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Income-tax Officer, Ward – 1, Hyderabad Versus Sri Venkateswara Cold Storage, Hyderabad

2015 (8) TMI 45 - ITAT HYDERABAD

Claim of deduction u/s 35AD - CIT(A) allowed claim - Held that:- There cannot be any doubt with regard to assessee’s claim that the cold storage has started operating during the relevant FY, irrespective of the fact whether it is in February’10 or March’10. The department has failed to bring any material on record to either controvert the factual finding of ld. CIT(A) or any other contrary evidence to conclusively prove the fact that the cold storage has started operating in April’10. As far as .....

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o farmers, etc. demonstrating that assessee has commenced operation of cold storage in the FY 2009-10, the statement of the farmers cannot be given much credence. In the aforesaid view of the matter, there being no infirmity in the order of ld. CIT(A) - Decided in favour of assessee.

Addition u/s 69 - addition deleted by CIT(A) - Held that:- Addition u/s 69 of the Act has been made purely on conjectures and surmises. The department’s contention that bonds were not produced before AO b .....

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ordingly, ld. CIT(A) was justified in deleting the addition and, hence, upholding the order of ld. CIT(A), we dismiss the grounds raised by revenue.- Decided in favour of assessee. - ITA No. 1277/Hyd/2014 - Dated:- 29-7-2015 - Shri B. Ramakotaiah and Shri Saktijit Dey, JJ. For the Petitioner : Shri Rajat Mitra For the Respondent : Shri M. Chandramouleswara Rao ORDER PER SAKTIJIT DEY, J.M.: This appeal by the department is directed against order dated 25/05/2014 of ld. Commissioner of Income-tax( .....

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under consideration, assessee filed its return of income on 26/11/2010 declaring total income at Rs. Nil after claiming deduction u/s 35AD of the Act. In course of assessment proceeding, AO called upon assessee to produce bills and vouchers for construction of cold storage, evidences in support of commencement of business activity, bonds/receipts issued to the farmers for obtaining bank loan, list of farmers who preserved their stocks in the cold storage for justifying the claim of deduction u/ .....

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purchase of machinery of cold storage. It was submitted by assessee that it has commenced its production in the month of March 10 for a short period of 10 days and for the financial year 2009-10, the income from cold storage amounted to ₹ 1,85,000. 5. AO referring to the acknowledgment issued by General Manager, District Industries Centre, Khammam observed that the issuance of acknowledgment does not confer any legal right on the cold storage and it is required to seek requisite clearance .....

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nformation obtained from Indian Overseas Bank, Madhira. It was found that farmers stated to have kept their agricultural produce in the cold storage and obtained loans from the bank from 25/02/10 (wrongly mentioned as 25/02/13). From the aforesaid facts, AO inferred that assessee has issued bonds to the farmers to whom loans were given by bank even prior to the date of commencement of business i.e. 23/03/10. AO observed that without obtaining statutory licence from the govt. authorities, assesse .....

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d that cold storage business of assessee started operating in the month of April, 2010. Being aggrieved of the aforesaid disallowance made by AO, assessee challenged it in an appeal preferred before ld. CIT(A). 6. In course of hearing of appeal before ld. CIT(A), assessee apart from reiterating what was stated before AO submitted that though it otherwise fulfills all the conditions of section 35AD, but, the only dispute remains with regard to the date of commencement of the business. In this con .....

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cold storage started from April 10, assessee submitted that the statements recorded from the farmers have no relevance to the date of commencement of operation of the cold storage. It was further submitted that AO having not confronted the statements of the farmers nor allowed any opportunity to assessee to cross-examine the farmers evidence collected behind the back of assessee cannot be utilized for the purpose of disallowing assessee s claim. 7. Ld. CIT(A) after considering the submissions o .....

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lectricity which proves the fact of commencement of cold storage. She also noticed that assessee has maintained receipt book and receipt register containing date of receipt of stock, quantity of stock, etc., which were also produced before AO. She also referred to the acknowledgment of the Industries Department, which indicated that assessee has commenced its operations from 23/03/2010. She also found that assessee has issued bonds to farmers, which indicated the date of commencement of cold sto .....

