2019 (11) TMI 1022 - AT - Income Tax

Disallowance of depreciation on the car purchased by the assessee - Proprietorship firm - assessee purchased the car in his personal name and the payment of the purchase of the car was also made from the personal account - HELD THAT - As assessee is an individual so naturally the assessee will purchase the car in his own name only. Therefore we do not find any reason that assessee should not be allowed depreciation on the car which is used for the purposes of his business. Merely because assessee has made payment for purchase of car from his personal account does not mean that it is not the business asset of the assessee. AO has not found any expenditure debited to the profit and loss account but it cannot be said that depreciation on the asset is not allowable to the assessee. Assessee is owning an asset which is used for the purposes of the business of the assessee. AO has presumed that assessee is not using motor car for his business purposes which cannot be the basis of disallowance of depreciation. Accordingly we direct the learned assessing officer to delete the disallowance of depreciation. Addition being cash deposited in savings bank account - HELD THAT - We have carefully considered the rival contention and found that assessee has sold his old car for INR 90, 000 and has also shown two cash receipts of INR 45, 000/ each against the sale of old car and therefore the addition made by the lower authorities deserves to be deleted. Merely because the assessee has not made any application under rule 46A for admission of the additional evidence the learned CIT(A) has not considered the above evidence and confirmed the disallowance. We do not find the confirmation of the above addition by the learned CIT(A) in accordance with the law. Therefore we direct the learned assessing officer to delete the above addition. Low household withdrawal of the assessee - HELD THAT - We find that appellant s family consists of 4 persons wherein the children s are independent. Therefore the assessee has to bear the expenditure of self and his wife. For this purpose the assessee has shown the total withdrawal of INR 190, 000 per annum. Before the learned assessing officer as well as before the learned CIT(A) assessee has stated that he is residing in a colony where the cost of livelihood is less. However the lower authorities have confirmed the above addition. We do not find any reason to sustain the above addition because of the reason that no expenditure was found to have been incurred by the assessee outside the books of accounts. In view of this we direct the learned assessing officer to delete the addition because of low also withdrawal.

Summary

Issues involved:
1. Disallowance of depreciation on a car purchased by the assessee.
2. Addition of cash deposited in the savings bank account.
3. Addition of low household withdrawal of the assessee.

Issue 1: Disallowance of depreciation on the car purchased by the assessee:
The appeal concerns the disallowance of depreciation amounting to INR 65,522 on a car purchased by the assessee for INR 4,36,816 in his personal name. The assessing officer disallowed the depreciation, alleging personal use based on the payment from the personal account. However, the Tribunal found that as the assessee, an individual trader, naturally purchased the car in his name, depreciation should be allowed as it was used for business purposes. The absence of car-related expenses in the profit and loss account does not negate its business use. The Tribunal directed the officer to delete the disallowance, emphasizing that ownership and business use justify the depreciation claim.

Issue 2: Addition of cash deposited in the savings bank account:
The second issue involves the addition of INR 90,000 deposited in the appellant's savings bank account, attributed to the sale of an old car. The appellant provided evidence of two cash receipts of INR 45,000 each for the car sale, but the CIT(A) did not consider it due to a procedural lapse. The Tribunal disagreed, stating that the evidence warranted deletion of the addition. The failure to follow a procedural rule did not justify upholding the addition, leading the Tribunal to direct the assessing officer to delete the amount from the assessment.

Issue 3: Addition of low household withdrawal of the assessee:
Regarding the low household withdrawal addition of INR 50,000, the assessing officer questioned the minimal annual withdrawal of INR 1,90,000 by the assessee. Despite the family consisting of 4 members with independent children, the officer added INR 50,000 for alleged personal and household expenses. The Tribunal, after considering the family composition and the assessee's explanation, found no basis for the addition. Noting the absence of unaccounted expenditures, the Tribunal directed the officer to delete the INR 50,000 addition due to low household withdrawal. Consequently, the appeal was allowed in favor of the assessee.

In conclusion, the ITAT Delhi ruled in favor of the assessee on all three issues, directing the assessing officer to delete the disallowance of depreciation, the addition of cash deposited in the savings bank account, and the addition related to low household withdrawal. The Tribunal emphasized the business purpose of the car purchase, the evidential support for the cash deposit, and the lack of unaccounted expenses to justify its decisions.