ACIT, GURGAON vs. SH. ASHOK KUMAR GUPTA, PROP., GURGAON

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: “A”, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA No.5680/Del/2012 Assessment Year: 2008-09 ACIT, Vs. Sh. Ashok Kumar Gupta, Circle-I, Gurgaon Prop., M/s. Ashok Kumar Gupta Shuttering Store, 508/2, Near State Bank of India, Mehrauli Road, Gurgaon PAN :ABEPG4595M (Appellant) (Respondent)

Appellant by Shri C.P. Singh, Sr.DR Respondent by Shri K.C. Singhal, Adv.

Date of hearing 26.02.2019 Date of pronouncement 27.03.2019 ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 30/08/2012 passed by the Ld. Commissioner of Income-tax (Appeals), Faridabad [in short ‘the Ld. CIT(A)’] for assessment year 2008-09, raising following grounds: 1. The Ld. CIT(A) has erred in holding the service of notice u/s 143(2) of the Act as defective, as Hon’ble Delhi High Court in the case of C1T vs Yamu Ind. Limited (306 ITR 309) has held that where notice u/s 143(2) of the Act sent by registered post at correct address had not been received back ‘un-served ’ within a period of 30 days of it’s issuance, it would be presumed to have been duly

2 ITA No.5680/Del/2012 served upon the assessee. It is also not factually correct that only a diary number has been made available by the A.O. during appellate proceedings. The Speed Post Booking List which is also a part of record, is a document issued by the Postal Department, which is an absolute evidence of the receipt of said notice by them. 2. Ld. CIT(A) has erred in deleting the addition made on account of capitalization of a part of current repair expenditure thereby not appreciating the fact that most of the claimed repair expenses comprised of purchase expenses on material/components that were required for making new fixed assets. The assessee had also failed to explain his claim of bifurcation of bills for same components/parts towards new acquisition of assets & repair expenses. 3. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.

3 ITA No.5680/Del/2012 Rs.1,00,00,000/- for shuttering material as capital expenditure, which were claimed by the assessee as revenue expenditure. After allowing depreciation on the same amounting to Rs.11,25,000/-, the Ld. Assessing Officer made net addition of Rs.88,75,000/- 2.1 Before the Ld. CIT(A), the assessee challenged service of notice under section 143(2) of the Act on the ground of beyond the stipulated period of six months from the end of the assessment year, along with the merit of the addition. The Ld. CIT(A) in his detailed finding annulled the assessment order holding that it was framed without effecting service of Statutory Notice. On the merit of the addition also, he concurred with the assessee and observed that the expenditure incurred was in the nature of the current appears and qualify for deduction. 2.2 Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal before the Tribunal, raising the grounds as reproduced above. 3. Before us, the Ld. DR submitted that the first notice under section 143(2) of the Act dated 18/09/2010 was sent through speed post on the correct address of the assessee and said notice never returned back as unserved and thus, it was deemed to have been served as held by the Hon’ble Delhi High Court in the case of CIT Vs Madhsy Films Private Limited (216 CTR 145). The Learned DR has submitted that this presumption is rebuttable but the assessee has to rebut with credible documentary evidences that said notice was not served. In absence of any such credible evidences, the Ld. CIT(A) was not justified in invalidating the entire assessment proceeding. On the issue of the merit of the addition, also he supported the finding of the Assessing Officer.

