THE ACIT, CIRCLE-2(1)(1). , AHMEDABAD vs. SHRI DIPAK G. PATEL,, AHMEDABAD

The captioned appeal and cross objection have been filed at the instance of the Revenue and assessee against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad (CIT(A)’ in short), dated 04.10.2017 arising in the assessment order dated 30.11.2016 passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning AY 2009-10. with CO No. 26/Ahd/19 [ACIT vs.Shri Dipak G. Patel] A.Y. 2009-10 - 2 -

2. The grievances, in Revenue’s appeal and assessee’s Cross Objection, raised being common, both the cases were heard together and disposed of by the common order.

“1 The Ld. CIT(A) has erred in law and on facts in deleting the addition made u/s. 2(24)(iv) of the Act amounting to Rs. 81,32,230/- being 1/3rd of amount of Rs. 2,43,96,701/- which was self disallowed in the Computation of Income of Ganesh Housing Corporation Ltd.( in which the assessee is one of the directors). 1.1 The Ld. CIT(A) has erred in law and on facts by not appreciating that the entire such expenditure incurred by Ganesh Housing Corporation Ltd. was self disallowed in its hand being personal expenses of the directors and it is a fact that the company being an inorganic body can not have personal expenses as such but would mean the personal expenses of the directors which have been debited in the P&L account of the company. 1.2 The Ld. CIT(A) has failed to appreciate that the expenses so incurred were directly related to the family function of the three directors, therefore, it was the monetary obligation of the assessee (along with other two directors) to bear such expenses in their personal capacity but such obligation was met by the company and, therefore, the AO was right in invoking the provision of the section 2(24)(iv) of the Act. Reference in this regard is made to the decision CIT vs. Nar Hari Dalmia [80 ITR 454 (Del.) and CIT vs. S. Varadrajan[141 CTR Mad 10]. 1.3 The Ld. CIT(A) has given relief to the assessee without application of mind in as much as he has failed to consider the unequivocal provisions of section 2(24)(iv) of the Act and which have been analysed in various case laws, some of which are listed above. 1.4 The Ld. CIT(A) has failed to appreciate that even if such sums were not benefits in perquisites, the same were covered by the 2nd limb of section 2(24)(iv) which states " and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid." 1.5 The Ld. CIT(A) has failed to appreciate that even if a different AO (who was assessing the income of another Director) had failed to invoke the provision of section 2(24)(iv) in his case, would not jeopardize the rightful addition in the hands of other directors as it is a trite law that to perpetuate an error is no heroism, to rectify is the compulsion of human conscience (Supreme Court in Distributors Baroda (P) Ltd. vs. UOI) with CO No. 26/Ahd/19 [ACIT vs.Shri Dipak G. Patel] A.Y. 2009-10 - 3 - 1.6 The Ld. CIT(A) has failed to appreciate directing as the inaction and mistake on part of one AO can not act as a binding precedence for all other AO. 1.7 The Ld. CIT(A) has erred in law and on facts by his failure to follow the direction of the Hon'ble Supreme Court as laid down in the case of ITO vs. Ch. Atchaiah (218 ITR 239) and reiterated in Shri S.P. Jaiswal vs. CIT (6th March 1997) that "he (the AO) can, and he must tax the right person and the right person alone." 1.8 The Ld. CIT(A) failed to appreciate that in such situation, an approximation had to be made and in any case, the onus was on the assessee to give the break- up of expenses which should have been added in his hands as section 106 of the Evidence Act mandates that when any fact is especially within the knowledge of any person, the burden of proving the fact is upon him.