2016 (7) TMI 1508 - AT - Income Tax

Deduction u/s 24 - income from house property or business asset - AO has disallowed the deduction u/s 24 on the ground that this property is business asset and the assessee has claimed depreciation thereon - HELD THAT - Though the assessee has claimed that deduction u/s 24 of the Act should be allowed as he has claimed income from house property, but in the light of the fact that when the assessee has claimed depreciation on this business asset, it is of the view that the assessee cannot claim the property to house property as well as the business assets. Once it is an house property, the depreciation cannot be allowed but the assessee claimed depreciation on this property. Therefore, the deduction u/s 24 of the Act cannot be allowed as it can only allowed against the income from house property and not against the business income of the assessee. - Decided against assessee. Adhoc additions made by the AO without pointing out any specific defect in the maintenance of account. Since the addition on account of adhoc disallowances are not sustainable in the eyes of law, we delete the same after setting aside the order of the CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Ex-parte order passed by CIT(A) ignoring adjournment application.
2. Denial of deduction u/s 24 of the Income Tax Act, 1961.
3. Disallowance of Travelling & Conveyance Expenses.
4. Disallowance of Freight Expenses.

Ex-parte Order Issue:
The appellant challenged the ex-parte order passed by the CIT(A) alleging that proper opportunity was not given. The Tribunal found that the CIT(A) had issued notices and the assessee sought adjournments multiple times. Ultimately, the CIT(A) disposed of the appeal on merit in the absence of the assessee. The Tribunal upheld the decision of the CIT(A) stating that there was no infirmity in the order, and Ground No.1 was rejected.

Deduction u/s 24 Issue:
Regarding the denial of deduction u/s 24 of the Income Tax Act, the assessee claimed depreciation on a property shown as a business asset. The Assessing Officer disallowed the deduction u/s 24 on the grounds that the property was a business asset on which depreciation was claimed. The Tribunal held that since the assessee claimed depreciation on the property, it cannot be considered a house property for the purpose of claiming deduction u/s 24. The deduction u/s 24 can only be allowed against income from house property, not against business income. Therefore, the Tribunal dismissed the appeal on this ground and confirmed the CIT(A)'s order.

Travelling & Conveyance Expenses Issue:
The Tribunal observed that adhoc disallowances were made by the Assessing Officer without specifying any defects in the account maintenance. As these additions were found to be unsustainable in the eyes of the law, the Tribunal deleted the disallowances and set aside the CIT(A)'s order on this issue.

Freight Expenses Issue:
Similar to the Travelling & Conveyance Expenses issue, the Tribunal found that adhoc disallowances made by the Assessing Officer without specific defects in account maintenance were not sustainable. Consequently, the Tribunal deleted the disallowance of Freight Expenses after setting aside the CIT(A)'s order.

In conclusion, the Tribunal partly allowed the appeal of the assessee, specifically addressing the issues related to the denial of deduction u/s 24 and the disallowance of Travelling & Conveyance Expenses and Freight Expenses.