VITARAG EXPORT INDUSTRIES,JUNAGADH ROAD vs ITO, WARD - 2(1)(1), RAJKOT, AAYAKAR BHAVAN

Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT

Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA

For Appellant: Shri D. M. Rindani, AR

For Respondent: Shri Dheeraj Kumar Gupta, Sr. DR

Hearing: 15/10/2024Pronounced: 13/01/2025

आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AYs) 2012-13, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘NFAC/Ld. CIT(A)’], dated 05.09.2023, which in turn arises out of an assessment order passed by the Assessing Officer (in short ‘AO’) , under section 143(3) of the Income tax Act, 1961, ( herein after referred to as the “Act”), dated 20.03.2015.

The grounds of appeal raised by the assessee are as follows: “1. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in sustaining addition of Rs.1,51,58,520/- by way of low production yield of groundnut oil.

ITA No.354/RJT/2023 Vitrang Export Industries 2. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi failed to appreciate appellant’s ground that when Section 145(3) was not invoked, book result could not have been disturbed by the assessing officer. 3. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi failed to appreciate the manufacturing process and the input-output formula of the Appellant’s products. 4. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in sustaining addition of Rs.10,22,875/- by way of purchases outside of books. 5. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in sustaining addition of Rs.1,72,250/- by way of disallowance of depreciation on alleged purchase of solvent machineries. 6. The Appellant craves leave to add, amend, alter and withdraw any ground of appeal at anytime up to the hearing of this appeal.”

Ground Nos.1 to 3 raised by the assessee are interconnected and mixed. These grounds relate to addition of Rs.1,51,58,520/- by way of low production yield of groundnut oil.

Brief facts qua ground Nos. 1 to 3 are as follows. The assessee before us is a partnership firm. The assessee-firm has filed its return of income for assessment year (AY). 2012-13, on 28.07.2012, declaring total income at Rs.9,45,163/-. The return of income of the assessee was processed u/s 143(1) of the Income Tax Act, 1961. Later on, the assessee`s case was selected for scrutiny under CASS and the notice u/s 143(2) was issued on 23.09.2013 to the assessee, which was duly served upon the assessee. Subsequently, notices u/s 142(1) were issued on 10.10.2013 to the assessee and duly served upon the assessee, calling for complete return of income, audit report and computation of income and other relevant details. In response to these notices, the assessee furnished its reply on 19.01.2015, before the assessing officer.

ITA No.354/RJT/2023 Vitrang Export Industries 5. During the assessment year (AY) 2014-15, a survey was conducted on 23rd and 24th December, 2014 at the assessee’s factory/office premises. During the course of survey proceedings at the premises certain viable laboratory reports were found and impounded. The details of such laboratory reports with date of report and yield of ground nut oil impounded from the business premises are as under:

As per the above list of reports, the percent yield of groundnut oil from groundnut seed powder varies from 47.86% to 49.94%. Considering, the above reports adopted in the same line of business and acceptable in Saurashtra Oil Mill belt, the average yield of groundnut oil from groundnut seed powder works out at 48%. This particular yield issue of groundnut oil was discussed in length during the course of survey proceedings conducted at the assessee’s premises. It was explained that from raw groundnut 90% of seeds are extracted. It was further, explained that from ground nut seeds 12% husk is removed and 78% of seeds (seed powder) is available for production of ground nut oil. Now, in order to actually work out the groundnut oil production on the basis of different laboratory reports available with the department which in turn are impounded from the premises of the assessee and the yield as per laboratory reports are basically accepted in the same oil mill belt and in the same line of business of groundnut oil extraction which has been

ITA No.354/RJT/2023 Vitrang Export Industries reiterated by the assessee during the course of survey proceedings, the production of groundnut oil is calculated as under:

From the above, it was observed by the assessing officer that the groundnut oil yield/production is suppressed to Rs.3,34,32,720/-. Accordingly, vide show cause notice dated 04.02.2015, the assessee was asked to explain the suppression of groundnut oil production of Rs.3,34,32,720/- and the same amount was proposed to be added to the total income of the assessee for the year under consideration.

