DCIT, Circle - 3, Kolkata, Kolkata V. M/s. Nikata Metals Pvt. Ltd., Kolkata

ITA 526/KOL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7249 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 02-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: S BANDYOPADHYAY
• Keywords: Unexplained expenditure; Depreciation; Additional depreciation; Corroborative evidences; Competent authority
• Section: 69C; 133(6); 32; 69; 68

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER %& %& %& %& ' ' ' ' / ITA NO.526/KOL/2010 () *+/ ASSESSMENT YEAR : 2006-07 (-. / APPELLANT ) D.C.I.T., CIRCLE-3, KOLKATA - ( - - VERSUS - . (01-./ RESPONDENT ) M/S.NIKITA METALS PVT. LTD., KOLKATA (PAN: AABCN 8969 K) -. 2 3 #/ FOR THE APPELLANT: SHRI NIRAJ KUMAR 01-. 2 3 #/ FOR THE RESPONDENT: SHRI S.BANDYOPADHYAY 4(5 2 '$ /DATE OF HEARING : 30.08.2011. 6* 2 '$ /DATE OF PRONOUNCEMENT : 11.10.2011. #7 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER DATED 14.12.2009 OF THE CIT(A)-I, KOLKATA PERTAINING TO A.Y. 2006-07. 2. THE FIRST TWO GROUNDS ARE RELATING TO DELE TION OF ADDITION MADE BY AO AMOUNTING TO RS.25,00,000/- U/S 68 OF THE IT ACT. 3. THE RELEVANT FACTS OF THE ABOVE ISSUES ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT AO ADDED AN AMOUNT OF RS.25,00,000/- BY OBSERVING THAT : FROM THE AUDITED BALANCE SHEET IT WAS FOUND THAT T HE ASSESSEE COMPANY HAD ISSUED SHARE CAPITAL OF RS.40,60,00/- INCLUDING SHARE PREM IUM. IN THIS REGARD ASSESSEE COMPANY WAS ASKED TO PRODUCE DETAILS OF SHARE ALLOT TED ALONG WITH COPY OF FORM NO-5 2 AND FORM NO.2 FILED WITH ROC VIDE LETTER NO.1808 DA TED 22,08.2008 AND THE ASSESSEE COMPANY AHS SUBMITTED ONLY NAME & ADDRESS OF ONLY TO WHOM SHARE ALLOTTED. IN ORDER TO VERIFY THE GENUINENESS OF SHARE CAPITAL RAISED B Y THE ASSESSEE COMPANY NOTICE U/S 133(6) WERE ISSUED. BUT ONE OF THE SHARE APPLICANT, M/S. RGF CAPITAL MARKET LTD. DID NOT COMPLY WITH THE NOTICE U/S 133(6). AS PER CLAIM OF THE ASSESSEE COMPANY M/S.RGF CAPITAL MARKETS LTD. HAS PAID RS.25,00,000/ - FOR 1,25,000 SHARES INCLUDING SHARE PREMIUM. THE ASSESSEE COMPANY WAS AGAIN REQUE STED TO PRODUCE THE CORROBORATIVE EVIDENCES IN SUPPRT OF ITS CLAIM OF I NCREASE OF SHARE CAPITAL (INCLUDING SHARE PREMIUM) OF RS.4,06,00,000/- VIDE SHOW CAUSE LETTER NO.2668 DATED 05.12.2008 FIXING THE DATE OF HEARING ON 15.12.2008 AND THE SH OW CAUSE LETTER WAS PROPERLY SERVED TO THE ASSESSEE. BUT NEITHER THE ASSESSEE NO R THE AR OF THE ASSESSEE APPEARED OR SUBMITTED ANY EXPLANATION IN RESPECT OF ABOVE CLAIM . IN SPITE OF ADEQUATE OPPORTUNITY PROVIDED TO THE AS SESSEE TO SUBSTANTIATE ITS CLAIM THE ASSESSEE COMPANY FAILED TO FILE ANY DOCUMENTARY EVI DENCE IN SUPPORT OF