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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Ms. Annapurna Gupta & Shri Siddhartha Nautiyal
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Assessment Year 2010-11
M/s. Jugalkishore R. JCIT, Agrawal Infrastructure B.K. Range, Palanpur C/o Pvt. Ltd. Agrawal Vs Income Tax Office, 2nd Floor, Shri Hari Complex, Nr. Lion’s Hall, Deesa-385535 Complex, Abu Highway, PAN: AABCJ8888A Palanpur-385001 (Appellant) (Respondent)
Assessee by: Shri M.K. Patel, A.R. Revenue by: Shri Atul Pandey, Sr. D.R.
Date of hearing : 22-08-2022 Date of pronouncement : 16-11-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-XX, Ahmedabad in Appeal no. CIT(A)-XX/63/13-14 vide order dated 21/04/2014 passed for the assessment year 2010-11. I.T.A No. 1703/Ahd/2014 A.Y. 2010-11 Page No. 2 M/s. Jugalkishore R. Agrawal Infrastructure Vs. JCIT
The assessee has taken the following grounds of appeal:-
“1. The ld. Commissioner of Income Tax (Appeals) - XX, Ahmedabad has erred in law and on facts in confirming the addition of Rs. 11,39,632=00 in respect of disallowance of depreciation and Insurance expenses and erred in not properly appreciating the explanation and submission of the appellant. 2. The ld. Commissioner of Income Tax (Appeals) - XX, Ahmedabad has erred in law and on facts in confirming the addition of Rs. 6,52,296=00 in respect of difference in the account of M/s. Ambica Construction and erred in not properly appreciating the explanation and submission of the appellant. 3. The ld. Commissioner of Income Tax (Appeals) - XX, Ahmedabad has erred in law and on facts in confirming the addition of Rs. 1,15,714=00 for non deduction or TDS from payment made to transporters and erred in not properly appreciating the explanation and submission of the appellant. 4) The learned CIT (A) has erred in law and on facts of the case in initiating penalty proceedings u/s. 271(1)(c) of the Act.”
The assessee has taken primarily three grounds of appeal, which shall be taken up individually in the succeeding paragraphs.
Ground number 1: Disallowance of depreciation of " 11,39,632/-
The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the AO observed that certain assets (vehicles) were purchased on which assessee had to claim depreciation which were not held in the name of the assessee company. Accordingly, the AO disallowed the depreciation claimed by the assessee on such assets on the basis that the assessee company could not submit any proof in respect of the claim that the dominion over the said assets vested with assessee
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company and the assets under consideration were indeed used for the purpose of the assessee’s business. In the instant case, the AO held that not only were the assets not in the name of the assessee company, but also no proof or evidence have been submitted to substantiate the claim that the dominion over the assets were with the assessee company and the assets were used for the business of the assessee. Accordingly, the AO relied on this case of Mysore minerals Ltd v. CIT 239 ITR 775 (SC) and disallowed the claim of depreciation on such assets and also the vehicle insurance expenses were also disallowed.
In appeal, Ld. CIT(Appeals) dismissed the assessee’s appeal, and confirmed the order of the AO with the following observations:
“3.5 On going through the facts and submissions, it was found that the appellant has claimed that the assets have been acquired out of the funds of the appellant company and shown in its balance sheet is found unsubstantiated. In support a copy of the schedule-4 i.e. fixed assets, profits and loss account for the year under consideration has been enclosed by the appellant with the written submission. As is noticed from the above that the vehicles includes Activa, AUDI Car, Sonnata Car, Bolero, Bajaj Pulsar etc. but how and in what manner those have been recorded in the books of accounts is not known. From the schedule-4 and the profit and loss account the appellant's contention is not verifiable. How the payments from the books of accounts of the appellant company has been made is also not demonstrated by the appellant. Specific details could have been furnished to support its contention which is found absenting. Even the vehicles have been purchased in the name of various persons like Shri Rajiv J. Agarwal, Jugal Kishore R. Agarvval, Anilkumar R. Agawal and Sanjay J. Agarwal but the appellant has not shown the relation of these persons with the appellant company. Merely purchasing the vehicle in the name of the outsiders and claiming to have dominion control thereupon by the appellant is not accepted. Whether the running expenditures relating to these vehicles have been debited in the books of accounts of the appellant company has also not been demonstrated. No bill copies of the vehicle purchases, their repairing and maintenance expenses and diesel,. petrol expenses have been submitted alongwith the respective ledger account copies to verify the contention of the appellant. Whether those vehicles have been utilized
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for the purpose of business of the appellant company has also not been -proved. Further, verification about the possession of those vehicles under the appellant in absence of any details and supporting evidences remained unverifiable. Therefore, the case laws relied upon by the appellant are also not applicable over the facts of the case as those were specific to the vehicle in the.name of the directors but in our case it is not so. Therefore the AO's action for making the disallowance of the insurance expenses and depreciation is correct and justified and the ground of the appellant is dismissed.”
