2018 (10) TMI 422 - AT - Income Tax

Disallowance on account of electric repair and maintenance expenses - Revenue v/s capital expenditure - A.O. noted that these items are of enduring nature and cannot be termed as consumables and rather in the nature of capital items and allowed 100% depreciation on it - Held that - We are of the view that the addition is wholly unjustified. Considering the nature of business of assessee, these expenses are incurred on electrical repair and maintenance, which are in nature and consumable expenses. The assessee has rightly treated the same as revenue expenditure. The A.O. has not pointed-out as to which capital have been generated by the assessee for purchasing tube rods, electrical wires etc. In the absence of any specific finding against the assessee, we set aside the Orders of the authorities below and delete the addition. Addition on account of car running and telephone expenses - Held that - We are of the view that addition is wholly unjustified. The assessee is a domestic company and as such there may not be any personal expenses incurred by the assessee company on account of car running and telephone expenses. It appears to be an adhoc addition made by the A.O. without pointing out any specific inadmissible expenses incurred by the assessee. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. Addition on account of fabrication charges - complete desired details were not submitted - Held that - In the absence of any specific defect pointed-out in the maintenance of the books of account, there were no justification for the A.O. to disallow the entire amount of fabrication charges. The assessee has given a certificate in the paper book that all the documentary evidences were filed before A.O, which have not been rebutted through any evidence or material on record by the Revenue. CIT(A) also verified the details and the books of account and came to the finding that the assessee has maintained proper books of account and that there are no violation of TDS provisions. CIT(A) on proper appreciation of facts and verification of the record and the books of account produced by the assessee, correctly deleted the addition. Therefore, there is no justification to restore back the matter in issue to the file of the CIT(A) for fresh examination. Addition u/s 68 - Held that - We are of the view that no interference is called for in the matter. The assessee proved the identity of the investor, its creditworthiness and genuineness of the transaction in the matter. Whatever documentary evidences were filed on record, the A.O. did not make any efforts to summon the Investor and no efforts have been made to verify the documents from the Investor. There is no finding that material disclosed was untrustworthy. No evidence has been brought on record, if investment made by the Investor Company actually emanated from the coffers of the assesseecompany so as to enable the total investments to be treated as undisclosed income of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of electric repair and maintenance expenses.
2. Disallowance of car running and telephone expenses.
3. Addition under Section 14A of the I.T. Act.
4. Acceptance of new evidence regarding payments to job workers.
5. Addition on account of fabrication charges.
6. Addition under Section 68 of the I.T. Act for loan received.

Issue-wise Detailed Analysis:

1. Disallowance of Electric Repair and Maintenance Expenses:
The assessee challenged the disallowance of ?1,53,072/- on account of electric repair and maintenance expenses. The A.O. treated these expenses as capital items and allowed 10% depreciation, adding ?1,37,765/-. The Ld. CIT(A) confirmed the addition. The tribunal found the addition unjustified, noting that the expenses were consumables necessary for business operations. The A.O. failed to identify any capital asset generated from these expenses. The tribunal deleted the addition, allowing the assessee's ground.

2. Disallowance of Car Running and Telephone Expenses:
The assessee contested the addition of ?1,81,937/- for car running and telephone expenses, which the A.O. disallowed due to the absence of log books and the potential for personal use. The Ld. CIT(A) upheld this disallowance. The tribunal found the addition unjustified, noting that the assessee, being a domestic company, likely did not incur personal expenses. The A.O.'s addition was deemed arbitrary without specific inadmissible expenses identified. The tribunal deleted the addition, allowing the assessee's ground.

3. Addition under Section 14A of the I.T. Act:
The assessee did not press this ground, and it was dismissed accordingly.

4. Acceptance of New Evidence Regarding Payments to Job Workers:
The Revenue challenged the Ld. CIT(A)'s acceptance of new evidence regarding payments to job workers, alleging a violation of Rule 46A. The tribunal found no merit in the Revenue's claim, noting that the assessee had submitted all relevant details, including the cash book, at the assessment stage. The Ld. CIT(A) had the authority under Rule 46A(4) to call for and examine the books of account. The tribunal dismissed the Revenue's ground.

5. Addition on Account of Fabrication Charges:
The Revenue contested the deletion of ?7,58,31,017/- in fabrication charges. The A.O. disallowed the entire amount due to incomplete details and cash payments without TDS. The Ld. CIT(A) found the books of account properly maintained and within the monetary limits of Section 194C(5). The tribunal upheld the Ld. CIT(A)'s findings, noting that fabrication charges were essential for business operations, and the assessee provided comprehensive details. The A.O. had not rejected the books of account or found specific defects. The tribunal dismissed the Revenue's ground.

6. Addition under Section 68 of the I.T. Act for Loan Received:
The Revenue challenged the deletion of ?1,44,95,000/- received as a loan from M/s. Shivam International Limited. The A.O. doubted the lender's creditworthiness due to its financial state. The Ld. CIT(A) found that the assessee provided sufficient evidence, including confirmation, ITR, balance-sheet, and bank statements, proving the lender's identity, creditworthiness, and transaction genuineness. The tribunal upheld the Ld. CIT(A)'s decision, noting that the A.O. did not make efforts to verify the lender's details or find the evidence untrustworthy. The tribunal dismissed the Revenue's ground.

Conclusion:
The Cross-Objection of the Assessee was partly allowed, and the Appeal of the Department was dismissed. The tribunal's order was pronounced in the open court.