2024 (2) TMI 227 - HC - Income Tax

Bogus purchasers capitalized - ITAT has held that capitalization cannot be denied to the assessee merely on a statement given by him, without adducing evidence of other necessary parties - HELD THAT - There is no enunciated legal position which needs reconsideration, alteration, modification or clarification or any need to resolve an apparent conflict between a difference in viewpoints being that of the AO and the CIT(A) as against that of the ITAT. The entire order of AO is based merely on the statement of the Director of assessee without summoning or adducing additional/supplementary evidence of any other person corroborating the allegation of the department regarding bogus payments made by assessee. We thus, have no hesitation in holding that there is no infirmity in the order passed by the Tribunal, least of all existence of any substantial question of law in the matter.

Issues involved:
The issues involved in the judgment are related to the denial of capitalization to the assessee based on a statement given by a director, discrepancies in construction accounts and procurement of steel, alleged siphoning off of cash by directors, challenge to the order of the Assessing Officer before the Commissioner of Income Tax (Appeals), and the subsequent appeal before the Income Tax Appellate Tribunal (ITAT).

Details of the Judgment:

1. Denial of Capitalization:
The ITAT allowed the appeal filed by the assessee, holding that capitalization cannot be denied solely based on a statement without additional evidence from other necessary parties. The Tribunal analyzed various documents produced by the assessee, including ledger extracts, confirmation from parties, bank statements, and a certificate from a registered valuer showing construction of a building and procurement of steel. The denial of capitalization was based on a statement by a proprietor recorded under Section 131 of the Income Tax Act, which had been negated in a similar case involving the same assessee.

2. Alleged Cash Siphoning:
During search and seizure operations, discrepancies were found in the construction account of the plant and procurement of steel. An amount was disclosed by a director of the assessee company, indicating that cash was siphoned off through cheques issued against bogus capital expenses. The Assessing Officer determined the income based on these findings, leading to a subsequent challenge by the assessee before the CIT(A) and then the ITAT.

3. Questions of Law Proposed:
The appellant raised several questions of law for determination, including the eligibility for depreciation on alleged bogus amounts, withdrawal of depreciation claims based on disclosures made by a director, and the coherence of the ITAT's findings with those of a Co-ordinate Bench in a related case.

4. Tribunal's Findings:
The ITAT accepted the proofs provided by the assessee regarding expenditure on raw materials for construction. It emphasized that suspicion cannot replace evidence, and the statement recorded by the Revenue was not conclusive. The Tribunal directed the AO to allow capitalization on both counts, considering the interconnected issues in the assessee's appeal.

5. Conclusion:
Based on a factual analysis, the Tribunal found no legal position requiring reconsideration or modification. The order of the AO was deemed to lack substantial evidence beyond the director's statement, leading to the dismissal of the appeal without costs.

This summary provides a detailed breakdown of the judgment, highlighting the key issues, findings, and conclusions reached by the Bombay High Court.

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