Shree Rama Multi-Tech Ltd., Ahmedabad V. The Dy.CIT, Crcle-8, Ahmedabad

ITA 1140/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3878 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-11-2019
• Assessment Year: 2002-2003
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: S N SOPARKAR WITH PARIN SHAH
• Keywords: Bogus purchase; Depreciation; Valuation report; Set aside
• Section: 271(1)(c); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NOS: 1140, 1342 TO 1344/AHD/2015 (ASSESSMENT YEARS: 2002-03 TO 2005-06) SHREE RAMA MULTI-TECH LTD. 603, SHIKHAR BUILDING, NAVRANGPURA, AHMEDABAD-380009 V/S DY. CIT, CIRCLE-8, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAJCS 1563N APPELLANT BY : SHRI S. N. SOPARKAR WITH PARIN SHAH RESPONDENT BY : SHRI O.P. SHARMA, CIT/DR ( )/ ORDER DATE OF HEARING : 10 -10-201 9 DATE OF PRONOUNCEMENT : 25-11-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A). OUT OF THESE FOUR MATTERS LEAD MATTER IS I TA NO. 1140/AHD/2014 ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 2 AND IN ALL FOUR APPEALS ISSUE IS REGARDING DISALLOW ING OF DEPRECIATION. AND IN ITA NO. 1140/AHD/2015, ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1 LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONF IRMING ACTION OF AO IN DISALLOWING DEPRECIATION OF RS. 9,27, 36,250/- ON TANGIBLE ASSE TS IN THIS SET ASIDE PROCEEDINGS IGNORING SPECIFIC DIRECTIONS IN ORDER OF HON'BLE IT AT. LD. CIT (A) OUGHT TO HAVE DELETED DISALLOWANCE MADE BY AO APPRECIATING SUBMIS SIONS & DOCUMENTARY EVIDENCE PLACED ON RECORD. 2 LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONF IRMING DISALLOWANCE MADE BY AO WITHOUT VERIFICATION OF PURCHASE BILLS OF ASSETS OR PAYMENT TO SUPPLIERS FOR ASSETS RECORDED IN ASSET REGISTER CORROBORATED BY REPORT O F DALAI MOTT MACDONALD AS DIRECTED BY HON'BLE IT AT. LD. CIT (A) OUGHT NOT TO HAVE CONFIRMED DISALLOWANCE SIMPLY ON THE BASIS OF SURVEY REPORT. 3 LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT C ONSIDERING FURTHER VALUATION DONE FROM SHRI MUKESH M SHAH BY HOLDING IT TO BE SELF SE RVING DOCUMENT. LD. CIT (A) OUGHT TO HAVE TAKEN COGNIZANCE OF VALUATION CORROBO RATING EXISTENCE OF THE ASSETS. LD. CIT (A) OUGHT NOT TO HAVE RELIED ON FIN DING OF THE SURVEY REPORT THAT ONLY ASSETS INSTALLED IN 2001 & 2002 BE CONSIDERED AS REAL ADDITION. 4.LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG DISALLOWANCE BY AO WITHOUT GRANTING OPPORTUNITY TO THE APPELLANT TO CROSS EXAM INATION OF THE STATEMENTS RECORDED DURING SURVEY. LD. CIT (A) OUGHT TO HAVE D IRECTED AO TO EVALUATE CLAIM OF DEPRECIATION AS PER DIRECTIONS OF HON'BLE IT AT. 2. THIS IS THE SECOND ROUND BEFORE US. THIS MATTER CAM E BEFORE THE ITAT IN ITA NO. 298/AHD/2006 FOR A.Y. 2002-03, ITA NO. 338/AHD/ 2006 FOR A.Y. 2002- 03, ITA NO. 4282/AHD/2007 FOR A.Y. 2002-03 WHEREIN REVENUE CHALLENGED THE ORDER OF THE LD. CIT(A) AND CO-ORDINATE BENCH SET A SIDE THIS MATTER BACK TO THE FILE OF THE A.O. WITH THE FOLLOWING OBSERVATION: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. THE ASSESSEE CLAIMED THAT DUE TO FINANCIAL CRISIS THE DETAILS CO ULD NOT BE PRODUCED AT THE TIME OF SURVEY WHICH IS NOT IN DISPUTE AND IS ALSO SUPPO RTED BY THE FACT THAT ASSESSEE FILED THE RETURN OF INCOME DECLARING LOSSES OF RS.1 9.95 CRORES. THE ASSESSMENT YEAR UNDER APPEAL IS 2002-03 AND SURVEY IS CONDUCTE D AFTER SEVERAL YEARS ON 15- 03-2005. THE ASSET VALUATION REPORT OF DALAI MOTT M ACDONALD OF MAY/2003 WAS FOUND DURING THE COURSE OF SURVEY. COPY OF THE SAID REPORT IS FILED ON RECORD WHICH VALUATION REPORT IS PREPARED, ON THE BASIS OF INFOR MATION, DATA AND PARTICULARS PROVIDED BY INDUSTRIAL DEVELOPMENT BANK OF INDIA AN D THE ASSESSEE. THE LEARNED ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 3 COUNSEL FOR THE ASSESSEE PREPARED A CHART AND REFER RED TO PAGE NUMBERS IN THE REPORT OF THE VALUER AND BY REFERRING THE DETAILS N OTED IN THE ASSESSMENT ORDER EXPLAINED THAT ALL THE ASSETS NOT FOUND BY AO ARE S PECIFICALLY MENTIONED IN THE VALUATION REPORT. THEREFORE, CLAIM OF THE AO IS INC ORRECT THAT THE ASSETS ARE NOT MENTIONED IN THE VALUATION REPORT WHICH, WAS PREPAR ED ABOUT TWO YEARS PRIOR TO THE DATE OF SURVEY. THE VALUATION SHOWN BY THE VALU ER OF ASSETS WAS ALSO STATED TO BE MORE THAN THE VALUE CLAIMED BY THE ASSESSEE. THE ASSESSEE PRODUCED ALL THE RELEVANT DETAILS BEFORE AO REGARDING PURCHASE OF TH E ASSETS BUT SAME HAS NOT BEEN DISCUSSED IN DETAIL. THE ASSESSEE ALSO CLAIMED THAT SOFTWARE WAS ALSO PURCHASED WHICH WAS USED FOR THE PURPOSE OF BUSINES S. THE AO ON THE BASIS OF REPORT OF DALAL MOTT MACDONALD ALSO ACCEPTED THE CL AIM OF THE ASSESSEE IN PART AND GRANTED DEPRECIATION. THEREFORE, THERE WAS NO R EASON FOR THE AO TO DISPUTE THE REMAINING PART OF SUCH REPORT WHICH CONTAINED A LL THE DETAILS OF INSTALLATION OF THE FIXED ASSETS IN THE PREMISES OF THE ASSESSEE. E VEN, ONE OF THE PERSONS EXAMINED DURING SURVEY ADMITTED FHAT ALL THE SOFTWA RE WORO INBUILT. THO LEARNED CIT(A) ON PROPER EXAMINATION OF EVIDENCES--AND MATE RIAL RIGHTLY CAME TO THE CONCLUSION THAT SOFTWARE IS INTANGIBLE ASSET AND WA S LOADED IN THE SYSTEM OF MACHINE. THE LEARNED CIT(A) ALSO RIGHTLY HELD THAT INSTALLATION OF SOFTWARE COULD BE CHECKED BY THE TECHNICAL PERSON WHETHER IT WAS L OADED IN THE SYSTEM OR NOT. THEREFORE, THE FINDING IN THE SURVEY CANNOT BE RELI ED UPON. EVEN THE AO HAS ACCEPTED THE FACT THAT'SOME OF THE SOFTWARE WERE DE VELOPED LOCALLY AND INSTALLED IN THE SYSTEM. THE FINDING OF FACT RECORDED BY LEAR NED CIT(A) FIND SUPPORT FROM THE VALUATION REPORT OF ASSETS PREPARED BY DALAI MO TT MACDONALD WHICH WAS FOUND IN SURVEY -WHICH .INDICATED THAT SOFTWARE WER E DEVELOPED AND INSTALLED BY THE ASSESSEE IN THE SYSTEM. THE ASSESSEE PRODUCED A LL THE VOUCHERS AND RECEIPT FOR THE SAME WHICH .VAS ALSO EXAMINED BY LEARNED CI T(A). NOTHING IS PRODUCED BEFORE US DURING THE COURSE OF ARGUMENTS TO REBUT T HE FINDINGS OF LEARNED CIT(A). CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE MATERIAL .ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INT ERFERE WITH THE ORDER OF THE LEARNED CIT(A) IN ALLOWING DEPRECIATION RESPECT OF ALL THE SOFTWARE PURCHASED AND INSTALLED DURING THE YEAR. FURTHER, THE AO DENIED C LAIM OF THE ASSESSEE BECAUSE NO FIXED ASSETS REGISTER WAS MAINTAINED BY THE ASSE SSEE BUT SAME WAS PRODUCED BEFORE THE AO SUBSEQUENTLY. SOME STATEMENTS WERE RE CORDED DURING THE COURSE OF SURVEY BUT IT IS NOT CLEAR FROM THE ASSESSMENT O RDER WHETHER THE SAME WERE SUPPLIED TO THE ASSESSEE FOR ALLOWING THEIR CROSS E XAMINATION ON BEHALF OF THE ASSESSEE. UNLESS, CROSS EXAMINATION IS ALLOWED TO S UCH STATEMENTS, THE SAME CANNOT BE USED IN EVIDENCE AGAINST THE ASSESSEE. ME RELY BECAUSE THE PARTIES WHO HAD SUPPLIED ASSETS TO THE ASSESSEE HAVE NOT RESPON DED TO THE NOTICE OF THE AO MAY NOT BE A GROUND FOR DENYING CLAIM OF THE ASSESS EE ON TANGIBLE ASSETS. THE LEARNED CIT(A) ALSO FAILED TO CONSIDER THAT SPECIFI C ITEMS OF TANGIBLE ASSETS ARE RECORDED IN THE REPORT OF DALAI MOTT MACDONALD, SIN CE THE MATERIAL SUPPLIED BY THE ASSESSEE IS NOT EXAMINED IN DETAIL AND COMPLETE DETAILS OF THE ASSETS ARE RECORDED IN THE REPORT OF VALUATION PREPARED PRIOR TO THE SURVEY ATTHE INSTANCE OF IDBI, THEREFORE, WE ARE OF THE VIEW THE 'MATTER AS REGARDS DEPRECIATION ON ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 4 TANGIBLE ASSETS REQUIRES RECONSIDERATION AT THE LEV EL OF THE AO. WE ACCORDINGLY, CONFIRM THE ORDER OF THE LEARNED CIT(A) IN GRANTING DEPRECIATION ON INTANGIBLE ASSETS. THE DEPARTMENTAL APPEAL ON GROUND NO.1 IS A CCORDINGLY DISMISSED. HOWEVER, THE ORDER OF LEARNED CIT(A) IN REFUSING TO GRANT DEPRECIATION ON TANGIBLE ASSETS IS SET ASIDE AND THE MATTER IS RESTORED TO T HE FILE OF THE AO FOR RECONSIDERATION. THE AO SHALL PASS REASONED ORDER B Y GIVING REASONABLE SUFFICIENT OPPORTUNITY TO THE ASSESSEE CONSIDERING THE VALUATI ON REPORT OF DALAI MOTT MACDONALD AND THE 'EVIDENCES PRODUCED BY THE ASSESS EE FOR PURCHASE OF TANGIBLE ASSETS. IN THE RESULT, GROUND NO. 2 & 3 OF THE APPEAL OF TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO DISAL LOWED DEPRECIATION AMOUNTING TO RS.1 2,82,1 7,500/- IN RESPECT OF VARIOUS ASSETS MADE DURING THE YEAR WHICH INCLUDED INTEGRATED SOFTWARE PURCHASED, SAESA 1005 IMP MACHINE, COMPONENT FOR PLT, CONTROL PANELS, HOT FOIL STAMPIN G MACHINE, LAB TESTING EQUIPMENT, UTILITIES FOR PLT, DYES AND MOULDS FOR I NDG ETC. MAINLY PERTAINING TO UNIT-2, UNIT-3 AND UNIT-4 FOR THE YEAR UNDER CON SIDERATION. THE DISALLOWANCE HAS-BEEN MADE ON THE FOLLOWING GROUNDS. THE DETAILS HAVE BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. THE SOFTWARE AND MA CHINERIES WERE PURCHASED FROM .ASSOCIATED CONCERN VIZ. VIMPSON PRECISION PVT . LTD., SURAKSHA PETRO CHEMICALS PVT. LTD., MODERN PRECISION.) INDUSTRIES AND SAMPAT RAO. A SURVEY WAS CONDUCTED AT THE OFFICE PREMISES OF THE ASSESSE E ON 15-03-2005 AND DURING THE SURVEY NO FIXED ASSETS REGISTERED WAS FOUND TO HAVE BEEN MAINTAINED AT THE OFFICE PREMISES AND VARIOUS ASSETS WERE NOT FOUND P HYSICALLY AT THE FACTORY PREMISES. LATER ON, THE ASSESSEE PRODUCED THE FIXED ASSETS .REGISTER, WHERE THE ADDITIONS TO FIXED ASSETS WERE WRITTEN IN THE REGIS TER IN DIFFERENT PEN AND WITH SR. NO. SUFFIXED WITH 'A'. THE ASSET VALUATION REPO RT PREPARED BY DALAI MOTT MACDONALD WAS FOUND DURING THE SURVEY WHICH LISTED THE ASSETS OF THE ASSESSEE AND ITS VALUATION AS ON 30-04-2003. THE A. O. HAS F OUND THAT ALL THE ASSETS ARE NOT MENTIONED THEREIN. THE STATEMENTS WERE TAKEN FR OM VARIOUS PERSONS, WHO ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 5 SAID THAT MAJORITY OF THE SOFTWARE CAME WITH MACHIN ES AND ONLY SMALL CHANGES ARE TO BE MADE IN THE SOFTWARE IN CONSULTATION WITH THE ORIGINAL SUPPLIERS AND THAT WHERE IS THE LICENSE OR CD TO USE SOFTWARE, NO BODY COULD PRODUCE THE SAME. THE SUMMONS WAS ISSUED TO VARIOUS SUPPLIERS, BUT NO ONE ATTENDED. THE AO HAS, THEREFORE, HELD THAT THE PURCHASES OF THESE ASSETS ARE NOT GENUINE AND DISALLOWED THE DEPRECIATION CALCULATED AT RS. 12,82 ,17,500/-. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT ALL THE ASSETS PURCH ASED ARE GENUINE AND THE DEPRECIATION SHOULD BE ALLOWED. A COPY OF THE APPRA ISAL REPORT FOR VALUATION DONE BY DALAI MOTT MACDONALD IN RESPECT OF FIXED AS SETS WAS FOUND DURING THE SURVEY. THE VALUE OF THE ASSETS AS ON 31-03-2003 IS MORE THAN THE VALUE OF THE ASSETS AS PER THE COMPANY'S RECORDS. IT SHOWS THAT ALL THE ASSETS WERE PURCHASED AND THE DEPRECIATION WAS RIGHTLY CLAIMED. THE ASSES SEE HAD PURCHASED PLANT & MACHINERY NOT ONLY FROM THE ALLEGED ASSOCIATED CONC ERNS, BUT PURCHASED MACHINERY PARTS IN LARGE NUMBER FROM OVERSEAS MARKE T FROM WORLD LEADER MANUFACTURERS AS WELL. THE TOTAL MACHINERY PURCHASE D WORTH RS.94,97,96,045/- WAS ADDED DURING THE YEAR, WHICH INCLUDED INTEGRATE D SOFTWARE PURCHASED FROM DESIGN ELECTRONICS & SOFT DESIGN. WHEN THE MACHINER IES WERE PURCHASED, THE COMPANY HAD TWO ALTERNATIVES TO PURCHASE THE SOFTWA RE EITHER TO PURCHASE INBUILT SOFTWARE ALONG WITH THE MACHINE FROM ORIGIN AL SUPPLIER LOCATED AT SWITZERLAND OR TO GET IT DEVELOPED LOCALLY. BY THIS PROCESS, THE COMPANY COULD SAVE LARGE AMOUNT OF CUSTOMS DUTY AND VALUABLE FORE IGN EXCHANGE OF THE COUNTRY. THE DEVELOPMENT OF SOFTWARE FROM LOCAL MAR KET WAS FOR THE IMMEDIATE AVAILABILITY FOR AFTER SALES SERVICE. FOR THE PURPOSE OF DEVELOPING SOFTWARE TO BE FITTED IN THE MACHINERIES IMPORTED F ROM AISA SWITZERLAND, APPLITECH