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2021 (8) TMI 301 - AT - Income TaxDisallowance of depreciation on cars for personal use - Addition of 20% of depreciation on the two cars - HELD THAT:- There is no dispute on the fact that the assessee did use the vehicles for personal purpose which is evident from the fact that a sum from travelling and conveyance expenses was voluntarily disallowed by the assessee. Section 38(2) which clearly provides for making disallowance, inter alia, of depreciation on account of non business use also. Thus hold, in principle, that the AO was justified in making disallowance of depreciation on motor cars purchased during the year. However, considering the entire facts and circumstances of the case prevailing in the instant case, we are satisfied that it would be reasonable to restrict the disallowance at 10% of depreciation instead of 20%, which will be in addition to the disallowance of ₹ 50,000/- offered by the assessee itself. This ground is, thus, partly allowed. Addition on account of construction cost of non-80IB project - AO observed that the assessee had shown huge profit in 80IB project at around 60% as against around 7% in non-80IB project - HELD THAT:- There can be several reasons for such a nominal increase in the cost of construction depending upon the quality of construction etc. AO has not pointed out any defect in the details furnished by the assessee showing the construction cost per sq.ft. computed in Gold Ember project at ₹ 1531/- per sq.ft. Neither the books of account have been rejected. A simple plus and minus mechanism has been followed for sustaining the addition of ₹ 21,15,552/-. In our considered opinion, this type of exercise for making and sustaining the addition cannot be countenanced in view of the fact that the assessee furnished all the necessary details towards costs incurred in the eligible as well as non-eligible projects, which were not faulted with and further the AO did not reject the books of account by pointing out any mistake therein. We are of the considered opinion that no addition is called for on this score. The addition is hereby deleted. Addition towards loss on account of embezzlement - HELD THAT:- The amounts so collected and embezzled by Shri Rahul Kulkarni have been credited to the respective parties’ accounts with the debit to loss on embezzlement account. Before such entries, the assessee debited full amount of sales including the amount embezzled to the accounts of respective parties accounts, which was credited to the Sales account. It means that the amount embezzled by Shri Rahul Kulkarni has been accounted for in the figure of Sales offered by the assessee and since the amount was embezzled, the assessee claimed a deduction for the same. On a specific query, the ld. AR submitted that whereabouts of Shri Rahul Kulkarni were not known as he left the place and there is no further information about him. On the question of status of the police complaint, the ld. AR submitted that nothing has transpired so far towards recovery of any amount. These facts indicate that the amount embezzled by Shri Rahul Kulkarni has become irrecoverable and the same should be allowed as deduction. We, therefore, overturn the impugned order and grant deduction for the amount embezzled. It is clarified that as and when the recovery is made from Shri Rahul Kulkarni, the same should be offered for taxation. Appeal is partly allowed.
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