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TMI Blog2016 (2) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... Expenditure related to bogus sales Rs. 32,52,353/- (d) Disallowance of depreciation Rs.1,36,11,269/- 3. The assessee has also raised following legal issues:- (a) Scope of assessment in the set aside proceedings. (b) Scope of assessment of items assessed in the block assessment order. 4. The facts relating to the case are stated in brief. The original assessment in this case was completed on 31.3.1999 determining a total income of Rs. 1,72,05,380/- on the basis of findings recorded during the course of survey operations conducted u/s 133A of the Act on 23.03.1999. The assessee filed appeal before Ld CIT(A) challenging the original assessment order. In the mean time, the revenue also carried out search o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the A.O have to be looked into vis-à-vis the materials found during the course of search, whether the assets on which depreciation has been claimed were found in the physical verification of the assets during the search have to be verified and reconcile. All this needs thorough scrutiny and investigation. Therefore, in the interest of justice, I set aside the assessment to be redone after giving reasonable opportunity to the appellant to prove its fresh claims made at the time of appeal hearings. The A.O is also directed to apply his findings in the course of the block assessments to the facts in the year under consideration." 5. According to the assessee, the assessing officer has made new additions in the set aside p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged its stand and submitted that the claim of Rs. 1.36 crores depreciation on energy savings device was wrong, but the said expenditure includes purchase of films worth Rs. 1.04 crores. In the set aside proceedings, the AO disallowed the claim of depreciation as well as the expenditure claimed towards purchase of films cited above. 9. Under these set of facts, the assessee is raising two contentions, viz., (a) the disallowance of depreciation of Rs. 1.36 crores is wrong, since the same amount has been disallowed under block assessment proceedings and was assessed as undisclosed income. (b) the amount of Rs. 1.36 crores includes the purchase of films worth Rs. 1.04 crores (due to change in stand) and hence disallowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; However, we notice that the amount of Rs. 1,04,15,121/- disallowed as Machinery purchase actually relate to the claim of the assessee that the same represents purchase of films. Hence we are of the view that the amount of Rs. 1,04,15,121/- falls under the scope of set aside proceedings. We notice that the assessing officer has proved that the purchases of films claimed by the assessee was bogus. 12. However, we notice that the assessee has claimed that it has declared the sales of films picturised by using the films of Rs. 1.04 crores referred above. There should not be any doubt that the pictures could not be produced without the use of films and if the sale of pictures is assessed, then the corresponding expenditure should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself has changed its stand that the claim of machinery purchases actually includes the purchase of films. Under these set of facts, it is not clear as to how the assessee could obtain hire purchase finance facility on the non-existing machineries. If the assessee has actually obtained the hire purchase finance, then the question arises about its utilisation. If the loan obtained has been used by the assessee for business purposes, we are of the view that the finance charges are allowable as deduciton, as the hire purchase finance is only one of the modes of raising loans. Hence, in our view, this issue requires fresh examination. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to examine the manner of utili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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