The ITO, Ward-6(4), Ahmedabad V. M/s. Babulal Karsandas & Co., Ahmedabad

ITA 1189/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9832 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N DIVATIA
• Keywords: Depreciation; Additional evidence; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1135 & 1189/AHD/2012 (ASSESSMENT YEAR: 2008-09) M/S. BABULAL KARSANDAS & CO. 55/1, GIDC, OPP: BANK OF INDIA, VATVA, AHMEDABAD INCOME TAX OFFICER, WARD- 6 (4), AHMEDABAD V/S V/S INCOME TAX OFFICER, WARD- 6 (4), AHMEDABAD M/S. BABULAL KARSANDAS & CO. 55/1, GIDC, OPP: BANK OF INDIA, VATVA, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACFB1281G APPELLANT BY : SHRI S. N. DIVATIA, AR RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 14 -12-201 6 DATE OF PRONOUNCEMENT : 16 -12-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 2 1. ITA NOS.1135 & 1189/AHD/2012 ARE CROSS APPEALS BY T HE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE VERY SAME ORDER OF TH E LD. CIT(A)-XI, AHMEDABAD DATED 12.10.2006 PERTAINING TO A.Y. 2008- 09. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1135/AHD/2012 ASSESSEES APPEAL FOR A.Y. 20 08-09 3. WITH GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE FINDINGS OF THE LD. CIT(A) IN NOT ENTERTAINING EVIDENCES PRODUCED DURING THE A PPELLATE PROCEEDINGS UNDER RULE 46-A OF THE ACT. 4. WE HAVE CAREFULLY PERUSED THE ORDER OF THE FIRST AP PELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY HAS OBSERVED THAT THE ASS ESSEE HAD GOT SUFFICIENT OPPORTUNITY GIVEN BY THE A.O. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS YET THE ASSESSEE FAILED TO AVAIL THOSE OPPORTUNITIES WHICH PROMPTED THE ASSESSING OFFICER TO MAKE AN ASSESSMEN T ORDER U/S. 143(3) OF THE ACT IN THE MANNER OF ORDER PASSED U/S. 144. THE FIRST APPELLATE AUTHORITY PROCEEDED BY DECIDING THE APPEAL ON THE B ASIS OF EVIDENCES AVAILABLE BEFORE THE A.O. DURING THE ASSESSMENT PRO CEEDINGS AND REMAND PROCEEDINGS ONLY. 5. SINCE THE FIRST APPELLATE AUTHORITY HAS ADMITTED CE RTAIN EVIDENCES AND TRANSMITTED THE SAME TO THE A.O. CALLING FOR THE RE MAND REPORT, THE ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 3 EVIDENCES WHICH WERE NOT SUBMITTED DURING THE REMAN D PROCEEDINGS WERE NOT CONSIDERED. WE, THEREFORE, DO NOT FIND ANY ERRO R OR INFIRMITY IN THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. GROUND N O. 1 IS ACCORDINGLY DISMISSED. 6. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF EXPENSE S OF RS. 83,944/- IN RESPECT OF REPLACEMENT OF GATE. 7. BEFORE THE A.O., THE ASSESSEE CLAIMED THAT INFRASTR UCTURE DEVELOPMENT PROGRAMME BY VATVA INDUSTRIAL ESTATE BY DEVELOPING ROADS, STREET LIGHTS, DRAINAGE SYSTEM ETC, AS A CONSEQUENCE OF WHICH THE GROUND LEVEL WAS ALLEVIATED WHICH PROMPTED THE ASSESSEE TO REPLACE T HE EXISTING GATE WITH A NEW ONE. IT IS THE SAY OF THE LD. COUNSEL THAT OUT OF RS. 83,944/-, RS. 25,000/- IS TOWARDS CONTRIBUTION TO VATVA INDUSTRIAL ESTATE AND REMAINING TOWARDS NEW GATE. WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT PERUSAL OF THE RECORD REVEALS THAT THE ASSESSEE HAS NOT GIVEN ANY COGENT EVIDENCE TO PROVE ITS SUBMISSION. DISALLOWANCE OF RS. 83,944/- WAS ACCORDINGLY CONFIRMED. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL POINT ED OUT THAT BECAUSE OF THE DEVELOPMENT PROGRAMME UNDERTAKEN BY VATVA INDUS TRIAL ESTATE, THE GROUND LEVEL WAS ALLEVIATED AND, THEREFORE, THE ASS ESSEE HAS TO INCUR THE IMPUGNED EXPENSES. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 4 9. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FIND INGS OF THE LOWER AUTHORITIES, WE FIND THAT SO FAR AS RS. 25,000/- IS CONCERNED, IT IS CONTRIBUTION TO VATVA INDUSTRIAL ESTATE AND, THEREF ORE, HAS TO BE ALLOWED AS INCURRED DURING THE COURSE OF THE BUSINESS. A PERUS AL OF THE COPY OF THE LEDGER ACCOUNT EXHIBITED AT PAGE 35 OF THE PAPER BO OK CLEARLY SHOWS THAT THE ASSESSEE HAS INCURRED EXPENDITURE FOR A NEW IRO N GATE EVEN THE LABOUR CHARGES ARE SHOW AS INCURRED FOR NEW GATE CONSTRUCT ION. IN OUR CONSIDERED OPINION AND ON THE APPRECIATION OF THE FACTS EMANAT ING FROM THE COPY OF THE LEDGER ACCOUNT AT PAGE 35 OF THE PAPER BOOK, RS . 58,944 IS A CAPITAL EXPENDITURE AND THE SAME HAS TO BE DISALLOWED AS SU CH. THE A.O. IS DIRECTED TO ALLOW DEPRECIATION AS PER THE PROVISIONS OF THE LAW ON THE AMOUNTS OF RS. 58,944/- . GROUND NO. 2 IS PARTLY ALLOWED. 10. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF EXPENSE S OF RS. 25,12,232/- IN RESPECT OF THE REPAIRS TO MACHINERY. 11. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED RS. 23,62,748/- TOWAR DS MACHINERY REPAIRING EXPENSES WHICH WAS FOUND TO BE HIGHER THAN THE WDV OF MACHINERY AS ON 01.04.2007. THE A.O. FURTHER NOTICED THAT EXCEPT FO R RS. 7,004/- ALL OTHER EXPENDITURE PERTAINS TO REPLACEMENT OF MACHINERY PA RTS. THE A.O. TREATED THE AMOUNT OF RS. 25,12,232/- AS CAPITAL EXPENDITUR E AND ALLOWED DEPRECIATION ON THE SAME. ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 5 12. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT THE EXPENDITURES WERE NOTHING BUT REPLACEMENT OF NEW WH EELS BELTS, VEE BELTS, PUMP CASTING BUSH ETC. IT IS SAY OF THE LD. COUNSEL THAT SUCH EXPENDITURES ARE NECESSARY FOR KEEPING THE MACHINERY ROLLING IN THIS LINE OF BUSINESS. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDING S OF THE LOWER AUTHORITIES AND IN SUPPORT RELIED UPON THE CO-ORDINATE BENCH IN ITA NO. 10/CHD/2013. 14. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE HAVE ALSO GONE THROUGH THE COPY OF LEDGER ACCOUNT EXTRAC TED AT PAGES 27 TO 31 OF THE PAPER BOOK. WE FIND FORCE IN THE CONTENTIONS OF THE LD. COUNSEL. ALL THE EXPENSES HAVE BEEN INCURRED IN RESPECT OF SPARE PAR TS USED IN THE MACHINERY. IN OUR CONSIDERED OPINION, SUCH EXPENDIT URES HAVE TO BE INCURRED TO KEEP THE MACHINERY ROLLING. THEREFORE, SUCH EXPENDITURES HAVE TO BE ALLOWED AS REVENUE EXPENDITURE. WE ALSO FIND THAT THE ASSESSEE HAS INCURRED SIMILAR EXPENDITURES IN PRECEDING AS WELL AS SUCCEEDING YEARS AS PER THE FOLLOWING CHART:- MACHINERY REPAIRING EXPENSES F.Y. AMOUNT 2004-04 RS. 1736752/40 2005-06 RS.1213265/- 2006-07 RS.2007756/31 2007-08 RS. 23,62,748/- ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 6 2008-09 RS.23,65,274/- 2009-10 RS. 18,63,804/- 2010-11 RS. 10,06,786/- 15. SINCE NO ADVERSE INFERENCE HAS BEEN DRAWN IN THE PR ECEDING YEAR, WE DO NOT FIND ANY REASON FOR DISALLOWING THE SIMILAR EXP ENDITURE FOR THE YEAR UNDER CONSIDERATION. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO ALLOW THE IMPUGNED EXPENDITU RE AFTER WITHDRAWING THE DEPRECIATION ALLOWED BY HIM. GROUND NO. 3 IS AC CORDINGLY ALLOWED. 16. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS. 1,2 0,395/- OUT OF SALARY AND WAGES ON ADHOC BASIS. 17. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS ASKED TO PRODUCE EVIDENCES IN SUPPORT OF SALARY AND WAGES EXPENDITURE. THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT PRODUCE D ANY EVIDENCE IN SUPPORT OF SALARY AND WAGES EXPENDITURE AND ACCORDI NGLY DISALLOWED 20% OF THE SAME AND MADE AN ADDITION OF RS. 1,20,395/-. 18. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 19. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT COPIES OF LEDGER ACCOUNTS WERE FURNISHED WHICH WERE NOT CONSIDERED B Y THE LOWER AUTHORITIES. IT IS SAY OF THE LD. COUNSEL THAT THES E EXPENDITURES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND, ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 7 THEREFORE, ADHOC DISALLOWANCE IS UNCALLED FOR. PER CONTRA, THE LD. D.R. SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 20. AFTER GIVING A CAREFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE A RE AUDITED AND NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE AUDITORS IN SO FAR AS THESE EXPENDITURES ARE CONCERNED. SINCE THE BOOKS OF ACCO UNTS ARE FOUND TO BE AUDITED WITH NO QUALIFIED REMARKS FROM THE AUDITORS , ADHOC DISALLOWANCE IS UNCALLED FOR. WE, ACCORDINGLY, SET ASIDE THE FINDIN GS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 1,20, 395/-. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1189/AHD/2012 REVENUES APPEAL FOR A.Y. 200 8-09 22. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 39,42,046/- ON THE BASIS OF ADDITIO NAL EVIDENCES VIOLATING THE PROVISIONS OF RULE 46-A. 23. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS DEBITED RS. 1,31,40,161/- UNDER THE HEAD POWER AND FUEL. THE A.O. FURTHER NOTICED THAT AS PER THE AUDIT REPORT POWER AND FUEL CHARGES WERE AT RS. 96,67,110/- TOWARDS FUEL PURCHASE AND RS. 34,73 ,051/- TOWARDS ELECTRIC BURNING EXPENSES. THE ASSESSEE WAS ASKED TO PRODUCE POWER AND FUEL ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 8 ACCOUNT ALONG WITH SUPPORTING BILLS/INVOICES FOR VE RIFICATION. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O. DISALLOWED 30% OF THE POWER AND FUEL EXPENSES AND MADE AN ADDITION OF RS. 39,42,048/-. 24. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND SUBMITTED ALL THE NECESSARY EVIDENCES. THE FIRST AP PELLATE AUTHORITY CALLED FOR A REMAND REPORT FROM THE A.O., WHO SUBMITTED A REPORT DATED 24.01.2012, THE RELEVANT PART OF THE REPORT READS A S UNDER:- IN ITS SUBMISSION MADE BEFORE THE HON'BLE CIT(A) T HE ASSESSES HAS PURPORTEDLY FURNISHED THE DETAILS PERTAINING TO FUEL EXPENSES ( ANNEXURE-1), DETAILS OF ELECTRICITY EXPENSES (ANNEXURE 2) AND DETAILS OF SA LARY, WAGES AND BONUS (ANNEXURE-3). PERUSAL OF THE DETAILS SO FURNISHED, REVEALED THAT THE ASSESSEE HAS MERELY FURNISHED LEDGER ACCOUNTS IN RESPECT TO ALL THE EXPENSES WHILE ALSO FURNISHING BILLS FOR ELECTRIC BURNING EXPENSES OF R S. 34,73,051/- FOR THE RELEVANT PERIOD. THE ELECTRICITY BILLS SO FURNISHED ARE VERI FIED AND FOUND TO BE IN ORDER AND WITHOUT PREJUDICE, THE SAID EXPENSES MAY BE TREATED AS EXPLAINED IF THE HONBLE CIT(A) IS INCLINED TO ADMIT THE ADDITIONAL EVIDENCE S.' 25. AFTER CONSIDERING THE FACTS IN THE LIGHT OF THE REM AND REPORT, THE LD. CIT(A) DELETED THE ADDITION OF RS. 39,40,246/-. 26. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY STATED THAT THE LD. CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE S IN VIOLATION OF RULE 46- A. THEREFORE, THE FINDINGS OF THE LD. CIT(A) DESERV ES TO BE REVERSED. PER ITA NO. 1135 & 1189/AHD/2012 . A.Y. 2008-0 9 9 CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 27. WE HAVE CONSIDERED THE ORDERS OF THE AUTHORITIES BE LOW, WE FIND THAT ALL THE SUPPORTING EVIDENCES FURNISHED BEFORE THE FIRST APPELLATE AUTHORITY WAS TRANSMITTED BY HIM TO THE A.O. FOR EXAMINATION AND CALLING FOR A REMAND REPORT. ELSEWHERE, WE HAVE EXTRACTED THE REL EVANT PART OF THE REMAND REPORT, A PERUSAL OF THE SAME SHOWS THAT AFT ER VERIFICATION THE A.O. HIMSELF AS MENTIONED THAT THE SAID EXPENSES MAY BE TREATED AS EXPLAINED IF THE LD. CIT(A) IS INCLINED TO ADMIT THE ADDITION AL EVIDENCES. THIS OBSERVATION OF THE A.O. ITSELF SHOWS THAT THE EVIDE NCE CONSIDERED BY THE FAA GO TO THE ROOT OF THE MATTER AND SINCE OPPORTUN ITY WAS GIVEN TO THE A.O. FOR VERIFICATION, THERE IS NO DENIAL OF NATURA L JUSTICE. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY ERROR OR INFI RMITY IN THE FINDINGS OF THE LD. CIT(A). 28. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 16 - 12- 201 6. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 16 /12/2016 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)