ITA NO.1348/AHD/2015 & CO NO.112/AHD/2015 ASSESSMENT YEAR: 2010-11 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO.1348/AHD/2015 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), AHMEDABAD. ..................APPELLANT VS. SATGURU POLYFAB PVT. LTD., ............................RESPONDENT SHED NO.299 TO 303, SECTOR-2, KANDLA SEZ GANDHIDHAM 370 201. [PAN : AACCS 6794 C] C.O. NO.112/AHD/2015 (IN ITA NO.1348/AHD/2015) ASSESSMENT YEAR: 2010-11 SATGURU POLYFAB PVT. LTD., ..................APPELLANT SHED NO.299 TO 303, SECTOR-2, KANDLA SEZ GANDHIDHAM 370 201. [PAN : AACCS 6794 C] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), AHMEDABAD. ............................RESPONDENT APPEARANCES BY S.R. SHAH FOR THE ASSESSEE SAURABH SINGH FOR THE REVENUE HEARING CONCLUDED ON: 15.03.2018 ORDER PRONOUNCED ON : 08.06.2018 O R D E R PER PRAMOD KUMAR, AM: 1. THIS SET OF APPEAL AND THE CROSS OBJECTION ARE D IRECTED AGAINST LEARNED CIT(A)S ORDER DATED 18 TH FEBRUARY 2015, IN THE MATTER OF ASSESSMENT UNDER S ECTION 154 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2010-11. ITA NO.1348/AHD/2015 & CO NO.112/AHD/2015 ASSESSMENT YEAR: 2010-11 PAGE 2 OF 5 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S : 1. WHETHER THE LD. CIT(A) IS RIGHT IN LAW AND ON F ACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON ASSETS OF RS.1,31,8 2,674/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICE R BE RESTORED. 3. BRIEFLY STATED, RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THIS CASE SCRUTINY ASSESSMENT UNDER SECTION 143(3) WAS FINALISED ON 07 .03.2013. SUBSEQUENTLY ON 12.09.2013, THE ASSESSING OFFICER ISSUED A SHOW CAU SE NOTICE TO THE ASSESSEE POINTING OUT CERTAIN APPARENT MISTAKES IN THE ASSESSMENT ORD ER. THIS SHOW CAUSE NOTICE, INTER ALIA, STATED AS FOLLOWS :- ON VERIFICATION OF RECORDS IT IS SEEN THAT THERE I S A MISTAKE APPARENT FROM RECORD. HENCE, A NOTICE U/S. 154 OF THE ACT DATED 12.09.2013 HAS BEEN SENT TO THE ASSESSEE, WHEREIN IT HAS BEEN MENTIONED THAT TH E ASSESSING OFFICER HAD MADE ADDITION OF INTEREST U/S. 36(1)(III) OF RS.22, 01,481/- ON THE BASIS OF FAILING ON THE PART OF THE ASSESSEE TO FURNISH DETAILS OF D ATE WISE DETAILS OF MACHINERY PURCHASED, INSTALLATION, PAYMENTS ETC. SO THE ASSE TS OF RS.18,34,56,779/-, ADDED DURING THE YEAR WERE NOT PUT TO USE TILL THE END OF F.Y. 2009-10. THUS IN ABSENCE OF SUCH DETAILS THE DEPRECIATION ON SUCH AS SETS WERE ALSO NOT ELIGIBLE FOR DEDUCTION. NOT DOING SO RESULTED INTO EXCESS ALLOW ANCE OF DEPRECIATION AS DETAILED BELOW :- ASSET EXCESS DEPRECIATION ALLOWED BUILDING (5% OF 239556000) 1197800 FURNITURE & FITTINGS (5% OF 114293) 5715 MACHINERY & PLANT (7.5% OF 159274609) 11945596 MACHINERY & PLANT (30% OF 111877) 33563 TOTAL 13182674 THIS RESULTED INTO POTENTIAL TAX EFFECT OF RS.44,80 ,790/- AS DETAILED BELOW. TAX ON RS.13182674 @ 30% 3954802 SC @ 10% 395480 EC & HEC @ 30% 130508 TOTAL POTENTIAL TAX EFFECT 4480790 ITA NO.1348/AHD/2015 & CO NO.112/AHD/2015 ASSESSMENT YEAR: 2010-11 PAGE 3 OF 5 THEREFORE, IN THIS CONNECTION, IF YOU WISH TO BE HE ARD, YOU MAY APPEAR EITHER IN PERSON THROUGH AN AUTHORISED REPRESENTATIVE IN MY O FFICE AT ABOVE MENTIONED ADDRESS, OR MAY FURNISH A WRITTEN REPLY TO THIS NOT ICE ON OR BEFORE 20.09.2013 4. ON THE SCHEDULED DATE OF HEARING, THERE WAS NO R EPLY OR APPEARANCE BY THE ASSESSEE. THE ASSESSING OFFICER THUS PROCEEDED TO MAKE THE PROPOSED DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.1,31,82,674/-. AGG RIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO DELETED THE AFORESAID DISALLOWANCE BY OBSERVING AS FOLLOWS :- 2.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ID. A.R. OF THE APPELLANT AND THE FACTS AVAILABLE ON RECORD THAT TH E COMPANY COMMENCED COMMERCIAL PRODUCTION OF THE NEW PLANT LOCATED AT K ANDLA SEZ, GANDHIDHAM W.E.F. 01.10.2009. THE APPELLANT CAPITAL IZED PRE-OPERATIVE EXPENSES OF REVENUE NATURE INCURRED UPTO 30.09.2009 INCLUDING INTEREST PAYMENTS TO STATE BANK OF PATIALA AND STATE BANK OF TRAVANCORE TOWARDS INTEREST ON TERM LOANS AND CASH CREDIT FACILITY AND DEBITED THE SAME TO THE RESPECTIVE FIXED ASSETS AS PER THE AUDITED ACCOUNTS . THE APPELLANT ALSO SUBMITTED COPY OF LETTER DTD. 10.10.2009 SUBMITTED TO STATE BANK OF PATIALA, INDORE STATING THAT COMMERCIAL PRODUCTION OF THEIR KANDLA SEZ IS STARTED FROM 1 ST OCTOBER, 2009. THE APPELLANT ALSO SUBMITTED THAT C OPY OF SALES REGISTER SHOWING TURNOVER AS PER BALANCE SHEET AS A T 31.03.2010 AT RS.2,71,85,943/- ALONG WITH FINISHED GOODS DETAILS FROM 01.10.2009 TO 31.03.2010 SHOWING FINISHED GOODS CLOSING STOCK AT 977.125 M.T., RAW MATERIAL PURCHASE CLOSING BALANCE AT 1489,715 M.T. VALUING RS.3,81,21,833/- AND FINISHED STOCK CLOSING BALANCE AT 977.125 M.T. VALUING RS.3,36,01,661/-. IT WAS ALSO INFORMED BY THE APPELLANT THAT IT HAD S UBMITTED VIDE LETTER DTD. 17.01.2013 TO A.O. THE FOLLOWING DOCUMENTS AT THE T IME OF SCRUTINY PROCEEDINGS: - (I) DETAILS OF POWER & FUEL EXPENSES OF RS.1,14,63 ,420/- (II) ENTIRE SALES REGISTER SHOWING THE SALES TURNO VER OF RS.2,71,85,943/- (III) LEDGER ACCOUNTS OF ALL FIXED ASSETS (IV) PARTY-WISE DETAILS OF SALES & PURCHASES IN EXC ESS OF RS.10 LAKHS (V) PRODUCT-WISE QUANTITATIVE DETAILS OF FINI SHED GOODS AND RAW MATERIALS FROM OCTOBER, 2009 TO MARCH, 2010. (VI) BANK STATEMENTS OF STATE BANK OF PATIALA AND STATE BANK OF TRAVANCORE. THE APPELLANT ALSO STATED TO BE SUBMITTED TO A.O. T HE FOLLOWING DOCUMENTS VIDE LETTER DTD. 04.03.2013. I) CERTIFIED CLOSING STOCK OF FINISHED GOODS AS SUB MITTED TO THE BANK II) WORKING OF RAW MATERIAL CONSUMPTION AND STORES & SPARES CONSUMPTION ITA NO.1348/AHD/2015 & CO NO.112/AHD/2015 ASSESSMENT YEAR: 2010-11 PAGE 4 OF 5 III) SAMPLE BILLS OF RAW MATERIAL PURCHASED AND SA LES INVOICE FOR FINISHED GOODS. IV) LEDGER ACCOUNTS OF MAIN RAW MATERIAL SUPP LIERS AND DEBTORS V) BILLS FOR IMPORTED PLANT AND MACHINERY VI) PURCHASE REGISTER CONTAINING 102 PAGES IN CD VII) RAW MATERIAL CONSUMPTION OF RS.3,35,47,596/ - AS PER ANNEXURE-9 OF TAX AUDIT REPORT VIII) CLOSING STOCK OF RAW MATERIALS OF RS.3,81,21, 832//- IX) CLOSING STOCK OF FINISHED GOODS OF RS.3,36,01 ,661/- X) SALES OF RS.2,71,85,9437-. THE APPELLANT ALSO CONTESTED THAT IF THE FIXED ASSE TS WERE