M/s. Shree Shantinath Silk Indus., Surat v. The ACIT., Circle-2,, Surat

ITA 3381/AHD/2007 | 1999-2000
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 338120514 RSA 2007
Assessee PAN AAJFS6041C
Bench Ahmedabad
Appeal Number ITA 3381/AHD/2007
Duration Of Justice 3 year(s) 2 month(s) 23 day(s)
Appellant M/s. Shree Shantinath Silk Indus., Surat
Respondent The ACIT., Circle-2,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-10-2010
Date Of Final Hearing 21-10-2010
Next Hearing Date 21-10-2010
Assessment Year 1999-2000
Appeal Filed On 06-08-2007
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER. AND SHRI N. S. SAINI ACCOUNTANT MEMBER I.T.A.NO.3381/AHD/2007 ASSESSMENT YEAR :1999-2000 SHREE SHANTINATH SILK INDUSTRIES UDHNA MAGDALLA ROAD UDHNA SURAT. VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2 AAYAKAR BHAVAN MAJURA GATE SURAT. APPELLANT RESPONDENT. PAN NO: AAJFS 6041C APPELLANT BY : SHRI S.N. DIVATIA. RESPONDENT BY : SHRI R. K. DHANESTA D.R. ORDER PER SHRI N.S. SAINI ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF THE LEARNED C.I.T.(A)-II SURAT DATED 16-5-2007. 2. THE APPEAL FILED BY THE ASSESSEE IS BARRED BY LI MITATION OF 3 DAYS. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAD NO OBJECTION IN ADM ITTING THE APPEAL OF THE ASSESSEE. THEREFORE THE DELAY IN FILING THE APPEAL BY THE AS SESSEE OF 3 DAYS WAS CONDONED AND THE APPEAL WAS ADMITTED FOR HEARING. 3. GROUND NO.1 OF THE APPEAL READS AS UNDER :- 1. AUTHORITY HAVE ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING DEPARTMENTAL ACTION UNDER SECTION 147 OF THE ACT AND EXPANDING T HE SCOPE BEYOND RECORDED AND SANCONED REASONS. ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 2 4. AT THE TIME OF THE HEARING THE LEARNED AUTHORISE D REPRESENTATIVE SUBMITTED THAT HE IS NOT PRESSING THIS GROUND OF APPEAL. HENCE THE SAME IS DISMISSED AS NOT PRESSED. 5. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS:- 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS GRIEVOUSLY ERRED IN LAW AND OR IN FACTS IN CONFIRMING THE WITHDRAWAL OF INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/- UNDER SECTION 155(4A) R.W.S. 32A OF THE ACT. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT NOT TO H AVE UPHELD THAT THE APPELLANT HAD NOT UTILIZED INVESTMENT ALLOWANCE RES ERVE FROM ASSESSMENT YEAR 1989-90 AND THAT THERE WAS VIOLATION OF THE PROVISI ONS OF SECTION 155A4A) R.W.S. 32A. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT HAVE ANY OBJECTION TO ACCEPTING THE ABOVE ADDITIONAL GROUNDS OF APPEAL RA ISED BY THE ASSESSEE. THEREFORE THE ABOVE ADDITIONAL GROUNDS OF APPEAL OF THE ASSES SEE WERE ACCEPTED AND BOTH THE PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS ON T HEM. 7. THE BRIEF FACTS OF THE CASE ARE THAT IN THE COUR SE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD B EEN ALLOWED INVESTMENT ALLOWANCE IN THE ASSESSMENT YEARS 1988-89 AND 1989-90 AND AL SO IN EARLIER YEARS. THE ASSESSEE HAD CREATED RESERVE OF `. 53 75 486/- UNDER THE PROVISIONS OF SECTION 32A(4) OF THE I. T. ACT. HOWEVER THIS AMOUNT HAD REMAINED UNUTILIZED S INCE THE ASSESSMENT YEAR 1989- 90. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXP LAIN WHY THE RESERVE WHICH HAD REMAINED UNUTILIZED FOR IN EXCESS OF 10 YEARS SHOUL D NOT BE WITHDRAWN IN VIEW OF THE PROVISIONS OF SECTION 155(4A) OF THE I. T. ACT. THE ASSESSEE SUBMITTED THAT BEGINNING WITH THE F.Y. 1989-90 AND UP TO THE F.Y. 2004-05 T HE ASSESSEE HAD PURCHASED INSTALLED AND PUT TO USE NEW MACHINERY WORTH `. 5 78 33 620/- WHICH WAS FAR IN EXCESS OF THE INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/-. IT WAS FURTHER SUBMITTED THAT THE INVESTMENT ALLOWANCE RESERVE WAS NOT SQUARED OFF AN D NOT DEBITED BECAUSE OF INADVERTENCE AND OVERSIGHT. THE SAME INADVERTENCE H AD ALSO LED THE AUDITOR TO OVERLOOK THE FACT THAT THE RELEVANT ENTRIES HAD NOT BEEN PAS SED INDICATING THE UTILIZATION OF THE INVESTMENT ALLOWANCE RESERVE IN THE SUBSEQUENT YEAR S. THEREFORE IN EFFECT THE ENTIRE INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/- WHICH HAD APPARENTLY REMAINED STAGNANT SINCE THE A.Y. 1989-90 HAD ACTUALLY BEEN UTILIZED D URING THE FOLLOWING 10 YEARS AS IS ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 3 REQUIRED UNDER THE PROVISIONS OF SECTION 32A(4) OF THE I. T. ACT. IT WAS THUS ARGUED BY THE ASSESSEE THAT THE OMISSION WAS BONAFIDE GENUIN E AND TECHNICAL IN NATURE AND IN THE INTEREST OF JUSTICE AND EQUITY AND FAIR PLAY N O ADVERSE VIEW SHOULD BE TAKEN IN THIS REGARD. IN SUPPORT OF ITS CONTENTIONS THE ASSESSEE PLACED RELIANCE ON SEVERAL CASE- LAWS. 8. THE ASSESSING OFFICER REJECTED THE ASSESSEE SUB MISSIONS TAKING THE VIEW THAT SINCE THE ASSESSEE HAD ADMITTED TO THE MISTAKE WHE THER BONAFIDE OR GENUINE YET THE PROVISIONS OF SECTION 32A (5) (B) AND OF SECTION 14 4(4A) (B) SPECIFICALLY REQUIRED THAT THE INVESTMENT ALLOWANCE EARLIER ALLOWED TO THE ASSESSE E WAS REQUIRED TO BE WITHDRAWN. HE ALSO DISCOUNTED THE RELIANCE PLACED BY THE ASSESSEE ON SOME OF THE CASE-LAWS. HE THUS TOOK THE VIEW THAT THE INVESTMENT RESERVE WHICH STO OD AT `. 53 75 486/- AS IN THE ASSESSMENT YEAR 1989-90 OUGHT TO HAVE DECREASED IN THE SUBSEQUENT YEARS AS AND WHEN THE SAME WAS UTILIZED FOR PURCHASING NEW MACHI NERIES. SINCE THE ASSESSEE HAD FAILED TO DO SO THE PROVISIONS OF SECTION 32A (5) (B) R.W.S. 155(4A) WERE CLEARLY ATTRACTED. 9. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE WRITTEN SUBMISSIONS THE AUTHORISED REPRESENTATIVE OF THE AS SESSEE PLACED RELIANCE ON THE DECISION AHMEDABAD BENCH OF THE TRIBUNAL IN THE CA SE OF THE ASSESSEES SISTER CONCERN M/S. SHREE SHANTINATH SILK MILLS SURAT IN ITA NO.923 TO 925/AHD/90 DATED 2- 12-1993 AND ARGUED THAT THE ASSESSING OFFICER HAD I GNORED THE DECISION TAKEN BY THE TRIBUNAL WHERE THE FACTS WERE THE SAME. THE PROVIS IONS OF SECTION 155(4A) ARE DIRECTORY AND NOT MANDATORY IN AS MUSH AS IT AIMS T O PROMOTE INDUSTRIAL GROWTH BY REPLACEMENT OF OLD MACHINERY WITH TECHNICALLY UPGRA DED NEW MACHINERIES. THE ASSESSEE HAD PURCHASED NEW MACHINERIES IN THE YEARS THAT FOLLOWED AND THEREFORE HAD PRACTICALLY AND LEGALLY MET WITH THE RIGOURS OF THE ACT. THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN WITHDRAWING THE INVESTMENT ALL OWANCE ALLOWED IN THE RELEVANT YEARS. 10. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HELD AS UNDER :- I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. I H AVE ALSO GONE THROUGH THE DECISION OF THE ITAT IN THE CASE OF M/S. SHREE SHANTINATH SILK MILLS (SUPRA). IN THIS CASE THE ASSESSING OFFICER WITHDREW THE INVES TMENT ALLOWANCE U/S. 155(5A) ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 4 ON THE GROUND THAT THE ASSESSEE HAD DEBITED THE IN VESTMENT ALLOWANCE RESERVE ACCOUNT AND CREDITED THE PARTNERS CAPITAL ACCOUNT . THE ITAT OBSERVED THAT THE FACT THAT THE ASSESSEE HAD PURCHASED NEW MACHINERIE S UTILIZING THE RESERVE ACCOUNT WAS NOT IN DISPUTE. HOWEVER INSTEAD OF CRE DITING THE INVESTMENT ALLOWANCE RESERVE UTILISATION ACCOUNT THE ASSESSEE HAD CREDITED THE PARTNERS CAPITAL ACCOUNTS. SUCH ENTRIES WOULD NOT DISENTITL E THE ASSESSEE FROM RETAINING THE BENEFIT OF THE INVESTMENT ALLOWANCE ORIGINALLY GRANTED TO THE ASSESSEE. WHILE TAKING THIS VIEW THE HON. ITAT PLACED RELIANCE ON THE DECISION OF THE HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. KARAMCHAN D PREMCHAND PVT. LTD. 200 ITR 281. THE FACT OF THE CASE OF SHANTINATH SILK MILLS ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CASE. IN THE CASE OF TH E ASSESSEE THERE WAS NO EVIDENCE TO SHOW THAT THE RESERVE OF `. 53 75 486/- HAD BEEN UTILIZED IN PURCHASING NEW MACHINERIES DURING THE SUBSEQUENT YE ARS. THE INVESTMENT ALLOWANCE RESERVE ACCOUNT WAS NOT DEBITED AT ALL. I T WAS THEREFORE NOT A QUESTION OF CREDITING THE PARTNERS CAPITAL ACCOUNT AS IN T HE CASE OF THE ASSESSEES SISTER CONCERN. THE ASSESSEES PLEA THAT IT WAS AN OVERSIG HT OR INADVERTENT MISTAKE IN NOT DEBITING THE INVESTMENT ALLOWANCE RESERVE ACCOU NT CANNOT BE ACCEPTED. IN THE CASE OF KARAMCHAND PREMCHAND PVT. LTD. (SUPRA) THE ASSESSEE HAD TRANSFERRED THE DEVELOPMENT REBATE RESERVE TO THE GENERAL RESERVE ACCOUNT FROM WHICH IT HAD DECLARED DIVIDEND. THE ASSESSING OFFICER HAD WITHDRAWN THE DEVELOPMENT REBATE ON THE GROUND THAT SINCE THE ASS ESSEE HAD DECLARED DIVIDEND IT HAD VIOLATED THE PROVISIONS OF SECTION 155(5)(II). THE HON. COURT HELD THAT THE ASSESSEE HAD UTILIZED THE RESERVE AMOUNT I N PURCHASING AND INSTALLING CAPITAL ASSETS WHICH MEANT THAT THE VERY PURPOSE O F THE DEVELOPMENT REBATE RESERVE WAS FULFILLED SINCE THE SAME WAS DONE WITH IN THE STIPULATED PERIOD OF 8 YEARS. IT WAS THEN OPEN TO THE ASSESSEE TO CARRY FO RWARD THE BALANCE AMOUNT TO THE GENERAL RESERVE AND TO DECLARE THE DIVIDEND. TH EREFORE THE FACTS OF BOTH THESE CASE BEING CLEARLY DISTINGUISHABLE FROM THE F ACTS OF THE ASSESSEES CASE THEIR RATIOS CANNOT BE APPLIED TO THE FACTS OF THE ASSESSEES CASE TO ARGUE THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN WITHDRAWING THE INVESTMENT ALLOWANCE EARLIER GRANTED TO THE ASSESSEE. HOWEVER WHAT THE ASSESSING OFFICER ADDED TO THE A SSESSEES TOTAL INCOME WAS ONLY THE RESERVE AMOUNT OF `. 