M/S. SHRI RAJ SALT & CHEMICAL WORKS PVT. LTD.,MUMBAI vs. D.C.I.T. - 8(2)(1), MUMBAI

Brief facts of the case are that the assessee company engaged in the business of manufacturing of salt, filed its return of income for the assessment year under consideration declaring loss of Rs. 98,56,149/-. The AO passed the assessment order u/s 143 (3) of the Act determining the total income at Rs. 2,21,730/- inter alia making addition of Rs. 86,94,256/- on account of disallowance of depreciation on Earth work claimed by the assessee and Rs. 9,37,227/- on account of disallowance of expenses claimed by the assessee. In the first appeal, the Ld. CIT (A) confirmed the addition of Rs. 55,89,505/- on Assessment Year: 2014-15 account of disallowance of depreciation on Earth work claimed and addition of Rs. 9,37,227/- on account of disallowance of expenses claimed by the assessee. Against the said findings of the Ld.CIT (A), the assessee is in appeal before the Tribunal.

The assessee has challenged the impugned order passed by the Ld. CIT (A) on the following effective ground:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the depreciation claim of Rs. 5589505/- on “Earth Work” as made by the Assessing Officer.

On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not considering the submissions made by the appellant as regards the claim of depreciation on “Earth Work”.

On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the disallowance of Rs. 937227/- being 20% of various expenses totaling to Rs. 4686137/- incurred by the appellant in its regular course of business.

On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not considering the submissions made by the appellant regarding various expenses incurred by the appellant.

The appellant prays that its claim of depreciation of Rs. 5589505/- on “Earth Work” be allowed and the adhoc disallowance of Rs. 937227/- out of various expenses be deleted.”

This case was fixed for hearing on 09.10.2019. However, on the said date, when the case was called out for hearing, none appeared on behalf of the assessee. From the record, we observed that the assessee had not appeared on the last two successive dates and even no application for adjournment was moved. The notices issued on 16.01.2019, 05.04.2019 and 16.08.2019 by the registry have not been received back un-served. Hence, from the aforesaid facts it can be presumed that the assessee had received the notices issued by the Registry. Therefore, we are of the considered view that no purpose would be Assessment Year: 2014-15 served in case the appeal is adjourn and fresh notice is issued. We accordingly decided to dispose of the appeal on the basis of material on record after hearing the Departmental Representative (DR).

The Ld. DR relying on the order passed by the Ld. CIT (A) submitted that since the assessee has failed to justify the claim of depreciation amounting to Rs. 55,89,505/- during the assessment proceedings or during the appellate proceedings, the Ld. CIT (A) has rightly confirmed the addition made by the AO. Similarly, the Ld. DR submitted that since the assessee has failed to establish the expenses claimed by it by adducing cogent and convincing evidence before the authorities below. The Ld.CIT (A) has rightly confirmed the disallowance of 20% of the various expenses claimed by the assessee. The Ld. DR further submitted that there is no infirmity in the order of the Ld. CIT (A) to interfere with the same.

We have gone through the entire record in the light of the submissions made by the Ld. DR. The Ld. CIT (A) has confirmed the disallowance made by the AO in respect of depreciation on account of earth work holding as under: “So far as second ground of appeal regarding the disallowance of Rs. 55,89,505/- made by the AO in respect of depreciation on account of Earth work claimed by the appellant is concerned, the disallowance has been made by the AO due to the fact that the appellant did not produce supporting evidences in respect of the Earth work carried out by it. No bills were furnished before the AO in respect of the Earth work despite the fact that the AO had specifically asked for the same on 25/10/2016. Even before the undersigned, the appellant has furnished only three bills for the work amounting to Rs. 7,18,850/-, though, it has submitted the Ledger account of the parties and has also furnishes the evidence regarding deduction of TDS in respect of the payments made. Moreover, the appellant has not given any reasons for furnishing complete bills and no reasons have been given for not filing this evidence before the AO. Under these circumstances, the additional evidence filed by the appellant is not admitted. Examination of bills submitted by the appellant shows that they are self-made vouchers and the payment has been made for work carried out through JCB, Hitachi machines and Tractors. It is surprising Assessment Year: 2014-15 that the persons who are owning such costly machines are unable to give proper bills. Considering the overall facts of the case and considering the fact that the appellant has not produced any evidence before the AO and has not given any reason before the undersigned for its failure to furnish all the bills, the disallowance of depreciation made by the AO amounting to Rs. 55,89,505/- is hereby confirmed. So far as remaining disallowance of Rs. 31,04,751/- towards depreciation, made by the AO, is concerned, the same is consequential in nature. So far as third ground of appeal regarding 20% disallowance out of expenditure amounting to Rs. 46,86,137/- made by the appellant under various heads is concerned, it has been mentioned by the AO in the assessment order that the appellant has only furnished ledger accounts of these expenses and no others supporting evidences like bills/vouchers/receipts of these expenses were furnished. Even the name and addresses of persons to whom payment was made for these appellant were not corroborated with the bank the statement also. During the course of appellate proceedings the appellant has stated that since the volume of such bills/ vouchers/ receipts was high they were not furnished before the AO. I’m not satisfied with the explanation of the appellant. It could have always produced these evidences for a small period or could have requested the AO to select a period for which such evidences could have been furnished by it. Furnishing of Ledger accounts only is not sufficient, if the AO wants to examine the correctness of claim of expenditure. This is more so, considering the huge losses claimed by the appellant. In view of these facts, disallowance of Rs. 9,37,227/- made by the AO out of various expenses debited by the appellant amounting to Rs. 46,86,137/- is hereby confirmed”.

The Ld. CIT (A) has confirmed both the additions on the ground that the assessee has failed to furnish the bills during the assessment proceedings despite specifically asked by the AO. Even during the assessment proceedings, the assessee furnished only three bills, which do not substantiate the claim of the assessee. Similarly, in respect of addition on account of disallowance of 20% out of the total expenditure claimed by the assessee, the Ld. CIT (A) has Assessment Year: 2014-15 confirmed the said addition holding that the assessee could not substantiate its claim by adducing cogent and convincing evidence either during the assessment proceedings or during the appellate proceedings. In our considered view, the findings of the Ld. CIT (A) are based on the evidence on record and as per the provisions of law. Hence, we do not find any reason to interfere with the same. We therefore, uphold the decision of the Ld. CIT (A) and dismiss the assessee’s appeal. In the result, appeal filed by the assessee for assessment year 2014- 2015 is dismissed. Order pronounced in the open court on 29th October, 2019. (S. RIFAUR RAHMAN) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 29/10/2019