TMI Blog2022 (10) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... in affirming the disallowance @ 10% of the consumption on foods and beverages is affirmed. Nature of expenses - Disallowance of expenses incurred on repairs by treating the said expenditure as capital in nature - HELD THAT:- AO specifically held that the Assessee has incurred the expenses on purchase of Air Conditioners outdoor units which were stolen, pipes, cables and accessories, compressor, miscellaneous accessories, dryer, PVC Cable, wooden crate boat, kitchen equipments etc. which provides enduring benefits and not confined to the use of one year only and also not of the recurring nature . Commissioner though affirmed the addition on these items, however allowed the depreciation on the said expenditure before computing the income. We have given thoughtful consideration to the determination made by the Ld. Commissioner and the AO and do not find any infirmity in determination made by the Ld. Commissioner on the issue in hand. Even otherwise also we do not find any material/reason to controvert the findings of the ld. Commissioner. Hence, addition under challenge does not require any interference. Consequently ground nos. 5 6 are also dismissed. - ITA No. 1117/DEL/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer thus the lower authorities have erred in holding that stocks records were not maintained. 5. The lower authorities have erred in holding that sum of Rs.22,27,702/- incurred on repairs maintenance was Capital in nature. 6. The CIT (A) has erred in confirming addition of Rs.22,27,702/- as Capital Expenditure. 7. The above grounds of appeal are independent and without prejudice to one another. 8. Your appellant craves leave to add, amend, alter, or vary any of the aforesaid grounds of appeal before or at the time of hearing. 5. Ground nos. 1 to 2 are inter connected. The Assessing Officer by observing that the Assessee has not maintained, kept, or furnished any quantitative details/ stock register for the goods credited/ consumed. Further there is no evidence to verify the basis of valuation of the closing stock; the Assessee failed to furnish item-wise trading results and quantitative details or opening and closing stock, leaving apart the details of such items location-wise/ head-wise, therefore correct picture of the profit earned by the Assessee could not be determined. Even the tax auditors against item no. 35 of form no. 3CD i.e. quantitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise sales are also not available. The Ld. Commissioner ultimately by considering the fact in totality restricted the disallowance from 20% to 10% of the consumption on food and beverages and consequently allowed the relief to the extent of Rs. 2,03,54,514/- and affirmed the remaining amount. 8. The Assessee being aggrieved also challenged the addition in hand before us. Though in grounds of appeal the Assessee claimed that stock registers were produced before the AO and therefore the ld. CIT(A) should have deleted the entire disallowance of 20% of the purchases as against deleting only 10% of the purchases. We observe that from the orders of the authorities below it nowhere appears that the Assessee has duly produced the stock records as claimed by the Assessee. It is a fact that in Item no. 35 of form no. 3CD, the Assessee instead of providing quantitative details of goods traded and raw-material etc. simply stated that Item no. 35 of Form 3CD is not applicable. The Assessee failed to demonstrate before the authorities below as to how the Assessee was not required to provide quantitative details of goods traded and raw-material etc. in Item no. 35 of Form no. 3CD before the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot be considered as current repair. The Appellant itself submitted that Rs.9,59,510/- was incurred for replacement of 10 Air Conditioner outdoor units, which were stolen. By no stretch of imagination, the expenditure incurred on purchase of Air Conditioners can be called revenue in nature. Besides, the expenses were also incurred on pipes, cables and accessories. These items also provide enduring benefits, not confined to the use of one year only Rs. 1,47,249/- was incurred for compressor, miscellaneous accessories, dryer. PVC Cable, wooden crate boat etc. I find that these items were also not of the recurring nature. I he expenditure includes purchase for kitchen equipments, which cannot be said to be repairs, in view of the above facts and in the circumstances, the disallowance made by the Assessing Officer is hereby confirmed. However, the Assessing Officer shall allow depreciation on the said expenditure before computing the income. 11. The Assessee being aggrieved also challenged the said addition in the instant appeal. 12. We observe that the AO specifically held that the Assessee has incurred the expenses on purchase of Air Conditioners outdoor units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent footing vis a vis assessment proceedings. 5.6 From the facts of the case enumerated hereinabove, it is not the case of A.O that the appellant did not disclose the facts which had a material bearing on computation of income. In fact, at no stage Assessing Officer has rejected the books of account of the appellant. The nature of disallowance was purely based on an estimated basis which was limited to 10% (from 20%) by the Ld. CIT(A). The disallowance was predicated on the appellant, not being able to explain its purchases to the satisfaction of the A.O. During the course of penalty proceedings, the appellant has offered to explain the said purchases with reference to peculiar characteristics to its business. Further, as has been held in CIT vs. Rajbans Singh 276 ITR 351, CIT vs. Ajaib Singh Co. 253 ITR 630 (P H) and other related cases on identical facts, penalty is liable to be cancelled, where an amount has been enhanced on an estimated basis. In the said judgment the Hon ble ITAT had relied the decision in the case of CIT vs. Aero Traders P. Ltd., wherein it has been held that the penalty u/s 271(1 )(c) cannot be imposed when income is determined on an estimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred the instant appeal. 18. Heard the ld. DR and perused the material available on record. Though the ld. Commissioner in this case deleted the penalty under consideration on merits by accepting the explanation of the Assessee and by relying upon various judgments passed by the higher authorities/counts, including the Hon ble Apex Court in the case of CIT Vs. Reliance Petro products Pvt. Ltd. 322 ITR 158 (SC), however, it is a fact that the AO vide assessment order dated 29.12.2016 initiated the penalty proceedings u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income and for concealment of the income and ultimately levied the penalty of Rs. 73,26,800/- on account of affirmation of the additions of Rs. 2,03,54,514/- and Rs. 22,27,702/- on account of disallowance qua rejection of consumption claimed and capital expenses respectively for concealment of income/furnishing of inaccurate particulars which goes to show that AO while imposing the penalty was not clear under which limb the penalty was supposed to be levied. This peculiar fact entails the penalty order as void-ab-initio. Coming to the merits of the case, the Ld. Commissioner categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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