LYNX SYNERGY & SOLUTIONS P.LTD, MUMBAI v. ITO 5(2)3, MUMBAI

ITA 3255/MUM/2013 | 2004-2005
Pronouncement Date: 09-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 325519914 RSA 2013
Assessee PAN AAACL2681B
Bench Mumbai
Appeal Number ITA 3255/MUM/2013
Duration Of Justice 11 month(s) 13 day(s)
Appellant LYNX SYNERGY & SOLUTIONS P.LTD, MUMBAI
Respondent ITO 5(2)3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 09-04-2014
Assessment Year 2004-2005
Appeal Filed On 26-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT ITA NO. 3254 & 3255/MUM/2013 (ASSESSMENT YEARS: 2005-06 & 2004-05) M/S. LYNX SYNERGY & SOLUTIONS P. LTD. INCOME TAX OF FICER - 5(2)(3) A-307 VIRWANI INDUSTRIAL ESTATE MUMBAI 3RD FLOOR WESTERN EXPRESS HIGH WAY VS. GOREGAON (E) MUMBAI 400063 PAN - AAACL2681B APPELLANT RESPONDENT APPELLANT BY: SHRI K. SIVRAM RESPONDENT BY: MS. SONIA KUMAR DATE OF HEARING: 28.01.2014 DATE OF PRONOUNCEMENT: 09.04.2014 O R D E R PER D. MANMOHAN V.P. THESE TWO APPEALS ARE FILED AT THE INSTANCE OF THE ASSESSEE COMPANY AND THEY ARE DIRECTED AGAINST THE ORDERS PASSED BY CIT(A)-9 MUMBAI. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTIC AL THE APPEALS ARE HEARD TOGETHER. 2. THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE TRIB UNAL IS WITH REGARD TO VALIDITY OF REOPENING OF ASSESSMENT. IN THE EVEN T OF HOLDING THAT REOPENING IS AS PER LAW THE ALTERNATIVE CONTENTION OF THE AS SESSEE IS THAT IT IS ENTITLED TO CLAIM DEPRECIATION ON CAR PURCHASED IN THE NAME OF THE DIRECTOR AND CONSEQUENTLY THE INTEREST ON CAR LOAN AS WELL AS IN SURANCE PAYMENT SHOULD BE ALLOWED. THERE WERE ALSO SOME MINOR DISALLOWANCE S WITH REGARD TO DEPRECIATION ON COMPUTER PACKAGE AND CONVEYANCE EXP ENSES NOT SUPPORTED BY VOUCHERS. 3. FACTS NECESSARY FOR DISPOSAL OF THESE APPEALS ARE S TATED IN BRIEF. IN RESPECT OF PREVIOUS YEAR RELEVANT TO A.Y. 2004-05 T HE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF ELECTRON IC TELEPHONES ETC. DECLARED TOTAL INCOME OF ` .1 51 440/- AND THE SAME WAS PROCESSED UNDER ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 2 SECTION 143(1) OF THE ACT. SIMILARLY FOR A.Y. 2005 -06 INCOME OF ` 2 82 330/- DECLARED IN THE RETURN OF INCOME FILED ON 30.10.200 5 WAS ACCEPTED UNDER SECTION 143(1) PROCEEDINGS. 4. THEREAFTER THE AO RECEIVED A TAX EVASION PETITION A ND AN RTI APPLICATION ALLEGING THAT THE DIRECTOR OF THE ASSES SEE COMPANY SHRI NITIN R. SHAH HAD PURCHASED A MOTOR CAR USING UNKNOWN SOURCE S OF INCOME. ON ENQUIRY AND VERIFICATION IT WAS NOTICED BY THE AO T HAT THE CAR WAS PURCHASED BY SHRI NITIN SHAH AND THE ADDRESS GIVEN THEREIN WA S NOT THAT OF THE COMPANY; IT WAS REGISTERED IN THE NAME OF SHRI NITI N SHAH. HOWEVER THE ASSESSEE CLAIMED DEPRECIATION ON THE SAID CAR AND A LSO CERTAIN EXPENDITURE INCLUDING INTEREST PAID ON THE LOAN TAKEN FOR PURCH ASE OF THE CAR. THEREFORE THE AO ISSUED A NOTICE UNDER SECTION 148 OF THE ACT AFTER GETTING NECESSARY APPROVAL. IN RESPONSE THERETO THE ASSESSEE SUBMITTE D THAT THE RETURN ALREADY FILED MAY BE TREATED AS RETURN FILED IN COMPLIANCE TO THE NOTICES ISSUED UNDER SECTION 148 OF THE ACT. THEREAFTER THE ASSESS EE REQUESTED THE AO TO PROVIDE THE REASONS FOR REOPENING OF THE ASSESSMENT . THE AO PROVIDED THE REASONS WHEREIN IT WAS STATED THAT BASED ON THE RTI APPLICATION AND THEREAFTER THE TAX EVASION PETITION CERTAIN ENQUIRI ES WERE MADE WHEREIN IT WAS REVEALED THAT SHRI NITIN SHAH DIRECTOR OF THE COMPANY PURCHASED THE CAR IN HIS NAME. THE COMPANY HAD TAKEN IT ON RECORD AND CLAIMED DEPRECIATION AND INTEREST ON THE CAR LOAN AND THER EFORE HE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR THE YEAR UNDER CONSIDERATION. 5. DURING THE COURSE OF HEARING ONE OF THE DIRECTORS O F THE ASSESSEE COMPANY ALONGWITH THE CHIEF ACCOUNTANT APPEARED FRO M TIME TO TIME AND SUBMITTED THAT THOUGH THE CAR WAS REGISTERED IN THE NAME OF ONE OF THE DIRECTORS OF THE COMPANY BUT IT WAS MEANT FOR THE U SE OF THE COMPANY AND IN FACT THE INVOICE WAS ISSUED BY SAMAN MOTORS PVT. LTD. IN THE NAME OF THE COMPANY. IT WAS ALSO SUBMITTED THAT THE CAR WAS PUR CHASED BY THE COMPANY OUT OF ITS OWN FUNDS AND IT HAD ALSO TAKEN A LOAN O F ` 4 90 000/- FROM FORD CREDIT KOTAK MAHINDRA LTD. AND REPAYMENTS WERE ALSO MADE BY THE COMPANY. THE CAR WAS REGISTERED IN THE NAME OF SHRI NITIN SHAH DIRECTOR OF ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 3 THE COMPANY TO AVAIL CERTAIN BENEFITS; IT IS NOT EC ONOMICAL UNDER THE MOTOR VEHICLE ACT TO REGISTER IT IN THE NAME OF THE COMPA NY. SHRI NITIN SHAH HAS GIVEN A DECLARATION THAT HE IS HOLDING THE CAR ON B EHALF OF THE COMPANY AND HE HAS NO BENEFICIAL INTEREST IN THE CAR. BOARD RES OLUTION PASSED IN THE MEETING OF THE BOARD OF DIRECTORS LEDGER ACCOUNT O F FORD CREDIT KOTAK MAHINDRA LTD. ETC. WERE PLACED BEFORE THE AO. 6. THE AO OBSERVED THAT IN ORDER TO CLAIM DEPRECIATION ON MOTOR VEHICLE IT HAS TO BE SHOWN UNDER SECTION 32 OF THE ACT TH AT THE CAR IS OWNED BY THE ASSESSEE. NO DOUBT MERE NON-REGISTRATION OF THE VE HICLE IN THE NAME OF THE COMPANY CANNOT DISENTITLE/DEBAR THE COMPANY FROM CL AIMING DEPRECIATION BUT IN THE PECULIAR FACTUAL MATRIX OF THE CASE THE AO WAS OF THE VIEW THAT THE CAR WAS OWNED BY THE DIRECTOR AND NOT BY THE COMPAN Y. IN THIS REGARD HE OBSERVED THAT THE CAR WAS PURCHASED AND REGISTERED IN THE NAME OF THE DIRECTOR. EVEN THE LOAN IS GRANTED IN THE