Sri.Vinu Selvaraj M/s. Radhas Textiles, Kollam V. The ITO, Wd-4, Kollam

ITA 611/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7452 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-01-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 31-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Assessee Lawyers: R SRINIVASAN
• Keywords: Depreciation; Fair market value
• Section: 40A(3); 143(3); 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S HRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO. 611 /COCH/201 9 ASSESSMENT YEAR : 2011 - 12 SHRI VINU SELVARAJ, RADHAS TEXTILES, CHOWKA ROAD, PUNALUR, KOLLAM. [PAN: A E D PV 3753G] VS. THE INCOME TAX OFFICER, WARD - 4, KOLLAM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHRI R . SRINIVASAN, CA REVENUE BY SHRI MRITUNJAYA SHARMA , SR. DR DATE OF HEARING 21 / 0 1 / 20 20 DATE OF PRONOUNCEMENT 27 TH / 0 1 /20 20 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), TRIVANDRUM DATED 04/10/2019. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. 2 . THE ASSESSEE IS AN INDIVIDUAL WHO IS A TEXTILE DEALER AT PUNALUR. FOR THE ASSESSMENT YEAR 2011 - 12, THE RETURN OF INCOME WAS FILED ON 17.02.2012 DECLARING TOTAL INCOME OF RS.9 , 27 , 050/ - . THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 143(3) OF THE I.T. ACT. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. ACT VIDE ORDER DATE D 31/01/2014, DETERMINING I.T.A. NO. 611/ COCH/201 9 2 THE TOTAL INCOME AT RS.39,49,670/ - AS AGAINST THE RETURNED INCOME OF RS.9,27,050/ - . IN COMPLETING THE SAID ASSESSMENT, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: S.NO. ITEM AMOUNT(RS.) REASON 1. DISALLOWANCE U/S. 40A( 3) 20,44,371 CASH PAYMENT 2. DISALLOWANCE U/S. 40A(2) 5,40,000 EXCESSIVE PAYMENT 3. CAR EXPENSES 2,42,941 PERSONAL USE 4. DEPRECIATION ON BUILDING 43,982 5. ADHOC DISALLOWANCE 1,50,000 POSSIBLE INFLATION 6. INTEREST U/S. 244A 1,330 NOT D ISCLOSED 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ADHOC DISALLOWANCE OF RS.1,50,000/ - . 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE OFFICERS BELOW WERE NOT JUSTIFIED IN INVOKING/ CONFIRMING THE ADDITION MADE U/S. 40A (3). 2. THE COMMISSIONER OF INCOME - TAX (A) IS NOT JUS TIFIED IN HOLDING THAT THE APPELLANT IS NOT COVERED BY EXEMPTION STATED UNDER RULE U/S. 6DD. 3. THE COMMISSIONER OF INCOME - TAX(A) DID NOT APPRECIATE THE FACT THAT THE APPELLANT BUSINESS IS LOCATED IN PUNALUR WHICH IS ABOUT 40 KM A WAY FROM THE PLACE OF PUR CHASE I.E. K OLLAM. 4. MERELY BECAUSE THE APPELLANT DID NOT PRODUCE ANY LETTER FROM THE SELLER INSISTING FOR CASH PAYMENT BY THE SELLER OF GOODS, THE COMMISSIONER OF INCOME - TAX (A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE ON THIS GROUND. I.T.A. NO. 611/ COCH/201 9 3 5. THE CO MMISSIONER OF INCOME - TAX(A) ALSO DID NOT CONSIDER THE DECISION OF MADRAS HIGH COURT FILED DURING THE COURSE OF HEARING. 6. THE OFFICERS BELOW ARE NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE U/S. 40A(2) ESPECIALLY WHEN ALL THOSE IN RECEIPT OF SALARY HAVE INCLUDED THE SAME AND FILED THEIR I.T. RETURN. 