1. The assessee has preferred this appeal against the order dated 3-5-1983 of Dr. N.R. Sivaswamy, the Commissioner (Appeals), who dismissed the appeal against the order dated 30-3-1981 of Shri E.Hariharan, the Fourth ITO.2. The relevant facts in brief are that the assessee is an individual.
The previous year relevant for the assessment year 1968-69 ended on 31-3-1968. The original assessment was completed on 19-2-1969.
However, later on, the ITO had information that the assessee as director of Saroja Mills was freely using the cars of the company for his personal purposes and the value of such benefit or perquisite was not disclosed or admitted in the original assessment. Therefore, the ITO reopened the assessment after getting sanction of the Commissioner on 15-10-1976.
Consequently, the ITO issued notice on the assessee under Section 147 read with Section 148 of the Income-tax Act, 1961 ('the Act') to show cause that why reassessment should not be made on the assessee being the income escaped to be assessed in the original assessment. In compliance with the notice the assessee filed the return and therein pleaded that there was no benefit or perquisite assessable in the hands of the assessee and in particular, there should be no addition on account of personal use of the cars by the assessee in view of the fact that in the case of the company for the assessment year 1968-69, such perquisites were added under Section 40(c) of the Act vide order dated 25-9-1971 and the amount relating to the assessee was at Rs. 9,097 which was included in the company's assessment. Accordingly, the ITO held that the contention of the representative of the assessee that there was no benefit or perquisite assessable could not be accepted and that similar addition for the assessment year 1970-71 in the assessee's own case was confirmed in appeal. On these reasons he made addition for a sum of Rs. 9,097 for the personal use of the cars by the assessee of the company. Reliance was placed on the decision in Rendell v. Went (Inspector of Taxes)  58 ITR 73 (HL).
3. In appeal, the Commissioner (Appeals) confirmed it and thereby distinguished the decision relied upon by the learned representative of the assessee in the case of CIT v. A.R. Adaikappa Chettiar  91 ITR 90 (Mad.) observing as under : In my opinion, the above decision does not apply to the present case. The Madras High Court decided in the case cited by the assessee that where a director obtains any benefit in an unauthorised manner from a company then Section 2(6C)(iii) of the Indian Income-tax Act, 1922, which corresponds to Section 2(24)(iv) of the Income-tax Act, 1961, shall not apply, for in such an event, the director should return the benefit to the company under the Company Law. Moreover, the Madras High Court held, 'The Income-tax Officer tried to assess the value of a benefit received by a partner of a managing agency firm from a company but the ITO did not assess the value of the benefit in the hands of the managing agency firm itself. The High Court held that unless the managing agency firm was also assessed on such income, the partner cannot be assessed and the partner's assessment cannot be reopened. Moreover, in the case of CIT v. A.R. Adaikappa Chettiar  91 ITR 90 (Mad.) the unauthorised use of the car was by the managing agents but not by the directors of the company and, therefore, the provisions of Section 2(6C)(iii) of the Indian Income-tax Act, 1922, were not applicable at all.
Moreover, in the present case before me, it is a director of a company who used all the cars of the company. The assessee could not prove that the use of the cars was unauthorised. In fact the company Saroja Mills Ltd. authorised the use of the cars by the assessee and the assessee used such cars for a number of accounting years. The company did not take any action against Sri T. Manickavasagam Chettiar nor did it ask for any payment. The articles of the company did not prohibit such use of the cars by the directors.