53 75 486/- WHICH WAS ONLY 75% OF THE INVESTMENT ALLOWANCE GRANTED TO THE ASSESSEE DURING THE A.Y. 1989-90 AND EARLIER YEARS. AS PER THE PROVISIONS OF SECTION 32A (5)(B) R.W.S. 155 (4A) IF THE INVESTMENT ALLOWANCE RESERVE IS NOT UTILIZED WITHIN A PERIOD OF 10 YEARS IN PURCHASING NEW PLANT AND MACHINERY THEN THE INVEST MENT ALLOWANCE ORIGINALLY ALLOWED IS TO BE DEEMED TO HAVE BEEN WRONGLY ALLOWE D AND THE ASSESSING OFFICER IS TO RECOMPUTE THE TOTAL INCOME OF THE ASS ESSEE FOR THE RELEVANT PREVIOUS YEARS BY MAKING THE NECESSARY AMENDMENTS IN TERMS O F THE PROVISIONS OF SECTION154 OF THE I.T. ACT. THEREFORE INSTEAD OF S IMPLY ADDING BACK THE INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/- THE ASSESSING OFFICER OUGHT TO HAVE WITHDRAWN THE INVESTMENT ALLOWANCE ACTUALLY GR ANTED DURING THE RELEVANT YEARS KEEPING IN VIEW THE PROVISIONS OF SECTION 154 OF THE I. T. ACT. THE ASSESSING OFFICER IS DIRECTED TO TAKE ACTION ACCORD INGLY. THE ASSESSEES APPEAL ON THIS GROUND IS CONSEQUENTLY REJECTED. ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 5 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORDS. IN THE INSTANT CASE THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR TRANSFERRED INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/- CREATED IN EARLIER YEAR TO THE PARTNERS CAPITAL ACCOUNT. ACCORDING TO THE LEARNED ASSESSING OFFICER THE INVESTMENT ALLOWANCE RESERVE COULD NOT BE TREATED AS UTILISED FOR PURCHA SE OF MACHINERIES IN EARLIER YEARS AS THE ASSESSEE HAS NOT PASSED NECESSARY ENTRIES IN TH E BOOKS OF ACCOUNT OF THOSE YEARS. THE LEARNED ASSESSING OFFICER THEREFORE TREATED TH E ENTIRE AMOUNT OF ` .53 75 486/- AS NON UTILISATION OF INVESTMENT ALLOWANCE RESERVE FOR THE SPECIFIED PURPOSES WITHIN THE SPECIFIED TIME AND TREATED THE SAME AS INCOME OF TH E YEAR UNDER CONSIDERATION. 12. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE. 13. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT THE ASSESSEE ACTUALLY UTILISED INVESTMENT ALLOWANCE BY PURCHASING PLANT AND MACHINERY IN THE YEARS SUBSEQUENT TO THE YEAR IN WHICH SUCH RESE RVE WAS CREATED AND NOT PASSING OF THE ENTRIES IN THE BOOKS OF ACCOUNT WAS A MERE TECH NICAL MISTAKE FOR WHICH NO DISALLOWANCE CAN BE LEGALLY MADE. FOR THE ABOVE CO NTENTION HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SHREE SHANTINATH SILK MILLS (2008) 303 ITR 58 (GUJ.). THE LEARNED AUTHORI SED REPRESENTATIVE OF THE ASSESSEE ALSO SUBMITTED THAT OUT OF TOTAL INVESTMENT ALLOWAN CE OF `. 53 75 486/- ` .6 24 862/- WAS CREDITED IN THE ASSESSMENT YEAR 1988-89 AND ` .16 37 723/- WAS CREDITED IN THE ASSESSMENT YEAR 1989-90. HE POINTED OUT THAT 10 YEA RS FROM THE ASSESSMENT YEAR 1988-89 EXPIRED IN THE ASSESSMENT YEAR 1998-99 AND THEREFORE IN THE PRESENT ASSESSMENT YEAR THE MAXIMUM DISALLOWANCE CAN BE MAD E IS OF ` .16 37 723/- AND NOT ENTIRE INVESTMENT ALLOWANCE OF ` .53 75 486/-. 14. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS). 15. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD AS UNDER :- ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 6 HOWEVER WHAT THE ASSESSING OFFICER ADDED TO THE AS SESSEES TOTAL INCOME WAS ONLY THE RESERVE AMOUNT OF `. 53 75 486/- WHICH WAS ONLY 75% OF THE INVESTMENT ALLOWANCE GRANTED TO THE ASSESSEE DURING THE A.Y. 1989-90 AND EARLIER YEARS. AS PER THE PROVISIONS OF SECTION 32A (5)(B) R.W.S. 155 (4A) IF THE INVESTMENT ALLOWANCE RESERVE IS NOT UTILIZED WITHIN A PERIOD OF 10 YEARS IN PURCHASING NEW PLANT AND MACHINERY THEN THE INVEST MENT ALLOWANCE ORIGINALLY ALLOWED IS TO BE DEEMED TO HAVE BEEN WRONGLY ALLOWE D AND THE ASSESSING OFFICER IS TO RECOMPUTE THE TOTAL INCOME OF THE ASS ESSEE FOR THE RELEVANT PREVIOUS YEARS BY MAKING THE NECESSARY AMENDMENTS IN TERMS O F THE PROVISIONS OF SECTION154 OF THE I.T. ACT. THEREFORE INSTEAD OF S IMPLY ADDING BACK THE INVESTMENT ALLOWANCE RESERVE OF `. 