TMI Blog2018 (5) TMI 1638X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of excessive claim of the expenditure - assessee had started the new line of business which was manufacturing of bricks - Held that:- Referring to fact that the assessee is remitting royalty to the Government of West Bengal for excavation of mud and new machines purchased by the assessee for excavation of mud for which assessee had incurred cost of ₹ 27,48,000/-for the Hitachi Hydraulic Excavator powered by Isuzu Engine on 12.11.09 and the truck purchase for ₹ 8,00,000/- and that the electronic equipment (Tough Rider) at the cost of ₹ 3,74,400/- goes on to show that the assessee had set up the unit for manufacture bricks and the royalty to Govt for excavating mud and coal and electricity consumption, labour payments booked and sales of bricks, VAT documents filed are facts which throw light that assessee had started manufacturing and sale of bricks this year and has thus justified its expenditure for production of bricks as stated above - Decided in favour of assessee. Addition account of share application money introduced into the company - Held that:- ll the three directors of the company were filing I.T. Returns and the amounts has been adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the audited financials. 3.1 The brief facts of the case is that the Assessing Officer during the assessment proceedings sought an information from the Indian Overseas Bank u/s 133(6) of the Income Tax Act 1961 (herein after referred as the Act ) from where the Assessing Officer got the copies of stock statement submitted by the assessee company to the Bank which is reproduced as under: Date Value of closing stock 26-09-2009 Rs.65,95,000/- 31-10-2009 Rs.67,04,500/- 31-12-2009 Rs.69,55,000/- 31-01-2010 Rs.70,99,000/- 05-03-2010 Rs.75,10,500/- The Assessing Officer after taking note of the value of closing stocks as given above was of the opinion that the assessee had maintained monthly stock amounting to ₹ 65 lakhs to 75 lakhs, i.e. average stock of ₹ 69,72,800/-per month during the last six months. However, he noted that as per the stock submitted before him by the assessee, the closing stocks were shown at only ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted before it with suspicious eyes and has therefore made the additions on the basis of conjectures and surmises. The ld. AR also brought to our notice that in the Paper Book filed before us which contains 45 pages, new documents have been filed for the first time before the Tribunal at Serial No.12 and 13 which are annexed from Page 42 to 45 which only gives the details of month wise break up of closing inventory and month wise details of major expenses. Since these breakup working were not produced before the authorities below, therefore, he prayed for admission of these financials which according to AR was necessary to adjudicate the issues before us. We note that because of the unfortunate sudden demise of the accountant, the assessee could not prepare the month wise break up which was reasonable cause, and that fact prevented the assessee from filing it from the authorities below and it only gives the breakup/details therefore we are inclined to admit in the interest of justice. 3.3 Coming to the issue in hand, we note that the addition has been made by the Assessing Officer taking note of the statement of assets hypothecated against cash credit by the assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s justification for not producing books of account has been because of the sudden demise of the accountant and the assessee could not retrieve books of accounts maintained in the computer, since assessee was not aware of the password. In such a scenario, we are of the opinion that there is reasonable cause for the assessee not to produce it before the Assessing Officer. As stated earlier, the return of income was filed on 23.09.2010 and therefore, audited financials were also filed by the assessee on that date. Since, the accountant of the assessee had passed away in November, 2010, the Chartered Accountant with the aid of books maintained by the late accountant prepared the Profit Loss and Balance Sheet, after proper verification of income and expenditure. We note in a similar case Jay Engineering Works Ltd. reported in 113 ITR 389 (Del). When the regular books of accounts were destroyed by fire, the Assessing Officer did not accept the deduction claimed by the assessee. However, the Tribunal taking note of the fact that the assessee s accounts have been audited, allowed the deduction. The Revenue challenged the action of the Tribunal where in the Hon ble Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he has gathered for the purpose of making an assessment. While the word evidence may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, the use of the word material shows that the ITO not being a Court can rely upon material which may not be strictly evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judicial authorities can take official notice of wider varieties of facts which need not be proved before them. Thus, not only in respect of the relevancy but also in respect of proof the material which can be taken into consideration by the ITO and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act Under s. 34 of the Indian Evidence Act account books maintained in the regular course of business are evidence after the relevant entries are proved by oral evidence or are admitted. The ITOs, however, have to deal with such numerous cases of assessment that they can accept as correct books of account maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible for the assessees to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books. In