4. The assessee being aggrieved and dissatisfied with the order of the Commissioner (Appeals) has preferred this appeal. Shri N. Devanathan, the learned Counsel for the assessee, contends that the learned Commissioner (Appeals) erred in sustaining the addition of Rs. 9,097 in the income-tax assessment of late Shri T. Manickavasagam Chettiar as being the value of perquisite attributable to the use of car of Saroja Mills Ltd. for personal purposes, that the Commissioner (Appeals) ought to have appreciated that the benefit of perquisite assessable under the Act should be a benefit or perquisite legally permissible to be enjoyed by the assessee and in this case the assessee was not authorised to use the cars and, therefore, the use of the cars was unauthorised, hence, no question arises of assessment of value of perquisite as income of the assessee. Reliance is placed on the decisions in A.R. Adaikappa Chettiar's case (supra) and MM. Metha v. CIT  117 ITR 362 (Cal.) On the other hand, Shri K. Venkataraman, the learned departmental representative, contends that Section 2(24)(iv) of the Act defines 'income' and Section 17(2) of the Act defines 'perquisite'. These two sections read together leave no doubt that the impugned amount of perquisite representing the use of the cars by the director of the company, which is for personal use by the director, is assessable in the income of the assessee. He further contends that there is no proof that the assessee is using the cars as unauthorised in view of the fact that the company is not opposed to the assessee, therefore, the presumption is there that the use of the car by the director is authorised. He further urged that the assessee is using the cars of the company continuously for several years and the company has not opposed it. Therefore, the company has authorised its use and as such it is perquisite. He further contends that the findings of the Commissioner (Appeals) that in fact the company authorised the use of cars by the assessee and the assessee used such cars for a number of years and the company did not take any action against Shri T. Manickavasagam Chettiar, nor did it ask for any payment, that the articles of the company did not prohibit such use of cars by the director are all findings of fact and there is no material to rebut these. Therefore, it is proved that the use of the cars by the assessee is authorised. He relies on the order of the Commissioner (Appeals).
5. In availing the right of rebuttal Shri N. Devanathan admits that the assessee is using the cars of the company continuously for a number of previous accounting years and no action has been taken by the company for the unauthorised use of the cars by the assessee, that the articles of the company did not prohibit such use of the cars by the director, but he contends that it is for the department to prove that the company has authorised the cars and proof cannot be substituted for conjecture and inferences, howsoever, strong these are. He further admits that past record of the case on the issue is not in favour of the assessee, but the assessee on account of it cannot be debarred to plead its claim as each year is specific and independent and no principle of res judicata and estoppel is applicable in income-tax matters.
6. We have heard the rival contentions and gone through the records before us. In the case of A.R. Adaikappa Chettiar (supra), their Lordships of the Madras High Court has held that in the instant case unauthorised user of the company's car by the assessee was held not to attract Section 2(6C)(iii) of the Indian Income-tax Act, 1922 ('the 1922 Act') as it would not constitute a benefit or perquisite obtained from the company. Even if such unauthorised use of the company's cars by the managing agents is taken to be a benefit or perquisite, unless, the managing agency firm is assessed on such income by reopening its assessments, its partners' assessments cannot be reopened. In the instant cases as the managing agents' assessments were not reopened, it was held that the reopening of the partners' assessments was invalid in law. Further, as in the instant cases it was found that the unauthorised user was by the assessee as managing agents and not as directors, it was held that the provisions of Section 2(6C)(iii) cannot be brought in aid. Their Lordships further observed that the benefit or advantage which might have been taken by a director or other person from a company without any claim of right has to be repaid or returned to the company if the company discovers the unauthorised taking and seeks to enforce its restitution. In the circumstances, the words 'benefit or perquisite' occurring in Section 2(6C)(iii) can only take in those authorised by the company and it is not possible to treat both authorised and unauthorised benefits alike. In the case of the assessee the facts are quite distinguishable and the Commissioner (Appeals) has rightly distinguished these holding further that the case of A.R.Adaikappa Chettiar (supra) is not applicable to the facts of the case of the assessee. In the case of the assessee the director and managing director used the cars of the assessee for years together and the company did not oppose its use nor took action for the recovery.
Furthermore, in the past the claim of the assessee was not accepted and disallowances were made as is made over here and the assessee accepted it. Therefore, we hold that the case of A.R. Adaikappa Chettiar (supra), is not applicable to the facts of this case ; rather the conduct of the assessee and the company proves that the assessee is authorised to use the cars of the company and is using these per the authority of the company. The use of car can be there no doubt under the agreement between the company and its managing director or directors, but an agreement or contract could be worked out and it can be proved by the conduct of the parties. In this case it has been proved, as we have mentioned above, that the company has not questioned the assessee in the previous year relevant for the assessment year under consideration nor in the past. No action was taken by the company or even raised a finger was to point out that the director is using the cars without its authority. Therefore, we hold that the use of the cars by the assessee of the company are authorised and in agreement with the company. Furthermore, had it not been there then the assessee should have challenged the disallowance made in the case of the assessee in the past but the assessee accepted it. There is no proof brought on record to rebut this presumption and there is no proof on record even at this stage to rebut the findings of the Commissioner (Appeals), which are findings of fact and are there in his order in paragraphs 3 and 4 and in particular, the findings which we have cited above.
