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TMI Blog2012 (5) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... increasing the authorized capital of company which is a one time expenditure and not a recurring expenditure, secondly the nature of expenditure has nothing to do with commencement of the business. 2. The grounds raised by the assessee are as under:- 1. That having regard to the facts and circumstances of the case, Ld CIT(A) -II, Dehradun has erred in law and on facts in confirming the action of the ld Assessing Officer in making addition of Rs. 49,00,462/- on account of illegal transportation on the basis of surmises and assumptions without placing any corroborating material and by recording incorrect facts and observations purely on the basis of third party reports the findings which were also stayed by the higher authorities. 2. That having regard to the facts and circumstances of the case, the Ld CIT(A) -II, Dehradun has also erred in law and on facts in confirming the action of the Ld Assessing Officer in making addition of Rs. 45,89,133/- on account of illegal stock on the basis of surmises and assumptions without considering the relevant material and by recording incorrect facts and observations purely on the basis of third party reports, the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- (iv) Legal fee for increasing capital of the company Rs. 53,000/-. (v) Out of running and hired vehicles Rs. 1,00,000/-. (vi) Penalty on account of illegal mining Rs. 75,000/-. (vii) Illegal transportation (Un-disclosed sales) Rs. 49,00,452/-. (viii) Illegal stock of Rs. 45,89,133/-. (ix) Disallowance u/s 40a(ia) in respect of non deduction of TDS on fixed monthly hire charges of transportation Rs. 62 lakhs. 4. Aggrieved by the above, the assessee company filed an appeal before Ld CIT(A). The Ld CIT(A) vide his order dated 8.1.2008 deleted the addition at (i) to (iii) above. Aggrieved, by the CIT(A)'s order both the Department and the assessee has filed separate appeals. The Department has filed appeal against deletion of addition made u/s 40A(2)(b) amounting to Rs. .16,33,645/- and Rs. 53,000/- being legal fee being capital in nature. Whereas the assessee has filed appeal against confirmation of addition of Rs. 49,00,452/- on account of illegal transportation and Rs. 45,89,133/- being illegal stock. The appeal of the assessee also include confirmation of disallowance u/s 40a(ia) in respect of hiring of machines and equipments on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R and the appellant had saved notional interest on working capital for a period of about 8 months. The operative part of Ld CIT(A)'s order in this regard is reproduced below:- "I am in agreement with the contention of the counsel of the appellant that under business exigencies of the situation, the appellant had to resort to purchase at the prevailing market price when the purchase negotiation actually got settled during March, 2005 and therefore the rejection of such purchase rate is not tenable and therefore I am not in a position to sustain the addition made by the Assessing Officer u/s 40A(2)(b) of the IT Act by adopting an estimated rate of such purchase at Rs. 13.50 per qtl. as against the actual rate of purchase at Rs. 18.50/- per qtl. and accordingly the Assessing Officer is hereby directed to delete such addition of Rs. 16,33,645/-." 7. Aggrieved the Department is in appeal. 8. The Ld DR argued that whatever stock was purchased in the month of March, was lying as stock in trade in the month of March and therefore there was no business exigencies and therefore he pleaded that there is contradiction in the order of Ld CIT(A) wherein the Ld CIT(A) had stated that during bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorized share capital; of the company and the expenditure was incurred after the commencement of business and therefore is a regular revenue expenditure and should be allowed as normal business expense. The Ld CIT(A) after considering the submissions of the assessee agreed with the contentions deleted the addition of Rs. 53,000/-. The relevant portion of Ld CIT(A)'s order is reproduced below:- "I find enough force in the contention of the counsel of the appellant and since the expenses have been laid out after the commencement of operation, the same should constitute revenue expenses and accordingly the same should be allowed in the assessment. In view of these facts, the Assessing Officer is hereby directed to delete the addition of Rs. 53,000/- under the head legal expenses." 13. Aggrieved, the revenue is in appeal before us. 14. The Ld DR argued that Rs. 53,000/- is a capital expenditure being incurred for increase in share capital of the company and therefore should not be allowed as revenue expenditure. 15. On the other hand, Ld AR submitted that the amount is a regular business expenditure and was incurred after commencement of business and therefore it is a revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee must have incurred expenses on account of labour and transport charges outside the books of accounts. He took Rs. 4.85 per qtl. as average transportation and labour charges and therefore calculated an amount of Rs. 45,89,133/- being payments made for labour and transportation outside the books of account and added the same to the total income of the assessee. Aggrieved, the assessee filed appeal before Ld CIT(A). 19. The Ld AR submitted the following submissions before Ld CIT(A):- (1) That the Assessing Officer has wrongly made the addition on account of illegal mining/illegal transportation on the basis of report of DM, Nainital which had already been stayed by Commissioner due to inheritance weakness in the findings of investigating agencies. (2) That the ld Assessing Officer proceeded to make superfluous addition on the basis of further assumption on the basis of said report of DM, Nainital without placing any material on record and without finding any defect in the accounts. (3) The Assessing Officer failed to take note of the fact that Ld DM, Nainital had initially allowed the appellant the right to transport and use the material by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove three assesses and have found that the facts of the present case are similar to the facts of above three cases relied upon by the Ld AR. The operative part of the Tribunal order in the case of M/s Jai Shree Stone Crushers (P) Ltd. is reproduced below:- "5. We have duly considered the rival contentions and gone through the records carefully. No doubt there was survey by the Forest Department, Revenue Department and PWD of the State of Uttarakhand. But the proceedings arising from such survey for the purpose of determining the violation of the terms of lease agreement etc. have not attained finality. The penalty imposed by the Ld. District Magistrate, Nainital for such violation is under challenge before the Divisional Commissioner, Nainital. Thus, the information in the shape of any corroborative evidence considered by the A.O. for charging the assessee with having excess stock is premature information. Considering this aspect, we set aside this issue to the file of the A.O. for re-adjudication. He shall take into consideration the outcome of survey carried out by the authorities of the State Government as corroborative piece of evidence and then determine the issue whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of two months. Thus, it is clear that it is a case of transporting goods contract where expenses are to be borne by the assessee but the dumpers/JCV was to be provided by M/d Radha Transport Agency and M/s Parveen Stone Crushers." 27. Aggrieved, the assessee filed appeal before Ld CIT(A) and submitted as under:- 1. That Assessing Officer had made the addition illegally and against the provisions of law in complete disregard to departmental circulars and terms of agreement on record. 2. That TDS provision for hiring of machines/equipments were introduced by the Income Tax Amendment Act, 2006 and the same could not have been made applicable retrospectively. 3. The Assessing Officer contradicted his findings made in para 8 of the order considering the transaction as running and maintenance of hired vehicle for the purpose of making disallowance of Rs. 1 lac. 4. The Assessing Officer had deliberately failed to distinguish between hiring of machines and transportation contract. 28. The CIT(A) did not agree with the contentions of Ld AR and upheld the addition made by the Assessing Officer. The operative part of Ld CIT(A)'s orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the provisions of section 194C are clearly applicable. 34. The Assessing Officer in his order at para 12 of page 08 has clearly mentioned that it is a transporting contract where expenses are to be borne by the assessee but the dumpers/JCB was to be provided by M/s Radha Transport Agency and M/s Pasrvin Stone. In fact the Assessing Officer himself has admitted in his order that dumpers/JCB were hired and all expenses were borne by the assessee. This establishes the fact that agreement was for lease of dumpers/JCB only and there was no agreement for executing any work or contract and hence cannot be classified as works contract or a service contract. To arrive at the correct conclusion in the present case we have to compare the facts of the present case with the facts of cases relied upon by the Ld AR which are as under:- 1. Mithari Transport Corporation v. ACIT Vishakhapatnam Bench reported in 124 ITD 40. The assessee a transport contractor hired lorries from other persons to transport bitumen to various points as per directions of the owners of goods. The assessee himself executed the contract of transportation of Bitumen. The lorry owners had simply placed the vehicles at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im was made before Assessing Officer during assessment proceedings. 37. Before us Ld AR argued that even no claim was made in the return of income then also the assessee is eligible to get the benefit of deduction u/s 80IB of the Act. He pleaded that the objective of the Income tax proceedings is to assess fair amount of income and tax payable as per law. If any claim is allowable to the assessee and the assessee omits to make claim in the return, it was the duty of the Assessing Officer to inform the assessee about such omission and give him opportunity to make the claim as per law. He placed reliance in the decision of Delhi Bench of the Tribunal in the case of M/s JP Stone Crusher Pvt. Ltd. in I.T.A. No.3872/Del/2009, assessment year 2006-07 and in I.T.A. No. 350/Del/2009 for assessment year 2005-06 and in the case of Malika Arjun JEO Resources Associates in I.T.A. No.,5000/Del/2004 for assessment year 2002-03. Reliance was also placed on the decision of Hon'ble Tribunal in assessee's own case for assessment year 2006-07 in I.T.A. No.3874/Del/2009. 38. The Ld DR relied upon the order of Ld CIT(A) in this regard and argued that in the absence of any specific claim made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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