The DCIT, Circle-9, Ahmedabad V. M/s. Khanij Excavations, Ahmedabad

ITA 3430/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60293 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 30-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U S BHATI
• Keywords: Depreciation
• Section: 68

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , !', #$ # % BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. ./ I.T.A.NO.3430/AHD/2009 - ( ( ( (/ // / A.Y. 1997-1998 2. ./ I.T.A.NO.3420/AHD/2009 - ( ( ( (/ // / A.Y. 1999-2000 1. DCIT CIRCLE-9 AHMEDABAD 2. M/S.KHANIJ EXCAVATIONS AHMEDABAD / VS. 1. M/S.KHANIJ EXCAVATIONS 25, SOMNATHNAGAR SOCIETY NARANPURA CHAR RASTA AHMEDABAD 2. DY.CIT (OSD) CIRCLE-9, AHMEDABAD ) #$ ./*+ ./ PAN/GIR NO. : AGCPP9230F ( ), / // / APPELLANTS ) .. ( -.), / RESPONDENTS ) ASSESSEE BY : SHRI U.S.BHATI REVENUE BY : SHRI SAMIR TEKRIWAL, SR.D.R. / 0 '$ / / / / DATE OF HEARING : 24/4/2012 12( 0 '$ / DATE OF PRONOUNCEMENT : 27/4/12 #3 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS ARE IN RESPECT OF THE SAME APPEL LANT PERTAINING TO THE AYS 1997-98 & 1999-2000 ARISING FROM THE OR DERS OF THE CIT(A)- XV, AHMEDABAD RESPECTIVELY ORDERS DATED 28/10/20 09 AND 27/10/2009. FIRST, WE SHALL TAKE UP THE REVENUES APPEAL FOR A .Y. 1997-98. [A] ITA NO.3430/AHD/2009 (A.Y. 1997-98 REVENUES APP EAL) : 2. GROUNDS RAISED BY THE REVENUE ARE HEREBY DECI DED AS FOLLOWS:- ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 2 - 1) THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.1292704/- MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN [STCG] ON SALE OF DUMPERS. 3. FACTS OF THE CASE AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 254 IS THAT THE ASS ESSEE-FIRM IS IN THE BUSINESS OF EARTH EXCAVATION. FOR THE YEAR UNDE R CONSIDERATION, IN THE PAST, ITAT C BENCH AHMEDABAD VIDE ITA NO.2481/AHD /2002 AND ITA NO.3105/AHD/2002 FOR A.Y. 1997-98 ORDER DATED 04/05/2007 VIDE PARA-7 HAS RESTORED THE ISSUE TO THE FILE OF THE AO AS FOLLOWS:- 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MA TERIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE, LOWER AU THORITIES HAVE NOT ADVERTED TO THE CONTENTS OF THE MOU, BESIDES, A PPLICABILITY OF SECTION 19 OF THE SALE OF GOODS ACT HAVE NOT BEEN E XAMINED. SO ALSO, WE CANNOT GET ANY INFORMATION REGARDING TREAT MENT GIVEN BY MEC IN THEIR BOOKS, IN OUR CONSIDERED OPINION, AL L THESE ASPECTS ARE VITAL, HAVING IMPORTANT HEARING ON THE ISSUE, I N VIEW OF THIS, WE ARE INCLINED TO SET ASIDE THIS ISSUE BACK TO THE FI LE OF AO TO DECIDE THE SAME AFRESH IN VIEW OF THE ABOVE OBSERVATIONS A ND TO DECIDE THE MATTER IN ACCORDANCE WITH LAW AFTER GIVING ASSE SSEE AN OPPORTUNITY OF BEING HERD. 3.1. CONSEQUENT THEREUPON, THE ISSUE WAS HEARD BY THE AO AND IN COMPLIANCE OF SHOW-CAUSE NOTICE, IT WAS SUBMITTED AS UNDER:- 2. REGARDING SHORT TERM CAPITAL GAINS ON SALE OF D UMPERS IT IS AN UNDISPUTED FACT THAT THE 5 DUMPERS IN QUES TION WERE GIVEN TO M/S.MAHALAXMI ENGINEERING CO. GANDHINAGAR ON LEA SE AND THE LEASE RENT IN RESPECT OF THESE 5 DUMPERS UPTO 30/9/ 1996 RS.2,75,000/- HAD BEEN ACCOUNTED FOR AN SHOWN AS TH E INCOME OF ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 3 - THE YEAR UNDER CONSIDERATION. THE SAID DUMPERS WER E ALREADY IN THE POSSESSION OF THIS PARTY EVEN PRIOR TO 1/4/1996 . ON 7 TH OCTOBER, 1996 AN AGREEMENT TO SELL THESE DUMPERS TO THIS PARTY WAS ENTERED INTO AS PER THE COPY OF THE MEMORANDUM OF UNDERSTANDING, WHICH WAS FILED IN THE ORIGINAL PROC EEDINGS. HOWEVER, A COPY OF THE SAME IS ENCLOSED HEREWITH FO R YOUR READY REFERENCE. AS PER THIS MOU THE 5 DUMPERS WERE AGR EED TO BE SOLD TO THIS PARTY ON THE TERMS AND CONDITIONS INCORPORA TED IN THIS MOU. THE FIRST CONDITION WAS REGARDING THE PRICE O F THESE DUMPERS WHICH WAS FIXED AT RS.4,00,000/- FOR EACH D UMPER. THE CONDITION WAS VERY MUCH THERE REGARDING THE PAYMENT S TO BE MADE BY THIS PARTY TO THE ASSESSEE FIRM AND THEN THE FIR ST PARTY I.E. THE ASSESSEE WAS TO COMPLY WITH ALL THE FORMALITIES OF PAPERS TO BE HANDED OVER TO THIS PARTY. THE PAYMENTS RECEIVED F ROM THE VENDEES WERE RS.10,25,000/- UPTO 15/2/1997 AND THIS AMOUNT WAS SHOWN IN THE BALANCE SHEET BY THE ASSESSEE FIRM AS A LIABILITY AS ON 31/3/1997. IT WOULD BE SEEN FROM THE ASSESSMENT O RDER DATED 29/3/2000 THAT THE A.O. HAD DOUBTS ABOUT THE GENUIN ENESS OF THE SALE TRANSACTION AS SUCH. HOWEVER, WHEN THE COMMUN ICATION WAS RECEIVED FROM THE ACIT INV. CIRCLE, BHUJ THE A.O. A CCEPTED THE FACT OF THE SALE OF THESE DUMPERS. HOWEVER, THE ENQUIRIES WITH THE RTO OFFICE, AHMEDAB AD REVEALED THAT THE SAID DUMPERS WERE REGISTERED IN T HE NAME OF M/S.KHANIJ EXCAVATIONS I.E. THE ASSESSEE FIRM UPTO 8/5/1997 AND 9/5/1997, THE DATES ON WHICH THE NO.DUE CERTIFICATE WAS OBTAINED FROM THE OFFICE OF THE RTO AHMEDABAD IN FAVOUR OF R TO, BHUJ. THE A.O. THEN ACCEPTED THE FACT ABOUT THE SALE OF T HE DUMPERS. HOWEVER, THE THEN A.O. HAS OBSERVED THAT THE 5 DUM PERS HAD BEEN SOLD BY M/S.KHANIJ EXCAVATORS TO M/S.MAHALAXMI ENGINEERING CO. FOR RS.2,95,000/- EACH, TOTALING TO RS.14,75,000/-. IT WAS FURTHER OBSERVED BY HIM THAT THE DELIVERY OF THE DUMPERS WAS OBTAINED BY THE VENDEES ON 8/10/1996. ON THE BASIS OF THIS INFORMATION FROM THE ACIT, BHUJ, THE THEN A.O. ISSUED A SHOW CAUSE NOTICE ON 2 3/3/2000 TO THE ASSESSEE TO EXPLAIN WHY THE DEPRECIATION CLAIMED ON THESE DUMPERS, AMOUNTING TO RS.72,918/- BE NOT DISALLOWED . THE REPLY WAS EXPECTED WITHIN 3 DAYS AND THEN WITHOUT WAITING FOR THE REPLY ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 4 - FROM THE ASSESSEE FIRM THE A.O. DISALLOWED THE DEPR ECIATION CLAIMED ON THESE DUMPERS AND FURTHER ADDED AN AMOUN T OF RS.12,92,704/- AS PER THE OPENING PARAGRAPH ON PAGE 10 OF THE ASSESSMENT ORDER DATED 29/3/2000. THE MATTER WAS THEN SUBJECT MATTER IN APPEALS AND ULTIMATELY THE ITAT C BENCH AHMEDABAD VIDE ORDER DATED 4/5/2007 HAD SET ASIDE THE ORIGINA L ASSESSMENT ORDER VIDE PARAGRAPHS 4 TO 7 OF THEIR ORDER ON THIS ISSUE THE OBSERVATIONS IN PARAGRAPH 7 OF THE ORDER OF THE ITA T ARE AS UNDER: 3. IN THE CONTEXT OF THE ABOVE, WE WOULD LIKE TO MAKE THE FOLLOWING SUBMISSIONS FOR YOUR KIND CONSIDERATION: (I) AS PER THE MOU, THE PRICE OF THE DUMPERS WAS F IXED AT RS.4,00,000/- EACH I.E. TOTAL CONSIDERATION WAS FI XED AT RS.20,00,000/- AND THE SAME WAS TO BE PAID IN TO IN STALLMENTS THE LAST ONE WAS ON OR BEFORE 31-1-1997. THEREFORE, IT COULD BE SAID THAT THE PAYMENT OF CONSIDERATION BY MAHALAXMI ENGG . CO. WAS THE ESSENCE OF THE CONTRACT AND SO LONG AS THE PAYM ENT WAS NOT RECEIVED, THE PROPERTY IN THESE DUMPERS CANNOT BE S AID TO HAVE PASSED TO MAHALAXMI ENGG.CO. AS PER THE REPORT OF THE ACIT BHUJ (DATED 22-3-2000) THE TOTAL PAYMENTS OF RS.14, 75,000/- ONLY, WERE MADE BY MAHALAXMI ENGG.CO. TO THE ASSESSEE FIR M ON THE FOLLOWING DATES BY VARIOUS CHEQUES AS UNDER: (1) RS.5,25,000/- BY CHEQUE DT. 8/10/1996 (2) RS.5,00,000/- BY CHEQUE DT.17/2/1997 (3) RS.3,50,000/- BY CHEQUE DT.11/4/1997 (4) RS.1,00,000/- BY CHEQUE DT.7/6/1997 IN ALL RS.14,75,000/- ONLY WERE PAID AS AGAINST THE MOU AGREED PRICE OF RS.20,00,000/-. THE PAYMENT OF THE SALE C ONSIDERATION UPTO 31/3/1997 WAS ONLY RS.10,25,000/- AS SHOWN IN THE BALANCE ON THE LIABILITY SIDE BY THE ASSESSEE FIRM. THEREF ORE, THERE COULD BE NO PRESUMPTION OF TRANSFER OF THESE DUMPERS IN FAVO UR OF THE VENDEES, SIMPLY BECAUSE THE 5 DUMPERS WERE ALREADY IN THEIR POSSESSION (ON LEASE BASIS) ON THE DATE OF THE MOU. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 5 - (II) EVEN ASSUMING THAT THE SALE PRICE WAS RS.14,7 5,000/-, AS SHOWN BY MAHALAXMI ENGG. CO. IN THEIR BOOKS, THE RT O REGISTERS SHOW THAT THE LEGAL OWNERSHIP WAS TRANSFERRED TO MA HALAXMI ENGG. CO. ONLY IN THE MONTH OF MAY, 1997 AS CERTIFI ED BY THE RTO AHMEDABAD IN THE REPLY GIVEN TO THE THEN A.O. THIS ASPECT HAS NOT BEEN APPRECIATED PROPERLY IN THE ORIGINAL ASSESSMEN T. YOUR HONOUR MAY NOW APPRECIATE THE SAME IN PROPER PERSPE CTIVE. 3.2. HOWEVER, THE AO WAS NOT CONVINCED AND HELD TH AT FIVE DUMPERS WERE SOLD TO MAHALAXMI ENGINEERING COMPANY. THE A SSESSEE HAS NOT RECORDED THE SALES IN THE BOOKS OF ACCOUNTS. AS PE R AO, THE POSSESSION WAS HANDED OVER ON 8/10/1996 AND DUMPERS WERE REGIS TERED WITH THE RTO UPTILL 9/05/1997. THE SAID CONCERN HAS DULY R EFLECTED THE PURCHASE OF DUMPERS IN ITS BOOKS OF ACCOUNTS AND CLAIMED THE DEPRECIATION. HE HAS THEREFORE HELD THAT THE ASSESSEE HAS EARNED SHO RT-TERM CAPITAL GAIN AND COMPUTED THE SAME AS PER THE PROVISIONS OF SECTION 50(2) OF IT ACT AS FOLLOWS:- SALE CONSIDERATION OF 5 DUMPERS RS.14,75,000/- LESS : WDV FOR A.Y. 1997-98 RS. 1,82,296/- SHORT TERM CAPITAL GAIN RS.12,92,704/- ======== 4. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS DECIDED THE ISSUE IN ASSESSEES F AVOUR AS FOLLOWS:- 7. IT IS SEEN THAT THE AO HAS MADE THE ADDITION W ITHOUT DISCUSSING THE POINTS MENTIONED IN PARA 7 OF HONBL E ITAT ORDER. AFTER GOING THROUGH RIVAL SUBMISSIONS IN MY OPINION THE ADDITION OF RS.12,92,704 SHOULD BE DELETED BECAUSE OF THE FO LLOWING REASONS: ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 6 - FULL PAYMENT AGREED IN THE MOU WAS NEVER RECEIVED B Y THE APPELLANT AND THE AGREED SALE WAS ACTUALLY NOT EFFE CTED DURING THE YEAR UNDER CONSIDERATION. MAHALAXMI ENGINEERING C OMPANY WAS ALREADY IN POSSESSION OF THE DUMPERS ON THE DATE OF THE MOU BECAUSE IT HAD TAKEN THESE DUMPERS ON LEASE FROM TH E APPELLANT AND WAS PAYING LEASE RENT WHICH WAS SHOWN BY THE APPELLANT IN ITS RETURN. AS PER SECTION 19 OF SALE OF GOODS AC T INTENTION OF THE PARTIES ENTERING THE MOU SHOULD BE SEEN, THE INTENT ION OF THE APPELLANT WAS TO PART WITH THE POSSESSION OF THE DU MPERS, ONLY ON RECEIVING FULL PAYMENT. FURTHER THE APPELLANT HAS SHOWN PART PAYMENT RECEIVED AS LIABILITY IN ITS BALANCE SHEET IN ITS RETURN OF THE YEAR AND HAD ALSO BEEN CLAIMING DEPRECIATION. IN T HE COMPUTATION OF INCOME OF AY 2000-2001 THE WDV OF THE DUMPERS H AS BEEN SHOWN ONLY OF RS.39,376 WHICH HAS BEEN REDUCED FROM THE SALE CONSIDERATION RECEIVED OF RS.14,75,000 AND THIS IS HOW SHORT TERM CAPITAL GAIN OF RS.14,35,624 HAS BEEN SHOWN IN AY 2 000-2001. AS STCG HAS BEEN SHOWN IN IT RETURN OF AY 2000-2001 W HEN THE APPELLANT GOT CONVINCED THAT IT WOULD NOT RECEIVED RS.20,00,000 THE SALE PRICE AGREED IN THE MOU, THE ADDITION OF S TCG IN THE PRESENT AY IS NOT JUSTIFIED AND IS DIRECTED TO BE DELETED. 5. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.SAM IR TEKRIWAL HAS ARGUED THAT THE AO HAS CORRECTLY ASSESSED THE SHOR T-TERM CAPITAL GAIN FOR THE YEAR UNDER CONSIDERATION BECAUSE THE ASSESSEE H AS SHOWN THE RENT ON THOSE DUMPERS UPTILL SEPTEMBER-1996 AND NO RENT WAS SHOWN FROM OCTOBER-1996 TO MARCH-1997. IT WAS BECAUSE OF THE FACT THAT THE POSSESSION WAS HANDED OVER TO MAHALAXMI ENGINEERING CORPORATION (IN SHORT MEC) IN TERMS OF MOU DATED 07/10/1996. LD. DR HAS ALSO PLACED RELIANCE ON THE FINDING OF THE AO THAT THE S AID CONCERN, I.E. MEC HAS SHOWN IN THE BOOKS OF ACCOUNTS PURCHASES OF DUM PERS AND CLAIMED DEPRECIATION. HE HAS THEREFORE CONCLUDED THAT SINC E NO RENT WAS SHOWN ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 7 - BY THE ASSESSEE FROM OCTOBER-1996 AND THAT THE SAID OTHER PARTY HAS SHOWN THE PURCHASES IN ITS BOOKS OF ACCOUNTS AND TH AT ON INVESTIGATION ACIT (INV.), CIRCLE,BHUJ HAS INFORMED THAT THE TIP PERS WERE BOUGHT TO SITE BY MEC, LD.DR HAS PLEADED THAT THE CORRECT YEA R OF SHORT TERM CAPITAL GAIN SHOULD BE 1997-98, HENCE THE ACTION OF THE AO DESERVES TO BE ACCEPTED. 6. ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDE NT-ASSESSEE, LD.AR MR.U.S.BHATI APPEARED AND INFORMED THAT SINCE THE D UMPERS WERE ALREADY GIVEN ON HIRE TO MEC, THEREFORE THERE WAS NO QUESTI ON OF HANDING OVER THE POSSESSION ON A PARTICULAR DATE AS ALLEGED BY L D.DR. THE MOU HAS SIMPLY STATED THAT A SUM OF RS.10 LACS SHALL BE PAI D INITIALLY BY MEC, I.E. PARTY OF THE SECOND PART TO THE ASSESSEE, I.E. PART Y OF THE FIRST PART AT THE TIME OF DELIVERY OF TIPPERS. AS PER MOU, THE BALAN CE AMOUNT WAS TO BE PAID UPTO 31/01/1997. HE HAS INFORMED THAT UNDIS PUTEDLY THE MOU IS DATED 7/10/1996. HOWEVER, DUE TO CERTAIN MISUNDERS TANDING, THERE WAS DELAY IN SETTLEMENT OF ACCOUNTS AND LATER ON FOR A. Y. 2000-01 THE SHORT- TERM CAPITAL GAIN WAS SHOWN BY THE ASSESSEE AS UNDE R:- SHORT TERM CAPITAL GAINS: DATE OF TRANSFER 31-03-00 SALE PRICE RS.1,475,000 LESS: WRITTEN DOWN VALUE RS. 39,376 RS.1,435,624 6.1. LD.AR HAS PLACED RELIANCE ON R.DALMIA (DECEA SED) VS. CIT 133 ITR 169 (DEL.). HE HAS ALSO MENTIONED THAT THE IN TENTION AS REFLECTED IN ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 8 - THE MOU WAS TO PART-WITH THE OWNERSHIP OF THE DUMPE RS ONLY ON RECEIVING FULL PAYMENT. THE OWNERSHIP WITH THE RT O REMAINED WITH THE ASSESSEE UPTO 8-9/05/1997, MEANING THEREBY UPTO MAR CH-1997, RELEVANT FOR A.Y. 1997-98 THE OWNERSHIP REMAINED WITH THE AS SESSEE. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE PERUSED THE RELEVANT ORDERS AS ALSO THE ORDER OF THE RESPECTED CO-ORDINATE BENCH AS REFERRED SUPRA. AS FAR AS THE CONTENTS OF THE M OU IS CONCERNED, THERE IS A MENTION OF DETAILS OF PAYMENT AND THE REQUISITE C ONDITION WAS THAT THE PAYMENTS WERE TO BE MADE AT THE TIME OF DELIVERY OF THE TIPPERS. AS PER THE COPY OF ACCOUNT, PLACED ON PAGE NOS.24 & 25 OF THE PAPER-BOOK, PAYMENT RECEIVED IN THE MONTH OF OCTOBER-1996 WAS RS.5,25,000/- AND ON FEBRUARY-1997 A SUM OF RS.5 LACS WAS RECEIVED. LATER ON, IN THE NEXT F.Y. 1997-98 I.E. A.Y. 1998-99 ON 05/04/1997 A SUM OF RS.3,50,000/- WAS RECEIVED AND THEREAFTER ON 31/05/1997 AND 05/06 /1997 RS.1 LAC EACH WAS RECEIVED. AS PER THE VEHEMENT CONTENTION OF T HE ASSESSEE, THE DISPUTE WAS RESOLVED IN THE F.Y. 1999-2000, HENCE I N A.Y. 2000-01 SHORT-TERM CAPITAL GAIN WAS DISCLOSED. COPY OF T HE RETURN IS PLACED ALONG WITH THE STATEMENT OF TOTAL INCOME FOR A.Y. 2 000-01. BEFORE US, A DECISION OF R.DALMIA (SUPRA) HAS BEEN CITED THAT AC CORDING TO SECTION 19 OF THE SALE OF GOODS ACT WHERE THERE IS A CONTRACT FOR THE SALE OF SPECIFIC OR ASCERTAINED GOODS, THE PROPERTY IN THEM IS TRANS FERRED TO THE BUYER AT SUCH TIME AS THE PARTIES TO THE CONTRACT INTEND, IT TO BE TRANSFERRED AND FOR THE PURPOSE OF ASCERTAINING THE INTENTION OF THE PA RTIES REGARD SHALL BE HAD TO THE TERMS OF THE CONTRACT, THE CONDUCT OF THE PA RTIES AND THE CIRCUMSTANCES OF THE CASE. AS FAR AS THE CLAIM OF DEPRECIATION BY THE SAID ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 9 - PARTY, I.E. MEC IS CONCERNED, THE ARGUMENT BEFORE US IS THAT THE ASSESSEE COULD NOT BE HELD RESPONSIBLE FOR AN ACTION OF A TH IRD PARTY, SPECIALLY WHEN THE SAID THIRD PARTY HAD NOT MADE THE FULL PAY MENT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PRECEDENCE CITED, WE ARE NOT INCLINED TO INTERFERE WITH THE FI NDINGS OF THE LD.CIT(A), RESULTANTLY AFFIRM THE SAME. THIS GROUND OF THE R EVENUE IS, THEREFORE, DISMISSED. 8. GROUND NO.2 READS AS UNDER:- 2) THE LD. COMMISSIONER OF INCOME-TAX(A)-XV, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1032174/- MADE ON ACCOUNT OF PURCHASES MADE FROM SH. A.S. SID DIQUE BECAUSE THE ASSESSEE HAD NOT PROVED THE GENUINENESS OF THE BILLS FOR THE EXPENDITURE AT THE TIME OF ORIGINAL ASSESSM ENT OR DURING THE SET-A-SIDE ASSESSMENT PROCEEDINGS. 8.1. IN RESPECT OF THIS GROUND AS WELL THE CO-ORDIN ATE BENCHES RESTORED THE ISSUE WITHOUT MUCH DELIBERATION PRIMARILY ON T HE REASON THAT IN RESPECT OF OTHER GROUNDS THE FACTS AND CIRCUMSTANCE S HAVE TO BE RECONSIDERED, THEREFORE AO HAS TO DECIDE THIS ISSUE AFRESH. IT WAS OBSERVED BY THE AO THAT A SUM OF RS.10,32,174/- WAS CLAIMED AS EXPENDITURE ON ACCOUNT OF PURCHASES OF VARIOUS ITEM S, VIZ. KAPCHI, GRIPS, LABOUR CHARGES, ETC. ON THE BASIS OF THE COPY OF A CCOUNT SHRI A.S.SIDDIQUE A PAYMENT WAS MADE IN CASH OF RS.8,04, 525/-. AN ENQUIRY WAS MADE AND IN THE ABSENCE OF SATISFACTORY REPLY T HE AO HAS HELD THAT THE GENUINENESS OF THE BILLS WERE NOT PROVED. IN HIS OPINION, BILLS WERE FABRICATED, HENCE THE IMPUGNED ADDITION WAS MADE. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 10 - 9. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, LD.CIT(A) HAS APPRECIATED THE AFFIDAVIT OF MR.SIDDI QUE AND ALSO NOTED THAT HE BEING AN EDUCATED PERSON HAD DULY APPEARED BEFORE THE AO AND CONFIRMED THE SUPPLY OF LABOUR AND MATERIAL. THE ADDITION WAS DELETED AS FOLLOWS:- 8. GROUND NO.2 IS THAT THE LD.AO ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.10,32,174 IN RESPECT OF PU RCHASES MADE FROM SHRI A.S. SIDDIQUE. THIS ADDITION HAS BEEN MA DE AS PER THE NARRATION GIVEN IN PARA 7 OF THE ASSESSMENT ORDER. THE AO HAS STATED THAT IN THE ORIGINAL ASSESSMENT THE ADDITION WAS MADE BECAUSE PURCHASE VOUCHERS OF VARIOUS ITEMS PURCHASE D FROM SHRI A.S.SIDDIQUE WERE NOT GENUINE IN THE EYES OF THE A. O. IN THE PRESENT ORDER UNDER APPEAL THE AO HAS STATED THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE BILLS FOR THE EXP ENDITURE EITHER AT THE TIME OF ORIGINAL ASSESSMENT OR DURING THE SET A SIDE PROCEEDINGS. 9. VIDE WRITTEN SUBMISSION DATED 5.10.2009 IT WAS STATED THAT THE AO MADE THE ADDITION WITHOUT APPRECIATING THE CONT ENTS OF THE AFFIDAVIT OF SHRI A.S. SIDDIQUE AND THE STATEMENT O F THIS PERSON RECORDED BY THE THEN AO. RELIANCE WAS PLACED ON TH E FOLLOWING FINDINGS OF THE THEN CIT(A)XV AHMEDABAD IN HIS ORD ER DATED 21.06.2002: 5.3. DURING THE COURSE OF APPEAL HEARING AN OPPORT UNITY WAS GIVEN TO THE APPELLANT TO PRODUCE SHRI A.S.SIDDIQUE BEFORE ME AND THE ASSESSING OFFICER WAS ALSO REQUESTED TO REM AIN PRESENT ON THE DATE OF APPEARANCE OF SHRI A.S.SIDDIQUE. SH RI A.S.SIDDIQUE WAS EXAMINED ON 18.3.2002 AND HIS STAT EMENT WAS RECORDED BY THE ASSESSING OFFICER I.E. DCIT, CIRCLE -9, AHMEDABAD AND AS PER THE STATEMENT, IT WAS FOUND TH AT HE HAD A DIPLOMA IN CIVIL ENGINEERING FROM HEWETT POLYTECHNI C, LUCKNOW AND HE HAD WORK EXPERIENCE WITH PWD, LUCKNOW BEFORE COMING ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 11 - TO AJMER AND SIROHI AND HE HAS CONFIRMED THE WORK C ARRIED OUT ON BEHALF OF THE APPELLANT BY SUPPLYING LABOURERS A ND MATERIALS TO THE APPELLANT AND THAT HE HAD RECEIVED ABOUT RS. 8.25 LACS FROM THE APPELLANT IN THE FINANCIAL YEAR 96-97 AND BALAN CE RS.2 LACS HAD BEEN RECEIVED BY HIM IN THE SUBSEQUENT YEAR. H E HAS GIVEN HIS PAN NO. AS AIJP 5790 OG AND HE HAD ALSO CONFIRM ED THAT HE HAD NO BANK ACCOUNT AT THAT TIME IN SIROHI AND THAT HIS BROTHER SHRI ABDUL SALEM SIDDIQUE AND HIS ASSISTANT HAVE SI GNED THE VOUCHERS FOR PAYMENTS RECEIVED ON BEHALF OF THE LAB OURERS. CONSIDERING THE ABOVE FACT AND THE STATEMENT OF SHR I A.S. SIDDIQUE AND THE CONFIRMATION BY HIM THAT HE HAD RE CEIVED THE AMOUNT AND THE AFFIDAVIT FILED BY HIM, THE PAYMENTS MADE TO SHRI A.S. SIDDIQUE ARE DIRECTED TO BE ALLOWED. AS THE P AYMENTS WERE LESS THAN RS.10,000/- EACH AND WERE GENUINE, NO DIS ALLOWANCE NEEDS TO BE MADE U/S.40A(3) FOR THE SAME, THEREFORE , THE ADDITION OF RS.10,32,174/- IS DELETED. 10. AFTER GOING THROUGH RIVAL SUBMISSIONS I FIND TH AT DESPITE HONBLE ITAT DIRECTIONS THE ASSESSING OFFICER HAS N OT BOTHERED TO DISCUSS THE AFFIDAVIT OF SHRI A.S. SIDDIQUE. THE I MPOUNDING OF BILLS BY THE THEN AO DOES OT MAKE THE BILLS BOGUS. SHRI ABDUL SIDDIQUE EXISTED AND WAS AN EDUCATED PERSON, HE APPEARED BEF ORE THE THEN AO AND CONFIRMED THE SUPPLY OF LABOUR AND MATERIAL ALSO THE PAYMENT RECEIVED FROM THE APPELLANT, IN THIS BACKGR OUND I AM INCLINED TO AGREE WITH THE FINDINGS CITED ABOVE OF MY PREDECESSOR IN HIS ORDER DATED 21.6.2002. THE AO IS DIRECTED T O DELETE THE ADDITION. 10. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND CONSIDERING THE CIRCUMSTANCES OF THE CASE, WHEN THE VERDICT OF THE LD.CIT(A) ON BOTH THE OCCASIONS IS DULY COINCIDE THEN WE ARE ALSO OF THE CONSIDERED VIEW THAT THE IMPUGNED ADDITION WAS UNCALLED FOR. THE CONC ERNED PARTY HAD APPEARED BEFORE THE AO AND CONFIRMED THE GENUINENES S OF THE TRANSACTION. IN VIEW OF THIS, WE HEREBY AFFIRM TH E FINDINGS OF THE LD.CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 12 - 11. GROUND NO.3 READS AS UNDER:- 3. THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.72918/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON FIVE DU MPERS SINCE DEPRECIATION CANNOT BE ALLOWED TO THE ASSESSEE WHEN THE ASSETS IN QUESTION WERE SOLD DURING THE RELEVANT ACCOUNTING P ERIOD. 11.1. THE ONLY ISSUE IS ABOUT THE DISALLOWANCE OF DEPRECIATION ON FIVE DUMPERS. THE FIRST APPELLATE AUTHORITY HAS HELD T HAT SINCE A VIEW WAS TAKEN THAT THE SALES OF DUMPERS HAVE NOT EFFECTED D URING THE YEAR UNDER CONSIDERATION AND THE APPELLANTS NAME HAS APPEARED IN THE RTO RECORDS DURING THE YEAR UNDER CONSIDERATION, THEREFORE THE ASSESSEE WAS HELD AS ELIGIBLE FOR THE DEPRECIATION. 12. FROM THE REVENUES SIDE LD.SR,DR MR.SAMIR TEKRI WAL HAS STATED THAT IN ONE OF IN BETWEEN ASSESSMENT YEAR AN ADVER SE VIEW WAS TAKEN IN RESPECT OF THE DEPRECIATION BUT THE SAME WAS NOT CH ALLENGED. ACCORDING TO LD.DR, THE CONSEQUENTIAL EFFECT SHOULD BE GIVEN AND THE DEPRECIATION SHOULD NOT BE ALLOWED. 13. HAVING HEARD THE SUBMISSIONS, WE FIND NO FALLAC Y IN THE VIEW TAKEN BY THE LD.CIT(A) SPECIALLY WHEN WE HAVE HELD THAT S ALES WERE NOT COMPLETED DURING THE YEAR UNDER CONSIDERATION, THEN IN CONSEQUENCE THEREUPON THE ASSESSEE IS ENTITLED FOR THE DEPRECIA TION. THIS GROUND OF THE REVENUE IS DISMISSED. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 13 - 14. IN THE RESULT, REVENUES APPEAL FOR A.Y. 1997- 98 IS HEREBY DISMISSED. [B] ITA NO.3420/AHD/2009 (ASSESSEES APPEAL FOR A.Y. 1999-2000) : 15. GROUND NO.1 READS AS UNDER: 1.0. THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN LAW AND ON FACTS DISMISSING THE GROUND RELATING TO ADDITION OF RS.2,00,000/- IN RESPECT OF CASH CREDIT U/S.68 OF THE INCOME TAX ACT, 1961. 15.1. WHILE DECIDING THE APPEAL FOR A.Y. 1999-2000 THE TRIBUNAL IN ITA NO.1837/AHD/2003 VIDE AN ORDER DATED 18/12/2007 HAV E RESTORED THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISS UE OF CASH CREDIT AS PER LAW. IN COMPLIANCE OF THE SAID DIRECTION, IT WAS EXPLAINED THAT THE IMPUGNED AMOUNT OF RS.2 LACS WAS RECEIVED FROM M/S. BHARATI TRADING. PAN ACCOUNT AND THE DETAILS OF THE CHEQUE WERE MENT IONED. HOWEVER, THE ASSESSEE HAS NOT FURNISHED CONFIRMATION OF THE SAID PARTY, INSTEAD FURNISHED COPY OF ACCOUNT AND THE DETAILS OF BANK T RANSACTION. IN THE ABSENCE OF COMPLETE COMPLIANCE OF THE PROVISIONS OF SECTION 68, AN ADDITION WAS MADE OF RS.2 LACS IN THE HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 16. THE LD.CIT(A) HAS OPINED THAT NO CONFIRMATION W AS FILED AND THAT MERELY A COPY OF ACCOUNT WAS FILED. PLACING RELI ANCE ON MADATHIL BROTHERS 301 ITR 345 AND SHIV RICE & GENERAL MILLS 300 ITR 19, THE ADDITION WAS CONFIRMED. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 14 - 17. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES , THE UNDISPUTED FACT IS THAT THE ENTIRE INGREDIENTS OF SECTION 68 WERE NOT COMPLIED WITH BY THE ASSESSEE. THE REVENUE AUTHORITIES WANTED CONFIRMA TION LETTER BUT THAT COULD NOT BE PRODUCED BY THE ASSESSEE EVEN WHEN AN OPPORTUNITY IN THE SECOND OF ASSESSMENT WAS GIVEN. EVEN BEFORE US, B ARRING THE COPY OF ACCOUNT OR MENTIONING PAN NO OTHER INFORMATION WAS PLACED ON RECORD. LD.AR HAS PLACED RELIANCE ON CIT VS. ROHINI BUILDER S 256 ITR 360 (GUJ.) BUT IN THAT ORDER THE HONBLE COURT HAS ACCE PTED THE GENUINENESS OF THE LOAN WHEN THE AMOUNT IN QUESTION WAS FOUND T O BE PAID IN CHEQUES AND THAT THE IDENTITY OF THE CREDITOR WAS ESTABLISH ED, COMPLETE ADDRESSES WERE FOUND CORRECT AND THEIR PANS WERE INFORMED AND THEIR CONFIRMATIONS ALONG WITH THE ASSESSMENT ORDERS WERE ALSO INFORMED TO THE AUTHORITIES. WHEN ALL THOSE CONDITIONS WERE FULFIL LED AND THE ASSESSEE HAS DISCHARGED THE ONUS AS MENTIONED U/S.68 OF IT ACT, THEN THE HONBLE COURT HAS HELD THAT THERE WAS NO SUBSTANTIAL QUESTI ON OF LAW AND DECIDED IN FAVOUR OF THE ASSESSEE. AS AGAINST THAT, IN THE PRESENT APPEAL, THE PRIMARY ONUS HAS NOT BEEN COMPLETELY DISCHARGED BY THE ASSESSEE. WE THEREFORE AFFIRM THE FINDINGS OF THE AUTHORITIES BE LOW AND AFFIRM THE ADDITION. THEREFORE, GROUND IS DISMISSED. 18. GROUND NO.2 READS AS UNDER:- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.26,251/- IN RESPECT OF DUMPERS. ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 15 - 18.1. THIS GROUND IS CONSEQUENTIAL IN NATURE BECAUS E ON ONE HAND THE FIRST APPELLATE AUTHORITY HAS HELD THAT THE DUMPERS WERE SOLD IN A.Y. 2000-01, THEN IN CONSEQUENCE THEREUPON, FOR A.Y. 19 99-2000, AN IN BETWEEN ASSESSMENT YEAR, DEPRECIATION ON THOSE DUMP ERS OUGHT TO HAVE BEEN ALLOWED. RATHER, FOR A.Y. 1997-98, LD.CIT(A ) HAS ALLOWED THE CLAIM OF DEPRECIATION ON DUMPERS PRIMARILY ON THE G ROUND THAT THE SALE OF DUMPERS HAD NOT BEEN EFFECTED DURING THAT YEAR. F OR THE YEAR UNDER CONSIDERATION, THE LD.CIT(A) HAS REJECTED THE CLAIM MERELY ON THE GROUND THAT NO EXPLANATION WAS TENDERED FROM THE SIDE OF T HE ASSESSEE. HOWEVER, WE ARE OF THE VIEW THAT THE ISSUE OF ALLOWANCE OF D EPRECIATION IS A LEGAL CLAIM WHICH OUGHT TO HAVE BEEN ALLOWED AS PER LAW. WE HOLD ACCORDINGLY AND ALLOW THIS GROUND OF THE ASSESSEE. IN THE RESULT, ASSESSEES APPEAL FOR A.Y. 1999-2000 IS PARTLY ALLO WED. 19. REVENUES APPEAL IS DISMISSED, WHEREAS AS SESSEES APPEAL IS PARTLY ALLOWED. SD/- SD/- ( !' ) ( ) #$ ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/ 4 /2012 4'.., .../ T.C. NAIR, SR. PS ITA NOS.3430 & 3420/AHD/2009 DCIT VS. KHANIJ EXCAVATIONS (CROSS APPEALS) ASST.YEARS 1997-98 & 1999-2000 - 16 - #3 0 -5 6#5( #3 0 -5 6#5( #3 0 -5 6#5( #3 0 -5 6#5(/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-XV, AHMEDABAD 5. 5:; - , , / DR, ITAT, AHMEDABAD 6. ;< =/ / GUARD FILE. #3 #3 #3 #3 / BY ORDER, .5 - //TRUE COPY// > >> >/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..24.4.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.4.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S27.4.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.4.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER