DEEPAK NOVOCHEM TECHNOLOGIES LTD,PUNE vs. DCIT CIR 9(3)(1), MUMBAI

This appeal has been filed by the assessee against the order dated 26.12.2016 passed by the Commissioner of Income Tax (Appeals) (for short ‘the CIT (A)’)-16, Mumbai, for the assessment year 2012-13, whereby the Ld. CIT (A) has partly allowed the appeal filed by the appellant/assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that the assessee engaged in the business of manufacturing, processing and trading of chemicals, filed its return of income for the assessment year under consideration declaring loss of Rs. 3,43,71,110/-. In response to the Notices u/s 143 (2) and 142 (1), authorized representative (AR) of the assessee submitted some of the details and also discussed the case with the AO. Since, the assessee had claimed expenditure of Rs. 57,02,165/- under the head repair and maintenance-Plant and Machinery 2 Assessment Year: 2012-13 and Rs. 4,69,917/- under the head ‘Monsoon Shed Erection’ , the AO made addition of Rs. 57,20,924/- holding as under:- “6.3 From the above details, it can be seen that the assessee incurred substantial expenditure for fabrication and other work which is not in the nature of repair and which brings into existence new/upgraded asset of enduring value and has not established with necessary information and evidences that the same is revenue in nature, the above expenditure amounting to Rs. 61,72,082/- ( 57,02,165 + 4,69,917) is treated as capital expenditure and depreciation of Rs. 4,27,662/- at the rate of 7.5% on amount of Rs. 57,02,165/- capitalized from Repairs & Maintenance – Plant & Machinery and of Rs. 23,496/- at the rate of 5% on amounts of Rs. 4,69,917/- capitalized from Repairs & Maintenance – Building is allowed and the difference amount of Rs. 57,20,924/- [ 57,02,165 – 4,27,662) + (4,69,917 – 23,496] is capitalized and added to the income returned.

Accordingly, AO inter alia making the addition of Rs. 57,20,924/- aforesaid determining the total income of the assessee at Rs. 71,89,360/- (rounded off). Aggrieved by the assessment order, the assessee challenged the same before the Ld. CIT (A). The Ld. CIT(A) after hearing the assessee partly allowed the appeal, however, confirmed the addition made on account of disallowance of expenses claimed under the head repair and maintenance holding that the assessee has failed to prove the genuineness of expenditure incurred. Still aggrieved, 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 grounds:- 1. “The learned CIT (A) erred in confirming the action of AO in making disallowance of Rs. 57,02,165 being expenditure incurred on repairs and maintenance of plant and machinery.

At the outset, the Ld. counsel for the assessee submitted that the assessee was represented by Sh. Bhavin Shah of B.K. Khera & Company, Chartered Accountant before the authorities below. However, Sh. Shah left the firm and at the time of filing the present appeal, the assessee had no information whether the copies of invoices relating to repairs and maintenance were called for from the assessee and filed before the authorities below? Perusal of the Ld. CIT(A) order revealed that some of the copies of invoices were produced before the Ld. CIT(A) however, the same were not legible and for that reason, Ld. CIT(A) did not consider the same. The assessee has submitted an application for admitting legible copies of bills and vouchers as additional evidence. Since, the authorities below has disallowed the expenses on the ground that the assessee has failed to produce relevant vouchers/invoices for verification, these documents are very crucial for adjudicating the issues involved in the present appeal. The Ld. CIT(A) further submitted that the application of the assessee may be allowed in the interest of justice and the documents produced along with the application may be admitted as additional evidence.

On the other hand, the Ld. Departmental Representative (DR) opposed the application on the ground that since the assessee has failed to produce bills and vouchers before the authorities below despite availing sufficient opportunities, the assessee’s application for admitting additional evidence deserves dismissal.

We have heard the rival submissions and also gone through the entire evidence on record including the additional evidence produced before us by the assessee. We notice that during the appellate proceedings the Ld. CIT(A) asked the AR of the assessee to furnish copies of various bills, vouchers to examine 4 Assessment Year: 2012-13 the nature of expenses in the light of the contention of the assessee, however, the assessee did not furnish the complete details for further verification. Photo copies of some of the bills submitted before the Ld. CIT(A) were not legible. The Ld. counsel for the assessee has explained before us as to how the assessee could not produce the same before the authorities below. Under these circumstances, we are of the considered opinion that the assessee should not be debarred from establishing its case on the basis of documentary evidence available with it, merely on the ground that it has failed to produce the same before the authorities below. Moreover, the assessee has explained the circumstances under which the documents are being produced before the Tribunal for admitting as additional evidence. As contended by the assessee the documents produced before us are copies of sample invoices of expenditure incurred for repairs and maintenance of plant and machinery. Hence, in our considered opinion the same are required to be placed on record and further require verification by the AO. We therefore, allow the application of the assessee and admit the documents produced along with the application as additional evidence in the interest of justice. Consequently, we set aside the order passed by the Ld. CIT (A) and sent the appeal back to the AO for passing the assessment order afresh after due verification of the documents admitted as additional evidence in accordance with law and affording a reasonable opportunity of being heard to the assessee. In the result, appeal filed by the assessee for assessment year 2012- 2013 is allowed for statistical purposes.