TMI Blog2014 (2) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on machinery and wind electric generator - Held that:- Relying upon the decision in Dy. Commissioner of Income-tax Versus M/s. Prakash Industries Ltd. [2014 (2) TMI 53 - ITAT DELHI] - The physical examination shows that machinery do exist in the premises of assessee as a result of which production is also undertaken - The existence of machinery having been proved by the physical examination itself, it can not be said that no machinery is taken on lease for which lease rent is paid - The other corroborative evidence like lease agreement passing of money by banking channels, declaring lease income of recipients etc. are overwhelming evidence against the presumption that manufacturers do not have capacity to produce machineries - The existence of the machinery and its use has been established by assessee beyond any doubt. The wind electric generators were installed at the premises of TNEB which has been confirmed by the TNEB which is a Government Undertaking - The certificate submitted by the assessee from TNEB remains uncontroverted - Decided against Revenue. Depreciation on machinery transferred to another division - Held that:- The AO has failed to establish that no ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has not submitted complete details in respect of expenses - The disallowance of 10% was held to be justified - Decided in favour of Revenue. - ITA No.90/Del./2012 - - - Dated:- 15-1-2014 - Shri B. C. Meena And Shri C. M. Garg,JJ. For the Petitioner : Shri Ajay Wadhwa, Advocate For the Respondent : Shri D. K. Mishra, DR ORDER Per B. C. Meena, Accountant Member : This appeal filed by the revenue emanates from the order of the CIT (Appeals), Rohtak dated 31.10.2011. 2. The assessee is a limited company engaged in the business of manufacturing and sale of PVC Pipes, Picture Tubes, Video Tape, Power Generation, Sponge Iron, Induction Furnace, Heavy Structural Rolling Mill Mining, and Crushing activities. The return of income was filed on 27.11.1997 declaring taxable income at Nil. The assessee has claimed carry forward of unabsorbed depreciation allowance for the assessment year 1994-95, 1995-96 and 1996-97 in sums of Rs.29,62,98,768/-, Rs.28,05,89,424/-and Rs.31,53,17,903/- totaling Rs.89,22,06,095/-. Besides, claim was also made for carry forward of unabsorbed capital loss of Rs.25,49,300/-. 3. The grounds of appeal filed by the revenue read as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on admission of additional evidence in the shape of a certificate from Tamilnadu without affording any opportunity in this regard. 8. On the facts and in the circumstances of the case, the Ld. ClT(A) has erred in deleting the disallowance of depreciation of Rs.10,60,941/- on the so-called purchase of machinery from M/s Ashish Engineering Works without appreciating properly that the genuineness of purchase of machinery could not be established conclusively by the assessee. 9. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Rs.5,71,49,911/- on account of lease rent, lease Management fee and lease rent of building respectively without appreciating that every year is independent and expenditure of each year is admissible on the facts and circumstances which did not warrant the allowance of above expenditure in the year under consideration. 10. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of interest of Rs.50,00,000/- out of interest claimed on account of utilisation of borrowed funds for non-business purposes by following his order passed in the assessee's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced at Pages 33 to 38 of the paper book. The AO has identified certain entries and has disallowed Rs.17,08,029/-. The complete details of disallowance was submitted by the assessee before CIT(A), which are placed at pages.6 to 8 of the paper book. 5. We have heard both the sides on the issue. We have dealt the issue of prior period expenses in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 5 to 8 of order dated 24.09.2013. Both the sides relied on the pleadings in that appeal. The relevant para 8 of that order is reproduced hereunder :- "8. We have heard both the sides. We have also perused the orders of the authorities below. We have also considered the case laws relied upon by both the sides. The Assessing Officer has made a patent mistake while adding the prior period expenses to the income of the assessee. The total prior period expenses were of Rs.96,57,170/- and there was prior period income of Rs.26,16,334/-. The Assessing Officer added both these amounts which is patently wrong. Therefore, the CIT (A) has rightly appreciated this fact and considered this mistake in his order. The assessee's contention for consistency wherein it was conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses debited in Profit Loss account and expenses which can be allowed only on actual payments. It will be sufficient to meet the end of justice. We order accordingly. Therefore, we partly allow this ground of revenue's appeal." Respectfully following our decision in the aforesaid order, we find that there is no claim in this year that prior period expenses also include the expenses which deserved to be disallowed u/s 43B of the Act and the same is to be allowed when the actual payments are made. Therefore, in absence of such details, we set aside the order of the CIT (A) on this issue and allow this ground of revenue's appeal for disallowance of Rs.17,08,029/-. This ground of revenue's appeal is allowed. 6. In the ground no.2, the issue involved is deleting the disallowance of Rs.25 lacs out of repair expenses. The AO has disallowed a sum of Rs.25 lacs on account of repair maintenance on Plant Machinery, Building and others for the reasons given in assessment order for the AY. 1996-97, just to apprehend that expenditure of capital nature and inadmissible nature are included in this expenditure. The AO has admitted that the complete details of repair and maintenance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Del/2010 for assessment year 1996-97. We have dealt this issue in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 13 to 16 of order dated 24.09.2013. The relevant para 16 is reproduced hereunder :- "16. We have heard both the sides. We have also gone through the submission made by both sides. We find that the Assessing Officer has made an ad hoc disallowance without appreciating the facts of the case that the turnover and profit of the company has been increased during the year. The payment has been made in accordance with Schedule-XIII of the Companies Act, 1956 and this payment has also been approved by the Board of Directors and shareholders of the company. In view of these facts, it was unjustified to make an ad hoc disallowance of Rs. 1 lac from the total payment of Rs.2.5 lacs to the whole time Managing Director of the company. In view of these facts, we find no merits in this ground of revenue's appeal and we sustain the order of the CIT (A) on this issue. This ground of revenue's appeal stands dismissed." Respectfully following our aforesaid decision, we dismiss this ground of revenue's appeal. 9. Ground No.4 is against the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has himself disallowed some expenditure which is not allowable. The Assessing Officer relied on the disallowance made in Assessment Year 1995-96 which has been finally deleted by the ITAT while deciding the ITA No.2978/Del/2000 dated 13.12.2005. The Assessing Officer has not pinpointed any specific defects in the details nor has he further asked any details in this regard, therefore, we find no defects in the order of CIT (A). Accordingly, we sustain the same. This ground of revenue's appeal is dismissed." Facts being same, therefore, respectfully following our aforesaid decision, we dismiss this ground of revenue's appeal. 12. Ground No.6 is against the disallowance of Rs.10 lacs on account of commission expenses. The AO dealt this issue in para 12 at page 8 of his order and the CIT (A) dealt the same in para 11 at pages 9 10 of his order. 13. We have heard both the sides on the issue. Both the sides relied on the pleadings made in ITA No.3036/Del/2010 for assessment year 1996-97. We have dealt this issue in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 25 to 28 of order dated 24.09.2013. The relevant para 28 is reproduced hereunder :- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 15 at page 9 of his order and the CIT (A) has dealt this issue in para 14 at page 12 of his order. Both the sides relied on the pleadings made in ITA No.3036/Del/2010 for assessment year 1996-97. 15. We have heard both the sides on the issue. We have dealt this issue in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 29 to 32 of order dated 24.09.2013. The relevant para 32 is reproduced hereunder :- "32. We have heard both the sides on the issue. This issue has been discussed by the Assessing Officer in para 17.1 and 17.2 at pages 15 16 of Assessing Officer's order. The CIT (A) has dealt the issue in para 15.2 to 15.10 at pages 28 to 33 of his order. We have also perused the details submitted. At the outset, we would like to state that confirmation was made available to the Assessing Officer on 19.03.1999. This fact has been accepted by the ld. DR when it was pointed out to him during the hearing. In view of these facts, we hold that the confirmation filed from TNEC did not constitute additional evidence and the same was filed before the Assessing Officer. On the perusal of the confirmations, we find that TNEC has confirmed that 45 wind electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified the veracity of the certificate issued by TNEB if he was having any doubt regarding the supplier M/s. Airo Energy Ltd.. Merely not finding M/s. Airo Energy Ltd. that too without summoning the same at the premises cannot be made a basis to draw the conclusion that firm was non-existent. As it is not possible to ensure that the company will continue at the same premises in the coming time. Assessee requested for issuing summons to supply M/s Airo Energy Ltd which was not accepted by the Assessing Officer. Therefore, the evidence in the form of certificate from TNEB assumes a credence and deserves to be considered for allowing the depreciation on the assets. In the assessee's own case for Assessment Year 1995-96, the ITAT has held as under :- "We have examined in detail the spot verification report carried out by the Dr. Director of Income-tax (Inv)-I, Raipu0 MP on the instructions of the Addl. Commissioner of Income-tax Hissar Range, Hissar. We find that the annexure of the report contains the name of each of the lessor to whom lease rent is being paid along with the items supplied by him and existing at the site of the assessee company at Champa. There is also a column w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Assessee pointed out the production and purchase of raw materials. Assessee submitted that details about the transaction, truck number, etc. Thus, assessee produced relevant materials to show purchase of materials and its use in production. AD has accepted the existence of G in case of A for asst. yr. 1985-86. The Tribunal appreciated all these facts in arriving at a conclusion. It clearly appears that matter has been disposed of on appreciation of evidence and when the matter has been decided