TaxTMI 
TaxTMI 
2019 (10) TMI 911
X X X X Extracts X X X X
X X X X Extracts X X X X
....f estoppels and not accepting the facts that there are no discrepancies in the documents and the revised surrendered income is NIL. 2. That on the facts and in circumstances of the case and in law, the Commissioner of Income Tax (Appeals) has erred by not appreciating the complete facts that the additions made by the Ld. AO by disallowing ad-hoc % of other expenses was on the basis of suspicion, conjecture and surmise that the appellant has inflated expenses to suppress profit which is liable to omitted & deleted. 2.1 That on the facts and in circumstances of the case and in law, the Commissioner of Income Tax (Appeals) has erred in upholding the addition of 10% of the other expenses made by the Ld. AO. 3. That on the facts and in circumstances of the case and in law, the Commissioner of Income Tax (Appeals) has erred by confirming the disallowance of 1 /5th of depreciation on additions to fixed assets made during the year. 4. That the order passed by the Commissioner of Income Tax (Appeals) /AO is bad in law. 5. That each ground is independent of and without prejudice to the other grounds raised herein. 3. The grounds of the appeal raised by the Revenue are reproduced a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....specifically mentioned that in question No.43 of the questionnaire dated 23.10.2013, the assessee was asked to submit details of expenses claimed in profit and loss account with documentary evidences. In view of non-compliance on the part of the assessee, the Assessing Officer disallowed 50% of the expenses claimed of Rs. 36, 85, 40,000/-by the assessee under the head "other expenses" and worked out the disallowance at Rs. 18,42,70,000/-. Similarly, the Assessing Officer disallowed 50% of the depreciation claimed of Rs. 26,60,92,945/- by the assessee and worked out the disallowance at Rs. 13,30,46,472/. In the assessment order passed on 28.03.2014, both the disallowances were made by the Assessing Officer. 4.1 On further appeal before the learned CIT(A), the assessee challenged the disallowances and submitted that all the books of accounts, bills and vouchers etc. were produced before the learned Assessing Officer, however, he did not consider those. The assessee submitted that his books of accounts have been duly audited both under the company law and under section 44AB of the Income-tax Act and no discrepancy has been pointed out by any of the Auditor. He also submitted that n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before the issue of relevant questionnaire and that the appellant should have been ready to furnish the details as and when called for. The observations made in para 7 show that the A.O. had not expected the delay in submission of the details. This has played in his mind while arriving at the decision of disallowing 50% of the entire expenditure debited under the head "other expenses". 4.1.15 The A.O. has noted that the assessee did not furnish any details whatsoever in reply to Q.No.43 of the questionnaire dated 23.10.13. His remark at para 3 of the assessment order is reproduced below for ready reference: "The assessee has also not furnished any details whatsoever in reply to Q. No.43 of the questionnaire dated 23.10.13 regarding the details or expenses claimed in P&L account with documentary evidence. The above details were not furnished in spite of repeated reminders as noted in the order sheet. The assessee had failed to furnish the complete details on the said dates." 4.1.16 Thereafter, the A.O. has noted that the assessee has claimed expenses of Rs. 36,85,40,000/- in P&L account under the head of "other expenses" but no details were filed by the assessee in this regar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... namely freight, forwarding and distribution expenses, misc. expenses, processing, commission, brokerage and other , expenses, rent and repairs and replacement, advertising and publicity as well as sales promotion. The A.O. also has required the assessee to produce the documentary evidence for verification during the course of hearing. The turnover of the company for the relevant year was Rs. 167.93 crores. The total expenditure debited to P&L account was 161.85 crores. 4.1.19 The AR has submitted in the written submissions that the AO denied to take assessment proceedings as the same were bulky. This averment of the AR has no substance as firstly the details required by Q.No.43 had not been submitted at all ( the question of bills and vouchers would come thereafter) and secondly appellant has not denied that question number 43 was not answered, in any of the replies before the AO. Further the conduct of the appellant group as a whole (as noted from the assessment orders of other members of the group) has been one of reluctance to get its affairs scrutinized properly. There has been general delay and reluctance in timely compliance to the AO's requirements. The assessment records....