Case Law Details
Rashmi Chhibba Jauhar Vs. ACIT (ITAT Delhi)
Considering the nature of business of assessee, i.e., consultancy services carried out from residence, possibility of personal use of the car could not be ruled out, therefore, AO was justified in disallowing part of vehicle running and maintenance expenses.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal by assessee has been directed against the order of the learned Commissioner (Appeals)-I, Noida, dated 24-2-2017, for the assessment year 2006-2007 on the following grounds :–
“1. That on the facts & in the circumstances of the case and in law. the order passed by the learned Commissioner (Appeals) (Commissioner (Appeals)) is wrong and bad in law.
2. That the learned Commissioner (Appeals) grossly erred on the facts and circumstances of the case and in law in confirming the action of the learned assessing officer of disallowing the vehicle running and maintenance amounting to Rs. 52,381.
3. That the learned Commissioner (Appeals) grossly erred on the facts and circumstances of the case and in law in confirming the action of the learned assessing officer of disallowing the Traveling Expenses amounting to Rs. 1,28,341.
4. That the learned Commissioner (Appeals) grossly erred on the facts and circumstances of the case and in law in partially confirming the action of the learned assessing officer of making dis allowance on account of purchase of jewelry and purchase of two cars.
5. That the learned Commissioner (Appeals) grossly erred on the facts and circumstances of the case and in law in enhancing the income by making an dis allowance of Rs. 4,93,085. on account of repayment of car loan to Kotak Mahindra Bank.”
2. I have heard the learned Representatives of both the parties and perused the material on record.
3. Briefly the facts of the case are that the assessee filed return of income showing taxable income of Rs. 5,05,838. The assessee is doing Consultancy Services. With respect of running and maintenance, assessee has claimed expenses of Rs. 2,02,381 in Profit & Loss A/c. Accordingly, the assessee was required to file copy of account to justify business use since her office is at same place as her residence and she is not required to travel to place of work every day and her buyers are foreign concerns. Therefore, the assessee does not have to travel to the destination of sales also. The assessee explained that she is running her office from residence but all the business activities cannot be done from the house and she has to go outside for doing business activities. For visiting such places the assessee using her own car. The expenses relating to that are debited to the profit & loss account. the assessing officer noted that assessee did not file copy of the account for this expenses. In the absence of copy of the account and observation of the assessing officer, it was found that assessee is not able to justify claim of all the expenses debited, more so, since assessee own only those cars which she used in the business and does not own any other car. So the element of personal use also cannot be ruled out. The claim was therefore, limited to Rs. 1,50,000 and Rs. 52,381 and was added to the income of the assessee.
3.1. The assessee was required to file details of travelling expenses and state who traveled where and for what and justify if for business purpose. The assessee was required to file copy of the accounts which is reproduced at page-4 of the assessment order in which the assessee claimed traveling expenses of Rs. 1,28,343. However, no reply have been filed. Though the source of payment claim has been shown but bills and evidence of business use has not been established. Therefore, the entire amount of Rs. 1,28,343 was disallowed.
3.2. The assessing officer on perusal of the chart of the fixed assets filed with the return of income observed that assessee had made addition of Rs. 32,831 under the Head “Jewellery” and Rs. 10,14,521 and Rs. 5,80,417 under the Head “Cars”. The assessee was required to file bills and source of purchase of jewellery and car. The assessee submitted before assessing officer that bills of purchase of jewellery purchased are misplaced, however, the same was purchased through credit card by the assessee and can be verified from the credit card statement. Photo copy of the Registration Certificate for the car purchased was filed. The assessing officer on perusal of the credit card statement found that the same does not show any entry of Rs. 32,871 as claimed by assessee for purchase of jewellery nor the narration in credit card reveals purchase of jewellery. Hence, investment in jewellery is treated as unexplained investment under section 69 and added in the hands of the assessee.
3.3. With respect to purchase of car also no source have been shown by the assessee and no such entry was found in the bank statement. Hence, the same was treated as unexplained investment under section 69 of the Income Tax Act and addition of Rs. 16,27,809 was made to the income of the assessee. These additions were challenged before the learned Commissioner (Appeals).
4. The learned Commissioner (Appeals) not only confirmed all the additions but also enhanced the addition by Rs. 4,93,085 on account of repayment of car loan to Kotak Mahindra Bank. The appeal of assessee was accordingly dismissed.
5. The assessee is in appeal on the above grounds. Ground No. 1 is general in nature and needs no adjudication.
6. On Ground No. 2, the assessee challenged the addition of Rs. 52,381 on account of dis allowance of vehicle running and maintenance expenses. The assessee did not file copy of the account for these expenses before the assessing officer The assessing officer also noted that since car has been used for personal purpose as well, therefore, personal use of the car cannot be ruled out. The learned Commissioner (Appeals) noted that assessee has made claim of deduction of expenditure of Rs. 2,02,381 on running and maintenance of the vehicles, therefore, assessee should have run atleast 300 KM per day. The learned Commissioner (Appeals) therefore, found that either the vehicle has not been used as claimed or sale price of the vehicle is bogus. The learned Commissioner (Appeals) accordingly, confirmed the addition.
7. The Learned Counsel for the assessee argued that it is an ad hoc addition. I do not agree with the contention of the Learned Counsel for the assessee. The assessing officer has given specific finding that assessee did not file copy of the account of these expenses and has not justified that entire expenditure having used for the purpose of business. The learned Commissioner (Appeals) also found that if the total claim of assessee is considered, then the vehicle must have been used excessively atleast for 300 KM per day. Considering the nature of business of assessee i.e., Consultancy Services carried out from the residence of the assessee, the authorities below were justified in disallowing part of the expenditure. Ground No. 2 has no merit and the same is accordingly dismissed.
8. On ground No. 3, the assessee challenged the addition of Rs. 1,28,341 on account of traveling expenses. The assessee did not file specific reply before assessing officer as per his query. The assessee has not established that the travelling expenses have been incurred for the business use. The learned Counsel for the assessee admitted before learned Commissioner (Appeals) that assessee has visited Dubai and the entire expenditure pertains to her Dubai visit. It was found that assessee had no business activities in Dubai and did not produce any evidence or material before assessing officer to show that expenditure was incurred for the purpose of business. Since the assessee failed to justify that these expenses were incurred for the purpose of business, there were no justification to interfere with the orders of the authorities below. Further, it was found that during the year assessee was working for an American principal and had no business interest in Dubai. Learned Counsel for the assessee during the course of arguments could not satisfy as to what business purpose have been served by visiting Dubai. It would therefore, show that it was a personal expenditure incurred by assessee for visiting Dubai which have been wrongly claimed as business expenditure. No interference is called for in the matter. Ground No. 3 of the assessee is accordingly dismissed.
9. On ground Nos. 4 and 5, the assessee challenged the addition made on account of purchase of jewellery and two cars respectively for enhancement for repayment of loan to Kotak Mahindra Bank. The assessing officer found that the credit card statement did not show any entry of purchase of jewellery. Similarly, with respect to claim of purchase of cars also no source has been shown by assessee and no such entry was appearing in the bank statement. The assessing officer therefore, added Rs. 16,27,809 under section 69 of the Income Tax Act. The learned Commissioner (Appeals) also found that expenditure of Rs. 32,871 on purchase of jewellery was not found included in the accounts of assessee. The learned Commissioner (Appeals) accordingly, confirmed the addition.
9.1. The Learned Counsel for the assessee referred to PB-43 which is bank statement of Citi Bank to show the entry of Rs. 32,871 through card. It is an account maintained by assessee. Therefore, this needs verification at the level of the assessing officer I, accordingly, set aside the orders of the authorities below and restore this issue to the file of assessing officer with a direction to re-decide this issue by verifying the fact of payment through bank statement of Citi Bank. Assessee is directed to produce copy of this bank statement before assessing officer for his verification. The assessing officer shall give reasonable, sufficient opportunity of being heard to the assessee. Accordingly, part of Ground No. 4 of appeal of assessee is allowed for statistical purposes.
