Bogus accommodation entries, fixed asset depreciation and 80IC deduction: ITAT restricts additions, restores depreciation, and allows deduction despite late return

Addition for alleged bogus accommodation entries was confined to a 12% restriction following precedent, limiting the AO's enhanced disallowance. Disallowance of depreciation for plant and machinery was overturned because the AO doubted valuation without rejecting books of account or providing basis for computed values; estimates by survey staff and conjecture were held insufficient and prior years' verifications supported the assessee, so depreciation was restored. Denial of deduction under 80IC for late filing was treated as a procedural irregularity where Form 10CCB quantified the claim; filing of audit report found directory and not fatal to the deduction.

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Issues: (i) Whether disallowance of deduction under section 80IC on account of inter-unit transfer of pre-used plant & machinery and alleged breach of conditions is sustainable; (ii) Whether disallowance of depreciation on plant & machinery due to discrepancies found in survey can be sustained; (iii) Whether additions under section 69C in respect of alleged bogus purchases/expenses from M/s Radhika Enterprises should be restricted; (iv) Whether claim of deduction under Chapter VI-A (section 80IC) can be allowed though the return was filed after the due date and whether section 80AC operates to disallow such claim.

Issue (i): Disallowance of deduction under section 80IC due to inter-unit purchase/transfer of pre-used plant & machinery.

Analysis: The issue was examined in light of prior appellate orders in the assessee's own case where identical factual and legal questions were decided in favour of the assessee by the Tribunal. The appellate authority applied those coordinate-bench decisions to the year under consideration and found no new corroborative material to distinguish the present case from earlier years. The claim was quantified in Form 10CCB and supported in audit records filed before completion of assessment proceedings.

Conclusion: The disallowance of deduction under section 80IC is not sustainable and the deduction is to be allowed (in favour of assessee).

Issue (ii): Disallowance of depreciation on plant & machinery due to discrepancies found during survey.

Analysis: The appellate authority relied on prior Tribunal findings in the assessee's own case which held that valuation differences observed after several years and during survey did not justify doubting audited books without rejecting them under section 145. The earlier Tribunal orders deleting similar additions were held to be binding for the subject years and no independent corroborative evidence supported AO's valuations.

Conclusion: The disallowance of depreciation is not sustainable and the additions are to be deleted (in favour of assessee).

Issue (iii): Treatment of alleged bogus purchases/expenses from M/s Radhika Enterprises and the extent of addition under section 69C.

Analysis: The appellate authority applied the ratio of the Tribunal's prior orders in the assessee's own case, which had restricted additions under section 69C to 12% of the total bogus purchases. Following that precedent, the AO was directed to restrict the addition to the prescribed percentage as earlier held by the Tribunal.

Conclusion: The addition under section 69C is to be restricted to 12% (in favour of assessee to that extent).

Issue (iv): Allowability of deduction under section 80IC where return was filed after the due date and interplay with section 80AC.

Analysis: The appellate authority considered jurisprudence holding that filing of audit report/Form 10CCB is directory and that declarations filed before completion of assessment can be treated as sufficient. The assessee had filed Form 10CCB and audit report quantifying deduction before completion of assessment. Coordinate decisions and higher court precedents permitting allowance despite belated filing were applied.

Conclusion: The claim of deduction under section 80IC is allowable despite belated filing of the return; section 80AC does not bar the deduction in the facts of the case (in favour of assessee).

Final Conclusion: The Tribunal upheld the appellate authority's orders and dismissed the Revenue's appeals, resulting in allowance of the challenged deductions and deletion or limitation of the contested additions in accordance with prior Tribunal precedent; the overall effect is favourable to the assessee.

Ratio Decidendi: Where identical factual and legal issues have been finally decided in the assessee's own case by a coordinate bench of the Tribunal, subsequent assessments for later years involving the same issues should follow that precedent unless fresh, distinguishing evidence is produced; audit certificates/Form 10CCB filed before completion of assessment are directory and may support allowance of statutory deductions despite delay in filing the return.

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