERAGE IS ONLY A SHAM FOR MANAGING THE ENTRIES TO REDUCE PROF IT OF THE COMPANY. SIMILARLY, THE LD CIT(A) HAS RETURNED A FINDING THAT THE APPELLANT DID NOT FILE ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE ME WHICH MAY JUSTIFY THE PAYMENT OF BROKERAGE TO THE PERSONS WHO ARE EIT HER THE DIRECTOR(S) OF THE APPELLANT COMPANY OR THEIR CLOSE RELATIVES. IT IS FURTHER NOTED THAT THE UNITS WERE SOLD TO THE ERSTWHILE OWNER OF THE L AND ON WHICH THE PROJECT WAS COMPLETED AND THEREFORE, THE BUYERS AND SELLERS WERE ALREADY KNOWN TO EACH OTHER. THE CONTENTION OF THE APPELLANT THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS DID NOT MAKE THE PAYMENTS ON ACCOUNT OF BROKERAGE GENUINE AS IT HAS BEEN HELD IN A NUMBER OF JUDICIAL PRONOUNCEMENTS THAT PAYMENTS THR OUGH BANKING CHANNELS IS NOT SACROSANCT. THE ABOVE FINDINGS REM AIN UNCONTROVERTED BEFORE US. 7. THE WHOLE PURPOSE OF APPOINTING A BROKER IS TO I NTRODUCE BOTH THE PARTIES TO EACH OTHER AND ASSIST IN THE FINALISATIO N OF THE SPECIFIED TRANSACTION AND IN RETURN, SPECIFIED BROKERAGE IS P AID. IN THE INSTANT CASE, WE FIND THAT SOME OF THE BUYERS OF THE FLATS BELONG TO THE BHARGAVA FAMILY WERE ALREADY KNOWN TO THE ASSESSEE AND ITS PROMOTERS/DIRECTORS, AS THE LAND ON WHICH THE PROJE CT WAS COMPLETED WAS PURCHASED INITIALLY BY THE ASSESSEE FROM THEM O NLY. FURTHER, THERE ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 8 IS NOTHING ON RECORD WHICH DEMONSTRATES THAT ANY SE RVICES WERE RENDERED OR OBTAINED BY THE ASSESSEE FOR WHICH IT H AS INCURRED THE BROKERAGE EXPENSES IN RESPECT OF ABOVE SALE OF UNIT S TO THE BHARGAVA FAMILY. THOUGH THE ASSESSEE IS THE BEST JUDGE TO DE TERMINE THE BUSINESS EXPEDIENCY BUT AT THE SAME TIME, WHERE THE SAME IS CHALLENGED BY THE REVENUE, THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT THERE EXISTS BUSINESS EXPEDIENCY IN INCURRENCE OF SUCH AN EXPEND ITURE. HOWEVER, IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE HAS FAI LED TO DEMONSTRATE THE BUSINESS EXPEDIENCY OF INCURRENCE OF THE BROKERAGE EXPENDITURE PAID TO THE PROMOTERS/DIRECTORS. THEREFORE, THE BROKERAGE EXPENSES TO THE EXTENT PAID TO PROMOTERS/DIRECTORS IN RESPECT OF SA LE OF UNITS TO THE MEMBERS OF THE BHARGAVA FAMILY CANNOT BE HELD TO HA VE BEEN INCURRED FOR THE PURPOSES OF BUSINESS AND THE DISALLOWANCE T HEREOF IS HEREBY SUSTAINED. AT THE SAME TIME, THERE APPEARS TO BE SO ME BUYERS SUCH AS RAKHI JAIN AND ANITA GOEL WHICH DOESNT SEEMS TO BE LONG TO BHARGAVA FAMILY. FURTHER, WE FIND THAT BROKERAGE HAS BEEN P AID TO MR ASHISH GATTANI WHICH AGAIN DOESNT SEEM TO BE A DIRECTOR O R PROMOTER OF THE ASSESSEE COMPANY. THESE TRANSACTIONS HAVE NOT BEEN CHALLENGED BY THE REVENUE AND TO THAT EXTENT, THE ADDITION IS HEREBY DIRECTED TO BE DELETED. THE MATTER IS ACCORDINGLY SET ASIDE THE M ATTER TO THE FILE OF THE AO FOR THE LIMITED PURPOSES OF ASCERTAINING THE BUY ERS WHICH BELONG TO BHARGAVA FAMILY WHICH ARE ALREADY KNOWN TO THE ASSE SSEE AND