During the assessment proceedings, the assessing officer, issued notice to the assessee, to explain the transactions and manufacturing process.In response to the notice of the Assessing Officer, the assessee submitted its reply before the assessing officer, which is reproduced below:

“As regards suppression of ground nut oil for production of 278606x120=Rs.333432720/- as worked out in point no.2 of above letter, it is submitted that the method and manner of computing yield has been completely misunderstood by you in this line of business of oil mill and solvent extraction plant. The detailed flowchart showing the entire process of manufacturing is filed herewith. The correct method of computing the yield is explained hereunder:

ITA No.354/RJT/2023 Vitrang Export Industries (A) We hereby explained short brief of process of manufacturing that groundnut along with the shell/husk is crushed in the oil mill and after the crushing process, ground nut oil, oil cake and husk are generated in on single process. At every stage of processing, content of oil and husk remain continue till end, thus husk is not first reduced because the bare seeds are not crushed independently. (1) The laboratory reports referred by you are speaks for the pure yield of 48% oil from bare sees only, it always means standard yield of 48% of oil which ought to be derived from oil seeds. It does not refer to the all, oil recovery from the entire process. 48% yield mention in lab. Reports found, refer to yield from pure ground nut seeds. The correct manufacturing activity/methodology by which oil mill produce oil as stated above. In the process of crushing of seeds in oil mill, percentage of husk continues to remain. (bare seeds are not crushed) (2) As per industry standard, groundnut is taken to be of 200 gms each, ideally, it should have seed content of 144 gms. Now from every ground nut seed processed under laboratory conditions to test its quality, 48% oil recovery means 48% of 144 gms i.e. 69.12 gms (which is equal to 34.56 of gross weight of 100 gms) which is more than standard yield and not lower, hence there is no low recovery at all. (29.19 (GN OIL) + 4.55 (SEEDS) +1.00 (LEFT IN) = 34.74) (3) After considering your suppressed production of 278606 kg of G.N. Oil, the production result and input-output ratio will be worked out as under:

From the above working, it is seen that the total output is much more i.e. 105.28 than total input pg 100.00 which shows that the method is incorrect and illogical. More, recovery of oil would technically reduce recovery of other products, as the input is same quantity. Thus, the method adopted by you is illogical. Single point yield rate cannot be applied to a two- stage oil recovery process. The deduction made by you of husk from the ground nut seeds for computing the yield is totally unaccountable methods. In all solvent plant and oil mill business the proper method of yield is above as stated. Without applied the husk, there could not be recovery of oil. In this aspect, we are also practically bringing before you the weight scale, ground nut and G.N. oil cake and de-oilcake to explain the above stated method of working which

ITA No.354/RJT/2023 Vitrang Export Industries is adopted while calculating the yield. Thus, the yield arrived by us is correct. In support of this also, the certificates for yield from the expert laboratories and authorized Associates are submitted herewith which as under: (1) The Solvent Extractors’ Association of India, Mumbai (2) The Saurashtra Oil Mills Association, Jamnagar (3) Intertek India Pvt. Ltd., Gandhidham (4) CCIC India Pvt. Ltd., Gandhidham, Kutch (5) Quality Analytical Laboratory, Dhoraji Further, we also submit herewith the report from Quality Analytical laboratory for G. N. Oil Cake which shows and proves that there is oil percentage and fiber (husk) percentage remained at end of the product which may please be seen in respect of total yield arrived. (4) All the quantity details have been maintained. All material relating to the product- wise details were submitted. (5) The books of accounts are audited u/s 44AB of I.T. Act, 1961 (6) The assessee has been adopting the same method since long and it has been accepted by the department. There is consistent method. Also, in earlier the assessment has been made u/s 143(3) of I.T. Act. (7) Also the method is accepted by the Appellate Authority. (8) The yield of product depends upon the quality of the ground nut products in each case and accordingly there could be some variation. However, the calculation made by you by adopting the above formula is illogical and hence there is not suppression of income. During the survey, the partner has given method in brief and stated about 30 to 31 percentage oil is recovered is of the FY.14- 15. However, the detailed method of business and recovery of yield from oil is supported with the above technical reports of laboratories and practically explained by demonstrating the method as stated as above. However, if any further details or explanation required, let us give an opportunity to produce and represent the further in above issue.” 7. However, the assessing officer, after considering the reply of the assessee, rejected the contention of the assessee and held that the amount of suppression of amount of ground nut oil has resulted into Rs.1,51,58,520/-. In order to come to any logical solution on the issue in keeping in view justice to be allowed in adopting the yield figure vis-à-vis seed content, it appears most appropriate to adopt the figures which are derived on the basis of normal industries standard and which is prevalent in such line of business. Therefore, suppression of ground nut oil may be taken at Rs.1,51,58,520/-. The assessing officer also held that during the