NAME OF S HRI NITIN SHAH. IT WAS REGISTERED ON AN ADDRESS WHICH IS NON-EXISTENT. THE COMPANY CLAIMS TO BE THE LEGAL OWNER. THE ONLY FACTOR IN FAVOUR OF THE A SSESSEE IS THAT IT HAD REPAID THE LOAN TAKEN BY MR. NITIN SHAH AND THE ASS ET HAS BEEN SHOWN IN THE BOOKS OF THE ASSESSEE COMPANY. THE AO FURTHER O BSERVED THAT THE COMPANY HAD NOT SUBMITTED ANY PROOF WITH REGARD TO USE OF THE CAR BY THE COMPANY; NO EXPENDITURE TOWARDS PETROL ETC. WAS CL AIMED AGAINST THE CAR. THEREFORE HE CONCLUDED THAT THE ENTIRE TRANSACTION IS NOTHING BUT PERQUISITE GIVEN TO THE DIRECTOR IN THE FORM OF REPAYMENT OF L OAN TAKEN BY HIM. HE ALSO OBSERVED THAT THE COMPANY HAS NOT FURNISHED ANY LOG BOOK OR CONTROL BOOK TO SHOW THAT THE CAR WAS UTILISED FOR ITS BUSINESS PURPOSES. HE THUS CONCLUDED THAT THE ASSESSEE IS NOT ENTITLED TO CLAI M DEPRECIATION ON MOTOR CAR. CONSEQUENTLY HE DISALLOWED THE CLAIM OF INTERE ST ON CAR LOAN AS WELL AS INSURANCE PAYMENT MADE. 7. THE AO FURTHER NOTICED THAT THE ASSESSEE INCLUDED A SUM OF ` 25 740/- UNDER COMPUTER IN THE BLOCK OF ASSETS WHEREAS THE S AID COMPUTER WAS PURCHASED IN THE NAME OF LYNX SYSTEMS & SERVICES PV T. LTD. A SISTER CONCERN OF THE ASSESSEE COMPANY. SINCE THE OWNERSHI P IS NOT WITH THE ASSESSEE DEPRECIATION CLAIMED BY THE ASSESSEE ON T HIS COMPUTER WAS ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 4 DISALLOWED. HE ALSO MADE AN ADHOC DISALLOWANCE OF ` 15 509/- OUT OF THE CONVEYANCE EXPENSES ON THE GROUND THAT MAJORITY OF THE CONVEYANCE EXPENSES ARE RECORDED IN CASH AND THEY ARE NOT FULL Y VERIFIABLE AND HENCE 5% OF EXPENDITURE DESERVES TO BE CONSIDERED AS NON-BUS INESS EXPENDITURE. 8. IN RESPECT OF A.Y. 2005-06 ALSO THE AO REOPENED THE ASSESSMENT FOR THE SAME REASONS AND DISALLOWED THE CLAIM OF DEPREC IATION ON CAR APART FROM DISALLOWING THE INTEREST CLAIMED TO HAVE BEEN PAID ON CAR LOAN AND INSURANCE PAYMENT ON THE CAR. HE ALSO DISALLOWED A SUM OF ` 13 189/- OUT OF THE CONVEYANCE EXPENSES ON THE GROUND THAT THEY ARE NOT FULLY VERIFIABLE. 9. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A) THA T REOPENING OF ASSESSMENT IS NOT IN ACCORDANCE WITH LAW AND THE LE ARNED AO ERRED IN CONCLUDING THAT THE ASSESSEE IS NOT THE REAL OWNER OF THE CAR BY IGNORING THE JUDICIAL PRONOUNCEMENTS IN THIS REGARD. IT WAS ALSO CONTENDED THAT THERE IS NO BASIS FOR MAKING ADHOC DISALLOWANCE OUT OF THE C LAIM OF CONVEYANCE EXPENSES. IN RESPECT OF A.Y. 2004-05 IT WAS FURTHE R CONTENDED THAT THE AO ERRED IN DISALLOWING THE CLAIM OF DEPRECIATION ON C OMPUTER OVERLOOKING THE FACT THAT ASSESSEE IS THE RIGHTFUL OWNER OF THE COM PUTER. 10. THE AUTHORISED REPRESENTATIVE APPEARED ON BEHALF O F THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT ASSESSEE IS A DIST RIBUTOR OF ELECTRONIC TELEPHONES ETC. AND SHRI NITIN SHAH SHRI RAMESH S ETHU AND SHRI RAJESH KUMAR ARE DIRECTORS OF THE COMPANY. REGISTERED OFFI CE OF THE COMPANY WAS 406 BHAGYALAXMI KENNEDY BRIDGE OPERA HOUSE MUMB AI TILL 31.12.2010 WHICH WAS SUBSEQUENTLY CHANGED TO A-307 VIRWANI IN DUSTRIAL ESTATE WESTERN EXPRESS HIGHWAY GURGAON (E). ASSESSEE COMP ANY PURCHASED A CAR DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R 2004-05. TO SAVE ON OCTROI AND REGISTRATION CHARGES THE CAR HAS BEEN RE GISTERED IN THE NAME OF THE DIRECTOR SHRI NITIN R. SHAH. THOUGH THE LOAN W AS TAKEN FROM FORD CREDIT KOTAK MAHINDRA LTD. IN THE NAME OF SHRI NITI N SHAH ALL THE INSTALMENTS HAVE BEEN PAID BY THE ASSESSEE COMPANY AND THE ASSET IS PROPERLY REFLECTED IN ASSESSEES BOOKS OF ACCOUNT. IT WAS ALSO SUBMITTED THAT A BOARD RESOLUTION WAS PASSED FOR PURCHASE OF THE V EHICLE AND USE OF THE VEHICLE FOR COMPANYS BUSINESS PURPOSES. UNDER THES E CIRCUMSTANCES IT WAS ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 5 CONTENDED THAT REOPENING OF ASSESSMENT MERELY BASED ON RTI APPLICATION AND TAX EVASION PETITION IS NOT SUSTAINABLE BECAUSE THE AO HAS NO REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. IN THIS REGARD IT WAS SUBMITTED THAT THE MAIN COMPLAINT OF THE PETITIONER WAS THAT SHRI NITIN SHAH PURCHASED A CAR FROM UNKNOWN SOURCE S. A LETTER TO VERIFY THE FACT WAS ISSUED TO MR. NITIN R. SHAH WHO IN TUR N EXPLAINED THE SOURCE OF PURCHASE OF CAR AND IT WAS ALSO SHOWN THAT IT WAS R ECORDED IN THE BOOKS OF THE COMPANY. IT IS ALSO STATED THAT THE CAR HAS BEE N PURCHASED WITH COMPANY FUNDS. THERE WAS NO EVIDENCE PRIOR TO ISSUE OF NOTICE UNDER SECTION 148 THAT THE CAR OWNED AND REFLECTED IN THE BOOKS H AS BEEN USED FOR THE PERSONAL PURPOSES BY THE DIRECTORS. IT MAY BE NOTIC ED THAT NOTICE UNDER SECTION 148 WAS ISSUED ON 29.09.2010 AND ADMINISTRA TIVE APPROVAL FOR REOPENING OF THE CASE HAS BEEN OBTAINED ON 17.09.20 10. HOWEVER THE CASE OF THE ASSESSEE BEFORE THE LEARNED CIT(A) WAS THAT THERE WAS NO EVIDENCE BEFORE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT THAT THE CAR OWNED AND REFLECTED IN THE BOOKS OF THE ASSESSEE COMPANY HAS BEEN USED FOR PERSONAL PURPOSES BY THE DIRECTORS AND THUS THE REA SONS FOR REOPENING OF THE ASSESSMENT IS NOT CLEAR. IN CASE THE REOPENING OF ASSESSMENT IS FOR PURCHASE OF CAR FROM UNKNOWN SOURCES THE SAME FAIL S AS THE SOURCE OF PURCHASE HAS BEEN PROPERLY REFLECTED IN THE BOOKS A ND CONSEQUENTLY THE MAIN REASON FOR REOPENING FAILS. RELIANCE WAS PLACE D UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF JET AI RWAYS LTD. 195 TAXMAN 117 AND OTHERS. IT WAS ALSO CONTENDED THAT REASSESS MENT ON THE BASIS OF THIRD PARTY INFORMATION WITHOUT ANY CORROBORATIVE E VIDENCE IS NOT JUSTIFIED. WITHOUT PREJUDICE TO THE ABOVE GROUND IT IS ALSO CO NTENDED THAT THE CLAIM OF DEPRECIATION AND OTHER EXPENSES IS IN ACCORDANCE WI TH LAW. THE CONTENTION OF THE ASSESSEE WAS THAT IT IS NOT NECESSARY TO GET THE ASSET REGISTERED IN THE NAME OF THE COMPANY TO CLAIM OWNERSHIP SO LONG AS IT IS REGISTERED IN THE NAME OF A DIRECTOR AND PAYMENT OF INSTALMENTS ARE M ADE BY THE COMPANY AND THE ASSET IS REFLECTED IN THE BOOKS OF THE COMP ANY ASSESSEE IS ENTITLED IN LAW TO CLAIM DEPRECIATION. IT WAS ALSO CONTENDED TH AT THE ASSESSEE COMPANY IS SMALL AND DOES NOT HAVE ADEQUATE INFRASTRUCTURE AND HENCE NO LOGBOOK ETC. HAS BEEN MAINTAINED BUT THE COMPANY HAS REIMBU RSED PETROL AND ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 6 MAINTENANCE EXPENSES TO THE DIRECTORS EVERY MONTH W HICH HAS BEEN DEBITED TO THE P & L ACCOUNT UNDER THE HEAD CONVEYANCE. L EDGER COPY OF CONVEYANCE EXPENSES WAS PLACED BEFORE THE LEARNED C IT(A). IT WAS ALSO CONTENDED THAT THERE IS NO PROOF THAT THE VEHICLE H AS BEEN USED FOR THE PERSONAL PURPOSES OF THE DIRECTORS AND HENCE DEPREC IATION IS ALLOWABLE IN THE HANDS OF THE DEFACTO OWNER. HE ALSO CHALLENGED THE ADHOC DISALLOWANCE UNDER THE HEAD CONVEYANCE EXPENSES. WITH REGARD T O THE DEPRECIATION CLAIMED ON COMPUTER IT WAS SUBMITTED THAT THE PAYM ENT WAS MADE BY THE COMPANY FOR UPGRADATION OF TALLY ACCOUNTING SOFTWAR E. THE COMPANY IS REGISTERED USER OF TALLY ACCOUNTING SOFTWARE AND TH IS PAYMENT WAS MADE TOWARDS SUBSTANTIAL UPGRADATION OF SOFTWARE AND HEN CE THE SAME WAS CAPITALISED AND DEPRECIATION CLAIMED THOUGH BY OVE RSIGHT THE RUBBER STAMP OF THE SISTER CONCERN WAS AFFIXED DESPITE THE FACT THAT THE PAYMENT WAS MADE BY THE ASSESSEE COMPANY. 11. THE LEARNED CIT(A) RECORDED THE FACTUAL MATRIX OF T HE CASE IN DETAIL AND AFTER ANALYSING THE FACTS HE ARRIVED AT A CONCL USION THAT NONE OF THE SUBMISSIONS MADE BY THE ASSESSEE CONTAIN ANY FORCE. WITH REGARD TO VALIDITY OF REOPENING OF ASSESSMENT THE CIT(A) OBSERVED THAT IT IS NOT IN DISPUTE THAT THE RETURNS OF INCOME WERE PROCESSED UNDER SECTION 143(1) OF THE ACT IN A ROUTINE MANNER AND HENCE NO OPINION WAS FORMED BY T HE AO AT THAT POINT OF TIME. THEREFORE IT CANNOT BE SAID THAT THERE WAS C HANGE OF OPINION WHILE ISSUING NOTICE UNDER SECTION 148 OF THE ACT. BY PLA CING RELIANCE UPON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF DESH RAJ UDYOG VS. ITO 318 ITR 6 THE LEARNED CIT(A) OBSERVED THAT A NOTICE UNDER SECTION 148 CAN BE ISSUED BEYOND FOUR YEARS IF THE ORIGINAL RETURN OF INCOME WAS MERELY PROCESSED UNDER SECTION 143(1) OF THE ACT IN A ROUTINE MANNER. HE ALSO RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. ITR 500 WHER EIN IT WAS HELD THAT IN A CASE WHERE RETURN WAS PROCESSED UNDER SECTION 143(1 ) OF THE ACT REOPENING CANNOT BE HELD TO BE INVALID SINCE THERE WAS NO APP LICATION OF MIND WHILE PROCESSING THE RETURN UNDER SECTION 143(1) OF THE A CT. WITH REGARD TO THE REASONS RECORDED THE LEARNED CIT(A) OBSERVED THAT A T THE TIME OF COMMENCEMENT OF THE PROCEEDINGS UNDER SECTION 148 O F THE ACT WHAT HAS TO ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 7 BE SEEN IS THE AVAILABILITY OF PRIMA FACIE MATERIAL AND SUFFICIENCY OR THE CORRECTNESS OF THE MATERIAL WAS NOT A THING TO BE G ONE INTO. IN THE INSTANT CASE THERE WAS PRIMA FACIE MATERIAL TO INDICATE THA T THE COMPANY CLAIMED DEPRECIATION ON A CAR WHICH IS IN THE NAME OF ONE O F THE DIRECTORS AND THEREFORE THE AO WAS JUSTIFIED IN ISSUING NOTICE UN DER SECTION 148 OF THE ACT. IN THIS REGARD THE LEARNED CIT(A) REFERRED TO THE D ECISION OF THE APEX COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. VS. ITO 236 ITR 34 WHEREIN IT WAS HELD THAT SUFFICIENCY OR CORRECTNESS OF THE MATERIA L NEED NOT BE GONE INTO AT THE INITIAL STAGE AND IF THERE IS SOME PRIMA FACIE MATERIAL TO SHOW THAT INCOME ASSESSABLE TO TAX ESCAPED ASSESSMENT THE AO IS ENTITLED TO REOPEN THE ASSESSMENT. HE THUS UPHELD THE ACTION OF THE AO . WITH REGARD TO ALLOWABILITY OF DEPRECIATION AND OTHER EXPENDITURE THEREON THE LEARNED CIT(A) OBSERVED THAT THE IMPUGNED CAR I.E. FORD ICON WAS PURCHASED AND REGISTERED IN THE NAME OF ONE SHRI NITIN SHAH. THOU GH HE WAS A DIRECTOR OF THE ASSESSEE COMPANY THE LOAN WAS GRANTED IN THE NA ME OF SHRI NITIN SHAH. IN FACT THE CAR WAS NOT REGISTERED AT THE ADDRESS OF THE ASSESSEE COMPANY BUT AT AN ADDRESS WHICH IS NON-EXISTENT. HE HAS ALS O NOTICED THAT NO PROOF WAS ADDUCED TO SHOW THAT THE FORD ICON CAR WAS USED BY THE ASSESSEE COMPANY AND PETROL EXPENDITURE WAS NOT CLAIMED BY T HE ASSESSEE COMPANY ON THE SAID FORD ICON. THOUGH THE COMPANY IS A LEGA L ENTITY CAPABLE OF HOLDING A CAR IN ITS NAME BUT IT HAS NOT REGISTERED THE CAR IN ITS NAME TO HAVE DOMINION ON THE SAID CAR. THE COMPANY HAS ALSO NOT MAINTAINED LOG BOOK OR CONTROL REGISTER FOR RECORDING MOVEMENT RU NNING PETROL EXPENSES REPAIR EXPENSES DRIVERS DETAILS OR THE DISTANCE T RAVELLED BY THE SAID CAR. UNDER THESE CIRCUMSTANCES THE LEARNED CIT(A) CONCLU DED THAT THE OWNERSHIP OF THE CAR BY SHRI NITIN SHAH IN HIS INDIVIDUAL CAP ACITY CANNOT BE DOUBTED AND HENCE IT CANNOT BE TREATED AS AN ASSET OF THE A SSESSEE COMPANY. IN THE LIGHT OF THE DECISION OF HON'BLE DELHI HIGH COURT I N THE CASE OF M.M. FISHERIES