by the Tribunal on appreciation of evidence, it cannot be said that, that raises a question of law. The Tribunal pointed out that at best it could be inferred that these parties were set up by somebody else and the reasons could be manifold for that. It is very much surprising that in the instant case the AD has drawn a presumption that the amount has come back in the assessee' hands, without any evidence whatsoever merely on the basis of withdrawal of amounts from the account of G. It goes without saying that it was within the knowledge of the banker as to who was the account holder and who withdrew the amount from the same bank. The AD by due diligence could have unearthed the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether charged in this year or in future years. He also relied on the pleadings made in ITA No.3036/Del/2010 for assessment year 1996-97. 18. We have heard both the sides on the issue. We have dealt this issue in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 33 to 37 of order dated 24.09.2013. The relevant para 32 is reproduced hereunder :- "37. We have heard both the sides on the issue. We are not able to understand why this ad hoc disallowance was made without any basis or substance. The disallowance cannot be made merely to cover possible loopholes or leakages of bogus purchase of capital goods. The AO has to establish that no assets have been purchased or installed and in that circumstances, he can resort to disallow the depreciation. No efforts have been made to establish that the details submitted by the assessee were not correct. Therefore, we sustain the order of CIT (A) for deleting such ad hoc addition and this ground of revenue's appeal is dismissed." Facts being same, therefore, respectfully following our aforesaid decision, we dismiss this ground of revenue's appeal. 19. In the ground no.9, the issue involved is deleting the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 19 at page 14 of his order and the CIT (A) has dealt this issue in para 17 at pages 14 15 of his order. Both the sides relied on the pleadings made in ITA No.3036/Del/2010 for assessment year 1996-97. 22. We have heard both the sides on the issue. We have dealt this issue in revenue's appeal in ITA No.3036/Del/2010 for assessment year 1996-97 in paras 44 to 47 of order dated 24.09.2013. The relevant para 41 is reproduced hereunder :- "47. We have heard both the sides on the issue. We have also perused the record. We have upheld the order of CIT (A) regarding the genuineness of the payment of lease rent raised in ground no.9, therefore, we find that there is no justification in disallowing the ad hoc amount of interest of Rs.2 crores from the interest debited in the books of account. Therefore, we sustain the order of CIT (A) for deleting this addition. This ground of revenue's appeal is dismissed." Facts being similar, respectfully following the aforesaid order, we dismiss this ground of revenue's appeal. 23. In the ground no.11, the issue raised is against the deletion of lump sum addition of Rs.1 crore made by the Assessing Officer. The Assessing Officer made this ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being value of goods sold by the assessee to M/s Sahib Engineering Works rather than the peak credit addition u/s 68 is not to be made In respect of peak of debit entries. The money trail leads to the said three leasing companies M/s Kotak Mahindra Finance Ltd., SRF Finance Ltd and Times Guarantee Finance Ltd and there is no evidence to establish that the said moneys remitted by M/s Kotak Mahindra Finance Ltd., SRF Finance Ltd and Times Guarantee Finance Ltd were the assessees funds. Under these circumstances, the addition of Rs.1,48,74,249/- is deleted". Once the advance made to a party and the same amount was received back then there cannot be any addition for escapement of income, At the most, the interest may be disallowed if the advances were made for non-business purposes. This has not been done by the Assessing Officer and we have no power to do it. Without going deep into the accounts merely stating that accounts were benami of the assessee is not justified. Moreover, the ITAT in assessee's own case had held that five parties are genuine and the Assessing Officer in remand report has already treated these five parties as genuine. Thus, allegations howsoever strong but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is against the deletion of disallowance of Rs.50,000/- out of advertisement expenses claimed. Assessing Officer disallowed the amount to cover up leakages, for not producing souvenir and in view of some Board Circular relevant to advertisement in souvenir. CIT (A) granted the relief by holding as under :- "13. Ground no.13 of appeal is regarding disallowance of Rs.50,000/- on account of advertisement expenditure. The AO noted that the appellant claimed Rs.43,47,836/- on account of advertisement expenses for which requisite details have been filed by the appellant. The AO held that advertisement given in a souvenir can be allowed only after the proof of advertisement in the souvenir has been filed by the appellant. In the absence of such proof the AO disallowed Rs.50,000/- on ad-hoc basis. The AR submitted before me that on the requisite details have been furnished before the AO and the payments have been made through leading advertisement companies by cheques. The action of the AO in disallowing ad-hoc amount is not justified. I have considered the issue and find that the AO made the ad-hoc disallowance without any basis and therefore it is deleted and the ground of appeal is all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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