IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-3 NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER I.T.A .No.-2366 & 2367/Del/2015 (ASSESSMENT YEAR-2004-05 & 2005-06) Trans Air, Vs DCIT, 118, Ansal Bhawan, Central Circle-12, Kasturba Gandhi Marg, New Delhi New Delhi-110001. PAN-AAAFT2744C (APPELLANT) (RESPONDENT) Assessee by Sh. Ashwani Kumar, CA Revenue by Ms. Anima Barnwal, Sr.DR Date of Hearing 19.07.2016 Date of Pronouncement 19.09.2016 ORDER Both these appeals have been filed by assessee assailing correctness of separate orders dated 16.03.2015 of CIT(A)-24, New Delhi pertaining to 2004-05 & 2005-06 assessment years on identical grounds. 2. Ld. AR submitted that issues in present appeals are allowance of expenditure pertaining to Mercedes Benz car claimed as business expenditure. Assessing Officer in present cases following base year i.e. 2003-04 A.Y has disallowed claim in both years. In circumstances, it was his submission that following precedent available in 2003-04 AY i.e. base year issue may be restored to AO. Relying upon order dated 11.12.2013 ITAT in 2003-04 AY in ITA No.646/Del/2013 it was submitted that ITAT had restored issue directing Revenue to confront evidences and statements of persons relied upon and provide assessee opportunity to cross-examine. Referring to facts it was I.T.A .No.-2366 & 2367/Del/2015 submitted that considering documentary evidences on record in regard to use of very same Mercedes Benz Car bearing Registration No-DL-3CA 1010 tax authorities have held that it was not used for purposes of business of assessee. As result of this conclusion claim of depreciation, insurance, petrol expenses etc. thereof was disallowed including claim of payment of interests on car loan. departmental case has been that car was actually used by Sh. Jagat Singh and investigation conducted by Enforcement Directorate in 2003-04 AY wherein case was re-opened u/s 148 of Income Tax Act, 1961 has been basis for re-opening assessments in present proceedings also. It was submitted that AO on basis of very same satisfactory note has re-opened original assessment u/s 143(3) on 24.03.2006 and assessed income of Rs.34,72,010/- in 2004-05 AY and 23,70,450/- processed u/s 143(1) on 17.03.2006. Inviting attention to ITA No.646/Del/2013 in case of assessee for 2003-04 AY, it was submitted that ITAT vide dated 11.12.2013 has restored issue back to AO. 3. Ld. Sr. DR, Ms. Anima Barnwal on perusal of same had no objection if issue is restored back. 4. I have heard rival submission and perused material available on record. relevant facts of case have been summed up by Co-ordinate Bench in following manner:- 2. In this case, notice u/s 148 of Income-tax Act, 1961 was issued on 31.03.2010 after recording satisfaction as per requirement of law. information received from Enforcement Directorate that Mercedes Benz car bearing registration no.DL-3CQ 1010 was purchased by M/s. Trans Air. investigation conducted by Enforcement Directorate revealed that car was actually used by Shri Jagat Singh, son of Shri Natwar Singh and it was under his absolute control and dominion. As per statement reproduced in reasons recorded, we Page 2 of 4 I.T.A .No.-2366 & 2367/Del/2015 find that Shri Chetan Gupta had stated on 05.05.2006 that car was purchased in April/May 2002 and it was used for short while and after which Shri Jagat Singh, s/o Shri Natwar Singh, 19, Teen Murti Lane, New Delhi borrowed it from him and then he has been using this car up to September / October, 2005. Assessing Officer disallowed depreciation and petrol expenses on car as same was not being used for business purposes of assessee and addition of Rs.7,30,294/- was made. CIT (A) has confirmed this addition by holding as under :- 3.1.6 I have considered submissions of AR and facts of case. It is not correct to say that depreciation is allowable merely on ground of ownership of asset. car must be used for purpose of assessee's business. asset in question may be in name of assessee firm. However, it has been proved sufficiently beyond doubt that said Mercedes Benz car was only in possession and use of Shri Jagat Singh who is not connected to assessee firm. I find that there is no merit in AR's argument that he was not confronted with findings of ED. facts were made known to assessee very much in beginning of assessment proceedings. assessee had requested for and collected reasons recorded while issuing notice u/s 148. In these reasoning, facts have all been made very clear. Further when notice under 143(2) and 142(1) were issued calling for firm's reply, as to why depreciation should not be disallowed for said reasons, firm has chosen to remain silent. Therefore, this is not case of not providing opportunity or not allowing cross examination by A.O. assessee never demanded it nor gave any explanation during assessment proceedings. In fact, in regular assessment for year, assessee has claimed that all books have been burnt in fire. Hence allegation of violation of principle of natural justice is not found acceptable. Sufficient opportunity has been given to appellant to put across his views or lead evidences in support of its claim during assessment stage. firm never asked for cross-examination of Shri Jagat Singh during assessment proceedings. Hence, making it one of issue before appellate authority is not on permissible. 3.2 Considering all facts, I do not, I do not find any merit in appeal. ground raised is rejected. 4.1. Considering submissions of parties, Co-ordinate Bench restored issue back to file of AO holding as under:- 4. We have heard both sides on issue and also perused record available. We find that statement of Shri Chetan Gupta recorded by Enforcement Directorate and other evidences collected by Enforcement Directorate have not been confronted with assessee with regard to use of car. We do not agree with view of CIT (A) that assessee had never asked for cross examination of Shri Jagat Singh. Even when assessee does not ask for then also all Page 3 of 4 I.T.A .No.-2366 & 2367/Del/2015 evidence used against assessee must have been confronted. Therefore, in interest of justice and equity, we find it appropriate to restore issue to file of Assessing Officer so that assessee can be provided with copy of statement recorded by Enforcement Directorate as well as with other material which was used while making such addition. Therefore, we set aside orders of authorities below and restore issue to file of Assessing Officer to decide issue de novo after providing opportunity of being heard to assessee. 4.2. In light of submissions by parties before Bench and considering precedent available in very same set of facts, it is deemed appropriate to set aside impugned orders and restore issue back to AO directing said authority to provide assessee with copy of statement recorded by Enforcement Directorate as well as with other material which was used while making additions. Accordingly, following precedent AO is directed to pass speaking order in accordance with law after giving assessee reasonable opportunity of being heard. 5. In result, appeals of assessee are allowed for statistical purposes. order is pronounced in open court on 19th of September, 2016. Sd/- (DIVA SINGH) JUDICIAL MEMBER *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI Page 4 of 4 Trans Air v. DCIT, Central Circle-12, New Delhi