Before us, the counsel for the assessee submitted that the CIT failed to appreciate the fact that the vehicles were used wholly and exclusively for the purpose of assessee’s business and the assessee company had dominion over the vehicle. He further submitted that the assets were purchased in the name of the Directors of the assessee company and it is a well-settled law that in the case of a company, even if the assets were purchased in the name of the directors of the company, if they are used wholly and exclusively for the purpose of business of the assessee company, depreciation and other related expenses can be claimed by the company. The counsel for the assessee further submitted that the assets purchases were reflected in the balance sheet of the assessee and its maintenance and petrol-diesel expenses were borne by the assessee company and the same have been debited in the profit and loss account. He further submitted that the vehicles formed part of the block of assets, on which depreciation had been claimed. In response, DR relied on the observations made by CIT and AO in their respective orders.
We have heard the rival contentions and perused the material on record. In our view, it is a well settled position that even if the assets are purchase in the name of the Directors of the company and the same are used for the purpose of the business of the assessee company, then the assessee
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company is eligible to claim depreciation on the same, irrespective of the fact that the assets (vehicles) are not registered in the name of the company. In the case of Aravali Finlease Ltd. [2012] 21 taxmann.com 147 (Gujarat), the Gujarat High Court held that where vehicle in question, though registered in name of Director of assessee-company, was used for purpose of business of company, income derived from leasing vehicle was shown as income of company, and entire fund for purchase of vehicle had also gone from coffers of company, assessee was entitled to depreciation on said vehicle. In the case of Bajaj Herbals (P.) Ltd [2021] 130 taxmann.com 258 (Ahmedabad - Trib.), the ITAT Ahmedabad held since car was reflected as an asset of company and car loan also appeared as a liability in balance sheet of company and car was used for business of assessee, assessee was to be allowed benefit of depreciation on said car even though it was bought by company in name of its Director.
7.1 However, in the instant facts, Ld. CIT(Appeals) has made a specific observation that firstly, the assets (vehicles) have not been acquired out of funds of the assessee company, secondly, the assets have been purchased in the names of Shri Rajeev Agarwal, Jugal Kishore Agrawal, Anil Kumar Agarwal & Sanjay Agrawal, however, the assessee has not been able to show the relation of these person with assessee company. In view of the above facts, we are hereby restoring the file to the Ld. CIT(Appeals) to verify whether the firstly, assets (vehicles) have been acquired out of funds of the assessee company, secondly, whether Shri Rajeev Agarwal, Jugal Kishore Agrawal, Anil Kumar Agarwal & Sanjay Agrawal are the Directors of the assessee company. In case, the assessee is able substantiate the above
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two aspects, Ld. CIT(Appeals) may allow the appeal of the assessee in light of several Rulings highlighted above.
In the result, Grounds No.1 of the assessee’s Appeal is allowed for statistical purposes.
Ground number 2: Unreconciled creditor " 6,52,296/-
The brief facts in relation to this ground of appeal are that the AO observed that in case of one creditor M/s Ambika Construction, the total credit amount as per the assessee’s books of accounts was " 96,31,203/- whereas the amount confirmed by the creditor in response to notice under section 133(6) of the Act was " 89, 78, 907/- only. The assessee submitted that TDS was deducted on the total amount of " 96,31,203/- and payment was made through cheque. Further the creditor had claimed TDS credit of the entire amount during the year under consideration. However, the AO held that the assessee has not been able to reconcile the difference and accordingly added back an amount of " 6,52,296/-to the total income of the assessee.
In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations:
“4.3. I have considered the facts of the case and submission made by the appellant. The AO has made the addition of Rs.6,52,296/- on account of difference in. the balance of account of M/s. Ambica Construction. In the ledger account of aforesaid party in the books of appellant total amount credited was at Rs.96,31,203/- whereas in appellant's ledger account in the books of the aforesaid
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party the debit amount was at Rs.89,78,907/-. So, it has resulting into the excess credit of Rs.6,52,296/- which remained unexplained. In the reply, it was submitted that the TDS was deducted on total amount of Rs.96,31,203/- and payment was made through cheques. Further M/s. Ambica has claimed the TDS credit of the1 entire amount. However, the appellant failed to reconcile the difference in the aforesaid balances. During the course of appellate proceedings also the appellant has reiterated the reply-given before the A.O. Simply it was submitted that the aforesaid party has considered the cheque amount as its receipts instead of considering the gross receipts while we have issued the cheques after TDS which has not been considered by the aforesaid party. It was further submitted that the total credit of the TDS of Rs.98,273/- has been claimed by the aforesaid party. On going through the cross ledger accounts, it was found that there were found various debits and credits not in tally to each other. For example the appellant has credited Rs.26 lakhs on 4.11.2009 while the aforesaid party has not credited any amount on the aforesaid date. Likewise the appellant has credited the amount of Rs.70,31,203/- on 31.3.2010 while no such amount has been debited by the aforesaid party in appellant's ledger account. Similarly, the aforesaid party has debited an amount of Rs.9,80,207/- and Rs.53,26,427/- on 31.10.2009 and 28.2.2010 respectively but no such amounts on the aforesaid dates have been credited by the appellant in the ledger account of the aforesaid party. Similar was the position in the case of debit entries in appellant's books and consequently credit amounts in aforesaid parties ledger accounts. The difference claimed to be on account of TDS which was only of Rs. 98,273/- is not the sole reason for the huge sum of difference as worked out by the A.O. The appellant has not explained that why the cash payment of Rs.25,000/- and Rs.4,75,749/- have not been debited by M/s. Ambica Construction in appellant's ledger account in the year under consideration. Why the amount of Rs.4,75,749/- has been debited in next year has not been explained. When the appellant has credited this amount in the year under consideration. Therefore, appellant's contention is not verifiable and supported with the details submitted. Hence, the addition made by the A.O. is justified and same is confirmed.”
Before us, the counsel for the assessee reiterated the submissions made before the AO and Ld. CIT(Appeals) to the effect that the difference is on account of accounting mistake made on the part of the creditor. The difference is owing to the fact that they have shown the receipt in the next year. The counsel for the assessee submitted that the creditor is the sub- contractor of the assessee and he should have booked the income in this year itself. The assessee has deducted TDS on the entire payment and the creditor
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has also claimed credit in respect of the same. Accordingly, the assessee cannot be penalised for the accounting error committed by its creditor. The counsel for the assessee submitted that the reason why the creditor M/s Ambika Construction credited the amount in the next year is not known to the assessee and the same is not under the control of the assessee. However, it is an undisputed fact that the assessee has deducted TDS on the entire amount and the payment to such creditor was also made through banking channels. Accordingly, Ld. CIT(Appeals) erred in facts and in law in confirming the addition on this ground.
In response, the DR relied upon the observations made by the AO and CIT in their respective orders.
We have heard the rival contentions and perused the material on record. In our considered view, the AO and Ld. CIT(Appeals) have made addition on the ground that there is an excessive balance of " 6,52,296/- in the name of M/s Ambika Constructions, the assessee’s creditor, which the assessee is unable to explain. In response, the assessee submitted that the entire amount of " 96,31,203/- was paid back to the creditor, after deducting TDS on the entire amount. The aforesaid creditor has also taken credit of the TDS amount of " 98, 273/- so deducted on the aforesaid payment. Further, the entire amount has been paid back to the creditor by way of account payee cheque i.e. through appropriate banking channels. The counsel for the assessee submitted that the assessee cannot be held responsible for any discrepancy/mistake committed by the creditor in its accounts. We are in agreement with the contention of the counsel of the assessee that the I.T.A No. 1703/Ahd/2014 A.Y. 2010-11 Page No. 9 M/s. Jugalkishore R. Agrawal Infrastructure Vs. JCIT
AO/CIT have not disputed that the entire amount of has been returned back to the creditor after deduction of taxes, through banking channels. Further, the assessee is not liable to explain any accounting discrepancy made by the creditor in its books of accounts. Accordingly, looking into the instant set of facts, we are of the considered view that the aforesaid addition is liable to be deleted.
In the result, ground number 2 of the assessee’s appeal is allowed.
Ground number 3: addition of " 1,15,714/-for non-deduction of TDS made to transporters:
During course of assessment, the AO observed that in the Form 3CD filed by the assessee along with the return of income, the assessee has not deducted TDS on certain expenses claimed under the head repairs and maintenance of " " 1,39,800 and 66,000/-on advertisement expenses which are otherwise subject to TDS. Accordingly, the AO made disallowance of " 205,800/- u/s 40(a)(ia) of the Act of the Act. Further, the AO observed that the assessee incurred carting expense amounting to " 1,15,714/- on which no TDS was deducted and therefore the assessing officer also disallowed the above payments u/s 40(a)(ia) of the Act of the Act.
In appeal, Ld. CIT(Appeals) dismissed the assessee’s appeal on the ground that the assessee has not been able to give any explanation for non-
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deduction of TDS and no details of expenses were submitted by the assessee during the course of appellate proceedings.
The assessee is in appeal before us against the aforesaid addition " 17. 1,15,714/- confirmed by Ld. CIT(Appeals) towards carting expenses. Before us, the counsel for the assessee submitted that admittedly that no TDS has been deducted on the aforesaid payment. Further, no additional supporting documents have also been furnished to the effect that the payee has reflected the above income in the return of income and paid taxes thereon, and accordingly, the assessee is not an assessee default. In view of the facts, we are of the considered view, that the Ld. CIT(Appeals) has not erred in facts and in law in confirming the disallowance of " 1,15,714/- made by the Ld. Assessing Officer.
In the result, this ground of the assessee’s appeal is dismissed.
In the combined result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 16-11-2022 (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16 /11/2022
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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, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद