Rule 46A evidence, trial run income, and CSR expense disallowance were all resolved against the Revenue.

Additional evidence for depreciation claims may be admitted under Rule 46A where the assessee shows sufficient cause, the Assessing Officer is given remand verification, and no prejudice is demonstrated; the depreciation disallowance was therefore not sustained. Trial run berth hire income that was adjusted against project cost and fixed assets did not require a separate addition, because it had already reduced the capital cost. An ad hoc disallowance of CSR expenses could not be upheld without material showing that the expenditure was bogus, fictitious, or otherwise inadmissible; the disallowance was deleted.

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Issues: (i) whether the deletion of the disallowance of depreciation made on the basis of additional evidence admitted under Rule 46A was justified; (ii) whether the deletion of the addition on account of berth hire income earned during trial run and adjusted against the cost of fixed assets was justified; (iii) whether the deletion of the ad hoc disallowance out of CSR expenses was justified.

Issue (i): whether the deletion of the disallowance of depreciation made on the basis of additional evidence admitted under Rule 46A was justified.

Analysis: The additional evidence consisted of bills and vouchers relating to fixed assets which were not produced during assessment. The Commissioner (Appeals) forwarded the material to the Assessing Officer for remand, and the Assessing Officer verified the documents and found them correct. Rule 46A permits admission of additional evidence where sufficient cause or lack of opportunity exists, and the rule was held to cover the situation where voluminous records could not be produced in time. Since the Assessing Officer had examined the evidence and no prejudice was shown, the admission of additional evidence was held to be proper.

Conclusion: The deletion of the depreciation disallowance was upheld and this issue was decided against the Revenue.

Issue (ii): whether the deletion of the addition on account of berth hire income earned during trial run and adjusted against the cost of fixed assets was justified.

Analysis: The income in question was earned during trial run operations and was adjusted against trial run expenditure and the cost of capital work in progress or fixed assets. It was held that such income had already gone to reduce the project cost and was therefore effectively brought to tax in the computation of asset cost. No infirmity was found in the view that the amount did not warrant separate addition to income.

Conclusion: The deletion of the berth hire income addition was upheld and this issue was decided against the Revenue.

Issue (iii): whether the deletion of the ad hoc disallowance out of CSR expenses was justified.

Analysis: The disallowance was made merely on an estimated basis without finding any bogus, fictitious, or inadmissible expenditure and without demonstrating that the expenditure was not incurred wholly and exclusively for business. It was held that an ad hoc disallowance cannot be sustained in scrutiny assessment without material to dispute genuineness or allowability of the claim.

Conclusion: The deletion of the CSR disallowance was upheld and this issue was decided against the Revenue.

Final Conclusion: All the disputed additions and disallowances were sustained as deleted by the first appellate authority, resulting in rejection of the Revenue's challenge in both years.

Ratio Decidendi: Additional evidence may be admitted under Rule 46A where the circumstances justify it and the Assessing Officer has an opportunity to verify it in remand; trial run income that merely reduces project cost need not be separately added again; and ad hoc disallowance of expenditure cannot stand without material showing that the claim is bogus or inadmissible.

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