ACIT, CIRCLE-24(1), HOOGHLY, HOOGHLY vs. M/S KUMAR ASSOCIATES, HOOGHLY

O R D E R

PER S.S.Godara, Judicial Member:

2. It is noticed at the outset that the Revenue’s sole substantive ground raised in the instant appeal challenges correctness of CIT(A)’s order deleting / partly restricting tools & tackles expenses addition of ₹4,39,661/- thereby granting relief of ₹80,21,484/- vide following detailed discussion:- “3.1 The second to fifth grounds of appeal are against an addition of Rs.84,61,145/- on account of expenses on tolls an tackles claimed by the ACIT, Cir-24(1), Hooghly Vs. M/s Kumar Associates Page 2 appellant. In the assessment order, the Assessing Officer (AO) has discussed the issue as under:- ‘The assessee had debited to P & L A/c. a sum of Rs.84,61,1145/- under the head tools and tackles. No proofs related to (i) purchase of those tools and tackles, (ii) site-wise sending of those items, (iii) item- wise use & exhaustion details, (iv) After using, items released as intact for further use, (v) Actual stock position, of all tools and tackles i.e. stock register could be furnished at all. The assessee vide its submission letter dated 30.03.2013 had estimated value of stock at Rs.27,77,791/-. No specific details of stock of tools & tackles could be furnished. It is also observed that use of tools & tackles is not losing its utility period if it is used once. There are scope of use of the same goods several times which gives the entity of the items as capital in nature. Hence, claiming of the expenditure under the head tools and tackles is not reasonably be taken as established revenue expenditure. The assessee did not give any clarification regarding the nature of goods whether revenue or capital. Moreover, the explanation regarding stock value explained by the assessee only based on estimation which goes against the principle of accounting. Considering the above facts and observation the claim made by the assessee under the head tools and tackles amounting to Rs.84,11,145/- is entirely disallowed and added to the total income of the assessee.’ 3.2 During the appellate proceedings, the appellant contended that the tools and tackle were used by the appellant for carrying out specific construction works and could be categorised into various groups like steel shuttering materials, dewatering sludge pump lifting tools etc., blank pipes, MS Chisel, Casting bailor, spare plywood and MS sheet. Details of the various groups were enclosed with ledger account of tools and tackles. The usage and consumption of the tools and tackles was explained as under: ‘1. Steel shuttering materials as per list A: Amount of purchase Rs.2532319/- Bill raised to client for staging work of 23768.20 cum and form work/shuttering work of 21948.70 sq. mt. amounting Rs.13899750/- after repeated use ½ of total materials purchased i.e. Rs1266160/- were found reusable.

ACIT, Cir-24(1), Hooghly Vs. M/s Kumar Associates Page 4 Purchase vouchers are verified with the Originals. The assessee could not produce/submit purchase vouchers of R.2,99,461/- (marked in store ledger) and per the certificate of the Civil Engineer, there are some tools of Rs.1,40,200/- are repairable, abut clamed as damaged/scrap.’ 3.4 The AR of the appellant, furnished a written reply to the remand report on 19.07.2016, wherein it was stated, inter-alia, as under:- • ‘We appeared at the office of Asst. Commissioner of Income Tax, Circle-24, Chinsurah, Hooghly in connection with ‘Remand Report’ for the above mentioned Appeal case from time to time and submitted the documents including the copies of purchase documents, store ledger, stock certificate and stock valuation report issued by a qualified Engineer as required by the Office of Asst. Commissioner of Income Tax during verification and assessment. • We tried our best to clarify all the queries raised by the Office of the Asst. Commissioner time to time. • We could not produce the purchase documents worth Rs.2,99,461/- which might have been misplaced and remained untraceable. • The Engineer who certified the stock valuation report did not consider some tools for Rs.140,200/- a scrap as per our stock ledge and certified as repairable and recommended addition to the closing stock by Rs.1,40,200.’ 3.5 I have considered the facts of the case and the appellant’s submissions. I find that the AO disallowed the expenses of tools and tackles of Rs.84,61,145/- as according to him, the appellant did not furnish any evidence relating to their purchase or usage and some of the tools and tackles were reused showing that the expenditure was capital in nature.. As is evident from the remand report, the AO has not found any specific evidence to confirm the findings in the assessment order that the expenditure was in the nature of capital expenditure. the finding given in the assessment order the expenditure was in the nature of capital expenditure had no concrete basis and no specific items of tools and tackles were discussed to show that the expenditure was capital expenditure yielding enduring benefits. I have examined the detail furnished by the appellant and do not find any material to show that the expenditure was in the nature of capital expenditure. Moreover, on the basis of possible reuse of tackles, closing stock of tools and tackles has been fairly estimated, which has to be increased by Rs.1,40,200/- as per the certificate given by the Engineer referred to in the remand report. Thus, it has to be held that the expenditure claimed by the appellant was revenue expenditure. As agreed to by the appellant, in the remand report it has been pointed out that purchase bills/.vouchers worth Rs.2,99,461/- could not be produced. The other purchases have been found properly vouched by the AO at the remand report stge. Therefore, addition of Rs.4,39,661/- (i.e. Rs.2,99,461/- + Rs.1,40,200/-) is confirmed and the balanced addition made by the AO is deleted.”