4 ITA No.5680/Del/2012 4. On the other hand, Ld. counsel of the assessee filed a paper book containing pages 1 to 70 and relied on the finding of the Ld. CIT(A), for both the issues of service of notice under section 143(2) of the Act and the expenses in dispute being revenue in nature. The learned counsel also filed copy of the decisions relied upon by the Ld. CIT(A) alongwith other decisions in support of his submissions. 5. We have heard the rival submissions and perused the relevant material including the orders of the lower authorities and the paper book filed by the assessee. 6. In ground No. 1, the Revenue has challenged the finding of the Ld. CIT(A) channeling the assessment order for non-service of notice under section 143(2) of the Act. According to the Assessing Officer, first notice under section 143(2) of the Act was issued on 18/09/2009. This fact has been duly mentioned in the 1st para of the assessment order. Assessing Officer has also mentioned issuing of second notice under section 143(2) alongwith notice under section 142(1) of the Act on 04/11/2010. Before the Ld. CIT(A), the assessee challenged that notice dated 18/09/2009 was never served upon the assessee and the notice dated 04/11/2010 was beyond the stipulated period of 6 months from the end of the assessment year. 6.1 For the assessee to succeed in establishing that no notice under section 143(2) of the Act was served within the stipulated period, the assessee is required to first cross the barrier of section 292BB of the Act, according to which service is deemed to have been made if the assessee appeared and cooperated in the assessment proceedings. This barrier will not apply, if the assessee raises objection of service of notice before completion of

5 ITA No.5680/Del/2012 such assessment. After crossing this barrier, the assessee has to demonstrate with credible evidences that said notice under section 143(2) was not served upon him. 6.2 As far as this first barrier is concerned, before the Ld. CIT(A) the assessee submitted that in letter dated 22/11/2010, he objected to the second notice dated 4/11/2010 as issued beyond the limitation period. A copy of the said letter has been placed on page 3 to 6 of the paper book. There is no mention of the said letter or objection of the assessee in the assessment order. Also there is no acknowledgement on the said letter that it was submitted before the Assessing Officer. However, the Ld. CIT(A) in para 6 of the impugned order has mentioned that this letter was available in the case records and the Revenue has also not disputed this fact, thus, we are not disputing this fact. In view of the letter filed by the assessee, the Ld CIT(A) held that the Principle of Estoppels enshrined in section 292 BB cannot be applied in the case of the assessee. However in our opinion, the assessee has merely done formality of filing objection before the Assessing Officer and it has not pursued his objection seriously before the Assessing Officer. The assessee has raised objection in one paragraph and thereafter never pursued or asked the Assessing Officer to provide evidence of service of the notice. The postal authorities keep the record of the service of letters sent through registered posts or speed post for a certain period and within that period, they can provide as on whom the said letter was served. After that period, it is not possible for the postal authorities to provide evidence of service of the letter. In the instant case also, had the assessee pursued the challenge of non- service of notice and asked for evidence of service of notice from

6 ITA No.5680/Del/2012 the Assessing Officer within the period for which record was available with the postal authorities, it would have been possible for the Assessing Officer to provide such evidences. But, he did not pursue this challenge of non-service of the notice and participated in the assessment proceedings. In our opinion, the assessee is not honest in his approach and intentionally remained silent after making a mention of his objection in one paragraph of letter dt. 22.11.2010. According to us, the assessee has not discharged the onus of raising objection before the Assessing Officer before completion of the assessment proceedings as per the proviso to section 292BB of the Act, in real purpose. 6.3 As far as establishing non-service of the notice contested by the assessee, we find that in the remand proceeding, the Ld. Assessing Officer provided a copy of the diary of the postal department to the Ld. CIT(A), according to which, the notice dated 18/09/2009 was handed over to the postal authorities on 25/09/2009. The said page of the diary bearing the stamp of the postal authority is available on page 10 of the paper book. It is contested by the Assessing Officer during remand proceeding on 14-16/08/2012 that said notice was sent by registered post at the correct address and had not been received back unserved within the period of 30 days of its issuance and therefore there was a presumption under the law that said notice had been duly served upon the assessee within the period of the limitation. The Ld. CIT(A), however, observed that such presumption was rebuttable and if the assessee challenges the service of notice, the Assessing Officer is under legal obligation to establish its service before proceeding further in the matter. According to the Ld.

7 ITA No.5680/Del/2012 CIT(A), the onus lies upon the AO in that situation to establish service of the notice. The Ld. CIT(A) further referred to the decision of the Hon’ble Supreme Court in the case of Narayana Chetty Vs ITO (35 ITR 388) wherein it is held that service of requisite notice is a condition precedent for validity of the assessment and it cannot be regarded as a mere procedural requirement. The Ld. CIT(A) observed that Assessing Officer has not brought anything on record to establish the service of notice except relying upon presumption in diary number. 6.4 Thereafter, the Ld. CIT(A) referred to the decision of the Hon’ble Punjab and Haryana High Court in the case of CIT Vs Cebon India Ltd (184 Taxman 290) wherein it is held that mere giving dispatch number will not be sufficient to establish service of notice and when there was no evidence to show that notice under section 143(2) was served within the stipulated time, the absence of notice cannot be held to be curable under section 292BB of the Act. The Ld. CIT(A) after concluding that notice was not served on the assessee within a stipulated period, he relying on the other decisions of Hon’ble Courts, held that without effective service of the statutory of notice, the assessment cannot be framed and accordingly, he annulled the assessment. The relevant finding of the Ld. CIT(A) is reproduced as under: “6. I have considered the submissions of learned counsel for the appellant and gone through the documents filed on record as well as the relied upon judicial rulings. The ground No. 1 of appeal challenges the validity of the notice issued under section 143(2) of the Act on 18.09.2009. The appellant has contended that the assessment made under section 143(3) deserves to be quashed as no notice under section 143(2) had been served upon the assessee within the statutory period. A perusal of the assessment order reveals that the notice u/s 143(2) was issued on 18.09.2009 but no date of service is mentioned by the AO. The second proviso to sub- section (2) of section 143, as amended by the Finance Act, 2008

8 ITA No.5680/Del/2012 w.e.f. 01.04.2008, lay down that no notice under clause (ii) shall be served upon the assessee after the expiry of six months from the end of the financial year in which the return is furnished. The notice u/s 143(2) in the instant case was therefore, required to be served on or before 30.09.2009. It*is the submission of the appellant that the notice dated 04.11.2010 issued alongwith questionnaire, which was duly served on 04.11.2010, was the first notice and the earlier notice dated 18.09.2009 stated to have been issued by the AO was never served upon the assessee. It is further contended that the fact of non service of initial statutory notice was brought to the notice of the AO in the hearing scheduled on 22.11.2010 vide letter dated 22.11.2010, a copy of which is filed in the paper book. On perusal of material before me including the remand report, it is evident that notice u/s 143(2) dated 18.09.2009 is stated to have been sent by Speed Post on 25.09.2009 through diary No. 9504 dated 25.09.2009. From the copy of letter dated 22.11.2010 filed in the paper book and also available in case records, it is evident that the Ld. AR of the assessee disputed the service of first notice u/s 143(2) dated 18.09.3009 but the AO has not at dealt with his objection. In the remand report the AO has relied upon the decisions in the case of Yamu Industries Ltd. and others cases (supra) and contended that since the notice sent by speed post was not received back unserved, there was valid presumption of service of notice. However, the evidence in the form of ‘Speed Post Booking List’ enclosed with the remand report does not indicate any speed post receipt number but only a diary number 9504. When a letter is sent through speed post, a receipt is issued which bears the speed post number for the purpose of tracking the delivery of the letter. The said speed post receipt is also not available on the office copy of notice in the assessment records. The Hon’ble Delhi High Court in CIT vs. Madhsy Films Pvt. Ltd. (216 CTR 145) has held that section 27 of the General Clauses Act, 1897, provides that service by post is deemed to have been affected by properly addressing, pre-paying and posting by registered post, a letter containing the notice required to be served. Unless the contrary is proved, the service is deemed to have been effected at the time when the letter would be delivered in the ordinary course of post. Under the normal circumstances, a presumption would lie that said notice had reached the assessee within 2/3 days. Though this presumption is rebuttable, yet in absence of any proof to the contrary, the presumption of proper service or effective service of the notice would arise. Thus, in the light of rationale laid down by the Hon’ble Delhi High Court in the case cited supra, unless a notice is received back unserved, a valid presumption as to its service would arise. Since the envelope containing the notice in question had not been received back, as stated by the AO, there may be a presumption that it had reached the assessee. However, such presumption is rebuttable and if the assessee challenges the service of notice, the AO is under legal obligation to establish its service first before proceeding in the matter further. The onus lies upon the AO in that situation to establish

9 ITA No.5680/Del/2012 service of notice. The Hon’ble Supreme Court in the case of Y. Narayana Chetty vs. ITO [35 ITR 388] has held that service of requisite notice is a condition precedent for validity of assessment and it cannot be regarded as a mere procedural requirement; it is only if said notice is served on assessee as required then the AO would be justified in taking proceedings against him. Despite challenge to the service of notice, the AO has not brought anything on record to establish the service of notice except relying upon presumption and diary number. The Hon’ble Punjab and Haryana High Court in the case of CIT vs. Cebon India Ltd. (184 Taxman 290) has held that mere giving dispatch number will not be sufficient to establish service of notice. When there was no evidence to show that the notice u/s 143(2) was served within the stipulated time, the absence of notice cannot be held to be curable under section 292BB of the Act. A Division Bench of Hon’ble Delhi High in the case of CIT vs. Lunar Diamonds Ltd. [281 ITR 1] (Del.) has held that service of notice within the time as stipulated in the proviso to Section 143(2) is mandatory. In case service is not effected within the time stipulated in the proviso, this would render the assessment void. The aforesaid decision in the case of Lunar Diamonds Ltd. (supra) has been followed in CIT Vs. Vardhman Estates P. Ltd., [287 ITR 368] (Del.) and CIT vs. Bhan Textiles P. Ltd. [287 ITR 370] (Del.). In view of the objections raised iri letter dated 22.11.2009, it was incumbent upon the AO to produce material on record to show that notice dated 18.09.2009 had, in fact, been served on the assessee before the expiry of limitation period, otherwise the objections raised would have to be accepted as correct. In this context, almost identical view has been held by Hon’ble High Court, in CIT vs. Silver Streak Trading Pvt. Ltd. (supra). I have gone through the other judicial rulings relied upon by the learned counsel which support the case of appellant. Consequent upon challenge of service of notice by the assessee, the principle of estoppel enshrined in section 292BB would not apply in view of the proviso to section 292BB of the Act. Keeping in view the above factual position that the service of notice dated 18.09.2009 is not established from the records and the judicial rulings relied upon by the learned counsel, the assessment order passed by the AO cannot be upheld. Therefore, the assessment order under appeal is annulled as it has been framed without effecting service of statutory notice. The ground No.1 of appeal is allowed.”

6.5 Thus, the Ld. CIT(A) has relied that evidence of diary number provided by the Assessing Officer in the remand proceeding is merely a dispatch number maintained in his office. In our opinion, this analysis of facts made by the Ld. CIT(A) is not correct.

10 ITA No.5680/Del/2012 6.6 On perusal of the said copy of diary available on page 10 of the paper book, it is evident that it a page of a register of speed booking list maintained by the Department of the post. The Ld. DR explained to us that under an arrangement between the Department of Post and the Income-tax Department, the postal authorities collect letters from the office of the Assessing Officer in bulk and provide to them receipt of those letters in the form of the list. The said list has been duly stamped by the postal authorities. On perusal of the said page, we find the name of the assessee at serial No. 195 having diary number 9504. Thus it is conclusive that it is not the dispatch number of the record of the Assessing Officer, but it is a receipt issued by the postal authorities that said notice was handed over to them. Thus the premise of the Ld. CIT(A) itself is wrong, which led to wrong conclusion . Further, the finding of the Ld. CIT(A) that once the assessee has challenged the service of the notice, the Assessing Officer is under legal obligation to establish service of notice before proceeding further in the matter. We note that as far as rebuttal of the presumption of service of notice, the assessee has neither furnished any document to establish that letter was not served not furnished any affidavit in support of its claim. The Ld. CIT(A) simply on the statement of the assessee challenging notice, directed the Assessing Officer to prove the fact of the service of the notice. Whereas, it was impossible for him at this stage i.e. after a period of more than two years from the providing of notice to the Postal Authorities, to collect the evidence from the postal authorities of service of the notice. The assessee was required to challenge the service of the notice before the Assessing Officer by way of affidavit and asking from the

11 ITA No.5680/Del/2012 Assessing Officer of the evidence of the service, maintained by the Postal Authorities within the period for which records are maintained by the postal authorities. After the period for which records are maintained by the postal authorities for service of letter, it was not possible for the Assessing Officer to collect the said record from the postal authorities and provide to the assessee. The evidence of providing the notice to the postal authorities, was available with the Assessing Officer, which he duly provided to the Ld. CIT(A) for discharging his onus. In the aforesaid circumstances, we cannot hold the Assessing Officer liable for not discharging his onus in establishing the service of notice by the postal authorities. The Assessing Officer cannot be asked to do the impossible. The onus was squarely on the assessee to raise this issue at the appropriate time before the Assessing Officer which he did not and thus we cannot say that assessee has been successful in rebutting the presumption of service of notice as laid down in the decision of the Hon’ble Delhi High Court in the case of CIT Vs Madhsy Films P Ltd. (supra). In absence of such a rebuttal, the presumption of service of the notice remains valid. Once, we have held that notice was served validly, the other decisions relied upon by the Ld. CIT(A) cannot be applied over the instant case. Accordingly we set aside the finding of the Ld. CIT(A) annulling the assessment order. The ground No. 1 of the appeal of the Revenue is allowed. 7. The ground No. 2 of the appeal relates to expenses of Rs.1,00,00,000/- held by the Assessing Officer as capital, which the Ld. CIT(A) has deleted. The Ld. Assessing Officer asked the assessee to explain abnormal increase in certain items of purchase. The Assessing Officer has listed 7 such items on page 2

12 ITA No.5680/Del/2012 of the assessment order. The Assessing Officer has also claimed to have gathered information of similar business on the issue of shuttering expenses. After analyzing the comparable cases and the case of the assessee, the Ld. Assessing Officer issued show cause notice to the assessee as why part of the purchases may not be treated as capital expenditure for new shuttering made out of purchases of that material. The Assessing Officer considered the explanation of the assessee and came to the conclusion that part of the expenses claimed on repair and maintenance of the shuttering was actually capital expenditure incurred for shuttering. The relevant finding of the Assessing Officer is reproduced as under: “From the above reply, it is imperative to note that the shuttering assets/material are used for construction work and are of enduring benefit to the assessee. Such assets get badly damaged while they are used at construction site due to rough usage by the laborers. The assessee can, however, again use such badly damaged assets by replacing the components of the shuttering assets /material which are merely the assembly of such components. It is evidenced by the fact that new shuttering assets /material are made up of same materials purchased by the assessee which are used for replacement of old assets (the cost of which is debited to P&L account). Therefore, the conclusion can be drawn that such replacement of components of badly damaged goods eventually creates new assets which can be further used for construction which was not possible had such replacement wouldn't have done. The support for such contention can also be drawn from the decision of Hon'ble Supreme Court in case of CIT vs Sri Mangayarkarsi Mills (315 ITR 114)wherein it has been held that to constitute current repairs under section 31 the expenditure must be incurred to preserve and maintain an already existing asset and not bring the new asset into the existence or to obtain new advantage. In the instant case as well the assessee has, by way of replacing the components of the shuttering assets / material, has secured a new enduing advantage or new asset which was otherwise not usable bad such replacement was not carried out. Also, the assessee has failed to explain the basis on which he has allocated the purchases to the repair expenses and balance to the capital expenses incurred for creating new shuttering/scaffolding material.

13 ITA No.5680/Del/2012 In view of the above, it can be concluded that a major part of expenses on repair and maintenance are actually used for making new shuttering material which is a capital item and has lead to the enduring benefit to the assessee. In view of the above discussion, facts of the case and the underlying information with to avoid leakage on account of excess repair expenses claimed by the assessee, the following disallowances are being made:

SI. No. Particulars of Raw Repair and Basis for Material Maintenance Repair and Disallowance Purchased claimed by Maintenance assessee treated as Capital Expenditure 1. Top Cup,L-late,Nuts 70,36,702/- 30,00,000/- Only Rs.32,05,867 H allocated for addition to fixed assets.

