2014 (1) TMI 1854 - AT - Income Tax

Disallowance of depreciation on split air-conditioners - sufficient evidence for proving the installation - addition deleted by CIT- A - admission of additional evidence - Held that - Assessment order nowhere states that assessee had failed to produce the evidence in the nature of invoice for the Split AC. AO has himself noted that the air-conditioner was purchased on 31.03.2003 based on evidence produced by the assessee. For installation of Split AC, not much time is required and assessee could not have been called upon to produce an installation certificate, as in the case of a major machinery. CIT(Appeals) was justified in considering the invoice to be sufficient evidence for proving the installation and allowing the claim. No new or fresh evidence in this regard was brought by the assessee before CIT(Appeals). Addition of sundry debtors balance - Held that - No doubt the explanation given by the assessee before the CIT(Appeals) was different from what was given by it before the Assessing Officer. However, there was no fresh evidence filed by the assessee. Assessee had only relied on the audited final accounts statement and schedules thereto, all of which were part of the return of income filed by it. It had shown therefrom that the difference between the debtors account and the sales value credited in the Profit & Loss Account was only due to the freight element and recovery of the freight amount from the debtors were netted against the freight cost. Only the net freight was charged to the Profit & Loss Account. In our opinion, explanation given by the assessee based on records already filed before the Assessing Officer cannot be considered as fresh evidence - hearing of the case before the ld. CIT(Appeals) took place over a period of seven different days. If the Assessing Officer chose himself not to be present at the time of such hearing, in our opinion, he cannot be heard to say that explanations given by the assessee were not put before him.

Summary

Issues:
Violation of Rule 46A of Income Tax Rules 1962 by admitting and relying on fresh evidence for deleting disallowance of depreciation and addition for difference in sundry debtors.

Analysis:
The appeal was filed by the Revenue challenging the decision of the Commissioner of Income Tax (Appeals) to admit and rely on fresh evidence while deleting a disallowance of depreciation and an addition for a difference in sundry debtors. The Assessing Officer disallowed a claim of depreciation on split air-conditioners and made an addition for a difference in sundry debtors' accounts. The assessee contended that the split air-conditioner was immediately used upon delivery, and the difference in debtors' accounts was due to charging customers on CIF basis while showing sales in the Profit & Loss Account on FOB basis.

The Commissioner of Income Tax (Appeals) found the assessee's explanations reasonable. Regarding the split air-conditioner, the Commissioner considered the invoice as sufficient evidence for installation and allowed the depreciation claim. Regarding the difference in debtors' accounts, the Commissioner noted that the explanation provided by the assessee was supported by audited accounts statements and schedules. The Commissioner concluded that the difference arose due to freight charges, which were netted against the total freight costs in the Profit & Loss Account.

The Revenue contended that the Commissioner admitted additional evidence in violation of Rule 46A. However, the Tribunal found that no new evidence was presented before the Commissioner, and the explanations were based on records already filed with the Assessing Officer. The Tribunal determined that the procedure outlined in Section 250(1) of the Act was followed during the appeal before the Commissioner, providing both the assessee and the Assessing Officer the opportunity to be heard. As no fresh evidence was introduced during the appeal, the Tribunal upheld the Commissioner's decision to delete the disallowance and addition.

In conclusion, the Tribunal dismissed the Revenue's appeal, finding no violation of Rule 46A and no grounds to interfere with the Commissioner's order. The decision was pronounced on January 8, 2014.