TMI Blog2016 (11) TMI 1705X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided in GS. ATWAL AND CO. (GUA). [ 2001 (2) TMI 32 - CALCUTTA HIGH COURT] the point that the assessee is still not an industrial undertaking even though it might be engaged in production of coal is, in our opinion, also to be decided against the Revenue. Under the definition of an industrial undertaking given under s. 33B, Explanation mining activity would bring in the assessee within the definition of an industrial undertaking. But we need not import the definition of another section to the present one, although ordinarily the definition given in one section in an Act can be used for the purposes of another section unless the context indicates otherwise. So far as the assessee is concerned, an undertaking it certainly is. We have found no facts from which we can opine that the assessee is not an industrial undertaking. Ordinarily speaking if a manufacturing activity or an article producing activity is carried on, an undertaking carrying on such activity is to be classed as an industrial one. It might be small scale or large scale, that does not matter much. Even if an undertaking is manufacturing or producing articles, but is still not to be classed as an industrial one f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee are directed against the different orders of Commissioner of Income Tax (Appeals)-Central-III, Kolkata (CIT(A) for short) dated 26.12.2012 27.12.2012. Assessments were framed by JCIT(OSD)-CC-XX, Kolkata u/s 143(3)/153C of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 29.12.2011 for assessment years 2007-08 to 2010-11 respectively. Shri Niraj Kumr, Ld. Departmental Representative appeared on behalf of Revenue and Shri A.K.Tulsyan and Shri Amit Kumar, Ld. Authorized Representatives appeared on behalf 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. Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NKG with regard to its normal course of business with assessee. The figures made by NKG were very much reflecting in the books of assessee which was produced before AO for verification. Therefore the papers seized at the time of search cannot be basis for the initiation of proceedings under section 153C of the Act. 2) Assessee further submitted that AO failed to record satisfaction before the initiation of proceedings u/s 153C of the Act. Assessee without prejudice to the above further submitted that the completed assessment cannot be reopened u/s. 153C of the Act 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as observed from the seized documents were duly disclosed in the normal course of assessee s business. Ld. AR in support of assessee s claim has drawn our attention on pages 111 to 119 of the paper book where the ledger copy of NKG and the bills raised by assessee to NKG are placed. He requested the Bench to quash the order of ld. CIT(A). On the other hand, Ld. DR submitted that the name of assessee is very much appearing on the seized documents. He requested the Bench to confirm the order of Ld. CIT(A). 6. We have heard the rival contentions of both the side and perused 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 provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and I respect of such assessment year- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . . . 'It is evident from the above satisfaction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961, and was assessable as such on the income from the property. Again, the Hon'ble Delhi High Court in the case of Pepsico India Holdings P. Ltd. vs. ACIT (370 ITR 295) following its earlier decision in the case of Pepsi Foods P. Ltd (supra) held that unless it is established that the documents in question do not belong to the searched person, the question of invoking the provisions of sec.153C of the Act does not arise. It was also held that unless searched person disclaims the documents as belonging to him, provisions of sec.153C do not get attracted. It is also further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy belongs to‟ the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to belong to‟ the petitioner. In view of the foregoing discussion, we do not find that the 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO reads as under: M/s Dhansar Engineering Co. Pvt. Ltd. PAN : AABCD 5271E A.Y 2004-05 to 09-10 06.07.2011 A Search was conducted u/s. 132 of the Income Tax Act 1961 on 13.01.2010 in the business Premises of M/s Naresh Kumar Group of 9B, Wood Street, 5th Floor, Kolkata. In course of the said Search, certain incriminating documents including bills, vouchers relating to M/s Dhansar Engg. Co. (P) Limited were found and seized. Later, at the time of verification of such documents, it was ascertained that following documents, marked as AVR-2; page 39 AVR-5; Pages 8-13 belong to M/s Dhansar Engg. Co. Pvt. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Revenue s appeal in ITA No.921/Kol/2013. At the outset, assessee s CO No.05/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. 