M/s Hi Tech International, Ludhiana V. DCIT, C-1, Ludhiana

ITA 899/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0543 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 25-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ZENIA HANDA
• Keywords: Depreciation
• Section: 32

Judgement Text

, . , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH , ! , ' # $ % & , '( ! BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 899/CHD/2018 / ASSESSMENT YEAR : 2014-15 HI TECH INTERNATIONAL, B/31, OPP. POWER HOUSE, BEANT COLONY, LUDHIANA. VS THE DC IT, CIRCLE-I, LUDHIANA. ./ PAN NO: AADFH9663F / APPELLANT / RESPONDENT / ASSESSEE BY : NONE / REVENUE BY : SMT. ZENIA HANDA, SR.DR ! ' # / DATE OF HEARING : 20.11.2018 $%&' # / DATE OF PRONOUNCEMENT : 30.11. 2018 ')/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSA ILING THE CORRECTNESS OF THE ORDER DATED 17.05.2018 OF LD. CIT(APPEA LS)-I LUDHIANA PERTAINING TO 2014-15 ASSESSMENT YEARS ON THE FOLLOWING GROUNDS : 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) IS BAD IN LAW AS WELL AS ON FACTS OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN BAD IN LAW AS WELL AS ON FACTS IN UPHOLDING THE DISALLOWAN CE IN RESPECT OF CARS AND TELEPHONES USED BY THE STAFF MEMBERS OF THE ASSESSE E FIRM UNDER SECTION 38 (2) OF THE INCOME TAX ACT, 1961 BY THE LEARNED ASSESSING O FFICER (AO) 3. THAT THE ASSESSEE CRAVES THE RIGHT TO ADD, ALTER, A MEND OR WITHDRAW ANY GROUND(S) OF APPEAL. 2. AT THE TIME OF HEARING, AN ADJOURNMENT APPLICATION WA S MOVED ON BEHALF OF THE ASSESSEE. THE APPEAL WAS PASSED OVER. IN THE SECOND ROUND ALSO, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE. ON CONSIDERING THE MATERIAL AVAILABLE ON RECORD, IT WAS DEEMED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-PARTE QUA THE ASSESSEE APPELLANT ON MERIT AFTER HEARING LD. SR.DR. 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE IN THE YEAR UNDER CONSIDERATION DECLARED AN INCOME OF RS. 43,07,880/-. THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, MADE AN ADHOC DISALLOWANC E OF 1/6 TH OF THE ITA-899/CHD/2018 A.Y. 2014-15 PAGE 2 OF 3 EXPENSES PERTAINING TO CAR AND TELEPHONE EXPENSES REJE CTING THE EXPLANATION OF THE ASSESSEE. THE RELEVANT DISCUSSION IN PARAS 5 TO 5 .4 OF THE ORDER IS REPRODUCED HEREUNDER : 5.0 DISALLOWANCE OF CAR AND TELEPHONE EXPENSES FOR PERSONAL USE:- 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAS BEEN NOTICED THAT THE ASSESSEE HAS DEBITED CERTAIN EXPENSES TO THE PR OFITS 85 LOSS ACCOUNT (LIKE CAR/TELEPHONE), PART OF THESE EXPENSES BEAR THE NAT URE OF PERSONAL USE, THE DETAILS OF WHICH ARE AS UNDER:- 5.2 VIDE ORDER SHEET ENTRY DATED 06.06.2016 THE ASSESSE E WAS APPRISED THAT NO RECORDS TO BIFURCATE BETWEEN BUSINESS AND P ERSONAL USE OF ASSETS SUCH AS CAR AND TELEPHONE IS BEING MAINTAINED. IN T HE ABSENCE OF ANY RECORDS, IT IS RATIONAL TO DISALLOW I/6 TH OF THE EXPENSES SINCE PERSONAL USE BY PARTNERS CANNOT BE RULED OUT. THE ASSESSEE VIDE LETTER DATED 30.05.2016 STATED AS UNDEN- 'CAR EXPENSES : IN THIS RESPECT WE ARE ENCLOSING HEREWITH MONTH-W ISE AND UNIT-WISE DETAILS OF EXPENSES ALONG WITH COPIES OF LEDGER ACCOUNTS AN D PHOTOCOPIES OF RELEVANT B ILLS EXCEEDING RS.20000/- TELEPHONE EXPENSES : IN THIS RESPECT WE ARE ENCLOSING HEREWITH MONTH-W ISE AND UNIT-WISE DETAILS OF EXPENSES ALONG WITH DETAILS OF EXPENSES EXCEEDING RS, 5000/-.' 