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TMI Blog2016 (11) TMI 1705X X X X Extracts X X X X X X X X Extracts X X X X ..... f of assessee. 2. As far as Cross Objections (CO) filed by assessee concerned, the first aspect to be considered is the condonation of 1036 days delay in filing the above COs which are explained as owing to inadvertently delay on the part of Accountant of the assessee concern who was looking after the income tax matters of assessee. Ld. DR raised no objection. Considering the reasons explained in affidavits filed by assessee, we deem it fit to condone the delay in filing the above Cos. We admit assessee's Cos. First we take up assessee's CO No.06/Kol/2016 for A.Y.09-10 and Revenue's appeal in ITA No.922/Kol/2013. 3. Assessee in its CO has raised following ground:- "1(I) That the Ld. CIT(A) erred in upholding the proceedings u/s. 153C of the Act which was initiated without recording of satisfaction which are incriminating documents. Recording of satisfaction is a pre-requisite for initiating proceedings u/s. 153C of the Act as held by the Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears. Hence the instant appeal is liable to be dismissed on this ground. (ii) That the Ld. CIT(A) erred in not considering the fact that no incriminating documents of any nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without finding any incriminating evidence in relation to those assessments. As such, no incriminating material was found during the course of search operation in the case of NKG. However, Ld. CIT(A) rejected the plea of assessee by observing as under:- "... ... Since, the AO has given specific finding of those documents belonging to the appellant and during the appellate proceedings the appellant has not been able to prove that those documents did not belong to it, the objection to the initiation of proceedings u/s. 153C is dismissed. The assessee has objected to validity of initiation of proceedings u/s. 153C on the ground that no reasons were revealed by the AO for initiation of such proceedings. I have checked up the assessment records and found that the reasons for initiating proceedings u/s. 153C in the instant case were duly recorded by the AO. Hence this objection of the appellant is also dismissed. The appellant has also objected to initiation of proceedings u/s. 153C contending that provisions of that section can be resorted to for assessment of undisclosed income only in search cases. The submissions of the appellant in this regard have already been reproduced ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the materials available on record. In the instant case we find that the matter of the assessee was picked up under the proceedings of section 153C of the Act as the documents belonging to the assessee were found during the search. From the perusal of those documents placed in the paper book we find that these were the working papers of NKG. The names of other parties were also appearing in those papers. The transactions recorded in those papers were duly recorded in the regular books of accounts. The ld. DR has not brought anything contrary to the arguments of the ld. AR. In our considered view the provisions of section 153C of the Act provides that where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accounts or seized documents belonged to person other than the person searched. Then the AO shall proceed against such other person by issuing notice and assess or re-assess the income of such other person. At this juncture we find important to reproduce the provisions of section 153C of the Act which reads as under:- "153C.[(1)] [Notwithstanding anything contained in section 139, section 147, section 148, section 149, sectio ..... 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(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, Before the date or receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.] From a plain reading of the provisions of Sec.153C, it is crystal clear that the condition precedent for issue of notice u/s 153C is that money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such person. If this requirement is not satisfied, recourse cannot be had to the provisions of section 153C of the Act. The very same provisions had come for interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act." 6.1 Further, the term belonging to has been interpreted by the Hon'ble Supreme Court in the case of CWT vs. Bishwanath Chatterjee Ors. 103 ITR 536 and late Nawab Sir Mir Osman Ali Khan (162 ITR 888) wherein the Hon'ble Supreme Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her laid down that in the satisfaction note there should be something to indicate that the seized document do not belong to the searched person. The Hon'ble Delhi High Court held as follows: "Having set out the position in law in the decision of this Court in the case of Pepsi Foods Pvt. Ltd. (supra), it must be seen as to whether the Assessing Officer of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners. First of all we may point out, once again, that it is nobody's case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that "where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A ...." In view of this phrase, it is necessary that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ingredients of Section 153C of the said Act have been satisfied in this case. Consequently all proceedings pursuant thereto stand quashed." Similarly, the Hon'ble Gujarat High Court in the case of Vijaybhai N.Chandrani vs. ACIT (333 ITR 436) held that even if there is a reference to the assessee in the seized documents, it does not mean that the assessee is the owner of those documents unless the revenue proves conclusively that the assessee is the owner of those documents. The Hon'ble Gujarat High Court held as follows: "Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of s. 153C of the Act. Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. of 46B, Rafi Ahmed Kidwai Road, Kolkata-700 016 So as per provision laid down u/s. 153C of IT Act, 1961 read with section 153A of IT Act, I am satisfied that it is a Fit Case for issue of notice u/s. 153C of IT Act and to assess the assessee's income in accordance with the provision u/s. 153C of the IT Act 1961. Therefore, in accordance with the provision section 153C, the assessee is liable to prepare a true and correct return of his income and file the same to this end to enable the undersigned to make an assessment of assessee's income. As per CIT (Central)-I, Kolkata's Order No.02/2011-12 dated 07.04.2011, the case has since been transferred to this Circle. Issue Notice u/s. 153C for the AY 2004-05 to 2009-10. " 7. From the material seized, though there was a reference to the name of the assessee-firm, equally there are names of other parties on the same documents. There is nothing to indicate that these documents were disclaimed by NKG in whose case search was conducted. The AO has not referred to any material to indicate that the assessee is the owner of those seized documents. Therefore, we hold that the AO was not justified in exercising jurisdiction u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents are bad in law in assessee's CO No.06/Kol/2016. The facts of this assessee's CO is identical to the CO No.06/Kol/2016 which we have allowed in favour of assessee vide Para No.6, 6.1, 6.2 & 7 of this order. Following the same, we allow this CO of the assessee in its favour. 17. Coming to Revenue's appeal in ITA No.920/Kol/2013. At the outset, assessee's CO No.04/Kol/2016 where challenging the validity of assessment proceedings u/s. 153C of the Act has been decided in favour of assessee as proceedings u/s. 153C has been held as invalid, therefore, grounds raised by Revenue in this appeal do not require any separate adjudication. Therefore, grounds of appeal are dismissed as not maintainable. 18. In the result, assessee's CO is allowed and that of Revenue's appeal is dismissed. Coming to Revenue's appeal in ITA No.923/Kol/2013 for A.Y.10-11 19. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of Rs. 6,93,39,027/- on account of additional depreciation u/s. 32(1)(iia) of the Act without appreciating the fact that the assessee is not engaged in manufacturing or production of coal. The grounds of appeal raised by Revenue in this appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted from mines and transported to the owners of the mine. Therefore the assessee is merely acting as a contractor employed by the owners of the mines. The AO also reviewed the contract of M/s BCCL which says that coal as available in its existing form had to be extracted by removal of top soil rock etc. Therefore, there is no processing involved which could be termed as "manufacturing process". 2) The assessee was not only engaged in the mining activities but also performing work of different nature at dam site, transportation site, ponds evacuation etc. The receipts from different kinds of work contracts were substantial to the activities of mining of coal. In view of the above, AO held that assessee is not engaged in any production / manufacturing activity and therefore the additional depreciation is not available for the deduction u/s 32(1)(iia) of the Act. Accordingly, additional depreciation of Rs.6,93,39,027/- was disallowed and added to the total income of assessee. 22. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that it is involved in the mining and transportation of coal activities which requires extraction of coal and other in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction of coal therefore, eligible for investment allowance u/s.32A of the Act. As per the letter of intent in that case the assessee was to be paid at certain rate as hiring charges of heavy earth moving machinery and the TDS certificate issued by the colliery showed that the payments were made against the contract for hiring of the machinery. In that case the Hon'ble jurisdictional High Court observed that the assessee had purchased machinery and used it itself in its work and did not give it on hire. The money received was not the hiring charges but for the work done utilizing the machinery with its own staff. Observing these facts the Hon'ble jurisdictional High Court held that the assessee was engaged for the purpose of mining of coal and / or extraction of coal on behalf of the colleries concerned and that the assessee was engaged in producing coal. Similar issue was considered by the Hon'ble jurisdictional High Court in another case also, viz., CIT v. Mercantile Construction Co.(1994) 74 Taxman 41 (Cal). In that case also the assessee was engaged in the business of interalia, raising of coal in the collieries belonging to Eastern Coalfields Ltd. under a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the depreciation chart which is placed on pages 344 of the paper book. The ld. AR further submitted that it is extracting coal which is buried under the several layers of soil after removing the overburden. This activity certainly amounts to production of coal. Therefore, the assessee is very much entitled for additional depreciation. Ld. AR relied on the order of Ld. CIT(A). 24. We have heard the rival contentions and perused the materials available on record. From the foregoing discussion, we find that the crux of the issue before us arise so as to whether the activity of extraction of coal amounts to the production. If yes then the assessee is entitled for additional depreciation. We find this issue is squarely covered by the decision of the Jurisdictional High Court in the case of CIT Vs. G.S. Atwal & company in 254 ITR 592 wherein it was held as under : "Following an old and longstanding decision given by Chakravartti, C.J. in 1949, which was later approved by the Supreme Court the Division Bench opined that the winning of coal is no doubt production. At para. 12 of the judgment it said that after winning coal something that was not there comes up, and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why this difference should be made in case of the undertaking in question, so that it stands out from the general category. We were not shown any such particular difference excepting that the assessee was also said to carry on transport business. It suffices in this regard to mention that on the principle of Shaan Finance (supra) if the assessee owns the machinery for which investment allowance is claimed, and such machinery is used for production then the section applies; it does not matter if the use for production is made by the lessee or only in one industrial part of the assessee's business undertaking. Accordingly, the transport business of the assessee does not tilt the question one way or the other." The facts of the case laws cited by the AO are different with the facts of the case before us. Those case laws were based on the diamond processing, Granites Processing, Marble processing and also on the definition of the goods etc. The above judgment being of Hon'ble Jurisdictional High Court and direct on the issue is binding on us. Respectfully following the aforesaid decision of Hon'ble Calcutta High Court, we find no infirmity in the order of ld. CIT(A) in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement of trial run of a machinery or machine kept ready to use is to be deemed to have been used within the meaning of section 32. Therefore, the said extractor machine is held to have been put to use on 01.10.2009 by the appellant. In light of the above discussion, it is held that appellant is entitled to allowance of depreciation on the new extractor machine at full rates since the same was put to use for 180 days or more . This ground of appeal is, hence decided in favour of the appellant." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 27. Both parties relied on the order of Authorities Below as favourable to them. 28. We have heard rival contentions and perused the materials available on record. At the outset, we find that the machine was put to use with effect from 02.10.2009 as evident from the Delivery Inspection Report, the Service Report of Volvo India Pvt. Ltd. and also from the report of Heavy earth moving machine which are placed on pages 120 to 125 of the paper book. In the background of the above discussion and precedent we do not find any infirmity in the order of Ld. CIT(A) and according we uphold the same. This ground of Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring that the expenditure claimed by the appellant was excessive and unreasonable as compared to the preceding year. The appellant submitted during the appellate proceedings that the entire expenditure was incurred for celebrating the anniversary of the appellant company and that the entire expenditure was duly supported by proper bills and vouchers, therefore, no disallowance out of such expenses is warranted. I agree with the submission of the appellant in this regard. There is no denial that expenditure was incurred by the appellant. The AO has brought no evidence on record to show that any part of the expenditure under consideration was bogus or of capital nature or incurred for the purpose other than wholly and exclusively for the purposes of the business of the appellant. Under the circumstances I do not find any justification in the disallowance made by the AO especially, when the expenditure was supported by bills and vouchers. Therefore, the disallowance of Rs. 22,34,617/ made by the AO is deleted. This ground of appeal is, hence, allowed." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 32. Before us both the parties relied on the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim drew our attention on pages 367 of the paper book where the list of investment is placed. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 38. We have heard rival contentions of both the parties and perused the materials available on record. We find that various Tribunals have held that there should not be any disallowance u/s. 14A of the Act in relation to investment held by assessee as strategic investment. Therefore, we are inclined to reverse the order of Authorities Below in relation to investment in equity share which is strategic investment made by assessee. In this connection, we rely in the order of Hon'ble Lucknow Tribunal in the case of U.P. Electronics Corporation Ltd. Vs. DCIT (2015) 43 CCH 0068. The relevant extract of the order is reproduced below. "Income-Expenditure incurred in relation to income not includible in total income-AO made addition of Rs. 40,31,477/- u/s 14A r/w/r 8D having noticed that assessee had shown dividend income of Rs. 7,52,120/- which were exempted from tax-AO computed Corresponding expenditure as per rule 8D (iii) at Rs. 40,31,477/- and made addition of same-CIT(A) confirmed disallowance-Held, out of tota ..... X X X X Extracts X X X X X X X X Extracts X X X X
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