TMI Blog2019 (10) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, we feel it appropriate to restore the matter back to the file of the Assessing Officer for deciding afresh with the direction to the assessee to produce all the necessary documents in support of its claim including books of accounts and bills and voucher in relation to other expenses and additions to assets for justifying the claim of the depreciation. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. Accordingly, the grounds raised by both the parties are allowed for statistical purposes. - ITA No.4973/Del/2015 And ITA No.5308/Del/2015 - - - Dated:- 15-10-2019 - Shri Sudhanshu Srivastava, Judicial Member And Shri O.P. Kant, Accountnat Member For the Assessee : Shri Rajat Jain, CA And Shri Akshat Jain, CA For the Department : Shri Kanwaljit Singh, CIT(DR) ORDER PER O.P. KANT, AM: These cross appeals by the assessee and the Revenue are directed against order dated 08/06/2015 passed by the learned Commissioner of Income-tax (Appeals) -24, New Delhi [in short the Ld. CIT(A) ] for assessment year 2012-13. Both the appeals being conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before or during the course of hearing of the appeal. 4. Briefly stated facts of the case are that the assessee company was engaged in the business of manufacturing and trading of ice cream under the brand name Cream bell and also engaged in providing management activities. In the case of the assessee, a search and seizure operation under section 132 of the Income-tax Act, 1961 (in short the Act ) was carried out on 27/03/2012 and incriminating material was seized. Consequent to the search proceedings, the assessee surrendered amount of ₹ 5 crore against discrepancy in the seized/impounded material. A notice under section 142 (1) of the Act was issued asking the assessee to file the return of income. In response, the assessee filed return of income on 17.06.2013, declaring loss of ₹ 11,69,00,806/- under normal provisions of the Act and book profit of ₹ 6,08,39,186/- under section 115JB of the Act. The assessee paid taxes of ₹ 1,12,55,249/- on the book profit. Subsequently, statutory notice under section 143(2) of the Act was issued for commencing scrutiny proceeding. During the assessment proceeding, the Assessing Officer on 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the addition of fixed assets added during the year under consideration. 4.3 Aggrieved with the finding of the CIT(A), learned both the assessee and Revenue are in appeal before the Tribunal, raising the grounds as reproduce above. 5. The learned counsel of the assessee filed a paper book containing pages 1 to 87 and submitted that ad-hoc addition made by the Assessing Officer needs to be deleted. 6. On the contrary, the learned DR submitted that before the Assessing Officer no bills and vouchers of the other expenses were submitted and, therefore, the Ld. CIT(A) was required to examine the documents of the assessee in detail in accordance with the provisions of the Act and then decide the disallowance rather than restricting the disallowance on ad-hoc basis. The learned DR accordingly submitted that the matter may be restored back to the file of the Assessing Officer for deciding afresh. The learned counsel of the assessee has also not objected to this proposition of the learned DR. 7. We have heard the rival submissions and perused the relevant material on record. We find that the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses could not be accepted and that ad-hoc disallowance of 50% was required to be made as bogus expenditure. The relevant part of para 3 of the assessment order is reproduced below for ready reference: In this regard, the assessee has claimed expenses of ₹ 36,85,40,000/- in the profit loss account under the head Other Expenses but no details filed by the assessee in this regard till date. This is clearly indicative of assessee s conduct showing that expenses are being inflated to suppress the profit. The assessee had not furnished any details of expenditures. In this background the expenses claimed by the assessee on account of other expenses cannot be accepted and accordingly an ad-hoc disallowance of 50% is being made on account of bogus expenses which comes to ₹ 18,42,70,000/- and will be added to the income of the assessee. 4.1.17 In the background of the observation of the A.O, it is necessary to examine Q.No.43 of the questionnaire dt. 23.10.13. The relevant Q.no.43 is reproduced below for ready reference: 43) Details of major expenses debited to P L Account and justificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiny of its claim. 4.1.20 The assessee has failed to provide the details for the expenses debited and justification etc. on the basis of which AO could have proceeded to third party enquiries or any other similar investigation/examination deemed fit by him or would have accepted the claim without any further enquiry. Non-furnishing of the required details has affected the assessment proceedings. I, therefore consider that there is merit in the A.O. drawing adverse inference. This is especially so due to the fact that the appellant has retracted from the surrender of undisclosed income (of ₹ 5 crore) made by it during the search and seizure action - that too after a very long gap of almost two years (as per assessment order the appellant retracted from the surrender by its letter dated 14/2/2014). The appellant had surrendered ₹ 5 crore towards discrepancy in seized/ impounded Annexures and others . But the same has been completely retracted after a gap of almost two years. It is noted here that the scheme of the act does recognize the act of surrender of any undisclosed income at the time of search. Such surrender is one of the significant events of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not 50% as done by the AO. There is sufficient adverse evidence to that effect in the form of acceptance by the appellant itself of deficiencies in the accounts (surrender of undisclosed income during search), a very long gap in retraction of surrender of undisclosed income without any valid and bonafide cause and its failure reluctance to get itself scrutinized during assessment proceedings. Hence, ordered accordingly. Grounds are partly allowed. 8. Similarly, regarding disallowance of depreciation, the learned CIT(A) observed as under : 4.2.7 I have considered the submissions of the AR and the assessment order. The assessing officer had called upon the appellant to provide the details of fixed assets along with supporting evidences. Below the said question he has also inserted a table in which he has also asked certain more details. The relevant question no. 37 of AO s Questionnaire dated 23.10.2013 is reproduced below for ready reference:- 37) Details of fixed assets as per schedule of companies Act. Details of additions to fixed assets along with the supporting evidences. Partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on expenditure was booked in the name of Rockhard Infrastructure Pvt. Ltd - which was surrendered during search). The names of the party who had supplied the asset and its utility etc. would have allowed the AO to decide the course of scrutiny and investigation. These have not been provided. The details in Form 3CD report are insufficient to cover the requirements sought by the AO. From the assessment proceedings and written submissions it is an undisputable fact that the appellant did not furnish details as required by Q.No.37. Without the details, AO could not have proceeded with proper assessment and hence there is merit in his action of drawing adverse inference. 4.2.11 In the above background it is now left to adjudicate whether the AO should disallow 50% of the depreciation claimed in the given circumstances. It is noted here that the AR has stressed on the fact that the GP and NP ratios do not call for any adverse inference and that the Form 3CD already contained the details. I do not agree that just because GP and NP ratios are better, assesse can get exemption from substantiating his claim of depreciation. Further, the details in Form 3CD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an opening w.d.v. of ₹ 78,24,06,608/- on which depreciation is automatically allowable because the same has been allowed in the previous year. The depreciation on the WDV works out to ₹ 12,07,76,856/- as under: Rate of Depreciation WDV Depreciation for the year (in Rs.) 0,25 65904918 16476229.5 0.6 4334818 2600890.8 0.15 18891711 2833756.65 0.15 225663625 33849543.75 0.15 1509955 226493.25 0.15 361006262 54150939.3 0.15 3241701 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retracted from the surrender by its letter dated 14/2/2014). The appellant had surrendered ₹ 5 crore towards discrepancy in seized/ impounded Annexures and others . But the same has been completely retracted after a gap of almost two years. It is noted here that the scheme of the act does recognize the act of surrender of any undisclosed income at the time of search. Such surrender is one of the significant events of in any search and post search proceedings and it greatly influences the post search investigation. By surrendering the undisclosed income the appellant stops the investigating officer from continuing with investigation on that issue on the principle that a fact accepted by the other party need not be proved. Here the- surrender was on account of discrepancy in the seized and impounded documents. After a gap of two years, it is very easy to say that there are no discrepancies in the documents. The party has got ample time to set right the weaknesses, if any, in his affairs and also to take care of any deficiencies that could be linked to the contents of the seized papers including party affairs. Thus any retraction from surrendered income, that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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