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2016 (7) TMI 904 - ITAT KOLKATA

2016 (7) TMI 904 - ITAT KOLKATA - TMI - Suppression of income - whether he closing stock calls for reduction to the extent of the reduction of purchases due to wrong entry ? - Held that:- It is clear from the order of CIT(A) that the assesse was not able to substantiate the fact that by reason of the inflation of purchases there was neutralizing entry whereby there was increase in the value of the closing stock and therefore there cannot be any inference of suppression of income. Even before us .....

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refore of the view that the treatment of the road tax and insurance premium as capital expenditure, in the facts and circumstances of the present case, was proper and calls for no interference. - Depreciation in respect of the Oil Tanker - Held that:- CIT(A) has proceeded on the basis that the Hindustan Petroleum Corporation Ltd has to give permission for use of the oil tanker by the assessee for transporting petroleum products and since such permission was not given, it cannot be said that .....

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oleum products and this fact is not disputed by the revenue. In the given facts and circumstances of the case we are of the view that the assessee has successfully established that the vehicle in question was ready for use though it was not actually put to use. We therefore are of the view that the claim of the assesee for deduction on account of depreciation ought to have been allowed and the same is directed to be allowed. - Decided in favour of assessee. - I.T.A No. 780/Kol/2013 - Dated:- 15- .....

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n of purchases due to wrong entry as raised in Ground No. 1 before him; 3. The Assessee is an individual. She carries on the business of trading in high speed diesel, petrol, lubricants etc in the name and style of M/s Bargabhima Fuel Centre. For A.Y. 2009-10 the assessee filed return of income declaring total income of ₹ 9,91,370/-. 4. In the course of assessment proceedings u/s.143(3) of the Income Tax Act, 1961 (Act), the Assessing Officer (AO) noticed that in the Trading Account for th .....

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count by ₹ 5,38,272/- which has the effect of reducing the income declared by the Assessee by the said sum. According to the AO, the difference of ₹ 5,38,272/- had to be treated as bogus purchase and had to be be added back to the total income. The Assessee when called upon by the AO to explain the above discrepancy submitted that a sum of ₹ 4,20,818/- was inadvertently inflated by misposting of an invoice dated 03/10/2008 in Oil Account. Another instance of repayment of workin .....

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The AO however did not accept the stand taken by the Assessee. He held that the Assessee failed to properly reconcile the figures in the purchase account. The following were his findings: (5.1)The assessee's explanation is not tenable. In submission dated 23/11/2011 (received in this Office on 28/11/2011), it was mentioned that purchase amount was inadvertently inflated by misposting of an invoice dated 03/10/2008 in Oil account by ₹ 4,20,818.91; whereas repayment of working capital o .....

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#8377; 5,38,272/- is deducted from the purchases and a Trading Account is redrawn, keeping other constants (except gross profit) remaining the same, the trading result increases by ₹ 5,38,272/-, in the following manner- Trading Account For The Year Ended On 31st March, 2009 (As per audited accounts) Particulars Amount (Rs.) Particulars Amount (Rs.) To Opening Stock 28,29,665.25 By Sales 26,05,93,440.44 HSD,Power,Turbo, Petrol HSD,Power,Turbo, Petrol & Lubricants & Lubricants To Pur .....

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,Power,Turbo, Petrol & Lubricants & Lubricants To Purchases of HSD, 25,42,14,841.82 By Normal Loss Power, Turbo HSD, Power, Turbo NIL To Purchase of Lubricants 10,23,574.72 By Closing Stock 21,99,141.75 To Gross Profit b/d 47,24,500.40 HSD,Power,Turbo& Lubricants Total 26,27,92 582.19 Total 26,27,92,582.19 Therefore, either way it is looked into, difference of ₹ 5,38,272/- persists and as such the assessee is not immune of inflated purchase figure. The gross profit is directly .....

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ame amount. However, this is true only in case where complete quantity records are' maintained in respect of purchase, sales and stock and the same are meticulously tallied. On the other hand, if complete quantity records are not maintained, there is every possibility that any excess debit of purchase may not be reflected in the closing stock. This is also in view of the fact that in case of most of the businessmen, closing stock is physically verified at the end of year and valued and the s .....

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to do so. He was, nevertheless, given one more opportunity for furnishing such evidence. In the subsequent hearing he has only produced a statement of transactions for the month of October 2008 However, this statement contains only amounts and has no details of quantity. Obviously, from such a statement, it is not possible to ascertain whether the quantity of material purchased vide the invoice under consideration was really taken twice in stock. Also, during the oral discussion, the authorized .....

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377; 4,20,818 resulted in a neutralizing entry in closing stock. Therefore, the same cannot be accepted for want of supporting evidence. This ground is accordingly rejected. 7. Aggrieved by the order of CIT(A) the assessee has raised ground No.1 before the Tribunal. 8. The ld. Counsel for the assessee reiterated the submissions as were made before the lower authorities. The ld. DR relied on the order of CIT(A). 9. We have considered the rival submissions. It is clear from the order of CIT(A) tha .....

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4 and 5 raised by the assessee and additional ground raised by the assessee read as follows :- II That the Ld. CIT(A) is wrong to reject the claim for Depreciation in respect of the Oil Tanker acquired this year and after performing all necessary formalities factual and legal for its business use and keeping a driver ever ready at the wheel; III That the Ld. CIT(A) is wrong to hold that the Tanker was not ready for instant use for business and he is absolutely wrong in rejecting the Calcutta Hig .....

