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TMI Blog2020 (8) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the alleged hawala purchase of machines should be restricted to the proportionate depreciation by applying reasonable Gross Profit rate on such alleged hawala purchase transactions. 3. Briefly stated, the facts of the case are that the Assessing Officer (AO) got some information about the assessee firm having obtained accommodation entries from hawala operators to the tune of Rs. 59,38,955/-, consisting of Rs. 37,12,576/- from M/s. Prathamesh Impex, Mumbai and Rs. 22,26,379/- from M/s. Meridian Sales Private Limited, Mumbai. These purchases related to certain machines which were capitalized by the assessee in its books of account. The information received by the AO also included affidavits made by the alleged sellers before the Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the AO treated the amount of two purchase bills of Rs. 59,38,955/- as bogus investment and made addition for that. In addition, the AO also disallowed depreciation on such fixed assets to the tune of Rs. 4,45,420/-, being 7.50% of Rs. 59,38,955/-. During the course of the first appellate proceedings, the assessee tried to furnish some evidence proving genuineness of the transaction. The ld. CIT(A) sent such evidence to the AO and called for a remand report. In the remand report, the AO stated that he visited the factory premises of the assessee and wanted to examine delivery challans, weighment slips, etc. in respect of three injection moulding machines, that is, SM 250, SM 180 and SM 80, which were claimed to have been purchased from M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s aggrieved by the confirmation of above additions. 4. We have heard the rival submissions through virtual court and gone through the relevant material on record. It is evident from the remand report, which has been reproduced in para 5.1 of the impugned order, that the AO personally visited the factory premises of the assessee and found three injection moulding machines i.e. SM 250, SM 180 and SM 80 actually installed. It is further true that the assessee recorded purchase of these machines from M/s. Prathamesh Impex, Mumbai and M/s. Meridian Sales Pvt. Ltd., Mumbai, in respect of which the assessee could not substantiate the receipt of machines except for the bills. The AO in his remand report has observed in para iii) that : "As there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls with higher value of the same machines from M/s. Prathamesh Impex, Mumbai and M/s. Meridian Sales Pvt. Ltd., Mumbai, which were recorded in the books of account. In view of the fact that the machines were actually installed at the factory premises of assessee, which fact has been admitted by the Revenue authorities, there can be no reason to repel the explanation of assessee made in the alternate and without prejudice that the same machines were actually purchased in the open market and installed at the factory premises, for which invoices with higher value were obtained. To put it simply, suppose the assessee obtained bills worth Rs. 100/- for the purchase of these three machines from M/s. Prathamesh Impex, Mumbai and M/s. Meridian Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red value, for which the bills were obtained for 100%. In that view of the matter, purchase value of the machines will get reduced to 85% instead of 100% and the claim of depreciation on such excess of 15% will be disallowed in the year under consideration and all the subsequent years. To sum up, we hold that the addition of Rs. 59,38,955/- as having been made and confirmed u/s 69 of the Act, is unwarranted. The same is accordingly deleted. In so far as the disallowance of depreciation of Rs. 4,45,420/- is concerned, we direct to restrict it by reducing the actual cost of such machines by 15% from Rs. 59,38,955/- to Rs. 50,48,111/- and accordingly disallow the depreciation on the excess amount of Rs. 8,90,844/-. 5. In the result, the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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