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Income Tax Appellate Tribunal, “A” BENCH,
Before: SHRI SATBEER SINGH GODARA, JM & DR. DIPAK P. RIPOTE, AM
आयकरअपीलीयअिधकरण “ए” �ायपीठ पुणे म�। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI SATBEER SINGH GODARA, JM AND DR. DIPAK P. RIPOTE, AM आयकरअपीलसं. / ITA No.2761/PUN/2017 िनधा�रणवष� / Assessment Year : 2009-10 Smt.SunitaG.Desai, The Income Tax Officer, Master Plaza, Jakadevi, Vs Ward-1, Ratnagiri. Khalgaon, Ratnagiri. PAN: ABOPD 2868 A Appellant/ Revenue Respondent/ Assessee Assessee by Shri Kishor B Phadke – AR Revenue by Shri S P Walimbe - DR Date of hearing 21/04/2022 Date of pronouncement 16/06/2022 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeals)-2, Kolhapur dated 01.09.2017 for the Assessment Year 2009-10. The Assessee raised the following grounds of appeal: “1. The learned CIT(A)-2, Kolhapur erred in law and on facts in upholding the action of the learned ITO, Ward-1, Ratnagiri (hereinafter referred to as the learned AO) in assessing total income of appellant at Rs, 50,34,254/- instead of returned income of Rs. 4,05,200/-. 2. The learned CIT(A)-2, Kolhapur erred in law and on facts in sustaining the additionof Rs.33,79,054/- made by the learned AO u/s 69C of the ITA, 1961 for the bogus purchases from M/s. Adijin Enterprises and M/s. Hiten Enterprises; without appreciating that, no any enquiries were carried out by the l-T Authorities in this regard. 3. The learned CIT(A)-2, Kolhapur and the learned AO erred in law and on facts in not appreciating that, the said bogus purchases of Rs. 33,79,054/- were, intact, capitalized to Plant & Machinery and depreciation of only Rs. 5,06,958/- (i.e. 15% of Rs. 33,79,054/-) was claimed as a deduction by appellant during AY 2009-10. The learned
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
l-T Authorities ought to have confined the disallowance on account of bogus purchases, only to the extent of Rs. 5,06,958/- (i.e 15% of Rs. 33,79,054), being depreciation claimed by appellant during AY 2009-10. 4. The learned CIT(A)-2, Kolhapur erred in law and on facts in presuming some alleged parallel transactions of purchase of Plant & Machinery of Rs.33,79,054/- from unknown parties in CASH, and further erred in confirming addition of Rs. 33,79,054/- u/s 69 of the ITA, 1961. 5. The learned CIT(A)-2, Kolhapur erred in law and on the facts in sustaining addition of Rs.9,00,000/- as profits from business u/s 41(1) of the ITA, 1961. The learned l-T Authoritiesought to have appreciated that the transaction is in the nature of gift from relative (i.e.from son to mother), and as such, no addition u/s 41(1) of the ITA, 1961 is warranted. 6. The learned CIT(A)-2, Kolhapur erred in law and on the facts in not appreciating appellant's additional claim of additional depreciation u/s 32(l)(iia) of the ITA, 1961; amounting to Rs. 36,59,958/-, on the analogy that the same was not claimed in the return of income in response to notice u/s 148 of the ITA, 1961. The learned CIT(A)-2, Kolhapur ought to have appreciated that depreciation claim is automatic and should be allowed even if not claimed in the return of income. 7. Appellant craves leave to add / modify / alter / delete all / any of the grounds of appeal.” 2. Brief facts of the case are that the Appellant assessee filed return of income on 29/9/2009 for AY 2009-10, showing income from house property of Rs.(-1,50,000), Profit from Vijayent Crusher of Rs.5,64,850/-. The case was selected for scrutiny. Assessment order was passed on 31.3.2015 u/s 143(3) rws147 of the Act. The Assessing Officer (AO) had received certain information regarding hawala purchases from Investigation wing of the department. The Investigation wing had received list of hawala dealers from Sales tax Department which has unearthed a racket of hawala dealers. The AO has mentioned in the assessment order that the assessee has obtained bogus bills from following parties:
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
Name of the Name and Fin. Year Asst. Amount of party/person who address of Year inflated issued fake bills. the Purchases beneficiary (Rs.) (i.e. the assessee.) M/s Adijin Enterprises Sunita 2008-09 2009-10 Rs.15,40,126 PAN: AAGPS5286C Gangaram TIN: 27600574149V Desai M/s Hiten Enterprises Sunita 2008-09 2009-10 Rs.18,38,928 PAN: ANBPP2704H Gangaram TIN: 27880265244V Desai Total Rs.33,79,054 2.1 The AO claimed that these expenses have been debited by the assessee in Profit and Loss Account of the assessee. The AO asked the assessee to prove the genuineness of the impugned purchases. However, it is mentioned in the assessment order that the assessee only filed Ledger account of these two entities in its books of account and no other evidence was submitted to prove the genuineness of the transaction. The assessee failed to produce these persons for verification before the AO. The AO send letters u/s 133(6) of the Act to these impugned entities from whom assessee claimed to have made purchases. These letters were returned unserved. It is mentioned in the assessment order that the assessee has not filed copies of Delivery Challan, Octroi bills, Stock registers etc to prove the delivery of the goods. The Sales Tax Authorities have already cancelled their registration. Therefore, the AO finally concluded that these purchases were non genuine and added the amount.
2.2 The Commissioner of Income Tax(A) confirmed the additions.
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
Aggrieved by the said order of the CIT(A), assessee filed appeal before this tribunal.
Ld.Authorised Representative(ld.AR) of the appellant assessee submitted modified ground of appeal vide letter dated 29/4/2021. During the hearing the Ld.AR submitted that he will not press for the Ground No.1 and 2. Accordingly Ground No.1 & 2 are dismissed as not pressed.
4.1 Ld.AR submitted that the so-called bogus purchases were capitalised hence if at all any disallowance is to be made it should be only depreciation claimed on it.
4.2 The Ld.Departmental Representative (DR) tookus through the order of the ld.CIT(A) and AO. He vehemently submitted that the assessee herself does not know these persons from whom she has claimed to made purchase. The cheques issued by the assessee have been retuned and the amount is outstanding in the books of the assessee. All these facts explain that the purchases are not genuine.
We have heard both the parties. Perused the case record.The appellant assessee has filed copies of the so called bills issued by the hawala dealers on page 28-36. From these bills it is observed that these bills were for sale of “M.S.Plates”. The assessee though has claimed that these have been capitalised but the assessee has not demonstrated that these were capitalised. In the block of assets there is addition of
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
asset called “Crusher”. The assessee has not established that these “M.S.Plates” were used for making Crusher. Therefore, we are of the considered view that these things need to be verified by the assessing officer. The AO has not mentioned that these expenses were capitalised. Therefore, in the interest of justice, we set aside this issue to the file of the AO for proper verification. The Assessee shall file all the relevant material before the AO. The AO shall provide opportunity of hearing. Accordingly, Ground No’s.3 and 4 of the Appellant assessee are set aside to Assessing Officer. Thus, the Ground No’s.3 & 4 are allowed for statistical purpose.
The Ground No.5 of the Assessee is regarding addition of Rs.9,00,000/- u/s 41(1) of the Act.
6.1. The relevant portion of the CIT(A)’s order is as under : Quote “ “5.2 Ground No.2 This is against the action of the AO in taxing Rs.9,00,000 claimed as gift by the appellant u/s 41(1). The facts are to be examined. The appellant purchases diesel from a proprietary concern of her son Sushil Desai. The ledger account of the concern Vijayent Petroleum was produced before me. I find that the opening balance of the same is NIL and there are a total debits towards diesel purchases only of Rs.45,18,098. The year end closing balance is NIL as the amount of Rs.9,00,000 is shown as a gift to the appellant. The balance due of Rs.36,18,098 has been paid by the appellant to> her son. Thus the factual picture which arises is that the appellant has appropriated a part of her dues to her son as a gift. The case of the AO is that this is assessable as income u/s 41(1) as the diesel purchased has been claimed as expenditure by the appellant. The case
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
of the appellant is that a gift from son to herself cannot be taxed, as income. I am of the view that this is not a gift from son to mother in their, individual capacities. It is in fact a gift from Vijayent Petroleum to Vijayent Crusher. This is for the simple reason that the transactions of purchase of diesel are not between mother and son in their individual capacities, but between two proprietorship concerns which are in the course of their business. The amount of Rs.9,00,000 having been written off by the proprietary concern of the son, cannot therefore constitute a gift from son to mother. It would necessarily constitute a benefit obtained by Vijayent Crushers of a trading liability. This is therefore correctly assessable as income of the appellant u/s 41(l)(a).” ” Unquote.
Heard both the parties and perused the case record. It has been claimed by the assessee that she has received gift from her son. However, the assessee has not received any actual gift. There is no gift deed. The assessee and her son had merely passed Journal entries in their books. There are two concerns namely, Vijayent Crusher and Vijayent Petroleum. The AR has filed copies of Ledger accounts. On perusal of the said ledger accounts, it is observed that Vijayent Crusher has purchased Diesel from Vijayent Petroleum. Total transaction is of Rs.45,18,098/-. Vijayent Crusher is the proprietary concern of the assessee. The Vijayent Petroleum is concern of her son. On 31.3.2009, they have passed a Journal entry in the said ledge account of Rs.9,00,000/-. The same is claimed by the assessee as Gift from her son. However, in fact there were business transaction between these to concerns. There was outstanding balance to be paid by Vijayent Crusher to Vijayent Petroleum. By journal entry Rs.9,00,000/- has been
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
reduced from the account of Vijayent Crusher proprietary concern of the assessee. Thus liability of the assesse has been reduced. This is nothing but cessation of liability u/s 41(1) of the act. Therefore, the addition made of Rs.9,00,000/- is upheld. This ground of appeal of the assessee is dismissed. 8. Next ground of appeal is regarding claim of additional depreciation. The assessee had not claimed additional depreciation in the return of income. The assessee claimed it for the first time before the ld.CIT(A). However, ld.CIT(A) rejected the said claim on the ground that it has not been claimed in the return and it has not been claimed during the assessment proceedings. The LD.AR relied on the order of Vedanta Ltd. Vs CIT 93 Taxmann.com 392(Delhi), where in the Hon’ble Delhi High Court has held as under: Quote “The relevant provisions of the Act read as follows: "Depreciation. 32. (1) In respect of depreciation of—
(i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— (i). * * ** ** (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that .....
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
Explanation 5.--For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;
(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : ............ "
This court is of opinion that the plain text of the explanation leaves no room for admitting the interpretive gloss that the assessee wishes to place over it. There can be a multitude of circumstances where, but for the provision, the incentive, available to all those for whom the benefit of additional depreciation was intended, could have been deprived of it. Undoubtedly, the amount of the assessee's claim for Section 80IB deduction increased, when it sought to withdraw the additional depreciation claim. However, that single circumstance should not influence this court to ignore the plain intendment of the statute, since Parliament clearly stated that the provisions of "this sub-section" would apply, "whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income". This court cannot re-write the statute, as is sought to be urged. For these reasons, the Court is of the opinion that no question of law arises on this aspect.”
Thus, the Hon’ble High Court has held that depreciation is to be allowed whether or not claimed by the assessee.
8.1. Respectfully following the Hon’ble High Court, the issue is set- aside to the file of the Assessing Officer with a direction that if assessee fulfils all the conditions applicable for claim of additional depreciation,
ITA No.2761/PUN/2017 for A.Y. 2009-10 Smt.Sunita G.Desai vs. ITO, Ward-1, Ratnagiri (A)
then, it shall be allowed even if it has not been claimed in the Return of Income. Opportunity shall be given to the assessee. Accordingly, Ground No.6 is allowed for statistical purpose. 9. In the result, the appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 16th June, 2022.
Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 16th June, 2022/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), Pune concerned. 4. The Pr. CIT, Pune concerned. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.