M/S. TRANS AIR,NEW DELHI vs. DCIT, NEW DELHI

Both these appeals have been filed by the assessee assailing the correctness of the separate orders dated 16.03.2015 of CIT(A)-24, New Delhi pertaining to 2004-05 & 2005-06 assessment years on the identical grounds.

2. The Ld. AR submitted that the issues in the present appeals are the allowance of expenditure pertaining to Mercedes Benz car claimed as a business expenditure. The Assessing Officer in the present cases following the base year i.e. 2003-04 A.Y has disallowed the claim in both the years. In the circumstances, it was his submission that following the precedent available in 2003-04 AY i.e. the base year the issue may be restored to the AO. Relying upon order dated 11.12.2013 the ITAT in 2003-04 AY in it was submitted that the ITAT had restored the issue directing the Revenue to confront the evidences and statements of the persons relied upon and provide the assessee an opportunity to cross-examine. Referring to the facts it was I.T.A .No.-2366 & 2367/Del/2015 submitted that considering the documentary evidences on record in regard to use of the very same Mercedes Benz Car bearing Registration No-DL-3CA 1010 the tax authorities have held that it was not used for the purposes of business of the assessee. As a result of this conclusion the claim of depreciation, insurance, petrol expenses etc. thereof was disallowed including the claim of payment of interests on the car loan. The departmental case has been that the car was actually used by Sh. Jagat Singh and the investigation conducted by the Enforcement Directorate in 2003-04 AY wherein the case was re-opened u/s 148 of the Income Tax Act, 1961 has been the basis for re-opening the assessments in the present proceedings also. It was submitted that the AO on the basis of the very same satisfactory note has re-opened the original assessment u/s 143(3) on 24.03.2006 and the assessed income of Rs.34,72,010/- in 2004-05 AY and 23,70,450/- processed u/s 143(1) on 17.03.2006. Inviting attention to in the case of the assessee for 2003-04 AY, it was submitted that ITAT vide dated 11.12.2013 has restored the issue back to the AO.

I.T.A .No.-2366 & 2367/Del/2015 find that Shri Chetan Gupta had stated on 05.05.2006 that the car was purchased in April/May 2002 and it was used for a short while and after which Shri Jagat Singh, s/o Shri Natwar Singh, 19, Teen Murti Lane, New Delhi borrowed it from him and then he has been using this car up to September / October, 2005. The Assessing Officer disallowed the depreciation and petrol expenses on the car as the same was not being used for business purposes of the assessee and an addition of Rs.7,30,294/- was made. The CIT (A) has confirmed this addition by holding as under :- “3.1.6 I have considered the submissions of the AR and facts of the case. It is not correct to say that depreciation is allowable merely on the ground of ownership of the asset. The car must be used for the purpose of assessee's business. The asset in question may be in the name of the assessee firm. However, it has been proved sufficiently beyond doubt that the said Mercedes Benz car was only in possession and use of Shri Jagat Singh who is not connected to the assessee firm. I find that there is no merit in the AR's argument that he was not confronted with the findings of the ED. The facts were made known to the assessee very much in the beginning of the assessment proceedings. The assessee had requested for and collected the reasons recorded while issuing notice u/s 148. In these reasoning, the facts have all been made very clear. Further when notice under 143(2) and 142(1) were issued calling for the firm's reply, as to why depreciation should not be disallowed for the said reasons, the firm has chosen to remain silent. Therefore, this is not a case of not providing opportunity or not allowing cross examination by the A.O. The assessee never demanded it nor gave any explanation during the assessment proceedings. In fact, in the regular assessment for the year, assessee has claimed that all books have been burnt in fire. Hence the allegation of violation of the principle of natural justice is not found acceptable. Sufficient opportunity has been given to the appellant to put across his views or lead evidences in support of its claim during the assessment stage. The firm never asked for cross-examination of Shri Jagat Singh during the assessment proceedings. Hence, making it one of the issue before appellate authority is not on permissible. 3.2 Considering all the facts, I do not, I do not find any merit in the appeal. The ground raised is rejected.”

4.1. Considering the submissions of the parties, the Co-ordinate Bench restored the issue back to the file of the AO holding as under:-

4. “We have heard both the sides on the issue and also perused the record available. We find that the statement of Shri Chetan Gupta recorded by the Enforcement Directorate and the other evidences collected by the Enforcement Directorate have not been confronted with the assessee with regard to the use of the car. We do not agree with the view of CIT (A) that assessee had never asked for cross examination of Shri Jagat Singh. Even when assessee does not ask for then also all

I.T.A .No.-2366 & 2367/Del/2015 evidence used against assessee must have been confronted. Therefore, in the interest of justice and equity, we find it appropriate to restore the issue to the file of the Assessing Officer so that assessee can be provided with the copy of statement recorded by the Enforcement Directorate as well as with other material which was used while making such addition. Therefore, we set aside the orders of the authorities below and restore the issue to the file of the Assessing Officer to decide the issue de novo after providing an opportunity of being heard to the assessee.” 4.2. In the light of the submissions by the parties before the Bench and considering the precedent available in the very same set of facts, it is deemed appropriate to set aside the impugned orders and restore the issue back to the AO directing the said authority to provide the assessee with the copy of statement recorded by the Enforcement Directorate as well as with other material which was used while making the additions. Accordingly, following the precedent the AO is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.

The order is pronounced in the open court on 19th of September, 2016.