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2022 (5) TMI 940 - AT - Income TaxDisallowance of depreciation on plant and machinery installed by the appellant company - HELD THAT:- 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 where RO Plant has been installed, charts of parties with details & remark of Wasmo Project and 9 bills of machineries of WASMO project which are available in the paper book. These papers are necessary to be considered by the AO for adjudicating the issue on hand. Thus in the interest of justice and fair play, we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. The assessee is also at the liberty to furnish the necessary details before the AO and should extend the full cooperation without fail. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Disallowance of the depreciation claimed with respect to the additions of 5 cars in the block of assets - whether the assessee is eligible to claim the depreciation on the purchase of cars in the manner as provided under section 32? - HELD THAT:- We are of the view that there cannot be any disallowance on adhoc basis as far as depreciation is concerned. In view of the above and after considering the facts in totality, the ground of appeal of the assessee is partly allowed for the statistical purposes. Addition u/s 68 - liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties - HELD THAT:- We find the assessee in order to establish the genuineness of the transaction and credit worthiness of the directors furnished necessary detail but the revenue authority without pointing any defect in the submission of the assessee treated the amount of share and premium as unexplained cash credit merely on the basis of individuals who lend fund to the directors were not able to explain the sources of funds in their hand. Therefore, we are of the view that assessee had been able to explain the sources of credit of share capital and premium in its books of account. The assessee cannot be made suffer due to some third parties who provided fund to the investor was not able to properly explain the sources fund in their hands. Hence, considering the fact in totality we hereby direct the AO to delete the addition made under section 68 -Thus the ground of appeal raised by the Assessee is hereby allowed. Addition under the provisions of section 40A(2)(b) - AO treated the salary paid to the employee being the relative of the director as excessive and unreasonable in pursuance to the provisions of section 40A(2)(b) - HELD THAT:- As nothing has been brought on record by the authorities below by making 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. 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 ₹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. Disallowance being 20% of legal and miscellaneous expenses - HELD THAT:- We are of the opinion that such expenses cannot be disallowed as the assessee has already paid the taxes in the form of fringe benefit tax to the revenue. For the balance amount of the expenses being legal and miscellaneous expenses we note that the assessee failed to discharge the onus imposed upon it. However, the fact that the relevant supporting documents were seized by the VAT department cannot be ruled out. It is for the reason that it was not possible for the assessee furnish the necessary details. Therefore it was prayed by the assessee to the AO and learned CIT-A for collecting the necessary details from the VAT department. But we note that the Revenue has not exercised its powers granted under the statute. However to meet the end of justice and to put the end of the ongoing litigation, we are of the view that disallowance of 5% of the legal and miscellaneous expenses will render the justice to the assessee and the Revenue. Hence, the ground of appeal of the assessee is partly allowed whereas ground of appeal the Revenue is dismissed. Addition after rejection the books of the accounts - AO, in the absence of necessary documents/records/informations which were to be furnished by the assessee, doubted on the genuineness of the transactions shown by the assessee in the financial statements - HELD THAT:- As 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. 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. See AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS [1993 (12) TMI 28 - ALLAHABAD HIGH COURT] We also find pertinent to note that even assuming the closing stock declared by the assessee is undervalued, then also it has tax neutral effect. It is for the reason that such closing stock shall become the opening stock in the next year and therefore there will not be any impact on the income of the assessee except the income of one year will shift to the income of another year. On this reasoning as well, we do not find any merit in the order of the AO. In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT (A). Accordingly, we uphold the same. Hence the ground of appeal of the revenue is dismissed. Difference between the income shown by the assessee viz a viz reflected in TDS certificate - HELD THAT:- 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. The assessee has raised the ground of appeal before us. However, at the time of hearing the learned AR has not advanced any argument or pointed out any infirmity in the order of the AO. Thus in the absence of any argument from the side of the learned AR of the assessee, we do not find any reason to interfere in the finding of the AO. Hence we confirm the same. Thus the ground of appeal of the assessee is hereby dismissed. Disallowance of EMD expenses - HELD THAT:- 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 - 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. 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 at the liberty to furnish the necessary details without delay. It is also directed to the assessee to extend full cooperation during the assessment proceedings. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
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