5.3 THE REPLY FURNISHED BY THE ASSESSEE HAS BEEN C ONSIDERED AND FOUND UNTENABLE. NO LOG BOOK AND TELEPHONE REGISTER HAVE BEEN MAINTAINED BY THE ASSESSEE. THEREFORE, USE OF CAR AND TELEPHONE FOR OTHER THAN BUSINESS PURPOSES CANNOT BE RULED OUT. SECTION 38(2) OF THE INCOME TAX ACT, 1961 PROVIDES THAT:- ' WHERE ANY BUILDING, MACHINERY, PLANT OR FURNITURE I S NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE DEDUCTI ONS UNDER SUB-CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30, CLAUSES (I) AND ( II) OF SECTION 31 AND [CLAUSE (II) OF SUB- SECTION (L)J OF SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE [ASSESSING] OFFICER MAY DETERMINE, HAVING REGAR D TO THE USER OF SUCH BUILDING, MACHINERY PLANT OR FURNITURE FOR THE PURPOSES OF TH E BUSINESS OR PROFESSION. 5.4 HENCE 1/6 TH OF EXPENSES OF RS. 43,07,767/- COMES TO RS. 7,17,9 61/- WHICH IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE ON ACCOUNT OF PERSONAL USE, AS PER SECTION 38(2) OF THE INCOME TAX ACT,1961. (ADDITION RS. 7,17,961/-) 4. THE ASSESSEE CARRIED THE ISSUES IN APPEAL BEFORE THE CIT(A). THE FACTS WERE APPRECIATED BY THE CIT(A) IN THE FOLLOWING MANNER : 3. IN THE APPELLATE PROCEEDINGS, ARGUMENT OF USE O F TELEPHONES AND CAR BY THE PARTNERS AND MEMBERS OF THE STAFF WERE REITERATED. IT WAS CANVASSED THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT FIRM OW NED TEN CARS OUT OF WHICH EIGHT SR. NO. NATURE OF EXPENSES AMOUNT (IN RS.) 1. CAR REPAIR AND MAINTENANCE 1178961 2. TELEPHONE EXPENSES 1186999 3. CAR DEPRECIATION 1280565 4. INTEREST ON CAR LOAN 469790 5. TELEPHONE SETS DEPRECIATION 1219 6. MOBILE PHONE DEPRECIATION 73523 7. INSURANCE OF CAR 116710 TOTAL 4307767 ITA-899/CHD/2018 A.Y. 2014-15 PAGE 3 OF 3 CARS WERE USED BY THE MEMBERS OF THE STAFF. SIMILAR LY OUT OF A TOTAL OF 145 TELEPHONE NUMBERS USED FOR THE PURPOSES OF BUSINESS OF THE AP PELLANT FIRM, ONLY TWO WERE STATED TO HAVE BEEN USED BY THE PARTNERS. ON THIS BASIS, D ISALLOWANCE OF L/6 TH OF SUCH EXPENSES WAS STATED TO BE UNWARRANTED. 5. CONSIDERING THE SAME, CIT(A) RESTRICTED THE DISALLOW ANCE TO 1/8 TH OF THE EXPENSES. THE LD. SR.DR RELIES UPON THE ORDER STA TING THAT MORE THAN ADEQUATE RELIEF HAS ALREADY BEEN GIVEN TO THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE ASSESSEE BEFORE THE CIT(A) HAS SPECIFIC ALLY ADDRESSED THAT OUT OF THE 10 CARS MAINTAINED, ONLY TWO WERE USED PERSO NALLY BY THE PARTNERS. SIMILARLY, OUT OF 145 TELEPHONE NUMBERS MAINT AINED, ONLY TWO TELEPHONE NUMBERS WERE BEING USED BY THE PARTNERS. A S PER THE SUBMISSIONS EXTRACTED FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSEE HAS SUBMITTED THAT DETAILS HAVE BEEN MAINTAIN ED QUA EACH OF THE VEHICLES/MOBILE NUMBERS. IN VIEW THEREOF AND CONSIDERING THE FAC T, THE ISSUE MAY ALSO BE OF A RECURRING NATURE. WE ARE OF THE VIEW T HAT INSTEAD OF ARRIVING AT AN ARBITRARY ESTIMATE, IT IS APPROPRIATE TO SET ASID E THE ISSUE BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO TAKE THE PAST HISTO RY OF THE ASSESSEE INTO CONSIDERATION AND CONFINE THE DISALLOWANCE TO BE MAD E ONLY ON THE GROUNDS OF PERSONAL USAGE TO THE SPECIFIC CARS/MOBILE/ PHONES STATED TO BE USED BY THE PARTNERS, IN CASE THE CLAIM IS FOUND TO BE CORRECT ON RECORD. NEEDLESS TO SAY THAT A REASONABLE OPPORTUNITY OF BEIN G HEARD BE GRANTED TO THE ASSESSEE. SAID ORDER WAS PRONOUNCED IN THE OPEN CO URT AT THE TIME OF HEARING ITSELF. 7. I N THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11. 2018. SD/- SD/- ( ' # $ % & ) ( ) (ANNAPURNA GUPTA) (DIVA SINGH) '( ! / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER # ' %( )* +* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ! , / CIT 4. ! , ( )/ THE CIT(A) 5. *-. / , # / , 012.3 / DR, ITAT, CHANDIGARH 6. .2 4' / GUARD FILE %( ! / BY ORDER, 5 / ASSISTANT REGISTRAR