TaxTMI 
TaxTMI 
2022 (5) TMI 940
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.... of Rs. 48,85,005 on account of disallowance of depreciation on plant and machinery installed by the appellant company be deleted. It is so held now. 2. Addition of Rs.872145 on account of disallowance of depreciation on cars be deleted. It be so held now. 3. Addition of Rs.6,99,82,515/- u/s.68 be deleted, it be so held now. 4. Addition of Rs.1500000 u/s.40A (2)(b) be deleted, it be so held now. 5. Such other reliefs as may be admissible in case of the Appellant may also be granted to the Appellant. 3. The 1st issue raised by the assessee is that the learned CIT-A erred in confirming the disallowance made by the AO for Rs. 48,85,005/- representing the depreciation claimed on the plant and machinery. 4. The necessary facts as arising from the order of the authorities below are that the assessee in the present case is a private limited company and engaged in the business of manufacturing & marketing of water treatment plants and parts. The assessee was awarded a contract by Water and Sanitation Management Organization (In short WASMO) under the scheme of Government of Gujarat to install the RO plant in the rural areas of Gujarat under BOOT sy....
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....as not done so. 6.1 The assessee during the appellate proceedings furnished the bills for the purchase of plant and machineries in duplicate before the learned CIT-A which are sufficient enough to establish the fact that the machineries were purchased and installed in the year under consideration. The assessee also furnished the invoices raised by it in the month of April 2009 to WASMO for the services rendered out of the use of the plant and machineries. The invoices raised pertains to the services rendered by the assessee in the month of March 2009. Thus there remains no ambiguity to the fact that the plant and machineries were installed in the year under consideration. 7. The learned CIT-A called for the remand report from the AO vide letter dated 23rd May 2013 on the detail submitted by the assessee. The assessing officer filed the remand report vide letter dated 5th November 2013. The AO in the remand report submitted that the assessee has only furnished 25 bills for the purchase of the plant and machineries against the 35 items of the plant and machineries. At the same time, there was no detail furnished by the assessee to justify the date of installation of the plant a....
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....ofession. 11.1 In the present case, there was the addition of the plant and machineries amounting to Rs. 6,51,33,397/- only. In this regard, we have perused the purchase ledger which is placed on page 66 of the paper book. Based on purchase ledger, we find that all the plant and machineries were purchased by the assessee at the fag end of the financial year under consideration. Thus it becomes imperative to ascertain whether the plant and machineries were put to use in the year under consideration. Indeed the onus lies upon the assessee to establish this fact based on the documentary evidence. However, we note that the assessee has not discharged its onus by submitting the primary documents. 11.2 We have also seen the bank sanctioned latter placed on page 72 of the paper book which states that the commercial operation shall commence from the month of June 2009. From the above letter, we find that the project was commercially due to start from June 2009. 11.3 Admittedly, there was also difficulty with the assessee to provide the necessary details on account of search operation of the VAT department. Therefore, the assessee time and again has requested to the AO to collect t....
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.... vapour cell, juice clarifier and fly ash arrester paid pweitier which according to the assessee had to be kept ready for use for its business expediency. Stand of the assessee is that it resulted in increase of capacity of the plant and that on account of technical justification for the said machinery, items of the machines were installed. Even though the auditors may not have accepted the said stand, the assessee was entitled to free play in joints in taking a decision to install the machinery if in its view the same was necessary for its business. If the assessee was to install such a machinery on its bona fide business consideration, mere absence of proof of actual use thereof was not enough to deny the claim for depreciation. Accordingly, we do not find any ground to interfere with the finding of the Tribunal, holding that the assessee was entitled to depreciation on the machinery, as claimed." 11.8 However, in the absence of necessary details, we are inclined to give one more opportunity to the assessee to raise its point of contention before the AO in support of its arguments. It is also seen that the assessee has filed additional papers demonstrating the list of villages....
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....port of its claim. Thus the AO disallowed the hundred percent depreciation claimed by the assessee on these 3 vehicles amounting to Rs. 5,03,490/- and added to the total income of the assessee. 13.3 The AO with respect to the remaining cars namely Audi-A4 and BMW found that the assessee has failed to furnish the logbook and therefore he was of the view that the personal use of the car cannot be ruled out. Thus the AO made a disallowance of 20% of the depreciation amounting to Rs. 3,68,655/- with respect to these cars namely Audi-A4 and BMW and added to the total income of the assessee. 14. Aggrieved assessee preferred appeal to the learned CIT-A. The assessee before the learned CIT-A has filed the duplicate copies of the invoices for the purchase of 5 cars but the assessee has not filed the RC book with respect to two cars namely Innova and BMW. 15. The AO in his remand report found that the copies of the RC/invoices in connection with the purchase of the car were not legible/readable. Accordingly, the AO in the remand report has not considered the invoices filed by the assessee. Accordingly the AO in the absence of the RC books and the invoices, requested to the learned C....
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....edger account but the same is not matching with the invoice i.e. of Rs. 37,27,150/-. Accordingly the question comes to determine the amount at which depreciation has to be claimed. Thus, we are of the view that the issue with respect to the car namely Audi A-6 needs reconsideration at the level of the AO. 20.3 With respect to the car namely INNOVA, we note that the assessee has filed the copy of the RC book 1st time before us which is placed on pages 155 of the paper book which is not properly visible. We have perused the copy of the invoice for the car on hand which is placed on pages 154 of the paper book but the same is not legible. It is the onus of the assessee to furnish the necessary documents to satisfy its contention. Once the invoice itself is not visible and keeping in view the fact that the copy of the RC book was made available to us 1st time, we are of the view that the entire issue for the purchase of the INNOVA car needs to be determined/reconsidered at the level of the AO. It was noticed that the assessee claimed to have made payment of Rs. 9,78,085/- whereas the amount as per the invoice furnished by the assessee stands at Rs. 8,78198/- which also creates doubt....
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....s for the reason that there is no dispute raised by the Revenue as far as the payments for the purchase of the car is concern. Thus, we are interpreting that the payments made by the assessee, as reflected in the books of accounts, amounts to beneficial owner ship of the assessee and eligibility to claim depreciation. In this regard we find support from the judgment of the Hon'ble Gujarat High Court in the case of PCIT vs. Asian Mills (P.) Ltd reported in [2022] 135 taxmann.com 163 (Guj) where in was held as under: 16. The Revenue challenged the same before the Tribunal. It also relied on the decision of ITO v. Electro Ferro Alloys Ltd.[2012] 25 taxmann.com 458 (Ahd. - Trib.). According to the ITAT, the material available on record, when looked at, the assessee though was not the legal owner of the vehicle, it has made the payment for acquisition of cars and thus, it is a beneficial owner. It is, therefore, held to be entitled for depreciation on the car. It has drawn the support from the decision of Electro Ferro Alloys Ltd. (supra) and the decision of the Rajasthan High Court in CIT v. Mohd. Bux Shokat Ali [2001] 118 Taxman 712/[2002] 256 ITR 357 and the decision in the ....
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.... the all the facts, the AO held that the assessee failed to discharge the creditworthiness of the parties and genuineness of the transactions. Therefore the AO treated the amount of share capital along with premium as unexplained cash credit under section 68 of the Act and added the same to the total income of the assessee. 23. Aggrieved assessee preferred an appeal to the learned CIT-A 24. The assessee before the learned CIT-A contended that it has duly discharged the source of funds by demonstrating that the shares were issued to the directors of the company. But the assessee is not expected to justify the source of source in the hands of the directors of the company. Likewise, the allegation of the AO that there was deposit in the bank account of the directors immediately before making the investment in the shares is far off from the reality by any logic. It is for the reason that the credit entries in the bank statement of the directors may be on account of various reasons. It may be possible that the directors have made investment in the earlier years which they received in the year under consideration or the directors have taken fresh loan for making the investment in t....
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....liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. " 28.1 Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. 28.2 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not be a mask to cover the actual transaction or designed ....