53 75 486/- THE ASSESSING OFFICER OUGHT TO HAVE WITHDRAWN THE INVESTMENT ALLOWANCE ACTUALLY GR ANTED DURING THE RELEVANT YEARS KEEPING IN VIEW THE PROVISIONS OF SECTION 154 OF THE I. T. ACT. THE ASSESSING OFFICER IS DIRECTED TO TAKE ACTION ACCORD INGLY. THE ASSESSEES APPEAL ON THIS GROUND IS CONSEQUENTLY REJECTED. 16. FURTHER SECTION 32A (5) READS AS FOLLOWS :- ANY ALLOWANCE MADE UNDER THIS SECTION IN RESPEC T OF ANY SHIP AIRCRAFT MACHINERY OR PLANT SHALL BE DEEMED TO HAVE BEEN WRO NGLY MADE FOR THE PURPOSES OF THIS ACT (A) IF THE SHIP AIRCRAFT MACHINERY OR PLANT IS SO LD OR OTHERWISE TRANSFERRED BY THE ASSESSEE TO ANY PERSON AT ANY TIME BEFORE THE EXPIR Y OF EIGHT YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH IT WAS ACQUIRED OR IN STALLED; OR (B) IF AT ANY TIME BEFORE THE EXPIRY OF TEN YEARS F ROM THE END OF THE PREVIOUS YEAR IN WHICH THE SHIP OR AIRCRAFT WAS ACQUIRED OR THE M ACHINERY OR PLANT WAS INSTALLED THE ASSESSEE DOES NOT UTILISE THE AMOUNT CREDITED T O THE RESERVE ACCOUNT UNDER SUB-SECTION (4) FOR THE PURPOSES OF ACQUIRING A NEW SHIP OR A NEW AIRCRAFT OR NEW MACHINERY OR PLANT [OTHER THAN MACHINERY OR PLANT O F THE NATURE REFERRED TO IN CLAUSES (A) (B) AND (D) OF [THE SECOND PROVISO] TO SUB-SECTION (1)] FOR THE PURPOSES OF THE BUSINESS OF THE UNDERTAKING; OR (C) IF AT ANY TIME BEFORE THE EXPIRY OF THE TEN YEA RS AFORESAID THE ASSESSEE UTILISES THE AMOUNT CREDITED TO THE RESERVE ACCOUNT UNDER SUB-SECTION (4) FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS OR FOR REMITTANCE OUTSIDE INDIA AS PROFITS OR FOR THE CREATION OF ANY ASSET OUTSIDE INDIA OR F OR ANY OTHER PURPOSE WHICH IS NOT A PURPOSE OF THE BUSINESS OF THE UNDERTAKING AND T HE PROVISIONS OF SUB-SECTION (4A) OF SECTION 155 SHALL APPLY ACCORDINGLY: 17. THUS EVEN WHEN CONTENTION OF THE REVENUE IS AC CEPTED THEN ALSO NO AMOUNT CAN BE ADDED TO THE INCOME OF THE ASSESSEE OF THE A SSESSMENT YEAR UNDER CONSIDERATION ON ACCOUNT OF NON UTILISATION OF INVE STMENT ALLOWANCE RESERVE IN RESPECT OF WHICH DEDUCTION FOR INVESTMENT ALLOWANCE WAS ALLOWE D IN EARLIER YEARS. THE LEARNED ASSESSING OFFICER WAS NOT EMPOWERED UNDER THE ACT T O MAKE ADDITION IN THE TOTAL ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 7 INCOME OF THE YEAR UNDER CONSIDERATION FOR NON UTIL ISATION OF INVESTMENT ALLOWANCE RESERVE WHICH WAS NOT CREATED DURING THE YEAR UNDER CONSIDERATION AND FOR WHICH NO DEDUCTION AS INVESTMENT ALLOWANCE WAS CLAIMED OR AL LOWED. THEREFORE IN OUR CONSIDERED OPINION THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN DISMISSING THE APPEAL OF THE ASSESSEE OF THE YEAR U NDER CONSIDERATION. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON TH IS ISSUE AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 18. GROUND NO.3 OF THE APPEAL READS AS UNDER :- AUTHORITY HAVE ERRED IN CONFIRMING THE DISALLOWANC E FOR `. 99 732/- OUT OF TELEPHONE AND MOTOR CAR EXPENSES AS WELL AS DEPRECI ATION CLAIMED ON MOTOR CARS. REGARDING ADVANCED FOR THE DISALLOWANCE BY AS SESSING AUTHORITY AND CONFIRMATION OF THE SAME ARE UNACCEPTABLE AND UNDIG ESTABLE. 19. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER HAD MADE THE DISALLOWANCE ON THE GROUND THAT THE PERSONAL USE OF SUCH ASSETS COULD NOT BE RULED OUT. 20. ON APPEAL BEFORE THE LD. CIT(A) THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE MOTOR CARS BELONGS TO THE SHREE SHANTINATH GROUP WHICH COMPRISES OF SEVERAL COMPANIES PARTNERSHIP FIRMS AOP AND HU FS AS WELL AS PROPRIETORSHIP CONCERNS. EXPENSES ON TELEPHONES AND MOTOR CARS ARE CLAIMED BY THE DIRECTORS AND PARTNERS OF DIFFERENT CONCERNS IN THEIR OWN HANDS. THEREFORE AS FAR AS THE FIRM WAS CONCERNED THE PERSONAL USE OF TELEPHONES AND MOTOR CARS BY THE PARTNERS OR THE FAMILY MEMBERS WAS TOTALLY NEGLIGIBLE. CONSEQUENTLY SUCH DISALLOWANCES OUGHT TO BE DELETED. 21. AFTER CONSIDERING THE SUBMISSIONS OF THE AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE THE COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER- I HAVE CAREFULLY CONSIDERED THE ISSUE. THE AUTHOR ISED REPRESENTATIVE HAS NOT FURNISHED THE DETAILS OF THE VEHICLES OWNED BY THE DIFFERENT CONCERNS/INDIVIDUALS HUFS OF THE GROUP AND HOW THE EXPENSES INCURRED THEREON ARE CLAIMED BY DIFFERENT ENTITIES. IN ANY CASE THE ASSESSEE ALSO OWNS MOTOR CARS AND TELEPHONES ON WHICH SUBSTANTIAL EXPENSES HAD BE EN CLAIMED ALONG WITH DEPRECIATION. I AM OF THE VIEW THAT HOWEVER MUCH IT MAY BE ARGUED IN SUCH CASES THAT MOTOR CARS AND TELEPHONES ARE USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS THEIR USE BY THE PARTNERS AND THEIR FA MILY MEMBERS CANNOT BE RULED OUT ESPECIALLY WHEN NO RECORD IS MAINTAINED OF THE IR USAGE. IN ANY CASE THE ASSESSING OFFICER MADE THE DISALLOWANCE OF ONLY 1/5 TH OF THE EXPENSES CLAIMED ITA.NO.3381/AHD/07 ASSESSMENT YEAR 99- 00 8 WHICH ACCORDING TO ME WAS QUITE REASONABLE AND JUS TIFIED. THEREFORE SUCH DISALLOWANCE TOTALING TO `. 99 732/- IS CONFIRMED. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORDS. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE COULD NOT BRING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THEREFORE WE DO NOT FIND ANY ERROR I N THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFI RMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 23. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 29 TH DAY OF OCTOBER 2010. SD/- SD/- (BHAVNESH SAINI) (N. S. SAINI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. AHMEDABAD: ON THIS 29 TH DAY OF OCTOBER 2010. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. T HE RESPONDENT 3. THE CIT CONCERNED. 4. THE LD . CIT(A)-II SURAT. 5. THE DR AHMEDABAD BENC 6. THE GUARD FI LE. BY ORDER. (DY./ASSISTANT REGISTRAR) ITAT AHMEDABAD. DATE. INITIALS. 1. DRAFTED DICTATED ON 2 2-10-2010 2. DRAFT PLACED BEFORE AUTHORITY. 25-10-2 010 3. DRAFT PROPOSED & PLACED 28-10- 2010 BEFORE SECOND MEMBER. 4. DRAFT DISCUSSED/APPROVED 28-10-2 010 BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO P.S. 29-10-2010 6. KEPT FOR PRONOUNCEMENT ON 29-10-2010 7. FILE SENT TO THE BENCH CLERK. 29-10-2 010 8. DATE ON WHICH FILE GOES TO AR 9. DATE OF DISPATCH OF ORDER.