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Ground No 7 before him taken to accept and declare that the resources against the Depreciation enjoyed by deduction from the revenue actually lies in the business in any form available for the replacement of the asset in question and for that the corresponding credit essentially is attributable to the Capital Account in absence of the Depreciation Reserve Account. Additional Grounds raised by the Assessee: 1. That in the facts and circumstances of the case the Ld CIT(A) XXXIII Kolkata is wrong t .....

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appeal arise for consideration are as follows. We have already seen that the assessee is in the business of trading in high speed diesel, fuel etc. The assessee purchased one oil tanker on 03.06.2008. The same was registered in the motor vehicles department on 04.08.2008 and road tax was paid on 26.11.2008. The vehicle was insured with National Insurance Company on 04.06.2008. According to the assessee this oil tanker was meant for use by the assessee in her business of trading in petroleum pro .....

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meant to drive the oil tanker was also paid and claimed as deduction by the Assessee. 12. The AO however noticed that in respect of the oil tanker owned by the assessee the assessee had declared income of ₹ 42,000/- as per the provision of section 44AE of the Act. The AO was of the view that since the income of the assessee was declared u/s 44AE of the Act no deduction allowable under the provision of sections 30 to 38 of the Act could be allowed as laid down in the provision of section 44 .....

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ges. The assessee pointed out that since the oil tanker in question was purchased by the assessee for use in its own business and since the oil tanker was not engaged in the business of plying, hiring or leasing, the declaration of income u/s 44AE of the Act was erroneous. 14. The AO however did not agree with the stand taken by the assessee and was of the view that such a claim without filing a valid revised return of income cannot be entertained. In this regard the AO made reference to the dec .....

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this regard placed reliance on the decision of the Hon ble Calcutta High Court in the case of CIT vs Union Carbide (P)Ltd 254 ITR 488 (Cal) wherein it was held that if an asset was ready for use depreciation is allowable. The AO however held that the assessee failed to prove that the oil tanker was ready for use though not actually put to use during the previous year. For all the aforesaid reasons the claim of the assessee for deduction on account of road tax, insurance and depreciation was disa .....

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and salary of driver of the five tankers could have been disallowed by the AO and these additions were deleted. The Revenue is not in appeal against the said findings of the CIT(A) and the same has now become final. However, with regard to the insurance and road tax, the CIT(A) held that the same was capital expenditure and it had to be capitalized as part of the cost of the oil tanker and directed the AO to allow depreciation on the value of the oil tanker after capitalization of the aforesaid .....

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fact that the asset i.e tanker acquired during the year was not actually put to use. However, the contention of the appellant is that it was kept ready for use and therefore depreciation should be allowed in light of decisions cited by her. The appellant was asked to support the contention that the tanker was kepi ready for use by producing evidence. it was informed by the appellant that the tanker was acquired in the month of June 2008 and all formalities like registration etc were duly complet .....

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of the previous year. No correspondence evidencing that the appellant had requested for permission from HPCL during the year under consideration has been produced. It has been mentioned by the appellant herself, that unless HPCL gives such permission, it is not possible for the appellant to use the tanker for carrying oil. The appellant has not been able to substantiate the claim that permission had been sought during the year and was awaited. Therefore, it cannot be said that the tanker was rea .....

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td. (supra) has been delivered by the jurisdictional High Court. However, on going through the decision, it is seen that it was undisputed fact in that case that the machinery under consideration had been actually used for trial run. This factual position was not contested by the revenue. Therefore ratio of that case cannot be applied in the present case where there is no use at all of the asset. Another case relied upon by the assessee is that of Siv Industries Ltd. (supra). It is seen that in .....

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aji Rao Sugar Company Ltd 71 ITR 319 (MP), CIT vs JK Transport 231 ITR 798 (MP), CIT vs Maps Tours and Travels 260 ITR 655 (Mad.), Dinesh kumar Gulabchand Agarwal vs CIT 267 ITR 768 (Bom.), CIT vs. Oriental Coal Co. Ltd. 206 ITR 682 (CaL), DCIT Vs Yellamma Dasappa Hospital 290 ITR 353 (Kar.). In particular, the case of Dinesh kumar Gulabchand Agarwal (supra) specifically dealt with issue of depreciation on trucks kept ready for use but not actually used. Thus, a large number of the judicial auth .....

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y the action of CIT(A) in sustaining the disallowance to the deduction of depreciation and not allowing the expenditure of road tax and insurance as revenue expenditure the assessee has raised ground nos. 2 to 5 and the additional grounds before the Tribunal. 18. We may, at the outset, point out that ground no.5 raised by the assessee and the additional grounds raised by the assessee are general arguments. In fact additional ground no.2 has been decided in favour of the assessee by the CIT(A) an .....

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asset as per the definition contained in section 43(1) of the Act means that actual cost to the assessee. When a new vehicle is acquired the insurance premium and the road tax paid would assume the character of the cost paid in acquiring the asset. But for incurring these expenses, the vehicle cannot be put to use by the assessee. We are therefore of the view that the treatment of the road tax and insurance premium as capital expenditure, in the facts and circumstances of the present case, was p .....

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