ITS CLAIM. IN VIEW OF THE ABOVE CIRCUMSTANCES I HAVE UNABLE TO VE RIFY THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION. SO, THE CLAIM OF THE ASSESSEE COMPANY ON ACCOUNT OF INCREASE IN SHARE CAPITAL (INCLUDING SHARE PREMI UM) FOR M/S.RGF CAPITAL MARKETS LTD. OF RS.25,00,000/- IS TREATED AS UNDISCLOSED CA SH CREDIT U/S 68 OF THE INCOME TAX ACT 1961 AND ADDED TO TOTAL INCOME OF THE ASSESSEE COMPANY. PENALTY PROCEEDING U/S 271(1)(C) OF THE INCOME TAX ACT 1961 INITIATED SEPA RATELY FOR FURNISHING INACCURATE PARTICULARS. 3.1. ON APPEAL THE LD. CIT(A) HAS DELETED BOTH THE SAME BY OBSERVING AS UNDER :- 8.3. THE APPELLANT HAS FURTHER SUBMITTED DOCUMEN TARY EVIDENCES ESTABLISHING THE IDENTITY OF M/S.RGF CAPITAL MARKETS LTD., SOURCES O F FUND IN ITS HANDS AND ALSO THE GENUINENESS OF THE CONTRIBUTION TOWARDS THE SHARES OF THE APPELLANT COMPANY IS CONCERNED. ON THE BASIS OF THE SAME, I AM CONVINCED IN SO FAR AS THE GENUINENESS OF THE CONTRIBUTION BY RGF CAPITAL MARKET LTD. TOWARDS THE SHARE CAPITAL OF THE APPELLANT COMPANY. THE AO HAS ACCEPTED THE CONTRIBUTION TO SH ARE CAPITAL IN THIS YEAR BY THE OTHER PARTIES. SIMPLY BECAUSE RGF DID NOT COMPLY WI TH THE NOTICE ISSUED BY THE AO THE PRESUMPTION WAS THAT THE SHARE CONTRIBUTION BY THAT PARTY WAS NOT GENUINE. FURTHER, THE SUPREME COURTS JUDGEMENT IN THE CASE OF M/S.LOVELY EXPORTS PVT. LTD. [216 CTR (SC) 195], IN THE SHARE CONTRIBUTION AMOUN TS BY THE SHAREHOLDERS CANNOT BE ADDED BACK IN THE HANDS OF THE COMPANY NEEDS TO BE FOLLOWED. IN VIEW OF THE FACTS AS DISCUSSED ABOVE AND IN CONFORMITY WITH THE HONBLE APEX COURT JUDGEMENT THE ADDITION OF THE AMOUNT OF RS.25,00,000/- IS DELETED . 3.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR APPEARING ON BEHALF OF THE REV ENUE BY REFERRING TO THE OBSERVATIONS MADE BY LD. CIT(A) THAT ASSESSEE HAS SUBMITTED DOCU MENTARY EVIDENCES ESTABLISHING THE IDENTITY OF M/S.RGF CAPITAL MARKETS LTD., SOURC ES OF FUND IN ITS HANDS AND ALSO THE GENUINENESS OF THE CONTRIBUTION TOWARDS THE SHARES OF THE APPELLANT COMPANY. HE CONTENDED THAT LD. CIT(A) HAS ACCEPTED THE ADDITION AL DOCUMENTS IN VIOLATION OF RULE 3 46A UNDER IT RULES. THEREFORE HE REQUESTED TO SET ASIDE THIS ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION. 5. ON THE OTHER HAND, THE LD. COUNSEL ON BEHA LF OF ASSESSEE BY REFERRING TO PARA 8.2. OF THE ORDER OF LD. CIT(A) WHEREIN LD. CIT(A) HAS S UBMITTED THAT ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS BEFORE AO : I) FULL ACCOUNT OF SHARE APPLICATION MONEY (TOTAL 17 COMPANIES AND TOTAL AMOUNT RS.40,60 ,000) II) FORM NO.2 FILED WOITH ROC. III)ACKNOWLEDGEMENT OF FILING OF RETURN OF INCOME B Y RGF CAPITAL MARKET LTD. FOR THE