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M/s Hari Om Steels (P) Ltd., Kanpur and others Versus ACIT – 6, Kanpur and others

2015 (7) TMI 944 - ITAT LUCKNOW

Addition on confiscation of stocks of scrap Rail and scrap Cast Iron by the District Authorities against the dues of KESCO - Held that:- CIT (A) decided the issue against the assessee by holding that there is no dispute regarding the value of confiscated stock of ₹ 50,92,490/- for which only possession has changed but the right remains with the assessee only. Before us also, same argument is made without establishing that entire stock of 832.809 M.T. was auctioned for ₹ 2.03 lacs bec .....

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n books, then the payment to KESCO is to reduce sundry creditor only and in that situation, sale proceeds of stock has to be considered as income only and the balance has to be considered as stock in absence of any evidence that entire stock was sold for ₹ 2.03 Lacs. If this demand of KESCO is other than liability as per books than also the assessee has to establish that deduction is allowable for the same but the assessee has not even explained the nature of the liability said to be payab .....

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Supra). Learned CIT (A) has decided this issue by following this judgment and learned DR could not point out any difference in facts. Hence, we decline to interfere in the order of learned CIT (A) on this issue. - Decided against revenue,

Unexplained investment made in the purchase of unrecorded stock - CIT(A) deleted the addition - Held that:- CIT (A) has given a categorical finding that purchase shown in the stock statement submitted to bank almost tallies with value reflected in bo .....

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show as to how this judgment of Hon’ble Jurisdictional High Court rendered in the case of CIT vs. Khan & Sirohi Steel Rolling Mills (Supra) is not applicable. Hence, we decline to interfere in the order of learned CIT (A) on this issue also - Decided against revenue.

Disallowance out of depreciation on plant & machinery which as per the assessing officer were not put in to use during the period under reference - CIT(A) deleted the addition - Held that:- none of the judgments followed .....

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now i.e. in the year 2015. Considering all these facts, we hold that the order of learned CIT (A) on this issue is not sustainable and therefore, we reverse the same and restore that of the A.O. - Decided in favour of revenue.

Addition u/s 43B on account of penal interest charged by the bank and interest payable to bank - CIT(A) delted addition - Held that:- Disallowance was made by the A.O. on account of interest payable on cash credit account and on account of penal interest charged .....

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Validity of assessment order u/s 143(3) - Held that:- Learned CIT (A) held that since the notice u/s 143 (2) was not validly served on the assessee within prescribed time, the assessment is void and he annulled the same. We find no infirmity in the order of CIT (A) in the facts of the present case and therefore, we decline to interfere in his order. See Anil Kumar Goel vs. ITO [2007 (2) TMI 260 - ITAT LUCKNOW-A ] - Decided against revenue. - ITA No.382/LKW/2013,ITA No.526 & 720/LKW/2013 - .....

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First, we take up the assessee s appeal. The only one effective ground raised is as under:- (i) The Ld. Commissioner (Appeals)- II Kanpur has erred in law and on facts in sustaining the addition of ₹ 50,92,440/- made by the assessing Officer on account of confiscation of stocks of scrap Rail and scrap Cast Iron by the District Authorities against the dues of KESCO. 3. Learned AR of the assessee reiterated the same contentions which were raised before CIT (A) and noted by him on page 11 of .....

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ty of stock seized but the same could not be furnished. Learned DR of the revenue supported the orders of the authorities below. 4. We have considered the rival submissions. We find that as per the A.O., there was opening stock of raw materials as per item no. 28A of the Tax Audit Report of Rail (Form 31) 344.374 MT and Cast Iron (Form 31) 488.435 MT total 832.809 MT. He has also reproduced the note given by the auditors which reads as under:- As explained to us, this stock has been seized by KE .....

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ing reply. Under these facts, the A.O. made addition of ₹ 50,92,490/- being value of this stock. When the assessee carried the matter in appeal before CIT (A), only argument was this that district authorities auctioned this entire stock for ₹ 2.03 Lacs which was adjusted towards arrear demands by KESCO. Learned CIT (A) decided the issue against the assessee by holding that there is no dispute regarding the value of confiscated stock of ₹ 50,92,490/- for which only possession ha .....

