TMI Blog2022 (2) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... blished with necessary documents, bank statements, IT return, confirmation letters, bank entries, etc. the AO ought not to have invoked proviso to section 68 which is not applicable to loan transactions. Thus, the grounds raised by the Revenue is rejected Nature of expenditure - disallowance of capital expenditure incurred for purchase of machinery, which is capital in nature, the same cannot be treated as revenue expenditure as per the Accounting Standard. Hence, addition made by the AO is unsustainable in law and liable to be deleted. - 1195/Ahd/2018 - - - Dated:- 16-2-2022 - S/Shri Pramod M. Jagtap, Vice President And T.R. Senthil Kumar, Judicial Member For the Assessee : Shri M.K. Patel, AR For the Revenue : Shri R.R. Makwana, Sr.DR ORDER PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is preferred by the Revenue against the order dated 18.01.2018 of the LD.Commissioner of Income-tax (Appeals)- 3, Vadodara passed in appeal no.CIT(A)-Vadodara-3/10076/2017- 16 relating to the assessment year 2014-15. 2. The Grounds of Appeal raised by the Revenue read as under: 1. On the fact and in the circumstances of the case and law, the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as the Act ) were issued from time to time, and the assessment was completed on three counts viz; i) addition made on account of unpaid/delayed payment of employees provident fund of ₹ 6,32,725/-, ii) addition made on account of unexplained cash credit u/s.68 of ₹ 1,31,26,457/-, and iii) disallowance on account of technology transfer as bogus expenditure of ₹ 87,54,200/-. 4. Aggrieved against the assessment order, the assessee preferred an appeal before the Commisisoner of Income Tax (Appeals)-3, Vadodara. The Ld.CIT(A) by his detailed order deleted all the additions and allowed the appeal in favour of the assessee as follows: ..3.3.2 I have pursued the audit report and Statement of Income placed on record during the appeal for ready reference by the assessee. The contention of the appellant is found tenable and it is evident that the A.O. had made addition on the basis of totally incorrect data. The assessee had also in its computation of income added the amount of ₹ 2,520/- as late payment of P.F. Therefore the addition made by the AO of ₹ 6,32,725/- is incorrect. This ground of appeal is allowed in favour of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than 20% tax to incur bogus expenditure. Although circumstantial evidences may be weak, but factual evidences are more powerful to overlook. Therefore, I agree to the view of the appellant and direct the disallowance of ₹ 87,54,200/- to be deleted. 5. As against the impugned order, the Revenue is in appeal on two issues rising the grounds of appeal which is reproduced in earlier paragraph. 6. The ld.DR contended that the Ld.CIT(A) has erred in deleting addition of ₹ 1,31,26,457/- made on account of cash credit under section 68 of the Act. The assessee could obtain unsecured loan of ₹ 2,93,63,000/- during the assessment year from three persons who are happened to be the Directors of the company; but their individual Return of Income showed a meager income of less than ₹ 5.00 lakhs, and their credit-worthiness of having lent such a huge unsecured loan of ₹ 2.93 crores. Further, the ld.CIT(A) has erred in following judgment of jurisdictional High Court in the case of DCIT Vs. Rohini Builders, (2012) 256 ITR 360 (Guj) which case clearly distinguishable with newly inserted provision to section 68 of the Act, therefore pleaded, addition is to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the AO are liable to deleted as held by the Ld.CIT(A). 9. On the second issue, the Ld.AR took us through page no.44 of the paper book filed before us, wherein depreciation chart for fixed assets relating to the assessment year 2014-15 is annexed, wherein Delta Pressure and Dust blow system was purchased for a consideration of ₹ 1,50,52,793.80. Though the same was claimed as fixed assets, but no depreciation has been claimed against the said capital asset, since the asset was not put to use during the assessment year 2014-15. Asset being a capital expenditure incurred for purchase of machinery, which is forming part of the balance sheet, cannot be added to the income of the assessee by disallowing it. Hence, addition made on this count is also liable to be deleted. 10. We have given our thoughtful consideration on the facts and materials placed before us. For adjudication of the issue, we are guided by the following judgments on section 68 of the Act by Hon ble Supreme Court: A. In Daulat Ram Rawatmull, 87 ITR 360: The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one was furnished and examine the evidence and the explanation. If the explanation showed that the receipt was not of an income nature, the Department could not act unreasonably and reject that explanation to hold that it was income. If, however, the evidence was unconvincing, then such rejection could be made. The Department cannot by merely rejecting a good explanation unreasonably, convert good proof into no proof. C. In the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC), at page 805, the Supreme Court has clearly explained the point of approach to be followed both by the assessee and the Department, in the context of section 68 of the Act, in the following words (page 805) : It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee (Parimisetti Seetharamamma v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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