Assessee wins appeal, Revenue loses. Vehicle expenses partly upheld. Section 69B addition deleted for lack of evidence.

The assessee's appeal was allowed, and the Revenue's appeal was dismissed. The disallowance of vehicle expenses and depreciation was partially upheld but reduced, with the issue remanded for fresh adjudication. The addition under section 69B was deemed unjustified due to lack of conclusive evidence, resulting in the deletion of the addition. The Tribunal ruled in favor of the assessee, emphasizing the importance of evidence in invoking section 69B.

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Issues Involved:
1. Disallowance of vehicle expenses and depreciation.
2. Addition u/s 69B of the Act.

Summary:

1. Disallowance of Vehicle Expenses and Depreciation:
The first issue in the assessee's appeal concerns the disallowance of Rs.9,58,836/- out of vehicle expenses and Rs.5,00,705/- out of depreciation of the vehicle, aggregating to Rs.14,59,541/-. The assessee, engaged in the diamond business, argued that high safety for movement of goods and personnel necessitated these expenses. The Assessing Officer (A.O.) disallowed 10% of the total vehicle expenses and depreciation, amounting to Rs.22,56,867/-. The learned CIT(A) confirmed the principle of disallowance but reduced the quantum to Rs.17,56,163/-. The Tribunal noted that the Fringe Benefit Tax (FBT) paid by the assessee did not justify the entire vehicle expenses as a fringe benefit to employees. Following the precedent set in the assessee's own case for the Assessment Year 2005-06, the Tribunal remanded the issue back to the A.O. for fresh adjudication. Accordingly, ground No.1 was allowed for statistical purposes.

2. Addition u/s 69B of the Act:
The next issue is the addition of Rs.80,49,540/- u/s 69B. The A.O. noted that the assessee purchased shares of Ocean Crown Diamond P. Ltd. at Rs.2500 per share, while the value as on 31st March 2006 was Rs.5407/- per share. The A.O. made an addition of Rs.5,08,69,593/- based on the difference in value. The learned CIT(A) reduced this addition to Rs.80,49,540/- after considering a valuation report that determined the value at Rs.2960/- per share. The Tribunal emphasized that for invoking section 69B, there must be conclusive evidence that the assessee paid more than recorded in the books. The Tribunal found no such evidence and noted that the shares were purchased from a related person at a negotiated price. The Tribunal concluded that the addition u/s 69B was not justified and deleted the addition sustained by the learned CIT(A), thereby allowing the assessee's appeal and dismissing the Revenue's appeal.

Conclusion:
In the result, the assessee's appeal was allowed, and the Revenue's appeal was dismissed. The order was pronounced on 30th July 2010.

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