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2016 (1) TMI 779 - ITAT AHMEDABAD

2016 (1) TMI 779 - ITAT AHMEDABAD - TMI - Addition on account of difference in the Closing stock - addition on basis of value as submitted to bank and as per the final accounts - undisclosed income of the appellant u/s. 69C - Held that:- The distribution of small quantities of samples is a commercial reality and it cannot simply be brushed aside as improbable. It was open to the authorities below to seek further clarification on the same but is could not have been dismissed as outright impossibl .....

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ale and yet in closing stock as well. As long as fact of sale being dated 31st March and being accounted for as such is not in dispute, which precisely is the situation here, the items sold cannot be included in stock as well. In any case, just because a higher stock value is shown in bank statements as held in the case of Munish Kumar Bansal vs. JCIT (2015 (4) TMI 185 - ITAT AMRITSAR ), the difference cannot be added to the income of the assessee. - Decided in favour of assessee

Addi .....

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l and is based on surmises and conjectures. In this view of the matter, we do not see any legally sustainable merit in the ld. CIT(A)ís stand or to decline the additional depreciation in question.- Decided in favour of assessee

Addition on account of interest disallowance - CIT(A) deleted the addition - Held that:- As we are decline to disturb the finding of the ld. CIT (A). We have noted that there is no finding to the effect that interest-bearing funds were used in granting these in .....

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ddition inasmuch as a difference simpliciter between the bank statement and the audited books of account cannot be reason enough to make an addition particularly when difference is reasonably explained by the assessee. - Decided in favour of assessee

Disallowance of depreciation on UV machine - CIT(A) deleted the addition - Held that:- We have gone through the records carefully. Sale of a product cannot be used as a pre-condition to ascertain whether the machine was used by the assess .....

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ddition on account of excess deprecation claimed on old machinery - CIT(A) deleted the addition - Held that:- We are unable to see any legally sustainable merits in this grievance. It is admitted position that the permission of the JCIT which is sine qua non was not obtained on the facts of this case. In this view of the matter, the ld. CIT(A) was legally justified in deleting the impugned disallowance. - Decided in favour of assessee

Disallowance of depreciation on machines claimed .....

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f depreciation as long as machinery has been put to use. There is no cogent material brought on record to dispute the claim of the assessee that the machinery was put to use before 24th September, 2006. As a matter of fact, there is categorical finding of the ld. CIT(A) that production had commenced within the period. On these facts, the is assessee indeed eligible for depreciation in respect of whole year and ld. CIT(A) was, therefore, justified in deleting the impugned addition - Decided in fa .....

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CIT(A) does not call for any interference.- Decided in favour of assessee - ITA No.408/Ahd/2011, ITA No.693/Ahd/2011 - Dated:- 30-10-2015 - Pramod Kumar AM and Rajpal Yadav JM For The Assessee : Sunil H. Talati For The Revenue : J.P. Jangid & R.K. Gupta ORDER Per Pramod Kumar AM: 1. By way of this appeal, the assessee appellant has called into question correction of order dated 5th January, 2011 framed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 196 .....

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submitted that the addition so made and sustained of ₹ 3,83,734/- be deleted. 1.1 Without prejudice to the above, the learned C.I.T. (Appeals) has erred in upholding the additions on account of undisclosed stock. It is submitted that the difference in rawmaterial as submitted to bank and as per audited accounts of ₹ 80,000/- is on account of sample stocks (Finished goods) shown as Raw-material in statement submitted to bank and the difference of ₹ 2,23,734/- in finished goods i .....

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lected in the statement filed with the banker. As the statement to the banker reflected more stock than the stock shown in the books of accounts, the Assessing Officer required the assessee to show cause as to why the same not be adopted for computing taxable profits of the assessee. The assessee did explain the differences but explanation of the assessee was rejected by the Assessing Officer by observing as follows: The reply of the assessee is carefully considered and it is noticed that he exp .....

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bank was factually correct and what is shown in the books of accounts have been shown after adjustments which is not allowable after end of financial year. The second explanation regarding stock of sample kits is also not acceptable because neither raw material nor the finished goods are more in the value as per audited accounts when compared to value as per statement submitted to bank. It means this value has not been considered in any of the stock in the audited books of accounts. The explanat .....

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the matter in appeal before the CIT(A) but without any success. Learned CIT(A) upheld the action of the Assessing Officer and justified the same as follows: 3.3 I have considered the facts of the case, assessment order and appellant s submission. This ground has two elements- addition on account of undisclosed stock and addition on account of difference in debtors. As regards undisclosed stock being difference of stock given to bank and stock as per books, appellant tried to explain it that raw .....

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for sale effected on 31st March. Appellant admitted that sale was effected subsequently but Bills were issued on 31st March. When sales were not effected on 31st March, then how appellant could disclose the same in this financial year, is not clear. Appellant disclosed less quantity of stock in the books of accounts despite the fact that no such sale took place upto the 31st March. The decisions relied upon by the appellant also confirm the additions on account of stock difference if there is an .....

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. 6. We have considered the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. We find that so far as sample, valued at ₹ 80,000/- in bank statement, are concerned, it is different to understand rationale of the observation that As regards sample kits, I agree with the Assessing Officer that there is no question of sample kits distributed free for raw material and, therefore, quantity to that extent rema .....

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rch but before taking figures for stock statement, this variation in stock statement to bank and stock figures as per books of accounts is fully explained. We see merits in this explanation. There is no contradiction in this approach. In any event, an item cannot be included in sale and yet in closing stock as well. As long as fact of sale being dated 31st March and being accounted for as such is not in dispute, which precisely is the situation here, the items sold cannot be included in stock as .....

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view that the assessee is not manufacturing any articles or things. It is submitted that the assessee is engaged in printing of paper labels, canvas, cloth, wood, glass PVC sheets, Acrylic, ACP Sheets etc. and on completion of this process of printing, the end product would be a different. 2.1 Without prejudice to the above the learned C.I.T. (Appeals) has erred in not granting additional depreciation of ₹ 78,60,300/- claimed on the new Plant and Machinery installed and commissioned durin .....

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so. 10. So far as these grievances of the assessee are concerned, the relevant material facts are like this. During the course of assessment proceeding, the Assessing Officer noticed that while assessee has not produced any new article of thing, the assessee is not eligible for additional depreciation of machines used for printing. The Assessing Officer was of the view that the assessee is only printing on an existing object, and no new product comes into existence. It was in this backdrop and .....

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g officer disallowed additional depreciation on the machines purchased on the ground that appellant is not manufacturing articles or things. Assessing officer relied upon several decisions as per which printing activity are not considered as manufacturing articles or things. Considering these decisions I agree with the assessing officer that appellant is not eligible to claim additional depreciation on machinery purchased during the year since it is not manufacturing articles or things. Appellan .....

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oduct comes into existence. In view of this appellant is not eligible for additional depreciation. Apart from the above, appellant purchased most of the machines during the year which were previously used and therefore additional depreciation for second hand machines are also not available as per section. In view of this also, appellant is not eligible for additional depreciation. The addition made by the assessing officer is therefore confirmed. 11. The assessee is aggrieved of the stand taken .....

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have, inter alia, observed as follows:- Considering the consistent view that has been adopted by the various High Courts while deducing the meaning of the word manufacture or manufacturer and the object with which Explanation 2 has been inserted in section 23A of the Act, we are of the view that the business carried on by the respondent-company of printing balance-sheet, profit and loss accounts, dividend warrants, pamphlets, share certificate, etc., required by the textile mills referred to in .....

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liance on the stand of the authorities below. In this view of the matter, we see no merits in ld. CIT(A) s objection to the effect that the assessee cannot be granted deprecation because it cannot be treated as manufacturer and only job work is claimed by the assessee. 15. Coming to the question as to whether the assessee had used second-hand machinery, we find that the observation of the ld. CIT(A) are vague inasmuch as he stated that most of the machines are used machines . This kind of sweepi .....

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000/- 29/04/2006 2. MACHINE VUTEK PRESS UV 320/400 (SR NO: 320035) 015 2,34,00,000/- 19/05/2006 WHATEVER STATED ABOVE IS ABSOLUTELY TRUE AND CORRECT TO THE BEST OF OUR KNOWLEDGE 16. No material has been brought on record to controvert the above certificate from the manufacturer. As a matter of fact, this stand of the authorities below to the effect that machines are used machines is not supported by any material and is based on surmises and conjectures. In this view of the matter, we do not see .....

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allowance. 20. So far as this disallowance is concerned, the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noted that the assessee has given interest free loan of ₹ 10,29,157/- to its directors but has not charged any interest on the same. It was also noticed that the assessee has paid interest of ₹ 24,27,946/- on loans taken by the assessee to the tune of ₹ 6,00,02,988/-. In this backdrop, the Assessing Officer procee .....