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....ly both the lower authorities has not doubted the identity of the investor/director but doubted the genuineness of transaction and credit worthiness. 28.7 The case of the learned AR before us is that the burden of the assesse under section 68 of the Act has been absolved by the fact that the assessee has furnished necessary detail being bank statement, ledger and contra ledger copy, financial statements of directors, copies of ITR and sources of fund in their hand. It is not the duty of the assessee to prove the sources of source. 28.8 We find force in the contention of the learned AR that assessee cannot be expected to explain the sources of source. In this regard we find support and guidance from the judgment of Hon'ble Gujarat High Court in case of in the case of CIT vs. Paragati Co. Op. Bank Ltd reported in 278 ITR 170, the relevant extract of the observation of Hon'ble Bench reads as under: This Court is in respectful agreement with the aforesaid principles. In the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 3601 (Guj.), this Court has, while dismissing Departmental tax appeal, upheld the approach of the Tribunal based on the judgment of Patna High Court t....
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....onable and excessive in pursuance to the provisions of section 40A(2)(b) of the Act and added to the total income of the assessee. 31. Aggrieved assessee preferred an appeal to the learned CIT-A 32. The assessee before the learned CIT-A submitted that the employee was the qualified engineer and the gold medalist in his education. The assessee to justify the qualification of the employee has also filed the details of the project report submitted during the study period and certificates before the learned CIT-A. Therefore, the amount of salary paid to the employee was reasonable. 32.1 However the learned CIT-A confirmed the order of the AO by observing as under: I am inclined with A.O. that, in the absence of appointment letter with details of duties & responsibility of Shri Vishal Dave or explanation about nature of services rendered by him over & above the services of existing director with linking of improvement in turnover & profit and details / evidences to substantiate the reasonableness & justification of salary, invocation of provision of 40A(2)(b) of the Act is justified. Shri Vishal Dave is a fresh graduate engineer and not done any research in the field o....
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....ing the comparison of the salary of the employee after having regard to the market which was one of the precondition for invoking the provisions of section 40A(2)(b) of the Act. On this reasoning only, the case of the revenue fails and assessee succeeds. 36.2 Be that as it may be, it is also important to note that the amount of salary was accepted by the revenue in the subsequent year. This contention of the learned AR was not doubted by the learned DR appearing on behalf of the Revenue. Thus, we are of the view that the revenue cannot take different stand for different assessment years. In other words, once the revenue has accepted the salary to the employee reasonable to the tune of Rs.18 lacs, the same cannot be disturbed in the year under consideration. Accordingly, we set aside the finding of the learned CITA, and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 37. The next issue raised by the assessee is that the learned CIT-A erred in confirming the order of the AO in part by sustaining the disallowance of Rs. 3.2 Lacs being 20% of legal and miscellaneous expenses. 38. The AO during the assessment proceedings ....
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....it tax liability of Rs.5,02,080/- and paid FBT of Rs.5,57,560/- As held by Hon'ble ITAT Mumbai in the case of JKH Export. Navi Mumbai (ITA No.137 of 2012) vide order dt. 31/03/13 following the principles laid down by its earlier order in the case of hansraj mathurdas Vs ITO in ITA no.2397/Mum/2010 dt. 16/09/11 and Board circular No. 08/05 dt. 20/08/05 that "Once FBI was levied on Expenses incurred, the same are treated as fringe benefit provided by assessee as employer to its employee and the same have to be allowed as expenses incurred wholly and exclusively for the purpose of business." Hon'ble Chandigarh ITAT also in the case of M/s Yamuna oils (ITA No. 1435/chd/2010) vide order dt. 16/04/03 held similar view. Considering the facts that all eight heads under which such expenses are incurred, claimed and disallowed by A.O. are part of valuation of FBT, except legal expense, and Misc. Expenses. The total of these two expenses are r 16,00,000/- (about) {9,99,155 + 6,09,243). The appellant neither in asstt.proceedings nor in appeal has furnished any details 7 bills etc. for these two expenditure. It is therefore 20% of these expenditure i.e. disallowance & addition of Rs.3,20,00....
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....e heard the arguments of both the sides and also perused the relevant material on record. The learned counsel for the assessee has taken us through the CBDT Circular No. 8/2005 dated 29-08-2005 giving explanatory notes on the provisions relating to fringe benefit tax as introduced by the Finance Act, 2005 and invited our attention to the relevant portion thereof to explain the object behind levying fringe benefit tax. As indicated in the said circular, the fringe benefit tax has been introduced as a surrogate tax on employer with the objects of resolving the problems in taxing some perquisites/fringe benefits in the hands of the employees in terms of section 17. Further, as explained in para No. 3.2 of the Circular, the scope of the term "fringe benefits provided" is defined in section 115WB(1) to mean any consideration for employment provided by way of any privilege, service facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees. Moreover, as clarified in the said circular while answering frequently asked question No. 15, fringe benefit is deemed to have been provided if the employer has incurred expense....
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....ee is partly allowed whereas ground of appeal the Revenue is dismissed. 47. In the Result appeal of the assessee is partly allowed for statistical purposes Coming to ITA No. 1447/Ahd/2014 an appeal by the Revenue for the AY. 2009-10 48. The Revenue has raised following ground of appeal: 1). The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.1,76,15,098/- made on account of disallowance of gross profit & rejection of books of accounts u/s.145(3) of the Act when Assessee completely failed to discharge its onus of proving the value of its stocks . 2). The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.11,78,321/- out of total addition of Rs.14,98,321/- made on account of various expenses not proved to have been incurred wholly & exclusively for Assessee's business. 3). On the facts and in the circumstances of the case, the Ld. Commissioner of Income- Tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 4). It is therefore, prayed that the order of the Ld. Commissione....
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....under the Companies Act, the licensed capacity, installed capacity, actual production and sales quantity is required to be furnished but the assessee has not complied the requirement under the Companies Act. 51.1 In view of the above the AO held that the books of accounts of the assessee are not reliable and therefore he rejected the same under the provisions of section 145(3) of the Act. Thus the AO estimated the gross profit at Rs. 12,30,29,978/- being 16% of the sales of Rs. 76,89,37,364/- and added the difference of Rs. 1,76,15,098/- between the gross profit shown by the assessee for Rs. 10,54,14,880/- viz a viz gross profit calculated by the AO. The necessary finding of the AO reads as under: Sales for the year of Rs.768937364 Gross Profit(r) 16% Rs. 123029978 Less ; G.P. disclosed by as per Annexure to Form 3CD Report Rs.105414880 Addition on account of G.P. Rs. 17615098 Thus, the difference in the gross profit amounting to Rs.17615098 is accordingly added to the total income of the assessee. 52. Aggrieved assessee preferred an appeal to the learned CIT-A 53. The assessee before the learned CIT-A contended that opening stock shown in ....
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....ing stock of impunged previous year, gross profit reflected during impunged previous year at substantially high rate, no cost audit report, sale transactions with associated partly etc. does not give any discrepancy as pointed out by A.O.. The appellant's books of accounts, bills, vouchers were with the VAT department and non production of ! such books / bills / vouchers does not amount to discrepancies which j can lead to rejection of books of account (audited) and estimating substantially higher G.P. results at 20% of G.P. without any comparable, reasonableness has any justification. Specific discrepancies for ' depreciation, disallowances of other expenditure are sufficient to take care of the net profit reflected by appellant. It is therefore, in my view, rejection of books of accounts u/s 145(3) of the Act and estimation of G.P. at 20% and thereby addition of r 1,76,15,0987- is neither justified nor sustainable in law. The A.O. j§. jdjrected to deletejne addition so made on presumption and surmises. The appellant gets relief accordingly. These grounds are allowed. 55. Being aggrieved by the order of the learned CIT-A the Revenue is in appeal before us. 56. B....