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was incorrect. He is estopped from doing so. 4.1.21 I, however, note that there is no merit in disallowance of such high a magnitude on ad-hoc basis for non-furnishing of details and without connecting it to any defect in the appellant's affairs and bringing on record any deficiencies in the accounts. The appellant had surrendered unaccounted income during the search and retracted from it after a very long gap. Non furnishing of the relevant details like party names and addresses of parties who are suppliers of goods and services which have been debited to P&L account has hampered the assessment of true income of the assesse. The appellant seems to have succeeded in preventing any possible further damage to him through delaying tactics and by failure in furnishing the details. But that cannot be a ground for making excessive disallowance. The present ad-hoc disallowance made by the AO is excess of surrendered amount by Rs. 13.4 crores (18.34 - 5). There is no case to support such disallowance over and above what was surrendered and retracted. But even disallowance of Rs. 5 crore from out of 'Other Expenses' alone in the given circumstances on appears excessive considering. I t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO's requirements. The assessment records also do not support the averment of the AR. 4.2.9 It is noted here that in the question the AO asked for details of fixed assets as per schedule of Companies Act and details of additions to fixed assets along with supporting evidences. In the table provided in the question the details such as date of purchase or installation, party from whom purchase has been made, the block of depreciation to which the asset relates to and utility of the asset vis-a-vis business activity of the company have been called for. 4.2.10 The above are vital details for AO to decide if the asset has been really acquired and put to use. This is especially relevant in view of the fact that the appellant group was found indulging in booking bogus expenditure. (For example in the case of group companies namely, Varun Beverages Ltd and Park View City Limited, bogus land development and construction expenditure was booked in the name of Rockhard Infrastructure Pvt. Ltd - which was surrendered during search). The names of the party who had supplied the asset and its utility etc. would have allowed the AO to decide the course of scrutiny and investigation. These have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., I am not in agreement with the AO's action of disallowing the entire 50% depreciation on this count. In a situation where the assessee has not furnished necessary replies and substantiated the depreciation claim and the AO wanted to make a huge disallowance based on that, I am of the view that, the AO should have issued a final show-cause letter to the assessee before doing so fin spite of the fact that he has been repeatedly calling upon the assesse to funish the details as is evident from the order sheet notings'). The AO has completed the assessment without issuing any show casuse notice. This is not even the case of best judgment assessment u/s 144. Even u/s 144, such a course could not have been adopted. Even under best judgment assessment, AO is required to issue a show cause notice. 4.2.13 Further, as pointed out by the AR, there was an opening w.d.v. of Rs. 78,24,06,608/- on which depreciation is automatically allowable because the same has been allowed in the previous year. The depreciation on the WDV works out to Rs. 12,07,76,856/- as under: Rate of Depreciation WDV Depreciation for the year (in Rs.) 0,25 65904918 16476229.5 0.6 4334818 2600890.8 0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tinuing with investigation on that issue on the principle that a fact accepted by the other party need not be proved. Here the- surrender was on account of discrepancy in the seized and impounded documents. After a gap of two years, it is very easy to say that there are no discrepancies in the documents. The party has got ample time to set right the weaknesses, if any, in his affairs and also to take care of any deficiencies that could be linked to the contents of the seized papers including party affairs. Thus any retraction from surrendered income, that too after a considerable time period, only points towards lack of bonafide on the party of the appellant. This is also against the rule of estoppel. A person who by his statement has induced another to believe his words and act in a particular manner, cannot go back and say that what he stated was incorrect. He is estopped from doing so. 4.2.17 However, the search action in the appellant's case or its group has not thrown up undisclosed income of such a magnitude so as to warrant disallowance of 50% of the depreciation. The investigating authority had been able to unearth transactions with only one party (Rockhard Infrastructu....