SOLUTION HAD DEPUTED ITS ENGINEERS TO AIS A COMPANY, SO THAT THEY COULD GET DETAILED KNOWLEDGE, TECHNICAL SPECIFICATI ONS, CRITICALITY OF THE MACHINE AND OTHER HARDWARE CONFIGURATION REQUIREMENTS. APPL ITECH SOLUTION LTD.. IS A ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 6 CMM 5 COMPANY, HAVING VAST EXPERIENCE OF DEVELOPING SOFTWARE PROCESS SOFTWARE FOR KANDLA PORT TRUST, GAD OF GOVT. OF GUJ ARAT, HOME DEPTT. OF GUJARAT, RAN BAXI LABORATORIES LTD., ADANI WILLMAR LTD. AND MANY OTHER LARGE SIZE ORGANIZATIONS. THE ASSESSEE HAS SUBMITTED THAT THE ADDITION IN PLANT AND MACHINERY ALSO INCLUDES THE ITEMS OTHER THAN INTEGR ATED SOFTWARE SUCH AS INSULATION FOR RCC TANKS, TREATING EQUIPMENTS, AIR COOL COMPRESSORS, AIR COOLED COMPACT WATER CHILLERS, DYES AND MOULDS, .WHICH HAV E BEEN ACQUIRED FROM VIMPSON PRECISION PVT. LTD., MODERN PRECISION INDUS TRIES AND SURAKSHA PETROCHEMICALS PVT. LTD. THE ASSESSEE FURTHER SUBMI TTED THAT SOFTWARE IS AN INTANGIBLE ASSET AND IT IS LOADED IN THE SYSTEM OF THE MACHINERIES AND IT CANNOT BE PHYSICALLY FOUND IN THE PREMISES DURING THE COUR SE OF SURVEY AND ANY TECHNICAL CAN ONLY ASCERTAIN WHETHER IT IS LOADED I N THE SYSTEM OR NOT. HENCE, THE AO WAS NOT JUSTIFIED TO SAY THAT NO SOFTWARE FO UND AND SEEN AT THE FACTORY PREMISES. FURTHER, IN THE VALUATION REPORT FOUND AT THE TIME OF SURVEY, WHICH WAS PREPARED BY DALAI MOTT MACDONALD, THERE IS MENT ION OF AUTOMATION FOR MACHINERY AND THE EXISTENCE OF SOFTWARE AND EVEN TH E O AO HAS ACCEPTED THESE FACTS AND CREDIT FOR PART OF THE AMOUNT IS TO BE GI VEN. WHEN THE AO WAS NOT ACCEPTING THE EXISTENCE OF SOFTWARE AND ALL THE PUR CHASES OF SOFTWARE WERE THERE TO JUSTIFY THE CLAIM, THE SAME HAS TO BE ACCEPTED. REGARDING-THE ABSENCE OF OTHER MACHINERIES DURING THE SURVEY, THE ASSESSEE H AS SUBMITTED THAT DURING THE LONG PERIOD FROM THE DATE OF INSTALLATION TO THE DA TE OF SURVEY, SOME OF THE ITEMS HAVE EITHER TURNED INTO SCRAP OR USED ITEMS A ND SOME OF THE ITEMS HAVE ALREADY BEEN FITTED IN AS A PART OF THE MACHINERY. FURTHER, IT WAS NOT POSSIBLE BY THE SURVEY TEAM TO NOTE DOWN CORRECTLY ALL ASSTS, A S IT WAS NOT PHYSICALLY POSSIBLE TO WRITE DOWN ALL THE ASSETS FOUND DURING THE SURVEY AT FACTORY PREMISES AS THERE WERE LARGE NUMBER OF PLANT & MACH INERIES AND HENCE, THE REPORT PREPARED AT THE TIME OF SURVEY WAS NOT PROPE R AND COMPLETE. THE FACT ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 7 THAT THE ASSETS ARE MENTIONED IN THE STOCK REGISTER IN DIFFERENT HAND WRITINGS AND WITH NUMBERS SUFFIXED WITH 'A' WAS ONLY DUE TO THE REASON THAT WHEN IT WAS FOUND THAT THE SAME WERE NOT ENTERED EARLIER, IT WA S ENTERED LATER ON. BUT THIS ACT DID NOT MAKE THE PURCHASE BOGUS. THERE WERE REC EIPTS OF PURCHASES, TRANSPORTATION PAYMENTS, GATE PASSES AND STORE RECE IPTS ETC. WHICH WERE PROPERLY MAINTAINED. THEREFORE, IT WAS SUBMITTED TH AT THE DEPRECIATION SHOULD BE ALLOWED, THE LEARNED CIT(A) CONSIDERING FACTS AN D THE EXPLANATION OF THE ASSESSEE PARTLY ALLOWED THE CLAIM OF THE ASSESSEE. 4. THE PURSUANT TO THE DIRECTION OF THE ITAT ORDER DAT ED 06.01.2012. LD. A.O. CALLED THE ASSESSEE. ASSESSEE FURNISHED CERTAIN DET AIL AND REITERATED THE STAND TAKEN BY THE ASSESSEE. 5. APART FROM THAT ASSESSEE HAS SUBMITTED ALL THE PUR CHASE BILLS INSTALLATIONS REPORT AND REPORT OF THE SURVEYOR AND ALSO SUBMITTE D DETAILS OF LOAN TAKEN BY THE ASSESSEE FROM IDBI BANK IN ORDER TO INSTALL MAC HINE AND WROTE THREE LETTERS ALONG WITH PHOTOGRAPHS OF THE MACHINES TO LD. A.O. TO COME AND INSPECT MACHINES ETC. BEFORE DISALLOWING THE CLAIM OF THE A SSESSEE FOR DEPRECIATION. BUT LD. A.O. DID NOT PHYSICALLY INSPECTED THE MACHINES UPON WHICH DEPRECIATION WAS CLAIMED AND LD. A.O. CONFIRMED HIS EARLIER ORDE R. 6. THEREAFTER ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO JUST CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER STATING THAT LD. A.O. HAS RIGHTLY RELIED ON THE STATEMENT TAKEN DURING THE COURSE OF SURVEY WHE REIN SURVEY TEAM DID NOT FIND ANY MACHINE INSTALLED AT THE PREMISES OF THE A SSESSEE. ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 8 7. THE CONTENTION OF THE LD. D.R. SHRI O.P. SHARMA ON BEHALF OF THE REVENUE CONTENDED THAT MACHINES WERE PURCHASED FROM THE SIS TER CONCERNED AND SAID SISTER CONCERN HAD NOT ENCLOSED BEFORE THE THREE YE ARS AGO WHEN ASSESSEE PURPORTEDLY TO PURCHASE THE MACHINES AND HEAVILY RE LIED ON THE STATEMENT RECORDED DURING THE SURVEY CONDUCTED BY THE INCOME TAX DEPARTMENT TEAM ON 15.03.2005. WHEN SPECIFICALLY INQUIRED FROM THE LD. D.R. THAT ON WHAT BASIS HE HAS STATED THAT ON THE DATE OF SUPPLY OF THE MAC HINES, COMPANY WAS NOT FUNCTIONING. BUT LD. CIT(A)/DR COULD NOT SUBSTANTIA TE HIS ARGUMENTS WITH ANY DOCUMENTARY PROOF AND HE VEHEMENTLY RELIED ON ASSES SMENT ORDER. BUT BEING A FINAL FACT FINDING AUTHORITY WITHOUT ANY DOCUMENTAR Y EVIDENCE/PROOF ON VERBAL SUBMISSION ADDITION CANNOT BE MADE AGAINST IN THE H ANDS OF THE ASSESSEE. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. NOW QUESTION BEFORE US IS THAT WHETHER ON THE BASIS OF SURVEY CO NDUCTED BY THE INCOME TAX DEPARTMENT CLAIM OF THE ASSESSEE FOR DEPRECIATION S HOULD BE ALLOWED OR NOT. AFTER DETAILED DELIBERATIONS AND BOTH THE PARTIES W E HEARD IN DETAIL IN SUPPORT OF ITS CONTENTION, LD. A.R. SUBMITTED ALL THE DETAI LS WITH REGARD TO PURCHASE OF MACHINES. ON THE OTHER HAND, REVENUE CONTENTION WAS THAT MACHINES WERE NOT PURCHASED ON THE GIVEN DATE AND PAYMENT WAS MADE TH ROUGH JOURNAL ENTRY. WHEN WE SPECIFICALLY ASKED ABOUT THE PAYMENT MADE I N ORDER TO PURCHASE MACHINERY. LD. A.R. SHOWN US THE PAYMENT DETAIL AND THEY WERE MADE THROUGH BANKING CHANNELS AND RELEVANT DETAILS OF THE SAID P AYMENT WERE SHOWN TO US AND LIST OF SUPPLIERS WITH INVOICES OF MACHINERY PU RCHASED WERE ALSO SUBMITTED BEFORE THE LOWER AUTHORITIES. AND LEDGER ACCOUNT OF M/S. VIMPSAN PRECISION PVT. LTD. WAS ALSO SUBMITTED BEFORE THE LOWER AUTHO RITIES. APART FROM THAT RECONCILIATION CHART OF PLANT AND MACHINERY WITH DA LAL MOTT MACDONALD REPORT WERE ALSO SUBMITTED TO THE EFFECT THAT MACHINES WER E VERY MUCH THERE AND ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 9 INSPECTION WAS DULY CARRIED OUT BY THE SURVEYOR. AN D VALUATION REPORT CERTIFICATE DATED 26.05.2003 WHEREIN BEFORE GRANTIN G LOAN IDBI BANK CARRIED OUT INSPECTION AND VALUATION REPORT WAS DULY PREPAR ED WHEREIN DETAILS OF ALL THE MACHINES WERE GIVEN. 9. THE ASSESSEE REQUESTED ASSESSING OFFICER ON 4 TH MAY, 2015 AND ON 12.08.2012 AND ON 19.09.2012 REQUESTING THE ASSESSING OFFICER TO CARRY OUT THE PHYSICAL INSPECTION OF THE MACHINES. BUT LD. A.O. DID NOT BO THER TO INSPECT THE SAME FOR THE REASON THAT ITAT DID NOT GIVE HIM DIRECTION TO PHYSICALLY INSPECT THE MACHINES WHEREIN IN DEPARTMENT APPEAL FILED BEFORE THE ITAT DIRECTED THE LD. A.O. THAT HE SHALL PASS REASONED ORDER BY GIVING RE ASONABLE SUFFICIENT OPPORTUNITY TO THE ASSESSEE CONSIDERING THE VALUATI ON REPORT OF DALAL MOTT MACDONALD AND THE EVIDENCES PRODUCED BY THE ASSESSE E FOR PURCHASE OF TANGIBLE ASSETS. AS WE CAN SEE, LD. A.O. DID NOT BO THER TO CARRY OUT THE PHYSICAL INSPECTION AND VALUATION REPORT OF DALAL MOTT MACDO NALD AND DID NOT CONSIDER EVIDENCES SUCH AS PHOTOGRAPH OF THE PLANT AND MACHI NERY SUBMITTED BEFORE THE LD. A.O. IN PURSUANT TO THE ITAT DIRECTION. 10. WE DRAW SUPPORT FROM THE CASE OF HONBLE SUPREME CO URT IN THE MATTER OF CIT VS. S. KHADER KHAN SON (2013) 352 ITR 480 (SC) WHEREIN HONBLE SUPREME COURT HAS HELD THAT ONLY ON THE BASIS OF ST ATEMENT RECORDED DURING THE SURVEY PROCEEDING U/S. 133A CANNOT BE BASIS OF ADDITION. THERE HAS TO BE CORROBORATIVE EVIDENCE IN SUPPORT OF THE CONTENTION OF THE LD. A.O.. IN OUR CONSIDERED OPINION, ASSESSEE HAS COMPLIED WITH ALL THE DIRECTION GIVEN BY THE ITAT AND SUBMITTED ALL THE PROOF/DOCUMENTARY EVIDEN CE AS PER THE DIRECTION OF THE CO-ORDINATE BENCH AND SINCE IT IS A SECOND C HANCE BEFORE THE ITAT AND ITA NOS. 114 0, 1342 TO 1344/AHD/2015 . A.YS. 2002- 03 TO 2005-06 10 WE CANNOT MAKE MORE MISERABLE CONDITION OF THE ASSE SSEE IN THE HANDS OF THE REVENUE. 11. IN THE RESULT, ALL FOUR APPEALS WITH REGARD TO DEPR ECIATION OF THE ASSESSEE ARE ALLOWED. 12. SO FAR GROUND RELATING TO LEVY OF INTEREST U/S. 234 A/234B/234C & 234D OF THE ACT AND INITIATION OF PENALTY U/S. 271(1)(C) ARE CO NCERNED, SAME ARE CONSEQUENTIAL AND NEED NOT TO BE ADJUDICATED AT THI S JUNCTURE BECAUSE WE HAVE ALREADY GIVEN RELIEF TO THE ASSESSEE. 13. IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 11- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 25/11/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD