2010 (12) TMI 1243 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the assessment order passed by the AO.
2. Wrong assessment of Rs. 5,00,000 as income instead of loan.
3. Addition of Rs. 91,881 on account of car insurance.
4. Condonation of delay in filing the appeal.

Summary:

1. Legality of the Assessment Order:
The first ground of appeal, which questioned the legality of the assessment order passed by the AO, was dismissed as academic in nature since it was dependent on the outcome of grounds no. 2 and 3.

2. Wrong Assessment of Rs. 5,00,000 as Income:
The assessee claimed that Rs. 5,00,000, which was admitted as professional income, was actually a loan. The Commissioner of Income Tax (CIT) had issued a show cause notice u/s 263 and directed the AO to investigate the genuineness of the loan. The AO, in the revised assessment order, accepted the loan claim but disallowed the insurance claim. The CIT(A) upheld the AO's decision based on the Supreme Court's decision in Goetz (India) Ltd., which restricts the AO from entertaining fresh claims without a revised return. However, the Tribunal clarified that this restriction does not apply to the Tribunal's powers u/s 254. Consequently, the Tribunal allowed the assessee's claim of Rs. 5,00,000 as a loan and not income.

3. Addition of Rs. 91,881 on Account of Car Insurance:
The AO disallowed the car insurance claim, treating it as part of the asset's cost to be capitalized. The CIT, in the revision order u/s 263, had directed the AO to verify if the car was used during the year and to allow insurance and depreciation accordingly. The Tribunal found that since the car was used during the financial year and depreciation was allowed, the insurance claim should also be allowed as revenue expenditure. The Tribunal clarified that insurance paid for risk cover for one year cannot be treated as part of the vehicle's acquisition cost.

4. Condonation of Delay in Filing the Appeal:
There was a delay of 240 days in filing the appeal. The assessee explained that the delay was due to pursuing the issue in other proceedings and acting under the bonafide belief based on the representative's advice. The Tribunal, considering the explanation and the principle of substantial justice, condoned the delay.

Conclusion:
The appeal bearing ITA No. 4045/Mum/2009 was allowed, and the appeal bearing ITA No. 2019/Mum/2010 was dismissed. The Tribunal pronounced the judgment in the open court on 10.12.2010.