10. However, as regards the addition on account of purchase of two cars and enhancement of repayment of loan, the assessee submitted before learned Commissioner (Appeals) that vehicles were purchased by taking loans from the Banks and from personal savings as well as the proceeds of the sale of first vehicle. The learned Commissioner (Appeals) however, confirmed the addition and also enhanced the addition by Rs. 4,93,085 which is said to be repayment of loan to Kotak Mahindra Bank because assessee has failed to explain the source of the same. The findings of the learned Commissioner (Appeals) in paras 14 to 24 of the order are reproduced as under :–
14. The appellant claimed to have purchased a luxury Sedan in the month of April, 2005 for Rs. 6,37,279 ex-showroom and considering the registration and insurance charges the vehicle would have cost about Rs. 7,00,000. For this investment the appellant has taken a loan of Rs. 4,50,000 from Kotak Mahindra Prime Ltd., and has claimed to have incurred the rest of the expenditure by withdrawing money from its bank account with the ABN Amro Bank and the details of withdrawal has been claimed by the appellant to be 16-12-2005 (Rs. 50,000), 26-12-2005 (Rs. 1,50,000), 3-1-2006 (Rs. 1,00,000) and 7-1-2006 (Rs. 30,000). It was claimed on behalf of the appellant that the expenditure of Rs. 3,00,000 was incurred by the appellant on purchase of vehicle in the month of April, 2005 from the withdrawals made by her in the month of December, 2005 a-1-2006.
15. The claims of the appellant are absurd.
16. The vehicle was purchased in the month of April, 2005 and the insurance under the M.V Act was taken on 13-4-2005. It is therefore, clear that the entire expenditure on purchase of vehicle, its registration with the M. V. Authorities and insurance, etc., was incurred by the appellant on or before 13-4-2005. No evidence has been furnished by the appellant either before the learned assessing officer or in the present proceedings to show that vehicle was sold to her without realizing the full price and the registration and insurance were also granted to her by the concerned parties without receiving payments. The claim of the appellant to have paid for the expenditure on purchase of vehicle from the withdrawals made in the month of December, 2005 a-1-2006 is clearly an afterthought.
17. Further, the appellant as per its own admission and a letter issued by the Financer on 26-10-2005 a copy of which was filed by the appellant in the present proceeding has paid the entire outstanding amount to M/s. Kotak Mahindera Primus Ltd. in respect of purchase of this vehicle and from the account submitted by the appellant it is seen that the appellant has paid total of Rs. 4.93.085 to M/s. Kotak Mahindera Primus Ltd. The appellant has no explanation regarding the source of this amount which it has paid to M/s. Kotak Mahindera Primus Ltd. Obviously, this was the unaccounted income of the appellant.
18. There is no merit in the claim of the appellant and the difference of Rs. 3,00,000 incurred on purchase of vehicle in April, 2005 is clearly unaccounted income of the appellant. The addition to that extent by the id. assessing officer for the purchase of first vehicle is therefore correct and the same is confirmed,
19. Further, the amount of Rs. 4,93,085 paid to M/s, Kotak Mahindra Primus Ltd. up to 26-10-2005 being the unaccounted income of the appellant is also liable to be added to its income. The appellant was asked to show cause why this amount be not added to its income and its income be enhanced under section 251 (1)(a) of Income Tax Act, 1961 the appellant failed to offer any cogent explanation except that the matter being very old she was not able to locate the old records and documents. This explanation of the appellant neither has any force nor any merit as the appellate proceedings launched by the appellant against the impugned order dated 28-11-2008 was pending and it was incumbent upon the appellant to preserve the relevant records and documents as it was her obligation to prove her claims. It is trite in law that no one can take advantage of his or her own wrongs or mistakes. If the appellant is not able to prove the necessary records and documents to support her claims she Is bound in law to suffer the consequences. As admittedly, the amount of Rs. 4,93,085 has been paid to M/s. Kotak Mahindra Primus Ltd., by 26-10-2005 this amount has to be accounted for by the appellant and as appellant has failed to explain its source the same is unaccounted income of the appellant and is added to her taxable income under section 251 (1)(a) of Income Tax Act, 1961. The income of the appellant stands enhanced to that extent.
20. The appellant has subsequently purchased another vehicle on 10-10-2005 on which about Rs. 10,00,000 as stated by the appellant was incurred. The appellant claims that this was financed by her out of the sale proceeds of the first vehicle and thereafter, taking a loan of Rs. 5,00,000 from HDFC bank which is sought to be corroborated by a letter issued by the HDFC bank dated 26-12-2005.
21. The appellant claimed to have purchased the second vehicle out of the sale proceeds of the first vehicle. The second vehicle was purchased on 10-10-2005 and was registered with the Motor Vehicle Authorities on 15-10-2005 as evident from the registration certificate issued by the concerned MLO. However, admittedly the appellant has sold the first vehicle being DL3C AQ 1269 to M/s. Ved Mediserve (P) Ltd. on 18-2-2006 as is evident from Form 30 under rule 55 (2) & (3) of the Motor Vehicle Rules a copy of which has been filed by the appellant in the present proceedings. Obviously, the appellant could not have financed the purchase of second vehicle in October, 2005 from the alleged sale proceed of the first vehicle in February, 2006. No material has been brought on record by the appellant to show that the alleged sale consideration was received by her prior to the sale of the first vehicle on 18-2-2006. Therefore, the admitted expenditure of Rs. 5,00,000 over and above the loan given by the HDFC Bank for the purchase of the second vehicle in October, 2005 was from unaccounted sources of the income of the appellant.
22. Further, the claim of the appellant that the vehicle purchased by her in April, 2005 for an ex-showroom price of Rs. 6,37,279 was sold by her in February, 2006 for Rs. 6,43,000 is plain scandalous. The luxury sedan purchased by the appellant in April, 2005 was being run for about 300 Kms every day as is evident from the expenditure claimed by the appellant on running and maintenance of vehicles and therefore, taking 25 working days in a month and calculating the same for about 9 months, i.e., April 2005 to February, 2006 the vehicle was run for about 67,500 kms and the appellant is claiming to have actually sold the vehicle on a price higher than she actually paid to purchase the said vehicle.
23. In view of the apparent absurdity of the claims of the appellant the appellant was asked to lead evidence to corroborate its claim that she had sold her vehicle purchased for Rs. 6,37,2791- after running the same for 9 months and for about 67,500 kms for Rs. 6,43,000. However, the appellant failed to lead any such evidence. In view of this the claims of the appellant is clearly afterthought and an attempt to cover up its unaccounted income. The same has no force or merit and is rejected.
24. There is, therefore, no merit in the claim of the appellant that the purchase of the second vehicle was financed by the appellant from the sale proceeds of the first vehicle and the difference of Rs. 5,00,000 incurred on purchase of vehicle in October, 2005 is clearly unaccounted income of the appellant. The addition to that extent by the learned assessing officer for the purchase of first vehicle is therefore, correct and the same is confirmed.
10.1. The Learned Counsel for the assessee filed synopsis on the issue and submitted that the addition is explained through synopsis.
11. The learned Departmental Representative on the other hand, relied upon the orders of the authorities below.
12. The assessee did not explain source of the two cars purchased before assessing officer and no entry was found in the bank statement to explain source of the purchase of the car. Therefore, addition under section 69 was made. The learned Commissioner (Appeals) found that assessee claimed to have purchased luxury sedan car in the month of April, 2005 for Rs. 6,37,279 ex-show room and considering the registration and insurance charges the cost of the vehicle comes to Rs. 7 lakhs. The assessee has taken loan of Rs. 4,50,000 from Kotak Mahindra Bank and also claimed to have made withdrawals. The learned Commissioner (Appeals) found that the claim of assessee to be absurd because the vehicle was purchased in the month of April, 2005 and insurance was taken on 13-4-2005. Therefore, entire expenditure for purchase of car must have been incurred by assessee on or before 13-4-2005. The assessee did not furnish any evidence before the authorities below to show that vehicle was sold to her without realizing the full price and the registration and insurance were also granted by the concerned parties without receiving payment. The assessee made claim of withdrawal in December, 2005 a-1-2006 which was found as an afterthought. The learned Commissioner (Appeals) also noted that as per statement of assessee and letter issued by the Financier on 26-10-2005, the assessee has paid entire outstanding amount to M/s. Kotak Mahindra Primus Ltd., in respect of purchase of the vehicle and from the account submitted by the assessee it was seen that assessee paid total of Rs. 4,93,085 to M/s. Kotak Mahindra Primus Ltd., and no source have been explained. Learned Counsel for the assessee through his synopsis submitted that Hyundai Car was purchased on 13-4-2005 for Rs. 5,80,417 and loan was taken from M/s. Kotak Mahindra Primus Ltd., on 4-10-2005 for Rs. 4,50,000 and there are withdrawals of Rs. 1,40,000 from the Bank on 17-3-2015. The learned Commissioner (Appeals), therefore, correctly did not accept the explanation of assessee because the car is purchased in April, 2005 but assessee had taken loan for purchase of car in October, 2005. The claim of assessee was therefore, wholly incorrect and an afterthought. No evidence was furnished by the assessee before the authorities below that vehicle was sold to her without payment. It is also highly improper that seller would sold the car to assessee without any payment. When loan was granted in October, 2005 for purchase of car, there is no question of purchase of car by assessee in April, 2005 without any payment. No evidence of withdrawal from the Bank connected with the purchase of the car in April, 2005 have been submitted before the authorities below. Therefore, authorities below were justified in holding that assessee made purchase of car from undisclosed source. Therefore, addition was correctly made against the assessee.
12.1. As regards repayment of loan of Rs. 4,93,085 to M/s. Kotak Mahindra Bank, Learned Counsel for the assessee filed letter of Kotak Mahindra Bank to the assessee (PB-3) to show that amount have been returned to them. In this letter, column-4 have been mentioned “cheque no.” the next column-5 is “receipt reference no.”. Both these columns are blank and have not been filled-in. However, rest of the columns are filled-in to show payment of Rs. 4,93,085 on different dates. The assessee shall have to explain the source of the repayment of the loan to M/s. Kotam Mahindra Primus Ltd., However, assessee failed to explain the source of repayment of loan before the authorities below as well as before the Tribunal. Therefore, learned Commissioner (Appeals) was justified in holding that payment is made from unaccounted income. Therefore, enhancement to the extent of Rs. 4,93,085 is wholly justified. No interference is called for in the matter.
12.2. As regards the second vehicle purchased by assessee of Rs. 10,14,521 on 15-10-2005, the assessee claimed that part of the amount is invested after selling the first vehicle in February, 2006. No material has been brought on record by the assessee to show that the alleged sale consideration was received by her prior to the sale of the first vehicle on 18-2-2006. Whatever payment have been made were found to be from unaccounted source. The learned Commissioner (Appeals) also rejected the contention of assessee for receipt of sale consideration of first vehicle because on traveling expenses, assessee claimed huge expenditure and would have run the vehicle for 300 KM per day and as such vehicle were deteriorated and would not have got such price as claimed by the assessee. The Learned Counsel for Assessee referred to PB-5 of the synopsis to prove that assessee explained the source of the investment in the second vehicle. However, no satisfactory evidence of withdrawal of the cash prior to purchase of the vehicle have been filed and explained. In its chart the assessee has mentioned certain dates of December, 2005 a-1-2006 of payment for purchase of second vehicle which were after the purchase of the second vehicle on 15-10-2005. Therefore, would not able to explain the source of purchase of the car. The learned Commissioner (Appeals) on proper appreciation of the facts and material on record, correctly confirmed the addition on account of second car purchased out of unaccounted money. The Learned Counsel for the assessee has not been able to satisfactorily explain the source of purchase of the car or repayment of loan to M/s. Kotak Mahindra Bank. The learned Commissioner (Appeals) was therefore, justified in confirming the addition of Rs. 16,27,809 as well as in enhancing the addition of Rs. 4,93,084. The findings of the learned Commissioner (Appeals) are confirmed. Accordingly, part of Ground Nos. 4 and 5 are dismissed.
13. In the result, appeal of assessee is partly allowed for statistical purposes.