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....e Act and thereby he has enhanced the value of GP and made the addition of Rs. 1,76,15,098/- only. 57.2 From the preceding discussion we find that the AO has rejected the books result declared by the assessee mainly for the reason that supporting document were not provided as required by the AO. At this juncture it is necessary to note that there was search and seizer operation conducted by the VAT department which prevented the assessee to file necessary supporting evidences during the assessment proceeding. It pertinent to highlight that books account of the assessee has been duly audited by the auditor and there was upward trend in GP ratio and in previous year as well in subsequent year, the book results were accepted by the Revenue. 57.3 Therefore, without bringing any corroborative material on record suggesting books result in the year under consideration not representing true the book result cannot be rejected merely for not providing the confirmation of the suppliers and supporting bills and voucher with respect to closing stock. In holding so we draw support and guidance from the judgment of Hon'ble Allahabad High Court in case of Awadhesh Pratap Singh Adbul Rehman &....
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....powered to make a best judgment assessment as provided in section 144, that is, after taking into account all relevant materials which he has gathered. Further, section 145(1) is an enabling provision. It is intended to enable the Assessing Officer to make the correct assessment which is the paramount object. It is not intended to confer any right or benefit upon an erring assessee. Thus, this section is intended to make the correct assessment in compliance with the law and not to by-pass the statutory provisions. It is a fair proposition that if an overall estimate of income has been made, there would not be any scope for making any disallowances and applying section 40A(3). This is not because the statutory provisions can be ignored or excluded but because they must be deemed to have been applied in making the estimate so that there is no scope for any further deductions. Thus, if an estimate is made on the basis of gross profit by using comparative instances, there would be no scope for further deductions applying section 40A(3). Therefore, all depended upon the manner of making the estimate. If it had been made in a way which covered the entire position regarding incom....
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....ccount of difference in income as per TDS reconciliation ofRs.1026466/- 6. The Ld.CIT(Appeals) erred in law and on facts in confirming disallowance of EMD expenses written off of Rs.100750/- 62. The 1st issue raised by the assessee is that the learned CIT-A erred in confirming the disallowances/additions made by the AO though the same were not subject to the assessment as the case was selected for limited scrutiny. 63 At the outset we note that the learned AR has not brought anything on record at the time of hearing in support of the ground of appeal. We have also perused the assessment order and the learned CIT-A order and find that there was no issue whether the case of the assessee was selected for the scrutiny for the limited purpose or it was a regular assessment. Thus in the absence of any contrary information available on record, we do not find any merit in the ground of appeal raised by the assessee. Hence we dismiss the same. 64. The next issue raised by the assessee is the learned CIT-A erred in confirming the disallowances made by the AO for the deprecation of Rs. 76,81,670/- on plant machineries. 65. At the outset we note that the issues raised by t....
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.... the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the grounds of appeal filed by the assessee is hereby partly allowed. 70. The next issue assessee by the assessee in ground No. 5 is that the learned CIT-A erred in confirming the difference between the income shown by the assessee viz a viz reflected in TDS certificate amounting to Rs. 10,26,466/-. 71. The AO during the assessment proceedings observed certain differences between the income shown in the books of accounts viz a viz in the TDS certificate. The details of the same stand as under: Sr.No. Name of the party Income as per TDS certificate Income as per P & L A/C Difference as per TDS certificate 1. State bank of India 669643 319197 350466 2. Kandla Port Trust 676000 NIL 676000 Total 1026466 72. The above difference was treated as income of the assessee and therefore the same was added to the total income of the assessee. However, the assessee has not challenged the impugned addition before the learned CIT-A. 73. Nevertheless, the assessee has raised the groun....
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....iscussion, we find that there is no issue to the fact that such forfeiture of the EMD is a business loss which is eligible for deduction. The learned CIT-A has disallowed the same on the reasoning that the assessee failed to furnish the necessary details about the EMD. Indeed, it is the onus upon the assessee to furnish the necessary details for the claim made by it in the income tax return. The assessee has only filed the copy of the ledger which is placed on pages 94-95 of the paper book. To our understanding, the copy of the ledger is not sufficient enough to admit the claim of the assessee until and unless it is supported by the documentary evidence. However at the same time, we find that generally these EMD's are provided by way of fixed deposits which are made through the banking channel. It is also a normal practice if the contract is not awarded to the party, the same is returned back to the assessee. But all these details are not available on record. However in the interest of justice and fair play we are inclined to give one more opportunity to the assessee to furnish the necessary details before the AO for fresh adjudication as per the provisions of law. The assessee is ....