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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI RAJESH KUMAR, AM
आदेश / O R D E R PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 22.09.2010 of Commissioner of Income Tax (Appeals)-41, Mumbai (hereinafter called as the CIT(A) ) for assessment year 2008-09. The assessee has raised following grounds of appeal:
Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT
"The Ld. CIT(A) erred in confirming disallowance of depreciation as claimed by the appellant of Rs.1644450/- on addition to building out of additional income declared during the search proceedings for A.Y. 07-08 and A.Y. 08-09 without appreciating the seized material as well as statement recorded u/s 132(4) of the Income Tax Act.
The Appellant pray that necessary depreciation be allowed, as claimed.”
The issue raised in the 1st ground of appeal relates confirmation of 2. disallowance of depreciation on the additions to factory building out of income declared during search proceedings u/s 132(4) of the Act.
The facts in brief are that the assessee filed its return of income on declaring an income of Rs. 1,24,87,260/- including undisclosed income of 1,42,51,951/- as offered during the course of search u/s 132(4) on the all the group companies and their directors which was conducted on10.10.2007. The assessee company was engaged in the business of weaving of fabrics on job work basis. During the course of search the assessee surrendered Rs. 1,82,92,264/- in the AY 2007-08 and Rs. 1,42,51,951/- in AY 2008-09. Statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. The assessee capitalized under the head factory building the entire amount of surrender Rs. 3,25,44,215/-made during the course of search including some other petty amount and claimed 16,44,450/- as depreciation
Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT @ 5%.The entire amount of surrender was claimed to have been spent on the additions to factory building by the assessee before the AO & CIT(A).
The ld AO during the course of assessment proceedings required the assessee to explain the additions to factory building and produce the bills and vouchers which the assessee replied that the cash realized out of unbilled weaving charges, sale of scrap, sale of sleepage, sale of cartoons and sale of tubes etc as surrendered during the search was expended on the factory building and there were no bills and vouchers for the same. The AO framed the assessment u/s 143(3) r.w.s. 153A at Rs. 1,41,36,478/- by inter alia disallowing depreciation of Rs. 16,44,460/- on the ground that details of additions to the building was not supported with any bills and vouchers and same could not be allowed.
The ld CIT(A) upheld the order of AO by dismissing the appeal of the assessee by holding as under:-
1.4 “I have considered the submission of the appellant, the order of the A.O. and facts of the case in brief are that search & seizure operation u/s 132 and survey u/s.133A of the I.T.Act,1961 was carried out at the business and residential premises of the group company. Certain
Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT incriminating documents were found and seized and the statement of Shri Dilip Pacheriwala, Director of the company was recorded u/s.132(4) of the I.T.Act, 1961. The seized paper was confronted to the Director, who has admitted that these are not recorded in the books of accounts and declared additional income on this account.
In this statement, it was also admitted that the additional income declared was invested in the construction of factory building and depreciation on this building amounting to Rs.16,44,450/- was claimed. During the assessment proceedings, the A.O. has called for the documentary evidences to prove the investment made in the factory building in the shape of bills and vouchers etc. however, the A.R. of the appellant has submitted that the investment was made in cash and no documentary evidence in the shape of bills and vouchers is maintained to prove the investment made in the construction of factory building. Accordingly, the A.O. has disallowed the claim of depreciation of rs.16,44,450/-. During the assessment proceedings, the A.R. of the appellant has submitted the Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT same reply as before the A.O. and no further documentary evidence was produced to substantiate its claim. Since the provision of section 32 of the I.T.Act,1961 is very clear that onus is always on the assessee to submit the documentary evidence before the A.O. to prove the ownership of the building and cost of construction with proper bills and vouchers before claiming depreciation. In the present case, the appellant has admitted that no bills and vouchers had been maintained and the investment was made in cash. These facts show that the appellant has failed to discharge its onus b submitting any documentary evidence before the A.O. and before me, therefore, the disallowance of depreciation of Rs.16,44,450/- made by the A.O. is confirmed and ground of appeal is dismissed.”
6. The ld AR submitted before us that the CIT(A) has grossly erred in confirming the order of AO for the reasons that the assessee during the course of recording of statement had admitted to have expended the surrendered income on the additions to factory buildings during the two years for which the assessee made surrender more specifically in reply to question no 14 and 15 of the statement of Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT the director of the assessee Shri Dileep Kumar Pacheriwala recorded on 18.10.2007 u/s 132(4) of the Act. Mr Pacheriwala replied to the above queries that the cash realized from sale of various items as surrendered during the search was spent on the additions to the factory building and therefore the assessee was entitled to depreciation on the same. He finally prayed for the reversing the order of lower authorities by allowing the appeal of the assessee. Per contra, the ld DR relied heavily on the orders of authorities below.
5. We have considered the rival submissions and perused the materials on records. We find from the paper book filed by the ld AR that in the statement u/s.132(4) of the Act, the director of the company Shri Dileep Kumar Pacheriwala specifically replied while explaining various documents seized during the search that the amount of income surrendered in the search were partly spent on the additions to factory building which is placed at page no 1 to 10 of the paper book.
The assessee’s director was asked vide query no.14&15 about of the sources of income as appearing in the loose papers numbered 1-62 inventorised as A-2 as seized during search. As per replies of Mr. Pacheriwala the following amounts were spent on the construction of factory building out of the surrendered income:-
Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT Page no Assessment year Amount(Rs.)
1-10 2008-09 47,24,434.00 27-50 2007-08 1,03,43,268.00 13-15 2008-09 17,94,185.00 20-26 2007-08 35,72,848.00 16-17 2008-09 6,04,480.00 59-62 2007-08 18,78,515.00 55-58 2006-07 14,67,225.00 18-19 2007-08 6,02,350.00
Total 2,49,87,305.00 Thus, we observe from page no 7 to 16 of the paper book filed by the AR that the assessee had admitted to have spent Rs. 2,49,87,305/- out of the surrender made of Rs.3,25,44,215/- over two years namely AY 2007-08 and 2008-09 and the assessee deserved to be allowed the benefit of Rs. 2,49,87,305/- as factory additions and also allowed depreciation thereon. In view of the above facts the appeal of the assessee is partly allowed and the AO is directed to allow depreciation on Rs. 2,49,87,305/-.
In the result, the appeal of the assessee is partly allowed.
Benkatesh Synth Processors Pvt. Ltd., Vs. DCIT
Order pronounced in the open court on 4th February, 2016
Sd/- Sd/- (Amit Shukla) (Rajesh Kumar) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated :04.02.2016 Ps. Ashwini आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT – concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,