ITS PROMOTERS/DIRECTORS AND THE CLAIM OF THE BROKERAGE PAID TO THEM SHALL BE DISALLOWED AND THE REMAINING BROKERAGE SHALL BE ALLOWED. IN THE RESULT, THE GROUND OF THE ASSESSEE IS PARTLY ALLOWE D. 8. REGARDING GROUND NO. 2, BRIEFLY STATED, THE FA CTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE AO NOTICED THAT THE ASSESSEE HAD PURCHASED A CAR ON 30.03.2013 FOR RS. 42,95,962/- W HICH WAS INSURED THROUGH BAJAJ ALLIANZ ON 11.04.2013 I.E. IN THE NEX T FINANCIAL YEAR. THUS CLAIM ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 9 OF DEPRECIATION ON THE CAR WAS HELD NOT ALLOWABLE A S ANY VEHICLE COULD NOT BE PUT TO USE UNTIL IT WAS INSURED. HENCE, THE DEPRECI ATION OF RS. 3,22,197/- CLAIMED ON THE CAR WAS DISALLOWED AND ADDED TO RETU RNED INCOME OF THE ASSESSEE. 9. THE RELEVANT FINDINGS OF THE LD. CIT(A) IS CONTA INED AT PARA 3.3.2 WHICH IS REPRODUCED AS UNDER:- 3.3.2 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT THE APPELLANT HAS PURCHASED A CAR ON 30/03/2013 ON WHIC H IT HAS CLAIMED DEPRECIATION TO THE TUNE OF RS. 3,22,197/- WHICH WA S DISALLOWED BY THE AO BY OBSERVING THAT THE CAR WAS INSURED ON 11/04/2 013 AND IN THE ABSENCE OF INSURANCE, THE CAR CANNOT BE PUT TO USE. DURING THE APPELLATE PROCEEDINGS, IT WAS THE CONTENTION OF THE APPELLANT THAT THERE IS NO REQUIREMENT IN ANY LAW FOR GETTING THE VEHICLE INSU RED PRIOR TO VEHICLE PUT TO USE AND THUS, THE AO WAS NOT JUSTIFIED IN DI SALLOWING DEPRECIATION ON THE CAR. DURING THE APPELLATE PROCEEDINGS, THE A PPELLANT WAS REQUIRED TO FILE ANY EVIDENCE REGARDING PURCHASE OF PETROL O R DIESEL FOR THE NEW CAR, HOWEVER, NO SUCH EVIDENCE WAS FILED BY THE APP ELLANT. THEREFORE, SINCE THE APPELLANT HAS FAILED TO FURNISH ANY EVIDE NCE WHICH MAY ESTABLISH THAT THE CAR WAS PUT TO USE DURING THE YE AR UNDER CONSIDERATION, IN MY CONSIDERED OPINION, THE AO WAS JUSTIFIED IN NOT ALLOWING THE DEPRECIATION ON THE CAR PURCHASED BY T HE APPELLANT ON 30/03/2013 AND THUS THE SAME IS HEREBY SUSTAINED. 10. DURING THE COURSE OF HEARING, THE LD. AR HAS S UBMITTED THAT A NEW CAR WAS PURCHASED BY THE ASSESSEE COMPANY ON 30 TH MARCH 2013. SIMPLY FOR THE REASON THAT IT WAS NOT INSURED IN THAT YEAR BUT ON 11 TH APRIL 2013, THE DEPRECIATION WAS NOT ALLOWED BY THE LD. A O. SINCE NOT GETTING THE CAR INSURED COULD BE A VIOLATION UNDER MOTOR VE HICLE ACT BUT NOT ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 10 UNDER THE INCOME TAX ACT, STATUTORY DEDUCTION OF DE PRECIATION CANNOT BE DENIED. HOWEVER ON BEING CONVINCED ON THE ISSUE OF INSURANCE, ID. CIT(A) HAS REQUIRED INVOICE OF PETROL/DIESEL FOR NE WLY PURCHASED CAR AND IN REQUIRING SO, HE HAD NOT CONSIDERED THE FACT THAT THE NEWLY PURCHASED CARS ARE PROVIDED WITH ABOUT 10 LITERS OF PETROL/DIESEL BY THE DEALERS THEMSELVES AT THE TIME OF DELIVERY OF C AR. IN THIS CASE WHEN DELIVERY OF CAR WAS TAKEN ON 30TH MARCH 2013 E VENING, THERE WAS NO NEED OF RE-FILLING OF PETROL/DIESEL IN THE C AR. THEREFORE, LD. A0 AS WELL AS ID. CIT(A) WERE NOT JUSTIFIED IN DISALLO WING DEPRECIATION OF RS.3,22,197/- WHICH WAS USED FOR BUSINESS PURPOSES, OTHERWISE ALSO, DEPRECIATION CANNOT BE DENIED ON BLOCK OF ASSET REA DY FOR USE. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRONOUNCEM ENTS: (1) CIT VS. PANACEA BIOTECH LTD. (2010) 324 ITR 311 (AII): WHEN THE ASSET IS READY FOR USE, ENTITLED TO DEPRECIATION. (2) CIT VS. SONAL GUM INDUSTRIES (2010)233 CTR (GU J) 516: USER OF ASSET. ONCE IT IS FOUND THAT ASSETS ARE USED FOR BUSINESS, IT I S NOT NECESSARY THAT ALL THE ITEMS FILLING WITHIN BLOCK OF ASSETS HAVE TO BE SIMULTANE OUSLY USED FOR BEING ENTITLED TO DEPRECIATION. (3) CIT VS. MENTHA & ALLIED PRODUCTS (2010) 236 CTR (ALL) 329: EVEN IF THE ASSET HAS BEEN USED FOR TRIAL RUN, DEPRECIATION CAN NOT BE DENIED. (4) CITVS. OSWAL AGRO MILLS LTD. (2012) 341 IT R 467 (DEL): ASSETS FORMING PART OF BLOCK OF ASSETS DEPRECIATION TO BE ALLOWE D EVEN IF NOT USED IN RELEVANT YEAR. (5) CIT VS. RADIO TODAY BROADCASTING LTD. (20 16) 382 ITR 42 (DEL) : PLANT AND MACHINERY KEPT READY FOR USE- USE OF ASSET IN RELEV ANT ACCOUNTING YEAR-MEANING OF WORD 'USE' ASSETS KEPT READY FOR USE WOULD AMOUN T TO USE. ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 11 (6) PR. CIT VS. LARSEN AND TOUBRO LTD. (2018) 403 ITR 248 (BONI): CONDITION PRECEDENT FOR ALLOWANCE- USER OF PLANT AND MACHINER Y. MACHINERY UTILIZED FOR TRIAL RUN. DEPRECIATION ALLOWABLE. IT WAS SUBMITTED THAT WHEN THE VEHICLE WAS BROUGHT TO ASSESSEE'S PLACE OF BUSINESS, THE SAME IS USED OR R EADY FOR USE FOR BUSINESS PURPOSES. THE DISALLOWANCE OF MANDATOR Y ALLOWANCE OF DEPRECIATION WAS THEREFORE NOR WARRANTED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A NEW CAR WAS PURCHASED BY THE ASSESSEE COMPANY ON 30 TH MARCH 2013. IT IS THE CLAIM OF THE ASSESSEE THAT T HE DELIVERY OF THE CAR WAS TAKEN ON 30 TH MARCH 2013 AND THE VEHICLE WAS DRIVEN FROM THE CAR DEALERS SHOWROOM TO ASSESSEES BUSINESS PREMISES O N THE SAME DAY USING THE FUEL PROVIDED BY THE CAR DEALER. THE CAS E OF THE REVENUE IS THAT WHERE THE VEHICLE WAS INSURED ON 11.04.2013 I. E. IN THE NEXT FINANCIAL YEAR, THE CLAIM OF DEPRECIATION ON THE CAR WAS NOT ALLOWABLE AS ANY VEHICLE COULD NOT BE PUT TO USE UNTIL IT WAS INSURED. UNDIS PUTEDLY, THE OWNERSHIP AND POSSESSION BY WAY OF TAKING THE DELIVERY OF THE CAR DURING THE FINANCIAL YEAR IS NOT IN DISPUTE. WHAT IS THEREFORE RELEVANT TO DETE RMINE IS WHETHER THE VEHICLE IS READY TO BE PUT TO USE FOR THE PURPOSES IT HAS B EEN PURCHASED. THE PURPOSE IS TO USE THE VEHICLE TO PLY ON THE ROAD FO R CARRIAGE OF THE ASSESSEES EMPLOYEES FROM ONE PLACE TO ANOTHER. A VEHICLE CAN ONLY PLY ON THE ROAD ONLY WHEN IT HAS BEEN INSURED AND IN ABSENCE OF A VALID INSURANCE, IT CANNOT PLY ON THE ROAD. THEREFORE, THE INSURANCE OF THE VEHICLE IS REQUIRED TO MAKE THE VEHICLE READY TO BE PUT TO USE. IN THE INSTANT CAS E, THE INSURANCE HAS BEEN TAKEN IN THE NEXT FINANCIAL YEAR AND THEREFORE, WE AGREE WITH THE FINDINGS OF THE AO THAT THE DEPRECIATION IS NOT ALLOWABLE TO TH E ASSESSEE FOR THE IMPUNGED ASSESSMENT YEAR. HOWEVER, THE ASSESSEE SH ALL BE ELIGIBLE TO CLAIM DEPRECIATION FROM THE NEXT FINANCIAL YEAR. IN THE RESULT, THE GROUND OF APPEAL IS DISMISSED. ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 12 12. REGARDING GROUND NO. 3, THE RELEVANT FACTS AND FINDING OF THE ASSESSING OFFICER ARE AS UNDER:- THE ASSESSEE DEBITED RS. 1,56,000/- ON ACCOUNT OF PAYMENT OF RENT OF GUEST HOUSE. THE AR OF THE ASSESSEE WAS ASKED TO FURNISH THE RENT AGREEMENTS AND LEDGER AND OTHER DETAILS OF THE SAID RENT. THE ASSE SSEE FAILS TO SUBMIT DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM. IT I S SURPRISING THAT THE ASSESSEE HAD PROPERTIES WHICH ARE IDLE, AND IT IS P AYING RENT FOR GUEST HOUSE. IN ABSENCE OF SUPPORTING EVIDENCE OF PAYMENT OF REN T ON GUEST HOUSE AND THE IMPLAUSIBLE SITUATION THAT ASSESSEE KEPT ITS OWN PR OPERTIES IDLE AND WAS PAYING RENT OF GUEST HOUSE, THE EXPENSES CLAIMED ON RENT OF RS. 156,000/- ON ACCOUNT OF GUEST HOUSE IS HEREBY DISALLOWED AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 13. THE RELEVANT FINDINGS OF THE LD. CIT(A) IS CONT AINED AT PARA 3.4.2 WHICH IS REPRODUCED AS UNDER:- 3.4.2 DURING THE YEAR UNDER CONSIDERATION, THE APP ELLANT HAS CLAIMED AN EXPENDITURE OF RS. 1,56,000/- ON MAINTEN ANCE OF TWO GUEST HOUSES, ONE AT T3, SAPPHIRE HERITAGE, C-SCHEME, JAI PUR AND ANOTHER AT SHIVAM APARTMENT, BANI PARK, JAIPUR BY OBSERVING TH AT THE APPELLANT WAS HAVING ITS OWN UNSOLD UNITS WHICH COULD BE USED FOR THE PURPOSE OF ITS GUESTHOUSE. DURING THE APPELLATE PROCEEDINGS, T HE APPELLANT HAS STATED THAT THE AO CANNOT CHALLENGE THE WISDOM OF T HE APPELLANT AND IT SHOULD NOT PUT HIMSELF IN THE SHOES OF THE APPELLAN T. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT WAS REQUIRED TO FURNISH EVIDENCE THAT THESE TWO GUESTHOUSES WERE USED FOR THE PURPOSE OF THE BU SINESS OF THE APPELLANT AND TO FILE THE DETAILS OF OTHER EXPENDIT URE THEREON. HOWEVER, THE APPELLANT COULD FILE ONLY ELECTRICITY BILL IN R ESPECT OF THE SO-CALLED GUESTHOUSE AT C- SCHEME, JAIPUR AND NO EVIDENCE IN RESPECT OF ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 13 GUESTHOUSE AT BANI PARK COULD BE FILED. ON PERUSAL OF THE SAID ELECTRICITY BILL, IT WAS OBSERVED THAT THE SAME WAS IN THE NAME OF SHRI VIMAL SINGHI, THE DIRECTOR OF THE APPELLANT COMPANY. IT IS FURTHE R NOTED FROM THE ASSESSMENT ORDER THAT THE APPELLANT COULD NOT FURNI SH ANY RENT AGREEMENT, LEDGER AND OTHER DETAILS OF THE RENT CLA IMED TO BE PAID FOR GUESTHOUSES. THEREFORE, IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES CASE, I DO NOT FIND ANY REASON TO INT ERFERE WITH THE FINDINGS OF THE AO AS RECORDED IN THE ASSESSMENT OR DER AND HENCE, THE DISALLOWANCE OF RS. 1,56,000/- MADE BY THE AO ON AC COUNT OF RENT PAYMENT FOR THE ALLEGED GUESTHOUSE IS HEREBY SUSTAI NED. 14. DURING THE COURSE OF HEARING, THE LD. AR