Prop Sleev 3,64,800/- 2,00,000/- - 2. 3. Pipes & Tubes 14,20,070/- 1,00,000/- - - 4. Paints 26,81,752/- 4,00,000/- 5. Sheets 59,67,539/- 50,00,000/- Expenses on sheets pertains to new shuttering. 6. Angle 20,03,002/- 8,00,000/- On account of lower allocation to fixed assets 7. Labour charges 43,84,464/- 5,00,000/- On account of lower allocation to fixed assets Total 2,38,58,329/- 1,00,00,000/-

The above disallowances are made on estimate basis but based on the shuttering business information gathered as the assessee has failed to give possible explanation regarding expense allocation.”

7.1 Before the Ld. CIT(A), the assessee disputed the finding of the Assessing Officer. The Ld. CIT(A) after considering the submission of the assessee held that the expenses claimed on current appears by the assessee were eligible for deduction under

14 ITA No.5680/Del/2012 section 37(1) of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under: “6.1. Irrespective of above decision quashing the assessment order, I still proceed to decide ground No. 2 of appeal relating to addition of Rs.88,75,000/- made by the AO on account of capital expenditure. The expression ‘current-repairs’ means expenditure which is not for the purpose of renewal or restoration of capital asset but which is only for the purpose of preserving or maintaining an already existing asset and which does not bring a new asset into existence or does not give to the assessee a new or different advantage as held by the Hon’ble Supreme Court in the case of Ballimal Naval Kishore vs. CIT (224 ITR 414). Considering the nature of business of the appellant, there remains no dispute that the shuttering material requires adequate repairs for safety reasons and the extent of repairs depends upon the intensity of its use and manner of handling. The learned counsel has filed details of expenditure incurred on repairing of shuttering material in earlier two years also comparing the expenditure claimed vis-a-vis the opening WDV of the block’ of shuttering material. Such submissions are duly supported by the audited Balance Sheets and Profit & Loss accounts already filed with the returns of income and verifiable. The position of repairing expenditure is as under: Repair F. OW Addit Expenditur Percentage Y DV ions e of OWDV

2005- 1531434 10351754 12953676* 84% 06 5 2006- 2206417 25086807 16435121 74% 07 0 * 2007- 4020974 31537255 26875191 66% 08 0 • Actual figures as per balance sheet. It is evident from the above that the expenditure on repairing of shuttering material is substantially lower than the earlier two years despite increased opening WDV which would require more expenditure due to bear and tear of material. The appellant has filed details of various expenses during the assessment proceedings and examination of case records reveals that the expenditure on account of job work has been claimed at Rs.43,84,464/- which is not disputed by the AO. As evident from the assessment order, the appellant furnished the copies of bills purchase of shuttering material and labour charges. The AO has observed that the assessee could not explain the basis for allocation of cost of material

15 ITA No.5680/Del/2012 purchased towards replacement/repair of old shuttering material or new acquisition of shuttering material. Admittedly, the appellant purchased the new shuttering material as well as the material meant for repairs through common bills and bifurcated the expenditure towards new acquisition and repairs amounting to Rs.3,15,37,255/- and Rs.2,6875,191/-, respectively. The bills above Rs.50,000/- were examined and the expenditure as per those bills for repairing of shuttering material was Rs.2,38,58,329/-. The AO has mentioned that the overall cost of repairs comes to 5 to 10% based on ageing of material and the information gathered from the similar business. However, neither the comparable case has been cited by the AO nor has been the basis of accepting cost of repairs at 5 to 10%. These assertions made in the assessment order have no factual basis but based on presumptions only. The appellant has purchased Pipes and Tubes for an amount of Rs.2,49,87,559/- and capitalized the same which reveals that this material was purchased in connection with some high rise building. The AOs observation that purchase of pipes and tubes for repairs and maintenance was NIL in earlier years as against Rs.2.49 crores during the year in totally out of context since the entire amount of Rs.2.49 crores has been treated by the appellant as acquisition of new shuttering material and depreciation claimed thereon. The AO has actually applied wrong basis for comparision in highlighting the fact that the expenditure on repairs was higher in vaiying degrees as compared to shuttering material purchased as new asset during the year instead of comparing the same with the value of old shuttering material represented by the opening WDV which would only be relevant for deciding the extent and nature of repairs. The AO has treated expenditure of Rs.50.00 lacs and Rs.30.00 lacs as capital in nature out of total expenditure of Rs. 59,67,539/- and Rs.70,36,702/- incurred on repairs of ‘Sheets’ and Top Cup, L-Plates and Nuts’, respectively, by holding that the expenditure pertained to new shuttering material. Despite these observations, the AO has considered the labour charges of Rs.5,00,000/- as capital in nature and allowed remaining expenditure of Rs.38,84,464/- as revenue in nature which has been incurred on job work for repairing of shuttering material. Admitting that the AO has accepted labour charges of Rs.38,84,464/- on repairing of shuttering material as revenue expenditure in nature, it cannot be inferred that the appellant incurred expenditure of only Rs. 1,38,58,329/- (i.e. Rs.2,38,58,329/- minus Rs. 1,00,00,000/-) during the year on repairs whereas the expenditure of Rs. 1,64,35,121/- was incurred in the immediately preceding year having opening WDV much lower than the opening WDV in the year under appeal. I, therefore, find that the AO has moved only with the presumptions and estimations coupled with contradictions without bringing any conclusive finding on record. Considering the repair and maintenance expenditure incurred during the year to the extent of 66% of the opening WDV, which is much lower that the proportionate expenditure incurred in earlier years, I find no reason to sustain the addition made by the

16 ITA No.5680/Del/2012 AO as capital expenditure which is liable to be deleted. The expenditure is held to be in the nature of current repairs and qualify for deduction in view of several judicial rulings relied upon by the appellant. However, since the assessment order has been quashed, the discussion on this issue is only of academic interest. Ground No. 2 of appeal is decided in these terms.” 7.2 We find that the Ld. CIT(A) has analyzed the expenditure on various materials and opening WDV ( written down value ) of shuttering material vis-a-vis the earlier years and dealt all the issues raised by the Assessing Officer. The Ld. CIT(A) has pointed out that the Assessing Officer has not provided name of any comparable cases for basis of accepting cost of repairs at 5 to 10%. The Assessing Officer observed that repair and maintenance of Tubes and pipes in earlier year was nil as against Rs.2.49 crores claimed during the year. But the Ld. CIT(A) pointed out that expenditure of Rs.2,49,87,559/- on the tubes and pipes was already capitalized by the assessee. The Ld. CIT(A) has observed that the Assessing Officer has applied wrong basis for comparison of the repair expenditure vis-à-vis new shuttering material purchased as new asset instead of comparing the same with the value of the old shuttering material represented with opening WDV. We agree with the above analysis made by the Ld. CIT(A). Whether certain expenses have been incurred for repair and maintenance or for making of new shuttering can be in the knowledge of the assessee. The Assessing Officer cannot be allowed to estimate as how much was incurred on repair and maintenance and how much towards making of new shuttering material that too without any documentary evidences or any scientific basis. The Assessing Officer should have examined the each and every bill of purchase and other records maintaining day-to-day course of business by the assessee. Without carrying

17 ITA No.5680/Del/2012 such exercise and even without providing any comparable case, he was not justified in holding expenses of Rs.1,00,00,000/- out of repair and maintenance as incurred for making new shuttering material. In our opinion, the Ld. CIT(A) was justified in holding that the expenses claimed on current repears by the assessee qualify for deduction under section 37(1) of the Act. Accordingly, this ground of the appeal of the Revenue is dismissed. 8. In the result, the appeal of the Revenue is partly allowed.

Order pronounced in the open court on 27th March, 2019.

Sd/- Sd/- [H.S. SIDHU] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 27th March, 2019. RK/-[d.t.d.s] Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR

Asst. Registrar, ITAT, New Delhi