2018 (10) TMI 861 - AT - Income Tax

Purchases disallowance - Held that - We find no merit in the instant argument as the Assessing Officer himself has made it clear in his remand report dated 25.05.2016 (supra) that assessee successfully verified the relevant purchase vouchers with the originals. He appears to have concluded that only vouchers of ₹2,99,461/- and tools amounting to ₹1,40,200/- could not be produced or were found to have been claimed as damaged / scrap. We conclude in these facts that the Revenue can hardly be held to be aggrieved against the CIT(A) s findings since the AO has himself confirmed the impugned purchase disallowance to the extent of ₹4,39,661/- only during remand proceedings. We accordingly uphold the CIT(A) s findings granting part relief to the assessee with a rider that same shall not be treated as a precedent in any other case. - Decided in favour of assessee.

Summary

Issues involved:
1. Correctness of CIT(A)'s order deleting/partially restricting tools & tackles expenses addition.
2. Nature of expenses claimed under tools and tackles category.
3. Verification of purchase vouchers and usage details of tools and tackles.
4. Assessment of expenses as revenue or capital expenditure.

Detailed Analysis:
1. The Revenue's appeal challenged the correctness of CIT(A)'s order regarding the deletion/partial restriction of tools & tackles expenses addition totaling to ?4,39,661. The AO disallowed ?84,61,145 expenses on tools and tackles, stating lack of evidence on purchase, usage, and capital nature of expenses. The appellant provided detailed usage explanations during appellate proceedings, categorizing tools into groups like steel shuttering materials, dewatering sludge pump, and MS Chisel. The AO's remand report confirmed the verification of purchase vouchers but noted missing vouchers worth ?2,99,461 and tools claimed as damaged/scrap. The CIT(A) found no concrete basis for capital expenditure and confirmed ?4,39,661 addition while deleting the rest.

2. The appellant contended that tools and tackles were used for specific construction works and provided detailed usage and consumption explanations for various groups of tools. The appellant argued that the tools lose their utility after certain uses, particularly in rocky soil, justifying the estimated closing stock value of ?27,77,791. The AO's remand report confirmed the submission of necessary documents but noted missing purchase vouchers and tools claimed as damaged/scrap. The CIT(A) found no evidence to support capital expenditure and confirmed ?4,39,661 addition while deleting the rest.

3. During the appellate proceedings, the appellant presented detailed usage explanations for different groups of tools and tackles, emphasizing their specific utility in construction activities. The AO's remand report acknowledged the submission of documents but highlighted missing purchase vouchers and tools claimed as damaged/scrap. The CIT(A) analyzed the provided details and found no substantial evidence to classify the expenses as capital expenditure, leading to the confirmation of ?4,39,661 addition while deleting the remaining disallowed amount.

4. The Revenue's appeal was dismissed as the CIT(A) upheld the deletion/partial restriction of tools & tackles expenses addition after considering the appellant's detailed submissions and lack of concrete evidence supporting capital expenditure. The AO's remand report confirmed the verification of purchase vouchers but noted missing documents and tools claimed as damaged/scrap. The CIT(A) found no basis for capital expenditure and confirmed the addition of ?4,39,661, leading to the dismissal of the Revenue's appeal.