Print specialities, CHENNAI V. ACIT, CHENNAI

ITA 1148/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7884 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-04-2016
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Assessee Lawyers: K S LAKSHMI NARAYANAN
• Keywords: Depreciation; Additional depreciation
• Section: 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1148/MDS/2016 * +* /ASSESSMENT YEAR: 2008-09 M/S.PRINT SPECIALITIES, 13/7, SRINIVASA PERUMAL SANNADHI, 3 RD STREET, ROYAPETTAH, CHENNAI-14. VS. THE ASST. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-IX, CHENNAI [PAN: AAAFP 1576 C ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.K.S.LAKSHMI NARAYANAN, FCA ./,- 0 1 /RESPONDENT BY : MR.B. SAHADEVAN, JCIT # 0 2' /DATE OF HEARING : 05.01.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 05.01.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 13, CHENNAI, IN ITA NO.53/2008-09/CIT(A)-13 FOR THE AY 2008-09 AND RAIS ED ON THE FOLLOWING GROUNDS:- ITA NO.1148/MDS/2016 :- 2 -: 1) ISSUE ONE: DISALLOWANCE OF DEPRECIATION CLAIM RS. 14,29,272/-: THE ASSESSING OFFICER IS WRONG IN DISALLOWING THE D EPREDATION CLAIMED ON PLANT AND MACHINERY RS.14,29,272/- AND THE CIT HAS ERRED ON C ONFIRMING THE SAME ON THE FOLLOWING GROUNDS: A. THE ASSESSING OFFICER IS WRONG IN DISALLOWING THE DE PREDATION CLAIM ON GENUINE MACHINERY PURCHASED DURING THE YEAR, WHILE ALL THE CONDITIONS LAID DOWN FOR CLAIMING DEPRECIATION HAS BEEN COMPLIED WITH VIZ. T HE ASSESSEE OWNS THE MACHINE, THE MACHINE HAS BEEN PUT TO USE AND IS USED FOR BUS INESS PURPOSE. B. THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE F ACT THAT THE ENTIRE PAYMENT FOR THE PURCHASE OF THE MACHINE WAS GIVEN BY WAY OF DD AND HAS BEEN REALIZED TO THE ACCOUNT OF THE VENDOR OF THE MACHINE AND HE HAS ISS UED RECEIPTS FOR THE SAME. C. THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE M ERITS IN OUR SUBMISSION THAT THE MACHINE HAS BEEN PURCHASED OUT OF BANK LOAN AND THE SAME HAS BEEN HYPOTHECATED TO THE BANK. THE BANK HAS CONDUCTED IN SPECTION AND FOUND THAT THE MACHINE IS IN EXISTENCE. D. THE ASSESSING OFFICER IS WRONG IN DISALLOWING THE DE PRECIATION FOR THE MERE FACT THAT NOTICE U/S. 133(6) ON THE VENDOR HAS BEEN RETURNED UN-SERVED, WHILE WE HAVE GIVEN OTHER DOCUMENTARY EVIDENCES FOR THE PURCHASE OF MACHINES. E. THE ASSESSING OFFICER IS WRONG IN DISALLOWING THE DE PRECIATION CLAIM WITHOUT CONSIDERING OUR REQUEST FOR PHYSICAL VERIFICATION O F THE MACHINE. F. THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE F ACT THAT THE ADVANCE PAID TO MACHINE HAS BEEN SHOWN AS CAPITAL WORK IN PROGRESS IN OUR ACCOUNTS. G. THE ASSESSING OFFICER HAS FAILED TO APPLY THE VERDI CT OF VARIOUS COURTS, WHEREIN IT HAS BEEN HELD THAT THE DEPRECIATION IS ALLOWABLE, IF TH E MACHINE IS USED EVEN FOR ONE DAY IN BUSINESS. H. THE CIT HAS FAILED TO APPRECIATE THE MERITS OF THE INSURANCE PAPERS AND PHOTOGRAPHS OF THE MACHINERY GIVEN DURING THE COURS E OF THE APPEAL, AND HAS NOT CONSIDERED OR DISCUSSED THE SAME IN HIS ORDER. I. THE CIT HAS RELIED ON THE INSPECTION REPORT FROM TH E A/O. THE ASSESSEE HAS NOT BEEN GIVEN AN OPPORTUNITY TO EXPLAIN/REFUTE THE CON TENTS OF THE SAME EITHER BY THE A/O OR THE CIT. J. THE CIT HAS FAILED TO APPRECIATE THE FACT THAT THE SALES TAX REGISTRATION WAS VALID ON THE DATE OF SALE AND THE STATUS IS LIVE. K. THE CIT HAS FAILED TO APPRECIATE THE SUBMISSION THA T THE ASSESSEE IS A BONA FIDE BUYER OF THE MACHINE, AND HIS ONUS IS TO PROVE THAT HE IS IN PHYSICAL POSSESSION OF THE SAME AND CANNOT BE HELD LIABLE FOR THE MISTAKES /NONCOMPLIANCE OF THE VENDOR. 2) ISSUE TWO: ADDITION OF LOAN CREDITORS RS.2,50,00 0/- THE ASSESSING OFFICER IS WRONG IN ADDING TWO UNSECUR ED LOAN CREDITORS RS.2,50,000/- ON THE FOLLOWING GROUNDS. A. THE ASSESSING OFFICER IS WRONG IN SAYING THAT NO CON FIRMATION FROM THE SAID TWO LOAN CREDITORS WERE PRODUCED, WHILE THE SAME WERE P RODUCED VIDE LETTER DT. 1/12/2010 IN POINT 3. B. THE ASSESSING OFFICER HAS NOT APPRECIATED THE MERITS OF THE CONFIRMATION GIVEN WHICH CONTAINS THE BANK DETAILS AND CHEQUE NO. C. THE ASSESSING OFFICER HAS NOT GIVEN US THE OPPORTUNI TY FOR GIVING FURTHER DETAILS IN RESPECT TO THIS ADDITION, BEFORE COMPLETING THE ASS ESSMENT. 2.0 GROUND NO.1 IS RELATED TO THE DISALLOWANCE OF DEPR ECIATION ON PLANT AND MACHINERY TO THE EXTENT OF RS.14,29,272/- BY TH E ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO). DURING THE ASSES SMENT PROCEEDINGS, THE ITA NO.1148/MDS/2016 :- 3 -: AO FOUND THAT THE ASSESSEE HAS PURCHASED PLANT AND MACHINERY FOR A SUM OF RS.78,73,150/- AND CLAIMED DEPRECIATION OF RS.6, 12,545/- AND ADDITIONAL DEPRECIATION OF RS.8,16,727/-. THE ASSE SSEE FURNISHED THE DETAILS IN THE FORM OF PURCHASE INVOICE, INSURANCE COPY, ETC., IN SUPPORT OF PURCHASE OF PLANT AND MACHINERY. THE AO ISSUED NOT ICE U/S.136 TO THE SUPPLIER AND THE LETTER ISSUED TO THE SUPPLIER WAS RETURNED UN-SERVED WITH REMARKS THAT NO SUCH ADDRESSEE. THE AO OBSERVED FROM THE INVOICE THAT THE SUPPLIER HAD ISSUED INVOICE NO.005 ON 20.03.200 7 FOR A SUM OF RS.9,46,400/- AND ANOTHER INVOICE NO.001 FOR RS.69, 26,750/- AND LEFT DETAILS SUCH AS MODE OF DELIVERY, LR NO, DC NO., P URCHASE ORDER NO., ETC., BLANK. THEREFORE, THE AO DISBELIEVED THE GENUINENE SS OF THE PURCHASE OF THE PLANT AND MACHINERY AND DISALLOWED THE DEPRECIA TION CLAIMED BY THE ASSESSEE. 3.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA L) (HEREINAFTER REFERRED TO AS LD.CIT(A)) AND SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE MACHINERY FROM M/S.SRI TIRUMALA ENTERPRISES,VIJ AYAWADA IN JUNE 2007, THEY HAVE BROUGHT THE MACHINERY AND INSTALLE D THE SAME IN THEIR BUSINESS PREMISES. CORPORATION BANK, MYLAPORE BRAN CH HAS SANCTIONED THE TERM LOAN AND THE PAYMENT WAS MADE DIRECTLY TO THE SUPPLIER BY MEANS OF PAY ORDERS FAVOURING M/S.SRI TIRUMALA ENTE RPRISES AFTER INSTALLATION OF THE MACHINERY. FURTHER, THE LD.AR SUBMITTED BEFORE THE LD.CIT(A) THAT M/S.SRI TIRUMALA ENTERPRISES IS NOT DOING ANY BUSINESS WITH ITA NO.1148/MDS/2016 :- 4 -: THE ASSESSEE AND CANNOT DOUBT THE GENUINENESS OF TH E TRANSACTION SINCE THERE WAS A VALID SALES TAX REGISTRATION, AND THE PAYMENT WAS MADE BY PAY ORDERS FROM THE BANK DIRECTLY TO THE SUPPLIERS. THE ASSESSEE FURNISHED PHOTOGRAPHS OF THE MACHINERY, INSURANCE D ETAILS AND ELECTRICITY CONSUMPTION, ETC., AND REQUESTED THE LD.CIT(A) TO D ELETE THE ADDITION MADE BY AO. THE A.O CAUSED THE ENQUIRY THROUGH THE ADDITIONAL RANGE-2, VIJAYAWADA, AND FOUND THAT M/S TIRUMALA ENTERPRISES FILED THE SALES TAX RETURNS WITH THE SALES TAX DEPARTMENT 01.07.2007 AN D FILED SALES TAX RETURN IN APRIL, 2008 WITH NIL TURNOVER AND ALSO IN TIMATED TO THE DEPARTMENT THAT THE BUSINESS WAS CLOSED ON 31.07.20 08. THE LD.CIT(A) HAD ISSUED SUMMONS U/S.131 AT VIJAYAWADA OFFICE AN D VISAKHAPATNAM BRANCH AS PER THE ADDRESSES GIVEN BY THE ASSESSEE. THE SUMMONS ISSUED U/S.131 WERE ALSO RETURNED UN-SERVED. DURING THE AP PEAL PROCEEDINGS THE LD.CIT(A) HAS GIVEN ENOUGH OPPORTUNITIES TO THE ASS ESSEE TO PROVE THE GENUINENESS OF TRANSACTION BUT THE ASSESSEE DID NOT ESTABLISH THE GENUINENESS OF TRANSACTION. THEREFORE, THE LD.CIT(A ) HELD THAT THE TRANSACTION WAS NOT GENUINE AND THE ASSESSEE WAS UN ABLE TO PROVE THE TRANSACTION AND ACCORDINGLY DISMISSED THE APPEAL. 4.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE ASSESS EE FILED APPEAL BEFORE US. APPEARING FOR THE ASSESSEE, THE LD.AR SUBMITTED TH AT THE ASSESSEE HAS PURCHASED THE MACHINERY FROM M/S.SRI TIRUMALA E NTERPRISES IN JUNE 2007 AND THE SELLER HAS INSTALLED THE MACHINERY AT THE BUSINESS PREMISES ITA NO.1148/MDS/2016 :- 5 -: OF THE ASSESSEE. THE ASSESSEE HAS NOT TAKEN THE DE LIVERY CHALLAN AND LR. THE ASSESSEE HAS TAKEN THE BANK LOAN FOR THE PURPOS E OF PURCHASE OF MACHINERY, PAYMENT WAS MADE DIRECTLY TO THE SUPPLIE R THROUGH BANK CHEQUE. ASSESSEE ALSO ENCLOSED THE XEROX COPY OF B ANKERS CHEQUE ISSUED BY CORPORATION BANK. THE ASSESSEE HAS STATED THAT THE MACHINERY WAS RECEIVED, INSTALLED AND INSPECTED BY THE BANK AND T HE INSURANCE COMPANY. THE AO COULD HAVE VERIFIED THE AVAILABILITY OF MACH INERY IN THE BUSINESS PREMISES AND THERE IS NO REASON TO DOUBT THE PURCHA SE OF MACHINERY. THE LD.AR CONTENDED THAT PURCHASE IS GENUINE AND THE MA CHINERY IS AVAILABLE AND HYPOTHECATED BANK. THEREFORE, THE DEPRECIATION IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. 5.0 ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTA TIVE (HEREINAFTER REFERRED TO AS LD.DR) ARGUED THAT TH E AO HAS ISSUED NOTICE U/S.133(6) WHICH WAS RETURNED UN-SERVED WITH A REAS ON THAT THERE IS NO SUCH ADDRESS. THE ASSESSEE HAS SUBMITTED THE INVOIC E DATED 20.03.2007 FROM THE SUPPLIER BEARING NO.005 DATED 20.03.2007 F OR RS.9,10,000/- AND INVOICE NO.001 DATED 12.06.2007 FOR RS.67,25,000/- AND WHICH DOES NOT BEAR THE MODE OF DELIVERY CHALLAN, ETC. THE RECEIPT S WERE SUBMITTED BY THE ASSESSEE ON A LETTER HEAD FROM M/S. SRI TIRUMALA EN TERPRISES, CHENNAI AND VISAKHAPATNAM, INSTEAD OF HEAD OFFICE, VIJAYAWADA. THE LD.DR ARGUED THAT THE DEFICIENCIES OF THE INVOICE ISSUED BY M/S. SRI TIRUMALA ENTERPRISES AND THE RECEIPTS ISSUED BY CHENNAI AND VISAKHAPATNA M ON DIFFERENT DATES LEADS TO SUSPICION. THE LD.CIT(A) CONDUCTED THE E NQUIRY THROUGH THE ITA NO.1148/MDS/2016 :- 6 -: ADDL. CIT, RANGE-2, VIJAYAWADA, AS PER THE REPORT O F ADDL. CIT, RANGE-2, VIJAYAWADA, THE FIRM M/S.SRI TIRUMALA ENTERPRISES W AS REGISTERED ON 01.07.2007 WITH COMMERCIAL TAX DEPARTMENT AND CLOSE D THE BUSINESS ON 31.07.2008 AND THE TURNOVER DECLARED BY M/S.SRI TIR UMALA ENTERPRISES WAS NIL. THE LD.CIT(A) ISSUED SUMMONS TO M/S.SRI TIRUM ALA ENTERPRISES, VIJAYAWADA AND VISAKHAPATNAM BRANCHES, SUMMONS WERE RETURNED UN- SERVED. FROM THE INFORMATION OBTAINED FROM COMMERC IAL TAX DEPARTMENT SHOWS THAT THERE WAS NO SALE MADE BY M/S.SRI TIRUMA LA ENTERPRISES TO THE ASSESSEE SINCE IT WAS REGISTERED ON 01.07.2007 WHER EAS PURCHASES WERE MADE BY THE ASSESSEE PRIOR TO 01.07.2007. THE SALE S TAX RETURNS WERE ALSO FILED WITH NIL TURNOVER. WHEN THE ASSESSEE HA S PURCHASED THE MACHINERY FROM M/S.SRI TIRUMALA ENTERPRISES, VIJAYA WADA, THE PAYMENT WAS MADE AT CHENNAI BY WAY OF BANKERS CHEQUE PAYAB LE AT CHENNAI INSTEAD OF VIJAYAWADA FOR THE REASON BETTER KNOWN T O THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT M/S.SRI TIRUMALA ENTERP RISES WAS HAVING BRANCH AT CHENNAI. THE CHRONOLOGY OF EVENTS CLEARL Y EVIDENCE THAT M/S.SRI TIRUMALA ENTERPRISES WAS NEVER REGISTERED WITH COMM ERCIAL TAX DEPARTMENT BEFORE 01.07.2007 AND CONSEQUENTLY THERE WAS NO SALE OF THE MACHINERY. THE GENUINENESS OF THE PURCHASE OF THE MACHINERY HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. POSSESSION OF MAC HINERY IS DIFFERENT AND PURCHASE OF NEW MACHINERY IS DIFFERENT. THE ASSESS EE SHOULD OWN THE MACHINERY AND UNLESS THE GENUINE PURCHASE IS ESTABL ISHED, THE ASSESSEE CANNOT BECOME THE LEGAL OWNER ENTITLING TO DEPRECIA TION. THEREFORE, THE ITA NO.1148/MDS/2016 :- 7 -: LD.DR ARGUED THAT THE LD.CIT(A) RIGHTLY CONFIRMED T HE ADDITION IT SHOULD BE UPHELD. 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE LD.AR HAS FURNISHED THE PURCHASE INVOICE, INSU RANCE COPY, THE XEROX COPIES OF PAY ORDERS OF MACHINERY ISSUED IN F AVOUR OF ASSESSEE BY THE SUPPLIERS OF MACHINERY M/S.SRI TIRUMALA ENTERPR ISES EVIDENCING PURCHASE OF MACHINERY. THE PHOTOGRAPHS OF THE MACHI NERY WAS ALSO FURNISHED BY THE ASSESSEE. THE MACHINERY WAS PURCHA SED FROM M/S.SRI TIRUMALA ENTERPRISES, VIJAYAWADA AND THE PAYMENT WA S MADE THROUGH BANKERS CHEQUE PAYABLE AT CHENNAI. THE NOTICE ISS UED BY THE AO WAS RETURNED UN-SERVED. THE ENQUIRIES MADE WITH THE CO MMERCIAL TAX DEPARTMENT SHOWS THAT THE FIRM M/S.SRI TIRUMALA ENT ERPRISES WAS REGISTERED WITH SALES TAX DEPARTMENT ON 01.07.2007 I.E. SUBSEQUENT TO THE SALE OF THE PLANT AND MACHINERY. THE SUPPLIER H AS CLOSED THE BUSINESS ON 31.07.2008 FILING NIL RETURNS OF SALES. ALL THE ABOVE EVENTS LEAD TO SUSPICIOUS FEATURES BUT DO NOT DISPROVE THE TRANSAC TION. IN THE INSTANT CASE, THE ASSESSEE HAD MADE THE PAYMENT BY BANK CHE QUE, FURNISHED THE INSURANCE COPIES AND THE PHOTOGRAPHS OF MACHINERY W HICH PROVES THE EXISTENCE AND THE POSSESSION OF MACHINERY AND TWO P UBLIC SECTOR UNDERTAKINGS HAVE INSPECTED THE MACHINERY FOR GRANT ING LOAN BY THE BANK AND FOR INSURING THE MACHINERY. THE ASSESSEE HAS FU RNISHED ALL THE EVIDENCES REGARDING THE PURCHASE OF MACHINERY AND W E DO NOT FIND REASON ITA NO.1148/MDS/2016 :- 8 -: TO DISALLOW THE DEPRECIATION. HENCE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE A.O IS DELETED. THE ASSESSEES GROUND OF THE APPEAL IS ALLOWED. 7.0 GROUND NO.2 IS RELATED TO THE ADDITION ON ACCOUNT OF LOAN CREDITORS U/S.68 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT THE ASSESSEE HAS OBTAINED LOANS FROM SMT. G.BANUMATHI & MANJULA AND THE ASSESSEE HAS FURNISHED PAN, BANK STATEMENTS AND IT RETURNS. SINCE THE ASSESSEE HAS NOT FURNISHED THE CONFIRMATION LETTERS FROM THE CREDITORS, THE AO MADE THE ADDITION U/S.68 OF THE ACT. THE LD.CIT(A) CONF IRMED THE ADDITION MADE BY THE AO. THE LD.AR OF THE ASSESSEE SUBMITTED THA T HE HAS FURNISHED THE CONFIRMATION LETTERS ON 01.12.2010 AND THE AO HAS N OT APPRECIATED THE MERITS OF CONFIRMATION AND NOT GIVEN FURTHER OPPORT UNITY FOR SUBMITTING FURTHER DETAILS. ON THE OTHER HAND, THE LD.DR RELI ED ON THE ORDERS OF LOWER AUTHORITIES. 8.0 WE HEARD THE RIVAL SUBMISSIONS AND OBSERVED THAT T HE ASSESSEE HAS FURNISHED CONFIRMATIONS, PAN, BANK STATEMENTS AND I T RETURNS. HAVING FURNISHED ALL THE RELEVANT DETAILS, THE BURDEN OF T HE ASSESSEE HAS BEEN DISCHARGED AND IT IS FOR THE DEPARTMENT TO MAKE FUR THER ENQUIRIES TO DISPROVE THE TRANSACTION. IN THE APPELLANTS CASE, THE AO HAS NOT MADE ANY SUCH EXERCISE AND MERELY CONCLUDED THAT THERE W AS NO CREDITWORTHINESS TO THE CREDITORS. WE ARE UNABLE T O APPRECIATE THE ITA NO.1148/MDS/2016 :- 9 -: CONTENTION OF THE AO, SINCE THE ASSESSEE HAS FURNIS HED THE CONFIRMATIONS, PAN, BANK STATEMENTS AND IT RETURNS. THERE IS NO NE ED TO SUSPECT THE GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDIT ORS WITHOUT HAVING ANY MATERIAL. THEREFORE, THE ADDITION MADE BY THE AO IS DELETED AND THIS GROUND OF THE APPEAL IS ALLOWED. 9.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 31 ST JANUARY, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF