TMI Blog2016 (7) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(A) on this issue requires to be set aside and the issue needs to be looked into afresh by the AO in the light of the observations as set out above. We hold and direct accordingly. The AO will afford opportunity of being heard to the Assessee before deciding the issue. - Decided in favour of revenue - ITA No. 1240/Kol/2013 - - - Dated:- 11-5-2016 - Shri P. M. Jagtap, AM And Sri N. V. Vasudevan, JM For the Appellant : Shri Uday Kumar Sardar, CIT, Sr. DR For the Respondent : Shri Arvind Agarwal, Advocate ORDER Per N. V. Vasudevan, JM This is an appeal by the Revenue against the order dated 26.2.2013 of CIT(A)- IV, Kolkata, relating to AY 2007-08. 2. The only issue raised by the revenue in this appeal is as to whether the CIT(A) was justified in deleting the addition of ₹ 70,99,318/- made by the AO by disallowing depreciation claimed by the Assessee. The grounds of appeal raised by the revenue read thus: 1. That on the facts and circumstances of the case the Ld. CIT(A) has erred in law in directing the A.O. to delete the addition of ₹ 7099318/- on account of depreciation by accepting assessee s submission based on electricity b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why the claim of depreciation, to the extent that the assets on which depreciation is claimed could not have been put to use since the factory building was not completed be not disallowed. 5. The Assessee submitted before the AO that the construction work of factory building started during the AY 2006-07 and was being completed in a phased manner. 90% of the work of factory building was completed by AY 2007-08. The Assessee pointed out that out of a total cost of factory building of ₹ 393.97 lakhs incurred and capitalized upto 31.3.2008 ₹ 367.79 lakhs was incurred upto 31.3.2007. The Assessee claimed that during AY 2007-08 the completed area of factory building was utilized and production was carried out therein. The Assessee further explained that since factory building was not completed as a whole, the same was not capitalized in the books of accounts of AY 2007-08. 6. The AO however was of the view that the opening value of the factory building as on 1.4.2006 was ₹ 59.61 lakhs and the addition during the previous year was ₹ 308.17 lakhs. The claim of the Assessee was that after construction, Plant and machinery was installed and job work was done fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory building as on 1.4.06 was ₹ 59.61 lakh and further expenditure of ₹ 73.10 lakh in April 2006 and ₹ 20.47 lakh in May 2006. In effect, the assessee had already incurred an expenditure of ₹ 153.181akh by May 2006. It was submitted that the assessee has started the activities in its industrial unit in a phased manner and during the asst year 2007-08, the assessee had started commercial activities in its machine shop. This is evidenced by the fact that the assessee has done machining work using its own machine shop for various reputed parties i.e. Sundaram Fasteners Ltd., Electrosteel Castings Ltd. etc on a job work basis. It was further pointed out that though under the head Plant Machinery, during the asst year 2007-08, the assessee has capitalized ₹ 7,79,63,887/-, the assessee has claimed depreciation amounting to ₹ 64.,07,754/- on plant and machinery of ₹ 1,92,19,931/- only which were installed and used by the assessee in its machine shop and other plant and machinery such as weighing machine, generator, pumps etc. used by the assessee for carrying out the activities in its machine shop. The AO also has failed to appreciate the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative expenses as at 31.03.2007 which has subsequently been allocated to various fixed assets and capitalized in 31.03.2008. 11. It was also submitted that besides disallowing depreciation on plant machinery of ₹ 64,07,754/- as stated above, the AO has also disallowed the claim of depreciation on the following assets without assigning any reason even though all the under mentioned assets were used by the assessee for the purpose of its business: Asset Description Depreciable Value (Rs.) Depreciation (Rs.) Computer 749502 321828 Computer Software 738767 221630 Furniture Fixtures 436337 38357 Office Equipments 223437 17509 Office Equipments 137600 6880 Electrical accessories 143886 7560 Mobiles 43990 2801 Office Premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1st week of June, 2007, we find that these are mostly CNC lathe machinery. This machinery are high precision and computer controlled machinery which can very easily be put to use. The earliest bill of job work is dated 14.06.2006. Therefore, the appellant had almost 2and 1/2 months of time before production/job work started. This was of ample time to put to use CNC machine. What has been overlooked by the A.O. is that electric power charges to the extent of ₹ 5,01,470/- has been paid to the electricity Board for the entire factory. However, for running machine shop, electric charges of ₹ 97,977/- has been shown and for running the generator, diesel charges of ₹ 74,467/- has been shown. As machining tools are not heavy duty machinery, the electrical and generator charges for power was sufficient to take care of job work of the appellant. The A.O. has not doubted the job work income received by the appellant which hat there is nothing !o hold that job work was not done by the appellant. In fact, the job work was done for reputed clients and the A.O. had all the resources to verify the genuineness of the same. If, job work was done and electricity and fuel expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AO have been filed. Perusal of the same shows that on 3.11.2009, the A/R of the Assessee appeared before the AO and filed certain details and produced books of accounts. The AO raised a specific query and asked for submissions as to how the plant and machinery were put to use when the factory shed remained as WIP and nature of job charges. On 9.12.2009 the AO has recorded the fact that submissions regard query raised earlier were filed and has further called upon the Assessee to file addition to fixed assets and details with depreciation computation as per Act. Again on 4.12.2009 the A/R of the Assessee gave the required details. It was the submission of the AR that on the above dates of hearing, the electricity bills at pages 14 to 46 were also shown to the AO for verification. His further submission was that the case of the revenue is only based on violation of Rule 46A of the Rules and in view of the circumstances pointed out as above, the appeal of the revenue should be dismissed. In all other respects he relied on the order of the CIT(A). 16. We have given a very careful consideration to the rival submissions. Admittedly before the AO there was no whisper by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals)and Commissioner (Appeals). (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely:- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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