a sense it may be a question of law as to what the meaning of material is and whether the auditors' reports were material. But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference. Point No. 2 The Tribunal has stated that, though, ordinarily, the adjustments relating to expenses should have been made by the assessees in the accounts of the year to which the adjustments relate and not in a subsequent year, it is often inevitable that such adjustments relating to earlier years have to be made in subsequent years. This is specially so, when the business, as of the assessees, is of giant proportions and the branches are farflung. The Tribunal has also very properly relied upon the auditors' reports to draw the proper inference from the same. Since the evidence in income-tax proceedings need not consist necessarily of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llahabad High Court in CIT Vs. Khan Sirohi Steel Rolling Mills (2006) 152 Taxman 224 (All) and Hon ble Bombay High Court decision in CIT Vs. Acro India Ltd. 298 ITR 447 (Mum) and the Coordinate Bench Decision of Tribunal, Cochin Bench in the case of ACIT vs. Manglam Publication (2010) 190 taxman (Mag.) 1(ITAT Cochin) that it was a practice to inflate stock to draw higher credit from bank and without physical verification of stock by bank, the stock statement furnished by assessee to bank cannot be the sole basis to draw adverse view against assessee. Therefore the explanation of assessee is accepted by us, in the absence of physical verification by Bank of the stock as on 31.03. 2010. We note that there are divergent views on this issue by other Hon ble High Courts, however in the absence of jurisdictional Hon ble High Court on this issue, the settled position of law is that decision favorable for the assessee needs to be taken as per the judgement of the Hon ble Apex Court s in the case of CIT vs. M/s. Vegetables Products Ltd. in 88 ITR 192(SC) therefore, we accept the explanation rendered by the assessee company for the difference in stock position between statement given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... started manufacturing business of bricks. The ld. AR drew our attention to Page No.5 of Paper Book from where we note that the assessee in this Assessment Year had for the first time made expenditure of coal which was consumed at ₹ 15,93,830/- when in the previous year it was zero. Likewise, labour charges related to brick manufacturing was ₹ 25,25,210/- which was zero in the last year, likewise fuel oil expenses was ₹ 11,14,250/- whereas in the last year it was zero, and electricity charges increased from ₹ 51,163/- to ₹ 5,46,270/-. We note that the assessee had remitted royalty cess to the Government of West Bengal and invested for heavy earth removers for excavating mud from the earth which was to the tune of ₹ 27,48,000/- whereas last year it was zero, since assessee had started new line of business of manufacturing bricks. The assessee had also booked a vehicle expenses of ₹ 1,42,145/- since the assessee had purchases a new vehicle and last year it was Nil. These expenses which have been claimed by the assessee was because of its setting up a new business for manufacturing of bricks and was related to the production of bricks whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of share application money introduced into the company. 5.1 The brief facts of the case is that the Assessing Officer noted that the assessee had shown fresh introduction of share application money amounting to ₹ 6,00,000/-. On being asked to explain the identity, creditworthiness and genuineness of the same, the assessee submitted that the three directors of the company had invested ₹ 6,00,000/- out of which ₹ 3,00,000/- was introduced by Shri Tapan Kr. Manna, ₹ 1,50,000/- was introduced by Shri Sayantan Manna, ₹ 1,50,000/- was introduced by Smt. Shibani Manna. According to the Assessing Officer, the share applicants despite notices did not appear before him and taking note of their individual ITRs, and failure on the part of the assessee to explain the source of investment, it was treated as unexplained investment of the share capital from unexplained source of income of the assessee company, so the said amount was added to the total income. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer. Aggrieved, the assessee is in before us. 5.2 We have heard both the parties and perused the records. We note that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the total income was ₹ 3,01,890/-. Page No.23 to 24 is the TDS deduction from Shri Tapan Kr. Manna, Page 25 to 26 is the TDS Deduction of Smt. Shibani Manna and as per Page 27 to 28 reveals TDS deduction from Shri Sayantan Manna which corroborates with the ledger copies placed of all the three directors from Page Nos.21 to 31. Therefore, there is no dispute in regard to the identity of share applicants; and the assessee company is a closely held company where family member s i.e father, son and mother had introduced share capital to the company. We also note that all the three directors of the company were filing I.T. Returns and the amounts has been adjusted from their remuneration and thus the source of the introduction of the share application money has been explained. We also note that all the three were residing at the same house, therefore expenditure in the house was common and so the remuneration from the company could be adjusted for purchase of shares of own company is a plausible explanation in the facts of the case. Therefore we are of the view that on the facts and circumstances of the case as noted above, since the assessee has discharged the onus casted upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