PVT. LTD. VS. CIT 277 ITR 204 THE LEARNED CIT(A) CONCLUDED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION INT EREST EXPENDITURE REGISTRATION AND INSURANCE CHARGES REFERABLE TO THE AFOREMENTIONED CAR. 12. WITH REGARD TO DEPRECIATION ON COMPUTER THE LEARNE D CIT(A) NOTICED THAT THE COMPUTER/COMPUTER SOFTWARE WAS NOT OWNED B Y THE ASSESSEE ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 8 COMPANY AND THEREFORE THE DISALLOWANCE MADE BY TH E AO IS IN ACCORDANCE WITH LAW. IT DESERVES TO BE NOTICED THAT THOUGH THE ASSESSEE HAS RAISED A SPECIFIC GROUND WITH REGARD TO 5% ADHOC DISALLOWANC E REFERABLE TO CONVEYANCE EXPENSES THIS WAS NOT DISCUSSED INDEPEND ENTLY BUT IT WAS CONSIDERED IN PARA 5.3 OF HIS ORDER AS FORMING PART OF THE GROUND RAISED WITH REGARD TO OWNERSHIP OF FORD ICON. 13. FURTHER AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEF ORE US CONTENTING INTER ALIA THAT REOPENING OF ASSESSMENT BY ISSUANC E OF NOTICE UNDER SECTION 148 OF THE ACT IS BAD IN LAW AND THE TAX AUTHORITIE S WERE NOT JUSTIFIED IN REJECTING THE CLAIM OF DEPRECIATION AND EXPENDITURE ON FORD ICON CAR AS WELL AS ON COMPUTER. IT WAS ALSO CONTENDED THAT THE ADHO C DISALLOWANCE OF 5% REFERABLE TO CONVEYANCE EXPENSES IS ALSO NOT IN ACC ORDANCE WITH LAW. IT DESERVES TO BE NOTICED THAT 5% ADHOC DISALLOWANCE O UT OF CONVEYANCE WAS OMITTED TO BE CONSIDERED BY THE CIT(A) PRESUMABLY B ECAUSE OF THE SMALLNESS OF THE AMOUNT. 14. THE LEARNED COUNSEL FOR THE ASSESSEE ADVERTED OUR A TTENTION TO PAGE 36 OF THE PAPER BOOK TO SUBMIT THAT THE RETURNS OF INC OME FOR ASSESSMENT YEARS UNDER CONSIDERATION WERE ORIGINALLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE ASSESSEE DISCLOSED ALL FACTS TRULY AND CORRECTLY AND HENCE IN THE ABSENCE OF ANY FRESH MATERIAL AVAILABLE ON RECORD R EOPENING OF ASSESSMENT BEYOND A PERIOD OF FOUR YEARS IS BAD IN LAW. VIDE N OTICE DATED 17.04.2009 THE AO ADDRESSED A LETTER TO SHRI NITIN SHAH BASED ON AN RTI APPLICATION FILED BY MS. SONAL AMIT SHAH SISTER-IN-LAW OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY WHICH DOES NOT LEAD TO ANY PRESUM PTION THAT THE ASSESSEE COMPANY HAD NOT PURCHASED THE CAR WITH ITS OWN FINANCE. ON THE CONTRARY PAGE 37 TO 50 OF THE PAPER BOOK SHOWS THA T SHRI NITIN SHAH ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY HAD ALL ALON G MAINTAINED THAT MS. SONAL SHAH IS NO WAY CONNECTED TO HIM AND SHE HAD A BSOLUTELY NO RIGHT WHATSOEVER TO HAVE ANY SORT OF INFORMATION CONCERN ING HIS PERSONAL AFFAIRS AND ALSO FURNISHED DETAILS TO SHOW THAT THE CAR WAS PURCHASED BY HIM IN HIS INDIVIDUAL NAME BUT IT WAS FINANCED BY THE COMPANY THOUGH IT WAS REGISTERED IN HIS NAME. THE PAYMENT WAS MADE BY CHE QUE BY THE COMPANY ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 9 AND IN RESPECT OF THE BALANCE AMOUNT FINANCE WAS PR OVIDED BY FORD CREDIT KOTAK MAHINDRA LTD. AND THE OFFICE ADDRESS OF THE C OMPANY WAS MENTIONED IN THE REGISTER OF THE COMPANY THOUGH IN THE REGIST ER OF THE TRANSPORTATION AUTHORITIES THE CAR WAS REGISTERED UNDER A DIFFEREN T ADDRESS. PAGE 43 OF THE PAPER BOOK SHOWS THAT THE CAR WAS REGISTERED ON 16 TH APRIL 2003 IN THE NAME OF NITIN RASIKLAL SHAH BUT THE FINANCE WAS OBT AINED BY THE ASSESSEE COMPANY. PAGE 52 IS THE RESOLUTION PASSED BY THE BO ARD DIRECTORS OF THE COMPANY WHEREIN IT WAS STATED THAT THE CAR WAS PURC HASED FOR THE USE BY THE DIRECTORS AND THE ASSESSEE COMPANY ENTERED INTO HIRE PURCHASE AGREEMENT WITH FORD CREDIT KOTAK MAHINDRA LTD. IN F ACT SHRI NITIN SHAH FILED A DECLARATION DATED 14 TH AUGUST 2004 THAT THE CAR WAS REGISTERED IN HIS NAME BUT IT WAS OWNED BY THE COMPANY. PAGE 102 OF T HE PAPER BOOK CONTAINS THE SUMMARY OF VEHICLE EXPENSES WHICH REFL ECTS THE REIMBURSEMENT TO DIRECTORS BUT THIS DOCUMENT APPEARS TO HAVE NOT BEEN FILED BEFORE THE AO. 15. THOUGH IT WAS CLAIMED TO HAVE BEEN FILED BEFORE THE CIT(A) IT IS NOTICED THAT THERE WAS NO MENTION WITH REGARD TO REIMBURSEM ENT OF VEHICLE EXPENSES TO THE DIRECTORS. ON THE CONTRARY THE LEARNED CIT( A) OBSERVED THAT THE ASSESSEE COMPANY DID NOT SUBMIT ANY PROOF OF USE OF THE FORD ICON CAR BY THE DIRECTORS AND NO PETROL EXPENDITURE ON THE SAID CAR WAS CLAIMED BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY DID NOT EVEN MAINTAIN ANY LOG BOOK OR CONTROL REGISTER FOR RECORDING THE MOVEMENT RUNNING PETROL EXPENSES REPAIR EXPENSES TRAVEL DETAILS ETC. THE REFORE THERE IS NO BASIS TO SHOW THAT THE ASSESSEE COMPANY HAD REIMBURSED EXPEN DITURE INCURRED ON THE SAID CAR BY THE THREE DIRECTORS. 16. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED BRI EF WRITTEN SUBMISSION WHEREIN IT WAS STATED THAT BASED ON AN R TI APPLICATION FILED BY MS. SONAL SHAH THE AO MADE CERTAIN ENQUIRIES WITH R EGARD TO THE MOTOR CAR PURCHASED AND IN RESPONSE THERETO THE ASSESSEE FILE D DETAILS SUCH AS COPY OF THE INVOICE ETC. IN FACT REIMBURSEMENTS WERE MADE BY THE COMPANY AND IT WAS SHOWN AS THE ASSET OF THE COMPANY IN ITS BOOKS. THUS NO NEW INFORMATION HAS COME TO THE KNOWLEDGE OF THE AO SO AS TO INVOKE PROVISIONS OF SECTION 148 OF THE ACT. THE AO OUGHT NOT TO HAVE ACTED MERELY ON A TAX ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 10 EVASION PETITION FILED BY AN ESTRANGED FAMILY MEMBE R OF ONE OF THE DIRECTORS PARTICULARLY WHEN THERE IS NO ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE COMPANY. RELIANCE WAS PLACED UPON THE DECI SION OF THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 TO CONTEND THAT WHEN AN ASSET IS ALREADY DISCLOSED IN THE HANDS OF THE ASSESSEE REOPENING IS NOT PERMISSIBLE MERELY ON THE STRENGTH OF A THIRD P ARTY LETTER. HE ALSO RELIED UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS. ITO 324 ITR 154 IN SUPPORT OF HIS CONT ENTION THAT REOPENING OF ASSESSMENT IS NOT JUSTIFIED WITHOUT HAVING A PROPER REASON TO BELIEVE ABOUT ESCAPEMENT OF INCOME. IT WAS ALSO CONTENDED THAT DI SCLOSURE IN THE BALANCE SHEET WOULD AMOUNT TO FULL AND TRUE DISCLOSURE AND HENCE THE AO WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT. IN THIS REGA RD HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF ARTHUR ANDERSON & CO. VS. ACIT 324 ITR 240. THE LEARNED CI T(A) RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF RAJESH JH AVERI STOCK BROKERS P. LTD. 291 ITR 500 WHEREAS THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE AFOREMENTIONED DECISION IS NOT APPLICABLE TO THE PRESENT CASE AS THERE IS NO ESCAPEMENT OF INCOME APART FROM THE FAC T THAT THE AO HAS ACTED MERELY ON THIRD PARTY COMPLAINT WITHOUT APPLYING HI S MIND. 17. ON MERITS IT WAS CONTENDED THAT THOUGH THE CAR WAS NOT PURCHASED IN THE NAME OF THE ASSESSEE COMPANY THE FACT REMAINS THAT IT WAS FINANCED BY THE ASSESSEE COMPANY AND IT WAS USED FOR THE PURPOS E OF THE BUSINESS OF THE COMPANY BY THE DIRECTORS. IT WAS ONLY TO SAVE ON OC TROI AND REGISTRATION CHARGES THE CAR HAS BEEN REGISTERED IN THE NAME OF ONE OF THE DIRECTORS. IN FACT THE LOAN AGREEMENT IS CO-EXECUTED BY THE DIREC TOR SHRI NITIN SHAH AND THE INVOICE IS IN THE NAME OF THE ASSESSEE COMPANY. EVEN A BOARD RESOLUTION WAS PASSED WHEREIN IT WAS STATED THAT THE CAR WAS P URCHASED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF ITS BUSINESS AN D THE CAR RUNNING EXPENDITURE WAS CHARGED TO THE P & L ACCOUNT SHOWIN G USE OF THE CAR BY THREE DIRECTORS IN WHICH EVENT THE ASSESSEE COMPANY IS ENTITLED TO CLAIM DEPRECIATION ON THE SAID CAR. RELIANCE WAS PLACED U PON THE FOLLOWING DECISIONS TO CONTEND THAT ONCE AN ASSET IS REGISTER ED IN THE NAME OF A DIRECTOR BUT THE PAYMENT IS MADE BY THE COMPANY AND DECLARED IN THE ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 11 BALANCE SHEET OF THE COMPANY THE ASSET SHOULD BE DE EMED TO BE OWNED BY THE COMPANY AND DEPRECIATION OUGHT TO HAVE BEEN ALL OWED IN THE HANDS OF THE ASSESSEE COMPANY: - I. ICDS LTD. VS. CIT 350 ITR 527 (SC) II. CIT VS. DILIP SINGH SARDARSINGH BAGGA 201 ITR 995 ( BOM) III. CIT VS. VARANSAI AUTO SALES PVT. LTD. 326 ITR 192 ( ALL) IV. CIT VS. ARAVALI FINLEASE LTD. 341 ITR 282 (GUJ) THE LEARNED CIT(A) RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF M.M. FISHERIES P. LTD. VS. CIT 277 I TR 204. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AFORESA ID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE TH EREFORE CONTENDED THAT DEPRECIATION INTEREST ON CAR LOAN AND INSURANCE PA YMENT OUGHT TO HAVE BEEN ALLOWED AS DEDUCTION IN THE HANDS OF THE ASSES SEE COMPANY. 18. SIMILARLY WITH REGARD TO UPGRADATION OF COMPUTER S OFTWARE AND DEPRECIATION CLAIMED THEREON THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THOUGH THE BILL WAS MISTAKENLY ISSUED IN THE N AME OF THE SISTER CONCERN OF THE ASSESSEE COMPANY THE SAME WAS CLARIFIED SUBS EQUENTLY THAT THE ASSESSEE COMPANY HAS PURCHASED THE COMPUTER SOFTWAR E. IN THIS REGARD HE ADVERTED OUT ATTENTION TO THE WRITTEN SUBMISSION FI LED BEFORE THE CIT(A) (PAGE 100) AND ALSO THE CONFIRMATION LETTER FROM FIRST B ASE WHEREIN IT IS STATED THAT THE ASSESSEE COMPANY IS REGISTERED USER OF TAL LY SOLUTIONS AND THE AMOUNT WAS ALSO RECEIVED FROM THE ASSESSEE COMPANY TOWARDS UPGRADATION OF THE SOFTWARE TALLY. AS REGARDS THE ADHOC DISALLO WANCE OF 5% OF THE CONVEYANCE EXPENDITURE THE LEARNED COUNSEL RELIED U PON THE FOLLOWING DECISIONS TO SUPPORT HIS CONTENTION THAT THERE IS B OUND TO BE SOME CASH ELEMENT WITH RESPECT TO CONVEYANCE EXPENSES AND MER ELY ON THAT BASIS ADHOC DISALLOWANCE IS NOT PERMISSIBLE: - I. SAYAJY IRON ENGG. CO. VS. CIT 253 ITR 749 (GUJ) II. DINESH MILL LTD. VS. CIT 254 ITR 673 (GUJ) 19. ON THE OTHER HAND THE LEARNED D.R. SUBMITTED THAT THE RETURNS OF INCOME WERE ORIGINALLY PROCESSED UNDER SECTION 143( 1) OF THE ACT WHEREIN THERE CANNOT BE ANY APPLICATION OF MIND. WHILE REOP ENING THE ASSESSMENTS ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 12 UNDER SECTION 148 OF THE ACT THE AO OBTAINED PERMIS SION FROM PROPER AUTHORITIES AFTER FURNISHING DETAILS WITH REGARD TO THE DISCREPANCIES FOUND IN THE REGISTRATION ETC. WHICH WOULD CLEARLY POINT OU T THAT THE ASSESSEE HAS NOT DECLARED TRUE AND CORRECT INCOME AND THE INCOME ASS ESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE THUS JUSTIFIED THE ACTION OF THE AO IN REOPENING THE ASSESSMENT. WHILE ARGUING THE ISSUE CONCERNING REOP ENING OF ASSESSMENT AS WELL AS THE CLAIM OF DEPRECIATION AND OTHER EXPENDI TURE ON THE SAID CAR THE LEARNED D.R. SUBMITTED THAT THE CAR WAS NOT ONLY PU RCHASED IN THE NAME OF ONE OF THE DIRECTORS IN HIS INDIVIDUAL CAPACITY BUT THE ADDRESS OF VASAI WAS GIVEN FOR REGISTRATION WHICH DOES NOT EXIST AT ALL AND THIS IN ITSELF SHOWS THE INTENTION OF THE ASSESSEE. IF IT IS PURCHASED FOR A ND ON BEHALF OF THE ASSESSEE COMPANY AT LEAST THE ADDRESS OF THE COMPANY SHOULD HAVE BEEN GIVEN TO THE ROAD TRANSPORT REGISTRATION