2006 (10) TMI 137 - HC - Income Tax

Addition towards investment in construction of Air Pollution Control Device (chimney) even if availability of bricks with the assessee was taken into account investment in the construction of chimney was not proved no basis for income surrendered by assessee - Assessing Officer found difference in the investment as estimated at the time of survey & at the time of assessment - Tribunal was right in taking into account the above difference & not considering surrendered amount

Summary

Issues:
1. Addition towards investment in construction of 'Air Pollution Control Device'.
2. Entitlement of depreciation on assets.
3. Substitution of 'Sales' figure by an 'estimated' figure.

Analysis:
1. The appellant filed an appeal against the Income Tax Appellate Tribunal's order regarding the addition of Rs.1,18,000 towards investment in an Air Pollution Control Device. The appellant argued that the source of investment was duly explained and shown in the capital statement, thus the addition was unjustified. The Tribunal partially allowed the appeal, reducing the addition to Rs.1,18,000, stating that the Assessing Officer could not justify the entire investment. The Tribunal found that the investment in the construction of the device was not proven to the satisfaction of the Assessing Officer, leading to the reduction in the addition amount.

2. The appellant raised the issue of entitlement to depreciation on assets, contending that the omission of section 34(1) entitled them to depreciation under section 32(1) of the Income Tax Act. The Tribunal rejected this argument, stating that the appellant did not raise this ground before the lower authorities. The Tribunal emphasized that the appellant failed to prove the investment in the construction of the Chimney, leading to the rejection of the plea for additional depreciation.

3. Regarding the substitution of the 'Sales' figure by an 'estimated' figure, the Tribunal observed that there was no suppression of sales by the appellant. However, the Tribunal did not accept the sales figure reflected by the appellant and substituted it with an estimated amount. The Tribunal justified this action based on the lack of proper accounts maintenance by the appellant and the unexplained investment in the construction of the chimney. The Tribunal concluded that the addition should be restricted to Rs.1,18,000 instead of the proposed Rs.1,50,000, as the investment in the chimney was not adequately proven.

In summary, the High Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's findings. The judgment focused on the justification of the additions made by the Assessing Officer, the lack of proof regarding investments, and the rejection of certain claims by the appellant.