The Jaipur Bench of Income Tax Appellate Tribunal (ITAT) has held that the depreciation being statutory allowance cannot be restricted on the basis of personal use.
The assessee, Bhagchand Jain is engaged in the business of trading of old iron material. The assessee e-filed his return of income declaring total income of Rs.5,59,530/-. The case was selected for scrutiny under CASS and notices were issued to the assessee. The AO after discussing all the facts and circumstances as well as the documents placed before him passed assessment order under section 143(3) of the Income Tax Act, 1961 determining total income of assessee at Rs. 2,48,63,340/- by making various additions.
As per the the assessee has maintained complete Books of account and other subsidiary record and all the expenses are fully supported by vouchers. A bare reading of the order of lower authority shall reveal that in almost all the cases the disallowances have been made on ad hoc basis, simply on mere suspicion, surmises and conjectures. No specific instance of any nature whatsoever has been given by the AO in the impugned order to support his contention with the documentary evidence that the expenditures were incurred for non- business purposes, element of personal user was there. An allegation remains a mere allegation unless proved.
All the expenses were fully supported by vouchers which were even produced before the AO during the remand proceeding and the same were admitted by him. The Freight, Telephone expenses, Petrol & Diesel Expenses and Vehicle Expenses were duly supported by Bills and vouchers etc. In these expenses there was no possibility of personal use. It is a settled law that a businessman is the best judge to take care of its own interest & to take decisions and the AO is not supposed to intervene therein nor he can replace the assessee.
It was submitted that looking at a huge turnover of more than Rs.9.40crores (approx.), claim of expenditure is otherwise very meagre. Thus such a meagre claim to achieve such a huge turnover is not at all unjustified. All these expenses were incurred exclusively for business purposes and are under the provisions of the Act. Pertinently, despite increasing turnover, the claimed expenses are equal to/ less than expenses claimed in the preceding year.
The coram headed by Vice President, N,K, Saini and Judicial Member, Sandeep Gosain has held that disallowance of depreciation on vehicles is also not warranted with the facts and merits of the case as depreciation being a statutory allowance and hence cannot be restricted on the basis of personal use.
“Considering the totality of the facts and circumstances as well as case laws relied upon by the ld. AR, we found merit in the contentions raised by the assessee, therefore, we direct to delete the additions confirmed by the CIT(A) with regard to various expenses,” the ITAT ruled.
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