M/s Alliance Engineers and Construction, Faridabad V. Addl. CIT, Faridabad

ITA 6180/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3740 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 23-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Capital asset; Depreciation; Opportunity of being heard
• Section: 44AD; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6180/DEL/2015 ASSESSMENT YEAR : 2011-12 ALLIANCE ENGINEERS AND CONSTRUCTION, 1645, SECTOR-29, FARIDABAD. PAN: AAKFA0810A VS. ADDL.CIT, RANGE-1, FARIDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KAPIL GOEL, ADVOCATE REVENUE BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING : 07.02.2019 DATE OF PRONOUNCEMENT: 15.02.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13 TH SEPTEMBER, 2015 OF THE CIT(A)-FARIDABAD, RELATING TO ASSESSME NT YEAR 2011-12. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL RELATES TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.25,04,3 47/- ON ACCOUNT OF DEPRECIATION. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF STONE AGGREGATION AND OTHER CONT RACT WORK/JOB WORK. IT FILED ITS RETURN OF INCOME ON 26 TH SEPTEMBER, 2011 DECLARING TOTAL INCOME OF RS.39,28 ,880/-. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, OBSERVED THAT THE ITA NO.6180/DEL/2015 2 ASSESSEE HAS CLAIMED DEPRECIATION AT RS.2,75,48,797 /-. FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE, HE OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 30% ON MACHINERY CLAIMED AS COMMERCIAL VEHICLE. THE ASSES SING OFFICER NOTICED THE VARIOUS VEHICLES ON WHICH THE DEPRECIATION AT HIGHER RATE O F 30% HAS BEEN CLAIMED AND OBSERVED THAT THE ASSESSEE IS NOT DOING BUSINESS OF MOTOR BUSES, MOTOR LORRIES, MOTOR TAXIES USED IN A BUSINESS OF RUNNING THEM ON HIRE. HE, THEREFORE, WAS OF THE OPINION THAT IN VIEW OF THE PROVISIONS OF SECTION 32(2) OF THE IT ACT, THE ASSESSEE IS ENTITLED TO DEPRECIATION @ 15% WHICH IS APPLICABLE TO PLANT & M ACHINERY. HE, THEREFORE, CONFRONTED THE SAME TO THE ASSESSEE. THE ASSESSEE R EPLIED THAT MOST OF THE PLANT &MACHINERY ARE DUMPER, HYVA, EXCAVATOR, JCB AND COM MERCIAL VEHICLES AND HAS WORKED FOR TRIPLE SHIFTS. RELYING ON VARIOUS DECIS IONS, IT WAS ARGUED THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION @30%. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT CERTAIN VEHICLES AR E LIGHT COMMERCIAL VEHICLES, NAMELY, BOLERO, CAR, JEEP, MARUTI SWIFT DEZIRE, SAFARI AND SCORPIO, ETC., WHICH ARE NOT USED FOR CARRYING ANY MATERIAL. THEY ARE USED FOR THE PERSO NAL TRANSPORTATION OF THE STAFF AND PARTNERS OF THE FIRM. BY CHANGING THE NAME AND NOME NCLATURE OF THESE VEHICLES THE ASSESSEE CANNOT CLAIM HIGHER DEPRECIATION. HE, THE REFORE, ALLOWED DEPRECIATION ON THESE VEHICLES AT 15% AS AGAINST 30% CLAIMED BY THE ASSESSEE. SIMILARLY, HE ALSO RESTRICTED THE DEPRECIATION TO 15% AS AGAINST 30% C LAIMED BY THE ASSESSEE FOR COMPRESSING MACHINERY, ROCK BREAKER, EXCAVATOR AND IR DRILL MACHINE BESIDES ITA NO.6180/DEL/2015 3 COMMERCIAL VEHICLES LIKE BOLERO, CAR, JEEP, MARUTI SWIFT DEZIRE, SAFARI AND SCORPIO, ETC., 4.1 IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF CIT(A), THE ASSESSEE IS IN APPEA L BEFORE THE TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. 6. ON A POINTED QUERY RAISED BY THE BENCH AT THE TI ME OF HEARING AS TO WHAT HAS HAPPENED IN THE PRECEDING YEAR, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS PASSED AN EX PARTE ORDER FOR WHICH THE APPEAL IS PENDING BEFORE THE TRIBUNAL AGAINST SUCH EX PARTE ORDER. HOWEVER, IT IS THE SUBMISSION OF THE LD. CO UNSEL FOR THE ASSESSEE THAT THE VARIOUS DECISIONS RELIED ON BY THE ASSESSEE AT THE TIME OF HEARING BEFORE THE ASSESSING OFFICER WERE NOT CONSI DERED BY THE ASSESSING OFFICER. IT IS HIS SUBMISSION THAT THE DECISION OF THE JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S SAYEED IQBAL WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER WHEREIN IT HAS BEEN HELD THAT DEPRECIATION ON TIPPERS, ROAD ROLLERS AND JCB WILL BE ALLOWABLE @ 40% AS AGAINST 25% ALLOWED BY THE AS SESSING OFFICER TREATING THESE MACHINERY AS PLANT AND MACHINERY AND NOT UNDER THE CATEGORY OF MOTOR VEHICLES. HOWEVER, THE ASSESSING OFFICER AS WELL AS THE CIT(A ) HAVE BRUSHED ASIDE THE SAME. THUS, IT IS HIS SUBMISSION THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE VARIOUS DECISIONS CITED BEFORE HIM. HE ALSO RELIED ON THE FOLLOWING DECISIONS TO THE PROPOSITION THAT HIGHER RATE OF DEPRECIATION IS ALL OWABLE ON TIPPERS, ROAD ROLLERS AND JCB:- ITA NO.6180/DEL/2015 4 I) GAYLORA CONSTRUCTIONS, ORDER DATED 19.08.2009 (ITA NO.1255/2009) (KER.) II) GUJCO CARRIERS, ORDER DATED 18.02.2002 (ITA NO.271/ 1987) 256 ITR 50 (GUJ). 7. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUM STANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE T HE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF VARIOUS DECISIONS CITED ABOVE. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER F ACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. THE FIRST ISSUE RAISED BY THE ASSESSE E IN THE GROUNDS OF APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. THE SECOND ISSUE RAISED BY THE ASSESSEE IN THE G ROUNDS OF APPEAL IS REGARDING THE ADDITION OF RS.41 LAKHS MADE BY THE ASSESSING OFFIC ER U/S 68 OF THE IT ACT WHICH HAS BEEN UPHELD BY THE CIT(A). 9. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSE E HAS RAISED UNSECURED LOANS AMOUNTING TO RS.58,20,000/- FROM THE FOLLOWING PERS ONS/CONCERNS:- (I) M/S ASTHA MINERALS, PROP. SHRI P.K. WADHWA (II) SHRI A.K. GARG (III) SMT. KRISHNA WATI (IV) SHRI P.K. WADHWA (V) M/S RAM BABU DELHI STONE SUPPLIERS, PROP. SHRI P.K . WADHWA (VI) SHRI V.K. PATHAK ITA NO.6180/DEL/2015 5 10. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE, THE ASSESSING OFFICER NOTED THAT THE UNSECURED LOANS IN THE CASE OF SHRI A.K. G ARG AND SMT. KRISHNA WATI ARE OLD LOANS. HE, THEREFORE, ACCEPTED THE SAME AS GENUINE . HOWEVER, HE OBSERVED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.19,50,000/- F ROM M/S ASTHA MINERALS OUT OF WHICH AN AMOUNT OF RS.16 LAKHS IS SHOWN TO HAVE BEE N RECEIVED IN CASH. SIMILARLY, THE ASSESSEE HAS ALSO RECEIVED CASH LOAN OF RS.25 L AKHS FROM THE PARTNER SHRI P.K. WADHWA. HE, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE LOAN AMOUNT OF RS.41 LAKHS RECEIVED IN CASH SHOULD NOT BE DISAL LOWED. IT WAS SUBMITTED THAT DUE TO BUSINESS EXIGENCY LOANS WERE RECEIVED IN CASH AND N OT RECEIVED THROUGH BANK. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. IN ABSENCE OF ANY PLAUSIBLE EXPLANATION REGARDING THE BUSINESS EXIGENCY AND OBSERVING THAT THE CASH WITHDRAWAL MADE BY THE PART NER FROM HIS BANK ACCOUNT AND SUBSEQUENT INVESTMENT IN THE FIRM IS NOT VERIFIABLE , THE ASSESSING OFFICER TREATED THE SUM OF RS.41 LAKH AS UNEXPLAINED INCOME U/S 68 OF T HE IT ACT. 11. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE COULD NOT GIVE ANY EXPLANA TION FOR THE BUSINESS EXIGENCY WHICH FORCED HIM TO TAKE THESE LOANS IN CASH ON REG ULAR BASIS. THE ASSESSEE HAS NOT FURNISHED ANY CASH FLOW STATEMENT TO ESTABLISH THE WITHDRAWAL AND THE DEPOSIT OF CASH DURING THE COURSE OF APPEAL PROCEEDINGS. THE ACKNO WLEDGEMENT OF THE INCOME-TAX RETURNS FILED BY THE ASSESSEE AND OTHER PAPERS IN T HE ABSENCE OF CASH FLOW STATEMENT DO ITA NO.6180/DEL/2015 6 NOT ESTABLISH THE FACT OF THE ASSESSEES CASE. HE ACCORDINGLY UPHELD THE ACTION OF THE ASSESSING OFFICER. 11.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET , FILED THE FOLLOWING CASH FLOW STATEMENT AND SUBMITTED THAT SHRI P.K. WADHWA HAS S UFFICIENT MEANS TO EXTEND THE LOAN OF RS.41 LAKHS TO THE PARTNERSHIP FIRM:- PRAVEEN KUMAR WADHWA CASH FLOW STATEMENT FOR FY 2010-11 (CORRESPONDING PERIOD 01.04.2010 TO 31.03.2011) AMOUNT TOTAL OPENING BALANCES : CASH IN HAND 3,01,240.00 CASH AT BANK 2,55.065.68 5,56,305.68 ADD: INFLOWS A) FROM M/S AASTHA MINERALS 1 A,SHOP NO.3, V.K COLONY, M.B. ROAD, NEW DELHI (PROP. PRAVEEN KR. WADHWA) DECLARING INCOME U/S 44AD IN THE ITR OF P.K WADHWA 16,00,000.00 B) FROM M/S RAM BABU STONE WORKS VISHWAKARMA COLONY, M.B. ROAD, NEW DELHI (PROP. PRAVEEN KR. WADHWA) AS APPEARING IN THE AUDITED FINANCIAL STATEMENTS FO R THE F.Y 2010-11 9,50,000.00 C) CASH WITHDRAWN FROM ALLAHABAD BANK ACCOUNT NO. 20478788485 16,50,000.00 TOTAL INFLOWS 42,00,000.00 LESS: OUTFLOWS A) TO M/S ALLIANCE ENGINEERS & CONTRACTORS I.AS LOAN FROM AASTHA MINERALS II.AS PARTNERS LOAN 16,00,000.00 25,00,000.00 B) CASH DEPOSIT TO ALLAHABAD BANK ACCOUNT NO. 20478788485 2,00,000.00 C) OTHER TRANSACTIONS, CHEQUES DEPOSIT & CHEQUES WITHDRAWN IN ALLAHABAD BANK ACCOUNT 1,49,571.00 TOTAL OUTFLOWS 44,49,571.00 CLOSING BALANCES : CASH IN HAND 2,01,240.00 CASH IN BANK 1,05.494.68 3,06,734.68 ITA NO.6180/DEL/2015 7 13. REFERRING TO THE FOLLOWING DECISIONS, HE SUBMIT TED THAT IN CASE OF A PARTNERSHIP FIRM, ONCE A PARTNER HAS ACCEPTED THAT HE HAS ADVAN CED CERTAIN SUMS TO THE FIRM, NO ADDITION IN THE HANDS OF THE FIRM CAN BE MADE AND I NVESTMENT CAN BE EXAMINED IN THE HANDS OF THE PARTNER U/S 69, ETC.:- I) PUNJAB & HARYANA HIGH COURT IN 208 CTR 459, 224 ITR 180; II) MADRAS HIGH COURT IN TAJ BROWELLERS 291 ITR 232; III) HON'BLE SUPREME COURT IN LOVELY EXPORTS; AND IV) ALLAHABAD HIGH COURT IN 141 ITR 706. 14. HE ACCORDINGLY SUBMITTED THAT ADDITION, IF ANY, CAN BE MADE IN THE HANDS OF THE PARTNER AND NOT IN THE HANDS OF THE PARTNERSHIP FIR M. HOWEVER, SINCE THE PARTNER HAS SUFFICIENT MEANS TO EXTENT THE CASH LOAN, THEREFORE , NO ADDITION COULD HAVE BEEN MADE AND, THEREFORE, THE ORDER OF THE CIT(A) BE SET ASID E. 15. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED O N THE ORDER OF THE CIT(A). HE SUBMITTED THAT THERE IS NO JUSTIFICATION OR BUSINES S EXIGENCY FOR GIVING SUCH HUGE CASH LOAN TO THE FIRM BY ONE OF THE PARTNERS. THE ASSES SEE HAS NOT PROPERLY EXPLAINED THE SOURCE OF SUCH LOAN AND THE EXIGENCY OF SUCH LOAN P AID IN CASH. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AN D THE GROUND RAISED BY THE ASSESSEE BE DISMISSED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND, THE ASSESSING OFFICER, IN THE ASSES SMENT ORDER HAS MENTIONED AS UNDER:- ITA NO.6180/DEL/2015 8 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED IN T OTALITY BUT IT IS FOUND TO BE NOT TENABLE SINCE THE CASH ALLEGEDLY RECEIVED IN THE FIRM TO THE TUNE OF RS.41 LAKHS HAS BEEN INVESTED BY THE PARTNER IN THE FIRM OUT OF HIS WITHDRAWALS FROM HIS BANK ACCOUNT. 17. ALTHOUGH THE ASSESSEE HAS NOT EXPLAINED SUCH BU SINESS EXIGENCY, HOWEVER, IT IS A FACT THAT THERE ARE WITHDRAWALS FROM THE BANK ACC OUNT OF THE PARTNER APART FROM HIS DECLARATION OF INCOME U/S 44AD OF THE IT ACT. THE R EVENUE HAS NOT PROVED THAT THE PARTNER AFTER WITHDRAWAL OF THE MONEY FROM THE BANK HAS UTILIZED THE MONEY OTHERWISE THAN FOR INVESTING IN THE PARTNERSHIP FIRM. THERE I S NOTHING ON RECORD TO SHOW THAT THE PARTNER HAS UTILIZED THE MONEY FOR ACQUISITION OF A NY CAPITAL ASSET OR SPENT THE MONEY TOWARDS SOME MARRIAGE IN THE FAMILY OR ON OTHER SUC H OCCASIONS WHERE HUGE CASH IS REQUIRED TO BE INVESTED OR EXPENDED. IT HAS BEEN H ELD IN VARIOUS DECISIONS THAT WHEN A PARTNER INTRODUCES THE MONEY IN THE FIRM EITHER IN THE SHAPE OF CAPITAL OR LOAN TO THE PARTNERSHIP FIRM, ADDITION, IF ANY, CAN BE MADE ONL Y IN THE HANDS OF THE PARTNER AND NOT IN THE HANDS OF THE PARTNERSHIP FIRM AS LONG AS THE PARTNER CONFIRMS TO HAVE INVESTED TOWARDS CAPITAL OR AS LOAN TO THE FIRM. SINCE THE PARTNER IN THE INSTANT CASE HAS ADMITTED TO HAVE INVESTED IN THE FIRM IN THE SHAPE OF UNSECURED LOAN AND THE WITHDRAWALS FROM THE BANK ACCOUNT HAS NOT BEEN DISP UTED BY THE REVENUE, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT ADDITION, IF ANY, COULD HAVE BEEN MADE IN THE HANDS OF THE PARTNER, NAMELY, SHRI P.K. WADHWA BUT, CERTAINLY NOT IN THE HANDS OF THE PARTNERSHIP FIRM. AS LONG AS THE PARTNER HAS SUFFIC IENT MEANS TO EXPLAIN THE SOURCE OF SUCH LOAN, THE REVENUE CANNOT TREAT THE SAME AS UNE XPLAINED CASH CREDIT U/S 68 IN THE HANDS OF THE PARTNERSHIP FIRM MERELY STATING THAT T HERE IS NO EXIGENCY FOR INTRODUCTION ITA NO.6180/DEL/2015 9 OF SUCH LOAN IN THE SHAPE OF CASH. IN THIS VIEW OF THE MATTER WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELE TE THE ADDITION. THE SECOND GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 18. IN THE RESULT, THE FIRST ISSUE RAISED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE SECOND ISSUE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 5.02.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 15 TH FEBRUARY, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI