TMI Blog2012 (4) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of application money received from four persons as per following details. (i) Smt. Sharmila Kashid ₹ 5,00,000/- (ii) Shri Shankar Kashid ₹ 17,75,700/- (iii) M/s. Pushkraj Packaging (India) Pvt. Ltd. ₹ 15,17,650/- (iv) Shri Jeevan Visram Sawant ₹ 5,00,000/- Total ₹ 42,93,350/- Of the above, Shri Shankar Kashid is the Managing Director of the Assessee company and Smt. Sharmila Kashid is his wife. On being asked to prove the genuineness of the claim, the assessee produced before the AO the Income tax particulars and copy of the relevant bank account of the above persons besides producing the above individuals for examination of the AO. The AO, however, was not satisfied and added an aggregate sum of ₹ 42,93,350/- as unexplained cash credit u/s. 68 of the Act. 2.1. According to the AO the financial capacity of Smt. Sharmila Kashid and the genuineness of the transaction could not be established by the assessee. In this regard the AO has made a reference to the fact that this share applicant had explained source of investment out of funds lying in her bank account with Satara Jilla Madhyavarti Sahakari Bank Ltd.,(Satara), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing but unproved cash credits in the A/cs. of the assessee company. The AO also made a reference to the fact that the said assessment has been upheld in 1st appeal. In the circumstances and as the genuineness of the transactions according to the AO was not established, the amount of ₹ 15,17,650/- was added as unproved cash credits u/s.68 of the I.T.Act. 2.4 A sum of ₹ 17,75,000/- was received as share application money from Shri Shankar Kashid. The AO on perusal of the copy of his A/c. No. 010428 with the Deccan Merchant Co-op. Bank Ltd., Dahisar, noticed credits in the said account from particular accounts belonging to the assessee group. The details of which were as under Date Credits Debits (Share application money) 13.04.2008 4,21,000 4,57,000 13.04.2008 5,86,000 10,07,000 5,50,000 10,07,000 08.07.2005 6,94,700 3,22,400 08.07.2005 _________ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority is the decision of the Apex Court in CIT v. Lovely Exports Ltd. 216 CTR 195 (SC) wherein the Apex Court while dismissing the SLP against the decision of Hon ble Delhi High Court ordered as under: Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. In view of the above, I delete the addition made of ₹ 42,93,350/- as unexplained share application money. The ground is allowed. 4. Before us the ld. D.R submitted that the CIT(A) fell into an error in not examining the capacity of the share applicants and also genuineness of the transactions. According to him merely establishing the identity of share applicant is not sufficient and the assessee was bound to explain the capacity of the share applicant(creditworthiness) and also the genuineness of the transactions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the AO for making the impugned addition cannot be sustained. The law is well settled that the assessee is not obliged to prove the source of source. The evidence filed by the assessee prima facie establishes the receipt of share application money by the assessee and therefore, the order of the CIT(A) has to be sustained for the above reasons. In assessment year 2005- 06 this share applicant had given share application money for purchase of the assessee s shares. Similar addition was made in assessment year 2005- 06. The Tribunal set aside the order of the revenue authorities and remanded the issue to the AO for fresh consideration. The AO made the addition in the set aside proceedings but the CIT(A) on appeal by the assessee deleted the addition made by the AO holding that the assessee has furnished satisfactory explanation with regard to this share applicant. We are of the view that in the light of the evidence filed by the assessee prima facie the receipt of share application money has been satisfactorily explained. 5.3 Shri Shankar Kashid: As far as this share applicant is concerned the share application signed by her disclosing the PAN had been filed. Her Income Tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhon regarding no objection for commencing of production of flexible packaging in assessee s factory from 31/8/2005. The AO was however of the view that except the aforesaid certificate there was no evidence to show installation of the machinery and use of the machinery prior to 30/9/2005. The AO therefore, disallowed the depreciation to the extent of ₹ 48,34,428/- as follows: Opening WDV 29,340,301 15% 4,401,045 Addition 36,096,984 7.5% 2,707,274 TOTAL 7,108,319 Accordingly, the excess depreciation of ₹ 48,34,428/-(11942747 - 7108319) was disallowed. 9. On appeal by the assessee the CIT(A) deleted the addition made by the AO for the following reasons: 4.3.3 The other dispute is on admissibility of full depreciation claimed on the additions made. The appellant contends that the added machineries were put to use in the first half of the year and it began commercial production of flexible packaging materials in August, 2005. The AC dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction conducted by the assessee in respect of flexible packaging material. The said chart is at page No.53 to 57 of the assessee s paper book. A perusal of the same shows that the machineries which were added to the block of assets during the previous year comprised of printing machines and allied machinery. Erection of these machinery requires laying of found and erection. The bills evidencing laying of found and erection and also the purchase of raw materials for carrying out trial run production are available at page No.58 to 161 of the assessee s paper book. To quote an example at page 59 we find that the assessee had effected sale of printing lamination films and raised an invoice dated 8/9/2005. Apart from the above we find that the expenses incurred for erection of the machinery had been in the month of July. The purchase of the machinery and its arrival in the assessee s premises prior to 30/9/2005 had not been disputed by the AO. In our view the AO has not considered any of the aforesaid evidence and has rejected the claim of the assessee for no valid reasons. In our view the CIT(A) was fully justified in deleting the addition made by the AO. The order of the CIT(A) is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents, no. of classes etc. of the school are not available. It is also not explained satisfactorily as to how cash of over ₹ 50 lacs was generated in a school s counter in a rural area. It is further explained that cash collected from sales was transferred from factory to the head office in Mumbai and the same was deposited in the Bank A/c. In this connection, it may also be stated here that the assessee is having a bank a/c. in Kaledhon itself and yet, cash of large sums is stated to be brought from factory to Mumbai, instead of depositing there and thereafter transferring through DD or other means to Mumbai Bank a/cs. Looking to the peculiar circumstances of the case, the explanations are not fully convincing. 7.2 As regards cash deposits of ₹ 8,45,222/- in the Cosmos Co-op Bank, Kandiwali, the assessee has submitted Xerox copies of invoices as per which sales of ₹ 6,79,816/- were made in Kaledhon and balance sales of ₹ 1,65,406/- were made in Mumbai. From this also it is not clear as to why the cash of considerable sums was brought to Mumbai as claimed instead of depositing in the bank account in Kaledhon. 7.3 As mentioned earlier, cash sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This has resulted in taxing the same receipt twice in the same hands. The addition made of ₹ 30,35,408 has no basis. The same is deleted. The ground is allowed. 14. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.3 before the Tribunal. We have heard the rival submissions. The learned DR relied on the order of the AO. We have considered his submission. We find that for cash deposit of ₹ 53,91,000/- in SBI (IFB), Worli, Mumbai, the Assessee has given date wise sales made at various schools and the cash deposited in the Bank A/C. This statement is at page-258 259 of Assessee s paper book. The sales are duly disclosed and the same is not disbelieved. The supporting evidence in the form of challans evidencing dispatch of books to various centres had also been filed. The AO has not found any defect in the evidence filed by the Assessee but has proceeded to make the addition purely on surmises and conjectures. The other reasons for disbelieving the source of cash deposited in the other two accounts are also vague and in any event cannot be the basis to disregard documentary evidence filed on behalf of the Assessee. We are of the view that the CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess house and would have advertisement value. We therefore uphold CIT(A) s order and dismiss Gr.No.4 raised by the Revenue. 19. Ground No.5 raised by the revenue reads as follows: 5. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting ₹ 7,19,500/- disallowance out of expenses claimed on repair to building without appreciating fact that the amount of ₹ 5,53,980/- ₹ 1,65,420/- were pertaining to concrete flooring and replacement of shutters was part of fixed assets of the business. 20. The assessee claimed to have incurred ₹ 18,91,179/- on repairs. The AO observed that expenses of ₹ 5,53,980/- pertained to concrete flooring and that of ₹ 1,65,420/- on replacement of shutters. He held that durability was of more than one year and such expenses were on capital circumstances, he disallowed ₹ 7,19,400/- out of ₹ 18,91,179/- claimed as repairs expenses, subject to depreciation. However, the AO did not allow any depreciation. 21. Being aggrieved, the assesee submitted before CIT(A) full details of expenses which were also given during the assessment proceedings showing that the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be valid for 3 years. The AO observed that the ISO Certification conferred certain special status to the assessee company in the market or amongst consumers or the public at large. In these circumstances, he held that the expenses were of capital nature and disallowed the same. 26. Being aggrieved, the assessee submitted before CIT(A) that benefit of obtaining such certification is immediate and, therefore, the said expenses are wholly and exclusively for the purpose of business. The assessee submitted that the certification is for the quality management system. The expenses should, therefore, be allowed as business expenditure. 27. The CIT(A) deleted the addition made by the AO for the following reasons: 9.3 I have considered the dispute. On going through the certificate in question I observe that the institution giving the certificate states that the certificate holder operates a quality management system which has been assessed as confirming to ISO 9001-2000 standards. I do not understand what led the AO to conclude that the certification brought any enduring advantage or creation of any capital asset. Validity of such a certificate for only 3 years shows that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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