Therefore, we hold that the assessee has been authorised the use of cars in dispute and as such, the contention of the learned Counsel for the assessee is liable to be rejected when he says that the assessee is using the cars as unauthorised and, therefore, the onus is on the department to prove that the use of the cars is there by the assessee as authorised by the company to which the cars belong and the assessee is managing director thereof. Furthermore, Section 2(24)(iv) describes income and says that income includes : the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ; (i) the value of rent-free accommodation provided to the assessee by his employer ; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer ; (iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases-- (b) by a company to an employee being a person who has a substantial interest in the company ; (c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income under the head 'Salaries', exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds eighteen thousand rupees ; Rule 3 of the Income-tax Rules, 1962 ('the Rules') says that the value of perquisite in respect of motor-car is to be computed in the manner mentioned in the table hereinafter stated : 1 2 3 Where the h p. rating Where the h.p. rating of of the car does not the car exceeds 16 or the exceed 16 or the cubic cubic capacity of the capacity of the engine engine exceeds 1.88 litres Thus, from the combined reading of Section 2(24)(iv), Section 17(2) and Rule 3, there is no doubt left in our mind that if the cars of the company are used by its directors then it is a benefit or amenity granted or provided by the company and as such it is perquisite and it is immaterial if the same is free of cost or at concessional rate, but the value of such perquisite is to be determined and to be assessed in the case of the director or managing director or employee of the company by whom such cars are used. As in this case it is an admitted position that the cars have been used by the assessee of the company, but these are used as such without authorisation of the company and being so, the value of this benefit cannot be assessed in the income of the assessee. Thus, it is an admitted position that the cars have been used by the assessee and the same are perquisite, but the value of the perquisite cannot be assessed in the hands of the assessee on the totality of the facts and circumstances of the case since it has been assessed accordingly by the authorities below, hence, we hold that they are justified in doing so and thereby confirm the impugned order on the issue. Before we part we want to mention that the case relied upon by the assessee in M.M. Metha's case (supra) is also of no help to the assessee being distinguishable and the admitted facts as we have mentioned above it is not rebutted by the learned Counsel of the assessee when the learned departmental representative stated at the Bar that the cars of the company are authorised to be used by its directors and managing directors and reliance was placed on the articles and objects of the association of the company. No doubt, the learned Counsel for the assessee accepted it stating therein that there is no proof brought on record by the department to prove that in the case of the assessee there was authorisation by the company and if circumstances are there to prove it, as we have mentioned above, then it cannot be said that the onus is not discharged by the department because contractual obligation can be proved by producing contract of service between the employer (company) and the employee (director, managing director), which is not produced by the assessee as it is in his possession. Furthermore, it can be proved by the conduct of parties since the agreement can be in writing and verbal. Therefore, in this case it is proved from the facts mentioned above that the assessee was authorised to use the cars and actually these have been used.
Therefore, the onus has been discharged by the department. Furthermore, the contractual obligation is there as contended by the learned departmental representative, which is proved by citing the articles of association where the use of the cars of the company is to be made by the managing director and directors and the assessee-counsel has failed to rebut it but admitted it though pleaded that it is for the department to prove by bringing material on record showing therein that there is contractual obligation between the assessee and the company for the use of the car and it cannot be taken as there if the articles of association of the company in general allowing the use of the car by the managing director and directors, which contention we have rejected on account of reasons cited above. Accordingly, we hold that this decision is distinguishable.
7. In view of our above discussions and reasons thereto, we hold that there is authorisation for the use of the cars of the company by the assessee and, therefore, it is a perquisite to be assessed in the income of the assessee and as it has been assessed in the past and the assessee has accepted it. Therefore, on account of totality of facts and circumstances of the case and conduct of the assessee, we hold that the plea of unauthorised use of the car by the assessee is an afterthought, in particular when the order of the ITO shows that the value of this perquisite is assessed in the income of the assessee since 1968-69 and the assessee has accepted it. Reliance can be placed on the decision in Rendell's case (supra) and the past record of the assessee. Hence, we confirm the impugned order. The appeal is dismissed.