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ectors on 06.04.2006.and that there is another receipt of ₹ 30,00,000/- on 19.04.2006 but no interest was paid in respect of amounts so received and used by the assessee company. Considering the facts of the case and over all fund available with company, the ld. CIT(A) deleted the disallowance of interest made by the Assessing Officer. The Assessing Officer is aggrieved and is in appeal before us. 22. Having heard the rival contentions and having perused the material available on record, w .....

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missed. 23. In the second ground of appeal, the Assessing Officer is aggrieved of the ld. CIT(A) s deleting the disallowance of ₹ 2,07,935/- on account of difference in book debts. 24. So far as this disallowance is concerned, it is sufficient to take note that addition was made in respect of book debts as there was difference of ₹ 3,83,734/- between the amount shown in the statement submitted to the banker vis-a-vis books of accounts the assessee. It was explained by the assessee th .....

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ld. CIT(A) was quite justified in deleting the impugned addition inasmuch as a difference simpliciter between the bank statement and the audited books of account cannot be reason enough to make an addition particularly when difference is reasonably explained by the assessee. This issue also does not call for our interference. Ground no.2 is also dismissed. 26. In ground no.3, the Assessing Officer is aggrieved of ld. CIT(A) s deleting the addition of ₹ 81,96,572/- made on account of disal .....

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ssessee. He believed that since the assessee has not shown sales out of use of this machine and, therefore, this machine was not put to use. Accordingly, he disallowed the deprecation. 28. On appal the first appellate authority has allowed the depreciation. The finding reported by the ld. CIT(A) reads as under :- 5.3 I have considered the facts of the case, assessment order and appellant s submission. Assessing Officer disallowed claim of depreciation on new UV machine on the ground that in the .....

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d the use of machine. Since the machine was purchased within first two months of the previous year and it was installed within first four months also, presuming that machine was not used or ready for use of business purpose is not correct. After installation, the UV machine was fully ready for use and therefore assessee was entitled to claim depreciation even at that stage. However, appellant submitted details of production and sale made out of this machine. Just by not mentioning the figures of .....

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lly. Sale of a product cannot be used as a pre-condition to ascertain whether the machine was used by the assessee for the purpose of production. The very approach of the Assessing Officer was vitiated in law, and, in any case. the first appellate authority has recorded finding of fact that machine was put to use and it was ready to use for the purpose of business. On the facts of this case, therefore, depreciation cannot be denied to the assessee. After going through the well reasoned order of .....

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is to be allowed. The ld. CIT(A) reversed this action and directed the Assessing Officer to adopt the price at which it was purchased. He did it for the reason that the purchase price of an asset can be substituted for .written down value in the hands of previous owner in certain circumstances can only be taken when the permission of JCIT is obtained. This compliance was not done in the present case. Yet, the Assessing Officer is aggrieved and is in appeal before us. 32. Having heard the rival .....

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ggrieved of ld. CIT(A) s deleting the addition of ₹ 16,28,241/- made on account of disallowance of depreciation on machines claimed to be put to use before 30th September, 2006. 34. So far as this ground of appeal is concerned, it is sufficient to take only a few material facts. The claim of the assessee was that machine was put to use before 24th September, 2006 and accordingly deprecation was claimed for the full year. The Assessing Officer rejected this claim on the short ground that th .....

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noticed why the date of 24th September, 2006 has been chosen as date of commercial production but there is no sale of production by new machinery is shown. Therefore, according to the Assessing Officer, machinery could not have been put to use in the month of September, 2006, as claimed by the assessee. On this basis, the Assessing Officer disbelieved the claim of the assessee and proceeded to disallow the depreciation to the extent of 50%. The assessee carried the matter in appeal before the l .....

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l year. Only dispute is with regard to commercial use of these machines. Appellant declared commercial use on 24.09.2006. Prior to that trial production was made which is not in dispute. Therefore, the machines were owned by the appellant and were used for the purpose of business. Since both the conditions are fulfilled, appellant is eligible for depreciation for the full year. The dispute regarding commercial production is not relevant as far the machines were used for the purpose of appellant .....

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elementary that the use of machine is linked to the production and not ales and, therefore, irrespective whether or not productions of a machine are same at a point of time. The assessee is eligible in respect of depreciation as long as machinery has been put to use. There is no cogent material brought on record to dispute the claim of the assessee that the machinery was put to use before 24th September, 2006. As a matter of fact, there is categorical finding of the ld. CIT(A) that production ha .....

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