2021 (2) TMI 266 - AT - Income Tax

Disallowance of the depreciation on the bogus purchase of machinery - HELD THAT - As decided in assessee's own case equipment financed by Bank of Maharashtra cannot be summarily treated as bogus. The AO has not made any inquiry from the bank in this regard. The disallowance of depreciation in respect of equipment purchased financed by Bank of Maharashtra is not warranted. The disallowance of depreciation was deleted. - Decided in favour of assessee.

Summary

Issues:
Disallowance of depreciation on bogus purchase of machinery from M/s. Galaxy Corporation.

Analysis:
1. The appeals were filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Years 2010-11 and 2011-12, where the disallowance of depreciation on the purchase of machinery from M/s. Galaxy Corporation was deleted.

2. The Assessing Officer reopened the assessments based on information received regarding accommodation entries provided by various dealers, including the assessee. The Assessing Officer treated the purchases as non-genuine, alleging that the assessee had obtained accommodation entries without any actual transportation of goods. The Assessing Officer disallowed depreciation on the machine purchased from M/s. Galaxy Corporation.

3. The Learned Commissioner of Income Tax (Appeals) sustained the addition of 25% of alleged bogus purchases but deleted the disallowance of depreciation on the machinery from M/s. Galaxy Corporation after considering the submissions and evidence provided by the assessee.

4. The revenue appealed against the deletion of depreciation on the machinery. During the proceedings, the assessee did not appear, and the Departmental Representative supported the Assessing Officer's orders.

5. The Learned Commissioner of Income Tax (Appeals) extensively reviewed the matter and concluded that the disallowance of depreciation on the machinery purchased from M/s. Galaxy Corporation was not warranted. The reasons provided by the Commissioner were found to be valid, and the deletion of the disallowance was upheld for both assessment years.

6. After a thorough examination of the order of the Learned Commissioner of Income Tax (Appeals), it was determined that there was no error in deleting the disallowance of depreciation on the machinery purchased from M/s. Galaxy Corporation. Consequently, the revenue's appeals were dismissed for both assessment years.

7. The judgment was pronounced in the virtual court on 21.01.2020, upholding the decision to dismiss the revenue's appeals regarding the disallowance of depreciation on the bogus purchase of machinery from M/s. Galaxy Corporation.