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2018 (5) TMI 1638 - AT - Income TaxAddition on account of discrepancy in value of stock statement furnished to the bank and the value of stock reflected in the audited financials - addition made taking note of the statement of assets hypothecated against cash credit by the assessee from Overseas Bank of India, after comparing it with the assessee’s balance sheet as on 31.03.2010 - Held 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. As there are divergent views on this issue by other Hon’ble High Courts,thus decision favorable for the assessee needs to be taken, we accept the explanation rendered by the assessee company for the difference in stock position between statement given to the Bank as well as that given in the balance sheet. - Decided in favour of assessee. 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 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 since the assessee has discharged the onus casted upon it in respect of introduction of share application money, the Assessing Officer ought not to have made addition - Decided in favour of assessee. Disallowance of depreciation on machinery - assessee did not produce the purchase bill of the machinery and could not explain the source of investment of the capital expenditure - Held that:- We note that the assessee had not only set up the manufacturing but also started production of the same which are revealed from the fact that the consumption of electricity has gone up from 51,163/- to 5,46,270/- and the fuel and oil was booked for the first time was to the tune of ₹ 11,14,250/-, coal consumed for the first time to the tune of ₹ 15,93,830/- and labour charged of ₹ 25,25,210/- etc., all these facts goes on to show that the assessee had set up manufacturing and started production and sales of the bricks which is corroborated by the VAT details which emanating from Page No.37 to 41 of the Paper Book, details of which is given in Page No.36. Thus the assessee has been able to prove that it has made addition to machinery (fixed assets) - Decided in favour of assessee.
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