TMI Blog2013 (1) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... e as expenditure incurred for the business & directed the AO to disallow depreciation - Held that:- As the CIT(A) considered the additional evidence without following the procedure as stipulated in Rule 4CA(3) of the Rules and issue has been restored back to the file of CIT(A) for necessary compliance therefore the issue of verification of bills of Rs.16,09,348/- also deserves to be restored to the file of the CIT(A) - also CIT(A) has given contradictory findings as in para 8.6, he held that the expenditure for which no evidence was produced stood at Rs.24,65,795/- and he allowed the expenditure of Rs.16,09,348 for which additional evidence was admitted. In para 8.7 the CIT(A) held that since the amount is recorded in the books of accounts and the best depreciation cannot be allowed directed AO to delete the entire addition of Rs.40,75,143. Further, in para 8.8, he allowed the AO to disallow the depreciation on the amount of Rs.24,65,795 for which no evidence was produced but unable to see any finding that the same was allowed by the AO either as capital or as revenue expenditure. Thus the findings of the CIT(A) are self-contradictory and not sustainable - in favour of revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee company failed to substantiate its claim of expenses. 5. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal. 3. Brief facts of the case giving rise to this appeal are that the assessee filed the return declaring income of Rs.1,11,329/- and the same was selected for scrutiny. Consequently, notice u/s 143(2) of the Income Tax Act, 1961 (for short the Act) was served on the company. The Assessing Officer finalized the assessment with a total taxable income of Rs.21,71,830 by making some additions and disallowances. The assessee filed an appeal before the Commissioner of Income Tax(A) which was partly allowed. Now, the revenue is in appeal before us against the order of the Commissioner of Income Tax(A) on the above mentioned ground. Ground no.2 4. Apropos ground no.2, ld. DR submitted that the Commissioner of Income Tax(A) erred in entertaining and considering additional evidence submitted by the assessee under Rule 46A of the Income Tax Rules 1962 ignoring the objections of the Assessing Officer submitted in the remand report. The counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, has not been complied with. There is nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result has been that additional evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. Since this is an indispensable requirement, we are of the view that the Tribunal ought to have restored the matter to the CIT (A) with the direction to him to comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT (A) under sub- ITA No.928/2011 Page 29 of 31 section (4) of Section 250 with the powers vested in him under Rule 46A. The Tribunal seems to have overlooked sub-rule(4) of Rule 46A which itself takes note of the distinction between the powers conferred by the CIT (A) unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the, brand name. These expenses include organizing events, traveling, advertisement etc. that helps in making the brand known to the masses. 8.3 As these expenses help in brand building, which is a regular process and benefits of the same accrue to the assessee for more than one year, the same are capital in nature. Thus such type of expenses which directly related to brand building were capitalized and depreciation was charged on them @25% as the said expenses were incurred to create a brand name which is the main asset of the company. The depreciation was charged @ 25% which is a residual category and includes all the other assets on which depreciation is chargeable if the same in not included in any category of specified rates. 8.4 The AO observed that the appellant could produce bills for Rs. 1,24,04,721 against the capitalized expenditure of Rs. 1,64,79,864. The AO further observed that Rs. 55,10,000 being the payment made to Set India Ltd. for which bill is produced is eligible for depreciation. 8.5 The AO worked out disallowance of Rs. 40,75,143 as under: Bills produced .... 1,24,04,721 Less: Capital expenditure eligible for dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the amount of Rs.24,65,795. But the Assessing Officer did not allow any depreciation on disputed amount of expenditure and he disallowed the part of expenditure of Rs.40,75,143/- for which the assessee-appellant could not produce bills before the Assessing Officer. Since we have observed that the CIT(A) considered the additional evidence without following the procedure as stipulated in Rule 4CA(3) of the Rules and we have restored this issue to the file of CIT(A) for necessary compliance by allowing ground no.2 in favour of the Revenue, therefore the issue of verification of bills of Rs.16,09,348/- also deserves to be restored to the file of the CIT(A). 10. Before we part with the findings of ground no.1, we also observe that in para 8.6, 8.7 and 8.8, the ld. CIT(A) has given contradictory findings. In para 8.6, he held that the expenditure for which no evidence was produced stood at Rs.24,65,795/- and he allowed the expenditure of Rs.16,09,348 for which additional evidence was admitted. In para 8.7 the CIT(A) held that since the amount is recorded in the books of accounts and the best depreciation cannot be allowed and directed the Assessing Officer to delete the entire ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther incurring any expenditure or acquiring any asset which were not recorded in the books and he deleted the addition with an observation that the addition merely based on suspicion cannot be upheld. 14. On careful consideration of the findings of the authorities below and the submissions before us, we observe that the DR did not dispute the fact that during the year under consideration, the total withdrawal of cash from the bank was of Rs.16,24,747 and opening cash balance at the beginning of the year was Rs. 1,70,856 and the closing cash balance at the end of the year was Rs.11,64,598. In this situation we decline to approve the finding of the Assessing Officer that the amount of cash withdrawals during the financial year be considered as assessee s unexplained expenditure which was not recorded in the books of accounts. As the Assessing Officer has observed cash withdrawals during the year, at the same time, the fact should also be considered that a major amount of cash withdrawals has been found as cash balance at the end of the year. 15. Accordingly, we are of the opinion that the findings of the CIT(A) are sustainable and we have no reason to interfere with the same. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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