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2015 (10) TMI 1080 - ITAT AHMEDABAD

2015 (10) TMI 1080 - ITAT AHMEDABAD - TMI - Addition u/s 69 - untallied entries /credits /deposits /clearings as appearing in four bank statements shown by the assessee in its books and due to lack of satisfactory explanation/details - CIT(A) deleted the addition - Held that:- Section 69 comes into operation only if investments are not recorded in the books of account maintained by the assessee which is not the case looking to the facts of the assessee wherein the bank balances are shown in the .....

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books of accounts. The AO has himself recorded in his order that assessee has disclosed all the bank accounts in his regular 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 expe .....

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th 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 assessee at ₹ 12,98,213/- are revenue in nature and there is no error in the findings of CIT(A). We uphold the same - Decided against revenue. - ITA No.512/Ahd/2013 - .....

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ection 69. 2. The ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 12,98,213/- treating the same as revenue expenses. 3. On the facts and circumstances of the case, the ld. CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is therefore, prayed that the order of the ld. CIT(A) may be set aside and that of the Assessing Officer be restored. 2. Brief facts of the case as per the order of AO & Paper Book submitted by the ld. AR of the assessee, are .....

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u/s 69 of the Act in relation to untallied entries /credits /deposits /clearings as appearing in four bank statements shown by the assessee in its books and due to lack of satisfactory explanation/details AO made an addition of ₹ 33,38,164 under section 69 of the Act by observing as under :- Therefore, it is seen that the details regarding credits/deposits/clearings as appearing in the four Bank statements are not tallied with all receipts shown by the assessee in its books. Hence it is n .....

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ings 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 account .....

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ry book keeping system. In double entry book keeping system, if the funds transfers from one bank to other bank are not reflected or properly accounted for the balance sheet will never tally. These are glaring mistake which will disturb the entire accounting system and the trial balance will never match. The book keeping now-a-days is being done with the help of computer software. If the bank transfers are not properly accounted for, the software will not compile the financial results in the for .....

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by the AO were clubbed with other cheques and the same was deposited in the bank accounts of the appellant. I have perused the details furnished by the appellant and it is observed that the fund transfers as mentioned by the AO on page 6 of the assessment order are duly accounted for in the other bank account of the appellant. Otherwise also the funds transferred vide cheque has to be accounted for by the other bank. In view of these facts also the addition made by the AO is not tenable. 3.4 It .....

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tion offered by him is not in the opinion of the AO satisfactory. Perusal of the assessment order reveals that the AO has not identified the investments made by the appellant during the year under consideration. This way the first precondition of section 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 reco .....

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ll 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 Revenue is in appeal before the Tribunal. The ld. D .....

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appellant firm were duly audited under section 44AB. There is no question of any such discrepancy to arrive. 6. We have heard the rival contentions and gone through the facts and circumstances of the case. This ground of addition of ₹ 33,38,164/- depends on the applicability of Sec.69 of the Act. The relevant portion of section 69 of the Act in relation to investments, which are not recorded in the books of account, reads as under :- Where in the financial year immediately preceding the a .....

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d in the books of account maintained by the assessee which is not the case looking to the facts of the assessee wherein the bank balances are shown in the audited balance sheet and reconciliation statement for various entries which were not tallied, as observed by AO but duly put on record before the lower authorities and also filed along with Paper Book. The relevant facts available on record clearly indicate that the non-reconciliation of entries/bank funds transfers which were actually formin .....

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nder 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 allowe .....

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given to the assessee to co-operate the inspector in the proceedings. In view of the report of the inspector and photo copies taken of the so called machinery repaired during the period 1.4.2008 to 31.3.2009 in the presence of the partner of the firm at the business premises of the firm on 30/12/2011, it is learnt that the assessee has not repaired the machinery but it is a new structure was installed. (The photocopy of so called machinery repaired is as under). 5.1 In view of the above and vari .....

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s per the IT Act, 1961. The machinery repairing is capitalized of ₹ 6,17,769/- (Rs.15,17,309/- (-) ₹ 2,29,096/-). The penalty proceedings u/s 271(1)© of the IT Act is being separately initiated for furnishing of inaccurate particulars of income. 8. Aggrieved, assessee went in appeal before CIT(A) who after considering the submissions of assessee and contention of the AO, deleted the disallowance due to lack of finding on the part of AO to establish the facts and circumstances of .....

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e. The very argument of the AO is not convincing. By mere look of machine, no reasonable person can reach to a conclusion that the machines were not repaired. The AO has allowed depreciation @15% on the machinery repair expenses of ₹ 15,27,309/-. If the AO s contention is taken as true then some new machinery should have been manufactured by incurring these expenses as the AO has allowed depreciation @ 15%. However, the AO had failed to establish the existence of such new plant and machine .....

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er 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 incu .....

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the assessee was of ₹ 78,27,027/- and the expenses incurred for repair and maintenance of machinery amounting to ₹ 12,98,213/- is a substantial amount and needs to be capitalized and further duly supported the finding made by the AO. 10. On the other hand, the ld. AR of the assessee submitted as under :- (1) It may be evident from the audited balance sheet, enclosed vide Annexure -B herewith, that the appellant firm was having machines of ₹ 73.47 lacs and boiler worth ₹ .....

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ring and supervising authority is Gujarat Boiler Inspection Department. Further, this boiler is required to be kept updated and maintained properly so that no untoward accident could take place. (2) During the year under consideration, the appellant firm had made additions to the boiler amounting to ₹ 11.24 lacs and the cost of the addition was debited to the Boiler Account. The details of Machinery repair expenses is enclosed herewith vide Annexure-C. It may kindly be appreciated that mos .....

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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 b .....

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inspection of the plant and machineries of the appellant firm with the help of his Inspector on 20th December, 2011 in order to know the condition of plant and machineries during the year 2008-09. Though the ld. AO had relied upon the report of the Inspector, while reaching to the conclusion that the appellant firm had new plant and machineries and no repair work was carried out, however he had failed to provide us a copy of the same for our rebuttal. Merely photographs of plant taken by the In .....

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pairing expenses for last 5 years as under :- 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 Also after examining the machinery repair expenses ledger accounts available in the Paper Book from pages 59 to 67 from which it is clear that majority of the expenses which have been incurred regularly round the year are less than ₹ 10,000/- and in very few cases has exceeded ₹ 20,000/- which further duly support the Revenue .....

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