MANNA BRICKS MANUFACTURING & TRADING PVT. LTD.,MIDNAPORE(W) vs. JCIT, RANGE-2, MIDNAPORE, MIDNAPORE

IN THE INCOME TAX APPELLATE TRIBUNAL “B”, BENCH KOLKATA BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.389/Kol/2017 ("नधा"रणवष" / Assessment Year: 2010-11) Manna Bricks Manufacturing Vs. JCIT, Range – 2, & Trading Pvt. Ltd. Midnapore Vill: Sheulipur, P.O. Mohar, Dist Midnapore (W), West Bengal, Pin – 721161. "थायीलेखासं./जीआइआरसं./PAN/GIR No. : AAECM 9769 R (Appellant) .. (Respondent)

Appellant by :Shri Soumitra Choudhury, Adv. & Anikesh Banerjee, Adv. & Saswati Mita Dutta, Adv. Respondent by :Shri S. Dasgupta, Addl. CIT(DR)

सुनवाईक"तार"ख/ Date of Hearing : 13/03/2018 घोषणाक"तार"ख/Date of Pronouncement : 23/05/2018 आदेश / O R D E R Per Dr. A. L. Saini: This is an appeal preferred by the assessee company against the order of the Ld. Commissioner of Income Tax(Appeals)-11, Kolkata dated 27.12.2016 for Assessment Year 2010-11. 2. The Ground No.1 of the assessee is not pressed, so dismissed. 3. By preferring ground No.2, the assessee has assailed the decision of the ld. CIT(A) in confirming the addition of Rs.37,59,520/- on account of discrepancy in value of stock statement furnished to the bank and the value of stock reflected in the audited financials.

Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

3.1 The brief facts of the case is that the Assessing Officer during the assessment proceedings sought an information from the Indian Overseas Bank u/s 133(6) of the Income Tax Act 1961 (herein after referred as ‘’the Act’’) from where the Assessing Officer got the copies of stock statement submitted by the assessee company to the Bank which is reproduced as under:

Date Value of closing stock 26-09-2009 Rs.65,95,000/- 31-10-2009 Rs.67,04,500/- 31-12-2009 Rs.69,55,000/- 31-01-2010 Rs.70,99,000/- 05-03-2010 Rs.75,10,500/-

The Assessing Officer after taking note of the value of closing stocks as given above was of the opinion that the assessee had maintained monthly stock amounting to Rs.65 lakhs to 75 lakhs, i.e. average stock of Rs.69,72,800/-per month during the last six months. However, he noted that as per the stock submitted before him by the assessee, the closing stocks were shown at only Rs.32,13,280/- as on 31-03-2010. Taking note that assessee did not produce any books of accounts and other documents to verify the stock, the Assessing Officer concluded that the correctness, completeness of the value of closing stock cannot be verified. Therefore, the Assessing Officer adopted the average value of stock of Rs.69,72,800/- as on 31-03-2010. So, there was a stock difference of Rs.37,59,520/- (Rs.69,72,800/- - Rs.32,13,280/-) which was treated as the undisclosed income from undisclosed source of the assessee which it invested in stock and added the same to the total income of the assessee. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer. Aggrieved, the assessee is before us.

3.2 We have heard both the parties and perused the records. During the hearing, the Bench asked the Ld AR as to why books of accounts were not produced before the Assessing Officer. The Ld. AR drew our attention to the Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

fact that the accountant of the assessee company Shri Susil Chakraborty who maintained books of accounts suddenly passed away on 03.11.2010 and since he was maintaining the same in computer and the password of the computer could not be cracked later by other staff, therefore, the books of accounts could not be retrieved from the computer. The ld. AR gave us the copy of the death certificate of Shri Susil Chakraborty who suddenly passed away on 03.11.2010. However, the ld. AR brought to our notice that the assessee had conducted statutory audit and had filed all the documents before the Assessing Officer to substantiate its claim. We note that return of income was filed by the assessee company on 23.09.2010 and along with return of income, the assessee had filed the audited financials, which means when the accountant was alive, the Chartered Accountant ought to have gone through the regular books of accounts maintained by the Accountant in the computer and prepared the Profit & Loss A/c and Balance Sheet after proper verification of supporting materials. It was pointed out by the ld. AR that the Assessing Officer has not made any adverse comments in respect to the audited accounts submitted before him. According to Ld. AR, even though the reason for not producing books of account were brought to due notice of the authorities below they simply brushed it aside and made a mountain out of a mole and has viewed audited accounts submitted before it with suspicious eyes and has therefore made the additions on the basis of conjectures and surmises. The ld. AR also brought to our notice that in the Paper Book filed before us which contains 45 pages, new documents have been filed for the first time before the Tribunal at Serial No.12 and 13 which are annexed from Page 42 to 45 which only gives the details of month wise break up of closing inventory and month wise details of major expenses. Since these breakup working were not produced before the authorities below, therefore, he prayed for admission of these financials which according to AR was necessary to adjudicate the issues before us. We note that because of the unfortunate sudden demise of the accountant, the assessee could not prepare the month Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

wise break up which was reasonable cause, and that fact prevented the assessee from filing it from the authorities below and it only gives the breakup/details therefore we are inclined to admit in the interest of justice.

3.3 Coming to the issue in hand, we note that the addition has been made by the Assessing Officer taking note of the statement of assets hypothecated against cash credit by the assessee from Overseas Bank of India, after comparing it with the assessee’s balance sheet as on 31.03.2010. According to the Assessing Officer, since the assessee had disclosed from 26.09.2009 to 05.03.2010 monthly stock of Rs.65 lakhs to 75 lakhs, the average stock of assessee must be Rs.69,72,800/- as on 31.03.2010 and, therefore, since the assessee had shown only Rs.32,13,280/-, the difference of Rs.37,59,520/- was treated as undisclosed income from undisclosed source of assessee which it had invested in stock and added to the total income of the assessee. On appeal, the ld. CIT(A) after taking note of the remand report from the Assessing Officer was influenced by the negative fact of the assessee not producing books of account before the Assessing Officer. Even though before the ld. CIT(A), the assessee had produced the copies of the VAT Return to justify its claim which reflected higher sale in the month of March 2010, however the ld. CIT(A) did not give weightage to the same. The assessee has pleaded before the ld. CIT(A) that the Bank had not physically checked the stock to authenticate the stock statement submitted to it and it is common practice in business to inflate the stock for availing higher credit facility which practice has been judicially accepted by the Hon’ble Madras High Court in CIT vs. Apcom Computers Pvt. Ltd. 292 ITR 630 (Mad), Hon’ble Allahabad High Court in CIT Vs. Khan & Sirohi Steel Rolling Mills (2006) 152 Taxman 224 (All) and Hon’ble Bombay High Court decision in CIT Vs. Acro India Ltd. 298 ITR 447 (Mum) and the Coordinate Bench Decision of Tribunal, Cochin Bench in the case of ACIT vs. Manglam Publication (2010) 190 taxman (Mag.) 1(ITAT Cochin). We note that these decisions go on to show that in similar case, the explanation rendered by the assessee company for the difference in Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

stock position between the statement given to the bank as well and that given in the Balance Sheet as on 31st March has been accepted taking note of the fact that no physical verification was carried out by the bank of the stock statement filed by the assessee for availing loan credit.

3.4 However, the aforesaid explanations were not accepted by the ld. CIT(A) who confirmed the order of the Assessing Officer. We note that the authorities below were influenced by the failure of the assessee to produce the books of account. We note that the assessee’s justification for not producing books of account has been because of the sudden demise of the accountant and the assessee could not retrieve books of accounts maintained in the computer, since assessee was not aware of the password. In such a scenario, we are of the opinion that there is reasonable cause for the assessee not to produce it before the Assessing Officer. As stated earlier, the return of income was filed on 23.09.2010 and therefore, audited financials were also filed by the assessee on that date. Since, the accountant of the assessee had passed away in November, 2010, the Chartered Accountant with the aid of books maintained by the late accountant prepared the Profit & Loss and Balance Sheet, after proper verification of income and expenditure. We note in a similar case Jay Engineering Works Ltd. reported in 113 ITR 389 (Del). When the regular books of accounts were destroyed by fire, the Assessing Officer did not accept the deduction claimed by the assessee. However, the Tribunal taking note of the fact that the assessee’s accounts have been audited, allowed the deduction. The Revenue challenged the action of the Tribunal where in the Hon’ble Delhi High Court upheld the Tribunal order as under:

“These are two applications under s. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), praying that the Tribunal be asked to state the case and to refer to this Court the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal in the absence of any evidence was legally correct in holding that the amounts of Rs. 3,26,200 and of Rs. 83,523 were deductible from determination of profits for the asst. yrs. 1962-63 and 1963-64 respectively ?" Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

The applicant-assessees carry on business of manufacturing of fans, etc., on a large scale. The relevant account books for the accounting years 1961-62 and 1962-63 was destroyed in fire in November, 1962. In the returns filed by the assessees along with the statements of profit and loss accounts and balance-sheets a deduction of Rs. 3,36,200 from the determination of profits for the asst. yr. 1962-63 and a deduction of Rs. 83,523 from the determination of the profits for the asst. yr. 1963-64 were claimed by the assessees. The deductions were disallowed by the ITO, but were allowed by the AAC and by the Tribunal. The applications made by the assessees for reference of the above question of law to this Court were also dismissed by the Tribunal. Hence the present applications. In finding out whether the Tribunal should be asked to refer to this Court the above question of law, two points require consideration, viz.: (1) When can it be said that a finding by an income-tax authority is not supported by any evidence ? and (2) Whether in the present case the orders allowing the deductions claimed by the assessees could be said to be unsupported by any evidence ? Point No. 1 The ITO and certain other authority functioning under the IT Act have a dual character. They are both agencies of investigation made into the incomes of assessees and they are also quasi-judicial authorities assessing the liabilities of the assessees to payment of income-tax. Under s. 142(2) of the Act the ITO may make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of an assessee. Under s. 143(3) of the Act, the ITO does not only hear such evidence as the assessee may produce or as he may require to be produced, but also takes into consideration "all relevant material which he has gathered" for the purpose of making an assessment. While the word "evidence" may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, the use of the word "material" shows that the ITO not being a Court can rely upon material which may not be strictly evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judicial authorities can take "official notice" of wider varieties of facts which need not be proved before them. Thus, not only in respect of the relevancy but also in respect of proof the material which can be taken into consideration by the ITO and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act Under s. 34 of the Indian Evidence Act account books maintained in the regular course of business are evidence after the relevant entries are proved by oral evidence or are admitted. The ITOs, however, have to deal with such numerous cases of assessment that they can accept as correct books of account maintained in regular course of business without such a formal proof. In the present case, the relevant books of account in which detailed information as to the expenses which were claimed as deductions for the asst. yrs. 1962-63 and 1963-64 are destroyed by fire in November, 1962. Under the Indian Evidence Act secondary evidence of the contents of these account books would have to be adduced if they were to be used to prove any fact. The external auditors of the assessee-companies had, however, made their annual reports under s. 227(2) of the Companies Act, 1956, to the members of the company on the accounts examined by them and on the balance-sheets and profit and loss accounts for these two years. These reports do not doubt the correctness of the expenses, deductions of which were claimed by the assessees. Under s. 227 (3)(b) and (c) the auditor's report had to state whether in their opinion proper books of account as required by law have been kept by the company and whether the company's balance-sheets and profit and loss accounts were in agreement with the books of Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

account and returns. Under s. 209 of the Companies Act, the assessee-company was required to maintain proper books of account with reference to the receipts and expenditure taking place in the business of the assessees. The account books maintained by them must be such as to give a true and fair view of the state of affairs of the companies. The question arises, therefore, whether the reports of the auditors could be said to be "material" on which reliance could be placed by the IT authorities. Unlike the proof required of such reports as also of the account books under the Indian Evidence Act, it is quite competent for the IT authorities not only to accept the auditors'. report, but also to draw the proper inference from the same. The IT authorities could, therefore, come to the conclusion that since the auditors were required by the statute to find out if the deductions claimed by the assessees in their balance sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions, when the deductions were disallowed, by the ITO on the ground that detailed information regarding them was not available, justice was not done to the assessees. It was not possible for the assessees to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books. In a sense it may be a question of law as to what the meaning of "material" is and whether the auditors' reports were material. But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference. Point No. 2 The Tribunal has stated that, though, ordinarily, the adjustments relating to expenses should have been made by the assessees in the accounts of the year to which the adjustments relate and not in a subsequent year, it is often inevitable that such adjustments relating to earlier years have to be made in subsequent years. This is specially so, when the business, as of the assessees, is of giant proportions and the branches are farflung. The Tribunal has also very properly relied upon the auditors' reports to draw the proper inference from the same. Since the evidence in income-tax proceedings need not consist necessarily of evidence admissible under the Evidence Act but may consist of other material which has a probative value, the Tribunal was justified in taking such material into account. It cannot, therefore, be said that the decision of the Tribunal was not based on any evidence. On the contrary, it was based on evidence meaning thereby that it was based on relevant material which can be considered in the income-tax proceedings. The applications are, therefore, dismissed. There will be no order as to costs.”

We note that the statement of stock hypothecated by the assessee for cash credit loan with the Bank cannot be the sole basis for drawing adverse inferences against the assessee. We note that the stock statement given by the Bank was only up to 05.03.2010 whereas the figure furnished by the assessee as stock in its balance sheet were as on 31.03.2010. We note that the Assessing Officer has not verified from the Bank as to whether they had Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

physically verified the stock when the stock statement was filed by the assessee. Even if the stock has been verified it is only up to 05.03.2010, whereas the assessee’s audited balance sheet shows the stock value as on 31.03.2010. In order to show that there was a substantial sale of its stock, the Ld. AR has drawn our attention to Page 17 of the Paper Book from where we note that stock as on 31.03.2009 was only Rs.26,90,223/- (Assessment Year 2009-10) whereas the closing stock shown as on 31.03.2010 is 33,13,280/- (Assessment Year 2010-11) which is the relevant Assessment Year before us, which difference is only Rs.6,00,000/- (approx.). We note from Page 36 of the Paper Book which shows that aggregate sale price excluding VAT was Rs.2,66,36,381/- out of which the assessee in Quarter 4 has made a total aggregate sale of Rs.1,21,87,076/- out of which in March-10 has made Rs.87,91,390/-. The corroborative evidences in respect of aforesaid figures are produced from Page 37 to 41 of Paper Book which is the Form No.14 of West Bengal Value Added Tax Rules, 2005 which is found tallying with Page 36 of PB. We also note that the assessee had filed the month wise break up of closing inventory from Page 42 to 43 of Paper Book.

3.5 In the light of the aforesaid facts and circumstances and taking note of the decisions of the Hon’ble Madras High Court in CIT vs. Apcom Computers Pvt Ltd. 292 ITR 630 (Mad), Hon’ble Allahabad High Court in CIT Vs. Khan & Sirohi Steel Rolling Mills (2006) 152 Taxman 224 (All) and Hon’ble Bombay High Court decision in CIT Vs. Acro India Ltd. 298 ITR 447 (Mum) and the Coordinate Bench Decision of Tribunal, Cochin Bench in the case of ACIT vs. Manglam Publication (2010) 190 taxman (Mag.) 1(ITAT Cochin) that it was a practice to inflate stock to draw higher credit from bank and without physical verification of stock by bank, the stock statement furnished by assessee to bank cannot be the sole basis to draw adverse view against assessee. Therefore the explanation of assessee is accepted by us, in the absence of physical verification by Bank of the stock as on 31.03. 2010. We note that there are divergent views on this issue by other Hon’ble High Courts, however Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

in the absence of jurisdictional Hon’ble High Court on this issue, the settled position of law is that decision favorable for the assessee needs to be taken as per the judgement of the Hon’ble Apex Court’s in the case of CIT vs. M/s. Vegetables Products Ltd. in 88 ITR 192(SC) therefore, we accept the explanation rendered by the assessee company for the difference in stock position between statement given to the Bank as well as that given in the balance sheet. Therefore, this ground of the appeal of the assessee is allowed.

4.1 The brief facts of the case is that the Assessing Officer during the assessment proceedings compared the Profit & Loss A/c for the year ended 31-03-2009 and 31-03-2010 wherein he observed that gross turnover for Assessment Year 2009-10 was Rs.3,50,28,543/- and the total expenses claimed in the Profit & Loss A/c was Rs.18,22,544/- which according to Assessing Officer is 5.2% of the gross turnover, whereas the gross turnover for the Assessment Year 2010-11 was Rs.2,66,36,381/- and total expenses claimed was Rs.79,76,872/- which according to Assessing Officer was 29.94% of the gross turnover. Thus according to the Assessing Officer, the assessee had claimed excessive expenses to the tune of Rs.65,89,841/- i.e. 24.74% of gross turnover of Rs.2,66,36,381/-. When assessee was asked to explain why excessive expenditure claimed in this year, according to the Assessing Officer, the assessee could not explain the reason for excessive expenditure and since the assessee failed to produce the books of accounts and other details taking note of the comparison as stated above, the sum of Rs.65,89,841/- was disallowed and added back to the income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who has pleased to confirm the same. Aggrieved, the assessee is before us. Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

4.2 We have heard both the parties and perused the records, we note that the Assessing Officer after comparing the turnover and expenses claimed by the assessee for the earlier year and this year, was of the opinion that the assessee has claimed excess expenditure which in the absence of the books of accounts and other materials, he was pleased to disallow the claim of the assessee. The ld. CIT(A) confirmed the order of the Assessing Officer without taking into consideration the fact that the assessee had started a new business that is manufacturing business of bricks w.e.f. 13/01/2010. Before that the assessee was only trading in cement, Iron & Steel, AC Sheet, Berger Paint etc. This year only the assessee had started manufacturing business of bricks. The ld. AR drew our attention to Page No.5 of Paper Book from where we note that the assessee in this Assessment Year had for the first time made expenditure of coal which was consumed at Rs.15,93,830/- when in the previous year it was zero. Likewise, labour charges related to brick manufacturing was Rs.25,25,210/- which was zero in the last year, likewise fuel & oil expenses was Rs.11,14,250/- whereas in the last year it was zero, and electricity charges increased from Rs.51,163/- to Rs.5,46,270/-. We note that the assessee had remitted royalty & cess to the Government of West Bengal and invested for heavy earth removers for excavating mud from the earth which was to the tune of Rs.27,48,000/- whereas last year it was zero, since assessee had started new line of business of manufacturing bricks. The assessee had also booked a vehicle expenses of Rs.1,42,145/- since the assessee had purchases a new vehicle and last year it was Nil. These expenses which have been claimed by the assessee was because of its setting up a new business for manufacturing of bricks and was related to the production of bricks which had started w.e.f. 13/01/2010. We note that the authorities below were influenced by the fact that the assessee failed to produce books of accounts (we have already dealt with this issue so we are not repeating). The Assessing Officer ought to have taken note of the fact that the assessee’s accounts were audited by Chartered Accountant Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

professionals and without finding fault in the evidence furnished by the assessee ought not to have made disallowance in the facts of this case as discussed earlier in our order. In case if the Assessing Officer had any doubts about the expenditure claimed by the assessee on the items specified above and which have been incurred for the first time because of starting manufacturing of bricks, the Assessing Officer in all fairness should have made further enquiries to bring material on record to suggest that the assessee was making wrong/excessive claims. The assessee had produced document which goes to show that the assessee had started the new line of business which was manufacturing of bricks and for which the assessee had booked additional expenditure which is revealed from perusal of Page 17 of the Paper Book in which item wise details have been furnished. The fact that the assessee is remitting royalty to the Government of West Bengal for excavation of mud and new machines purchased by the assessee for excavation of mud for which assessee had incurred cost of Rs.27,48,000/-for the Hitachi Hydraulic Excavator powered by Isuzu Engine on 12.11.09 and the truck purchase for Rs.8,00,000/- and that the electronic equipment (Tough Rider) at the cost of Rs.3,74,400/- goes on to show that the assessee had set up the unit for manufacture bricks and the royalty to Govt for excavating mud and coal and electricity consumption, labour payments booked and sales of bricks, VAT documents filed are facts which throw light that assessee had started manufacturing and sale of bricks this year and has thus justified its expenditure for production of bricks as stated above. In the aforesaid facts and circumstances of the case and in the light of the audited financials, we are inclined to allow this ground of appeal of the assessee and direct to delete the addition made by the Assessing Officer.

5.1 The brief facts of the case is that the Assessing Officer noted that the assessee had shown fresh introduction of share application money amounting to Rs.6,00,000/-. On being asked to explain the identity, creditworthiness and genuineness of the same, the assessee submitted that the three directors of the company had invested Rs.6,00,000/- out of which Rs.3,00,000/- was introduced by Shri Tapan Kr. Manna, Rs.1,50,000/- was introduced by Shri Sayantan Manna, Rs.1,50,000/- was introduced by Smt. Shibani Manna. According to the Assessing Officer, the share applicants despite notices did not appear before him and taking note of their individual ITRs, and failure on the part of the assessee to explain the source of investment, it was treated as unexplained investment of the share capital from unexplained source of income of the assessee company, so the said amount was added to the total income. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer. Aggrieved, the assessee is in before us.

5.2 We have heard both the parties and perused the records. We note that the assessee is closely held private limited company and the amounts in question have been received from the directors and shareholders of the company. The breakup of Rs.6,00,000/- is that Shri Tapan Kr. Manna, Director, father of Shri Sayantan Manna has introduced Rs.3,00,000/- and Shri Sayantan Manna, Director and son of Shri Tapan Kr. Manna has introduced Rs.1,50,000/- and wife of Shri Tapan Kr. Manna, Smt. Shibani Manna who is mother of Shri Sayantan Manna has introduced Rs.1,50,000/-. Thus total amounting to Rs.6,00,000/- were introduced in the company by family members who are directors of assessee company. It was brought to our notice that Directors of the company was entitled to remuneration from the company for discharging of their duties and TDS was duly deducted from director’s remuneration. The ld. AR drew our attention to Page No.23 to 28 which is the TDS reconciliation analysis of Shri Tapan Kr. Manna, Smt. Shibani Manna, Shri Sayantan Manna. We find from the remuneration given to these directors, TDS was duly deducted. It was brought to our notice that a Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

portion of remuneration of the Directors were adjusted / converted to share application money of the company during the year under consideration. In order to corroborate this fact, the ld. AR drew our attention to Page No.29, the ledger of Shri Tapan Kr. Manna maintained by the assessee company shows that an amount of Rs.3,00,000/- was introduced on 31.03.10 from the directors remuneration of Rs.4,00,000/-, and Page No.30 reveals from ledger of Smt. Shibani Manna that an amount of Rs.1,50,000/- was introduced on 31.03.10 from the directors remuneration of Rs.3,75,000/- and Page No.31 Shri Sayantan Manna reveals that Rs.1,50,000/- was introduced on 31.03.10 from the directors remuneration of Rs.3,50,000/-. The ld. AR drew our attention to Page No.20 which is the I.T. Return filed for the Assessment Year 2010-11 of Shri Tapan Kr. Manna which shows gross total income of the assessee was Rs.5,24,670/- and the total income was Rs.4,24,670/- and the Page No.21 revealed that I.T. Return of Smt. Shibani Manna which shows gross total income of the assessee was Rs.4,48,587/- and the total income was Rs.3,48,587/- and Page No.22 revealed that I.T. Return of Shri Sayantan Manna shows gross total income of the assessee was Rs.4,01,890/- and the total income was Rs.3,01,890/-. Page No.23 to 24 is the TDS deduction from Shri Tapan Kr. Manna, Page 25 to 26 is the TDS Deduction of Smt. Shibani Manna and as per Page 27 to 28 reveals TDS deduction from Shri Sayantan Manna which corroborates with the ledger copies placed of all the three directors from Page Nos.21 to 31. Therefore, there is no dispute in regard to the identity of share applicants; and the assessee company is a closely held company where family member’s i.e father, son and mother had introduced share capital to the company. We also note that all the three directors of the company were filing I.T. Returns and the amounts has been adjusted from their remuneration and thus the source of the introduction of the share application money has been explained. We also note that all the three were residing at the same house, therefore expenditure in the house was common and so the remuneration from the company could be adjusted for purchase of Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

shares of own company is a plausible explanation in the facts of the case. Therefore we are of the view that on the facts and circumstances of the case as noted above, since the assessee has discharged the onus casted upon it in respect of introduction of share application money, the Assessing Officer ought not to have made addition on this count, without bringing any adverse material against the assessee company. Therefore, we allow the appeal of the assessee and direct deletion of the addition made.

6.1 The brief facts of the case is that the Assessing Officer noted that assessee has made an addition to machinery (fixed assets) of Rs.39,22,400/- and claimed depreciation of Rs.7,48,407/-. According to the Assessing Officer since the assessee did not produce the purchase bill of the machinery and could not explain the source of investment of the capital expenditure of Rs.39,22,400/- the Assessing Officer disallowed the rate of depreciation claimed proportionately and thus disallowed Rs.3,73,282/-. On appeal, the ld. CIT(A) confirmed the order of the ld. Assessing Officer. Aggrieved, the assessee is before us.

6.2 We have heard both the parties and perused the records, we note that assessee has started a new business of manufacturing bricks in this Assessment Year from 13.01.2010 and for excavation of mud has remitted royalty to the Government of West Bengal to the tune of Rs.2,01,036/-. For the excavation purposes, the assessee has purchased Hitachi Hydraulic Excavator Model ZX-70 fitted with GP bucket powered by Isuzu Engine on 12.11.2009 costing Rs.27,48,000/- at Page 34 of the Paper Book reveals that the assessee has purchased the same from P.S. Earthmovers Pvt. Ltd. for the said cost and after making the payment, the assessee also had purchased Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

truck costing Rs.8,00,000/- from Bhandari Automobiles Pvt. Ltd. on 30.12.2009 at Page No.33 reveals this fact that the assessee had purchased this truck. We also note that the assessee had purchased one Tough Rider from Universal Construction Machinery at the cost of Rs.3,74,400/- which is placed at Page 35 of the Paper Book which goes on to show that the assessee had purchased machinery in this Assessment Year for the purpose of manufacturing bricks. We note that the assessee had not only set up the manufacturing but also started production of the same which are revealed from the fact that the consumption of electricity has gone up from 51,163/- to 5,46,270/- and the fuel and oil was booked for the first time was to the tune of Rs.11,14,250/-, coal consumed for the first time to the tune of Rs.15,93,830/- and labour charged of Rs.25,25,210/- etc., all these facts goes on to show that the assessee had set up manufacturing and started production and sales of the bricks which is corroborated by the VAT details which emanating from Page No.37 to 41 of the Paper Book, details of which is given in Page No.36. Thus we note that the assessee has been able to prove that it has made addition to machinery (fixed assets) of Rs.39,22,400/- and has rightly claimed depreciation of Rs.7,48,407/- which ought to have been allowed. Therefore, the proportionate depreciation not allowed by the Assessing Officer needs to be allowed and accordingly, this ground of the assessee is allowed.

Order is pronounced in the open court on 23.05.2018. (A. T. VARKEY) (A. L. SAINI) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER कोलकाता /Kolkata; "दनांक Dated 23/05/2018 [RS, SPS] Manna Bricks Manufacturing & Trading Pvt. Ltd. Assessment Year: 2010-11

आदेशक"""त"ल"पअ"े"षत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant - Manna Bricks Manufacturing & 1. Trading Pvt. Ltd. ""यथ"/ The Respondent – JCIT, Range – 2, Midnapore 2. आयकरआयु"त(अपील) / The CIT(A), 3. आयकरआयु"त/ CIT 4. "वभागीय""त"न"ध, आयकरअपील"यअ"धकरण, कोलकाता/ DR, ITAT, Kolkata 5. गाड"फाईल / Guard file. 6. स"या"पत""तBy Order

Senior Private Secretary, Head of Office/D.D.O, I.T.A.T, Kolkata Benches, Kolkata.