Court partially allows departmental appeal, dismisses Cross Objection, sends issues back for fresh adjudication. Condonation of delay granted.

The court partially allowed the departmental appeal for statistical purposes and dismissed the Cross Objection of the assessee. The issues concerning the disallowance of depreciation and the restriction of rent received were sent back to the CIT(A) for fresh adjudication. Condonation of delay in filing the Cross Objection was granted due to valid reasons. The deletion of addition on account of folding charges and the restriction of unaccounted job work charges were upheld, emphasizing the genuineness and necessity of the expenses.

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Issues Involved:
1. Condonation of delay in filing the Cross Objection.
2. Deletion of addition on account of folding charges.
3. Restriction of addition on account of unaccounted job work charges.
4. Deletion of addition on account of disallowance of depreciation.
5. Restriction of addition on account of rent received.

Summary:

1. Condonation of Delay in Filing the Cross Objection:
The Cross Objection by the assessee was filed beyond the period of limitation by 16 days due to the illness of the person handling tax affairs. The delay was condoned as the learned DR had no objection.

2. Deletion of Addition on Account of Folding Charges:
The revenue challenged the deletion of an addition of Rs. 2,38,2992/- on account of folding charges. The AO disallowed the folding charges due to lack of evidence like bank documents. The learned CIT(A) found that similar payments were made in the previous year and were allowed by the AO after verification. The Tribunal upheld the CIT(A)'s decision, noting that folding charges are a necessary component of the assessee's business and the payments were genuine.

3. Restriction of Addition on Account of Unaccounted Job Work Charges:
The revenue challenged the restriction of the addition from Rs. 22,64,800/- to Rs. 3,50,000/-. The AO estimated suppression of job work charges due to excess claim of shrinkage of cloth. The learned CIT(A) restricted the addition, considering the explanation and evidence provided by the assessee. The Tribunal confirmed the CIT(A)'s decision, noting that the entire job work charges cannot be taxed as income and only the profit on the same may be taxed.

4. Deletion of Addition on Account of Disallowance of Depreciation:
The revenue challenged the deletion of addition on account of disallowance of depreciation of Rs. 1,90,205/-. The learned CIT(A) directed the AO to allow depreciation as claimed by the assessee, considering the explanation that the land belonged to the partners and the superstructure was constructed by the assessee. The Tribunal set aside the CIT(A)'s order and restored the issue for fresh adjudication, noting that the CIT(A) did not pass a speaking order on merits.

5. Restriction of Addition on Account of Rent Received:
The revenue challenged the restriction of addition made on account of rent received from Rs. 96,000/- to Rs. 72,000/-. The learned CIT(A) allowed deduction u/s 24 of the IT Act and directed to add the balance amount. The Tribunal set aside the CIT(A)'s order and restored the issue for fresh adjudication, noting that the CIT(A) did not give specific reasons for the decision.

Conclusion:
The departmental appeal is partly allowed for statistical purposes, and the Cross Objection of the assessee is dismissed. The issues regarding depreciation and rent received are restored to the learned CIT(A) for fresh adjudication.

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