Dubond Products India Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-1(1)(4), Ahmedabad

ITA 1004/AHD/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6032 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Bogus purchase; Depreciation; Principle of natural justice; Additional depreciation; Additional evidence; Onus to prove
• Section: 133(6); 73; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Shri Mahavir Prasad, Judicial Member Dubond Products India Pvt. Ltd. C-3-1002, Anushruti Tower, Nr. Jain Derasar, Opp. New York tower, Thaltej, Ahmedabad-380054 PAN No: AADCD1023G (Appellant) Vs ITO, Ward-1(1)(4), Ahmedabad (Respondent) Appellant by : Shri Tej Shah, A.R. Respondent by : Shri V.K. Singh, Sr. D.R. Date of hearing : 21-03-2022 Date of pronouncement : 25-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-1, Ahmedabad, (in short referred to as CIT(A)), dated 28-02-2017, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2012-13. 2. Brief facts relating to the case as transpires from the orders of the authorities below is that the assessee company is engaged in the business of manufacturing of construction chemical and wall putty. During the course of assessment proceedings ITA No. 1004/Ahd/2017 Assessment Year 2012-13 I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 2 for the impugned year, the Assessing Officer (A.O) disallowed various expenses on account of the enquires made by him from the parties to the transactions drawing a blank. The said expenses are as under: (i)Bogus purchases (ii) Depreciation on plant and machinery purchased during the year and (iii) freight outward expenses. 3. The same were upheld by the Ld. CIT(A) for the same reason. Further disallowance of preoperative expenses to the extent of Rs. 2,09,634/- was also made by the A.O. and upheld by the ld. CIT(A) . 3.1 Since the disallowance of expenses on account of bogus purchases, depreciation and freight outward was made for the identical reason that enquiries by the A.O. revealed that the parties did not exist, we shall first be dealing with the grounds raised by the assessee with respect to the same in ground no. 1 to 3 as under: 1. That the Ld. CIT (A) erred in law and on the facts of the case in confirming the action of the AO in making an addition of Rs. 13,41,501/- as unaccounted purchases made from Gautam Stone Grinding Mills. 2. That the Ld. CIT (A) erred in law and on the facts of the case in confirming the action of the AO in disallowing Rs. 3,23,333/- being depreciation @15% and Rs. 4,31,111/- being additional depreciation @20% totaling to RS. 7,54,444/- 3. That the Ld. CIT (A) erred in law and on the facts of the case in confirming the action of the AO in disallowing freight outward expenses of Rs. 5,76,999/-. 4. The orders reveal that the parties to the above transactions found bogus were as under: Purchases M/s. Gautam Stone Grinding Mills Rs. 13,41,501/- Depreciation M/s. Pneucon Process Technologies Rs. 21,55,554/- Freight outward M/s Jai Baba Roadways Rs. 5,76,999 I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 3 And the reason for holding these transactions ingenuine/bogus was that enquiries conducted by the AO by issuing notice u/s. 133(6) of the Act to the said parties remained unresponded. 5. Before the Ld. CIT(A) the assessee submitted additional evidences which were admitted by the Ld. CIT(A) but he upheld the above disallowances finding the impugned expenses to be not genuine. 6. The contention of the Ld. Counsel before us with respect to each of the above expenses was that he had submitted all possible evidences to prove their genuineness and merely because the parties were not found at the address on the notices u/s. 133(6) of the Act,the expenses could not be held to be ingenuine. Reliance was placed on the decision of the Hon’ble Bombay High Court in the case of Commissioner of Income Tax vs Nikunj Eximp Enterprises (P) Ltd. (2013) 216 Taxman 171 (Bombay). We shall take up each expense and deal with it separately. 7. The purchases from M/s Gautam Stone Grinding Mill amounting to Rs. 13,41,501/- was held to be bogus and the same confirmed by the Ld. CIT(A) at para 2.9 of the order is as under: 2.9. On careful consideration of entire facts, it is observed that purchases made from Coating Specialties Ltd. and Gautam Stone Grinding Mills, the appellant has furnished the ledger account of the assessee from its books of account and copy of return of income for the A.Y. 2012-13. The appellant has also furnished the copy of purchase bills received from coatings specialties (India) Ltd, but copy of bank Statements of Gautam Stone Grinding Mills has not been furnished by the assessee. The appellant has also not submitted the copy of bank Statements of Gautam Stone Grinding Mills before me during the course of appellate proceedings. The A.O. is also satisfied with the purchases made from Coating Specialties Ltd as indicated in the Remand Report (supra). Under the facts and circumstances of the case, I am partly inclined to accept the contention of the AR. Therefore, in view of the above, purchases made from Coating Specialties Ltd. of I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 4 Rs.25,04,225/- is considered to be genuine and is deleted. The furnished any reply. Further, the assessee also failed to furnish the copies of bills for the purchase of machinery on various dates as shown in ledger account. 8. Before us Ld. Counsel for the assessee drew our attention to the various documents filed by him before the lower authorities. (i) Confirmation leter of M/s. Gautam Stone Grinding Mills placed at paper book page no. 71. (ii) Copies of Bills issued by M/s Gautam Stone Grinding Mills filed at paper book page no. 1 to 16 of Paper Book-2 (iii) Bank statement of the assessee in Syndicate Bank and HDFC Bank depicting payment to M/s Gautam Stone Grinding Mills in the narration, at paper book page no. 17 to 24 of Paper Book-2 (iv) Acknowledgement of Return of Income of Gautam B Afna, Proprietor of M/s Gautam Stone Grinding Mills for impugned assessment year i.e. A.Y. 2012-13 filed at paper book page no. 26. 9. .Referring to the above, the contention of the Ld.Counsel for the assessee was that the findings of the Ld. CIT(A) that the purchases were not proved to be genuine since the assessee had not furnished bank statement of M/s Gautam Stone Grinding Mill before him and also for the reason that notices served by the AO u/s. 133(6) were returned back ,is of no relevance, Since the fact of payment to Gautam Stone through banking channels stood established by the bank statement of the assessee itself wherein the payments made to Gautam Stone by cheques find clear mention. He also contended that in view of the evidences filed by him by way of bills of the said party on which CST also stood paid and the copy of bank statement also of the assessee evidencing payment to the said party, the expenses could at the most be said to be unproved but not ingenuine for want of any response from the said party to the notices issued by the A.O. I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 5 10. The ld. D.R. on the other hand vehemently supported the order of the ld. CIT(A). 11. We have considered the contention of both the parties and we find that the reasons for treating the purchases made from Gautam Stone as bogus is the mere fact that the bank statement of Gautam Stone was not furnished by the assessee and notices served u/s. 133(6) of the Act were returned back by the postal authorities. It is not denied that the assessee had filed copies of all bills raised by Gautam Stone to the lower authorities. Copy of the bank statement evidencing payment made to Gautam Stone was also filed to the revenue authorities. We have also gone through the bank statement wherein the narration mentioning payment made to Gautam Stone by cheque has been highlighted by the ld. Counsel for the assesse. Nothing adverse has been pointed out by the Revenue with respect to the aforesaid facts. The assessee having clearly established the factum of payment through banking channels and the revenue not pointing out anything to the contrary, we fail to understand the relevance and the requirement of bank statement of Gautam Stone to establish the genuineness of the transaction. Further the assessee having furnished bills of Gautam Stone, the bank statement showing payment to him and also the acknowledgement of return of income filed by the proprietor of Gautam Stone, his onus for establishing the genuineness of the transaction we hold stood discharged. The fact that the said party was not found at the stated address alone is not sufficient to hold that the transaction was bogus. The return of income of the proprietor of Gautam Stone being part of the Revenue record only, the same should have been looked into and considered by the revenue, before arriving at any conclusion or finding regarding the genuineness of the transaction. In any case, since the transaction related to earlier period while the verification of the same was carried out subsequently during assessment/appellate proceedings, there could be any reason for the party not being found at the said premises. It is not the case of the revenue that even in the year in which the enquiry was conducted, the assessee was carrying on I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 6 transactions with the said party, which could have raised doubts regarding the said transaction. Further considering the fact that the assessee made purchases of raw materials from two parties only ,as noted by the AO also in his order at para 4.1 , having purchased raw material worth Rs.25.04 lakhs from Coating specialties and 13.41 lakhs from Gautam Stone ,treating the entire purchases from Gautam Stone bogus would tantamount to disallowing 1/3 of the total purchases approximately of raw material, and without doubting the factum and quantum of sales made by the assessee ,the same would result in the consumption ratio of raw material and the gross profit of the assessee going for a toss. Without dealing with this aspect of the matter as also without conducting further inquiries from its own records and ignoring the evidences filed by the assessee showing purchase of raw material from the said party and payment also being made to it by banking channels, the disallowance of purchases merely for the reason that notice u/s. 133(6) of the Act remained unserved, we hold is not justified. The reliance placed by the Ld.Counsel for the assessee on the decision of the Hon’ble Bombay High Court in the case of Nikunj Eximp (supra) is apt, wherein it was held that merely on account of non appearance of parties, purchase transactions conducted with them could not be said to be bogus when otherwise the assessee had filed all relevant evidences in support and the book results of the assessee were accepted including sales made by it. The relevant findings of the Hon’ble High Court at para 7 of the order is as under: 7. We have considered the submission on behalf of the revenue. However, from the order of the Tribunal dated 30.04.2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 7 Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs.1.33 crores was not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal.” 12. The disallowance of purchase made from M/s Gautam Stone Grinding Mill therefore of Rs. 13,41, 501/- is directed to be deleted. Ground no. 1 is allowed. 13. As for the disallowance of depreciation and additional depreciation amounting to Rs. 3,23,333/- and 4,31,111/- respectively on account of purchases made of plant and machinery from one M/s. Pneucon Process Technologies amounting in all to Rs. 21,55,554/-,we have noted that the Ld. CIT(A) upheld the disallowance holding as under: 3.5. I have gone through the facts and the submission of the appellant carefully. During the course of assessment proceedings the A.O. has asked appellant to furnish the copies of bills for fixed assets purchased during the year. The assesses has furnished ledger account of Pneucon Process Technologies from whom it has shown purchases of machinery during the year amounting to Rs. 27,55,5547-. On verification of copies of bills furnished by the assesses, bills for purchases of machinery made on various dates, from Pneucon Process Technologies were not found by the A.O. Further, the assessee also failed to furnish the copies of bills for the purchase of machinery on various dates as shown in ledger account. Therefore, the claim of depreciation @15% amounting to Rs.3,23,333/- and additional depreciation @20% amounting to Rs.4,31,111/- totaling to Rs. 7,54,444/- is disallowed and added to the total income of the appellant company by the A. O. On the other hand appellant has submitted that appellant has in fact purchased the machinery from M/s. Pneucon Process Technologies, during the year under consideration. The A.O. has disallowed the depreciation of the said machinery purchase only on the ground that the notice u/s. 133(6) remained unserved, which is in fact I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 8 factually wrong and against the law. We are hereby submitting the copy of the invoices of which due Central Sales Tax has been paid by the appellant. He has further submitted that the said invoices has also been produced during the assessment proceedings of the A.Y. 2013-14 and it has been already accepted by A.O. and no otherwise view has been taken by him. 3.6. The appellant made a request for admitting the additional evidences under Rate 46A of I.T. Rules, stating that during the course of assessment proceedings, the appellant was unable to submit the requisite details. The appellant requested to get these verified by AO as the same was not available at the time of assessment proceedings. The same has been admitted as additional evidence in the interest of the natural justice as it was closely connected to the issue and these facts were not called by the A.O. at the time of the assessment order. The same were sent to the A.O. for his verification and necessary enquiries related to the issue. 3.7. The A.O. has submitted the Remand Report and stated that the notice u/s 133(6) of the act was issued during the remand proceedings. However, the same is not responded. Therefore, the assessee was requested to produce the person for verification. The assessee was not produced the person but filed confirmation of accounts and copy of return of income. The confirmation is not signed. Therefore, the veracity of the additional evidences produced by the assessee is not verifiable. 3.8. The appellant has submitted the Rejoinder of the Remand Report and stated that during the course of the remand proceedings, we have already submitted the confirmation of accounts duly received from the said company along with the return of income. We have already submitted the copy of the invoices on which due Central Sales Tax has been paid by the appellant. It is also submitted with due respect that the said invoices has also been produced during the assessment proceedings of the A. Y. 2013-14 and it has been already accepted by the A.O. and no otherwise view has been taken by him. 3.9. In view of the above facts, it is seen that the notice u/s 133(6) of the act was issued during the remand proceedings. However, the same is not responded. Therefore, the assessee was requested to produce the person for verification. Trie assessee was not able to produce the person but filed confirmation of accounts and copy of return of income. The confirmation is not signed and therefore not considered to be of any I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 9 evidentiary value. Therefore, the veracity of the additional evidences produced by the assessee is not verifiable. The appellant has contested that it has already submitted the confirmation of accounts duly received from the said company along with the return of income. On careful consideration of entire facts, it is observed that appellant has failed to furnish the confirmation of accounts and copy of return of income. The assessee also failed to discharge its burden of proof by not producing above party from whom the machineries were purchased. Therefore, it is held that purchases of plant & machinery of Rs.21,55,554/- shown in books of accounts is a bogus. The same is also directed to be added to the total income of the appellant and also the depreciation claimed by the appellant of Rs. 7,54,444/- is to be disallowed, if it is debited in the P&L a/c. The disallowance made by the A.O. of depreciation @15% amounting to Rs.3,23,333/- .and additional depreciation @20% amounting to Rs.4,31,111/- totaling to Rs. 7,54,444/- is upheld. This ground of appeal is dismissed. 14. ld. Counsel for the assessee pointed out that the disallowance of depreciation and additional depreciation has been made for the same reason as in the case of purchases, that the party was not produced and the notice u/s. 133(6) remained unserved in this regard. 15. Ld. Counsel for the assessee drew our attention to the evidences filed by him to prove the genuineness of purchase of plant and machinery made from M/s. Pneucon Process Technologies as under: (i) invoices of M/s. Pneucon Process Technologies at paper book page 72 to 73 (ii) Bank statement of the assessee depicting payment of machinery to Pneucon Process Technologies and ledger account of the assessee at paper book page no. 27 to 28 of P.B-2. 16. Ld. D.R. on the other hand relied on the order of the A.O./CIT(A) I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 10 17. We have gone through the facts before us and find that as in the case of purchases made by the assessee from Gautam Stone, all possible evidences vis-à-vis purchase of plant and machinery made by the assessee from M/s Pneucon Process Technologies were filed. We have noted that copies of bills of purchases of plant and machinery as also the bank statement highlighting payments made to the said party mentioned in the narration were filed. Therefore the burden of proof stood duly discharged by the assessee and we have noted that nothing adverse has been pointed out by the revenue with respect to aforementioned evidences. It is only the fact that the party was not traceable in response to notice u/s. 133(6) issued by the AO. and the assessee was unable to produce him that the evidences were discarded by the revenue as not sufficient to prove the claim of the assessee. As in the case of Bogus purchases, dealt with us above at para 11-12 we hold that in the light of evidences filed by the assessee, nothing adverse having been pointed out against which by the revenue, the onus of proving the genuineness of the claim stood duly discharged and the purchases of plant and machinery could not have been held to be bogus merely for the reason that the party was not found at the stated address. In view of the above, disallowance of depreciation and additional depreciation on the impugned assets purchased from Pneucon Process Technologies amounting in all to 7,54,444/- (3,23,333 + 4,31,111) is deleted. Ground no. 2 is allowed. 18. As for the disallowance of claim of freight outward expenses amounting in all to Rs. 5,76,999/- all pertaining to Jai Baba Roadways, the same were confirmed by the Ld. CIT(A) at para 5.5 to 5.8 are as under: 5.5. I have gone through the facts and the submission of the appellant carefully. It is seen from the ledger account of Jai Baba Roadways that appellant has credited freight outward expenses amounting to Rs.5,76,999/- by way of Journal. The A.O. asked appellant to explain why the freight outward expenses of Rs. 5,76,999/-, should not b&- disallowed. The appellant has not furnished any evidences for freight outward expenses and freight for depot transfer credited in the account of Jai Baba Roadways. Therefore, the A.O. has observed that the freight outwards expenses of Rs.5,76,999/- shown in I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 11 books of accounts is not genuine expenses. Therefore, the same is disallowed and added to the total income of the appellant company by the A.O. On the other hand appellant has submitted all the bills/invoices issued by Jai Baba Roadways are genuine which has been substantiated by the goods receipt by the respective parties on the lorry receipt. Further, the appellant has also tried to trace the party M/s. Jai Baba Roadways by personally sending the person at the business location of it. However, it has been learnt from sources that the party has left the premises and located somewhere else. Therefore, the disallowance made by the A.O. of Rs.5,76,999/- by considering the freight outward expenses as bogus, may kindly be deleted. 5.6. The appellant made a request for admitting the additional evidences under Rule 46A of I.T. Rules stating that during the course of assessment proceedings, the appellant was unable to submit the requisite details. The appellant requested to get these verified by AO as the same was not available at the time of assessment proceedings. The same has been admitted as additional evidence in the interest of the natural justice as it was closely connected to the issue and these facts were not called by the A.O. at the time of the assessment order. The same were sent to the A.O. forhfs verification and necessary enquiries related to the issue. 5.7. The A.O. has submitted the Remand Report that the notice issued u/s 133(6) of the act during the course of assessment proceedings had not been responded. During the course of remand proceedings, also notice u/s133(6) of the Act issued on 06/01/2017 has not been responded. Moreover, the assessee could not produce the above persons though the opportunity was provided vide letter dated 16/01/2017 the assessee has also not produced any evidence in this regard. Therefore, the additions made on the issue may kindly be sustained. The appellant has submitted the Rejoinder of the Remand Report and stated that all the expenditure incurred by the appellant are genuine. It is also submitted all the bills /invoices issued by Jai Baba Roadways are genuine which has been substantiated by the goods receipt by the respective parties on the lorry receipt. During the course of the remand proceedings also we could not trace out the party, however, the said payments has already been supported by goods receipt by respective parties on lorry receipt. 5.8. In view of the above facts, it is seen that during the course of remand proceedings, also notice u/s 133(6) of the act issued on 06/01/2017 has not been responded. I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 12 Moreover, the assessee could not produce the above persons though the opportunity was provided vide letter dated 16/01/2017. The assessee has also not produced any evidence in this regard. The appellant has vehemently objected to this and stated that during the course of the remand proceedings also they could not trace out the party, however, the said payments has already been supported by goods receipt by respective parties on lorry receipt. The assessee has also failed to discharge it burden of proof by not producing the above party. In view of the above, it is held that even after giving another opportunity, the appellant has not proved that these expenses are genuine. Therefore, I hold that the Assessing Officer is right in making the disallowance in respect of freight outward expenses. The disallowance made by the AO for a sum of Rs.5,76,999/- is therefore confirmed. Accordingly, this ground of appeal is dismissed and decided against the appellant 19. With respect the same, ld. Counsel for the assessee drew our attention to the following evidences filed by him to prove the genuineness of claim: (i) The ledger account of Jai Baba Roadway’s along with invoices and Lorry receipts page 102 to 136 of the paper book (ii) Ledger account of Jai Baba Roadways in the book of the assessee and bank statement of the assessee evidencing payment made to it filed at paper book page no. 29 to 35 of P.B-2. 20. Ld. D.R. supported the order of the Ld. CIT(A). 21. We have gone through the facts of the case and we have noted that the facts are identical as in the case of bogus purchases and purchase of plant and machinery discussed and adjudicated by us by above in the preceding paragraph wherein the assessee has filed all possible evidences available with it to prove the genuineness of its claim by way of invoices of the said party as also demonstrating payment to the said party through banking channels and the revenue, we have noted has without pointing anything adverse in the said evidences has held the same to be bogus for the I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 13 reason that the notice issued by the A.O. u/s. 133(6) remained unserved/unresponded, 22. For the reasons discussed above by us at para 11-12 while dealing with the issue of bogus purchases and purchase relating to plant and machinery, the impugned expenses are also held to have been proved by the assessee to be genuine and disallowance made is directed to be deleted. 23. Ground no. 3 is allowed. 24. Ground no. 4 reads as under: 4. That the Ld. CIT (A) erred in law and on the facts of the case in confirming the action of the AO in disallowing preoperative expenses of Rs. 2,09,634/-. 25. The Ld. CIT(A) has dealt with the issue at para 6.3 and 6.4 is as under: 6.3. I have gone through the facts and the submission of the appellant carefully. It is seen from the profit & loss account that appellant has written off Rs.31,99,676/- as preoperative expenses. On careful perusal of the ledger account by the A.O. preoperative expenses written off comes to Rs. 29,90,042/-.Thus, appellant has claimed excess amount of Rs.2,09,634/- (Rs.31,99,676- Rs.29,90,042) as preoperative expenses. Therefore, the same is disallowed and added to the total income by the A.O. On the other hand appellant has contended that R&D in the year under consideration and the relevant expenditure has been capitalized and only 1/5th of such expenses have been written off as preliminary & preoperative expenditure. The appellant has further submitted the detailed copy of ledger, journal entries etc. in support of his claim. 6.4, After going through the facts of the case, it is seen that appellant has claimed written off Rs. 31,99,676/- as preoperative expenses whereas preoperative expenses written off comes to Rs. 29,90,042/-. The appellant has not given any cogent reason for the above discrepancies. I hold that the Assessing Officer is right in making the disallowance in respect of excess preoperative expenses written off. The disallowance I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 14 made by the AO for a sum of Rs.2,09,634/- is therefore confirmed. Accordingly, this ground of appeal is dismissed and decided against the appellant. 26. ld. Counsel for the assessee stated that the Ld.CIT(A) has misappreciated the facts of the case while holding that the assesses claim to preoperative expenses with respect to an amount of Rs. 2,09,634/- did not emerge from the facts before it. In this regard he drew out attention to the ledger of Misc. expenses for the year, placed at paper book page no. 36, pointing out that it included R &D expenses of Rs. 2,09,634/- alongwith preoperative expenses of Rs.29,90,042/- and it was this R&D expenses claimed as preoperative expenses, which was denied by the Ld.CIT(A) for no reason at all. He further drew out attention to the Ledger account of R & D Exp Assets , during the year placed at paper book page no. 137 pointing out therefrom that the total expenses incurred were to the tune of Rs.10,48,178/- ,and 1/5 th of the same ,amounting to Rs.2,09,634/- was claimed as preoperative. He thereafter took us to P.B page no 139, being the journal of R&D Exp Assets, showing the break up of expenses included therein as under: (i) Remuneration to director 4,00,000/- (ii) Testing exposés 35,000/- (iii) Laboratory Expenses 38,846/- (iv) and Salary LAB Staff 5,74,332/- 27. He contended that 1/5 of this expenses amounting to Rs. 2,09,635/- which was claimed as preoperative by the assessee and was not allowed by the Ld. CIT(A) without giving any reason. 28. Ld. D.R. on the other hand supported the order of the Ld. CIT(A). 29. We have gone through the facts of the case and have noted that the disallowance of preoperative expenses of Rs. 2,09,634/- has been sufficiently demonstrated by the I.T.A No. 1004/Ahd/2017 A.Y. 2012-13 Page No Dubond Products India Pvt. Ltd. vs. ITO 15 assessee as relating to R&D expenses incurred of which 1/5 had been claimed during the year. The ld. CIT(A) we have noted has given no reason for not allowing the claim of the assessee and has failed to appreciate the contention of the assessee and the facts as pointed out by him. We therefore hold that the claim of the assessee to preoperative expenses of Rs.2,09,634/- was duly established and the disallowance of same is therefore directed to be deleted. 30. Ground no. 4 is allowed. 31. In effect, appeal of the Assessee is allowed. Order pronounced in the open court on 25-03-2022 Sd/- Sd/- (MAHAVIR PRASAD) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 25/03/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद