2014 (9) TMI 1170 - AT - Income Tax

Depreciation claim on wind mill - disallowing the claim of depreciation @ 80% on the total cost of the windmill by treating part of the cost as being incurred for civil works and thereby allowing depreciation @ 10% only on such costs - necessary civil works towards erection and installation of the wind turbine are integral part of the windmill without which the windmill cannot come into existence and generate electricity and therefore the same is to be treated as part of the windmill - Held that - Tribunal in the case of CIT Vs. Everready Investments Pvt. Ltd. 2013 (11) TMI 1733 - ITAT PUNE has held that cost of civil work apportioned towards the erection of foundation for windmill shall be eligible for depreciation @80% and the balance of the cost shall be eligible for depreciation @10%. Thus we restore the issue to the file of the AO with a direction to recompute the depreciation in the light of the direction of the Tribunal. The ground raised by the revenue as well as the ground raised by the assessee in the CO are accordingly allowed for statistical purposes. Addition made on account of unaccounted investment in land - Held that - Respectfully following the decision of the Tribunal in the case of Ghodawat Foods International Pvt. Ltd. 2013 (12) TMI 1672 - ITAT PUNE where similar addition made by the Assessing Officer was deleted by the CIT(A) and the appeal filed by the revenue has been dismissed, therefore, we find no infirmity in the order of the CIT(A) deleting the addition made by the Assessing Officer on account of unaccounted payment for purchase of land. The ground raised by the revenue is accordingly dismissed. Estimated profit on suppressed turnover - unaccounted sale of Gutkha - Held that - Since the assessee in the instant case maintains proper books of accounts which are duly audited and since no addition has been made by the excise department on account of purchases, sales or production outside books and since no incriminating documents whatsoever were either found or seized from the office or the factory premises of the assessee regarding any unaccounted purchases or sales and since the stock found at the time of search tallied with the stock as per books of accounts maintained, therefore, under the facts and circumstances of the case, we are of the considered opinion that no addition can be made on account of estimated profit on suppressed turnover. Since the income on account of suppressed sale has been deleted by the Tribunal in the hands of Shri Dharmesh Patel, therefore, there is no question of any unaccounted sale by the assessee to Shri Dharmesh Patel. Accordingly, the grounds raised by the assessee for the A.Y. 2009-10 is allowed. Addition on account of working capital employed to run unaccounted business of gutkha - Held that - Admittedly, the addition was made by the AO on the ground that the assessee is running parallel unaccounted business for which initial capital is required considering the production process and average credit given to C&F agents, distributors etc. In the preceding paragraphs, we have already held that the order of the CIT(A) deleting the additions made in A.Yrs. 2003-04 to 2006-07 and 2007-08 to 2009-10 are justified and does not require any interference in absence of evidence of any unaccounted sales. We have also deleted the addition sustained by the CIT(A) for A.Y. 2009-10. Since there is no finding of any unaccounted business, therefore, there is no requirement of any additional capital. In this view of the matter, we uphold the order of the CIT(A). Ground raised by the Revenue is dismissed. Rejection of books of accounts u/s.145 - Held that - In view of our discussion in the preceding paragraphs while adjudicating the ground relating to deletion of estimated profit on unaccounted sales made by the AO, we find no infirmity in the order of the CIT(A) holding that the AO was not justified in rejecting the books of accounts u/s.145 of the I.T. Act. We accordingly uphold the order of the CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed. Disallowance of depreciation and petrol of vehicles - Held that - CIT(A) has deleted the adhoc disallowance made by the Assessing Officer by following the decision of Hon ble Gujarat High Court in the case of Sayaji Iron and Engineering Company 2001 (7) TMI 70 - GUJARAT HIGH COURT . No infirmity in the order of the CIT(A) deleting the adhoc disallowance. Accordingly, we uphold the same. The ground raised by the Revenue is accordingly dismissed. Unexplained investment in cars - Held that - Presumptions and surmises, however strong may be, cannot be the basis for addition in absence of any corroborative evidence. There is nothing on record to show that during the impugned assessment year the assessee has paid any extra money over and above the purchase price as recorded in the books of accounts. None of the sellers was examined by the AO. The AO has not brought on record the date of original purchase price by the sellers, date of purchase by them, date of sale to the assessee etc. It is well known that the price of vehicle decreases after it is purchased and used for some time and the value never remains constant or increase. It only decreases. In view of the above and considering the detailed order of the CIT(A) which in our opinion is a reasoned one, we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. Adopting the expenditure over gross receipt of agricultural income - Held that - We find the AO in the very first paragraph has stated that the agricultural income shown by the assessee is ₹ 3,93,99,179/. However, at para 15 of the order he has stated the agricultural income declared by the assessee at ₹ 3,62,84,200/-. We find although the Ld.CIT(A) accepted the reasoning given by the AO, he however accepted the contention of the assessee that there is some arithmetical inaccuracy. Since there is some variation in the agricultural income mentioned by the AO in the body of the assessment order, therefore, we restore this issue to the file of the AO with a direction to verify the figures and pass appropriate order. The ground raised by the Revenue is accordingly allowed for statistical purposes. Addition with regard to silver coins - CIT(A) deleted the addition holding that the silver coins stand fully explained in the books of account - Held that - It is the settled proposition of law that the powers of the CIT(A) are co-terminus with that of the power of the Assessing Officer. He can do anything which the AO has failed to do. From the copy of the assessment order, we find the order of the AO is silent regarding as to what type of queries were asked to the assessee. The AO simply has mentioned in the body of the assessment order that assessee has not given any explanation with regard to source of investment of silver coins found at the business premises. It is also a fact that no such seizure was made of the silver coins. Since the ledger account contains the purchase of silver as well as the bill for manufacturing of the same into coins and that those bills were debited to Advertisement account, therefore, we do not find any infirmity in the order of the CIT(A) deleting the above addition after due verification of the same - Decided in favour of assessee.

Summary

Issues Involved:
1. Depreciation on Windmill.
2. Unaccounted Investment in Land.
3. Unaccounted Sale of Gutkha.
4. Rejection of Books of Accounts.
5. Disallowance of Depreciation and Petrol Expenses.
6. Unexplained Investment in Cars.
7. Expenditure over Gross Receipt of Agricultural Income.
8. Unexplained Silver Coins.

Issue-wise Detailed Analysis:

1. Depreciation on Windmill:
The Revenue challenged the CIT(A)'s decision allowing depreciation on windmill components, which the AO had partially disallowed, treating some costs as civil work eligible for lower depreciation. The Tribunal, following the Pune Bench's decision in Everready Investments Pvt. Ltd., directed the AO to recompute depreciation, allowing 80% for foundation costs and 10% for other civil works. The issue was restored to the AO for recomputation.

2. Unaccounted Investment in Land:
The AO added amounts for unaccounted land investments based on assumptions of "on money" payments. The CIT(A) deleted these additions, noting no direct evidence or incriminating documents were found during the search. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for concrete evidence rather than assumptions.

3. Unaccounted Sale of Gutkha:
The AO estimated suppressed sales and profits based on production capacity and statements from C&F agents. The CIT(A) deleted these additions, noting the lack of incriminating evidence and the retraction of statements by C&F agents. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for corroborative evidence and rejecting the use of retracted statements.

4. Rejection of Books of Accounts:
The AO rejected the books of accounts under Section 145, citing discrepancies. The CIT(A) and the Tribunal found no substantial defects or discrepancies in the books, which were audited and accepted by the excise authorities. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for clear findings before rejecting books.

5. Disallowance of Depreciation and Petrol Expenses:
The AO disallowed 20% of depreciation and petrol expenses, assuming personal use. The CIT(A) deleted the disallowance, citing the Gujarat High Court's decision in Sayaji Iron and Engineering Company, which held that a company cannot have personal expenses. The Tribunal upheld the CIT(A)'s decision.

6. Unexplained Investment in Cars:
The AO added amounts for unexplained investments in cars, assuming payments over the recorded prices. The CIT(A) deleted these additions, noting the lack of evidence and the depreciation of car values over time. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for concrete evidence.

7. Expenditure over Gross Receipt of Agricultural Income:
The AO estimated agricultural expenses at 45% of gross receipts, higher than the 32% claimed by the assessee. The CIT(A) adjusted the addition but upheld the principle of higher expenses. The Tribunal restored the issue to the AO for verification of figures, noting discrepancies in the AO's calculations.

8. Unexplained Silver Coins:
The AO added the value of silver coins found during the search, assuming unexplained investment. The CIT(A) deleted the addition, accepting the assessee's explanation and supporting documents. The Tribunal upheld the CIT(A)'s decision, noting the proper explanation and documentation provided by the assessee.

Conclusion:
The Tribunal's judgment emphasized the need for concrete evidence and proper documentation in making additions, rejecting assumptions and retracted statements without corroborative evidence. The issues were resolved by upholding the CIT(A)'s decisions and directing the AO for further verification where necessary.