TIRUPATI CONSTRUCTION,SURAT vs. NFAC, DELHI, DY. CIT, CIRCLE 1(3), SURAT

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ITA 960/SRT/2024Status: DisposedITAT Surat23 July 2026AY 2022-235 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the petrol and diesel expenses claimed were reasonable considering the firm's turnover and the nature of its business involving site supervision at various locations. Therefore, the addition made on this account was liable to be deleted.

What were the facts?

The assessee, a construction firm, claimed depreciation, interest on car loan, and petrol/diesel expenses for two luxury cars purchased during the year. The Assessing Officer disallowed 50% of these expenses due to lack of documentation proving exclusive business use.

What were the issues?

Whether the disallowance of petrol and diesel expenses for business vehicles was justified in the absence of detailed logbooks and bills, considering the firm's turnover and business operations.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 960/SRT/2024 Assessment Year: 2022-23

Tirupati Construction NFAC, Delhi, 240 Laxmi Enclave, Dy. CIT, Opp. Gajera School, Vs Circle-1(3), Katargam Surat Surat -395004 PAN: AAHFM7064K (Appellant) (Respondent) Assessee Represented: Shri Mehul Shah, CA Revenue Represented: Ms. Neerja Sharma, Sr. D.R. Date of hearing : 08-05-2026 Date of pronouncement : 23-07-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the assessee as against the appellate order dated 16.07.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2022-23.

I.T. A No. 960//SRT/2024 A.Y. 2022-23 Page No 2 Tirupati Construction vs. DCIT

2.

Brief facts of the case are, the assessee is a partnership firm engaged in construction business, predominantly executing Government contracts. For the Assessment Year 2022-23, the assessee filed its return of income on 27.09.2022 declaring total income at Rs. 3,59,01,250/-. The return was selected for scrutiny assessment under CASS for the reason being “Low net profit shown by construction and claim of large refund”. The Assessing Officer noted that the assessee has purchased two luxury cars during the relevant previous year on which depreciation and other expense in the nature of interest on car loan and petrol, diesel expenses have been claimed. The AO noted that in the absence of the value of vehicles, date of purchase, registration of owner of vehicle, put to use, purpose of vehicle purchase, log book of vehicles, it is not ascertained the direct relation of the vehicles with the business of the assessee firm. Further, interest expenses are also higher comparative with earlier years and therefore, the assessee was requested to submit all documents including explanation. The assessee partly submitted the explanation that it is engaged in the contruction business and undertake work contract at different places of Gujarat and for monitoring the sites partners, engineers, site managers require to visit various sites as well as government office for work order, tenders, bills etc. and the cars were exclusively used for business purpose only. The assessee also provided list of site location and jurisdictional Govt. offices with distance. 2.1 The Assessing Officer was not satisfied with the above reply made the following disallowances:- Depreciation claimed Rs. 12,14,117/- Interest of car loan Rs. 2,30,177/- Excess Petrol and diesel expenses Rs. 4,36,893/-

I.T. A No. 960//SRT/2024 A.Y. 2022-23 Page No 3 Tirupati Construction vs. DCIT

Hence, 50% of the above expenses namely Rs. 9,40,594/-, disallowed and added to the income of the assessee firm. 3. Aggrieved against the assessment order, the assessee filed appeal before ld. CIT(A) who has also partly allowed the appeal by observing as follows:-

“4.2.4 During the course of appellate proceedings, the appellant filed copies of invoices towards purchase of both the vehicles from which it is seen that the 'fortuner' car was purchased on 27.09.2021 in the name of 'Nareshbhai Malaviya -Tirupati Construction' for invoice value of Rs. 35,55,200/- and car 'discovery sports' was purchased on 25.01.2022 for invoice value of Rs. 69,34,580/- in the name of 'Nareshbhai Malaviya -Tirupati Construction'. The appellant has not forwarded any documentary evidences in respect of additional expenditure incurred on these cars purchased. Therefore the cost of acquisition of these cars is taken at invoice value. Since the appellant is owning said two motor cars and used for the purpose of business, it is eligible for claim of deduction on account of depreciation Accordingly, the depreciation allowable to the appellant works out to Rs. 10,53,373/- (@ 15% on Rs. 35,55,200/- plus @ 7.5% on Rs. 69,34,580/-). Thus the disallowance made by the A.O. in the impugned assessment order is restricted to Rs. 1,60,744/- being the excess depreciation claimed. 4.2.5 With regard to the appellant's claim of interest on car loan of Rs. 2,30,177/- the appellant has not filed any documentary evidences relating to vehicle loan taken and interests expenditure incurred. In the absence of any documentary evidences the appellant's claim of expenditure cannot be allowed. The disallowance of interest expenditure made by the A.O. in the assessment order is therefore upheld. 4.2.6 With regard to expenditure on petrol and diesel the case records reveals that the appellant has not filed copies of bills as also the log book and in the absence of the same it cannot be said that the vehicle has been used wholly and exclusively for the purpose of business. The disallowance made by the AO in this regard is therefore upheld. This ground of appeal raised by the appellant is thus partly allowed.” 4. Aggrieved against the appellate order, the assessee is in appeal before us, raising the following grounds of appeal:-

1.

On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in making disallowance on issue other than the issue mentioned in the show cause notice.

I.T. A No. 960//SRT/2024 A.Y. 2022-23 Page No 4 Tirupati Construction vs. DCIT

2.

On the facts and circumstances of the case as well as law on the subject, the Id. CIT(A) has erred in partly confirming the action of assessing officer by sustaining the disallowance of expense amounting to Rs. 4,94,279/- out of total disallowance of Rs. 9,40.594 u/s. 37(1) of the Act. 3. It is therefore prayed that the above disallowance made by the assessing officer and partly confirmed by the CIT(A) may please be allowed. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

5.

We have heard rival submissions and perused the materials available on record. Regarding the travel expenses, the assessee explained that during the Covid-19 period because of restrictions Government office at Gandhinagar, most of the meetings were done through Video Conference and lesser expenses on petrol and diesel, whereas during the financial year, the assessee firm was awarded majority of contract works which are outside Surat city on a direct contract basis, wherein day to day site supervision was done by the firm engineers, supervisors and periodic visits to the sites were made by the partners of the firm. Therefore, there is increase in petrol and diesel expenses. 5.1 Further, on perusal of record, the assessee claimed Rs.4,40,943/- on petrol and diesel expenses. Considering the total turnover the assessee firm of Rs. 135.93 crores, the above expenses claimed is reasonable and does not require any addition. Thus, the addition made on this court is liable to be deleted. Thus, the Ground raised by the assessee are hereby allowed.

In the result, the appeal filed by the assessee is allowed.

I.T. A No. 960//SRT/2024 A.Y. 2022-23 Page No 5 Tirupati Construction vs. DCIT

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 23-07-2026

Sd/- Sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat: Dated 23/07/2026 *Ganesh Kumar, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत

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