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2022 (1) TMI 787
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....ee u/s.271(1)( c) of the Income Tax Act, 1961 (Act). All these appeals involve common issues and hence were taken together for hearing. We deem it convenient and proper to pass a common order. 2. First we shall take up for consideration ITA No. 1232/Bang/2005 as a lead case and this appeal by the Revenue against the order dated 31.5.2005 of CIT(A), Gulbarga, relating to AY 2002-03. 3. The issues that needs to be adjudicated in this appeal are as to whether the CIT(A) was justified in deleting the addition made by the AO by disallowing deduction of Capital Expenditure u/Section 35(1)(iv) read with section 35(2) of the Income Tax Act, 1961 (Act) of a sum of Rs. 10,13,29,425/- and whether the CIT(A) was justified in deleting the addition of Rs. 22,92,940/- towards depreciation on assets purchased during the relevant previous year. The Tribunal vide it's order dated 30.11.2009 reversed the order of the CIT(A) and restored the disallowance made by the AO. On appeal by the Assessee against the said order, the Hon'ble High Court of Karnataka in ITA No.140 of 2010 by order dated 1.10.2010 set aside the order of the Tribunal and remanded the issue for fresh consideration in accordance....
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.... M/s.Hi-Watt Power Systems Rs, 98,21,750 7. M/S.Sangram Castings Rs. 97,39,738 8. M/S.Sri Mythili Enterprises Rs. 1,00,40,000 9. M/S.Reliable Engineering Co. Rs, 1,35,37,500 10. M/S.Srinivas Industries Rs. 1,07,00,000 Rs. 10,15,19,425 6. To verify the genuineness of the bills/invoices furnished by the Assessee in respect of capital expenditure incurred for R& D Purposes, the AO sent letters to 7 parties to confirm the purchase bills/invoices and also to file the ledger extract of the company. In response to the above letter confirmation letters were received from the 7 persons. Similar letters were sent by the Assessee to the remaining 3 parties also and out of the 3 two persons Srinivasa Industries and Mythili Enterprises did not send any reply. 7. The AO on verification of the Bills and invoices produced by the Assessee found some anomalies therein and therefore to verify the genuineness of the R& D activities carried on by the Assessee, a Survey u/s.133A of the Act was carried out on 24.2.2005 in the following business premises of the Assessee, viz., (i) Factory premises at Kolhar Industrial Area, Bidar; (ii)....
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....d, AP, the Chairman and MD Shri.Venkat R.Kaluvakolanu was not available but Vice-President (Finance) one Mr.P.Veerabhadra Rao was available. He was confronted regarding purchase of Plant & Machinery for scientific research on which deduction was claimed u/s.35(2)(ia) of the Act. He admitted that the entire transactions shown under the head R & D expenditure are bogus and the parties from whom Plant & Machinery was claimed to have been purchased do not exist. He admitted to have made bogus claim for deduction as above and that the bills are all fabricated. 11. There were also admission that the entities which purported to supply machineries to the Assessee were floated by the Assessee in the name of its employees and payments for purchase of plant and machinery were routed through bank account of employees of the Assessee and returned to the Assessee through such accounts either in cash or through bank. 12. In the course of Survey, verification of the suppliers of Plant and Machinery at the address given in the bills and invoices was also carried out and the result of such verification yielded following results: 1. M/s Vision Metal: Plot No.11, Phase-IV Ida Jeedimetis Hy....
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.... As per Annexure-5 Revenue expenditure 32,446,250 As per Annexure-6 A.Y.2003-04 Capital expenditure 16,238,646 As per Annexure-7 Revenue expenditure 28,693,750 As per Annexure-8 A.Y. 2004-05 R&D expenses 65 181,550 As per Annexure-9 A.Y. 2001-02 Capital expenditure P&M equipment purchase Meganet Engineering 35,231,412 As per Annexure-10 ESSEM Equiptech 29,787,282 Asper Annexure-10 Total 308,908,315 15. Another letter dated 18.3.2005 calling for explanation was also issued. Mr.R.Venkat Kalavakolanu, Chairman & MD sent a reply dated 25.3.2005 to the AO stating that the time allowed for compliance was too short and wanted another week's time to file a reply. The AO rejected the plea for grant of time and proceeded to hold that the expenditure claimed as deduction u/s.35(2)(ia) of the Act cannot be allowed, with the following observations: "The above letter received from Sri.Venkat. R.K are rejected on the following rounds: I. The sworn statement recorded from Shri T.V.Narasa Reddy, Vice President (Proj.) is in the normal course and no pressure ....
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....or production of drugs. As seen from the ledger extract of the inward expenses, it is seen that transport expenses for purchase of P&M and raw materials are not reflected in the books of accounts separately. Neither the goads are purchased nor received at the factory, hence the transport expenses are not claimed in the books of accounts. After verifying al! the details, bills / invoices, bank accounts, sworn statement of the employees and bogus confirmation letters it is found out that the entire claim of R&D expenses is false. The CMD and Shri P.Veerabhadra Rao, Vice President (Fin.) have knowingly planned in such a way to manipulate the accounts of the company and to defraud the revenue to avoid the taxes by claiming false expenditure for R&D purpose. The bills furnished when cross verified it is found out that they are non-existing firms, bills are fabricated according to their convenience and the payments are being paid not to the names mentioned in the bills but to their own bogus concerns and to their bank accounts. During the cross verification of bills and vouchers we have received some of the confirmation letters from the bogus parties. This also proves that the c....
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....ry out survey at AP was legally not valid as he did not have territorial jurisdiction. 5. The Assessee gave details of the dates on which the various documents used agains the Assessee were given by the AO, which were as follows: Item of information / document used Date of receipt 1. Statement recorded on oath of Sri T.V.Narasa Reddy 30.3.2005 2. Statement recorded on oath of 30.3.2005 3. Statement recorded on oath of Smt. V.K.Saipriya 30.3.2005 4. Response of postal dept. in respect of service of letter on Srinivasa Ind. Through DCIT letter dt 18.3.2005, served on C&MD on 24.3.2005 (on hospital bed). 5. Response to postal department in respect of service of lettelr on Reliable Engg. 6. Response of postal Department in respect of service of letter on Mythili Enterp. 7. Response of postal department in respect of service of letter on Hi-tech Electr 8. Response of postal department in respect of service of letter on Raghavendra Enterpr. 9. Response of postal Department in respect of service of letter on Pionner Ind. Pr. 10. Response of postal department in re....
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....ave to be discarded for the lack of further utility. Equipments like Condensers, Dryers, Centrifuges, Reactors etc., are being re-modified after taking some Research and Development trials. These equipment have been designed in such a way to cater to the company's future developments in small volumes, after research and development trials. Hence, these equipment are modified for as higher capacities where controls, service fittings, fines for the equipment changing all the tubes, pipe fittings for condensers. Hence, higher batches of Research and Development small volume production can be taken. Vice President (Prod.) is incharge of day to day production activities of the Company and has very negligible knowledge of the Research and Development activities undertaken by the Company which are highly confidential. The company is in to Research and Development for the last 10 years and developed many products earlier years also the company has claimed the research expenses and those assessments are already completed. During the assessment period we repeatedly informed to the assessing officer that these equipment are fabricated equipment, suppliers p....
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....e held that the survey conducted on 24.2.2005 cannot be the basis to conclude regarding physical presence of Plant and Machinery in R & D department in FY 2001-02. 4. That the AO has failed to understand the complicated nature of R & D carried out by the Assessee. The observations of the CIT(A) in this regard were as follows: "It is quite apparent that the A.O. has been completely oblivious of various relevant facts arising out of highly technical nature of research activities eg. the technical name of the asset as mentioned in the purchase bill / invoice may not always tally with its common name or regular usage name adopted by the workers. In industry , it is not uncommon to call a distillation column as evaporator / seperator or a heat exchanger as condenser. Similarly a purchase bill may describe an item as autoclave but it may still be called commonly as a reactor. In his submission dated 9.5.2005 ate CMD of i7ippellint co. has confirmed that equipments like glass set apparatus, analytical balances, Lyophilizers, cold chamber and clear rooms, analytical instruments, lab equipments and glassware do not normally have life more than 1 year, after continuous oper....
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....g no role in R&D cannot have any material bearing on the company and cannot vitiate the claims made by the appellant in respect of capital expenditure and revenue expenditure on R&D activities. 6. On the comments of the AO regarding the size of the R & D Building, the CIT(A) held that the value of machinery and the smallness of the building has no correlation. 7. He accepted that the statements obtained at the time of survey were obtained in very inhospitable conditions and were therefore not reliable. He also held that whatever be the deficiency in the statement like the person in charge of the affairs not knowing the name of suppliers or about machinery used for R & D etc., have to be ignored because the statements were obtained by exercising pressure. He accepted the retraction of the statement in the form of affidavit of the person who made statement at the time of survey retracting the same. He also held that the AO should have re examined all the persons in the course of assessment proceedings also. 8. Regarding the results of enquiry by the AO about the non existence of the suppliers of the plant and machinery, the CIT(A) held that the enquiries ma....
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.... in respect of new additions made to fixed assets. To sum up, the findings of A.O. that the appellant co. had claimed fraudulently a) false capital expenditure on R&D at Rs. 10,13,29,425/- on purchase of plant and machinery b) bogus revenue expenditure on R&D for purchase of raw materials / chemicals at Rs. 3,24,46,250/- and c) depreciation at Rs. 22,92,940/- on the basis of bogus bills / invoices have been rejected on facts of the case after having due regard to the merits of the issues involved. And hence I do not consider it necessary to quash the entire assessment order even when there are certain glaring instances of denial of natural justice to the appellant company. All the five grounds of appeal are answered in favour of appellant company. The A.O. is accordingly directed_ to grant suitable relief to the appellant company and after taking due note of the disallowance sustained at Rs. 1,56,470/-." On identical reasoning the disallowance of depreciation was also deleted. 20. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. As already stated the issues that was remanded for fresh consideration by the Hon'ble High Cou....
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....with reference to the rival legal submissions made by the learned counsels for the parties to find out the correctness of the same. The Assessing Officer in his assessment order has made certain observations after carefully verifying the documents in the course of the proceedings, he has directed the Assessing Officer obtained details from the Auditor, who has represented the Assessee before me in the proceedings and considered the details regarding the mode of payment, cheque number, name of bank, branch and date of payment by serving a letter dated.21.1.2004 to furnish the particulars in whose name the cheque was issued in respect of the machineries alleged to have been purchased from the suppliers situated in Secunderabad. Again by another letter dated 25.2.2004, he has specifically directed the assessee to furnish the details regarding the mode of payment made to the suppliers in respect of machineries, on 4.3.2004, personal appearance was made by Sri Srinath and Sri P.V. Rao on behalf of the assessee. No details were furnished by them as directed by the Assessing Officer. Even on 12.3.2004 they appeared and did not produce evidence regarding machineries purchased but he did no....
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....also for getting quotations from various parties, this has not been done by the assesee company. Further it is rightly observed by the Assessing Officer regarding the details of invoices that they are only quotations obtained by the assessee from the suppliers and nowhere they have mentioned the nature or date of payment. numbers that supplied the machineries etc except saying that the matter relating to R & D is most confidential and cannot be divulged to anybody. The Assessing Officer has further observed that only particulars of the person incharge of R & D who made a request for purchase if necessary equipment and the details of the suppliers for supplying the machineries were needed and he was not interest in the formula or any other thing. 13. The Assessing Officer after appreciation of facts & material evidence on record produced by the assessee, he came to the right conclusion and held that the purchase of R & D machineries, they were required to be transported from Secunderabad, which is in Andhra Pradesh to the Karnataka State of Bidar. The provisions under Section 28A, 28AA, and 28B for transport of machineries are applicable for the check post entries,, payment....
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....aid to have been issued by the suppliers which is referred to by him in his order at page No.10 produced as Annexure-C before us, the same reads as under. "The above two companies who have supplied machineries to my assessee runs into crores of rupees. If a sales worth crores are made to a single company, it must be a big enough to supply the equipments to other companies also. It is surprising to note that a company who is carrying on such a big volume of business is not traceable. I have also asked the assessee company itself to file the confirmation, if any, obtained from the companies who have sold The machineries to them. This has also not been done. The assessee was told about the returning of letters of two concerns from whom they purchased machineries and asked to furnish the correct address and also proper confirmations. The letters filed by the assessee on 12.3.2004 though bears letter pads of the two concerns, it is interesting to note that even no telephone number or nature of the proprietorship who signed the letter was available. In this background returns of letters by postal authorities give rise to a reasonable finding that the transactions are no....
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.... proving that the Assessee did not carry out R & D on the Revenue, when it was on the Assessee to prove its case. He submitted that it was the Assessee to prove its case and it cannot pick holes in the insignificant procedural lapses, if any, on the part of the AO and seek to make a claim for deduction. It was also highlighted by him that in the later order of the Hon'ble Karnataka High Court by which this appeal was remanded to the Tribunal for consideration, this earlier order of the Hon'ble Karnataka High Court was not brought to its notice. He therefore submitted that the appeal of the revenue has to be allowed on the two issues remanded for consideration by the Tribunal. 23. We have considered the submissions and the material on record. The sequence of events in the course of assessment needs to be examined to find out whether the case made out by the AO can be sustained on the basis of probabilities. The Assessee did not file return of income voluntarily. A notice u/s.142(1) of the Act was issued by the AO on 6.3.2003 calling upon the Assessee to file return of income. The Assessee filed the return of income on 25.2.2004. The return was processed u/s.143(1) of the Act on 2....
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....n the basis that the AO did incomplete enquiry. There was no material whatsoever produced by the Assessee to disprove the conclusions drawn by the AO and positively prove that it purchased machineries in question for R & D and that it carried out R & D activities. In such circumstances, the CIT(A) in our view fell into an error in deleting the addition made by the AO. Perusal of the order of the CIT(A) reveals that the CIT(A) has made observations that the AO could have adopted a better course than what he did, but does not go further and call upon the Assessee to produce evidence to substantiate its case. We therefore find force in the contention of the learned DR that the CIT(A) without any valid evidence that the machineries existed and that R & D was carried out by the Assessee, merely allowed the claim of the Assessee on the basis of a finding that incomplete enquiries were made by the AO. As rightly submitted by him there was not a shred of evidence filed by the Assessee even before CIT(A) to establish with cogent evidence as to how the conclusions of the AO based on outcome of Survey proceedings and enquiries from the purchasers and their whereabouts were not correct. Withou....
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....een addition to the fixed assets to the extent of Rs. 16,20,85,711/- during the relevant previous year by the Assessee. The AO made enquiries found that the claim of having purchased fixed assets was fictitious and hence he disallowed claim of the Assessee for depreciation of a sum of Rs. 3,10,16,050/-. In AY 2002-03, the Assessee claimed to have purchased assets during the relevant previous year and such purchase to the extent of Rs. 96,08,994/- was found to be bogus and therefore the AO disallowed 25% depreciation resulting in a disallowance of Rs. 24,02,248/- as depreciation in AY 2002-03. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2003-04 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of Rs. 18,01,687 being 25% of Rs. 72,06,746/- was disallowed by the AO. The CIT(A) allowed the claim of the Assessee for deduction and hence the appeal by the revenue before the Tribunal, raising the following grounds of appeal: 1. The Order of CIT(A) is opposed to Law and the facts of the case as brought out by the AO on various issues dealt by him in the Assessment Order after....
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....g on for the reasons explained therein. In fact, the reasons given for not carrying on the Research Work are only self-serving. The CIT(A) ought to have appreciated the fact of admission by the assessee that no Research Work was done by the Company coupled with the facts established by the AO that the purchase invoices are bogus, which goes against the assessee. 7. The CIT(A) has erred in coming to a finding that the AO after collecting information has not given opportunity to the assessee without appreciating the fact that an opportunity was provided by the AO which was not made use of fully by the assessee and only two of the trusted employees-cum-vice presidents, who were faithful to the master were produced for re-verification and not other parities. 8. The CIT(A) has erred in allowing relief after giving a finding that investigation of the matter is at the half-investigated level. Before giving such a finding the CIT (A) using his inherent powers could have caused enquires/ investigations through the A.O.obtaining a remand report. 9. The CIT(A) has failed to appreciate the fact that summons u/s131 could not have been issued by the AO to the parties f....
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....25 litres 2 nos. 9,60,000 5 S.S. 316 Distillation Unit Capacity - 250 litres 1 no. 11,55,000 6 S.S. Extractor Capacity - 250 litres 1 no. 3,80,000 7 Vacuum Tray Dryer Capacity - 12 trays 1 no. 4,80,000 8 S.S. 316 Centrifuge Capacity - 12 inches 1 no. 3,80,000 9 Pumps for process, vacuum, services 5,00,000 10 Lab Reaction Set, Ups All Glass for Q.C. and 7,50,000 11 Process Control Instruments etc. 7,83,640 Total 16,238,640 30. The enquires done by the AO and the result of such enquiry on the whereabouts of the aforesaid vendors was as follows: S. No. Name and full addresses of party as per the bills furnished Details of outcome after making the enquiries 1. M/s. Swati Engineering, Plot No.75/3, Phase VI, Industrial Development Area, Jeedimetla, Hyderabad-500 055 Tel No. 23099449 Detail enquiries were made to locate such firm and its address but it could not be found. Enquiries with nearby residents....
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....ith regard to findings during Survey u/s.133A of the Act are same as in AY 2002-03. The AO therefore concluded that the deduction claimed u/s.35(2)(ia) of the Act was bogus and cannot be allowed. 32. The AO found that the Assessee had claimed depreciation on additions to fixed assets to the extent of Rs. 16,20,85,711/-. The details of the persons from whom the Assessee purchased the items of Plant & Machinery were as follows: S. No. Name of the seller Description of machine purchased Date of purchase Amount is Rs. 1 Supreme Corporation No.253, Mahaveer Dham Society Part-II Nava Poshad Glass Liner assembly 11-04-02 4,932,000 2 Same as above S.S. Reactor of 500 & 1000 litres 17-05-02 5,283,000 3 Same as above Stainless Steel Reaction Unit 21-07-02 3,870,000 4 Same as above Same 12-09-02 3,375,000 5 Same as above Same 09-10-02 3,924,000 6 Same as above Ultra Centrifuge 11-12-02 4,080,000 7 Same as above Stainless Steel Reaction Unit 28-01-03 5,068,800 8 Same as above Lab Instruments 15-03-03 6,853,125 9 Royal Engineering Corporation 4 Hari Bha....
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....arters etdc. 17-07-02 3,030,000 32 Same as above Preparative High Pressure Liquid Chromatograph 08-08-02 6,078,800 33 Same as above Glass Assembly Units with electrical fittings 12-11-02 1,908,000 34 Same as above S.S. Reactor Complete assembly unit 27-11-02 3,350,000 35 Same as above Advanced HPCL System and production scale purge valve etc. 04-12-02 6,325,000 36 Same as above L.C.M.S. Systems with several specifications 13-02-03 6,330,000 37 Same as above Lab Benches for laboratory specifications 23-03-03 3,374,880 38 All other miscellaneous bills from different All types of electrical equipments Different dates 1,062,180 Total bills furnished 162,138,755 33. The bills had defects like figures being in round sum etc. The Assessee failed to produce parties for examination by the AO. The AO made enquires on his own and the outcome of such enquiry has been tabulated as follows by the AO in the order of Assessment: DETAILS OF OUTCOME OF THE ENQUIRY IN RESPECT OF PURCHASES OF PLANT AND MACHINERY FOR Rs. 16,20,85,711/-. S. No. ....