AUTHORITY. HE ALSO RELI ED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF M.M. FISHER IES (P) LTD. VS. CIT 277 ITR 204 TO SUBMIT THAT THE CAR IS NOT IN THE NAME O F THE COMPANY AND THERE IS NO PROOF THAT THE CAR WAS UTILISED FOR THE PURPO SE OF ASSESSEES BUSINESS WHICH CAN EASILY BE NOTICED BY THE FACT THAT ON ONE HAND THE ASSESSEE COMPANY IS CLAIMED TO BE A VERY SMALL COMPANY WHERE AS PAYMENT WAS CLAIMED TO HAVE BEEN MADE TO THE THREE DIRECTORS TO WARDS PETROL REPAIRS AND MAINTENANCE. THE EXPENDITURE IN THE FINANCIAL YEAR 2003-04 WAS CLAIMED TO BE ` 1 25 340/- AND NONE OF THE DIRECTORS HAVE SHOWN AS TO WHERE THE CAR WAS RUN AND WHAT WAS THE PURPOSE. THE COMPANYS TOT AL INCOME IS ` 1 51 440/- WHEREAS THE VEHICLE EXPENDITURE CLAIMED TO HAVE BEEN REIMBURSED TO THE DIRECTORS FOR THE FINANCIAL YEAR 2003-04 WORKS OUT TO ` 1 25 340/- WHICH HIGHLIGHTS THAT THE CLAIM IS NOT B ASED ON ANY MATERIAL. FOR THE NEXT FINANCIAL YEAR THE EXPENDITURE WORKS O UT TO ` 1 04 571/-. IT ALSO DESERVES TO BE NOTICED THAT IN SOME MONTHS ALL THE DIRECTORS WERE SHOWN TO HAVE UTILISED THE CAR WHEREAS IN SOME MOTHS ONE OR TWO DIRECTORS WERE STATED TO HAVE UTILISED THE CAR. THE TOTAL PETROL E XPENDITURE OF MORE THAN ` 15 000/- FOR MONTH OF APRIL 2003 FOR THE NEW CAR INDICATES THAT THE CAR SHOULD HAVE RUN MORE THAN 120 KMS. PER DAY (INCLUDI NG HOLIDAYS) WHICH IS IMPOSSIBLE AND THUS SUCH CLAIM IS NOT ACCEPTABLE. H E ALSO ADVERTED OUR ATTENTION TO PAGE 21 OF THE PAPER BOOK FILED FOR A. Y. 2004-05 TO SHOW THAT ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 13 THE OPENING STOCK PURCHASES SALES AND CLOSING STO CK ARE SHOWN AS NIL FOR THE YEAR WHEREAS A FRESH CLAIM WAS SOUGHT TO BE MAD E AT A LATER STAGE WHICH IS NOT PERMISSIBLE. IT WAS THUS CONTENDED THA T REOPENING OF ASSESSMENT IS VALID SINCE THE AO HAS REASON TO BELI EVE THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT AND THE CA R CANNOT BE SAID TO HAVE BEEN PURCHASED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY AND IT CAN AT BEST BE STATED TO BE PERQUISITE TO TH E DIRECTORS AND THUS THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION AND OTHER EXPENSES ON THE SAID CAR IN THE ABSENCE OF PROPER LOG BOOK ETC. WITH RE GARD TO THE CLAIM OF DEPRECIATION ON COMPUTER SOFTWARE AND ADHOC DISALLO WANCE THE LEARNED D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE AO AS WELL AS THE CIT(A). 20. JOINING THE ISSUE THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT IN RESPECT OF A.Y. 2005-06 THE ASSESSEE DECLARED OP ENING STOCK PURCHASE ETC. AS COULD BE NOTICED FROM PAGE 26 OF THE PAPER BOOK WHEREAS PAGE 21 MERELY REFERS TO THE EFFECT OF VALUATION PRESCRIBED UNDER SECTION 145A OF THE ACT; IN THE INSTANT CASE THERE IS NIL EFFECT ON THE PROFIT OR LOSS AND IT IS SHOWN MERELY ON PAGE 21 WHEREAS THE TOTAL PURCHASE AND SA LES WERE DECLARED IN PAGE 26 OF THE PAPER BOOK. HE FURTHER SUBMITTED THA T WITH REGARD TO OWNERSHIP OF THE CAR THERE IS NO DISPUTE THAT THE C OMPANY OWNED THE CAR BECAUSE REPAYMENTS OF CAR LOAN WERE MADE BY THE COM PANY. IN THANE OCTROI NEED NOT TO BE PAID AND IF IT IS PURCHASED IN THE N AME OF THE ASSESSEE COMPANY SUBSTANTIAL AMOUNT HAS TO BE PAID TOWARDS R EGISTRATION ETC. AND HENCE AS A TAX PLANNING MEASURE THE CAR WAS PURCHAS ED IN THE NAME OF ONE OF THE DIRECTORS THOUGH IT WAS TO BE USED BY ALL TH E THREE DIRECTORS. WHEN POINTED OUT AS TO WHY SO MUCH EXPENDITURE HAS BEEN INCURRED TOWARDS PETROL THE LEARNED COUNSEL FOR THE ASSESSEE COULD N OT POINT OUT THE DETAILS AND THE BASIS ON WHICH CLAIM OF EXPENDITURE WAS MAD E. HE MERELY SUBMITTED THAT THE DIRECTORS HAVE ACTUALLY INCURRED THE EXPENDITURE AND AS CLAIMED BY THEM THE COMPANY REIMBURSED THE EXPENDIT URE. 21. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RECORD. AS REGARDS THE PROPRIETY OF REOPENING OF AS SESSMENT IT DESERVES TO BE NOTICED THAT IN THE INSTANT CASE THE RETURNS OF INC OME FILED BY THE ASSESSEE ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 14 WERE PROCESSED UNDER SECTION 143(1) OF THE AC. AS R IGHTLY OBSERVED BY THE APEX COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI S TOCK BROKERS PVT. LTD. 291 ITR 500 THE STATUTE ASSUMES TWO DIFFERENT EXPRE SSIONS TO PROVIDE THE DIFFERENCE BETWEEN THE PROCESS UNDER SECTION 143(1) AND UNDER SECTION 143(3) OF THE ACT I.E. UNDER SECTION 143(1) OF THE ACT THE RETURN IS PROCESSED AND INTIMATION IS SENT WHEREAS UNDER SECTION 143( 3) OF THE ACT THERE IS DETERMINATION OF AMOUNT OF TAX PAYABLE WITH REGAR D TO THE ASSESSMENT YEAR. THE APEX COURT OBSERVED THAT THE INTIMATION U NDER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT; THE REFORE IN THE ABSENCE OF ASSESSMENT THE QUESTION OF CHANGE OF OPINION DOES N OT ARISE. THIS DECISION WAS NOT DIRECTLY OVERRULED OR DISTINGUISHED BY ANOT HER BENCH OF HON'BLE SUPREME COURT EXCEPT FOR THE FACT THAT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) THE BENCH CONSIDERED TH E EXPRESSION REASON TO BELIEVE TO EMPHASISE THAT THE AO IS NOT EMPOWERED TO ARBITRARILY REOPEN THE ASSESSMENT ON MERE CHANGE OF OPINION. IT CAN THUS B E SEEN THAT THE DECISION OF THE APEX COURT (SUPRA) DID NOT OVERRULE THE EARL IER DECISION BUT ONLY EMPHASISED THE NEED TO RECORD THE REASONS TO BELIEV E. IN THE CASE ON HAND THE AO HAS GATHERED SUFFICIENT MATERIAL TO COME TO THE CONCLUSION THAT THE CAR IS PURCHASED IN THE INDIVIDUAL NAME OF THE DIRE CTOR AND DEPRECIATION WAS CLAIMED BY THE ASSESSEE COMPANY WHICH HAS RESULTED IN ESCAPEMENT OF TAXABLE INCOME. THIS INFORMATION WAS OBTAINED THROU GH THE TAX EVASION PROCEEDINGS AND ENQUIRY THEREON. THUS IT CANNOT BE SAID THAT THERE IS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. IT CANNOT ALSO BE SAID THAT IT IS CHANGE OF OPINION BECAUSE IN 143(1) PROCEEDINGS IT CANNOT BE SAID THAT THE AO HAS APPLIED HIS MIND EARLIER. IF T HERE IS PRIMA FACIE MATERIAL ON WHICH ASSESSMENT IS REOPENED SUFFICIENCY OR COR RECTNESS OF THE MATERIAL CANNOT BE CONSIDERED AT THAT STAGE AS HELD BY THE APEX COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. VS. ITO 236 ITR 34. 22. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JE T AIRWAYS (I) LTD. 195 TAXMAN 117 IN SUPPORT OF HIS CONTENTION THAT IF THE ASSESSEE CLAIMS DEPRECIATION IN THE RETURN AND THE FACTS ARE ALREAD Y ON RECORD MERELY ON THE BASIS OF A TAX EVASION PETITION FILED BY AN ESTRANG ED MEMBER OF THE FAMILY ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 15 REASSESSMENT PROCEEDINGS CANNOT BE INITIATED. A CAR EFUL PERUSAL OF THE JUDGEMENT OF THE HON'BLE HIGH COURT REVEALS THAT TH E COURT WAS CONCERNED WITH THE EFFECT OF EXPLANATION 3 TO SECTION 147 WHI CH WAS INSERTED BY FINANCE (NO. 2) ACT 2009 WHEREBY IT IS STATED THAT EVENTHO UGH REOPENING OF ASSESSMENT IS BASED ON A PARTICULAR ISSUE THE ULTIMATE ASSESSM ENT CAN BE MADE BY TAKING INTO CONSIDERATION CERTAIN OTHER ISSUES WHICH WERE NOT FORMING PART OF THE NOTICE. THE COURT OBSERVED THAT THE EXPRESSION THE ASSESSING OFFICER IS FREE TO ASSESS OR REASSESS SUCH INCOME AND ALSO OTHER INCOME SHOWS THAT THE REASSESSMENT SHOULD BE VALID ON THE MAIN GROUND FOR WHICH IT WAS REOPENED IN WHICH EVENT ANY OTHER INCOME CHARGEABLE TO TAX WHI CH COMES TO HIS NOTICE SUBSEQUENTLY CAN BE TAKEN INTO CONSIDERATION FOR A SSESSMENT. THE WORDS AND ALSO ARE USED IN CUMULATIVE AND COGNITIVE SENSE. T HE HON'BLE HIGH COURT THUS HELD THAT IF AFTER ISSUING THE NOTICE UNDER SECTI ON 148 THE AO ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOM E WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT IT IS NOT OPEN TO HIM TO INDEPE NDENTLY ASSESS SOME OTHER INCOME. THIS HAS NO APPLICATION TO THE FACTS ON HAN D. ADMITTEDLY NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT ONLY ON THE GRO UND THAT THE ASSESSEE CLAIMED DEPRECIATION AND INTEREST ON THE ASSET WHIC H WAS PURCHASED BY ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY AND THUS CLAI M OF DEPRECIATION AND INTEREST HAS RESULTED IN ESCAPEMENT OF TAXABLE INCO ME. THE ASSESSMENT WAS ALSO MADE ON THE SAME PREMISE AND HENCE IT CANNOT B E SAID THAT THE ORIGINAL REASON FOR WHICH NOTICE WAS ISSUED UNDER SECTION 1 48 WAS DROPPED BY THE AO. THE LEARNED COUNSEL HAS ALSO RELIED UPON THE DE CISION OF THE HON'BLE BOMBAY HIGH COURT (REPORTED IN 324 ITR 154 & 240 RE SPECTIVELY) TO SUBMIT THAT IF THERE IS FULL AND TRUE DISCLOSURE AT THE TI ME OF FILING THE RETURN THE AO IS NOT EMPOWERED TO REOPEN THE ASSESSMENT MERELY ON CH ANGE OF OPINION BY HOLDING THAT THERE IS ESCAPEMENT OF INCOME. THE COU RT ALSO OBSERVED THAT THE REASONS WHICH WERE RECORDED BY THE AO FOR REOPENING OF ASSESSMENT ARE THE ONLY REASONS WHICH CAN BE CONSIDERED WHEN THE FORMA TION OF BELIEF IS CHALLENGED. HOWEVER IN THE INSTANT CASE THERE WAS NO ASSESSMENT MADE ORIGINALLY SINCE THE RETURNS WERE PROCESSED UNDER SECTION 143(1) OF THE ACT. DURING THE COURSE OF GATHERING MATERIAL TO RESPOND TO THE RTI APPLICATION ETC. ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 16 THE AO GATHERED MATERIAL BY WHICH HE HAS FORMED AN OPINION THAT THE INCOME CHARGEABLE TO TAX IN THE CASE OF THE ASSESSEE HAS E SCAPED ASSESSMENT BY VIRTUE OF THE FACT THAT THE COMPANY HAS CLAIMED DEPRECIATI ON ON AN ASSET WHICH WAS PURCHASED BY ONE OF THE DIRECTORS. AS LONG AS THERE IS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT SUFFICIENCY OF REASON S CANNOT BE GONE INTO AT THAT STAGE. UNDER THESE CIRCUMSTANCES I AM OF THE O PINION THAT FOR THE YEAR UNDER CONSIDERATION THE REASSESSMENT PROCEEDINGS AR E VALID IN LAW SINCE THE NOTICE WAS ISSUED BASED UPON SUFFICIENT MATERIAL OB TAINED BY THE AO SUBSEQUENT TO PROCESSING OF THE RETURN. 23. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE COMPA NY HAS DOMINION OVER THE CAR AND IT IS ENTITLED TO CLAIM DEPRECIATI ON IT DESERVES TO BE NOTICED THAT IN THE INSTANT CASE THE CAR WAS PURCHASED IN T HE NAME OF THE DIRECTOR BY GIVING FALSE ADDRESS. THE COMPANY MIGHT HAVE DECIDE D TO FINANCE THE CAR PURCHASED BY TAKING LOAN AND REPAYMENT THEREOF WHI CH MAY BE IN THE FORM OF GIVING AN INCENTIVE TO THE DIRECTORS I.E. MONEY MU ST HAVE BEEN INTENDED TO BE GIVEN AS PERQUISITE TO THE DIRECTOR BUT THAT ITSELF CANNOT BE TAKEN AS A BASIS TO HOLD THAT THE CAR WAS OWNED BY THE ASSESSEE COMPANY AND USED FOR THE PURPOSE OF BUSINESS BOTH CONDITIONS HAVE TO BE SA TISFIED IN ORDER TO CLAIM DEPRECIATION. AS REGARDS USAGE OF THE CAR THE LEARN ED CIT(A) HAS NOTICED THAT THE COMPANY HAS NOT MAINTAINED ANY LOGBOOK OR ANY O THER DETAILS TO SHOW THAT SOME PETROL EXPENSES ARE INCURRED ON THE SAID VEHIC LE. THOUGH THE ASSESSEE SUBMITTED BEFORE THE TRIBUNAL THAT SOME EXPENDITURE WAS REIMBURSED TO THE DIRECTORS AND THE CAR WAS USED BY THE THREE DIRECTO RS A BARE PERUSAL OF THE SUMMARY OF ALLEGED REIMBURSEMENT OF VEHICLE MAINTEN ANCE SHOWS THAT IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004-05 ITSELF THE C OMPANY CLAIMED TO HAVE SPENT A SUM OF ` 1 25 340/- TOWARDS VEHICLE EXPENSES WHICH IS PRESU MABLY THE PETROL EXPENSES. AT THE RELEVANT POINT OF TIME PETR OL RATE WAS HOVERING AROUND ` 40/- PER LITRE IN MUMBAI AND IN SOME MONTHS ALL THE THREE DIRECTORS CLAIMED TO HAVE UTILISED THE CAR AND IN TERMS OF PETROL CON SUMPTION IF IT IS RECKONED THE CAR MIGHT HAVE RUN FOR MORE THAN 180 KMS. PER D AY INCLUDING SATURDAYS AND SUNDAYS WHICH IS AGAINST THE PREPONDERANCE OF PROBABILITY PARTICULARLY IN A CITY LIKE MUMBAI AND ITS CHAOTIC TRAFFIC PARKING PROBLEMS ETC. IF IT IS THE CASE OF THE ASSESSEE THAT THE CAR WAS UTILISED FOR OUTST ATION TRAVEL THEN THERE WOULD ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 17 HAVE BEEN BILLS AND REIMBURSEMENT SHOULD BE BASED O N THE BILLS AND VOUCHERS WHEREAS THE ASSESSEE COMPANY CLAIMED TO HAVE NOT MA INTAINED ANY BILLS. IT IS ALSO NOT SHOWN AS TO WHAT ARE THE PLACES OF VISITS BY THEM AND WHAT IS THE NATURE OF THEIR VISITS. IN SUM AND SUBSTANCE THE B USINESS USAGE OF THE CAR WAS NOT PROVED APART FROM THE FACT THAT THE ASSESSEE C OMPANY HAS NOT MAINTAINED LOGBOOK CONTROL REGISTER FOR RECORDING THE MOVEMEN T RUNNING PETROL EXPENSES REPAIR EXPENSES TRAVEL DETAILS ETC. HAVING REGARD TO THE CIRCUMSTANCES THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT THE CA R WAS NOT USED FOR BUSINESS PURPOSE OF THE ASSESSEE COMPANY AND BASICALLY THE C AR WAS OWNED BY ONE OF THE DIRECTORS IN HIS PERSONAL CAPACITY AND HENCE TH E ASSESSEE IS NOT ENTITLED TO DEPRECIATION ON THE SAID CAR. THE CASE LAW RELIED U PON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. IN ALL THOSE CASES USAGE OF CAR FOR BUSINESS PURPOSE IS NOT DISPUTED THOUGH THE CAR WAS REGISTERED IN THE N AME OF THE LESSEE. THE COURT HAVE EXAMINED THE PROVISIONS OF SECTION 2(30) OF TH E MOTOR VEHICLES ACT THAT CREATES A LEGAL FICTION OF OWNERSHIP IN FAVOUR OF T HE LESSEE ONLY FOR THE PURPOSE OF THAT ACT BUT THE CIRCUMSTANCE CLEARLY SHOWED THA T THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF LEASING CARS WHEREAS IN THE INST ANT CASE THE ASSESSEE HAS NOT CLAIMED TO HAVE GOT THE CAR REGISTERED IN THE N AME OF THE DIRECTOR BECAUSE OF THE STATUTORY COMPULSIONS BUT ONLY TO AVAIL CERT AIN OCTROI AND OTHER BENEFITS. IF A PERSON CAN LIE UNDER A PARTICULAR ENACTMENT BY GIVING WRONG ADDRESS AND WRONG NAME OF THE OWNER IT IS DIFFICULT TO BELIEVE THAT THE ASSESSEES CLAIM UNDER THE INCOME TAX ACT IS GENUINE; IT MAY BE TO A VAIL TAX BENEFIT BY CLAIMING DEPRECIATION. IT IS WELL SETTLED THAT IN ORDER TO C LAIM ANY DEDUCTION THE INITIAL ONUS IS UPON THE PERSON WHO CLAIMS DEDUCTION. IN TH E INSTANT CASE NO MATERIAL WHATSOEVER WAS PLACED TO PROVE THAT THE CAR WAS UT ILISED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. THEREFORE MERE P AYMENT OF INSTALMENTS INSURANCE PREMIUM ETC. CANNOT LEAD TO THE CONCLUSI ON THAT THE ASSESSEE HAS DOMINION OVER THE VEHICLE AND IT WAS UTILISED FOR T HE PURPOSE OF BUSINESS. ON THE CONTRARY THE DECISION OF THE HON'BLE DELHI HIG H COURT IN THE CASE OF M.M. FISHERIES PVT. LTD. VS. CIT 277 ITR 204 IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE. THEREFORE I DO NOT FIND ANY INFIRMIT Y IN THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE. ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 18 24. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF DEPREC IATION ON COMPUTER. IT MAY BE NOTICED THAT THE ASSESSEE FURNISHED A CER TIFICATE OF THE TALLY AUTHORISED SERVICE PARTNER TO CONFIRM THAT THE ASSE SSEE COMPANY IS THE REGISTERED USER OF TALLY SOLUTIONS AND THE AMOUNT W AS RECEIVED BY DEMAND DRAFT NO. 637047 FROM THE ASSESSEE COMPANY TOWARDS UPGRADATION OF SOFTWARE. THESE FACTS WERE NOT DISPUTED BY THE LEAR NED D.R. UNDER THESE CIRCUMSTANCES I HOLD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION ON COMPUTER SOFTWARE. THE AO IS DIRECTED ACCORDINGLY. 25. NEXT ISSUE IS WITH REGARD TO ADHOC DISALLOWANCE MAD E BY THE AO REFERABLE TO THE CLAIM OF CONVEYANCE EXPENSES. THIS ASPECT WAS NOT CONSIDERED BY THE LEARNED CIT(A) IN HIS ORDER. THE CASE OF THE ASSESSEE IS THAT THERE IS NO BASIS FOR MAKING AN ADHOC DISALLOW ANCE OF 5% HAVING REGARD TO THE FACT THAT WITH REGARD TO CONVEYANCE EXPENDIT URE VARIOUS CASH BILLS ARE MADE IN SMALL DENOMINATIONS FOR WHICH THERE CANNOT BE THIRD PARTY VOUCHERS AND THE CLAIM HAS TO BE TESTED WITH REGARD TO THE TOTAL TURNOVER OF THE BUSINESS ETC. WHEREAS THE AO PROCEEDED TO MAKE AN ADHOC DISALLOWANCE WHICH IS NOT PERMISSIBLE. 26. THE LEARNED D.R. ON THE OTHER HAND RELIED UPON TH E ORDER PASSED BY THE AO. 27. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND ALSO CONSIDERING THE SMALLNESS OF THE AMOUNT DISALLOWED I AM OF THE VIEW THAT IT IS NOT A FIT CASE FOR MAKING ANY DISALLOWANCE. I THEREFORE SET ASIDE THE ADHOC DISALLOWANCE MADE UNDER THE HEAD CONVEYANCE EXPEND ITURE. 28. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE FO R ASSESSMENT YEARS 2004-05 AND 2005-06 ARE TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI DATED: 9 TH APRIL 2014 ITA NO. 3254 & 3255/MUM/2013 M/S. LYNX SYNERGY & SOLUTIONS P. LTD. 19 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 9 MUMBAI 4. THE CIT 5 MUMBAI CITY 5. THE DR SMC BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.