The ITO, Ward-6(1), Ahmedabad V. M/s. Bharat Agro Industries, Ahmedabad

ITA 512/AHD/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1134 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-09-2015
• Assessment Year: misc
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Unexplained investment; Depreciation
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI KUL BHARAT, JM, MANISH BORAD, AM. ITA NO.512/AHD/2013 ASST. YEAR 2009-10 INCOME-TAX OFFICER, WARD-6(1), AHMEDABAD. VS M/S BHARAT AGRO INDUSTRIES, SANAND ROAD, BAVLA, AHMEDABAD-382220 (APPELLANT) (RESPONDENT) PA NO.AADFB 8368N APPELLANT BY SHRI ALBINUS TIRKEY, SR.DR RESPONDENT BY SHRI UMAID SINGH BHATI, AR DATE OF HEARING: 01.09.2015 DATE OF PRONOUNCEMENT: 09/09/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF THE REVENUE IS FILED AGAINST THE OR DER OF CIT(A)- XI, AHMEDABAD VIDE ORDER DATED 31.12.2012 FOR AY 20 09-10 ON THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.33,38,164/- ON ACCOUNT OF NONE OF CO NDITIONS FULFIL LAID DOWN IN THE SECTION 69. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,98,213/- TREATING THE SAME AS REV ENUE EXPENSES. ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. BRIEF FACTS OF THE CASE AS PER THE ORDER OF AO & PAPER BOOK SUBMITTED BY THE LD. AR OF THE ASSESSEE, ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 31.08.2009 D ECLARING INCOME OF RS.66,760/-. THE RETURN WAS PROCESSED UNDER SECT ION 143(1) OF THE ACT AND THEREAFTER SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE ACT. THE AO FRAMED THE ASSESSMENT ORD ER UNDER SECTION 143(3) ON 30 TH DECEMBER, 2011 BY MAKING CERTAIN ADDITIONS OUT OF WHICH, REVENUE IS IN APPEAL ON GROUNDS MENTI ONED ABOVE IN PARA 1. 3. GROUND NO.1 RELATES TO ADDITION OF RS.33,38,164/ - MADE BY AO U/S 69 OF THE ACT IN RELATION TO UNTALLIED ENTRIES /CREDITS /DEPOSITS /CLEARINGS AS APPEARING IN FOUR BANK STATEMENTS SHO WN BY THE ASSESSEE IN ITS BOOKS AND DUE TO LACK OF SATISFACTO RY EXPLANATION/DETAILS AO MADE AN ADDITION OF RS.33,38 ,164 UNDER SECTION 69 OF THE ACT BY OBSERVING AS UNDER :- ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 3 THEREFORE, IT IS SEEN THAT THE DETAILS REGARDING C REDITS/DEPOSITS/CLEARINGS AS APPEARING IN THE FOUR BANK STATEMENTS ARE NOT TALLI ED WITH ALL RECEIPTS SHOWN BY THE ASSESSEE IN ITS BOOKS. HENCE IT IS NOT SATISFAC TORY REPLY FOR UNEXPLAINED INVESTMENT WHICH PROVES THE TRANSACTIONS MADE THERE IN. IN VIEW OF ANY SATISFACTORY EXPLANATIONS/DETAILS, IT IS CLEAR FROM THE ABOVE COMPARISON THAT A DIFFERENCE OF RS.33,38,164/- IS THERE BETWEEN THE T RANSACTION SHOWN BY THE ASSESSEE AND ACTUAL TRANSACTION APPEARING IN ITS FO UR BANK ACCOUNTS. THIS DIFFERENCE IS NOTHING BUT UNACCOUNTED INVESTMENT OF THE ASSESSEE. THEREFORE, I MAKE AN ADDITION OF RS.33,38,164/- U/S 69 OF THE I. T. ACT. PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME IS BEING SEPARATELY INITIATED . 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE CI T(A) WHO HAS DELETED THE ADDITION MADE BY THE AO TAKING THE BASI S THAT THE CONDITIONS REQUIRED TO INVOKE THE PROVISIONS OF SEC TION 69 OF THE ACT WERE NOT APPLICABLE TO THE ASSESSEE BECAUSE THEY WE RE DULY RECORDED IN THE BOOKS OF ACCOUNT AND GAVE FOLLOWIN G FINDINGS :- 3.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. IT IS SEEN THAT THE AO WAS NOT SATISFIED WITH THE PROPER ACCOUNTING OF SOM E OF THE BANK TO BANK TRANSFERS AND ACCORDINGLY THE IMPUGNED ADDITION OF RS.33,38,164 WAS MADE. PERUSAL OF FACTS AVAILABLE ON RECORD REVEALS THAT A LL THE THREE BANK ACCOUNTS NAMELY A/C NO.160 WITH ICICI BANK, A/C NO.11895 WIT H PNB AND A/C 114 WITH KCCBI ARE DECLARED ACCOUNTS. THESE ACCOUNTS FORMS P ART OF THE BOOKS OF ACCOUNTS AS WELL AS THE AUDITED BALANCE SHEET. THE ACCOUNTS OF THE APPELLANT IS DULY AUDITED. IT IS ALSO A MATTER OF RECORD THAT TH E APPELLANT IS FOLLOWING DOUBLE ENTRY BOOK KEEPING SYSTEM. IN DOUBLE ENTRY BOOK KEE PING SYSTEM, IF THE FUNDS TRANSFERS FROM ONE BANK TO OTHER BANK ARE NOT REFLE CTED OR PROPERLY ACCOUNTED FOR THE BALANCE SHEET WILL NEVER TALLY. THESE ARE GLARI NG MISTAKE WHICH WILL DISTURB THE ENTIRE ACCOUNTING SYSTEM AND THE TRIAL BALANCE WILL NEVER MATCH. THE BOOK KEEPING NOW-A-DAYS IS BEING DONE WITH THE HELP OF C OMPUTER SOFTWARE. IF THE BANK TRANSFERS ARE NOT PROPERLY ACCOUNTED FOR, THE SOFTW ARE WILL NOT COMPILE THE FINANCIAL RESULTS IN THE FORM OF BALANCE SHEET AND P & L ACCOUNT. SINCE THE BALANCE SHEET IS PROPERLY TALLIED, ACCORDINGLY, THE OBSERVATIONS OF THE AO ARE UNSUBSTANTIATED. ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 4 3.3 DURING THE ASSESSMENT PROCEEDINGS AS WELL AS AP PELLATE PROCEEDINGS THE APPELLANT HAS GIVEN COMPLETE RECONCILIATION OF BANK TO BANK FUND TRANSFERS AGAINST WHICH THE ADDITION HAS BEEN MADE BY THE AO. PERUSAL OF THE RECONCILIATION REVEALS THAT THE FUNDS WERE TRANSFER RED VIDE CHEQUES FROM BANK TO BANK. THE CHEQUES AGAINST WHICH ADDITION HAS BEEN M ADE BY THE AO WERE CLUBBED WITH OTHER CHEQUES AND THE SAME WAS DEPOSIT ED IN THE BANK ACCOUNTS OF THE APPELLANT. I HAVE PERUSED THE DETAILS FURNISHED BY THE APPELLANT AND IT IS OBSERVED THAT THE FUND TRANSFERS AS MENTIONED BY TH E AO ON PAGE 6 OF THE ASSESSMENT ORDER ARE DULY ACCOUNTED FOR IN THE OTHE R BANK ACCOUNT OF THE APPELLANT. OTHERWISE ALSO THE FUNDS TRANSFERRED VID E CHEQUE HAS TO BE ACCOUNTED FOR BY THE OTHER BANK. IN VIEW OF THESE FACTS ALSO THE ADDITION MADE BY THE AO IS NOT TENABLE. 3.4 IT IS ALSO OBSERVED THAT THE IMPUGNED ADDITION HAS BEEN MADE BY THE AO U/S 69 OF THE IT ACT. THE PROVISIONS OF SEC.69 CAN BE INVOKED IF THE FOLLOWING CONDITIONS ARE FULFILLED :- (A) THE ASSESSEE MUST HAVE MADE INVESTMENT IN THE F INANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR; (B) THE INVESTMENTS MADE ARE NOT RECORDED IN THE BO OKS, IF ANY, MAINTAINED BY THE ASSESSEE OR ANY SOURCE OF INCOME; (C) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NO T IN THE OPINION OF THE AO SATISFACTORY. PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS NOT IDENTIFIED THE INVESTMENTS MADE BY THE APPELLANT DURING THE YEAR U NDER CONSIDERATION. THIS WAY THE FIRST PRECONDITION OF SECTION 69 IS NOT FULFILL ED. THE FACTS AVAILABLE ON RECORD CLEARLY INDICATE THAT THE INTERBANK FUND TRANSFERS AGAINST WHICH THE IMPUGNED ADDITION IS MADE FORMS PART OF THE BOOKS OF ACCOUNT S. THIS WAY, IT CAN BE SAID THAT THE IMPUGNED INVESTMENT WAS RECORDED IN THE BO OKS OF ACCOUNTS. THIS WAY THE SECOND PRECONDITION OF SECTION 69 IS NOT FULFIL LED IN THE CASE OF THE APPELLANT. THE APPELLANT HAS ALSO FURNISHED COMPLETE RECONCILI ATION TO EXPLAIN THE PROPER ACCOUNTING OF THESE FUND TRANSFERS. THE AO HAS NOT DISPROVED THE EXPLANATION OFFERED BY THE APPELLANT. IN VIEW OF THESE FACTS IT CAN BE SAID THAT THE APPELLANT HAD FURNISHED AN EXPLANATION WHICH REMAINS UNCONTRO VERTED AND THIS WAY THE THIRD PRECONDITION OF SECTION 69 IS NOT FULFILLED. THIS WAY ALL THE CONDITIONS AS MENTIONED U/S 69 OF THE IT ACT ARE NOT FULFILLED IN THIS CASE. IN VIEW OF THESE FACTS ALSO, THE ADDITION MADE BY THE AO IS UNTENABLE. 3.5 IN VIEW OF ABOVE FACTS, I DO NOT HAVE ANY HESIT ATION IN HOLDING THAT ADDITION OF RS.33,38,164/- MADE BY THE AO U/S 69 OF THE IT A CT, 1961 IS UNTENABLE AND THE ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 5 SAME IS ORDERED TO BE DELETED. THE APPELLANT WILL G ET RELIEF TO THIS EXTENT. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIB UNAL. THE LD. DR HEAVILY RELIED ON THE ORDER OF A.O. 5. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SU BMITTED THAT ALL THE BANK ACCOUNTS WHICH HAVE BEEN REFERRED TO BY TH E AO IN HIS ASSESSMENT ORDER WERE DULY INCORPORATED IN THE BOOK S OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND BANK RECONCILIATION STATEMENT HAVE ALSO BEEN FILED. THE LD. AR FURTHER SUBMITTED THAT THERE WAS NOT A SINGLE ENTRY WHICH REMAINED UNTALLIED AND THE ASSES SEE IS FOLLOWING DOUBLE ENTRY BOOK KEEPING SYSTEM AND THE BOOKS OF A CCOUNTS OF THE APPELLANT FIRM WERE DULY AUDITED UNDER SECTION 44AB . THERE IS NO QUESTION OF ANY SUCH DISCREPANCY TO ARRIVE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS GROUND OF ADDIT ION OF RS.33,38,164/- DEPENDS ON THE APPLICABILITY OF SEC. 69 OF THE ACT. THE RELEVANT PORTION OF SECTION 69 OF THE ACT IN RELATI ON TO INVESTMENTS, WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, REA DS AS UNDER :- ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 6 WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT REC ORDED IN THE BOOKS OF ACCOUNTS, IF ANY, MAINTAINED BY HIM FOR ANY SOUR CE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NO T, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE I NVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FIN ANCIAL YEAR. SECTION 69 COMES INTO OPERATION ONLY IF INVESTMENTS ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH IS NOT THE CASE LOOKING TO THE FACTS OF THE ASSESSEE WHEREIN T HE BANK BALANCES ARE SHOWN IN THE AUDITED BALANCE SHEET AND RECONCIL IATION STATEMENT FOR VARIOUS ENTRIES WHICH WERE NOT TALLIED, AS OBSE RVED BY AO BUT DULY PUT ON RECORD BEFORE THE LOWER AUTHORITIES AND ALSO FILED ALONG WITH PAPER BOOK. THE RELEVANT FACTS AVAILABLE ON RECORD CLEARLY INDICATE THAT THE NON-RECONCILIATION OF ENTRIES/BANK FUNDS T RANSFERS WHICH WERE ACTUALLY FORMING PARTS OF THE BOOKS OF ACCOUNTS WER E THE BASIS OF ADDITION MADE BY THE AO AND FURTHER THE AO HAS DULY ACCEPTED THAT THE BANK ACCOUNTS ARE FORMING PART OF BOOKS OF ACCO UNTS. THE AO HAS HIMSELF RECORDED IN HIS ORDER THAT ASSESSEE HAS DISCLOSED ALL THE BANK ACCOUNTS IN HIS REGULAR BOOKS OF ACCOUNT AND O NLY BECAUSE OF THE REASON THAT SOME OF THE ENTRIES WOULD NOT TALLY AT THE TIME OF HEARING RESULTED INTO SUCH ADDITIONS. THEREFORE, LO OKING TO THE ABOVE FACTS THERE REMAINS NO SCOPE OF ANY ADDITION UNDER SECTION 69 OF THE ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 7 ACT AND WE DO NOT FIND ANY ERROR IN THE ORDER OF CI T(A). WE UPHOLD THE SAME AND AS SUCH THIS GROUND OF REVENUE IS DISMISSE D. 7. GROUND NO.2 RELATES TO ORDER OF CIT(A) DELETING ADDITION OF RS.12,98,213/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF MACHINERY REPAIR EXPENSES. THE AO MADE THE DISALLOW ANCE FOR THE VERY REASON THAT SUBSTANTIAL AMOUNT WAS INCURRED IN RELATION TO REPAIR OF PLANT AND MACHINERY AND THE SAME WAS, THEREFORE, REQUIRED TO BE CAPITALIZED AND ALLOWED DEPRECIATION ON THE SAME AS PER THE RATES PRESCRIBED UNDER THE ACT. THE FINDINGS OF AO ARE AS UNDER :- 5. TO VERIFY THE GENUINENESS OF THE MACHINERY REPA IRING OF RS.15,27,309/-, THE INSPECTOR OF THIS OFFICE WAS DEPUTED FOR PERSON AL VISIT AT PLACE OF THE BUSINESS PREMISES OF THE ASSESSEE AND WAS DIRECTED TO OBTAIN SUPPORTING COPY OF BILLS/VOUCHERS, IF ANY, AND ALSO DIRECTED TO GET TH E PHOTOCOPY OF THE SO CALLED MACHINERY REPAIRED AND ALSO PLANTED NEW MACHINERY. THE REQUEST LETTER WAS ALSO GIVEN TO THE ASSESSEE TO CO-OPERATE THE INSPECTOR I N THE PROCEEDINGS. IN VIEW OF THE REPORT OF THE INSPECTOR AND PHOTO COPIES TAKEN OF THE SO CALLED MACHINERY REPAIRED DURING THE PERIOD 1.4.2008 TO 31.3.2009 IN THE PRESENCE OF THE PARTNER OF THE FIRM AT THE BUSINESS PREMISES OF THE FIRM ON 30 /12/2011, IT IS LEARNT THAT THE ASSESSEE HAS NOT REPAIRED THE MACHINERY BUT IT IS A NEW STRUCTURE WAS INSTALLED. (THE PHOTOCOPY OF SO CALLED MACHINERY REPAIRED IS A S UNDER). 5.1 IN VIEW OF THE ABOVE AND VARIOUS ANGLE PHOTOCOP Y OF THE MACHINERY, IT IS PALPABLE THAT AFTER ALMOST TWO YEARS OF THE MACHINE RY SO CALLED REPAIRED BY THE ASSESSEE, IT LOOKS LIKE A FRESH AND NEW ONE IT IS N OT POSSIBLE, IF THE MACHINERY IS REPAIRED. THE STRUCTURE OF THE MACHINERY IS ALSO LO OKS LIKE A FRESH ONE. THEREFORE, IT CANNOT BE SAID THAT THE MACHINERY IS REPAIRED. T HEREFORE, THE CLAIM OF MACHINERY REPAIRED OF RS.15,27,309/- IS CAPITALIZED AND DEPRECIATION THEREON AT FULL RATE @15% IS ALLOWED OF RS.2,29,096/- AS PER T HE IT ACT, 1961. THE MACHINERY REPAIRING IS CAPITALIZED OF RS.6,17,769/- (RS.15,17,309/- (-) RS.2,29,096/-). THE PENALTY PROCEEDINGS U/S 271(1) OF THE IT ACT IS BEING SEPARATELY INITIATED FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 8 8. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND CONTENT ION OF THE AO, DELETED THE DISALLOWANCE DUE TO LACK OF FINDING ON THE PART OF AO TO ESTABLISH THE FACTS AND CIRCUMSTANCES OF SUCH NEW P LANT AND MACHINERY TO SUBSTANTIATE HIS FINDING. THE OBSERVAT ION OF CIT(A) ARE AS FOLLOWS :- 4.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. I HAVE ALSO PERUSED THE EVIDENCES AVAILABLE ON RECORD. IT IS SEEN THAT THE AO DEPUTED HIS INSPECTOR TO MAKE INSPECTION OF THE MACHINES. AS A RESULT OF THI S INSPECTION IT CAME TO THE NOTICE OF THE AO THAT THE MACHINERIES LOOKS LIKE FR ESH AND NEW ONE AND THE FRESH LOOK IS NOT POSSIBLE. IF THE REPAIR AND MAINTENANCE HAS BEEN DONE ON THE MACHINE. THE VERY ARGUMENT OF THE AO IS NOT CONVINC ING. BY MERE LOOK OF MACHINE, NO REASONABLE PERSON CAN REACH TO A CONCLU SION THAT THE MACHINES WERE NOT REPAIRED. THE AO HAS ALLOWED DEPRECIATION @15% ON THE MACHINERY REPAIR EXPENSES OF RS.15,27,309/-. IF THE AOS CONT ENTION IS TAKEN AS TRUE THEN SOME NEW MACHINERY SHOULD HAVE BEEN MANUFACTURED BY INCURRING THESE EXPENSES AS THE AO HAS ALLOWED DEPRECIATION @ 15%. HOWEVER, THE AO HAD FAILED TO ESTABLISH THE EXISTENCE OF SUCH NEW PLANT AND MACHINERY. THE OTHER SCENARIO COULD BE THAT THE CAPACITY OF EXISTING MAC HINERY IS ENHANCED OR THE APPELLANT HAD DERIVED SOME BENEFIT OF ENDURING NATU RE BY INCURRING THESE EXPENSES. HOWEVER, THE AO HAD FAILED TO BRING ANY E VIDENCE ON RECORD TO INDICATE THESE EVENTUALITIES. 4.3 IT IS A MATTER OF COMMON SENSE THAT, IF THE PLA NT AND MACHINERY IS BEING USED FOR THE PURPOSE OF BUSINESS IT REQUIRES REGULA R REPAIR AND MAINTENANCE. THE APPELLANT IS REGULARLY CLAIMING REPAIR AND MAINTENA NCE EXPENSES IN THE EARLIER YEARS AND THE SAME WAS ALLOWED. THE AO HAS NOT ALLO WED ANY REPAIR AND MAINTENANCE EXPENSES FOR THE YEAR UNDER CONSIDERATI ON. THE AO HAS FAILED TO BRING COGENT EVIDENCES ON RECORD TO PROVE THE FACT THAT REPAIR AND MAINTENANCE EXPENSES WERE NOT INCURRED. DURING THE ASSESSMENT P ROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS THE APPELLANT HAS FILED COPY OF ACCOUNT OF MACHINERY REPAIR EXPENSES. PERUSAL OF THESE EXPENSES REVEALS THAT TH ESE ARE NORMAL REPAIR AND MAINTENANCE EXPENSES WHICH HAS BEEN INCURRED IN SMA LL DENOMINATIONS AND ACCORDINGLY, I HOLD THAT THESE EXPENSES ARE REVENUE IN NATURE AND DESERVES TO BE ALLOWED. 4.4. IN VIEW OF ABOVE FACTS, I HOLD THAT THE MACHIN ERY REPAIR AND MAINTENANCE EXPENSES ARE REVENUE IN NATURE AND ADDITION OF RS.1 2,98,213/- IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 9 AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 9. DURING THE COURSE OF HEARING BEFORE US, THE LD. DR EMPHASIZED THAT THE WDV OF FIXED ASSETS AS ON 31.3.2009 OF THE ASSESSEE WAS OF RS.78,27,027/- AND THE EXPENSES INCURRED FOR REPAIR AND MAINTENANCE OF MACHINERY AMOUNTING TO RS.12,98,213/- IS A SUBST ANTIAL AMOUNT AND NEEDS TO BE CAPITALIZED AND FURTHER DULY SUPPOR TED THE FINDING MADE BY THE AO. 10. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UBMITTED AS UNDER :- (1) IT MAY BE EVIDENT FROM THE AUDITED BALANCE SHEE T, ENCLOSED VIDE ANNEXURE B HEREWITH, THAT THE APPELLANT FIRM WAS HAVING MACHINES OF RS.73.47 LACS AND BOILER WORTH RS.17.10 LACS (BOOK VALUE) AT THE BEGINNING OF THE FINANCIAL YEAR AND M ACHINES WORTH RS.14.27 LACS WERE ADDED DURING THE YEAR. IT MAY KI NDLY BE APPRECIATED THAT MOST OF THE ABOVE MACHINES WERE IN STALLED IN THE YEAR 1984. HOWEVER, A NEW BOILER WAS ACQUIRED DURIN G THE FINANCIAL YEAR 2007-08. A BOILER IS RECESSARILY REQUIRED TO B E REGISTERED WITH THE GOVERNMENT AUTHORITIES UNDER THE PROVISIONS INDIAN BOILER ACT, 1923. NON REGISTRATION OF A BOILER IS A SERIOUS OFFENCE. IN GUJARAT STATE THE REGISTERING AND SUPERVISING AUTHORITY IS GUJARAT BO ILER INSPECTION ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 10 DEPARTMENT. FURTHER, THIS BOILER IS REQUIRED TO BE KEPT UPDATED AND MAINTAINED PROPERLY SO THAT NO UNTOWARD ACCIDENT CO ULD TAKE PLACE. (2) DURING THE YEAR UNDER CONSIDERATION, THE APPELL ANT FIRM HAD MADE ADDITIONS TO THE BOILER AMOUNTING TO RS.11.24 LACS AND THE COST OF THE ADDITION WAS DEBITED TO THE BOILER ACCOUNT. THE DETAILS OF MACHINERY REPAIR EXPENSES IS ENCLOSED HEREWITH VIDE ANNEXURE-C. IT MAY KINDLY BE APPRECIATED THAT MOST OF THE EXPENSES ARE LESS THAN RS.10,000/-. HOWEVER, A FEW BILLS WERE MORE THAN RS .20,000/-. THE DEPRECIATION OF THESE ENTRIES/BILLS, CLEARLY INDICA TES THAT ALL THE ITEMS PURCHASED WERE CONSUMABLES IN CONNECTION WITH RUNNI NG AND MAINTENANCE OF THE BOILER, CONVEYOR BELT ETC. (3) THE STEAM GENERATED FROM THE BOILERS IS USED TO GET BOILED RICE. THE PARTS OF THE PLANT WHICH COME INTO CONTACT WITH STEAM EASILY GET CORRODED AND REQUIRE FREQUENT REPLACEMENT. FURTHER, SCALING ALSO TAKES PLACE INSIDE BOILER AND OTHER PLACES DIRECTLY COMING INTO CONTACT WITH WATER BECAUSE OF PRESENCE OF MINERALS/SALES IN WATER. FOR THE PURPOSE OF DE-SCALING THE BOILER CHEMICALS ARE REQU IRED REGULARLY. HOWEVER, THE RUBBER RINGS, WHICH ASSIST TO MOVEMENT OF CONVEYOR BELTS ALSO REQUIRED TO BE REPLACED REGULARLY DUE TO WORN OUT. THE ANALYSIS OF THE EXPENSES MENTIONED IN ANNEXURE-C CL EARLY DEPICT THAT MOST OF THE EXPENSES PERTAIN TO PURCHASE OF CHEMICA LS AND OTHER CONSUMABLE ITEMS IN ORDER TO OPERATE THE BOILER AND CONVEYOR BELTS ETC. SMOOTHLY AND IT CANNOT BE SAID FROM THE NATURE OF THESE EXPENSES THAT ANY NEW PLANT OR MACHINERY CAME INTO BEING. MA CHINE REPAIR EXPENSES ARE REGULAR FEATURE OF THE FIRM, BECAUSE M OST OF ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 11 MACHINERIES ARE VERY OLD, BEING INSTALLED IN THE YE AR 1984, WHICH WOULD BE EVIDENT FROM THE FOLLOWING TABLE BECAUSE O F OLD BOILER ETC. F.YR. 2004-05 2005-06 2006-07 2007-08 2008-09 MACHINE REPAIR EXP. 7,17,658 7,76, 197 8.35,263 16,39,856 15,27,309 (4) THE LD. AO HAD GOT CARRIED OUT INSPECTION OF TH E PLANT AND MACHINERIES OF THE APPELLANT FIRM WITH THE HELP OF HIS INSPECTOR ON 20 TH DECEMBER, 2011 IN ORDER TO KNOW THE CONDITION OF PL ANT AND MACHINERIES DURING THE YEAR 2008-09. THOUGH THE LD. AO HAD RELIED UPON THE REPORT OF THE INSPECTOR, WHILE REACHING TO THE CONCLUSION THAT THE APPELLANT FIRM HAD NEW PLANT AND MACHINERIES AN D NO REPAIR WORK WAS CARRIED OUT, HOWEVER HE HAD FAILED TO PROVIDE U S A COPY OF THE SAME FOR OUR REBUTTAL. MERELY PHOTOGRAPHS OF PLANT TAKEN BY THE INSPECTOR WITH THE HELP OF PROFESSIONAL PHOTOGRAPHE R WERE APPENDED TO THE ASSESSMENT ORDER. EVEN, THE LD. AO HAD FAILE D TO CONDUCT ANY ENQUIRY WITH THE VENDORS, WHO HAD ISSUED REPAIR BIL LS TO THE APPELLANT FIRM. THEREFORE, THE CONCLUSION OF THE LD. AO REGAR DING INSTALLATION OF NEW MACHINES WAS MERELY ON THE BASIS OF CONJECTURE AND SURMISES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND OBSERVED THAT THE ASSESSEE HAS BEEN INCURRING MACHINERY REPAIRING EXPENSES FOR LAS T 5 YEARS AS UNDER :- ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 12 F.YR. 2004-05 2005-06 2006-07 2007-08 2008-09 MACHINE REPAIR EXP. 7,17,658 7,76, 197 8.35,263 16,39,856 15,27,309 ALSO AFTER EXAMINING THE MACHINERY REPAIR EXPENSES LEDGER ACCOUNTS AVAILABLE IN THE PAPER BOOK FROM PAGES 59 TO 67 FRO M WHICH IT IS CLEAR THAT MAJORITY OF THE EXPENSES WHICH HAVE BEEN INCUR RED REGULARLY ROUND THE YEAR ARE LESS THAN RS.10,000/- AND IN VER Y FEW CASES HAS EXCEEDED RS.20,000/- WHICH FURTHER DULY SUPPORT THE REVENUE AS SUBMITTED BY THE LD. AR, THE MOST OF THE MACHINERY ARE VERY OLD AND SOME OF THEM BEING INSTALLED IN THE YEAR 1984 AND A SSESSEES MANUFACTURING PROCESS REQUIRES THE USE OF BOILERS W HICH ARE REQUIRED TO BE REGISTERED WITH THE GOVERNMENT AUTHORITIES UN DER THE PROVISIONS OF INDIAN BOILER ACT AND FOR SAFETY PURPOSES THE BO ILERS ARE REQUIRED TO BE KEPT IN GOOD CONDITION ROUND THE YEAR AND FOR TH IS VERY PURPOSE THE ASSESSEE HAS TO SPEND REGULARLY UNDER THE HEAD MACH INERY REPAIR AND MAINTENANCE. FROM THE PERUSAL OF THE BALANCE SH EET OF THE ASSESSEE IT IS CLEAR THAT AN ADDITION OF RS.11.24 L ACS HAS BEEN MADE BY THE ASSESSEE UNDER THE HEAD BOILER ACCOUNT, WHIC H WAS THE CAPITAL EXPENSES INCURRED BY THE ASSESSEE AND DEPRECIATION HAS BEEN CHARGED ACCORDINGLY. THE EXPENSES UNDER MACHINERY R EPAIR AND MAINTENANCE HAVE BEEN MAINLY INCURRED IN RELATION T O BOILERS WHICH ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 13 ARE USED TO GET BOILED RICE AND AS A PART OF THE PL ANT COME INTO CONTACT WITH STEAM GENERATED FROM THE BOILER, THERE BY GETTING CORRODED AND REQUIRE FREQUENT REPLACEMENT. SIMILARL Y CONSUMABLE STORES LIKE RUBBER RINGS, HARDWARE ITEMS WHICH ASSI ST IN MOVEMENT OF CONVEYOR BELTS ALSO NEED TO BE REPLACED REGULARLY D UE TO WEAN AND TEAR. AS SUCH THE MACHINERY REPAIR AND MAINTENANCE EXPENSES INCURRED BY THE ASSESSEE AT RS.12,98,213/- ARE REVE NUE IN NATURE AND THERE IS NO ERROR IN THE FINDINGS OF CIT(A). WE UPH OLD THE SAME. THIS GROUND OF REVENUE IS ALSO DISMISSED. 12. THE OTHER TWO GROUNDS ARE OF GENERAL NATURE AND NEED NO ADJUDICATION. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9/9/15 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 09/09/15 MAHATA/- ITA NO._512/AHD/2013 ASST. YEAR 2009-10_ 14 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 1.9.2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER:3/9/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 9/9/15 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: