TaxTMI 
TaxTMI 
2015 (8) TMI 45
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....AO called upon assessee to produce bills and vouchers for construction of cold storage, evidences in support of commencement of business activity, bonds/receipts issued to the farmers for obtaining bank loan, list of farmers who preserved their stocks in the cold storage for justifying the claim of deduction u/s 35AD. As stated by AO, in response to the query raised by him assessee produced its books of account, bills and vouchers for the expenditure incurred towards cost of construction of cold storage, list of farmers who stored their produce in the cold storage etc. It was also submitted by assessee that the total cost of construction of cold storage was Rs. 3.23 crores and assessee has taken a loan of Rs. 2.40 crores from the Indian Overseas Bank for the purpose of construction as well as purchase of machinery of cold storage. It was submitted by assessee that it has commenced its production in the month of March'10 for a short period of 10 days and for the financial year 2009-10, the income from cold storage amounted to Rs. 1,85,000. 5. AO referring to the acknowledgment issued by General Manager, District Industries Centre, Khammam observed that the issuance of acknowledgmen....
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....tricity. Assessee also produced bonds issued to the farmers against the products stored by them in the cold storage. As far as allegation of AO that some of the farmers have stated that operation of the cold storage started from April'10, assessee submitted that the statements recorded from the farmers have no relevance to the date of commencement of operation of the cold storage. It was further submitted that AO having not confronted the statements of the farmers nor allowed any opportunity to assessee to cross-examine the farmers evidence collected behind the back of assessee cannot be utilized for the purpose of disallowing assessee's claim. 7. Ld. CIT(A) after considering the submissions of assessee in the context of facts and materials on record, observed that as per the provisions of section 35AD of the Act, assessee has to satisfy two conditions, firstly, the expenditure must be incurred prior to the commencement of its operation and secondly the amount is capitalized in the books of account of assessee on the date of commencement of its operation. Ld. CIT(A) referring to the electricity bills of assessee for the relevant period found that there is substantial consumption o....
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....ness. He, therefore, submitted that there is no reason to interfere with the order of ld. CIT(A). 10. We have considered the submission of the parties and perused the orders of revenue authorities as well as other material on record. On perusal of the order of AO, it is very much evident that only on entertaining doubt with regard to the commencement of operation of the cold storage. AO has disallowed assessee's claim of deduction u/s 35AD. To justify his action, AO has primarily relied upon the enquiry conducted with some of the farmers and also the fact that licence for operating cold storage was granted by competent authority on 31/03/2010. However, as could be seen from the electricity bill of cold storage unit for the month of February'10 and March'10 it is found, while in the bill for February'10, the electricity units consumed is 'O' (zero), in March'10, assessee has consumed 17,367 units. This itself proves that assessee has commenced operation of cold storage partly in the month of February & March'10. Coupled with consumption of electricity, the other evidences like bonds/receipts issued by assessee against storage of agricultural produce of the farmers also proves the f....
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.... infirmity in the order of ld. CIT(A), we uphold the same by dismissing the ground raised by revenue. 11. The next issue as raised in Ground Nos. 7,8 & 9 relates to the addition made of an amount of Rs. 1,43,05,000 u/s 69 of the Act by AO, but, deleted by ld. CIT(A). 12. Briefly the facts are, for verifying the genuineness of assessee's claim that it has received products of the farmers in the cold storage, AO called for copies of the bonds given to the farmers. However, as observed by AO, assessee failed to produce copies of the bonds, instead, assessee submitted a list of farmers, who kept their stock for preservation in assessee's cold storage. AO on verifying the list submitted by assessee, with the list of farmers, who obtained loans by pledging their bonds with Indian Overseas Bank, Madhira found that most of the loans obtained by farmers were even before issuance of receipts by assessee. He further noticed that some of the farmers who appeared in the list of bank were not found in the list given by assessee. When this was pointed out, assessee submitted that they have issued temporary receipts to the persons, who may not be actual owners of produce or receipts might have b....
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.... farmers. Therefore, in the absence of necessary evidence, AO treated the stock held in the cold storage as assessee's own stock and thereby treated as unexplained investment u/s 69. Ld. DR submitted, in spite of the fact that in course of assessment proceeding assessee did not produce the bonds issued to farmers, but, ld. CIT(A) has deleted the addition on an incorrect assumption of fact that assessee produced the bonds before AO. He, therefore, submitted, order of ld. CIT(A) on this issue should be set aside. 14. Ld. AR, on the other hand, submitted before us, though assessee did not submit the bonds before AO, and submitted before ld. CIT(A), but, fact remains that AO himself has conducted enquiry with the concerned bank and has also summoned bank authorities for furnishing necessary information. It was submitted, in response to the summons issued by AO, bank authorities submitted all relevant informations relating to loan obtained by farmers, therefore, it cannot be said that bonds issued by assessee to farmers were not in the notice of AO. Ld. AR submitted, there being no evidence on record to indicate that stock of chillies kept in the cold storage belong to assessee, the ad....