Nagarajan Thiyagarajan Ganesh Vs DCIT (ITAT Chennai)
Chennai ITAT Deletes Addition for Luxury Car Purchase as Company’s Economic Ownership Prevails Over Registration in Director’s Name
The Chennai ITAT held that no addition could be made in the hands of a director merely because a luxury motor car was registered in his name, where the evidence established that the company had actually purchased the vehicle, capitalised it in its books, availed the loan, and bore the entire financial burden of acquisition and repayment. The Tribunal observed that economic ownership and source of investment are decisive factors, and mere registration in the assessee’s name does not establish unexplained investment or credit. Since the company had recorded the vehicle as its fixed asset, reflected the corresponding loan liability in its financial statements, and repaid the loan through its own bank account, the addition made by the Assessing Officer under section 68 (treated by the lower authorities as unexplained investment/expenditure arising from the vehicle purchase) was unsustainable. Accordingly, the Tribunal directed deletion of the entire addition of ₹51.01 lakh made in the assessee’s hands.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 26.11.2025 for Assessment Year (AY) 2020-21.
2. The assessee is an individual and did not file the return of income. The AO noticed that the assessee has entered into various financial transactions including purchase of motor car to the tune of Rs.51,01,000/- and purchase of immovable property to the tune of Rs. 95,00,000/-. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of notice u/s. 148 of the Act. The assessee in response to the notice u/s. 148 of the Act filed the return of income on 29.10.2024 declaring total income of Rs.7,27,080/-. The A.O called on the assessee to furnish the details pertaining to purchase of motor vehicle. The assessee submitted before the A.O that the car has been purchased by the company M/s. Team Works Events and Prints Pvt. Ltd. in which the assessee is a Director. The assessee further submitted that the seller has inadvertently raised the invoice in the name of the assessee and that the TCS for the purchase of car was not claimed by the assessee. The assessee also submitted that M/s. Team Works Events and Prints Pvt. Ltd. has obtained a loan towards purchase of the car which goes to prove that it is the company which has purchased the car and not the assessee. The AO however did not accept the submissions of the assessee and held that as per the certificate of registration furnished by the assessee the assessee’s name is mentioned as the owner of the car. Accordingly, the A.O treated the entire amount of Rs.51,01,000/- as the income of the assessee. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) gave partial relief to the assessee to the extent of the loan taken by the company amounting to Rs. 47,00,000/-. The relevant findings of the CIT(A) in this regard are extracted herein below:
“9. I have considered the assessment order, submission of appellant and facts available on record. During the year under consideration, a Volkswagen Car has been purchased for Rs 51,01,000. As per the A.O this car is purchased by the appellant whereas as per the appellant the car has actually been purchased by his company M/S Team Works Events and Prints Pvt Ltd. For deriving the conclusion, the A.O has relied on the invoices issued by the Jubilant Motor Work South, certificate of registration and loan disbursement certificate issued by M/S Audi Financials Services whereas the appellant has contended that the name/PAN of the appellant was mentioned by seller inadvertently. This car is disclosed as an asset in the books of the company and the re-payment of the loan has also been paid by the company. It is seen that for acquiring the vehicle, a loan of Rs 47,00,000 has been taken from Audi Financial Services. As per the approval letter issued by Audi Financial Services dated 24.07.2019, the name of the borrower is mentioned a NT Ganesh that is appellant and the name of the co-borrower is mentioned as Team Works Events and Prints Pvt Ltd. As per the registration certificates, the vehicle is registered in the name of appellant. These facts indicate that the vehicle is actually purchased by the appellant and the same is shown in the books of the company. Merely due to the fact that the appellant has not claimed the credit of TCS and the vehicle is shown in the books of the company does not ulter the fact that the vehicle has actually been purchased by the appellant. Regarding the source of purchase, it is an admitted fact that an amount of Rs 47,00,000 was raised through the vehicle loan obtained from Audi Financial Services. From the approval letter from the Audi Financial Services dated 24.07.2019 as submitted by the appellant, the margin money of Rs 10,00,000 was given The appellant has merely submitted that this margin money was paid by the company. However, the appellant has not produced any documentary evidence to explain the source of payment of margin money of Rs 10,00,000. Further, the source of payment of remaining amount of Rs 4,01,000 (51,01,000 47,00,000) has not been explained by the appellant. It is to be noted that the appellant has not filed any ITR as per the provisions of section 139 of the Act. The ITR was only filed on 29.10.2024 showing total income at Rs 7,27,080 in response to the notice issued u/s 148 of the Act. The appellant has not furnished any documentary evidences to explain the source of Rs 14,01,000 (10,00,000 Margin Money + 4,01,000 paid to the seller). Therefore, this amount needs to be treated as unexplained expenditure u/s 69C of the Act. Regarding the source of repayment of loan it is seen that the repayment is being made through the bank account maintained with Indusind Bank Ltd by the company Team Works Events and Prints Pvt Ltd. Therefore, the addition made by the A.O is restricted to Rs 14,01,000. Appeal on this ground is thus partly allowed.
