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2022 (1) TMI 787 - AT - Income TaxDisallowing deduction of Capital Expenditure u/Section 35(1)(iv) read with section 35(2) - disallowance of depreciation on assets purchased during the relevant previous year - CIT-A deleted the addition - HELD THAT:- CIT(A) deleted the addition made purely on the basis that the AO did incomplete enquiry. There was no material whatsoever produced by the Assessee to disprove the conclusions drawn by the AO and positively prove that it purchased machineries in question for R & D and that it carried out R & D activities. In such circumstances, the CIT(A) in our view fell into an error in deleting the addition made by the AO. Perusal of the order of the CIT(A) reveals that the CIT(A) has made observations that the AO could have adopted a better course than what he did, but does not go further and call upon the Assessee to produce evidence to substantiate its case. We therefore find force in the contention of the learned DR that the CIT(A) without any valid evidence that the machineries existed and that R & D was carried out by the Assessee, merely allowed the claim of the Assessee on the basis of a finding that incomplete enquiries were made by the AO. As rightly submitted by him there was not a shred of evidence filed by the Assessee even before CIT(A) to establish with cogent evidence as to how the conclusions of the AO based on outcome of Survey proceedings and enquiries from the purchasers and their whereabouts were not correct. Without such evidence, the CIT(A) ought not to have deleted the addition made by the AO. The reference to invoices and description of machineries mentioned therein is of no avail because the invoices were found to be bogus and the machineries found not existing at the time of survey. The CIT(A) has wrongly placed the burden of proving that the Assessee did not carry out R & D on the Revenue, when it was on the Assessee to prove its case. CIT(A) is not sustainable and the same is reversed and the order of the AO is restored on this issue. The reasoning for restoring the addition made by the AO disallowing deduction u/s.35(2)(ia) of the Act will equally apply to the disallowance of depreciation also and that addition is also restored - Decided in favour of revenue. Addition of depreciation on account of opening wdv being revised owning to findings in AY 2002-02 that purchase of fixed assets was bogus and therefore the opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2003-04 on the same item of machinery had to be reduced and as a consequence the depreciation being 25% was disallowed by the AO is also restored. CIT(A) ought not to have admitted the appeal for adjudication because the Assessee had not paid the tax due on the income admitted in the return of income and therefore in terms of Sec.249(4)(a) - HELD THAT:- As relying on case of D. Komalakshi [2006 (11) TMI 155 - KARNATAKA HIGH COURT] wherein CIT(A) had admitted the appeals despite the fact admitted taxes on income returned was not paid and therefore the said appeal was not maintainable in the light of section 249(4) of the Act. We therefore quash the order of the CIT(A) and allow the appeal of the Revenue and restore the order of the AO. The other grounds of appeal does not require any adjudication in view of the decision regarding maintainability of appeal before CIT(A). Penalty u/s 271(1)(c) - HELD THAT:- Out of four additions only two additions viz., disallowance of deduction u/s.35(2)(ia) and Disallowance of depreciation survive after the order of ITAT and Hon’ble High Court order in the quantum proceedings. The circumstances under which the additions were made clearly show that the Assessee had concealed particulars of income especially in the light of Explnation-1 to Sec.271(1) of the Act. The Assessee has not discharged his onus that lay on him in law. The CIT(A) is not right in holding that concealment has to be proved beyond doubt before imposing penalty u/s.271(1)(c) of the Act. In the circumstances, we restore the order imposing penalty in respect of the aforesaid two additions that survive after the quantum proceedings.
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