ITA No.354/RJT/2023 Vitrang Export Industries course of survey operation at the business premises of the assessee, the department came across laboratory reports of different agencies deciding groundnut oil yield and which was made to understand to the department that in this belt of Saurashtra considering the fertility of land, water, climatic condition, favourable for cultivation etc., the yield of ground oil as reported by the different agencies in surrounding Saurashtra region is most adopted and acceptable in this line of business. Therefore, the suppression of production of groundnut oil worked out taking into consideration the formula as laid down by the oil agencies for Saurashtra region (i.e. by taking average of 48% yield) an amount of Rs.3,34,32,720/-, was added to the total income of the assessee for the year under consideration.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The ld. CIT(A) noticed that it was already mentioned by the assessing officer that on the consideration of the appellant's argument that out of 200 gms of raw ground nuts, the seed content would ideally be 144 gms. and accordingly, the assessing officer has taken the seed content at 38,07,147 Kgs. There is no dispute to the appellant. But, the issue involved is yield. The assessing officer has taken the estimated yield on the basis of the laboratory reports which were found form the business premises of the appellant during the course of survey operation. As far as the quantum of yield of oil is concerned, it is well settled and an accepted position by now that reasonability of yield, gross profit, shortage etc. has to be judged in the light of quantitative records, trend and comparison in one's own case and other comparative cases. Analysis reports found during survey show that groundnut seeds give oil yield of 48%. The assessing officer has calculated the yield after accepting the appellant's view that out of 200 gms of raw ground nut, only

ITA No.354/RJT/2023 Vitrang Export Industries 144 gms of seed content was available. Therefore, based on these facts, the ld CIT (A) accepted the method adopted by the assessing officer and therefore, confirmed the addition of Rs.1,51,58,520/-.

Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before us.

10.

Shri D. M. Rindani, the Learned Counsel for the assessee, at the outset, clarified that the quantum of addition made by the assessing officer is to the tune of Rs.3,34,32,720/-, whereas, on appeal, by the assessee, before the ld. CIT (A), the Ld. CIT(A) confirmed the addition to the tune of Rs.1,51,58,520/- and dismissed the appeal of the assessee. Although the assessing officer made the addition to the tune of Rs.3,34,32,720/-, however, real addition to be confirmed by the assessing officer, vide assessment order page no.9, para no. 4.7(iv), the assessing officer himself stated that suppression of amount of groundnut oil has resulted into Rs.1,51,58,520/-. Moreover, in the appeal giving effect order of Ld. CIT(A), the assessing officer has taken the figure of Rs.1,51,58,520/-, therefore, ld. Counsel stated that instead of Rs.3,34,32,720/-, the figures should be read as Rs.1,57,58,520/-.

11.

On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) submitted that so far the difference in the figure of addition made by the assessing officer at Rs.3,34,32,720/- and confirmed by the Ld. CIT(A) at Rs.1,51,58,520/-, either the assessee or the department should file a rectification application before the Ld. CIT(A) and thereafter the relevant issue should be adjudicated by this Tribunal. This appeal was heard on merit on 8th July 2024 and soon after the hearing appeal, the ld.DR sent the letter to the Bench, stating that he would like to get rectify

ITA No.354/RJT/2023 Vitrang Export Industries the mistake in figures, under section 154 of the Act, and also requested the Bench to provide sufficient time to get the rectification done. Accordingly, the Bench, vide order sheet entry dated 22.07.2024, had re- fixed the case for hearing on 14.08.2024 and time was given to the ld. DR to get the rectification done on or before 3rd October 2024. Further time was granted to ld. DR, upto 15th October 2024, however, Ld. DR. did not receive the rectification order. Therefore, the appeal was finally heard on 15th October 2024, with the consent of the ld. DR for revenue.

12.

On merit, Ld. Sr. DR for the Revenue submitted that assessing officer has reached the conclusion, based on the cogent evidences, available with him, and based on the reports of agencies, like, SOMA laboratory, perfect laboratory, Dhoraji and quality analytical laboratory etc, therefore the addition made by the assessing officer should be upheld.

13.

On merit, the Ld. Counsel for the assessee submitted that assessing officer made addition on account of low yield of groundnut oil production and the percentage, so determined by the assessing officer, was arbitrary in nature. Besides, the book result of the assessee accepted during the previous as well as during the subsequent years. Having the same facts and circumstances, the books of accounts of the assessee, were not rejected. The Ld. Counsel also submitted that the appeal of other assessee, similar oil mill engaged in the groundnut oil production, was adjudicated in favour of the assessee, on the identical grounds, by the Hon’ble Jurisdictional, Gujarat High Court, in the case of CIT vs. Patidar Oil Cake Industries, Tax Appeal No.1881 of 2009.The Ld. Counsel for the assessee also took us through paper book page no.47 and explained the manufacturing process. The Ld. Counsel also took us through paper book page no.48 and 49 wherein the report of the Solvent Extractors’

ITA No.354/RJT/2023 Vitrang Export Industries Association of India and Shri Saurashtra Oil Mills Association are placed wherein they certified the oil contents in manufacturing of groundnut oil. The Ld. Counsel also took us through paper book page no.73 wherein certificate of Soma Laboratory placed and stated that the assessee in its process of manufacturing oil, did not hide any material aspects, which could lead to evasion of taxes. The Ld. Counsel also stated that the books of accounts of the assessee were not rejected by the assessing officer. Based on these facts, ld. Counsel argued that addition made by the assessing officer may be deleted.

14.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that ground Nos. 1, 2 and 3 raised by the assessee relate to making an addition of Rs.3,34,32,720/- by way of alleged suppression of production of groundnut oil. The assessing officer held that during the course of survey operation at the business premises of the assessee, the department came across laboratory reports of different agencies deciding groundnut oil yield in the belt of Saurashtra. Based on the report, the assessee was asked to explain the suppression of ground nut oil production of Rs.3,34,32,720/-.We find that all the quantity details have been maintained by the assessee and all material relating to the product- wise details were submitted, before the assessing officer. The assessee`s books of accounts are audited u/s 44AB of Act, 1961 and the assessee has been adopting the same method since long and it has been accepted by the department. The method so adopted by the assessee is consistent method and in earlier years, the assessment has been framed u/s 143(3) of Act, by accepting the same method. The yield of product depends upon the quality

ITA No.354/RJT/2023 Vitrang Export Industries of the groundnut products in each case and accordingly there could be some variation.

15.We note that in case of similar groundnut oil mill, as that of assessee, engaged in the groundnut oil production, the Hon’ble Gujarat High Court, having similar and identical facts, ( as that of assessee), in the case of CIT vs. Patidar Oil Cake Industries, vide Tax Appeal No.1881 of 2009, dated 19.04.20211, deleted the addition, observing as follows: “4. We find that the entire issue is based on facts and upon appreciation of evidence on record. The Tribunal having taken into account different factors emerging from the record, found that there was no reason to believe that the purchaser was bogus. We do not find any substantial question of law arising, in particular with respect to the contention of the counsel for the revenue that under similar circumstances, this Court had also upheld the additions made by the Income Tax Department in cases of Vijay Proteins, Sanjay Oil Cake Industries etc. We find that as already noted, the Tribunal has given detailed reasons for distinguishing the case of the present assessee from those cases. In particular, we find that the assessee had presented before the revenue authorities the parties who had also appeared and confirmed the transactions. This is, therefore, not a case where the parties were bogus or did not confirm the transaction. This being the material distinction, in our view the Tribunal not relying on cases cited by the revenue cannot be found fault with. The Tribunal in fact concluded that the purchaser cannot be stated to be unaccounted since payments were made through account payee cheques. 5. In totality of facts and circumstances of the case, we do not find any substantial question of law. 6. With respect to question no.2, we find that the issue pertains to the additions made by the Assessing Officer on account of low recovery of oil. We find that the CIT (Appeals) as well as the Tribunal both concurrently found that there was no evidence to make such additions. In particular the Tribunal considered the issue in the impugned order in the following manner: 49. We have considered the material on record and the rival contentions as regards additions by way of low recovery of oil made by assessing officer. The assessing officer has based the addition on laboratory reports and statements of employees of assessee. According to the assessing officer the report clearly show yield of 48 to 52% and the same has been also stated by employees during survey. Based on the same, we find from the working of the assessing officer on page 39 of assessment order that the assessing officer has applied 48% yield to groundnut seeds only after reducing husk ratio of 20.32% from 100% of groundnut input. Thus, the assessing officer has applied 48% to 79.68% (100% groundnut less 22.32% husk) and the resulting yield arrived at by the assessing officer is 38.24%. As the assessee has shown yield of 35.67%, the assessing officer has considered the difference of 2.57% as low recovery of oil and after working out suppressed production of 3,62,771 kgs., he has made addition of

ITA No.354/RJT/2023 Vitrang Export Industries Rs.1,68,21,691/- by way of value of suppressed sales of groundnut oil. As against this method applied by the assessing officer, according to the assessee, the husk of 20.32% cannot be first reduced from groundnut and 48% cannot be directly applied to the balance percentage of 79.68% but the yield can be arrived at technically only by considering the entire manufacturing process. From the copy of statement of the chemist of the assessee Mr. Gami which is relied upon by the assessing officer we find that in all his replies, the chemist has referred to the said yield out of groundnut oil seeds (emphasis supplied) and not to groundnuts. The partner of the assessee Mr. Kishorbhai has also referred to 48% yield on groundnut seeds. The said statements gets further support from certificate issued by Saurashtra Oil Mill Association which has also before the assessing officer in which also the yield of 42% to 52% is under laboratory testing the groundnut seeds and after describing the technical process of oil mill and solvent extraction, the said certificate states that the oil recovery after all process can be between 35% to 37%. We have also perused another letter from Geochem Laboratories Pvt. Ltd. said to be an international independent inspection and testing company, in which it is clearly stated that as per laboratory scale, oil content in pure groundnut seeds varies from 42% to 51% depending upon the quality f seeds and the overall recovery of oil from inshell groundnut remains between 34% to 37%. We also find that in earlier years in the case of assessee itself total oil yield is around 35% and the same is accepted for several years by the department in order passed u/s. 143(3) of the Act. The same position emerges from yield rates of many other cases of oil mills whose figures are cited by the assessee. We find that neither the accepted history of yield in own case or in other cases of the technical evidence furnished by the assessee has been controverted by the Revenue. After considering the same as also the process chart, it is also clear that the ITO has adopted a different method of computing the yield which is not same method as adopted by the department in earlier years or as generally recognized in this industry. It is also apparent the ITO appears to have wrongly interpreted the statements and reports because, based on the evidence on record, it also appears that groundnut seeds are not same as groundnuts. It is common knowledge that groundnut comes with the outer shell while seed is inside the groundnut shell. In our considered view, once this distinction is appreciated along with the total manufacturing process and the time tested method of arriving at the total oil yield. The yield comes to 35.67% as shown by the assessee. Hence in our view there is no valid reason which remains for computing the yield at 38.24% as done by ITO. Even otherwise, we find that the ITO has made addition of entire gross sales, which is also not to be done, as gross sales cannot be treated as income. We find that CIT (A) has rightly appreciated the facts in this regard and hence, no interference in the order of CIT(A) is required.” 7. From the perusal of the documents on record with the assistance of learned counsel for the revenue, we notice that the entire issue is raised on facts. The CIT (Appeals) as well as the Tribunal both concurrently assessed the evidence and came to the conclusion that the Assessing Officer was not justified in making additions on mere estimations and discarding the evidence produced by the assessee. No question of law, therefore, arises. In the previous assessment years also, similar figures presented by the assessee were accepted by the department. 8. In the result, the Tax Appeal is dismissed.”

ITA No.354/RJT/2023 Vitrang Export Industries 16.Therefore, we find that Jurisdictional Hon’ble Gujarat High Court, having similar and identical facts, ( as that of assessee), in the case of Patidar Oil Cake Industries(supra), held that addition should not be made in the hands of the assessee.

17.

We note that stocks and purchases are accepted and only production of groundnut oil is disturbed by increasing its yield and no other item of production is disturbed by the assessing officer, although it is an integrated manufacturing process, which produces four different items from one raw materials. During survey, there is no evidence found of suppressed sales or suppressed production, therefore only production does not give rise to income, without there being sales. The yield noted on laboratory reports found in survey is misunderstood and misapplied by assessing officer and CIT(A) without appreciating the technical manufacturing process shown in flow chart. In remand report, assessing officer clearly admitted that there was no noting in order sheet or in SCN about invoking Section 145(3) for rejection of book result. The Laboratory reports relied upon by assessing officer do not constitute a material or information showing suppressed production and that too for the whole year and that too when the laboratory reports pertain to previous years. Hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted.

18.

Before parting, we make it clear that since we have decided the issue in favour of assessee, by taking the figure of addition of Rs.1,51,58,520/-, and if the department, later on, gets rectified, this figure to be Rs.3,34,32,720/-, then also, our above adjudication would be applicable on rectified/ enhanced addition figure of Rs.3,34,32,720/-, as we have

ITA No.354/RJT/2023 Vitrang Export Industries decided the issue in favour of assessee, therefore, the figure is not material, our above adjudication shall apply to the rectified figure also. Hence, ground Nos.1,2 and 3 of the assessee are allowed.

19.

In the result, ground Nos.1,2 and 3 of the assessee are allowed.

20.

Ground No.4 raised by the assessee, relates to addition of Rs.10,22,875/- by way of purchases outside of books of accounts.

21.

Succinct facts qua the issue are that during the assessment proceedings, it was observed by the assessing officer, from the ledger accounts of the assessee that during the year under consideration, the assessee has made purchases from different parties groundnut oil amounting to Rs.13,62,77,210/- whereas in the audited accounts it was mentioned at Rs.1352.54 lacs. Therefore, the difference of Rs.10,22,875/- on account of purchases of ground nut oil was added to the total income of the assessee.

22.

On appeal, the ld CIT(A) confirmed the action of the assessing officer, therefore, the assessee is in appeal before us.

23.

The ld. Counsel argued before us that assessee had submitted the item-wise detailed chart which is tallied with the schedule 8 of Balance sheet. The assessing officer has taken figure from party ledger account which shows taxes also and other product purchases also and hence there would be difference which could be verifiable from the ledger itself. Therefore, addition so made by the assessing officer may be deleted.

24.

On the other hand, Learned DR for the Revenue submitted that neither during assessment proceedings nor during the present proceedings, the

ITA No.354/RJT/2023 Vitrang Export Industries appellant has submitted the reconciliation of the figures shown in the schedule 8 of the balance sheet and the party ledger accounts. The onus always lies on the appellant to prove the genuineness of the transactions. Therefore, addition made by the assessing officer may be confirmed.

25.

We have heard both the parties. We find merit in the submissions of ld. Counsel for the assessee to the effect that assessee submitted that the item-wise detailed chart which is tallied with the schedule 8 of Balance sheet. The assessing officer has taken figure from party ledger account which shows taxes also and other product purchases also and hence there would be difference which could be verifiable from the ledger itself. We have gone through schedule 8 of Balance sheet vis-à-vis ledger account of assessee, and observed no any difference, hence addition made by the assessing officer is directed to be deleted. 26. In the result, Ground No.4, raised by the assessee is allowed.

27.

Coming to ground No.5 raised by the assessee, which relates to addition of Rs.1,72,250/- by way of disallowance of depreciation.

28.

Brief facts qua the issue are that during the course of assessment proceedings, the assessee firm has furnished copies of some of the bills in respect of solvent plant and machinery purchased and installed. However, assessing officer noticed that the following computer generated and without complete description of the machinery invoices/bills were submitted by the assessee, in support of its claim of having purchased solvent plant and machineries:

ITA No.354/RJT/2023 Vitrang Export Industries

The assessee submitted, the bills/invoices, during the assessment proceedings, in respect of above parts of machinery, however, assessing officer, disallowed the depreciation on these machinery/ machinery parts stating that the assessee has failed to bring on record the evidences of transportation of these machineries and installation at the business premises thereof. The assessee -firm has debited depreciation of Rs.1,72,725/- @ 7.5% on Rs.23,03,002/- on such alleged purchase of solvent machineries. The assessing officer, based on the above reasons, disallowed the depreciation of Rs.1,72,250/-.

29.

Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the action of the assessing officer, therefore, assessee is in further appeal before us. We have heard both the parties. The Learned Counsel for the assessee, submitted that assessee had purchased the machineries from Swastika Feeds (Solvent Div) Ltd and Purchases have been made through cheque ( banking channel) and these machineries were installed in the premises of the assessee, and all the evidences in this respect were submitted before the assessing officer.On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the

ITA No.354/RJT/2023 Vitrang Export Industries sake of brevity. Before us, Ld. Counsel for the assessee submitted copy of certificate from auditor of the firm, copy of bills of machineries, copy of ledger account of Swastik Feeds Limited, copy of bank statement of Central Bank of India and State Bank of India, and copy of C- form received from Sales Tax department showing amount of machinery purchased. These documents were already on record before the lower authorities. Therefore, based on this factual position, we find that assessee`s claim is genuine, hence addition made by the assessing officer is hereby deleted. 30. In the result, ground No.5 raised by the assessee, is allowed.

31.

In the combined result, the appeal of the assessee is allowed.

Order is pronounced in the open court on 13/01/2025.

Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot �दनांक/ Date: 13/01/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File

By Order

Assistant Registrar/Sr. PS/PS ITAT, Rajkot

VITARAG EXPORT INDUSTRIES,JUNAGADH ROAD vs. ITO, WARD - 2(1)(1), RAJKOT, AAYAKAR BHAVAN