TMI Blog2008 (8) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the assessee was entitled to claim relief under Section 35(2(a)) of the Act in respect of a sum of ₹ 6,47,18,694/- on purchase of machinery for research and development from Magnet Engineering and Essem Equitech without there being any confirmation from these parties for supply of the said machinery nor the assessee furnishing particulars of the machinery purchased and proceeding merely on the basis of cheque payments and bank entries without actual proof of such purchase/s and consequently, recorded a perverse finding ? 2. The brief facts of the case are that the assessee is being assessed in the status of a public limited Company and it has been carrying on the business in manufacture and sale of bulk drugs. If is the case of the assessee that, in respect of the assessment year 2001-2002 it has filed a return of income or 10% December 2002 claiming a sum of ₹ 6,47,18,690/- to be allowed as 100% exemption towards expenditure incurred for the purpose of purchase of machineries to its R D Department during the said assessment year. For which it is entitled under Section 35(2)(ia) of the Income Tax Act. The Assessing Officer took up the matter for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in disallowing the claim made by the assessee. 3. The Tribunal has affirmed the findings of the First Appellate Authority by recording its reasons accepting the claim made by the assessee by extracting the relevant portion of the order passed by the First Appellate Authority in the impugned order, which reads thus: On the facts of the case, one is compelled to agree with the observation of the appellant that except making certain presumptions, the learned Assessing Officer could not place any adverse finding gathered by him to disprove the genuineness of the claims of appellant company in respect of K D expenses. In view of the incomplete enquiries with the suppliers and incoherent results obtained thereof and in face of non-consideration of details of payment to suppliers furnished on record by the appellant company on 12 3.2004 and 30.3.2004 in respect of date of Payment amounts thereof, cheques/DD No. bank details etc., one is forced to agree with the observations of appellant made in grounds of appeal that the ACIT has adopted a callous attitude while making a huge disallowance of this magnitude without proving his case to the hilt with due observance of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. Further, they have not noticed the material reqiured to be produced are not produced and the documents which were made available before the Assessing Officer by the Assessee to show that those materials were insufficient to justify the claim for grant of 100% disallowance in the assessment order for the relevant assessment year. Further, the appellate authorities have committed serious error in law in not noticing the relevant fact namely that the communication made by the Assessing Officer to the suppliers which are situated in Andhra Pradesh have either responded to the letters written by him or given the particulars to him as sought by him with regard to the date on which the particulars of machineries, date on which the sale was made and the date on which the machineries were transported to the Assesses Company by them, these relevant material facts have been. taken into consideration by the Assessing Officer to record a finding of fact in the assessment order in: disallowing the claim made by the assessee after affording adequate opportunity to it. 5. Therefore, the learned Counsel for the Revenue Sri. Aravind submits that the substantial question of law framed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary to. The material on record by assigning valid and cogent reasons, it is urged that the Second Appellate Tribunal has also rightly concurred with the findings of facts recorded by the First Appellate Authority holding that the findings of facts recorded by the Assessing Officer in disallowing the claim of the Assessee is not only erroneous but, also suffers from error in law. Therefore, the learned counsel for the assessee submits that no substantial question of law involved in this appeal would arise. in this Appeal to interfere with the impugned judgment by this Court by answering the same in favour of the Revenue. 6. Further learned Counsel for the Assessee submits that the confirmation. of supply of machineries by both the companies situated in Secunderabad, Andhra Pradesh State having confirmed by issuing separate letters supplying the machineries to R D Department of the Assessee Company. The above important aspects have not been taken into consideration by the Assessing Officer. Therefore, the same have been re-appreciated by both the Appellate Authorities and recorded valid and cogent reasons, the same are either shown as erroneous or error in law by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g taxable goods in the State shall; (a) get itself or himself registered in, such manner as may be prescribed; and (b) submit to the authority. prescribed in this behalf, return as may be prescribed of all taxable goods cleared, forwarded, transported or shipped by it or him. The aforesaid statutory provisions are incorporated in the Sales Tax statute to safeguard the sales tax to be collected by the Commercial Tax Department of the State Government in respect of the goods required to be transported from interstate sales. Undisputedly, the above detailed documents were required to be maintained by the assessee are not produced before the Assessing Officer is one more strong circumstance to show that there was no supply of the machineries to the assesses by its suppliers and it has not purchased nor transported the machineries and no sales tax paid to the Department for having transported the goods from Andhra Pradesh to Karnataka State for which the Karnataka State is entitled to recover the central sales tax under the provisions of the Central Sales Tax Act. Therefore, the learned Counsel for the Revenue submits that the findings recorded by the Assessing Officer in his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Auditor, who has represented the Assesses before him in the proceedings and considered the details regarding the mode of payment, cheque number, name of bank, branch and date of payment by serving a letter dated 21.01.2004 to furnish the particulars in whose name the cheque was issued in respect of the machineries alleged to have been purchased from the suppliers situated in Secundarabad. Again, by another letter dated 25.02.2004, he has specifically directed the asssessee to furnish the details regarding the mode of payment made to the suppliers in respect of machineries, on 04.03.2004, personal appearance was made by Sri. Srinath and Sri. P.V. Rao on behalf of the assesses. No details were furnished by them as directed by the Assessing Officer. Even on 12.03.2004 they. appeared and did not produce evidence regarding machineries purchased but he did not furnish the details regarding made of payment, date of payment and bank details and further. Therefore, the Assessing Officer has addressed a letter to the two companies from whom the machineries alleged to have been purchased by the assessee to confirm the sales made to the assessee with a sales tax number furnished, date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the nature or date of payment, vehicle numbers that supplied the machineries etc. expect saying that the matter relating to R D is most confidential and cannot be divulged to anybody. The Assessing officer has Further observed that only particulars of the person in charge of R D who made a request for purchase of necessary equipment and the details of the suppliers for supplying the machineries were needed and he was not interested in the formula or any other thing. 13. The Assessing Officer after appreciation of facts material evience on record produced by the assessee, he came to the right conclusion and held that the purchase of R D machineries they where required to be transported from Secundarabad. which is in Andhra Pradesh to the Karnataka State at Biden. The provisions under section 28A, 28AA and 28B for transport of machineries are applicable for the check post entries payment of sales tax entry of the inter-state sales tax paid by the Assessee and copy delivered to the check post. The above statutory documents certainly were required to be obtained by the Assessee. In addition to that, the particulars regarding documents in relation to the transit of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a single company, it must be a big enough to supply the equipment s to other companies also. It is surprising to note that. a company who is carrying on such a big volume of business is not traceable. I have also asked the assessee company itself to file the confirmation, if any, obtained from the companies who have sold the machineries to them. This has also not been done. The assessee was told about the returning of letters of two concerns from whom very purchased machineries and asked to furnish the correct address and also prover confirmations. The letters filed by the assessee on 12.93.04 though bears letter pads of the two concerns, it is interesting to note that even no telephone number or nature of the proprietorship who signed the letter was available. In this background returns of letters by postal authorities give rise to a reasonable finding that the transactions are not normal and the assessee wants to hide the real facts . 15. The finding of fact recorded by the Assessing Officer in his order is on proper appreciation of legal evidence on record by assigning valid and cogent reasons holding that the purchase of machineries by the assessee from the vender situat ..... 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