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Asstt. CIT (OSD) , Circle-8, Ahmedabad Versus Shyam Prakash Spinning Mills Ltd.

2016 (1) TMI 535 - ITAT AHMEDABAD

Depreciation on machinery purchased from group of companies - CIT(A) allowed the claim - Held that:- Parties from whom machines have been purchased are registered under VAT, purchase bills have been issued, entry is available in Gate Pass Register. The reason for absence of lorry number was that the machine(s) purchased from Prakash Finstock Pvt. Ltd. was at Ex- Mill delivery and, therefore, the transportation charges were not required to be paid by the assessee and in the case of Ashutosh Fibre .....

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en brought on record by the Assessing Officer to controvert the submissions of the ld. AR in regard to the details submitted in the form of bills, Gate Pass entry, inward entry of machinery, copy of bills of machinery of original purchaser etc. In these circumstances and on the basis of our observations above, we are of the opinion that as the assessee has furnished sufficient documents and evidences to prove the genuineness of purchase of machineries from group companies and therefore, we do no .....

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y in its books of account in the year under plea, and therefore, respectfully following the judgment of Hon’ble Apex Court in case of CIT vs. Sugauli Sugar Works (P) Ltd. (1999 (2) TMI 5 - SUPREME Court) and CIT vs. Bhogilal Ramjibhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT ) and in light of our discussions made above, we find no reason to interfere with the order of CIT(A) - Decided in favour of assessee - ITA No.34/Ahd/2012 along with C.O. No.42/Ahd/2012 - Dated:- 23-10-2015 - Shri Rajp .....

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rt the Act) by DCIT (OSD) on 29/12/2009. 2. At the outset the ld. AR of the assessee requested for withdrawal of the Cross Objection No.42/Ahd/2012. The ld. DR has no objection. So after hearing both the parties, we allow the assessee to withdraw the Cross Objection. The Cross Objection of the assessee is dismissed as withdrawn. 3. Now we take up the appeal of the Revenue wherein Revenue has raised following grounds of appeal :- 1. The ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in a .....

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prayed that the order of the ld. CIT(A)-XIV, Ahmedabad may be set aside and that of the order of the Assessing Officer be restored. 4. Briefly stated the facts of the case are that the assessee is a Limited Company, engaged in the business of manufacturing of cloth and running spinning mills. It filed its return of income for Asst. Year 2007-08 on 30.10.2007 declaring total income of Rs. NIL after setting off brought forward loss. Assessee s case was selected for scrutiny assessment. Order under .....

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m group companies and the amount of disallowance works out at ₹ 6,96,450/-. (b) Disallowance of ₹ 28,563/- being calculated @ 7.5 on machines purchased at ₹ 3,80,835/- for the reason that assessee has claimed depreciation for whole year whereas the AO allowed depreciation for six months only as the machines of ₹ 3,80,835/- were put to use after 30th September, 2009. 6. As regards disallowance of ₹ 28,562/- mentioned in para 5(b) above, assessee did not reply to the .....

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for ₹ 46,43,000/- from following group companies :- 1) Prakash Finstock Pvt. Ltd. Rs.3548000 2) Ashutosh Fibre Pvt. Ltd. Rs.1095000 Rs.4643000 Ld. AR submitted that assessee has furnished all the necessary details and evidences in support of the purchase of machinery of ₹ 46,43,000/- including purchase bills, entry in the Gate Pass Register, inward entry of machinery and delivery receipt of the original buyer. On the basis of all these details CIT(A) has rightly deleted the addition .....

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nes. 10. We find that the assessee is a Limited company and all its books of accounts are audited under the provisions of the Act as well as the Companies Act. Purchases of machineries are forming part of fixed assets schedule attached to the audited financial statement. Parties from whom machines have been purchased are registered under VAT, purchase bills have been issued, entry is available in Gate Pass Register. The reason for absence of lorry number was that the machine(s) purchased from Pr .....

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icient reason for not having lorry receipt for the machines purchased from Prakash Finstock Pvt. Ltd. and Ashutosh Fibre Pvt. Ltd. Apart from this, nothing contrary has been brought on record by the Assessing Officer to controvert the submissions of the ld. AR in regard to the details submitted in the form of bills, Gate Pass entry, inward entry of machinery, copy of bills of machinery of original purchaser etc. In these circumstances and on the basis of our observations above, we are of the opi .....

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of cessation of liability by CIT(A)-XIV. 13. The ld. DR vehemently supported the order of Assessing Officer and referred to the decision of ITAT Mumbai Bench in the case Asht Laxmi Diamond & Jewellery vs. ITO, 21(1)(1), Mumbai, (2015) 59 taxmann.com 430 (Mumbai-Trib.) dated 20.2.2015 14. On the other hand, the ld. AR submitted that during the course of assessment proceedings the Assessing Officer came across the list of sundry creditors for the Financial Year 2005-06 and Financial Year 2006 .....

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ount (Rs.) 1. NEO Enterprise 100000 2 Paras Cotton Company 5208303 3 Shalin Cotton Suppliers 210583 4 Ramniklal Vrajlal 24773 5 Sai Syntex Pvt. Ltd. 161862 6 Sandip Trading Co 10195 7 Svit Capital Market Ltd. 122660 8 Utility Services 16828 9 Akshardham Enterprises 10000 10 Industrial Trade Engineers 23524 11 Manilal Sanghyl 13000 12 Rushabh Enterprise 24750 5926478 The ld. AR submitted that during the course of assessment proceedings that were regular transactions from most of the above referre .....

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by no chance the claim of any of the sundry creditor has vanished. This fact was further supported by the ledger account of some of the parties wherein repayments have been made by the assessee through banking channel. The ld. AR submitted that as all the transactions entered with the sundry creditors were business transactions carried out in the normal course of business and the trading liability exhibited in the balance sheet are the liabilities to be paid by the company and has not written o .....

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s of the case and perused the material on record. The only question before us to decide is that whether the Assessing Officer was justified in invoking the provisions of section 41(1) of the Act with reference to unpaid sundry creditors. In the process of making the addition of ₹ 59,24,478/-, the Assessing Officer has picked up the names of some other sundry creditors on whom, there was no change in balances in comparison to last year. In other words, no transaction took place during the y .....

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utstanding balances in small installments due to the financial stability and lack of financial resources with the assessee. This facts is further supported by going through the ledger accounts of such sundry creditors as well as the chart shown on page 235 and 236 of the paper book, wherein transactions in the form of payment to the sundry creditors in some of the cases is shown. Two such instances are in case of Neo Enterprise in which closing balance as on 31/03/2007 was standing at ₹ 1l .....

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ed the sundry creditors as its liability in the balance sheet as on 31.03.2007. Not a single instance is placed by the Assessing Officer in the assessment order to prove that the sundry creditors on whom he is going invoking the provisions of section 41(1) has refused its claim to receive the amount outstanding in the balance sheet under the list of sundry creditors. 17. The ld. DR has referred to the judgment of ITAT, Mumbai Bench in the case of Asht Laxmi Diamond & Jewellery vs. ITO (supra .....

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y creditor has relinquished the right to his claim from the assessee. 18. On the other hand in the case of Sugauli Sugar Works (P) Ltd. (supra) Hon ble Supreme Court gave a land mark judgment wherein the Court categorically held- that the mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not able the debtor to say that the liability has come to an end. The court observed that the liability can remit or cease only by a bilateral an .....

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f an amount either in cash or in any other manner whatsoever or benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is the sine qua non for the application of this section. The mere fact that the assessee has made an entry of transfer in his accounts unilaterally will not enable the Department to say that section 41(1) would apply and the amount should be included in .....

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case, both elements are missing. There was nothing on record to suggest that there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08. It is undoubtedly by a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the asses .....

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