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Income Tax Appellate Tribunal, NAGPUR BENCH : : NAGPUR
Before: S.S.GODARA & DR. DIPAK P. RIPOTE
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Revenue against the order of ld.Commissioner of Income Tax(Appeals)-1, Nagpur dated 31.03.2017emanating from the order of ACIT(AO) under section 143(3) dated 23.03.2016. The Revenue has raised the following grounds of appeal:
1. On the facts and circumstances of the case and in law, the learned CIT(Appeals) has erred in allowing deduction of Rs.10,39,93,933/- u/s 35AD of the I.T.Act which was disallowed
A.Y.2013-14 M/s.Shaheen Frozen Foods [R] by the Assessing Officer.
2. The learned CIT(Appeals) has gravely erred in holding that various machineries and equipments found to be purchased and installed after April 2012 in fact pertained to replacement of these items which were installed and commenced on various dates prior to 31/01/2012, as this finding is perverse on facts.
The learned CIT(Appeals) has gravely erred in not noticing that as per the audited balance sheet as on 31/01/2013 the opening WDV as on 01/04/2012 of land, factory-building, plant & machinery was only Rs.5,00,000/- and had the machineries been replaced after 01/04/2012, the same would certainly have been included in opening WDV as on 01/04/2012.
Any of the ground that may be taken with the permission of Hon’ble ITAT.”
Brief facts: The Assessee is in the business of processing & reselling of Buffallow Meat. The Assessing Officer(AO) has disallowed assessee’s claim of deduction under section 35AD of Rs.10,39,93,933/-. The AO has given following reasons : i) Expenditure has not been incurred prior to the commencement of operations.
ii) The cold storage plant was not ready as on 01.04.2012, but the business was started from 02.04.2012. iii) Assessee had not furnished documentary evidence like permission from Maharashtra Pollution Control Board, Electricity Bill etc., iv) The refrigeration compressor, tube heat exchangers, air
A.Y.2013-14 M/s.Shaheen Frozen Foods [R] cooling units were delivered on 01.01.2013, 14.02.2013, 02.03.2014. The air-cooling unit was installed on 14.02.2013. Cold storage machine was purchased on 10.09.2012. Thus, machines were purchased after 01.04.2012 means cold storage unit had not commenced on 01.04.2012. v) Violation of section 35AD(b) as the amount is not capitalized on the date of commencement of operation.
3. Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) allowed the appeal of the assessee. Aggrieved by the order of the ld.CIT(A), the Revenue has filed appeal before this Tribunal.
4. The ld.Authorised Representative(ld.AR) of the assessee submitted that assessee had commenced operations on 02.04.2012 the entire cold storage facility was ready on that day. The ld.AR read out the relevant parts of the ld.CIT(A)’s order.
The ld.Departmental Representative(ld.DR) of the Revenue relied on the order of the Assessing Officer. The ld.DR submitted that the ld.CIT(A) has discussed in the order about permission from Maharashtra Pollution Control Board and Director of Industries, however, these documents were never produced before the Assessing Officer and therefore, the ld.CIT(A) has erred in considering the documents. Alternatively, ld.DR pleaded that the matter may be set-
A.Y.2013-14 M/s.Shaheen Frozen Foods [R] aside to the file of the AO. The ld.DR also pleaded that the Auditor in the Audit Report has not mentioned about the deductions under section 35AD. The ld.DR invited our attention to page no.19 & 20 of the paper book which were relevant pages of the Audit Report to demonstrate that Auditor has not mentioned about deduction under section 35AD of the Act.
We have heard both the parties and perused the records. It is a fact the ld.CIT(A) has considered the certificate issued by Maharashtra Pollution Control Board and Director of Industries. The Assessing Officer has specifically mentioned that assessee had not filed any evidence like permission from Maharashtra Pollution Control Board, Electricity Bill etc. We have also gone through the copy of submission made by assessee before the ld.AO which is on page no.90 to 95 of the paper book. On perusal of the submission made by the assessee before the AO, it is observed that assessee had not filed copies of the certificate issued by Maharashtra Pollution Control Board and Director of Industries. Thus, the ld.CIT(A) has erred in admitting Copy of Certificate of Maharashtra Pollution Control Board and Director of Industries without giving any opportunity to the Assessing Officer. This is violation of Rule 46A of the Income Tax Rules.
On perusal of the copy of the acknowledgment issued by A.Y.2013-14 M/s.Shaheen Frozen Foods [R] District Industries Centre, Buldana dated 21.04.2012 it is observed that against “cold storage” they have mentioned “NS”. The same is scanned and reproduced as under :
Thus, on perusal of the said acknowledgment, it is not clear whether the cold storage unit was started on 21.04.2012 or not! 8. It is also observed from the fixed assets schedule that opening WDV was only Rs.5,00,000/-, this was for land. There was no opening WDV for factory building, plant and machinery, furniture fixture. However, assessee had claimed before ld.CIT(A) that capital expenditure on plant and machinery till 31.03.2012 was A.Y.2013-14 M/s.Shaheen Frozen Foods [R] Rs.2,25,28,837/-. The assessee claimed before the ld.CIT(A) that these expenditures were capitalized on 15.05.2012. The assessee has also filed a copy of WIP Account before the ld.CIT(A). However, on perusal of the submission filed by the assessee before the AO which is part of paper book page no.90 to 95, it is observed that no such copy of WIP Account was filed before the AO. We have perused the copy of the Balance Sheet and its Annexures filed by the assessee for A.Y.2013-14 at page no.30 to 40. On perusal of the said Balance Sheet and its Annexure it is observed that assessee has not shown any work-in-progress(WIP). Therefore, assessee’s claim that amount of Rs.2,25,28,837/- was shown as WIP as on 31.03.2013 is factually incorrect. It is also a fact that certain machineries like air-cooling units, refrigeration compressor, heat exchangers etc., were delivered to the assessee after 01.04.2012, the specific dates are mentioned by the AO in the order. The air-cooling unit was installed on 14.02.2013 as mentioned by the AO in the order. However, in this context assessee had submitted before the ld.CIT(A) that these machines which were purchased after 01.04.2012 were for replacement of certain parts. This claim of the assessee has not been verified by the AO. The Para 15 of the Audit Report submitted by the assessee is scanned and reproduced here as under :
A.Y.2013-14 M/s.Shaheen Frozen Foods [R]
Thus, in the Audit Report in the relevant part Auditor has not mentioned regarding claim of deduction under section 35AD of the Act. The ld.CIT(A) failed to consider this fact.
Since in this case, many of the evidences have been considered by the ld.CIT(A) without giving opportunity to the AO which is violation of Rule 46A. Many facts remained to be verified. Therefore, in the interest of justice, we set-aside the issue of eligibility of the assessee for deduction under section 35AD of the Act to the file of the AO for denovo adjudication. The AO shall provide opportunity to the assessee. Accordingly, the Revenue’s
A.Y.2013-14 M/s.Shaheen Frozen Foods [R] appeal is allowed for statistical purpose.
In the result, appeal of the Revenue is allowed for statistical purpose. Order pronounced in the open Court on 13th February, 2023.