Mr. Om Parkash Arora, Delhi V. JCIT (OSD), New Delhi

ITA 3245/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7137 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 26-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-2 : NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO.3245/DEL/2015 ASSESSMENT YEAR : 2009-10 OM PRAKASH ARORA, A-82, CHANDER NAGAR, JANAK PURI, DELHI. PAN: AAGPA9515J VS. JCIT (OSD), CIRCLE-49(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SACHIN KUMAR, CA DEPARTMENT BY : SHRI S.K. JAIN, SR.DR DATE OF HEARING : 26.12.2016 DATE OF PRONOUNCEMENT : 06.01.2017 ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAI NST THE ORDER OF THE CIT(A) DATED 23 RD MARCH, 2015 PASSED FOR ASSESSMENT YEAR 2009- 10. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY ARE DES CRIPTIVE AND ITA NO.3245/DEL/2015 2 ARGUMENTATIVE IN NATURE. AT THE TIME OF HEARING, T HE LD. COUNSEL FOR THE ASSESSEE HAS CONFINED THE GRIEVANCE OF THE ASSE SSEE TO THE TWO ISSUES, NAMELY, (A) THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF DEPRECIATION ON CAR AMOUNTING TO RS .7,06,204/-; AND (B) THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING THE A D HOC DISALLOWANCE OF EXPENSES OUT OF CONVEYANCE, REPAIR AND MAINTENAN CE, BUSINESS PROMOTION, ETC. HE DID NOT PRESS OTHER GROUNDS. 3. AS FAR AS THE FIRST FOLD OF GRIEVANCES IS CONCER NED, THE BRIEF FACTS ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOM E ON 30 TH SEPTEMBER, 2009 DECLARING AN INCOME OF RS.36,93,160/-. THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U /S 143(2) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) WAS ISS UED ON 23 RD AUGUST, 2010. IT EMERGES OUT FROM THE RECORD THAT AT THE R ELEVANT TIME THE ASSESSEE WAS RUNNING TWO PROPRIETORSHIP FIRMS, NAME LY, M/S DELHI INVESTIGATORS AND M/S DI MANAGEMENT INTERNATIONAL S ERVICES. APART FROM THESE TWO PROPRIETORSHIP CONCERNS, HE WAS ALSO DIRECTOR IN M/S CITI COLLECTIONS INDIA PVT. LTD. THE ASSESSEE HAS P URCHASED A PORSCHE CAR IN THE MONTH OF AUGUST, 2007 FOR A CO NSIDERATION OF RS.52,56,504/-. THE ASSESSEE HAD CLAIMED DEPRECIAT ION ON THIS CAR IN ITA NO.3245/DEL/2015 3 ASSESSMENT YEAR 2008-09 WHICH WAS ALLOWED TO THE AS SESSEE. ACCORDING TO THE ASSESSEE, HE HAS SOLD THIS CAR TO ONE SHRI JASVINDER SINGH, WHO WAS A BROKER, BUT, ULTIMATELY THIS CAR W AS PURCHASED BY MR. PARMANAND VIJAY KUMAR. SHRI JASVINDER SINGH HA S ASSIGNED HIS RIGHTS TO MR. PARMANAND VIJAY KUMAR. THE CAR WAS S OLD IN AUGUST, 2010. THE ASSESSEE HAS CLAIMED DEPRECIATION ON THI S CAR. THIS CLAIM OF DEPRECIATION WAS DENIED TO THE ASSESSEE BY THE A SSESSING OFFICER ON THE GROUND THAT A SUM OF RS.29 LAC WAS RECEIVED BY THE ASSESSEE IN F.Y. 2007-08 ITSELF. ONLY RS.60,000/- WAS RECEIVED AT THE TIME OF ALLEGED ACTUAL TRANSFER OF THE CAR. THE LD. ASSESS ING OFFICER ASSUMED THAT FOR ALL PRACTICAL PURPOSES, THE CAR WAS TRANSF ERRED BY THE ASSESSEE IN FY 2007-08 AND, THEREFORE, HE IS NOT ENTITLED FO R THE DEPRECIATION IN INSTANT ASSESSMENT YEAR. ACCORDINGLY, HE DISALLOWE D THE CLAIM OF THE ASSESSEE AND MADE AN ADDITION OF RS.7,06,204/-. 