10. In the result the appeal is partly allowed.”
The assessee is in appeal before the Tribunal against the order of the CIT(A).
3. The Ld. Authorized Representative (AR) of the assessee submitted that the assessee is the Director of M/s. Team Works Events and Prints Pvt. Ltd. and the motor is purchased by the company and capitalized in the books of accounts of the company. In this regard, our attention was drawn to the fixed asset schedule of M/s. Team Works Events and Prints Pvt. Ltd. which is extracted hereunder:
4. The Ld. AR further drew our attention to the copy of the invoice to submit that the addition reflected in the fixed assets schedule matches with value as per invoice excluding GST. The invoice of the motor car is as given below:
5. The Ld. AR also submitted that the GST is not eligible for set off and therefore the company did not claim any credit towards the same. The Ld. AR also drew our attention to the car loan as reflected in the financial statements of M/s. Team Works Events and Prints Pvt. Ltd. The Ld. AR also submitted that the amount paid as advance by the assessee the seller of the car to the tune of Rs.7,00,000/- has been subsequently reimbursed by the company and therefore making an addition in the hands of the assessee merely for the reason that the name of the assessee is reflected in the RC book is not correct.
6. The Ld. Departmental Representative (DR), on the other hand, submitted that the CIT(A) has given a clear findings based on the fact that the assessee’s name is reflected as owner of the car and that the seller while deducting the TCS has done so against the assessee’s name. Accordingly, the ld. DR supported the order of the lower authorities.
7. We have heard the parties, and perused the material available on record. From the perusal of the above documentary evidences, we notice that M/s. Team Works Events and Prints Pvt. Ltd. in the books of accounts has recorded the motor car and has also reflected the loan obtained towards purchase of the car. We further notice from the bank statement of M/s. Team Works Events and Prints Pvt. Ltd. furnished as part of paper book that it is the company which has made payments towards the repayment of the car loan which substantiates the fact that the financial burden towards purchase of the car is borne by the company and not the assessee. It is also relevant to mention here that as per the submissions of the Ld. AR, even the advance money paid towards purchase of the vehicle is paid by the assessee which is subsequently reimbursed by the company. In view of these facts, in our view there is merit in the submission that when the entire financial burden is borne by the company and the vehicle being capitalized in the books of the company, the lower authorities are not correct in treating the cost of the vehicle as unexplained credit in the name of the assessee merely for the reason that the car is registered in the name of the assessee. Accordingly, we hold that the A.O is not correct in treating the sum of Rs. 51,01,000/- as addition u/s. 68 of the Act in the hands of the assessee when the entire economical burden is borne by M/s. Team Works Events and Prints Pvt. Ltd. and the asset is capitalised in company’s books. The A.O is therefore directed to delete the addition made in this regard.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on 21st day of July, 2026 at Chennai.
