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2016 (2) TMI 89 - ITAT MUMBAI

2016 (2) TMI 89 - ITAT MUMBAI - TMI - Disallowance of depreciation - whether the same amount has been disallowed under block assessment proceedings and was assessed as undisclosed income thus the disallowance of depreciation is wrong? - Held that:- The settled legal proposition is that the block assessment and regular assessment are two different assessment proceedings and they will run parallelly. The items that are required to be considered in the block assessment cannot be considered in the r .....

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ordingly, we set aside this issue to the file of the AO with the direction to examine this claim of the assessee and take appropriate 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 .....

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irect 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 aside proceedings. As noticed earlier, though the assessing officer has taken the view that the sale of pictures also is bogus one, he has not eliminated the same .....

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the loan obtained has been used by the assessee for business purposes, we are of the view that the finance charges are allowable as deduciton, as the hire purchase finance is only one of the modes of raising loans. Hence, in our view, this issue requires fresh examination. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to examine the manner of utilization of loan availed from the finance companies

Disallowance of depreciation - Held that:- In the earl .....

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ch 100% depreciation is allowable. Further it is also the responsibility of the assessee to show that the machineries worth 0.32 crores was actually purchased. Accordingly, this issue is also set aside to the file of the AO with the direction to examine the same afresh. - I.T.A. No.500/Mum/2005 - Dated:- 6-1-2016 - SHRI B.R.BASKARAN (AM) AND RAMLAL NEGI, (JM) For The Appellant : Shri Salil Kapoor For The Rspondent : Shri Vinod Kumar ORDER PER B.R. BASKARAN (AM) The assessee has filed this appe .....

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(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 .....

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e assessee changed its stand and claimed the claim of 100% depreciation was not correct and further the assessee claimed that it has purchased raw materials in the form of films to the tune of ₹ 1.04 crores and the same was wrongly claimed as energy savings devices. Since a new claim was made, the ld CIT(A) set aside the matter with the following observations:- …..At the time of appeal hearings the appellant has stated that its claim for 100% depreciation was not correct but it was .....

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under consideration. All the items which have been doubted by the A.O have to be looked into vis-à-vis the materials found during the course of search, whether the assets on which depreciation has been claimed were found in the physical verification of the assets during the search have to be verified and reconcile. All this needs thorough scrutiny and investigation. Therefore, in the interest of justice, I set aside the assessment to be redone after giving reasonable opportunity to the a .....

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e relied upon the decision rendered by Hon ble Gujarat High Court in the case 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 .....

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g 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. Later, the assessee changed its stand and submitted that the claim of ₹ 1.36 crores depreciation on energy savings device was wrong, but the said expenditure includes purchase of films worth ₹ 1.04 crores. In the set aside proc .....

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in stand) and hence disallowing the amount of ₹ 1.04 crores would amount to double disallowance. 10. The settled legal proposition is that the block assessment and regular assessment are two different assessment proceedings and they will run parallelly. The items that are required to be considered in the block assessment cannot be considered in the regular assessment proceedings and vice versa. Hence the items which have been assessed as undisclosed income in block assessment proceedings c .....

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in accordance with the law in the light of discussions made supra. 11. The next legal issue contested by the assessee relates to the scope of set aside proceedings. In the preceding paragraphs, we have discussed about the same. Before us, the Ld A.R submitted that the following additions made by the assessing officer in the set aside proceedings are new additions, which will not be covered by the scope of set aside:- (a) Machinery purchase Rs.1,04,15,121/- (b) Expenditure related to bogus sales .....

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d 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 .....

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As noticed earlier, though the assessing officer has taken the view that the sale of pictures also is bogus one, he has not eliminated the same from the total income of the assessee. Accordingly, we are of the view that there is no reason to disallow the expenses arrived on a proportionate basis. Accordingly we direct the AO to delete this disallowance. 14. With regard to the disallowance of finance charges, the Ld A.R submitted that the said addition was also made in the original assessment pro .....

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