RELEVANT YEAR. IV) BANK STATEMENT OF RGF CAPITAL MARKET LTD. (SHOW ING PAYMENT OF THE AMOUNT THROUGH BANK). V) DETAILED ACCOUNTS OF RGF CAPITAL MARKET LTD. VI) INVESTMENT BY RGF CAPITAL MARKET LTD. IN SHARES OF NIKITA I.E. THE APPELLANT COMAPANY. HE FURTHER SUBMITTED THAT ON SIMILAR ISSUE THE ITAT IN ASSESSEES OWN CASE FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR 2004-05 HAS R EJECTED THE APPEAL OF THE REVENUE. THEREFORE HE REQUESTED TO UPHELD THE ORDER S OF LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE DO CUMENTS REFERRED BY LD. CIT(A) WHICH WAS POINTED OUT BY THE LD. COUNSEL FOR ASSESS EE AT THE TIME OF HEARING ARE AVAILABLE WITH AO WHILE DOING THE ASSESSMENT. THERE FORE, WE FIND NO JUSTIFICATION ON THE PART OF AO TO IGNORE THE DOCUMENTS. IT IS FURTH ER OBSERVED THAT THIS TRIBUNAL IN THE IMMEDIATELY PRECEDING YEARS HAS DISMISSED THE APPEA L OF THE REVENUE ON THE SAME ISSUE. THEREFORE THERE IS NO NEED TO SET ASIDE THE ISSUE TO THE FILE OF AO AS CONTENDED BY LD. DR. THEREFORE GROUND RAISED BY THE REVENUE I N NO.1 AND 2 ARE DISMISSED. 7 . IN THE RESULT GROUND NOS. 1 AND 2 OF THE REVENU ES APPEAL ARE DISMISSED. 8. GROUND NO.3 RAISED BY THE REVENUE RELATES TO DE LETION OF ADDITION MADE U/S 69C OF THE IT ACT AMOUNTING TO RS.2,38,07,864/-. 4 9. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DO ING THE SCRUTINY ASSESSMENT HAS MADE AN ADDITION OF RS.2,38,07,864/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C BY OBSERVING AS UNDER :- FROM THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IT WAS FOUND THAT THE TOTAL PRODUCTION OF THE ASSESSEE COMPANY HAS INCREA SED FORM 1117.192 M/T TO 21011.288 M/T I.E. 19894.96 M/T OR 1781% DURING THE FINANCIAL YEAR ENDED ON 31.03.2006 RELEVANT TO ASST.YR. 2006-07. THE ASSESS EE COMPANY WAS ASKED TO PRODUCE THE DETAILS OF MONTH WISE, ITEMWISE, QUANTITATIVE A ND QUALITATIVE DETAILS OF FINISHED GOODS AND RAW MATERIALS SEPARATELY FOR EACH UNIT AL ONG WITH RESPECTIVE GRAND TOTALS AND ALSO ASKED TO RECONCILE THE CONSUMPTION OF ELEC TRICITY AS WELL AS PRODUCTION AS PER SPECIFIED FORMAT VIDE LETTER NO.1808 DATED 22.08.20 08 BUT TILL DATE THE ASSESSEE HAD NOT PRODUCED ANY DETAILS IN RESPECT OF CONSUMPTION OF E LECTRICITY ALONG WITH PRODUCTION. THE ASSESSEE COMPANY WAS AGAIN ASKED VIDE LETTER NO .2668 DATED 5.12.2008 FINALLY TO EXPLAIN THE DISPARITY ON INCREASE OF TOTAL MANUF ACTURING & OTHER EXPENSES AND COST OF MATERIALS WITH RESPECT TO INCREASE IN PRODUCTION DURING THE PREVIOUS YEAR 2005-06 COMPARING TO PREVIOUS YEAR 2004-05. MOREOVER THE AS SESSEE COMPANY WAS ASKED TO PRODUCE PURCHASES OF LAST TWO MONTH VIS-A-VIC CONSU MPTION AND CLOSING STOCK AND BASIS OF VALUATION WITH PROOF BUT THE ASSESSEE REMA INED SILENT ABOUT IT. THE ASSESSEE COMPANY WAS ALSO REPEATEDLY REQUESTED TO PRODUCE RE GULAR BOOKS OF ACCOUNTS ALONG WITH SUPPORTING EVIDENCES VIDE LETTER NO.1808 DATED 22.09.2008 VIDE LETTER NO.2668 DATED 5.12.2008 AND FINALLY VIDE LETTER NO.2711 DAT ED 19.12.2008 WHICH WERE DULY RECEIVED BY THE ASSESSEE COMPANY BUT THE ASSESSEE C OMPANY FAILED TO PRODUCE THE SAME. (I)THE ASSESSEE COMPANY HAD SHOWN TOTAL MANUFACTURI NG & OTHER EXPENSES IN SCHEDULE 16 OF AUDITED ACCOUNT OF RS.1,53,57,665/- COMPARE TO PREVIOUS YEAR OF RS.4,20,384/- I.E. TOTAL INCREASE OF RS.1,49,37,281 /-. AS PER INCREASE PERCENTAGE OF PRODUCTION, THE INCREASE OF MANUFACTURING & OTHER E XPENSES SHOULD BE RS.74,87,039 (I.E. 1781% OF RS.4,20,384). DUE TO INFLATION OF CO ST AND OTHER FACTORS 15% WEIGHTAGE MAY BE GIVEN AS APPRECIATION/INFLATION RISE. SO, 11 5% OF RS.74,87,039 COMES TO RS.86,10,094/-. SINCE IN THE CASE OF MANUFACTURING EXPENSES, ITS INCREASE OR DECREASE RESULTS IN INCREASE OR DECREASE OF PRODUCTION. THE DIFFERENCE OF AMOUNT OF RS.67,47,571/- (RS.1,53,57,665 RS.86,10,094) IS A DDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 69 OF THE I.T.ACT, 1961. (II) FURTHER, THE ASSESSEE COMPANY HAVE SHOWN COS T OF MATERIALS IN SCHEDULE 15 OF AUDITED ACCOUNT OF RS.20,81,52,154/- COMPARED TO PR EVIOUS YEAR OF RS.93,29,974/- I.E. TOTAL INCREASE OF RS.19,88,22,180/- AS PER INC REASE PERCENTAGE OF PRODUCTION, THE INCREASE OF COST MATERIALS SHOULD BE RS.16,61,66,83 6/- (I.E.1781% OF RS.93,29,974). DUE TO INFLATION OF COST AND OTHER FACTORS 15% WEIG HTAGE MAY BE GIVEN AS APPRECIATION/INFLATION. SO 115% OF RS.16,61,66,836/ - COMES TO RS.19,10,91,861/-. SINCE INCREASE OR DECREASE OF COST PRICE OF RAW MAT ERIALS RESULTS IN INCREASE OR DECREASE OF PRODUCTION. THE DIFFERENCE OF AMOUNT OF RS.1,70,60,293/- (RS.20,81,52,154/- - RS.19,10,91,861/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 69 OF THE IT ACT, 1961. IN VIEW OF THE ABOVE TO FACTS STATED ABOVE, THE TO TAL UNEXPLAINED EXPENDITURE OF RS.2,38,07,864 [RS.67,47,571/- + RS.1,70,60,293/-] IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY U/S 69C OF THE I.T.ACT, 196 1. 9.1. ON APPEAL LD. CIT(A) HAS DELETED THE SAME BY O BSERVING AS UNDER :- 5 10.6. FROM AN EXAMINATION OF THIS ISSUE, IT IS EVIDENT THAT THE AO HAD NOT BEEN ABLE TO FIND OUT ANY SPECIFIC DEFECT OR IRREGULARITY IN THE ACCOUNTS OF THE APPELLANT NOR HAD ANY FAULT BEEN FOUND WITH ANY OF THE ITEMS OF MANUF ACTURING & OTHER EXPENSES AS ALSO THE COST OF MATERIALS. THE AO HAS NOT SPECIFICALLY CHALLENGED ANY SINGLE ITEM OF SUCH EXPENSES. HE HOWEVER HAS PROCEEDED ON THE BASIS OF A MATHEMATICAL FORMULA, WHICH DOES NOT HAVE ANY RELEVANCE IN THE FRAMING OF AN IN COME TAX ASSESSMENT PER SE OR ARRIVING AT THE CORRECT INCOME OF THE ASSESSEE THE ADDITIONS SEEM TO HAVE BEEN MADE MERELY ON HYPOTHESIS AND PROBABILITY AND NOT ON THE BASIS OF ANY SPECIFIC FACT OR EVIDENCE. AS HELD BY THE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. [26 ITR 775] NO ADDITION CAN BE MADE IN AN INCOME T AX ASSESSMENT ON THE BASIS OF CONJECTURE ALONE. IN THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THIS ADDITION IS UNSUSTAINABLE AND FURTHERMORE, THE ADDI TION HAS BEEN MADE BY THE AO U/S 69C OF THE ACT. ADDITION UNDER THIS SECTION CAN ONL Y BE MADE IN RESPECT OF EXPENSES NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESS EE. IN THE PRESENT CASE THE AO HAD MADE ADDITIONS OUT OF EXPENSES RECORDED IN THE BOOK S AND AS CLAIMED IN THE ACCOUNTS. THEREFORE, THE VALIDITY OF THE ADDITION ITSELF IS Q UESTIONABLE FOR APPLYING THE PROVISIONS OF SECTION 69C OF THE ACT. THE ADDITION OF RS.2,38, 07,864/- IS ACCORDINGLY DELETED. 9.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 10. AT THE TIME OF HEARING THE LD. DR APPEARING ON BEHALF OF THE REVENUE BY REFERRING TO THE OBSERVATIONS MADE BY ASSESSING OFF ICER THAT THE ASSESSEE COMPANY WAS ASKED TO PRODUCE PURCHASES OF LAST TWO MONTH VI S-A-VIC CONSUMPTION AND CLOSING STOCK AND BASIS OF VALUATION WITH PROOF BUT THE ASS ESSEE REMAINED SILENT ABOUT IT. THE ASSESSEE COMPANY WAS ALSO REPEATEDLY REQUESTED TO P RODUCE REGULAR BOOKS OF ACCOUNTS ALONG WITH SUPPORTING EVIDENCES VIDE LETTER NO.1808 DATED 22.09.2008 VIDE LETTER NO.2668 DATED 5.12.2008 AND FINALLY VIDE LETTER NO. 2711 DATED 19.12.2008 WHICH WERE DULY RECEIVED BY THE ASSESSEE COMPANY BUT THE ASSES SEE COMPANY FAILED TO PRODUCE THE SAME. HE FURTHER CONTENDED THAT LD. CIT(A) WITHOUT REBUTTING THE ABOVE OBSERVATIONS OR WITHOUT CALLING FOR ANY REMAND REPORT SIMPLY BAS ED ON SUBMISSIONS MADE BY LD. COUNSEL FOR ASSESSEE HAS DELETED THE SAME WHICH IS NOT IN ACCORDANCE WITH LAW. THEREFORE HE REQUESTED TO SET ASIDE THIS ISSUE FOR FRESH CONSIDERATION BEFORE AO. 11. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE BY REFERRING TO PAGE NOS. 329 TO 352 OF THE PAPER BOOK WHICH CON TAINS (I) MONTHLY STOCK STATEMENT OF RAW MATERIALS & FINI SHED GOODS FOR THE YEAR ENDED 31.03.2006 & ELECTRICITY BILLS (II LEDGER COPIES OF PURCHASE AS SHOWN IN PAGE NO.1 4 (III) LEDGER OF MANUFACTURING & OTHER EXPENSES SHOW N IN PAGE NO.14 6 CONTENDED THAT LD. CIT(A) HAS COME TO THE CONCLUSIO N BASED ON THE DOCUMENTS WHICH WERE ALSO AVAILABLE WITH AO. THEREFORE HE REQUESTED TO UPHELD THE ORDER OF LD. CIT(A). 12. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL ON BEHALF OF ASSESSEE THOUGH SUBMIT TED THAT ALL THE DOCUMENTS ARE FILED IN THE PAPER BOOK HE HAS NOT SPECIFICALLY POINTED O UT WHETHER THE REQUIREMENTS CALLED FOR BY AO AT THE TIME OF ASSESSMENT HAS BEEN FILED OR NOT. EVEN WE HAVE GONE THROUGH THE DOCUMENTS REFERRED BY THE LD. COUNSEL WHICH WER E AVAILABLE IN THE PAPER BOOK AND OBSERVED THAT SIMPLY BY FILING THESE DOCUMENTS THE OBSERVATIONS MADE BY AO CANNOT BE IGNORED. THE LD. CIT(A) HAS NOT OBTAINED ANY REM AND REPORT BEFORE DELETING THIS ADDITION. THEREFORE WE ARE OF THE VIEW THAT LD. CIT (A) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY AO SIMPLY BY ACCEPTING THE ARGUMEN TS OF THE LD. AR AND WITHOUT REBUTTING THE OBSERVATIONS. IN OUR CONSIDERED VIEW, THE REQUIREMENTS MENTIONED BY AO ARE ESSENTIAL IN ORDER TO ASCERTAIN THE TAXABLE INC OME OF THE ASSESSEE. HENCE WE SET ASIDE THE ORDERS OF LD. CIT(A) ON THIS ISSUE AND R ESTORE IT BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AS PER LAW AFTER GIVING A REASON ABLE OPPORTUNITY OF BEING HEARING TO ASSESSEE. 13. IN THE RESULT GROUND NO.3 OF THE REVENUES APPE AL IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.4 RAISED BY THE REVENUE IS RELATING T O DISALLOWANCE OF DEPRECIATION OF RS.79,80,719/- . 15. THE RELEVANT FACTS OF THIS ISSUE ARE THAT WHILE DOING THE SCRUTINY ASSESSEE AO MADE AN ADDITION OF RS.79,80,719/- BY OBSERVING AS UNDER :- FROM THE TAX AUDIT REPORT IT IS FOUND THAT THE ASS ESSEE HAD CLAIMED TOTAL DEPRECIATION OF RS.1,50,29,386/- U/S 32(1) OF THE I NCOME TAX ACT WHICH INCLUDES ADDITIONAL DEPRECIATION OF RS.37,65,840/-. IN THIS CONNECTION THE ASSESSEE COMPANY WAS REQUESTED TO PRODUCE THE DETAILS OF ADDITION OF FIXED ASSETS ADDED DURING THE YEAR (I.E. 2005-06) ALONG WITH THE PROOF I.E. PURCHASE I NVOICE, DATE TO PUT TO USE AND ALSO REQUESTED TO EXPLAIN WHY THE TRANSPORTATION, LABOUR CHARGES AND OTHER DIRECT EXPENSES WAS NOT CAPITALIZED IN RESPECT OF NEW ADDITION OF F IXED ASSETS VIDE SHOW CAUSE LETTER NO.2668 DATED 05.12.2008. THE ASSESSEE COMPANY VIDE HIS LETTER DATED 26.12.2008 7 REPLIED THAT THE DATE ON WHICH FIXED ASSET WAS PUT TO USE CAN BE FURTHER CLARIFIED IN SCHEDULE 18B III OF NOTES ON ACCOUNTS OF AUDITED BA LANCE SHEET. BUT HE FAILED TO PRODUCE ANY PURCHASE BILL AND ANY PROOF FOR DATE OF PUT TO USE. MOREOVER, THE ASSESSEE COMPANY HAD NOT SUBMITTED FORM NO.3AA MADE BY AN AC COUNTANT FOR CLAIMING DEDUCTION U/S 32(A)(IIA) OF THE ACT. THE REPORT FRO M AN ACCOUNTANT WHICH IS REQUIRED TO BE FURNISHED BY THE ASSESSEE UNDER THE THIRD PROVIS IO TO CLAUSE (IIA) OF SUB SECTION (1) OF SECTION 32 SHALL BE INFORM NO.3AA. IT WAS ALSO F OUND FROM AUDITORS REPORT THAT INSTALLED CAPACITY OF THE ASSESSEE COMPANY DURING T HE FINANCIAL YEAR 2004-05 WAS 30,275 MT AND TOTAL PRODUCTION DURING THE YEAR UNDE R SCRUTINY I..E. DURING THE FINANCIAL YEAR 2005-06 IS 21,011 MT. SO, IT IS CLEA R THAT THE ASSESSEE HAD UTILIZED 70% OF INSTALLED CAPACITY OF F.Y. 2004-05 AND IT CAN BE SAID THAT ADDITION MADE BY THE ASSESSEE COMPANY IS NOT PUT TO USE DURING THE YEAR 2005-06 AND ALSO THE ASSESSEE COMPANY HAD NOT PRODUCED ANY PROOF IN RESPECT OF PU RCHASE OF FIXED ASSETS AS WELL AS DATE OF PUT TO USE TILL DATE. MOREOVER IT IS TO BE POINTED THAT THE AUDITOR IS NOT A TECHNICAL PERSON TO CERTIFY INSTALLATION OF FIXED A SSETS WITHOUT PRODUCTION OF COMPETENT AUTHORITYS CERTIFICATE. HENCE, THE DEPRECATION ON FIXED ASSETS AS PER I.T.ACT, 1961 TO BE ALLOWED IS CALCULATED AS FOLLOWS : PARTICULARS OF ASSETS RATE OF DEPRECIATON W.D.V. AS ON 01.04.2005(RS.) DEPRECIATION (RS.) BUILDING 10% 23,030,848 23,03,085 FURNITURE & FITTINGS 10% 6,56,006 65,601 MACHINERY & PLANT 15% 3,11,13,448 46,67,017 60% 21,607 12,964 INTANGIBLE ASSETS 56,45,820 ------- TOTAL DEPRECIATIONS TO BE ALLOWED U/S 32 70,48,667 BUT ASSESSEE COMPANYS CLAIM OF DEPRECIATION U/S 32 IS RS.1,50,29,386/- SO, THE EXCESS CLAIM OF DEPRECATION OF RS.79,80,719/- [ RS.1,50,29,386/- - RS.70,48,667/-] IS DISALLOWED. 15.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING AS UNDER :- 9.3. ON AN EXAMINATION OF THIS PARTICULAR ISSUE, I FIND SOME JUSTIFICATION IN THE CONTENTION OF THE APPELLANT. I AM ALSO OF THE VIEW THAT THE AOS INSISTENCE ON PRODUCTION OF ALL THE PURCHASE BILLS OF ALL THE NEW ASSETS AND PROOF REGARDING THEIR DATES OF BEING PUT TO USE WAS REPETITITVE AS THE EN TIRE ACCOUNTS HAD BEEN PRODUCED BEFORE HIM AND AN EXAMINATION OF THE SAME COULD HAV E MET HIS PURPOSES. THE DIRECTORS AND THE AUDITORS HAD MENTIONED IN THEIR R EPORTS ABOUT COMMISSIONING OF THE 2 ND FURNACE IN THIS YEAR. THE SPURT IN THE FIGURE OF P RODUCTION ALSO TESTIFIES TO ACQUISITION OF THE ASSETS AND OF THEIR BEING PUT TO USE IN THIS YEAR ITSELF. THE LEDGER COPIES OF THE ACCOUNT RELATING TO ACQUISITION OF TH E ASSETS ALONG WITH THE RELATED BILLS HAD BEEN PLACED IN THE PAPER BOOK FILED BEFORE ME. THE AO HAD ACCESS TO ALL THESE PAPERS, BUT APPARENTLY DID NOT EXAMINE THEM. HIS AC TION IN DISALLOWING A SUBSTANTIAL PART OF THE CLAIM OF DEPRECIATION APPEARS PREMATURE . I, DO NOT BELIEVE THIS ADDITION IS SUSTAINABLE IN THE VIEW OF THE CIRCUMSTANCES NARRAT ED. THIS ADDITION IS, THEREFORE, DELETED. 8 16. AT THE TIME OF HEARING BEFORE US THE LD. DR APPEARI NG ON BEHALF OF THE REVENUE BY POINTING OUT THE OBSERVATIONS MADE BY AO MAINLY THE ASSESSEE COMPANY HAD NOT PRODUCED ANY PROOF IN RESPECT OF PURCHASE OF FIXED ASSETS AS WELL AS DATE OF PUT TO USE TILL DATE. MOREOVER IT IS TO BE POINTED THAT THE AU DITOR IS NOT A TECHNICAL PERSON TO CERTIFY INSTALLATION OF FIXED ASSETS WITHOUT PRODUC TION OF COMPETENT AUTHORITYS CERTIFICATE. HENCE, THE DEPRECATION ON FIXED ASSETS AS PER I.T.ACT, 1961 TO BE ALLOWED IS CALCULATED AS FOLLOWS : PARTICULARS OF ASSETS RATE OF DEPRECIATON W.D.V. AS ON 01.04.2005(RS.) DEPRECIATION (RS.) BUILDING 10% 23,030,848 23,03,085 FURNITURE & FITTINGS 10% 6,56,006 65,601 MACHINERY & PLANT 15% 3,11,13,448 46,67,017 60% 21,607 12,964 INTANGIBLE ASSETS 56,45,820 ------- TOTAL DEPRECIATIONS TO BE ALLOWED U/S 32 70,48,667 BUT ASSESSEE COMPANYS CLAIM OF DEPRECIATION U/S 3 2 IS RS.1,50,29,386/- SO, THE EXCESS CLAIM OF DEPRECATION OF RS.79,80,719/- [RS.1 ,50,29,386/- - RS.70,48,667/-] IS DISALLOWED. ON THE OTHER HAND, LD. CIT(A) HAS SIMP LY ACCEPTED THE SUBMISSIONS OF ASSESSEE WITHOUT EXAMINING THE DETAILS OF THE ASSET S PURCHASED DURING THE YEARS RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. TH EREFORE HE REQUESTED TO SET ASIDE THIS ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATIO N. 17. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURT HER REFERRED TO PAGE NOS.142 TO 328 OF THE PAPER BOOK WHICH CONSISTS OF (I) LEDGER COPIES OF ASSET ALONG WITH BILLS AND (II) STATEMENT OF PRODUCTION & ELECTRICITY CONS UMPTION. THEREFORE HE REQUESTED TO UPHELD THE ORDERS OF LD. CIT(A). 18. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THE LD. CO UNSEL APPEARING FOR ASSESSEE WAS UNABLE TO EXPLAIN THE DETAILS OF THE ADDITIONS MADE DURING THE ASSESSMENT YEAR THOUGH HE HAS REFERRED THAT ALL THE MATERIALS ARE AVAILABL E IN THE PAPER BOOK. SINCE THE LD. 9 COUNSEL COULD NOT REBUT THE OBSERVATIONS MADE BY AO AS WELL AS POINTED OUT BY THE LD. DR AT THE TIME OF HEARING AND LD. CIT(A) HAS NOT CO MMENTED UPON THE OBSERVATIONS OF AO WHILE ACCEPTING THE SUBMISSIONS OF ASSESSEE WE C ONSIDER IT FIT TO SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE BACK TO THE FI LE OF AO FOR FRESH CONSIDERATION AS PER LAW AFTER GIVING A REASONABLE OPPORTUNITY OF BE ING HEARD TO ASSESSEE. 19. IN THE RESULT GROUND NO.4 OF THE REVENUES APPE AL IS ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLO WED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 11.10.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 11.10.2011. ORDER PRONOUNCED BY SD/- SD/- (JM) (AM) (NVK) (CDR) #7 2 0& 8#&*9- COPY OF THE ORDER FORWARDED TO: 1. M/S. NITIKA METALS PVT. LTD., 35, C.R.AVENUE, KOLKA TA. 2 D.C.I.T., CIRCLE-3, KOLKATA 3. THE CIT, 4. THE CIT(A)-I, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 1& 0/ TRUE COPY, #7(4/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.) 10