TMI Blog2016 (2) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate decision in accordance with the law in the light of discussions made supra. Disallowance of Machinery purchase - Held that:- We notice that the assessee has claimed that it has declared the sales of films picturised by using the films of ₹ 1.04 crores referred above. There should not be any doubt that the pictures could not be produced without the use of films and if the sale of pictures is assessed, then the corresponding expenditure should be allowed. Even though the assessing officer has considered the sales also as bogus, he did not exclude the value of sales from the income of the assessee. Since the purchase of films have not been proved by the assessee, we are of the view that this issue should be settled by disallowing some portion of the purchases in order to take care of the deficiencies in the purchase claim. Accordingly, we direct the assessing officer to disallow 20% of the film cost of ₹ 1.04 crores, since the assessing officer has assessed the sale of pictures. We order accordingly. Disallowance of Expenditure related to bogus sales - Held that:- We agree with the contentions of the assessee that the same is beyond the scope of the set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessing officer:- (a) Machinery purchase Rs.1,04,15,121/- (b) Financial charges ₹ 43,01,071/- (c) Expenditure related to bogus sales ₹ 32,52,353/- (d) Disallowance of depreciation Rs.1,36,11,269/- 3. The assessee has also raised following legal issues:- (a) Scope of assessment in the set aside proceedings. (b) Scope of assessment of items assessed in the block assessment order. 4. The facts relating to the case are stated in brief. The original assessment in this case was completed on 31.3.1999 determining a total income of ₹ 1,72,05,380/- on the basis of findings recorded during the course of survey operations conducted u/s 133A of the Act on 23.03.1999. The assessee filed appeal before Ld CIT(A) challenging the original assessment order. In the mean time, the revenue also carried out search operations u/s 132 of the Act in the hands of the assessee on 05-08-1999. Consequent thereto, the block assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Saheli Synthetics P Ltd Vs. CIT reported in 302 ITR 126. 6. We agree with the said contentions of the assessee. It is a well settled proposition of law that the assessing officer is not entitled to travel beyond the scope of set aside. The Hon ble Gujarat High Court in the case cited above has clearly held the set aside envisaged by the order of CIT(A) was in the context of the additions or disallowances which were in appeal before the appellate authority. The order of Ld CIT(A) could not be read as expanding the jurisdiction of the assessing officer. 7. The next legal issue contested by the assessee is that the assessing officer has assessed the items, which have already been considered in the block assessment proceedings. According to Ld A.R, the disallowance of depreciation to the extent of ₹ 1.36 crores has already been made in the block assessment order as decided by the ITAT and hence the assessing officer was not justified in disallowing the same again in the set aside proceedings. 8. We have earlier noticed that the assessee had initially claimed 100% depreciation on energy savings devices, which was disallowed in the original assessment proceedings. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, we notice that the amount of ₹ 1,04,15,121/- disallowed as Machinery purchase actually relate to the claim of the assessee that the same represents purchase of films. Hence we are of the view that the amount of ₹ 1,04,15,121/- falls under the scope of set aside proceedings. We notice that the assessing officer has proved that the purchases of films claimed by the assessee was bogus. 12. However, we notice that the assessee has claimed that it has declared the sales of films picturised by using the films of ₹ 1.04 crores referred above. There should not be any doubt that the pictures could not be produced without the use of films and if the sale of pictures is assessed, then the corresponding expenditure should be allowed. Even though the assessing officer has considered the sales also as bogus, he did not exclude the value of sales from the income of the assessee. Since the purchase of films have not been proved by the assessee, we are of the view that this issue should be settled by disallowing some portion of the purchases in order to take care of the deficiencies in the purchase claim. Accordingly, we direct the assessing officer to disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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