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.... at the address since 5-6 years. Shri Gitesh Gandhi, proprietor informed that he has never heard of any such concern. 6 Bhuta Enterprises, Nagardas Mansion, Ground Floor, Bhagat Singh Road, Vile Pahe, Mumbai 125,757 The enquiry team could not locate any such address. 7 Uniscan Power System, No.10-1-5, Sunrise Suite, Ground Floor, Adjacent to Kasturba Women's College, West Marredpally, Secunderabad 141,920 Enquiry revealed that no such firm or agency is functioning at the given address and it never existed in the said address. However, a beauty parlous shop in the name of M/s Honey Bee was functioning in the said premises since last 2 years. 34. The AO confronted the Assessee with the results of the enquiry and asked to show cause why the claim of depreciation on the addition to fixed assets during the previous year should not be disallowed. Since there was no response, the depreciation claim to the extent of Rs. 3,10,16,050/- was disallowed by the AO. 35. In AY 2002-03, the Assessee claimed to have purchased assets during the relevant previous year and such purchase to the extent of Rs. 96,08,994/- was found to be bogus and therefore the AO disallo....
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....peal of the Revenue is partly allowed. ITA No.628/Bang/2009: 39. This is an appeal by the Assessee against the order dated 28.2.2009 of CIT(A)-Hubli, relating to AY 2004-05: 40. As far as AY 2004-05 is concerned, the facts are almost identical to 2003-04. In this year also there was no disallowance of deduction claimed by the Assessee u/s.35(2)(ia) of the Act. The Assessee claimed deduction of a sum of Rs. 10,44,64,408/- u/s.35(1) (i) of the Act which provides for deduction in respect of expenditure on scientific research, being any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business, which was disallowed by the AO. The AO also disallowed depreciation claimed assets which were claimed to have been addition to the fixed assets to the extent of Rs. 14,90,64,625/- during the relevant previous year by the Assessee. The AO made enquiries found that the claim of having purchased fixed assets was fictitious and hence he disallowed claim of the Assessee for depreciation of a sum of Rs. 2,20,06,294/-. In AY 2002-03 & 2003-04, the Assessee claimed to have purchased assets during the relevant previous year a....
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....ssee that the AO expects the assessee after a lapse of 3 years to explain things with the help of original and genuine expenditure, when the Books of Accounts are in the custody of the AO, without noticing that mere entries in the Books of Account are not the conclusive evidences but the AO has to go beyond it, to know the truth. In fact, the CIT(A) failed to appreciate that the assessee took a very long time to procure Bills to suit it's conviniance and did not furnish the specific information required by the A.O.Moreover this a case where action U/s 147 was taken for failure to file the Return within the time allowed U/s 139(1) and the return in response to the notice U/s 148 was filed only on 08-52006 inspite of the fact the audit report U/s 44AB was filed on 01-11-2004. 6. The CIT(A) has erred in holding that the AO has given a conclusion that the entire activity of the Assessee is bogus and made additions without appreciating the correctness of the submission made by the assessee before the CIT(A) that the Research Work was not going on for the reasons explained therein. Infact, the reasons given for not carrying on the Research Work are only self-serving. The CIT....
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.... 42. In so far as the claim for deduction on account of depreciation on new assets acquired during the relevant previous year is concerned, the findings of the AO are identical to the findings of the AO in AY 2002-03. The list of persons from whom they were purchased in AY 2004-05 and the enquiries made by the AO and result of such enquiry was as follows: S. No. Name of the supplier Amount claimed in Rs. Findings of the ITI 1 M/s Bipico Industries, No.748/2, Gujarat Industrial Development Corporation, Vapi, Gujarat 30,728,050 The ITI has reported that despite his best efforts he could not locate any such party in the given address. The ITI also took the help from 0/o GIDC, Vapi. It was found that a concern with the name and style as "M/s Vico Forge Private Limited" is functioning at the above mentioned plot number. The assistants working in the 0/o GIDC, Vapi have confirmed that no such supplier/concern ever functioned in the given address. The ITI also tried to obtain details from the phone number printed in the bill and it was found that the phone belongs to some residential house. Therefore it is clearly established once again that no such supplier/conc....
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.... the post office who has got the jurisdiction over such place. It was also revealed by them that they have not seen any such supplier. Further the phone number given in the bill was found to be not in service. Therefore it is clearly established that no such supplier ever existed. 5 Saltzar Techtrol Systems, No.371, S.V. Lane, Andheri Kuria Road, Mumbai 29,471,000 In spite of best efforts made, the ITI could not locate any such supplier. It was informed by him that the Andheri-Kurla Road is stretched around 18 kilometres long. In spite of spending nearly about 4 hours he could not find any such supplier. The ITI took the help of the Andheri Post Office and they also could not locate any such address or concern. Further the phone number given in the bill was found to be of a residential house. It is therefore clearly established that no such supplier/concern existed and the claim is false. 6 M/s Puissance DE DPK, No.167/10, Bashyam Nagar, Cuddalore-607 001 443,000 The ITI could not found any such supplier in the said address. He could locate the address. It was found that the office of Deputy Inspector General of Registration, Cuddalore Zone, Cuddalore was fu....
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.... by the Assessee in AY 2004-05 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of Rs. 13,51,265 & Rs. 3,27,58,414 for AY 2002-03 & 2003-04 respectively disallowed by the AO is also restored. 47. In the result, appeal of the Revenue is partly allowed. ITA No.950/Bang/2009: 48. This is an appeal by the Assessee against the order dated 18.5.2009 of CIT(A)-Hubli, relating to AY 2005-06: 49. As far as AY 2005-06 is concerned, the facts are almost identical to 2004- 05. In this year also there was no disallowance of deduction claimed by the Assessee u/s.35(2)(ia) of the Act. The Assessee claimed deduction of a sum of Rs. 10,04,70,753/- u/s.35(1) (i) of the Act which provides for deduction in respect of expenditure on scientific research, being any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business, which was disallowed by the AO. The AO also disallowed depreciation claimed assets which were claimed to have been addition to the fixed assets to the extent of Rs. 17,49,64,543/- during the relevant previous year by the Assessee. The AO made enquiries found ....
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....esearch work was not going on for the reasons explained therein. In fact the reasons given for not carrying on the Research work are only self-serving. The CIT(A) ought to have appreciated the fact of admission by the assessee that no Research work was done by the company coupled with the facts established by the AO that the purchase invoices are bogus, which goes against the assessee. 6) The CIT(A) has erred in giving a finding that the investigation made by AO is at the half investigated level. However nothing prevented the CIT(A) to complete the investigation, as appeal proceeding is continuation of assessment proceedings. 7) The CIT(A) has erred in coming to a conclusion, that AO after gathering information has not given opportunity to the assessee company, but the fact is that the opportunity given by the AO, which was not fully utilized by the assessee and only two of the trusted employees, supposed to be vice presidents, Who were faithful to the master were produced for reverification and not other parties. 8) CIT(A) has failed to appreciate the fact, that the summons u/s 131 issued to parties for supply of plant and machinery and other equipments ....
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.... detail in the earlier pages the assessee was requested' on several occasions to furnish the evidences i.e bills for such purchases. The assessee has miserably failed to furnish the bills and evidence for such purchases. The primary conditions for allowing any claim of depreciation on new additions are acquisition of new asset and actual put into use of this asset for the purposes of assessee business. In view of absolute failure on the part of the assessee in furnishing the evidence in spite of being given jumbo of opportunities, the claim of new purchases as mentioned in S.No.1,2,4 & 5 have not been proved. Further in the preceding assessment years also the assessee could furnish only a part of the bills and accordingly proportionate disallowances were made. In the assessment year under consideration no details and evidence whatsoever is filed. It is the assessee company who is making the claims of having constructed building and purchased equipments during the financial year under consideration and therefore the onus of proving its transactions also lies on the assessee. Therefore in the show cause letter a proposal was issued to disallow the claim of depreciation. As no inf....
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.... and also considering the valuable evidence gathered during the survey and also considering the absolute failure of the assessee to furnish the bills and evidence for such purchases, I come to a conclusion that the claim of depreciation of Rs. 2,03,47,056/- need not be considered and the same is to be disallowed. Accordingly the said amount of Rs. 2,03,47,056/- is added to the income available. This amount of addition also, prima facie appears to be satisfying to the con ions requiring initiation of penalty proceedings u/s 271(1)(c). 52. In AY 2002-03 & 2003-04 & 2004-05, the Assessee claimed to have purchased assets during the relevant previous year and such purchase was found to be bogus and therefore the AO disallowed depreciation resulting in a disallowance of depreciation in AY 2002-03 & 2003-04 & 2004-05. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2005-06 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of Rs. 10,13,449/-, Rs. 2,45,68,811 and Rs. 3,17,86,843/- for AY 2002-03, 2003-04 and 2004-05 was disallowed by the AO. 53. The aforesaid additions were deleted ....
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....erits accepting the plea of the Assessee that he would pay the remaining taxes due on returned income in installments. As per the requirements of section 249(4)(a) of the Act, paying of tax due on income returned at the time of filing was not complied with by the assessee and, therefore, the ld CIT(A) ought to have refused to admit the appeal of the assessee as per the provisions of section 249(4) of the Act. Hon'ble Karnataka High Court in the case of D. Komalakshi v. Dy. CIT [2007] 292 ITR 99/162 Taxman 16 , wherein, it has been held that section 249(4) of the Act makes it clear that admission of an appeal before the ld CIT(A) is subject to payment of tax due on the income returned. In the case of CIT v. Manoj Kumar Beriwal [2009] 316 ITR 218 (Bom.), the Hon'ble Bombay High Court held that for the purpose of section 249(4) of the Act, the deposit of admitted tax is condition precedent for entertainment of appeal before the ld CIT(A. In the instant case, the view taken by the ld CIT(A) deserves to be reversed keeping in view the judgment of Hon'ble Karnataka High Court in the case of D. Komalakshi(supra), wherein, the Hon'ble High Court held as under: '....
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....assed by the Commissioner (Appeals) was challenged before the Tribunal, the Tribunal has accepted the order of the Commissioner. From a reading of the order of the Commissioner and the Tribunal, it is clear to us that tax due at the time of filing of appeal was not made over in terms of section 249(4) of the Act. It is also to be noticed at this stage by us that the appellants, in terms of the material on record have chosen to say in unmistakable terms that they did not have any source to raise funds to make good the tax due at the time of filing the appeal. They have further stated in their statement of objections that in terms of section 249(4) of the Act, the appeal cannot be admitted in the absence of tax on the admitted income. This very statement of the appellants before the authority would go with the mandatory requirement of section 249(4) of the Act. Under the facts of the case and in the given circumstances, we are satisfied that there exist no legal errors either in the order of the Commissioner or in the order of the Tribunal. The orders are therefore, accepted by us in the case on hand, particularly, in the light of the admitted facts in terms of the return and in term....
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....f the AO imposing penalty for the reason that there is nothing conclusive to prove beyond doubt that the Assessee attempted to conceal income. 63. Aggrieved by the order of CIT(A), the revenue is in appeal before the Tribunal. We have heard the submissions of the learned DR who submitted that the facts brought out in the order of assessment and the ultimate result in the quantum proceedings will be sufficient to impose penalty on the Assessee. We have considered his submission and find that out of the four additions only two additions viz., disallowance of deduction u/s.35(2)(ia) of Rs. 10,13,29,425/- and Disallowance of depreciation of Rs. 22,92,940/- survive after the order of ITAT and Hon'ble High Court order in the quantum proceedings. The circumstances under which the additions were made clearly show that the Assessee had concealed particulars of income especially in the light of Explnation-1 to Sec.271(1) of the Act. The Assessee has not discharged his onus that lay on him in law. The CIT(A) is not right in holding that concealment has to be proved beyond doubt before imposing penalty u/s.271(1)(c) of the Act. In the circumstances, we restore the order imposing penalty in ....