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2015 (10) TMI 1080

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..... ular books of account and only because of the reason that some of the entries would not tally at the time of hearing resulted into such additions. Therefore, looking to the above facts there remains no scope of any addition under section 69 of the Act and we do not find any error in the order of CIT(A). - Decided against revenue. Disallowance of machinery repair expenses - CIT(A) deleted the addition - Held that:- From the perusal of the balance sheet of the assessee it is clear that an addition of ₹ 11.24 lacs has been made by the assessee under the head boiler account, which was the capital expenses incurred by the assessee and depreciation has been charged accordingly. The expenses under machinery repair and maintenance have been mainly incurred in relation to boilers which are used to get boiled rice and as a part of the plant come into contact with steam generated from the boiler, thereby getting corroded and require frequent replacement. Similarly consumable stores like rubber rings, hardware items which assist in movement of conveyor belts also need to be replaced regularly due to wean and tear. As such the machinery repair and maintenance expenses incurred by the a .....

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..... son that a difference of ₹ 33,38,164/- is there between the transaction shown by the assessee and actual transaction appearing in its four bank accounts. This difference is nothing but unaccounted investment of the assessee. Therefore, I make an addition of ₹ 33,38,164/- u/s 69 of the I.T. Act. Penalty proceedings for concealment of income is being separately initiated. 4. Aggrieved, assessee went in appeal before the CIT(A) who has deleted the addition made by the AO taking the basis that the conditions required to invoke the provisions of section 69 of the Act were not applicable to the assessee because they were duly recorded in the books of account and gave following findings :- 3.2 I have carefully considered the rival contentions. It is seen that the AO was not satisfied with the proper accounting of some of the bank to bank transfers and accordingly the impugned addition of ₹ 33,38,164 was made. Perusal of facts available on record reveals that all the three bank accounts namely a/c No.160 with ICICI Bank, a/c No.11895 with PNB and a/c 114 with KCCBI are declared accounts. These accounts forms part of the books of accounts as well as the audited bal .....

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..... 69 is not fulfilled. The facts available on record clearly indicate that the interbank fund transfers against which the impugned addition is made forms part of the books of accounts. This way, it can be said that the impugned investment was recorded in the books of accounts. This way the second precondition of section 69 is not fulfilled in the case of the appellant. The appellant has also furnished complete reconciliation to explain the proper accounting of these fund transfers. The AO has not disproved the explanation offered by the appellant. In view of these facts it can be said that the appellant had furnished an explanation which remains uncontroverted and this way the third precondition of section 69 is not fulfilled. This way all the conditions as mentioned u/s 69 of the IT Act are not fulfilled in this case. In view of these facts also, the addition made by the AO is untenable. 3.5 In view of above facts, I do not have any hesitation in holding that addition of ₹ 33,38,164/- made by the AO u/s 69 of the IT Act, 1961 is untenable and the same is ordered to be deleted. The appellant will get relief to this extent. This ground of appeal is allowed. Aggrieved, the .....

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..... ome of the entries would not tally at the time of hearing resulted into such additions. Therefore, looking to the above facts there remains no scope of any addition under section 69 of the Act and we do not find any error in the order of CIT(A). We uphold the same and as such this ground of Revenue is dismissed. 7. Ground No.2 relates to order of CIT(A) deleting addition of ₹ 12,98,213/- made by the AO on account of disallowance of machinery repair expenses. The AO made the disallowance for the very reason that substantial amount was incurred in relation to repair of plant and machinery and the same was, therefore, required to be capitalized and allowed depreciation on the same as per the rates prescribed under the Act. The findings of AO are as under :- 5. To verify the genuineness of the machinery repairing of ₹ 15,27,309/-, the Inspector of this office was deputed for personal visit at place of the business premises of the assessee and was directed to obtain supporting copy of bills/vouchers, if any, and also directed to get the photocopy of the so called machinery repaired and also planted new machinery. The request letter was also given to the assessee to c .....

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..... 5%. However, the AO had failed to establish the existence of such new plant and machinery. The other scenario could be that the capacity of existing machinery is enhanced or the appellant had derived some benefit of enduring nature by incurring these expenses. However, the AO had failed to bring any evidence on record to indicate these eventualities. 4.3 It is a matter of common sense that, if the Plant and Machinery is being used for the purpose of business it requires regular repair and maintenance. The appellant is regularly claiming repair and maintenance expenses in the earlier years and the same was allowed. The AO has not allowed any repair and maintenance expenses for the year under consideration. The AO has failed to bring cogent evidences on record to prove the fact that repair and maintenance expenses were not incurred. During the assessment proceedings as well as appellate proceedings the appellant has filed copy of account of machinery repair expenses. Perusal of these expenses reveals that these are normal repair and maintenance expenses which has been incurred in small denominations and accordingly, I hold that these expenses are revenue in nature and deserves .....

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..... also takes place inside boiler and other places directly coming into contact with water because of presence of minerals/sales in water. For the purpose of de-scaling the boiler chemicals are required regularly. However, the rubber rings, which assist to movement of conveyor belts also required to be replaced regularly due to worn out. The analysis of the expenses mentioned in Annexure-C clearly depict that most of the expenses pertain to purchase of chemicals and other consumable items in order to operate the boiler and conveyor belts etc. smoothly and it cannot be said from the nature of these expenses that any new plant or machinery came into being. Machine repair expenses are regular feature of the firm, because most of machineries are very old, being installed in the year 1984, which would be evident from the following table because of old boiler etc. F.Yr. 2004-05 2005-06 2006-07 2007-08 2008-09 Machine repair Exp. 7,17,658 7,76, 197 8.35,263 16,39,856 15,27,309 (4) .....

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