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TMI Blog2010 (9) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... thers that may be argued at the time of hearing the appellant case that (a) That the deductions claimed by the appellant may please be allowed and addition confirmed by learned CIT(A) may please be deleted. (b) That such other relief and reduction as the facts and the circumstances so require be granted. 6 The appellant craves leave to add, alter, modify the grounds of appeal on or before the time of hearing. ITA No.1295/Ahd/2008[ Revenue] 1 The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition of ₹ 78,40,000/- made u/s 68 of the I.T. Act. 2 On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the AO. 3 It is, therefore, prayed that the order of the Ld. CIT(A) may be cancelled and that of the AO may be restored to the above extent. ITA No.1112/Ahd/2008 2. Adverting first to ground nos. 1 2 in the appeal of the assessee, facts, in brief, as per relevant orders are that return declaring income of ₹ 17,04,258/- under the normal provisions and book profits of ₹ 1,08,26,236/- u/s 115JB of the Income-tax Act,1961[hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication filed by the appellant before the AO, the capital asset value of moulds is ₹ 39,88,788/- and the appellant is eligible for depreciation of ₹ 7,38,075/- as against amount allowed by the AO of ₹ 2.73,800/- The appellant has contended that the moulds are like additional spares and these have life of 9 to 12 months and that the same is revenue expenditure. This contention is not acceptable as the moulds are capital assets and are eligible for depreciation @ 25 % and not @ 40 % as depreciation of 40% is only for moulds used in plastic and rubber goods factories, which is not the case of the appellant. Hence the disallowance of depreciation is held to be justified. However the A.O. is directed to allow depreciation on the total value of moulds excluding the cost of moulds which have been claimed as revenue expenditure in earlier years. 4 The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The learned AR on behalf of the assessee while reiterating their submissions before the ld. CIT(A) contended that the assessee had been consistently following the practice of treating certain moulds as consumables. The AO had capitali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. With these observations, ground nos.1 2 in the appeal of the assessee are disposed of. 6. Coming to ground no.1 in the appeal of the Revenue relating to an addition of ₹ 78,40,000/- u/s 68 of the Act, the AO noticed that the assessee had shown cash sales of ₹ 98,71,790/-, as extracted in the assessment order detailed hereunder : Date Nature of sale shown Mode Amount (Rs.) 23.04.03 Trading Sales Cash 2,42,700 01.05.03 Trading Sales Cash 1,75,800 03.05.03 Trading Sales Cash 2,10,500 05.05.03 Trading Sales Cash 2,10,300 09.05.03 Trading Sales Cash 2,12,500 12.05.03 Trading Sales Cash 2,85,800 16.05.03 Trading Sales Cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.11.03 Trading Sales Cash 3,20,600 07.11.03 Trading Sales Cash 1,75,800 13.11.03 Trading Sales Cash 2,20,850 08.12.03 Trading Sales Cash 97,800 22.01.04 Trading Sales Cash 1,80,500 29.01.04 Trading Sales Cash 1,29,000 03.02.04 Trading Sales Cash 1,12,700 10.02.04 Trading Sales Cash l,47,9oO 13.02.04 Trading Sales Cash 1,49,150 22.02.04 Trading Sales Cash 1,68,900 24.02.04 Trading Sales Cash 1,95,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays showing same truck no. on the bill. The AO pointed out that it was impossible that a truck owner gives its truck for five days for one trip from Sihor to Bhavnagar to Ahmedabad, which would not take more then 8 hours even if the maximum time was considered. In the light of these facts, the AO issued notice u/s 133(6) of the Act to the following persons from whom M/s Palakchand Ispat Pvt.Ltd. obtained the bills, i. Akhil Ship Breakers P Ltd ii. Arti Ship Breaking iii. Ashish Ship Breakers P ltd iv. Anupama Steel Ltd v. Zaid Impex Pvt.Ltd. 6.2 In response, M/s Akhil Ship Breakers Pvt. Ltd., did not explain from where they purchased material nor produced relevant purchase bills or transport bills through which they supplied material to M/s Palakchand Ispat Pvt. Ltd., who in turn supplied the same to the assessee company. Moreover, against the receipt of ₹ 55,59,820/towards sales consideration, more amount had been given back to M/s Palakchand Ispat Pvt. Ltd. which implied that no sales consideration was retained by Akhil ship Breakers Pvt. Ltd. and the same had been returned back to Palakchand Ispat Pvt. Ltd. 6.3 M/s Arti Ship Breaking replied that they had sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n used to sort out the scrap into different portions and sections depending upon the nature, size, contents, volume and size of the scrap materials. The appellant sold various items of scrap in different lots depending upon the estimated weight and the contents of the scrap as it was very difficult to weigh the materials. The buyers used to inspect the materials and used to lift the materials from the godown . The prices were fixed on lot basis. The A.O. suspected the sales as far as sales where sale price was received in cash and presumed that the appellant has introduced cash and the A.O. made addition of cash sales as cash credit u/s. 68 of the Act. The A.O. added ₹ 98,71,790/-as cash credit income ignoring the fact that the appellant itself had credited sale proceeds as its income to the profit and loss account , therefore the addition of ₹ 98 lacs as cash credit amounts to double addition. The trading sales of ₹ 1,30,11,640/- included cash sales of ₹ 98,71,790/- as well as credit sales of ₹ 31,39,850/-. The sale bills contain description of different compositions of scrap .However, the quantity was not weighed and the scrap was sold in lots as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s error in one or two cases where the vehicle numbers given were of smaller vehicles. From consideration of total facts it is clear that it is only a presumption made by the AO that materials were not transported or received by the appellant. Although the AO made inquiries and verified the bank accounts of suppliers of scrap, he has not come out with a single transaction whereby the suppliers would have returned cash to the appellant and all these parties have confirmed of having sold the materials to the appellant. Neither any such finding of bogus sales by the suppliers or bogus purchases by the appellant have been pointed out by Sales tax department or any other Government agency .The appellant purchased trading materials of ₹ 78,40,860/- and had made sales which included cash sales of ₹ 98,71,790/- and credit sales of ₹ 31,39,850/-. Thus the appellant has shown G.P. of 39% .The credit sales of ₹ 31.39 lakhs have not been doubted by the A.O. If the AO's contention is accepted that there were no genuine purchases by the appellant , then the appellant could not have made credit sales of ₹ 31,39,850/-, which have been accepted by A.O. as genuine sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid amount of ₹ 98,71,790/- was reflected in the accounts as cash sales in their business of trading in scrap besides their manufacturing activity. As pointed out by the ld. CIT(A), the assessee purchased scrap from various merchants in Bhavnagar and used to sort out the scrap into different portions and sections depending upon the nature, size, contents, volume and size of the scrap materials. Thereafter, the assessee sold various items of scrap in different lots depending upon the estimated weight and the contents of the scrap. On these facts, the ld. CIT(A) concluded that the transactions of purchase and sales were normal business transactions and the payments for the purchasers have been made by cheques while there is nothing to suggest that the payments made to the suppliers have come back to the assessee. Since the three parties viz. M/s Akhil Ship Breakers Pvt. Ltd., M/s. P.C. Steels and Palak Chand Ispat Pvt. Ltd. were assessed to income tax as well sales tax and all the parties confirmed having sold the materials to the assessee while GP @ 39% had been declared by the assessee , the ld. CIT(A) deleted the addition on the ground that once the assessee include ..... X X X X Extracts X X X X X X X X Extracts X X X X
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