2022 (1) TMI 1473 - AT - Income Tax

Addition as unexplained expenditure/investment - difference between the sale value mentioned in the agreement and actual sale deed value - HELD THAT - The assessee entered into sale agreement with Smt. Rekha Venugopal for purchase of land at Rs. 5 lakhs per acre. However, the sale deed shows the sale value of Rs. 50,000/- per acre. The explanation given by the assessee is that sale value shown in the sale agreement is at Rs. 5 lakhs is only for the purpose of availing higher amount of loan. We find that adjacent land situated to the land sold by Smt. Rekha Venugopal to M/s Emmvee Energy Ltd., is for Rs. 5 lakhs per acre. This was brought on record by the AO by referring the sale deed of M/s Emmvee Energy Ltd., executed by the same owner to the assessee. On this, the assessee was unable to give any convincing reply to show that how she sold the adjacent land for Rs. 5 lakh per acre. Being so, it cannot be said that the assessee has purchased a land at Rs. 50,000/- per acre from Smt. Rekha Venugopal and Shri G.N Venugopal, the property situated next to the property of M/s Emmvee Energy Ltd., Being so, in our opinion, the explanation offered by the assessee is not having any basis. Hence, the lower authorities are justified in confirming the addition made by the AO on this count. Accordingly, this ground of appeal of the assessee is rejected and dismissed. Depreciation on installation of solar plant - AO denied claim for reason that solar plant was ready but it was not actually put to use - HELD THAT - In our opinion, the CIT (A) has taken a concrete view which is based on the facts of the case and in the present asst. year under consideration, the assessee generated solar power and sold the same to M/s EMMVEE Photovoltaic Power Pvt. Ltd., at Rs. 18,276/- and thus, the amount has been offered for taxation by entering it in the profits and loss account. Assessee has also produced invoices for sale of power to M/s EMMVEE Photovoltaic Pvt. Ltd., and the usage of solar plant was established. In the case of CIT Vs. Chamundeshwari Sugar Ltd 2008 (10) TMI 98 - KARNATAKA HIGH COURT is squarely applicable, wherein it was distinguished the earlier judgment in the case of DCIT Vs. Yellamma Dasappa Hospital 2006 (11) TMI 150 - KARNATAKA HIGH COURT and observed that hospital has brought certain machinery and no evidence was placed to prove its use during the asst. year but claimed depreciation. However, in the present case solar plant was put to use and power was generated. In our opinion, solar plant was used for generation of electricity. Thus the date on which the asset has been put to use is the date on which power was produced and not when it supplied electricity to the grid. Once the electricity was generated and it was sold, the depreciation of such solar plant cannot be denied. Decided against revenue.

Summary

Issues Involved:

1. Validity of the assessment order under Section 143(3) read with Section 153A of the Income Tax Act.
2. Sustenance of addition as unexplained expenditure under Section 69B of the Income Tax Act.
3. Allowance of depreciation on the solar power plant.

Detailed Analysis:

1. Validity of the Assessment Order:

The assessee challenged the validity of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act, arguing that the search conducted was invalid, and thus, the provisions of Section 153A were not applicable. However, this ground was not pressed by the assessee during the appeal, leading to its dismissal.

2. Sustenance of Addition as Unexplained Expenditure:

The core issue was the addition of Rs. 1,01,34,000/- as unexplained expenditure under Section 69B, related to the purchase of land from Smt. Rekha Venugopal and Shri G.N. Venugopal. The assessee contended that the higher value in the sale agreement was shown to avail a higher bank loan and not the actual consideration. Despite an affidavit from the vendor confirming the sale at Rs. 50,000 per acre, the AO and CIT(A) sustained the addition, citing comparable sales at Rs. 5 lakh per acre to M/s Emmvee Energy Ltd. The Tribunal upheld the lower authorities' decision, stating the explanation lacked a basis, especially when adjacent lands were sold at a higher rate.

3. Allowance of Depreciation on Solar Power Plant:

The Revenue's appeal focused on the denial of depreciation on the solar power plant, arguing it was not put to use before 31.03.2013. The assessee provided a chronology of events showing the plant was operational and generating power by 30.03.2013, supported by bills and statutory approvals. The CIT(A) accepted these claims, noting the plant's use in generating and selling power, thus allowing depreciation. The Tribunal affirmed this decision, emphasizing that the plant's operational status and power generation were sufficient for depreciation, irrespective of grid synchronization.

In conclusion, the Tribunal dismissed both the assessee's and the Revenue's appeals, upholding the decisions of the lower authorities on all contested issues.