HAS SU BMITTED THAT UNDER SECTION 37(1) OF IT ACT, EXPENDITURE INCURRED ON MA INTENANCE OF GUEST HOUSE IS ALLOWABLE AS DEDUCTION. HOWEVER, BOTH THE LOWER AUTHORITIES HAD DENIED THE DEDUCTION FOR THE REASON THAT THE ASSESS EE COMPANY COULD HAVE USED THE UNSOLD RESIDENTIAL UNITS AS GUEST HOU SE WITHOUT APPRECIATING THE FOLLOWING FACTS: (A)UNSOLD FLATS ARE UNFURNISHED AND NON-USABLE FOR THE REASON THAT ELECTRIC CONNECTION IS TAKEN IN NAME OF THE PROSPECTIVE OWNE R; (B) UNSOLD FLATS ARE STOCK AND TRADE IN THE BUSINES S AND CAN BE SOLD AT ANY TIME, DEPENDING ON CHOICE AND LIKING OF BUYERS; (C)THE FURNISHING OF UNSOLD FLAT WILL COST MUCH HIG HER THAN MAINTENANCE CHARGES AND ANNUAL RENT (TOTAL RS.1,56,000/- IN A Y EAR) FOR THE GUEST HOUSE. (D)IT IS FOR THE BUSINESSMAN TO DECIDE WHETHER A SE PARATE GUEST HOUSE OR UNSOLD UNFURNISHED RESIDENTIAL FLAT WILL BE SUITABL E AND CONVENIENT FOR THE PURPOSE OF STAY OF OUTSIDER PROSPECTIVE BUYERS. THE TOTAL PAYMENTS FOR GUEST HOUSE WAS MADE BY A/C. PAYEE CHEQUES, DULY ENTERED IN REGULAR BOOKS OF ACCOUNTS, EXAMINED BY ID. AO HOWEVER THERE WAS NO OTHER SPECIFIC REQUIREMENT BY LD. AO T O SUBMIT COPY OF ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 14 LEDGER OR OTHER DETAILS. THE DISALLOWANCE OF RS. 1, 56,000/- IS WITHOUT ANY REASON AND JUSTIFICATION. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD AR HAS CONTENDED THAT THE TOTAL PAYMENT FOR GUEST HOUSE WAS MADE BY A/C. PAYEE CHEQUES, DULY ENTERED IN REG ULAR BOOKS OF ACCOUNTS AND EXAMINED BY AO HOWEVER THERE WAS NO OTHER SPECIFIC REQUIREMENT BY LD. AO TO SUBMIT COPY OF LEDGER OR O THER DETAILS. THE CASE OF THE REVENUE IS THAT BOTH DURING THE ASSESSMENT A ND APPELLATE PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE RENT AGREEMENTS AND LEDGER AND OTHER DETAILS OF THE SAID RENT AND THE A SSESSEE FAILS TO SUBMIT DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM. IN O UR VIEW, WHAT IS RELEVANT IS WHETHER THE GUEST HOUSE WAS USED FOR THE PURPOSES O F THE ASSESSEES BUSINESS OR NOT DURING THE PREVIOUS YEAR. WHERE TH E GUEST HOUSE WAS USED FOR THE PURPOSES OF ASSESSEES BUSINESS, THE EXPENS ES THEREON SHALL BE ALLOWED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE FIND THAT NOTHING HAS BEEN BROUGHT ON RECORD WHICH DEMONSTRATES THAT THE GUEST HOUSE WAS USED FOR THE PURPOSES OF ASSESSEES BUSINESS. IN VIEW O F THE SAME, WE HEREBY CONFIRM THE FINDINGS OF THE LOWER AUTHORITIES AND T HE GROUND SO TAKEN BY THE ASSESSEE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/08/2018. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 23/08/2018 ITA NO. 21/JP/2018 INDEXONE TRADECONE PVT. LTD., JAIPUR VS DCIT, JAIPUR 15 *GANESH KR VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - INEXONE TRADECONE PVT. LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT - DCIT, CENTRAL CIRCLE-2, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 21/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.