4. THE APPEAL TO THE CIT(A) DID NOT BRING IN RELIEF TO THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OU TSET, SUBMITTED THAT THE CAR WAS AGREED TO BE SOLD FOR A SUM OF RS. 35 LAC. SINCE POSSESSION WAS NOT GIVEN AND IT GOT SCRATCH MARK, T HEREFORE, ITA NO.3245/DEL/2015 4 ULTIMATELY, A SUM OF RS.29,60,000/- WAS RECEIVED BY THE ASSESSEE. THE CAR WAS TRANSFERRED ON 2 ND NOVEMBER, 2010. FOR BUTTRESSING THIS CONTENTION, HE TOOK ME THROUGH PAGE NO.15 OF THE PA PER BOOK WHEREIN INFORMATION COLLECTED FROM THE OFFICE OF THE MOTOR LICENSING OFFICER HAS BEEN PLACED ON RECORD. HE ALSO TOOK ME THROUGH PAGE 14, WHERE COPY OF FORM NO.29 ISSUED UNDER RULE 55(1) OF MOTOR VEHICLE ACT, 1988 HAS BEEN PLACED. ON THE STRENGTH OF THESE DOCU MENTS, HE CONTENDED THAT THE TRANSFER OF THE VEHICLE TOOK PLA CE ON 2 ND NOVEMBER, 2010. THEREFORE, THE DEPRECIATION SHOULD HAVE BEEN GRANTED TO THE ASSESSEE. 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DER OF THE CIT(A) AND SUBMITTED THAT THE LD. FIRST APPELLATE A UTHORITY HAS HIGHLIGHTED CIRCUMSTANTIAL EVIDENCE EXHIBITING THE FACT THAT CAR MIGHT NOT HAVE BEEN USED BY THE ASSESSEE AND IT WAS GIVEN TO THE PROSPECTIVE VENDEE. 7. I HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. DEPRECIATION IS BEING PROVID ED U/S 32 OF THE ITA NO.3245/DEL/2015 5 INCOME TAX ACT. IT IS PERTINENT TO TAKE NOTE OF TH E RELEVANT PART OF THIS SECTION:- DEPRECIATION. 32. (1) IN RESPECT OF DEPRECIATION OF ( I ) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING T ANGIBLE ASSETS; ( II ) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICEN CES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTE R THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESS EE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOL LOWING DEDUCTIONS SHALL BE ALLOWED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCE NTAGE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESC RIBED; ( II ) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTA GE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: . 8. A BARE READING OF THIS SECTION WOULD INDICATE TH AT IN ORDER TO CLAIM DEPRECIATION, THE ASSESSEE SHOULD DEMONSTRATE OWNERSHIP OVER THE ASSET AND ITS USER FOR THE PURPOSE OF THE BUSIN ESS. THE LD.CIT(A) WHILE REJECTING THE CLAIM OF THE ASSESSEER HAS OBSE RVED THAT THE ASSESSEE FAILED TO BRING DEMONSTRATIVE EVIDENCE OF THE USER OF THE CAR FOR THE PURPOSE OF BUSINESS. THE LD. FIRST APPELLA TE AUTHORITY FURTHER OBSERVED THAT ONCE THE ASSESSEE HAS RECEIVED SUBSTA NTIAL PART OF THE SALE CONSIDERATION, THEN, IT BE ASSUMED THAT THE CA R MUST HAVE BEEN ITA NO.3245/DEL/2015 6 TRANSFERRED BY THE ASSESSEE. IN MY OPINION, THE OW NERSHIP OF AN ASSET CAN BE DEMONSTRATED BY THE RELEVANT EVIDENCE, NAMEL Y, IF IT IS A TANGIBLE ASSET BEING BUILDING, LAND, ETC., THE REGI STERED SALE DEED COULD PROVE THE OWNERSHIP. IF IT IS A MACHINERY LIKE CAR , SHIP, ETC., THEN, THE REGISTRATION CERTIFICATE COULD DEMONSTRATE THE OWNE RSHIP. IN THE PRESENT CASE, IT IS PERTINENT TO TAKE NOTE OF THE C ERTIFICATE ISSUED BY THE LICENSING AUTHORITY WHICH IS THE AUTHORISED AGENCY FOR KEEPING THE RECORD OF VEHICLES UNDER THE MOTOR VEHICLE ACT. TH IS CERTIFICATE READ AS UNDER:- OFFICE OF THE MOTOR LICENSING OFFICER, TRANSPORT DEPARTMENT, GOVT. 'OF NCT OF DELHI, WEST ZONE -I, JANAK PURL, NEW DELHI-110058. NO F/MLO/WZ-I/2014/8125 DATED: 2/7/2014 TO, SH. O. P. ARORA, A-82, CHANDER NAGAR, JANAK PURI, NEW DELHI - 110058. SUB: INFORMATION ASKED UNDER RIGHT TO INFORMATION ACT 20 05, (ID NO. 10949). SIR, WITH REFERENCE TO LETTER NO. F.NO.19(26)/ID NO. 10 949 /TPT /RTI/14/2814 DATED 09/06/2014, OF PLO (RTI), RECEIV ED IN THIS OFFICE ON 10/06/2014 ON THE SUBJECT CITED ABOVE. THE PARA- WISE REPLY IS FURNISHED AS UNDER: ITA NO.3245/DEL/2015 7 PARA 2 & 3 : THE VEHICLE NO. DL4CAV 1260 WAS TRANSFERRED IN T HE NAME OF SH.PARMANAND VIJAY KUMAR ON DATED 02/ 11/20 10 AS PER THE RECORD HELD IN THIS OFFICE. REST OF THE INFORMATION CANNOT BE PROVIDED AS IT IS EXEMPTED UNDER SECTION 8 (J) OF RTI ACT, 2 005. SD/- PLO/MOTOR LICENSING OFFICER, WEST ZONE-I, JANAK PURI COPY FOR INFORMATION TO: 1. PLO (RTI), TRANSPORT DEPARTMENT, 5/9, UNDER HILL RO AD, DELHI- 110054. SD/- PLO/MOTOR LICENSING OFFICER, WEST ZONE-I, JANAK PURI 9. THE OWNERSHIP OF A VEHICLE IS NOT ONLY NECESSARY FOR THE PURPOSE OF CLAIMING DEPRECIATION, BUT, ALSO RELEVANT FOR OT HER LAWS, I.E., MOTOR VEHICLE ACT. IN CASE THE VEHICLE MET WITH AN ACCIDE NT AND INJURED SOMEBODY, THEN, WHO WILL BE RESPONSIBLE FOR MAKING THE PAYMENT OF COMPENSATION, TO WHOM THE INSURANCE COMPANY WOULD R EIMBURSE THE CLAIM IN CASE OF THEFT. HOW AN ASSESSEE CAN AFFORD TO HAND OVER A VEHICLE TO AN UNAUTHORIZED PERSON UNDER ATTENDING C IRCUMSTANCES WHICH CAN EXPOSE HIM FOR PAYMENT OF COMPENSATION IN CASE IT MET WITH AN ACCIDENT? THE OWNER OF THE VEHICLE COULD BE HELD LIABLE IN CASE IT IS INVOLVED IN SOME CRIMINAL OR ANTI SOCIAL ACTIVITIES. THERE COULD BE CHANCES FOR RECEIPT OF PURCHASE PRICE, BUT , TO MY MIND, ITA NO.3245/DEL/2015 8 TRANSFER OF OWNERSHIP COULD ONLY BE CONSTRUED WHEN IT IS EFFECTED UNDER THE MOTOR VEHICLE ACT. THERE MAY BE DISPUTE BETWEEN THE VENDEE AND VENDOR, PAYMENTS MIGHT HAVE BEEN MADE, B UT, UNLESS TRANSFER IS EFFECTED UNDER THE MOTOR VEHICLE ACT, T HE OWNERSHIP ON THE BASIS OF CIRCUMSTANCES CANNOT BE RECOGNIZED. TO MY MIND, THE LD. FIRST APPELLATE AUTHORITY HAS ERRED IN APPRECIATING THE CONTROVERSY ON THE SAID STRENGTH OF CIRCUMSTANTIAL EVIDENCE AND HO LDING THAT THE ASSESSEE WAS NOT OWNER OF THE VEHICLE. AS FAR AS D EMONSTRATIVE EVIDENCE EXHIBITING USER OF THIS VEHICLE FOR BUSINE SS PURPOSES IS CONCERNED, IT IS QUITE DIFFICULT FOR AN ASSESSEE TO BRING THAT TYPE OF EVIDENCE. THAT MAY BE A CORROBORATIVE FACTOR, BUT, ONCE OWNERSHIP IS NOT IN DOUBT AND DEPRECIATION WAS GRANTED IN EARLIE R YEAR, IT CANNOT BE DENIED IN THIS YEAR ALSO. IN VIEW OF THE ABOVE DISC USSION, I ALLOW THIS FOLD OF GRIEVANCES AND DELETED THE DISALLOWANCES. 10. IN THE NEXT FOLD OF GRIEVANCES, THE ASSESSEE HA S PLEADED THAT THE LD. FIRST APPELLATE AUTHORITY HAS UPHELD AD HOC DISALLOWANCE OUT OF VARIOUS EXPENSES. THE ASSESSEE HAS FILED WRITTEN S UBMISSIONS AND IN THE SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE HA S TABULATED THE DETAILS OF EXPENDITURE CLAIMED BY THE ASSESSEE, DIS ALLOWED BY THE ITA NO.3245/DEL/2015 9 ASSESSING OFFICER AND ALSO QUANTIFIED THE PERCENTAG E OF THE DISALLOWANCE TO THE TOTAL EXPENDITURE. FOR APPRECI ATING THE CONTROVERSY IN A MORE SCIENTIFIC WAY, I WOULD LIKE TO TAKE NOTE OF THESE DETAILS FROM THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. IT READ AS UNDER:- EXPENSES TOTAL DISALLOWED % AGE OF RECEIPT DISALLOWANCE IN %AGE OF TOTAL EXPENSES. M/S DELHI INVESTIGATORS CONVEYANCE AND PETROL EXPENSES INCURRED FOR TOWING OF VEHICLES 22,72,613 24,000 11.52% 1.06% OFFICE REPAIR & MAINTENANCE ON THE GROUND THAT SOME VOUCHERS UN-VOUCHED AND EXPENSES HAVE BEEN INCURRED IN CASH 3,28,444 25,000 1.67% 7.61% M/S D.I. MANAGEMENT INTERNATIONAL SERVICES OFFICE REPAIR & MAINTENANCE TO COVER UP UNVOUCHED EXPENSES 9,88,595 40,000 2.36% 4.05% BUSINESS PROMOTION AND STAFF WELFARE EXPENSES ON THE GROUND THAT THE EXPENSES OF PERSONAL NATURE CANNOT BE RULED OUT. 35,577 6,51,655 30,000 1.64% 4.36% VEHICLE REPAIR & MAINTENANCE EXPENSES BEING 1/8 ON THE GROUND OF USE OF THE ASSESSEE 1,34,301 16,790 0.32% 12.5% DEPRECIATION ON VEHICLE BEING 1/8 ON THE GROUND OF USE OF THE ASSESSEE 42,060 5,260 12.5% TELEPHONE EXPENSES ON THE GROUND OF USE OF THE ASSESSEE 39,80,658 12,000 9.49% 0.30% ITA NO.3245/DEL/2015 10 11. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. IN ORDER TO CLAIM EX PENDITURE FOR THE PURPOSE OF BUSINESS, THE ONUS LIES UPON THE ASSESSE E TO DEMONSTRATE THAT THE EXPENDITURES WERE INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS. THE LD. ASSESSING OFFICER HAS MADE ANALYSIS OF THE DETAILS SUBMITTED BY THE ASSESSEE AND ARRIVED A T A CONCLUSION THAT SOME PART OF THE EXPENDITURE HAVE BEEN INCURRED FOR USING THESE FACILITIES FOR PERSONAL PURPOSES OR FOR NON-BUSINES S PURPOSES. ACCORDINGLY, HE PARTLY DISALLOWED THE EXPENDITURE O N AD HOC BASIS. IT IS TRUE THAT THIS DISCRETION WAS EXERCISED BY THE A SSESSING OFFICER ON AN ESTIMATE BASIS AND WHENEVER SOME DISALLOWANCES I S BEING MADE ON ESTIMATE BASIS, THERE WOULD BE A GUESS WORK. WHENE VER WE FACE THIS TYPE OF CONTROVERSY AT THE LEVEL OF THE TRIBUNAL, W E FIND IT VERY DIFFICULT TO ADJUDICATE THE ISSUE THIS WAY OR THAT WAY BECAUSE IT IS AN ESTIMATED OPINION AND IT IS NOT ADVISABLE FOR THE S ECOND APPELLATE AUTHORITY TO INTERFERE IN THE DISCRETION EXERCISED BY THE TWO SUBORDINATE AUTHORITIES. AT THE LEVEL OF THE TRIBUN AL, WE ARE UNANIMOUS FOR CONFIRMING SUCH DISALLOWANCE ROUGHLY IN BETWEEN 5% TO 10% OF THE TOTAL DISALLOWANCES UNLESS THE ASSESS EE PROVED THAT ITA NO.3245/DEL/2015 11 EXPENDITURES WERE INCURRED EXCLUSIVELY FOR THE PURP OSES OF BUSINESS. THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED OUT TH AT OUT OF OFFICE REPAIR AND BUSINESS PROMOTION, THE LD. ASSESSING OF FICER HAS MADE DOUBLE DISALLOWANCE I.E., IN THE CASE OF M/S DELHI INVESTIGATORS AS WELL AS M/S DI MANAGEMENT INTERNATIONAL SERVICES. CONSID ERING THIS ASPECT, I CONCUR WITH THE LD. REVENUE AUTHORITIES I N PRINCIPLE, BUT, DIRECT THE ASSESSING OFFICER TO RE-EXAMINE THE DETA ILS OF THESE EXPENDITURE AND EXCLUDE THE ITEM WHICH HAS BEEN DIS ALLOWED TWICE. THE DISALLOWANCE TO THE EXTENT OF 10% OR LOWER TO T HAT, EXCLUDING DOUBLE ON ANY OF THE ITEMS IS BEING UPHELD AND IF T HERE IS ANY DISALLOWANCE OVER AND ABOVE 10% THAT WOULD STAND DE LETED. THE LD. ASSESSING OFFICER MAY QUANTIFY THE AMOUNTS AFTER PR OVIDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2017. SD/- [RAJPAL YADAV] JUDICIAL MEMBER DATED, 6 TH JANUARY, 2017. ITA NO.3245/DEL/2015 12 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.