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Lacs is said to have been adjusted against outstanding demand of KESCO of ₹ 71,21,300/-. If this demand of KESCO of ₹ 71,21,300/- or any part thereof is already accounted for in books, then the payment to KESCO is to reduce sundry creditor only and in that situation, sale proceeds of stock has to be considered as income only and the balance has to be considered as stock in absence of any evidence that entire stock was sold for ₹ 2.03 Lacs. If this demand of KESCO is other than .....

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nue is aggrieved for deletion of the addition of ₹ 18,47,381/- made by the A.O. on the basis of profit on sale outside books of excess stock shown in the stock statement submitted to the bank by the assessee as on 31.03.2002 and no such excess stock shown in the stock statement submitted to the bank by the assessee as on 30.04.2002. 8. Learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A). He also placed reliance on the judgm .....

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acts. Hence, we decline to interfere in the order of learned CIT (A) on this issue. These grounds are rejected. 10. Ground No. 4 to 5 are also inter connected as per which, the revenue is aggrieved for deletion of the addition of ₹ 24,39,059/- made by the A.O. on account of alleged unexplained investment made in the purchase of unrecorded stock. 11. Learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A). He also submitted that .....

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s of accounts are not rejected and no other adverse circumstantial evidence is brought on record by the A.O. After making these observations, he has decided this issue by following this judgment of Hon ble Jurisdictional High Court rendered in the case of CIT vs. Khan & Sirohi Steel Rolling Mills (Supra). Learned DR of the revenue could not controvert these categorical findings of CIT (A) and he could not show as to how this judgment of Hon ble Jurisdictional High Court rendered in the case .....

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venue supported the assessment order. He also submitted that as per section 38, depreciation is not allowable in the facts of the present case. Learned AR of the assessee supported the order of CIT (A). He also submitted that the assets were ready for use and hence, depreciation is allowable. 15. We have considered the rival submissions. We find that the learned CIT (A) has decided this issue by following the judgment of Hon ble Allahabad High Court in the case of CIT vs. Swaroop Vegetable Produ .....

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this case, there was a categorical finding of the tribunal that the unit was kept ready for use and despite all efforts to restore, it remained under suspension. In the present case, the assessee has started trading business and although we are in the year 2015, the learned AR of the assessee could not show that the manufacturing activity has restarted. Nothing is brought on record to establish this also that the plant & machinery were kept ready for use. Mere submission that it were kept r .....

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but only two machines for 2 in pouch making were not used because of no demand for such pouches. Because of these differences in facts, this tribunal order is also not applicable. 18. The next judgment is the judgment of Hon ble Delhi High Court rendered in the case of CIT vs. Bharat Aluminium Co. Ltd.(Supra). In this case also, only some items of machineries were not used but the concerned block was used. Under these facts, it was held that when the block of assets is being used in the relevan .....

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e. 19. The next judgment is also the judgment of Hon ble Delhi High Court rendered in the case of CIT vs. Panacea Bitech Pvt. Ltd. (Supra). In this case, the facts were that the office was put to use but not full fledged use. Under these facts, it was held that depreciation is allowable because full fledged use of office is not essential. Hence, it is seen that the facts in that case are also totally different. Therefore, this judgment is also not applicable. 20. As per above discussion, it is s .....

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industrial unit has restarted even till now i.e. in the year 2015. Considering all these facts, we hold that the order of learned CIT (A) on this issue is not sustainable and therefore, we reverse the same and restore that of the A.O. This ground is allowed. 21. As per Ground No. 7, the revenue is aggrieved for deletion of the addition of ₹ 20,22,852/- made by the A.O. u/s 43B on account of penal interest charged by the bank and interest payable to bank. 22. Learned DR of the revenue suppo .....

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e penal interest was for contravention of contractual obligation between borrower and lender and not for infraction of any law. Learned DR of the revenue could not controvert any of these findings of CIT (A). Hence, we find no reason to interfere in the order of CIT (A) on this issue. This ground is rejected. 24. In the result, this appeal of the revenue is partly allowed. 25. Now, we take up the revenue s appeal for A.Y. 2005 - 06 in ITA No. 720/LKW/2013. 26. The grounds raised by the revenue a .....

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fore the AO. 3. That the CIT(A) has erred in law and facts in ignoring that the impugned notice and assessment proceedings were in substance and effect in conformity with or according to the intent and purposes of the Act and being thus covered by Section 292B could not be invalidated. 4. The CIT(A) has erred in law and on facts in annulling the assessment order ignoring the provision of Section 124 of the Income-tax Act, 1961, whereby the assessee could not question the jurisdiction of the AO a .....

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