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e stated to have commenced the business for a period of 10 days in the month of March 10, but, subsequently, it has claimed that business started in the month of early part of March 10, whereas, the bonds issued on the basis of which the farmers obtained loan from bank revealed that date of commencement of business was in the month of February 10. Thus, it was submitted by ld. DR, assessee has not produced any authentic evidence to justify its claim that business was commenced in the relevant FY .....

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ficient material on record to controvert the finding of ld. CIT(A). Ld. AR submitted, evidences such as electricity bill, bonds issued to the farmers, receipts, etc. clearly demonstrate that assessee has commenced its cold storage operation during the relevant FY. Only because of some technical requirement like obtaining licence etc., it cannot be said that assessee has not commenced its business. He, therefore, submitted that there is no reason to interfere with the order of ld. CIT(A). 10. We .....

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granted by competent authority on 31/03/2010. However, as could be seen from the electricity bill of cold storage unit for the month of February 10 and March 10 it is found, while in the bill for February 10, the electricity units consumed is O (zero), in March 10, assessee has consumed 17,367 units. This itself proves that assessee has commenced operation of cold storage partly in the month of February & March 10. Coupled with consumption of electricity, the other evidences like bonds/rece .....

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y farmers in the cold storage. Thus, it cannot be said that the bank authorities without verifying the fact whether the farmers actually stored their products in the cold storage had granted loan to the concerned farmers. Moreover, the most crucial evidence, in our view, is the fact that AO while making addition on account of unexplained investment in stock has himself observed that assessee was having stocks of ₹ 1,43,05,000 during the relevant FY in the cold storage. It is another matter .....

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fact whether it is in February 10 or March 10. The department has failed to bring any material on record to either controvert the factual finding of ld. CIT(A) or any other contrary evidence to conclusively prove the fact that the cold storage has started operating in April 10. As far as the allegation of AO that some of the farmers have stated that cold storage started operating in April 10, we find merit in the submissions of ld. AR that in absence of confrontation of such statement to assess .....

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g no infirmity in the order of ld. CIT(A), we uphold the same by dismissing the ground raised by revenue. 11. The next issue as raised in Ground Nos. 7,8 & 9 relates to the addition made of an amount of ₹ 1,43,05,000 u/s 69 of the Act by AO, but, deleted by ld. CIT(A). 12. Briefly the facts are, for verifying the genuineness of assessee s claim that it has received products of the farmers in the cold storage, AO called for copies of the bonds given to the farmers. However, as observed .....

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e not found in the list given by assessee. When this was pointed out, assessee submitted that they have issued temporary receipts to the persons, who may not be actual owners of produce or receipts might have been issued in the name of vehicle driver or in the name of persons who brought chillies. AO, however was not convinced with the explanation of assessee. AO observed that assessee could not produce copies of bonds in case of 16 farmers, who obtained loan from banks for total amount of ͅ .....

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purchase of stocks as per section 69 of the Act and added to the income of assessee. Being aggrieved of such addition, assessee challenged the same before ld. IT(A). Ld. CIT(A) deleted the addition by holding as under: 5.2.1 After going through the facts of the case and the evidences available on record, I am in agreement with the submissions of the appellant. It is seen that the appellant has issued bonds to the alleged farmers for preserving their stocks in the appellant s cold storage, which .....

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rents collected by the appellant from the farmers in the next year. Hence, the Assessing Officer is not justified in construing that the stock of chillies stored in the appellant's cold storage belong to the appellant and accordingly the addition made on account of unexplained investment u/s.69 of the Act is hereby deleted. 13. Ld. DR submitted before us, apart from the discrepancy found in the list submitted by assessee and the bank, it is also a fact that during the assessment proceeding, .....

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fact that assessee produced the bonds before AO. He, therefore, submitted, order of ld. CIT(A) on this issue should be set aside. 14. Ld. AR, on the other hand, submitted before us, though assessee did not submit the bonds before AO, and submitted before ld. CIT(A), but, fact remains that AO himself has conducted enquiry with the concerned bank and has also summoned bank authorities for furnishing necessary information. It was submitted, in response to the summons issued by AO, bank authorities .....

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