NOT PUT TO USE, THEN THE ENTIRE AUDITED PROFIT & LOSS ACCOUNT COULD NOT HAVE BEEN PREPARED. THE A.O ALSO NOTED REJECTED THE BOOKS O F ACCOUNT OF THE APPELLANT U/S.145 OF I.T. ACT WHICH MEAN HE HAS ACC EPTED THE OPERATIONAL AND FINANCIAL RESULTS OF THE APPELLANT CONSISTING O F RAW MATERIAL AND STORES CONSUMPTION, PRODUCTION, SALES, POWER AND FUEL EXPE NSES, SALARY AND WAGES TO STAFF & WORKERS ETC. THE A.O ALSO CONSIDE RED THE SUBMISSION OF THE APPELLANT DTD. 4.3.2013 REGARDING DETAILS OF SO URCES OF FINANCE FOR ACQUISITION OF FIXED ASSETS AND THE TERMS LOANS OBT AINED BY THE APPELLANT WHICH WERE UTILIZED FOR THE PURPOSE OF ACQUISITION OF ASSETS. IN VIEW OF ABOVE MENTIONED FACTUAL POSITION, I AM INCLINED TO AGREE WITH THE SUBMISSION OF THE ID. A.R. OF THE APPELLANT. THE D ISALLOWANCE OF CLAIM OF CLAIM OF DEPRECIATION OF RS.1,31,82,674/- MADE BY T HE A.O. IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. AS HELD BY HONBLE SUPREME CURT, IN THE CASE OF ITO VS. VOLKART BROTHERS [(1971) 82 ITR 50 (SC)], A MISTAKE APPARENT ON RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE, AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LON G DRAWN PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS. IT WAS FURTHER OBSERVED THAT A DECISION ON DEBATABLE POINT OF VIEW IS NOT A MISTAK E APPARENT ON RECORD. IN THE LIGHT OF THIS LEGAL POSITION, LET US TAKE A LOOK AT THE FACT S OF THIS CASE. THE DEPRECIATION HAS BEEN DISALLOWED ON THE BASIS OF INFERENCES DRAWN FROM NO N-FURNISHING OF PARTICULARS BY THE ASSESSEE. NOT ONLY THESE INFERENCES CONSTITUTE, AT BEST, LONG DRAWN PROCESS OF REASONING AND, FOR THIS REASON ALONE, TAKE THE MAT TER OUT OF THE AMBIT OF LIMITED SCOPE OF SECTION 154, SUCH INFERENCES ARE DRAWN FROM THE LAP SES OF THE ASSESSEE RATHER THAT ANY COGENT MATERIAL. THE DETAILED EVIDENCES SUBMITTED BY THE ASSESSEE, IN PROCEEDINGS ITA NO.1348/AHD/2015 & CO NO.112/AHD/2015 ASSESSMENT YEAR: 2010-11 PAGE 5 OF 5 BEFORE THE LEARNED CIT(A), CLEARLY DEMONSTRATE THAT EVEN ON MERIT, SUCH INFERENCES ARE INCORRECT. THE ASSESSEE HAS FURNISHED REASONABLE E VIDENCE ABOUT COMMENCEMENT OF COMMERCIAL PRODUCTION, AND EVEN DETAILS OF PRODUCTI ON, AND, AS SUCH, IT CANNOT BE ASSUMED THAT THE MACHINERIES WERE NOT PUT TO USE. IN THE LIGHT OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE APPROV E WELL REASONED CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE I N THE MATTER. 8. IN THE RESULT, THE APPEAL IS DISMISSED. 9. AS REGARDS CROSS OBJECTION FILED BY THE ASSESSEE , IT MERELY SUPPORTS THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) THOU GH ON A DIFFERENT GROUND. HOWEVER, AS THE PLEA OF THE ASSESSEE HAS BEEN UPHELD ON MERI TS, WE SEE NO NEED TO DEAL WITH THIS CROSS OBJECTION WHICH IS ACADEMIC AS ON AT THI S STAGE. 10. IN THE RESULT, THE CROSS OBJECTION IS DISMISSED AS INFRUCTUOUS. 11. TO SUM UP, THE APPEAL AND THE CROSS OBJECTION A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF JUNE, 2018. SD/- SD/- RAJPAL YADAV PRAM OD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 8 TH JUNE, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD