EAGLE BURGMANN INDIA P.LTD, MUMBAI V. ADDL CIT RG 5(1), MUMBAI

ITA 3957/MUM/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8069 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN; CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: RAHUL KULKARNI
• Keywords: Bogus purchase; Depreciation; Revenue expenditure; Capital expenditure
• Section: 69C; 14A; 37(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO. 3957 /MUM/201 4 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., GAZEBO HOUSE, 52 GULMOHAR ROAD , OPPOSITE CROSS ROAD, NO. 7, JVPD SCHEME , VILE PARLE (W), MUMBAI 400 049 PAN: AABCS 5287 P V. ADDL. COMMISSIONER OF INCOME TAX , RANGE 5(1) MUMBAI (APPELLANT) (RESPONDENT) ITA NO.3902/MUM/2014 (A.Y: 2009 - 10) D.C.I.T - 5(1) ROOM NO. 568, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. EAGLE BURGMANN INDIA PVT. LTD., GAZEBO HOUSE, 52 GULMOHAR ROAD, OPPOSITE CROSS ROAD, NO. 7, JVPD SCHEME, VILE PARLE (W), MUMBAI 400 049 PAN: AABCS 5287 P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KISHORE PHADKE & SHRI RAHUL KULKARNI DEPARTMENT BY : SHRI V. JUSTIN & SHRI CHAUDHARY ARUN KUMAR SINGH DATE OF HEARING : 26 .10.2018 DATE OF PRONOUNCEMENT : 21 .12 .2018 2 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., O R D E R PER C. N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 9, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 3.3.2014 FOR THE ASSESSMENT YEAR 2009 - 10. 2. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NO.5 OF GROUNDS OF APPEAL OF THE ASSESSEE RELATING TO NOT GRANTING RELIEF U/S. 37(1) OF THE ACT IN RESPECT OF EXPENDITURE INCURRED IN CONNECTION WITH CONSULTANCY SERVICES IN THE COURSE OF THE AMALGAMATION IS NOT PRESSED. IN VIEW OF THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE GROUND NO.5 OF GROUNDS OF APPEAL OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. 3. COMING TO THE REST OF THE GROUNDS, GROUND NO.1 OF GROUNDS OF APPEAL OF THE ASSESSEE IS IN RESPECT OF SUSTAINING DISALL OWANCE MADE U/S. 14A R.W. RULE 8D OF THE ACT. 4. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER W HILE COMPLETING THE ASSESSMENT , O N A PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY NOTICED THAT ASSESSEE MADE INVESTMENTS IN EQUITIES AND MUTUAL FUNDS AMOUNTING TO . 21.18 CRORES AS ON 31.03.2009 AND .5. 9 1 CRORES AS ON 31.03.2008. HE ALSO OBSERVED THAT DURING THE CURRENT 3 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., ASSESSMENT YEAR ASSESSEE EARNED DIVIDEND INCOME OF . 53,92,364/ - FROM MUTUAL FUNDS AND CLAIMED AS EXEMPT IN THE COMPUTATION OF INCOME. HE ALSO NOTICED THAT ASSESSEE HAS NOT MADE ANY DISALLOWANCE IN RESPECT OF EXPENDITURE IN EARNING SUCH DIVIDEND INCOME. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS ASSESSEE CONTENDED THAT ASSESSEE MADE INVESTMENTS OUT OF ITS OWN FUNDS , AND INTERNAL CAS H ACCRUALS AND THE CASH PROFIT EARNED DURING THE YEAR. IT WAS FURTHER CONTENDED THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE IN EARNING SUCH DIVIDEND INCOME, THEREFORE NO DISALLOWANCE IS REQUIRED TO BE MADE. HOWEVER, THE ASSESSING OFFICER R EJECTED THE CONTENTION OF THE ASSESSE THAT THERE IS NO EXPENDITURE INCURRED IN EARNING DIVIDEND INCOME . BY INVOKING THE PROVISIONS OF RULE 8D THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE UNDER RULE 8D ( 2 ) (I I I) BEING 0.5% OF AVERAGE INVESTMENTS AND MAD E D ISALLOWANCE AT .6,77,503/ - . ON APPEAL THE LD.CIT(A) SUSTAINED THE DISALLOWANCE. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO PROPER SATISFACTION RECORDED BY THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SECTION 14A R.W. RU LE 8D OF THE ACT. THE LD. COUNSEL FURTHER REFERRING TO PAGE NO. 15 OF THE PAPER BOOK SUBMITS THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE TRIBUNAL HAD SEN T BACK THE MATTER TO THE ASSESSING OFFICER FOR WORKING OUT THE DISALLOWANCE U/S. 14A AFTER CONSIDERING THE ASSESSEES EXPLANATION. 4 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., 6. LD. DR VEHEMENTLY SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT THAT DIVIDEND INCOME WAS EARNED ON THE INVESTMENTS MADE IN MUTUAL FUNDS AND THE INVESTMENT S WERE MADE OUT OF ITS OWN FUNDS AND INTERNAL CASH ACCRUALS. ASSESSEE ALSO CONTENDED THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN TAXABLE INCOME AND T HEREFORE NO EXPENDITURE IS ATTRIBUTABLE FOR EARNING DIVIDEND INCOME. WE FIND THAT THE EXPLANATION OF THE ASSESSEE THAT INVESTMENTS WERE MADE FROM OUT OF INTEREST FREE FUNDS WAS ACCEPTED BY THE ASSES SEE AND NO DISALLOWANCE WAS MADE BY ASSESSING OFFICER TOWARDS INTEREST UNDER RULE 8D2(II) OF THE I.T. RULES . HOWEVER, THE EXPLANATION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOME HAS BEEN REJECTED BY THE ASSESSING OFFICER A ND COMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(III) BEING 0.5% OF THE AVERAGE INVESTMENTS . WHILE REJECTING THE EXPLANATION OF THE ASSESSEE THE ASSESSING OFFICER RECORDED HIS SATISFACTION AS TO WHY THE EXPLANATION WAS REJECTED. THEREFORE, THE CONTENTION O F THE ASSESSEE THAT THERE IS NO SATISFACTION BY THE ASSESSING OFFICER IS NOT CORRECT. 8. COMING TO THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008 - 09 , WE OBSERVE THAT BEFORE THE TRIBUNAL NOBODY APPEARED ON BEHALF 5 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., OF THE ASSESSEE AND THE TRIBUNAL NOT ED THAT BEFORE THE ASSESSING OFFICER ASSESSEE CONTENDED THAT IT DEPLOYED ITS OWN FUNDS , INTERNAL ACCRUALS FOR THE PURPOSE OF INVESTMENTS IN SHARES AND T HESE SUBMISSIONS WERE NOT CONSIDERED BY THE ASSESSING OFFICER AND COMPUTED THE DISALLOWANCE U/S. 14A OF THE ACT. FOR THESE REASONS THE TRIBUNAL SET - ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION. THIS DECISION HAS NO APPLICATION TO THE PRESENT FACTS FOR THE ASSESSMENT YEAR 2009 - 10. IN THE CIRCUMSTANCES, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER RULE 8D(2)(III) OF I.T. RULES AND REJECT THE GROUND RAISED BY THE ASSESSEE. 9. THE SECOND GROUND OF GROUNDS OF APPEAL OF THE ASSESSEE IS IN RESPECT OF SUSTAINING THE ADDITION OF .50,39,302/ - BEING THE EXPENDITURE INCURRED FOR CAPITAL PURPOSE. 10. BRIEFLY STATED THE FACTS ARE THAT, W HILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER NOTICED THAT BURGMANN INDIA PRIVATE LIMITED THE ERSTWHILE UNDERTAKING OF THE ASSESSEE HAD TAKEN LOAN OF .4.5 CRORES FROM DEUTSCHE BANK PRIOR TO AMALGAMATION . THIS LOAN WAS SUBSEQUENTLY REPAID IN JULY 2008 BY TAKING LOAN OF .4.5 CRORES FROM MIZUHO CORPORATE BANK LIMITED . ASSESSEE CLAIMED DEDUCTION OF . 50,39,302 / - ON ACCOUNT OF INTEREST ON TH IS LOAN. THE ASSESSEE WAS REQUIRED TO FURNISH COPY OF SANCTION LETTER BY THE BANK TO IDENTIFY THE PURPOSE FOR WHICH THE LOAN WAS 6 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., SANCTIONED. ASSESSING OFFICER OBSERVED THAT ASSESSEE VIDE LETTER DATED 18.10.2012 FILED LOAN DOCUMENT OF MIZUHO CORPORATE BANK L IMITED BANK LOAN TAKEN BY BURGMANN INDIA PRIVATE LIMITED WHICH REVEALED THAT THE PURPOSE OF LOAN WAS FOR CAPITAL EXPENDITURE. ASSESSEE WAS ASKED TO PRODUCE THE DOCUMENTARY EVIDENCE REGARDING UTILIZATION OF THE SAID LOAN AND THE DETAILS OF THE CAPITAL EXPE NDITURE, ASSETS ACQUIRED AND PUT TO USE. ASSESSEE VIDE LETTER DATED 4.10.2012 SUBMITTED THAT FINANCIAL CHARGES COMPRISE D OF INTEREST ON TERM LOAN BY BURGMANN INDIA PRIVATE LIMITED ( AMALGAMATING COMPANY) WHICH WAS PAID TO BANK FOR THE TERM LOAN AVAILED BY THE SAID COMPANY. IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III ) OF THE ACT, SINCE THE INTEREST IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR THE PERIOD BEGINNING FROM THE DATE ON WHICH CAPITAL WAS BORROWED FOR ACQUISITION OF ANY ASSET A ND TILL DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE , SHALL NOT BE ALLOWED AS DEDUCTION , T HE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST PAID ON BORROWED CAPITAL UTILIZED TOWARDS CAPITAL EXPENDITURE SHOULD NOT BE DISALLOWED. 11. THE ASSESSEE CONTENDED THAT LOAN FROM MIZUHO CORPORATE BANK LIMITED WAS TAKEN FOR A SHORT TENURE AND THIS LOAN HAS NOT BEEN UTILIZED FOR THE PURPOSE OF ACQUIRING THE ASSET S . IT WAS SUBMITTED THAT TH E LOAN FROM DEUTSCHE BANK WAS RE PAID IN FULL BY TAKING LO AN FROM MIZUHO CORPORATE 7 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., BANK LIMITED AND THE SANCTIONED BY DEUTSCHE BANK WAS FOR WORKING CAPITAL REQUIREMENTS AND WAS USED ONLY FOR DAY TO DAY RUNNING OF BUSINESS . THEREFORE, IT WAS CONTENDED THAT THE CHARACTERISTICS OF BUSINESS LOAN WERE APPLICABLE TO T HIS LOAN AS THE LOAN OBTAINED IS NOT FOR ACQUIRING AN ASSET OR ADVANTAGE OF ANY ENDURING NATURE AND THE OBJECT OF THE LOAN BEING BUSINESS DEVELOPMENT INTEREST EXPENDITURE WAS UNDOUBTEDLY REVENUE EXPENDITURE. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSES SEE THE ASSESSING OFFICER DISALLOWED THE INTEREST OBSERVING THAT THE IMPUGNED LOAN WAS FOR THE PURPOSE OF CAPITAL EXPENDITURE AS IS EVIDENT FROM SANCTION LETTER DATED 26.06.2008 FROM THE MIZUHO CORPORATE BANK LIMITED AND THE ASSESSEE HAS FAILED TO SUBMIT T HE DOCUMENTARY EVIDENCE REGARDING UTILIZATION OF THE SAID LOAN AND THE DETAIL S OF THE CAPITAL EXPENDITURE AND ASSET ACQUIRED AND PUT TO USE. 12. ON APPEAL THE LD.CIT(A) SUSTAINED THE DISALLOWANCE OBSERVING THAT DURING THE APPEAL PROCEEDINGS THE ASSESSEE WAS SPECIFICALLY REQUIRED TO FURNISH THE DETAILS OF LOAN APPLICATION MADE TO THE BANK , SO THAT THE PURPOSE OF THE LOAN REQUESTED BY THE ASSESSEE WO ULD BE ASCERTAINED FROM THE LOAN APPLICATION BUT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH EVEN THE COPY OF LOAN APPLICATION. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL FOR THE 8 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., ASSESSEE FURTHER INVITING OUR ATTENTION TO PAGE NO S . 25 AND 28A OF THE PAPER BOOK WHICH ARE THE LETTER S ISSUED BY DEUTSCHE BANK TO BURGMANN INDIA PRIVATE LIMITED ABOUT THE CREDIT FACILITIES PROVIDED BY THE BANK, PARTICULARLY, CLAUSE - 1 OF ANNEXURE A TO THE SAID FACILITIES , POINTED OUT THAT THE PURPOSE FOR WHICH THE LOAN WAS GRANTED TO BURGMANN INDIA PRIVATE LIMITED BY DEUTSCHE BANK WAS FOR THE PURPOSE OF UTILIZING FOR WORKING CAPITAL REQUIREMENT AND I NVITED OUR ATTENTION TO CLAUSE 2 OF ANNEXURE A, WHERE THE PURPOSE WAS MENTIONED BY THE BANK THAT THE FACILITIES SHALL BE USED FOR THE PURPOSE OF FINANCING WORKING CAPITAL REQUIREMENTS. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOAN O BTAINED BY THE BURGMANN INDIA PRIVATE LIMITED WAS LATTER REPAID BY TAKING LOAN FROM MIZUHO CORPORATE BANK LIMITED . THEREFORE, THE INTEREST PAID ON SUCH LOAN SHALL BE ON R EVENUE ACCOUNT AND SHALL BE ALLOWED AS DEDUCTION. 14. ON THE OTHER HAND, LD. DR VEHEMENTL Y SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FROM A PERUSAL OF THE CREDIT FACILITIES SANCTIONED BY DEUTSCHE BANK TO BURGMANN INDIA PRIVATE LIMITED DATED NIL PLACED AT PA GE NO. 25 OF THE PAPER BOOK , WE FIND THAT THE LOAN WAS GIVEN FOR THE PURPOSE OF WORKING CAPITAL REQUIREMENT AND THIS LOAN WAS REPAID BY THE ASSESSEE BY TAKING LOAN FROM MIZUHO CORPORATE BANK LIMITED . MIZUHO 9 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., CORPORATE BANK LIMITED SANCTIONED CREDIT FACILIT IES TO THE ASSESSEE ONLY FOR THE PURPOSE OF CAPITAL EXPENDITURE AS COULD BE SEEN FROM SANCTION OF CREDIT FACILITIES LETTER DATED 26.08.2008 ISSUED BY THE BANK. THOUGH MIZUHO CORPORATE BANK LIMITED SANCTIONED LOAN FOR CAPITAL PURPOSE TO THE ASSESSEE , IT AP PEARS THAT ASSESSEE UTILIZED THIS LOAN FOR REPAYMENT OF THE LOAN EARLIER TAKEN BY BURGMANN INDIA PRIVATE LIMITED FROM DEUTSCHE BANK FOR WORKING CAPITAL PURPOSE. WE ALSO OBSERVE FROM SANCTION LETTER DATED 26.06.2008 THAT EVEN THE MIZUHO CORPORATE BANK LIMI TED SANCTIONED CREDIT FACILITIES IN THE NAME OF BURGMANN INDIA PRIVATE LIMITED AND NOT IN THE NAME OF EAGLE BURGMANN INDIA (P) LTD., SINCE THE LOAN WAS GRANTED BY MIZUHO CORPORATE BANK LIMITED ONLY FOR THE PURPOSE OF CAPITAL EXPENDITURE, IN OUR CONSIDERED VIEW AS THIS LOAN WAS DIVERTED AND REPAID TO DEUTSCHE BANK TO SQUARE OFF OF THE LOAN OBTAINED FOR WORKING CAPITAL REQUIREMENTS THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION OF ANY INTEREST U/S. 36(1)(III) OF THE ACT ON THE LOAN BORROWED FROM MIZUHO CORPORATE BANK LIMITED . THUS , THE LOWER AUTHORITIES ARE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE , THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 16. GROUND NO.3 & 4 OF GROUNDS OF APPEAL OF THE ASSESSEE ARE RELATING TO THE ADDITION MADE U/S. 69 OF THE ACT ON ACCOUNT OF ALLEGED BOGUS PURCHASES OF GOODS BY THE ASSESSEE. 10 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., 17. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES AND THE INFORMATION RECEIVED FROM DGIT (INV.) FOUND THAT THE ASSESSEE COMPA NY FIGURED AS BENEFICIARY OF CERTAIN BOGUS TRANSACTIONS FROM THE PARTIES NAMELY ANAND ENTERPRISES AND KRISHNA ENTERPRISES , WHERE THE ASSESSEE PURCHASED GOODS WORTH .64,34,720/ - . ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE ALLEGED TRANSACTIONS FROM THE PARTIES SHOULD NOT BE TREATED AS BOGUS PURCHASES . 18. ASSESSEE FURNISHED REPLY STATING THAT IT HAS MADE PURCHASES FROM THE SAID CONCERNS, THE ASSESSEE SUBMITTED ALL THE GRRS REGARDING MATERIAL TRANSPORTED, BILLS RAISED, PAYMENTS MADE THROUGH CHEQUES WHERE S ALES TAX WAS ALSO INCLUDED. IT WAS ALSO CONTENDED THAT ASSESSEE HAS NOT MADE ANY SET OFF ON THE MATERIALS P URCHASED AS THE MATERIALS WERE USED FOR BUILDING CONSTRUCTION. IT WAS FURTHER CONTENDED THAT THE ABOVE SUPPLIERS HAVE NOT FULFILLED THEIR OBLIGATIO N BY NOT MAKING THE PAYMENT OF TAXES TO SALES TAX DEPARTMENT A ND T HEREFORE THE SALES TAX DEPARTMENT DECLARED THESE PARTIES AS BOGUS PARTIES. HOWEVER , THE TRANSACTIONS WITH THE ASSESSEE COMPANY ARE GENUINE AND NOT BOGUS. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES MADE BY THE ASSESSEE FROM THESE COMPANIES AS UNEXPLAINED 11 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., EXPENDITURE U/S. 69C OF THE ACT BASED ON THE STATEMENTS OF THE PARTIES AND INFORMATION FROM SALES TAX DEPARTMENT. 19. ON APPEAL THE LD.CIT(A) THOUGH AGREED WITH THE CONTENTION OF THE ASSESSING OFFICER THAT THESE PURCHASES WERE NOT GENUINE THE ALTERNATE CLAIM OF THE ASSESSEE THAT SINCE THESE PURCHASES FROM THESE PARTIES WERE MADE ONLY FOR THE PURPOSE OF CONSTRUCTION OF BUILDING , ONLY TO THE EXTEN T OF DEPRECIATION CLAIMED ON SUCH PURCHASES SHALL BE DISALLOWED HAS BEEN ACCEPTED AND ACCORDINGLY THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW ONLY THE DEPRECIATION ON SUCH PURCHASES. 20. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION /DISALLOWANCE WAS MADE BY THE AUTHORITIES ONLY BASED ON THE INFOR MATION AND ENQUIRIES CONDUCTED BY SALES TAX DEPARTMENT , WHERE CERTAIN STATEMENTS WERE RECORDED FROM THE DEALERS. THE ASSESSEE SUBSEQUENTLY REQUESTED FOR CROSS EXAMINATION OF THE PERSONS ON W HOSE STATEMENTS REVENUE IS RELYING ON. IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT PROVIDED ANY CROSS EXAMINATION. THEREFORE, NO ADDITION CAN BE MADE. ALTERNATIVELY, IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAS PURCHASED ONLY STEEL AND CEMENT ONLY DEPREC IATION CAN BE DISALLOWED. AS THE SECOND ALTERNATIVE, IT WAS FURTHER SUBMITTED THA T APPROPRIATE GROSS PROFIT OF THE ASSESSEE MAY BE CONSIDERED FOR DISALLOWANCE IN RESPECT OF THESE PURCHASES. 12 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., 21. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ASSESSING OFFICER DISALLOWED THE PURCHASES BASED ON THE SALES TAX INVESTIGATIONS, INFORMATION AND THE STATEMENTS RECORDED FROM THE PARTIES AND DISBELIEVED THE CONTENTION OF THE ASSESSEE THAT THESE PURCHASES WERE GENUINE. THE LD.CIT(A) HOWEVER RESTRICTED THE DISALLOWANCE ONLY TO THE EXTENT OF DEPRECIATION ON SUCH PURCHASES ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE PURCHASES MADE FROM THESE PARTIES WERE ONLY STEEL AND CEMENT AND THEY WERE UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF BUILDING AND DIRECTED THE ASSESSING OFFICER ACCORDINGLY TO EXCLUDE ONLY THE DEPRECIATION ON THESE PURCHASES. THIS VIEW OF THE LD.CIT(A) APPEARS TO BE JUSTIFIED. THEREFORE, SINCE THE ALTERNA TIVE SUBMISSION OF THE ASSESSEE WAS ALREADY CONSIDERED BY THE LD.CIT(A) AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE ONLY THE DEPRECIATION PORTION FROM THE PURCHASES, THE OTHER CONTENTION OF THE ASSESSEE ARE NOT GONE INTO. THUS , THE ACTION OF THE LD.CIT( A) IS SUSTAINED. GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS PARTLY ALLOWED. 23. COMING TO THE REVENUES APPEAL THE ONLY ISSUE IS THAT , THE LD.CIT(A) ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF PURCHASES FROM PARTIES ONLY TO THE EXTENT OF DEPRECIATION. 13 ITA NO.3957 & 3902 /MUM/2014 (A.Y: 2009 - 10) M/S. EAGLE BURGMANN INDIA PVT. LTD., 24. AS WE HAVE ALREADY DECIDED THIS ISSUE IN THE APPEAL OF THE ASSESSEE SUSTAINING THE ORDER OF THE LD.CIT(A) IN RESTRICTING THE PURCHASES ONLY TO THE EXTENT OF THE DEPRECIATION FOR THE REASONS EXPLAINED ABOVE, WE REJECT GROUND RAISED BY THE REVENUE. 25. IN THE R ESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21 ST DECEMBER , 2018 SD/ - SD/ - ( R AJESH KUMAR) ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 21 / 12 / 2018 GIRIDHAR , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM