DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE)-1(4), AHMEDABAD, AHMEDABAD vs. MAHALAXMI INFRACONTRACT LIMITED, AHMEDABAD

It is apparent that section 3(2) of the 1956 Act requires the payment of cess on the date prescribed under the U.P. Sugarcame Cess Rules, 1956. If the cess is not paid by the specified date, then by virtue of section 3(3) of the 1956 Act the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment. Section 3(5) of the 1956 Act is a very different provision. It does not deal with the interest paid on the arrear of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon. …. The interest paid under section 3(3) of the 1956 Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under section 10(2)(xv) of the 1922 Act the assessee was entitled to succeed. There was no dispute that the payment of interest represented expenditure laid out wholly or exclusively for the purpose of the business. There was also no dispute that it was in the nature of revenue expenditure.

Ground Number 2: Ld. CIT(Appeals) erred in allowing higher depreciation of ₹18,65,95,684/- claimed by the assessee or plant and machinery @30% instead of 15%

10. In appeal, Ld. CIT(Appeals) noted that for assessment years 2015-16, 2017-18 and 2018-19, similar issue came up for consideration before his predecessor and similar additions made by the assessing officer were deleted. Ld. CIT(Appeals) placed reliance on several judicial precedents and observed that the assessee was engaged in business of providing earthmoving equipment on hire and engaged in business of undertaking mining contracts, cargo handling and transportation contracts and for this purpose, the tippers/dumpers were used by the assessee for fulfilling the transportation part related to mining contracts. Ld. CIT(Appeals) observed that use of dumpers and tippers are integral part of the contract and without which, the contracts would not have been completed. Accordingly, in light of these facts, Ld. CIT(Appeals) allowed the appeal of the assessee.

11. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, at the outset, the counsel for the assessee submitted that on identical set of facts and issues, the Ahmedabad Tribunal in assessee’s own case for assessment years 2015-16, 2017-18 and 2018-19 have allowed the issue in favour of the assessee by dismissing the &1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 6– Department’s appeal on this issue. Accordingly, the issue is directly covered in favour of the assessee considering the orders passed by Ahmedabad Tribunal in assessee’s own case for assessment years 2015-16, 2017-18 and 2018-19.

“7. The case of the assessee is this that the depreciation claimed @30% on the dumper & tipper is as per the provisions of law as the activities of the assessee includes excavation of over burden materials, mining of minerals, transportation of excavated over burden material, excavation of minerals, transportation of minerals from mines to pit head and transportation of minerals from Pit head to Lignite handling system/power plant. Therefore, such motor vehicles, namely, dumpers & tippers are used in transportation of over burden materials and excavated materials owned by the Principal i.e. mining owner and not by the assessee. This particular vehicles are only used for transport beyond the shifting of materials from one place to another Mines, on which, excavation, transportation and other activities are carried out does not belong to the assessee and thus excavated earth and minerals transported doesn’t belong to the assessee but to the Principal who awarded this contract, whereas, the view of the Ld. AO is this that the assessee has been awarded with composite work including blast hole, drilling excavation, blasting, removal of overburden, dumping the overburden at dumping site and transporting the mined minerals from mines to stocking place and leveling of the same. It is found that in some cases separate rates for lignite mining and lignite transportation has been mentioned whereas the nature of work for all the sites is similar. Therefore, the assessee is not exclusively awarded contract work for transportation work and its dippers and tippers were exclusively used for earning transportation income. According to the Ld. AO, the claim of the assessee at the rate of depreciation is only available if motor lorries are used for running without hire, the assessee’s income is not from hire but from business of mining and other ancillary works as mentioned hereinabove, as the assessee got payment for these activities from the person who has awarded the contract on the basis of MT mined materials (net) or of instances on basis of “MT” material including overburden + mined materials. The assessee is basically having business of mining where excavators and dumpers are used which is entirely different income from vehicle running on hire. The Ld. AO relied upon certain judgmets including judgment passed by Hon’ble Rajasthan High Court in case of CIT vs. Sardar Stone, reported in 215 ITR &1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 7– 350 and judgment passed by the Hon’ble Karnataka High Court in the case of Veener Mills vs. CIT, reported in 201 ITR 764. Finally, the Ld. AO attempted to distinguish the judgment passed by the Hon’ble Apex court in the case of Gupta Global Exim (supra) to this effect that as the Hon’ble Supreme Court has allowed depreciation at higher rates for motor lorry used in the business of running them on hire. The basic test would be whether the assessee is having the transportation business whereas the assessee is having mining business not from transportation as the year under consideration and even in earlier year wherein mining contract which is also reflecting from the audit report from A.Ys. 2014-15 & 2015-16 has shown being mining and civil contractor rather than transportation. The assessee fails the test laid down by the Hon’ble Supreme Court and found not eligible for depreciation at higher rate. Addition thereon to the tune of Rs.8,71,10,768/- was made by the Ld. AO in the hands of the assessee.

8. In appeal, apart from all this explanation, the assessee further relied upon the Circular being No. 652 dated 14.06.1993 issued by the CBDT, wherein it has been categorically fixed that higher rate of depreciation was admissible on motor vehicle in the assessee’s business of transportation of goods on hire and that higher rate will not apply if the motor lorries etc. are used in the non-hiring business of the assessee. Further Circular No. 609 dated 29th July, 1991, wherein the Board has clarified that the higher rate of depreciation is also admissible when the assessee is using motor lorry in his own business of transportation of goods on hire. The following facts and figures were also placed before the First Appellate Authority: … 10. Further that, it was also placed on record that the judgment passed by the ITAT, Rajkot was challenged before the Hon’ble High Court in the case of PCIT, Rajkot-I vs. Durga Construction Co., reported in [2018] 93 taxmann.com 436, wherein the High Court came to the conclusion that the assessee therein was engaged in the business of mining and extractions. Needless to mention that the business carried out by the assessee before us is akin to the business carried out by the assessee therein, namely, Durga Construction Company. It is also noted that judgment passed by the Hon’ble Gujarat High Court in case of PCIT, Rajkot-I vs. Durga Construction Co. (supra), the department filed SLP before the Hon’ble Court which stood dismissed. Thus, the ratio laid down by the Jurisdictional High Court still holds the field under which the assessee’s claim could be considered with a positive note. As it is evident from the records before us and the orders passed by the authorities below which had not been able to be controverted by the Ld. DR that the assessee engaged in the activities of excavation of over burden, mining of minerals, transportation of such excavated over burden material, excavation of minerals, transportation of minerals from mines to Pit head and transportation of minerals from Pit head to Lignite handling system/power plant, where the motor lorries used for the transportation of goods on hire. The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee and, therefore, having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee, particularly, when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the Ld. DR. We do not find any reason to interfere with the order &1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 8– passed by the Ld. CIT(A) in granting relief by deleting the addition made by the Ld. AO by restricting the depreciation at 15% against the claim of depreciation at 30% on the dumpers and tippers used by the assessee. The same is found to be just and proper and therefore, upheld.

Ground Number 3: Ld. CIT(Appeals) has erred in allowing higher depreciation of ₹5,96,48,062/- claimed by the assessee on plant and machinery (dumper/tipper) @40% instead of 15%

Assessment year 2021-22

&1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 10–

Assessment year 2017-18:

“GROUND NO.1 - Invalid invocation of Section 147: - The Learned Commissioner of Income Tax (Appeals) -11, Ahmedabad [herein after referred to as "the Learned CIT(A)"] has erred in law and on facts that the assessment carried out u/s 147 is valid though the sole basis of the reopening of the assessment is without any contra confirmation by the appellant and the incriminating documents found during the search proceedings carried out on the premises of the third party. The learned CIT(A) grossly erred in recognising the fact that the learned AO also did not provide the appellant the opportunity to cross examine the third party as well as the case of the appellant was reopened on the basis of borrowed satisfaction only. GROUND NO.2 - Invalid Addition of Rs.50,24,589/- u/s 69C of the Act: - The Learned CIT(A) has erred in law and on facts as much as confirming the addition of Rs.50,24,589/- u/s 69C as unexplained expenditure made by the learned AO without considering the facts that the appellant has neither received a cash loan of Rs.10,45,00,000/- from Mr. Girish N Patel nor paid any cash interest of Rs.50,24,589/- to Mr. Girish N Patel. The learned AO framed an allegation of cash receipt of loan and cash payment of interest only on the basis of illusionary and imaginary working made in the excel sheets which was recovered from email of the accountant of Mr. Girish N Patel without any confirmation or acceptance of the appellant. Therefore, it is prayed to your honour that such order needs to be quashed and additions need to be deleted by passing appropriate order. Further, the appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.”

21. The assessee has also raised the following additional grounds of appeal:

“Ground No. 1.1 On the facts and in the circumstances of the case and in law, the learned Assessing Officer (‘learned AO’) has erred in initiating the assessment proceedings under section 147 of the Act without appreciating the fact that notice should have been issued under section 153C of the Act in the present case.”

&1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 11– 22. We shall first look into the merits of the instant additions. The brief facts of the case are that during the course of search proceedings on the Sadbhav group, various incriminating documents were found and seized. While examining the seized documents, the Assessing Officer observed that Shri Girish Patel Director of M/s Saakar Infra Nirmal Private Limited and his family members are managing and controlling multiple companies which were not carrying out any genuine business activities but were providing accommodation entries, unaccounted transactions in unsecured loans and the assessee was one of such beneficiaries who had availed accommodation entries to the tune of ₹10.45 crores. Further, examination of the incriminating documents also revealed that the assessee had taken cash loans of ₹10.45 crores from Girish Patel during the period 01-01-2017 to 21-03-2017 by paying interest @19.5%. The total amount of interest was shown at ₹50,24,589/-. The assessing officer made addition of ₹10.45 crores on account of undisclosed receipts in the form of cash loan and ₹50,24,589/- on account of interest paid in cash under section 69C of the Act, while passing the assessment order.

“1. DCIT, Central Circle 1(1) Vs. Shri Jayprakash A Keshwani in the Hon'ble IT AT "D" Bench, Ahmedabad in IT(SS)A No.99/AHD/2021 AY 2015-16, Dated 31- 08-2023. Wherein it was held as under; "On going through the facts of the instant case and the arguments put forth before us by both parties, we are inclined to agree with the view taken by Ld. CIT(A) in the appellate order. Firstly, the additions have been made on the basis of excel sheet found at the premises of the third party i.e. Mr. MurlidharM. Trivedi. However, apart from the fact that the name of the assessee has been mentioned in the aforesaid excel sheet, there is no further corroborative evidence which substantiates that the assessee had in fact made on-money payment with respect to the aforesaid two properties. Secondly, admittedly, the assessee had furnished all relevant documents viz. copies of agreements, details of cheque payments etc. towards purchase of the aforesaid two products. Thirdly, it is a settled law that additions cannot be made solely on the basis of notings / jottings in relation toward transaction, without any corroborative evidence for sustaining the addition. In the case of Gordhanbhai Talavia 146 taxmann.com 528, the ITAT held that where the Assessing Officer made additions to income of the assessee on the basis of certain loose papers recovered during search, however, no enquiry was conducted or independent evidence was brought on record, being corroborative evidence to connect seized material with the assessee, there was no infirmity or illegality in the order passed by Commissioner (Appeals) in deleting the addition. In the case of Pradeep Amrutlal Runwal 47 taxmann.com 293, the IT AT held that where the Assessing Officer made additions in the case of the assessee on the basis of &1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 14– notings in loose papers found during the search proceedings in case of third party against the name of assessee, as there was no evidence to suggest that payments were made by the assessee additions so made were not justified. In the case of Regency Mahavir Properties 89 taxmann.com 444, the ITATheld that no addition under Section 69 can be made on the basis of documents being found from premises of third party in absence of any document evidencing the fact that assessee had paid any cash as on-money to said party for purchase of property. In the case of Vinit Ranawat 88 taxmann.com 428, the ITATheld that no addition can be made in the hands of the assessee on the basis of papers found with the third party when there was no business connection between the assessee and that third party. Fourthly, it is a settled principle of law that no addition can be made on the basis of statement of a third party, without allowing the assessee an opportunity of cross- examining the person on the basis of whose statement the addition has been made. The Hon'ble Supreme Court in the case of Andaman Timber Industries 62 taxmann.com 3 (SC), held that when statements of witnesses are made the basis of demand, not allowing the assessee to cross-examine the witness is a serious flaw which makes order a nullity, as it amounts to violation of principles of natural justice. In the case of CITvs. Sunita Dhadda 100 taxmann.com 526, the Hon'ble Supreme Court dismissed the Department's SLP against order of High Court holding that where Assessing Officer while making addition on account ofon-money received by the assessee on sale of land to a builder group relied upon statement of Director of builder and did not allow the assessee to cross-examine the said Director, there being violation of principle of natural justice, impugned addition was liable to be deleted. In the instant facts despite a specific request made by the assessee to cross-examine the person on the basis of whose statement the addition was made, such opportunity of cross-examination was not granted to the assessee. Fifthly, we also observed that the Assessing Officer in the assessment order has not brought out the locus standi of Mr. Murlidahr M. Trivedi, on the basis of whose statement the addition were made in the hands of the assessee. Mr. Murlidhar M. Trivedi in his affidavit merely stated that the transactions in question pertained to NODPL and from his statement, it is not clear as to how Mr. Murlidhar M. Trivedi is related to NODPL since neither is he a Director or a Authorized person or an employee of NODPL. Even during the course of arguments before us, the Ld. DR has not been able to verify the relationship between Mr. Murlidhar M. Trivedi and NODPL. Therefore, it is not clear as to what evidentiary value does the statement of Shri Murlidahr M. Trivedi carry and what is his "locus standi" to make such statement which can implicate the assessee.

9. Accordingly, looking into the instant facts, our observations in the preceding paragraphs and judicial precedents on the subject, we do not find any infirmity in the order of Ld. CIT(A) so as to call for any interference.

&1578/Ahd/2024 & 1702/Ahd/2024 DCIT vs. Mahalaxmi Infracontract Ltd. & Mahalaxmi Infracontract Ltd. vs. DCIT Asst. Years –2020-21, 2021-22 & 2017-18 - 15– The fact of the above judicial pronouncement squarely applicable to the case of the appellant as in the case of the appellant;  The learned AO made the addition u/s 69C on the basis of excel sheet found at the premises of the third party.  The name "Mahalaxmi" is mentioned in the excel sheet, however the learned AO did not bring any corroborative evidence which substantiates that the appellant has in fact accept the loan in cash and payment of interest made in cash.  The appellant during the assessment proceeding strongly objected the reason recorded and denied any cash transaction out of its audited books of account, which was provided to the learned AO during the assessment proceedings.  The appellant had not been provided an opportunity to cross examine Shri Girish N Patel. The appellant had not been provided the copy of the statement given by Shri Girish N Patel.  No any corroborative evidence in support of the information received from the Investigating Wing was brought on record by the learned AO. The learned AO just copied the alleged loan amount and alleged interest payment amount for making the addition in the case of the appellant.  Thus, the addition made by the learned AO u/s 69C which was subsequently upheld by the learned CIT(A) is not sustainable in the eyes of the law.

2. Kashish Gaurav Chandani Vs. The ITO Ward - 3 (3)(2), Ahmedabad in the ITAT "B" Bench, Ahmedabad in IT(SS)A No.147/Ahd/2023, dated 10-06-2024 Wherein it was held as under; "6.7. As regards the cash component of Rs.7,86,450/-, the assessee has consistently denied making such payment and there is no corroborative evidence brought on record by the AO to substantiate this addition. Therefore, in the absence of any conclusive evidence, the addition of Rs.7,86,450/- is not sustainable." 2.7 Therefore, the learned CIT[A] ought to have appreciated that the impugned addition made was purely on suspicion and surmise, assumptions and presumptions and consequently, it results in to gross injustice to the regular tax payer appellant by involving the appellant in to the unnecessary legal proceedings and therefore, the baseless and illegal addition requires to be deleted. Thus, on the basis of the above facts and circumstances, the appellant is praying to your good honour to consider the written submission and allow the appeal by passing appropriate order.”

Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 12/03/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,