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Income Tax Appellate Tribunal, DELHI BENCH : F : NEW DELHI
Before: SHRI R.K. PANDA & MS SUCHITRA KAMBLE
ORDER
PER R.K. PANDA, AM:
This appeal by the assessee is directed against the order dated 13th September, 2015 of the CIT(A)-Faridabad, relating to assessment year 2011-12.
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.25,04,347/- on account of depreciation.
The facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of stone aggregation and other contract work/job work. It filed its return of income on 26th September, 2011 declaring total income of Rs.39,28,880/-. The Assessing Officer, during the course of assessment proceedings, observed that the 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 Assessing Officer noticed the various vehicles on which the depreciation at higher rate of 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 & machinery. He, therefore, confronted the same to the assessee. The assessee replied that most of the plant &machinery are Dumper, Hyva, Excavator, JCB and commercial vehicles and has worked for triple shifts. Relying on various decisions, it was argued that the assessee is entitled to depreciation @30%.
However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that certain vehicles are 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 personal transportation of the staff and partners of the firm. By changing the name and nomenclature of these vehicles the assessee cannot claim higher depreciation. He, therefore, 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% claimed by the assessee for compressing machinery, rock breaker, excavator and IR Drill Machine besides 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 the Assessing Officer. Aggrieved with such order of CIT(A), the assessee is in appeal before the Tribunal.
We have considered the rival arguments made by both the sides.
On a pointed query raised by the Bench at the time 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. counsel for the assessee that the various decisions relied on by the assessee at the time of hearing before the Assessing Officer were not considered 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 Assessing 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 allowable on Tippers, Road Rollers and JCB:- 3 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).
Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the 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 fact and law. We hold and direct accordingly. The first issue raised by the assessee in the grounds of appeal is accordingly allowed for statistical purposes.
The second issue raised by the assessee in the grounds of appeal is regarding the addition of Rs.41 lakhs made by the Assessing Officer u/s 68 of the IT Act which has been upheld by the CIT(A).
The facts of the case, in brief, are that the Assessing Officer, during the course of assessment proceedings observed that the assessee has raised unsecured loans amounting to Rs.58,20,000/- from the following persons/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
From the various details furnished by the assessee, the Assessing Officer noted that the unsecured loans in the case of Shri A.K. Garg 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/- from M/s Astha Minerals out of which an amount of Rs.16 lakhs is shown to have been received in cash. Similarly, the assessee has also received cash loan of Rs.25 lakhs 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 disallowed. It was submitted that due to business exigency loans were received in cash and not received through bank.
However, the Assessing Officer was not satisfied with 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 partner 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 the IT Act.
In appeal, the ld.CIT(A) upheld the action of the Assessing Officer on the ground that the assessee could not give any explanation for the business exigency which forced him to take these loans in cash on regular 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 acknowledgement of the income-tax returns filed by the assessee and other papers in the absence of cash flow statement do not establish the fact of the assessee’s case. He accordingly upheld the action of the Assessing Officer.
11.1 Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
The ld. counsel for the assessee, at the outset, filed the following cash flow statement and submitted that Shri P.K. Wadhwa has sufficient 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 16,00,000.00 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 9,50,000.00 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 for the F.Y 2010-11 16,50,000.00 c) Cash Withdrawn from Allahabad Bank Account No. 20478788485 Total Inflows 42,00,000.00 Less: Outflows a) To M/s Alliance Engineers & Contractors i.As loan from Aastha Minerals 16,00,000.00 25,00,000.00 ii.As Partner’s Loan b) Cash Deposit to Allahabad Bank Account No. 20478788485 2,00,000.00 1,49,571.00 c) Other transactions, Cheques deposit & Cheques withdrawn in Allahabad Bank Account 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 6
Referring to the following decisions, he submitted that in case of a partnership firm, once a partner has accepted that he has advanced certain sums to the firm, no addition in the hands of the firm can be made and investment 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.
He accordingly submitted that addition, if any, can be made in the hands of the partner and not in the hands of the partnership firm. 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 aside.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A). He submitted that there is no justification or business exigency for giving such huge cash loan to the firm by one of the partners. The assessee has not properly explained the source of such loan and the exigency of such loan paid in cash. He accordingly submitted that the order of the CIT(A) be upheld and 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 assessment order has mentioned as under:-
“The reply of the assessee has been considered in totality 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.”
Although the assessee has not explained such business exigency, however, it is a fact that there are withdrawals from the bank account of the partner apart from his declaration of income u/s 44AD of the IT Act. The Revenue 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 is nothing on record to show that the partner has utilized the money for acquisition of any capital asset or spent the money towards some marriage in the family or on other such occasions where huge cash is required to be invested or expended. It has been held 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 only 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 disputed 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 sufficient means to explain the source of such loan, the Revenue cannot treat the same as unexplained cash credit u/s 68 in the hands of the partnership firm merely stating that there is no exigency for introduction 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 delete the addition. The second ground raised by the assessee is accordingly allowed.