15. In the result, assessee s CO is allowed and Revenue s appeal is dismissed. Coming to assessee s CO No. 04/Kol/2016 for A.Y.07-08 and Revenue s appeal in ITA No.920/Kol/2013 16. At the outset, we find that we have already held that the assessments 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the assessee is entitled for additional depreciation in pursuance to the provisions of section 32(1)(iia) of the Act. The assessee also submitted that heavy earth moving machineries such as excavators, dozers, loaders, graders, drills etc. were used for the extraction of coal. Thus mining of coal is a production activity and therefore the assessee is entitled for additional depreciation under section 32(1)(iia) of the Act. However, AO disregarded the contention of the assessee that it involves any production activity and therefore assessee is not entitled for any additional depreciation. The reasons cited by Assessing Officer are as follows:- 1) Coal is naturally available which is extracted 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 dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing. Therefore, the premise of allowance of additional depreciation us/s 32(1)(iia) and of investment allowance u/s. 32A(2)(b)(iii) is similar. Both the sections provide for allowance where the plant or machinery is installed, inter-alia, for the purpose of business of manufacture or production of any article or thing. In Khalsa Brothers v. CIT (supra) the assessee was engaged in removing overburdens and raising of coal in a colliery under the Eastern Coalfields Ltd. under contract with that party. The assessee in that case, claimed that it was an industrial undertaking involved in production 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of coal and its transportation. The assessee carried no processing on the coal amounting to manufacture / production. The assessee is merely acting as a sub-contractor. He further submitted that the machineries were utilized for the activities other than mining of coal. Ld. DR relied on the order of AO and prayed before the Bench to confirm the same. On the other hand, Ld. AR before us filed paper book which is running from pages 1 to 395 and copy of Agreement which is kept with the record. He submitted that machines which were used exclusively for the purpose of extraction the coal from mines were only made subject to additional depreciation u/s. 32(1)(iia) of the Act. He in support of assessee s claim has 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although ordinarily the definition given in one section in an Act can be used for the purposes of another section unless the context indicates otherwise. 8. So far as the assessee is concerned, an undertaking it certainly is. We have found no facts from which we can opine that the assessee is not an industrial undertaking. Ordinarily speaking if a manufacturing activity or an article producing activity is carried on, an undertaking carrying on such activity is to be classed as an industrial one. It might be small scale or large scale, that does not matter much. Even if an undertaking is manufacturing or producing articles, but is still not to be classed as an industrial one for this, clear indications have to be given 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order the AO has noted that as the machine was put to use on and from 02.10.2009 but he did not accept that fact contending that no third party confirmation in that regard had been produced by the appellant. I agree with the appellant s contention that the Delivery Inspection Report and the Service Report were third party evidence which adequately proved that the machine was commissioned on 01.10.2009. As has been held in ACIT v. Ashima Syntex Ltd. (supra), Capital Bus Service (P) Ltd. v. CIT (supra) 123 ITR 404 (Delhi), Forest Industries Travencore Ltd. v. CIT (supra) 51 ITR 329 (Ker), CIT v. Shahbad Co-operative Sugar Mill Ltd. (supra) 56 DTR 414 (P H) and CIT v. Premier Indust5ries (India) Ltd. (supra) 170 Taxman 407 (MP) even 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elebration expense on ad hoc basis. The assessee celebrated its Golden Jubilee in Maysore where all the stockholder of the assessee-company, such as principals, founders, suppliers, banners, employees were also invited. Ld. AR further submitted that the Golden Jubilee festival was celebrated on the completion of its flagship Ravi Udyog it came into existence in 1972 to 1973 and the flagship company was the strategic partners of the assessee-company. The expenses were incurred wholly and exclusively for the purpose of business of assessee. Accordingly, Ld. CIT(A) deleted the addition made by AO by observing as under:- From the above it is observed that the disallowance of 50% of the expenses debited under the head Festival Celebration Expenses only on estimate basis considering 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 warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown the investment of ₹104,0,504/- the income from the investment will not forming part of taxable income of assessee. The AO observed that assessee has incurred interest expense of ₹18,80,53,784/- but no disallowance on account of interest was made in the books of assessee and therefore AO invoking the provision of Sec.14A r.w.s. 8D of the IT Rules, 1962 and disallowed the interest expense for ₹5,97,332/- and added to the total income of assessee. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the order of AO. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 37. Before us Ld. AR submitted that investment was made in the group companies of assessee and therefore no such disallowance is warranted. Ld. AR in support of assessee s claim 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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