7. THE OFFICERS BELOW ARE NOT JUSTIFIED IN NOT CONSIDERING THE FAIR MARKET VALUE OF SERVICES RENDERED BY RELATIVES AS EXCESSIVE AND UNREASONABLE HAVING REGARD TO THE MARKET VALUE OF SUCH SERVICES. 8. TH E CONFIRMATION OF DISALLOWANCE OF 1/3 OF CAR EXPENSES WAS NOT IN ORDER AS DIFFERENT CARS WERE UTILIZED FOR DIFFERENT PURPOSE LIKE FOR PURCHASE, FOR COLLECTION OF CREDIT SALES FOR VISITING THE BANK AND THE LIKE. 9. FOR THE ABOVE GROUNDS AND OTHER GROUNDS AS MAY BE ADDUCED AT THE TIME OF HEARING, YOUR APPELLANT PRAYS THAT THE HON BLE TRIBUNAL MAY CONSIDER THE ABOVE GROUNDS. 5. I SHALL ADJUDICATE THE GROUNDS, ISSUEWISE AS FOLLOWS: DISALLOWANCE OF RS.20,44,371/ - : ( GROUND NOS. 1 TO 5 ) 5.1 DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE PURCHASED TEXTILE GOODS FROM SPM & SONS, KOLLAM FOR A SUM OF RS.20,44,371/. I T WAS FURTHER NOTICED BY THE ASSESSING OFFICER THAT THE ENTIRE PAYMENT FOR THESE PURCHASES W ERE IN CASH. T HE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID CASH PAYMENTS MADE TO SPM & SONS, KOLLAM SHOULD NOT BE DIS ALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I . T. ACT. THE ASSESSEE FILED HIS REPLY DATED 13/12/2013 WHEREIN IT WAS CO NTENDED THAT THE PURCHASES WERE MADE FOR EFFECTING REDUCTION SALE AFTER ONAM SEASON. IT WAS STATED THAT IN ORDER TO AVOID DELAY IN GETTING GOODS, THE PURCHASE S WERE MADE BEYOND BANKING HOURS IN CASH . IT WAS ALSO STATED THAT THE PAYMENT S W ERE I.T.A. NO. 611/ COCH/201 9 4 MADE IN CASH , SI N CE THE DEALER DID NOT ACCEPT CHEQUES. IT WAS CONTENDED THAT THE INDIVIDUAL BILLS WERE BELOW RS.20,000/ - AND FURTHER, IT WAS COVERED UNDER THE EX E MPTION PROVIDED UNDER RULE 6DD OF THE I.T. ACT. THE CONTENTIONS OF THE ASSESSEE WERE REJECTED AND THE AS SESSING OFFICER DISALLOWED THE ENTIRE CASH PAYMENT MADE TO SPM & SONS, KOLLAM. BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 5.2 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER BY MAKING DISALLOWANCE U/S. 40A(3) OF THE I.T. ACT, THE ASSESS EE PREFERRED THE APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE CIT(A) , APART FROM REITERATING THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: 1. HARSHILA CHORDIA VS. CIT ( 298 ITR 349 ) (RAJ.) 2. KGL NETWORK P LTD. VS. CIT DATED 02.07.2018 (ITAT, DELHI) 5.3 THE CIT(A) REJECTED THE CONTENTIONS RAISED BY THE ASSESSEE AND CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER . THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: 4.1.3. THE LEARNED AR ALSO RELIED ON THE DECISION OF HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF HARSHILA CHORDIA, 298 ITR 349 AND ON THE DECISION OF ITAT, DELHI IN THE CASE OF KGL NETWORK P LTD DATED 02.07,2018. THE FACTS, THE GROUND OF APPEAL AND T HE ARGUMENTS OF THE LEARNED AR HAVE BEEN CONSIDERED. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT PURCHASES WERE MADE FROM A LEADING TEXTILE DEALER IN KOLLAM TOWN WHERE BANKING FACILITIES ARE AVAILABLE. FURTHER, LEARNED AR, EXCEPT STATING THAT THE GOODS AR E SOLD ONLY ON CASH, HAS NOT PRODUCED ANY EVIDENCE FROM THE PAYEE THAT THE PAYEE INSISTED ON CASH PAYMENT. THE LEARNED AR HAS ALSO NOT EXPLAINED HOW THE PAYMENTS ARE COVERED BY RULE 6DD OF THE I.T. I.T.A. NO. 611/ COCH/201 9 5 RULES, 1962. IN T HIS REGARD IT WOULD BE RELEVANT TO PLACE ON RECORD THE OBSERVATIONS OF JURIS DIC TIONAL HIGH COURT IN THE CASE OF MRS ROADWAYS, 52 TAXMANN.COM 99 AND THE R ELEVANT PART IS AS UN DER: ''7. AS FAR AS THE CASE ON HAND I S CONCERNED, THE ASSESSEE IS NEITHER THE OWNER OF THE GOODS NOR THE OWNER OF THE VEH ICLE CARRYING THE GOODS. IF THE ASSESSEE HAS TO CLAIM EXEMPTION UNDER SECTION 4 0 A(3), NECESSARILY HE HAS TO COMPLY W ITH THE STATUTORY PROVISION AND THE RULES FRAMED THEREUNDER. ONLY IN INSTANCES WHERE THE ASSESSEE FALLS UNDER ANY OF THE EXEMPTIONS COVERED IN RULE 6DD, HE IS ENTITLED TO CLAIM THE SAID AMOUNT AS AN EXEMPTION UNDER SECTION 40A(3).' 4.1.4. IN THE LIGHT OF THE OBSERVATIONS OF HON'BLE HIGH COURT, AS ABOVE AND AS THE APPELLANT IS NOT COVERED BY THE EXCEPTIONS STATED UNDER RULE 6DD, THE D ISALLOWA NCE OF RS. 20,44,171 IS UPHEL D AND THE GROUND RAISED ON THIS ISSUE IS DISMISSED. 5.4 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LD. AR SUBMITTED THAT THE ONLY REASON FOR THE CIT(A) TO CONFIRM THE D ISALLOWANCE MADE U/S. 40A(3) OF THE I.T. ACT WAS THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE FROM THE PAYEE THAT THE IT HAD INSISTED FOR PAYMENT IN CASH. FOR THE ABOVE PURPOSE, THE ASSESSEE HAS PRODUCED A LETTER FROM SPM & SONS, KOLLAM.(SELLE R OF THE GOODS TO THE ASSESSEE ) STATING THAT THEY HAD INSISTED ON CASH PAYMENT. THE ASSESSEE HAS FILED BRIEF WRITTEN SUBMISSION WHEREIN IT WAS STATED THAT THE ASSESSEE S CONCERN IS IN PUNALUR AND PURCHASES WERE MADE IN KOLLAM FROM SPM & SONS, KOLLAM , BE YOND THE BANKING HOURS AND ON INSISTENCE OF THE SETTLER, NAMELY SPM & SONS, KOLLAM, THE ASSESSEE WAS FORCED TO MAKE CASH PAYMENTS. IT WAS FURTHER CONTENDED THAT SINCE THE CASH PAYMENTS WERE MADE BEYOND BANKING HOURS, THE SAME WOULD FALL UNDER RULE 6DD(J) O F I.T.A. NO. 611/ COCH/201 9 6 INCOME TAX RULES, 1962. THE LD. D R ON THE OTHER HAND SUPPORTED THE ORD ERS PASSED BY THE INCOME TAX AUTHORITIES . 5.5 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE PRIMARY REASON FOR THE CIT(A) TO CONFIRM THE DISALLOWANC E MADE UNDER SECTION 40A(3) IS THAT THE ASSESSEE HAD FAILED TO PRODUCE EVIDENCE FROM THE PAYEE, I.E., SPM & SONS, KOLLAM THAT IT INSISTED ON CASH PAYMENTS. THE ASSESSEE HAS NOW PRODUCED A LETTER FROM SPM & SONS, KOLLAM WHEREIN IT WAS STATED THAT IT HAD IN SISTED FOR CASH PAYMENTS IN VIEW OF THE FACT THAT THE GOODS SOLD TO THEM WERE MILL GOODS, WHICH IS IN HIGH DEMAND . FUR THER, IT WAS STATED THAT THE ASSESSEES BANK ACCOUNT WAS LOCATED AT PUNALUR AND FOR ENCASHING THE CHEQUE/DRAFT WOULD REQUIRE TIME . IT W AS FURTHER MENTIONED IN THE SAID LETTER OF SPM & SONS, KOLLAM THAT THE PURCHASES WERE EFFECTED IN MOST OF THE DAYS AFTER THE BANKING HOURS. RULE 6DD(J) OF THE I.T. RULES STATES THAT WHEN PAYMENTS ARE REQUIRED TO BE MADE ON DATES ON WHICH THE BANKS ARE CLO SED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE, SUCH CASH PAYMENTS WOULD NOT BE LIABLE FOR DISALLOWANCE U/S. 40A(3) OF THE I.T. ACT. THE ASSESSEE HAS TO PROVE THE CIRCUMSTANCES UNDER WHICH THE ASSESSEE WAS FORCED TO MAKE CASH PAYMENTS AND SUCH CIRCUMSTANCE FA LLS WITHIN ONE OF THE CONDITIONS ENUMERATED UNDER RULE 6DD OF THE I.T. RULES. IN THE INTEREST OF JUSTICE AND EQUITY, I AM OF THE VIEW THAT ONE MORE OPPORTUNITY SHOULD BE GRANTED TO THE ASSESSEE TO PROVE HIS CASE THA T HE WAS FORCED TO MAKE CASH PAYMENTS UN DER THE COMPELLING CIR CUMSTANCES AND ASSESSEES CASE FALLS IN ONE OF SITUATION I.T.A. NO. 611/ COCH/201 9 7 ENUMERATED UNDER RULE 6DD OF THE I.T. R U LES. FOR THE ABOVE PURPOSE, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, GROUND NOS. 1 TO 5 OF THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSES. DISALLOWANCE U/S. 40A(2) AMOUNTING TO RS. 5,40,000/ - (GROUND NOS. 6 & 7 ) 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD PAID SALARY TO HIS MOTHER, HIS WIFE AND HIS TWO BROTHE RS IN TOTAL AMOUNTING TO RS. 10.80 LAKHS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD MADE PAYMENTS TO PERSONS COVERED U/S. 40A(2) IN EXCESS OF MARKET VALUE AND DISALLOWED 50% OF SUCH EXPENDITURE. ACCORDINGLY SALARY EXPENDITURE WAS DISALLOWED TO THE EXTENT OF RS.5.40 LAKHS. THE RELEVANT FINDING OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF 50% OF SUCH EXPENSES BY INVOKING THE PROVISIONS OF SECTION 40A(2) READS AS FOLLOWS: FROM THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE, IT IS SEEN THAT THE PAYMENT BY WAY OF SALARY TO THE ABOVE RELATIVES OF THE ASSESSEE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY THEM. THE BURDEN OF PROVING THE REASONABLENESS OF THE SALARY PAID TO THE RELATIVES VESTS WITH T HE ASSESSEE. THE EXPLANATION FURNISHED BY THE ASSESSEE DID NOT PROVE THE REASONABLENESS OF SALARY PAID TO THE RELATIVES FOR THE SERVICES RENDERED BY THEM. PART OF THE SALARY PAID TO THE RELATIVES IS COMPENSATION IN LIEU OF THEIR ENTITLEMENT TO SHARE IN THE BUSINESS. THEREFORE 50% OF THE SALARY PAID TO THE ABOVE RELATIVES OF THE ASSESSEE IS CONSIDERED TO BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY THEM AND IS DISALLOWED UNDER SECTION - 40A(2) OF THE INCOME T AX ACT 1961 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION.' I.T.A. NO. 611/ COCH/201 9 8 6.1 THE ASSESSEE BEING AGGRIEVED FILED APPEAL TO THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. THE RELEVANT FI NDING OF THE CIT(A) READS AS FOLLOWS: DURING THE APPEAL PROCEEDINGS, THE LEARNED AR REPEATED THE SAME ARGUMENTS MADE BEFORE THE ASSESSING OFFICER THAT THEY WERE FAMILY MEMBERS ENTITLED TO BUSINESS PROFITS AND THE APPELLANT HAS UTILIZED THEIR SERVICES IN C ONDUCT OF BUSINESS. THE ARGUMENTS OF THE LEARNED AR ARE CONSIDERED. IT IS FOR THE APPELLANT TO EXPLAIN WHAT SERVICES WERE RENDERED BY THE FAMILY MEMBERS AGAINST THE PAYMENTS RECEIVED BY THEM. THE LEARNED AR HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE TO PRO VE THE SAME. CONSIDERING THESE FACTS, THE DISALLOWANCE OF 50% OF THESE PAYMENTS UNDER SECTION 40A(2) OF THE ACT IS REASONABLE AND THE SAME IS UPHELD. THE GROUND RAISED ON THIS ISSUE IS DISMISSED. 6.2 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE H AS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A). 6.3 I HAVE HEARD THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. TH E ASSESSEE HAS FILED BRIEF WRITTEN SUBMISSIONS. THE CONTENTS OF THE SAME IS THAT THE ASSESSEES FATHER LATE SHRI R. SELVARAJ WAS RUNNING THE PROPRIETARY CONCERN AND ON ACCOUNT OF HIS PREMATURE DEATH, THE ASSESSEE WAS FORCED T O TAKE OVER THE REINS OF BUSINESS AT A VERY YOUNG AGE SINCE HIS BROTHERS WERE STUDYING FOR OTHER PROFESSIONAL COURSES. THE ASSESSEE WAS A STUDENT AND HAD TO DISCONTINUE HIS STUDIES TO ATTEND TO THE BUSINESS RUN BY HIS LATE FATHER. IN THE PROCESS, THE ASSE SSEES MOTHER WHO WAS ASSISTING HIS LATE FATHER , HAS HELPED THE ASSESSEE IN I.T.A. NO. 611/ COCH/201 9 9 THE DAY TO DAY AFFAIRS OF THE BUSINESS. S INCE THE ASSESSEE WAS FREQUENTLY GOING OUT ON TOUR FOR BUSINESS PURPOSES, THE SHOP HAD TO BE ATTENDED BY HIS MOTHER FOR WHICH ADEQUATE RE MUNERATION WAS PAID. LATER, HIS BROTHERS ALSO JOINED BUSINESS AFTER THEIR STUDIES. FURTHER, THE ASSESSEES FATHER DIED INTERSTATE AND THE ASSESSEE TOOK OVER THE BUSINESS FOR HELPING OTHER MEMBERS OF THE FAMILY. HAVING REGARD TO THE FACT THAT THE ASSESSE ES MOTHER, WIFE AND TWO BROTHERS HAD EXPERIENCE IN THIS LINE OF TRADE, SALARY WAS PAID TO THEM AS COMPENSATION FOR MARKET VALUE OF SERVICES RENDERED BY THEM. I AM OF THE VIEW THAT DISALLOWANCE OF 50% OF SALARY ON FACTS AND CIRCUMSTANCES OF THE INSTANT CA SE IS EXCESSIVE. IN ORDER TO MEET THE ENDS OF JUSTICE, OUT OF RS.5,40,000/ - , I HOLD THAT ASSESSEE IS TO BE GRANTED FURTHER DEDUCTION OF RS.2, 7 0,000/ - ON ACCOUNT OF SALARY PAID TO CLOSE RELATIVES , FOR THE REASON THAT A SSESSEES FATHER WAS THE PREVIOUS OWNE R OF THE BUSINESS , ON HIS PASSING AWAY, ALL HIS CHILDREN AND HIS WIFE WERE ENTITLE D TO BUSINESS. MOREOVER, IT IS ALSO A FACT THAT ASSESSEES MOTHER, WIFE AND HIS TWO BROTHERS WERE ASSIST ING THE ASSESSEE IN RUNNING THE DAY TO DAY BUSINESS AFFAIRS OF THE AS SESSEE. ACCORDINGLY, I GRANT FURTHER DEDUCTION OF RS.2, 7 0,000/ - AND CONFIRM THE DISALLOWANCE OF RS.2,70,000/ - OUT OF THE TOTAL DISALLOWANCE OF RS.5,40,000/ - MADE BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY THE CIT(A). IT IS ORDERED ACCORDINGLY. THUS , GROUND NOS. 6 & 7 ARE PARTLY ALLOWED. I.T.A. NO. 611/ COCH/201 9 10 D ISALLOWANCE OF CAR EXPENSES 7. THE ASSESSING OFFICER DISALLOWED 1/3 RD OF THE EXPENSES CLAIMED ON ACCOUNT OF FOUR CARS OWNED BY THE APPELLANT. THE RELEVANT PART OF THE ORDER IS AS UNDER: 'SINCE THE ASSESSEE I S DOING A PROPRIETARY BUSINESS AND THE BUSINESS HAVING NO BRANCHES, CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE ENTIRE EXPENSES OF ALL THE FOUR CARS IS FOUND TO BE NOT IN ORDER. AT THE TIME OF HEARING, THIS MATTER WAS DISCUSSED WITH THE AUTHORISED REPRESENT ATIVE. A LETTER WAS ISSUED TO THE ASSESSEE ON 10.12.2013 PROPOSING TO DISALLOW TWO THIRD OF THE ENTIRE EXPENSES ON THESE CARS. THE ASSESSEE FILED A REPLY, IN WHICH, IT IS STATED THAT ONE CAR IS USED BY THE ASSESSEE AND THE OTHER THREE CARS ARE USED BY THE ASSESSEE'S TWO BROTHERS AND MOTHER. IT IS ALSO STATED THAT THE BROTHERS USE THESE CARS FOR PURCHASES FROM DISTANT PLACES AND THE MOTHER USES THE CAR FOR ATTENDING BUSINESS. THE CARS OWNED BY THE ASSESSEE AND FAMILY MEMBERS FOR BOTH BUSINESS AND PERSON AL PURPOSES. SINCE THE CARS ARE USED BY FAMILY MEMBERS AND ALSO FOR PERSONAL PURPOSES, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE ENTIRE EXPENSES OF ALL FOUR CARS IS NOT ALLOWABLE. THEREFORE ONE THIRD OF THE ENTIRE EXPENSES IS DISALLOWED AND ADDED TO T HE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION.' 7.1 THE VIEW TAKEN BY THE AO WAS CONFIRMED BY THE CIT(A) . THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: 4.3.2. DURING THE APPEAL PROCEEDINGS, THE LEARNED AR A RGUED THAT THE APPELLANT HAD FOUR RELATIVES WHO WERE ATTENDING TO THE BUSINESS AND EACH OF THEM WAS GIVEN A CAR FOR ATTENDING BUSINESS AND THEREFORE, THE DISALLOWANCE IS NOT WARRANTED. THE ARGUMENTS OF THE LEARNED AR ARE CONSIDERED. THE LEARNED AR COULD NO T PRODUCE ANY DOCUMENTARY EVIDENCE TO PROVE THAT FOUR CARS ARE NECESSARY TO MAINTAIN A PROPRIETARY BUSINESS WHICH HAS NO BRANCHES. FURTHER, THE SERVICES RENDERED BY THE FOUR RELATIVES HAS NOT BEEN PROVED. CONSIDERING THESE FACTS, THE DISALLOWANCE OF 1/3 RD EXPENSES DEBITED TO P&L ACCOUNT ON ACCOUNT OF FOUR CARS IS UPHELD AND THE GROUND RAISED ON THIS ISSUE IS DISMISSE D. I.T.A. NO. 611/ COCH/201 9 11 7.2 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. BEFORE THE TRIBUNAL, THE ASSESSEE H AS CONTENDED THAT DISALLOWANCE OF 1/3 RD EXPENSES ON CAR, DEPRECIATION AND INTEREST ON LOAN IS VERY EXCESSIVE . THE LD. AR SUBMITTED THAT ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE BEING PROPRIETOR, IT WAS NOT NECESSARY FOR HIM TO MAINTAIN FOUR CARS ESPECIALLY WHEN HE HAD NO BRANCHES. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER THE FACT THAT THE ASSESSEE HAD FOUR RELATIVES WHO WERE ATTENDING TO THE BUSINESS AND EACH OF THEM W ERE GIVEN A CAR FOR ATTENDING BUSINESS AND FOR ITS UTIL IZATION. FURTHER, IT WAS SUBMITTED THAT THE ASSESSEE HAD TO GO TO OTHER PLACES SUCH AS TAMIL NADU AND BANGALORE FOR PURCHASES REQUIRED FOR THE BUSINESS. THEREFORE, IT WAS SUBMITTED THAT EXPENDITURE CLAIMED FOR CARS IS JUSTIFIED. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 7.3 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THAT THE ASSESSEE HAS FOUR RELATIVES WHO WERE ATTENDING TO BUSINESS AND EAC H OF T HEM WAS GIVEN A CAR FOR BUSINESS AND FOR ITS UTILIZATION. THE ASSESSEE HAS ALSO TO GO TO OTHER PLACES SUCH AS TAMIL NADU AND BANGALORE FOR MAKING PURCHASES . TAKING INTO THESE FACTS, I AM OF THE VIEW THAT 1/3 RD DISALLOWANCE OF CAR EXPENSES IS EXCESSIVE . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I RESTRICT THE DISALLOWANCE TO 1/4 TH OF THE CAR EXPENSES CLAIMED BY THE ASSESSEE. IT IS ORDERED ACCORDINGLY. THUS, GROUND NO. 8 IS PARTLY ALLOWED. I.T.A. NO. 611/ COCH/201 9 12 8. GROUND NO. 9 IS GENERAL IN NATURE, HENCE, THE SAME IS DIS MISSED AS NO ADJUDICATION IS REQUIRED ON THE SAME. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27 TH - 01 - 20 20 . SD/ - (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 27 TH JANUARY, 20 20 GJ COPY TO: 1 . SHRI VINU SELVARAJ, RADHAS TEXTILES, CHOWKA ROAD, PUNALUR, KOLLAM. 2. THE INCOME TAX OFFICER, WARD - 4, KOLLAM. 3. THE COMMISSIONER OF INCOME - TAX (AP P EALS) , TRIVANDRUM. 4. THE PR. COMMISSIONER OF INCOME - TA X, TRIVANDRUM. 5. D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REG ISTRAR) I.T.A.T., COCHIN I.T.A. NO. 611/ COCH/201 9 13