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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 ..... of the above and others 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 the 'Act' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 capitalized only the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations, 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 1,28,800 19.05.03 Trading Sales Cash 2,78,600 20.05.03 Trading Sales Cash 2,54,800 22.05.03 Trading Sales Cash 1,20,750 24.05.03 Trading Sales Cash 3,53,800 24.05.03 Trading Sales Cash 2,80,750 30.05.03 Trading Sales Cash 1,25,400 31.05.03 Trading Sales Cash 3,46,740 25.06.03 Trading Sales Cash 3,52,500 18.07.03 Trading Sales Cash 2,98,500 20.07.03 Trading Sales Cash 2,88,000 25.07.03 Trading Sales Cash 1,44,700 31.07.03 Trading Sales Cash 3,32,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied through it vide bill no. 4 on 16.07.2003 for ₹ 2,00,000/-. It was found that M/s Akhil Ship Breakers Pvt. Ltd. prepared bill on 28.4.2003 showing truck no. GJ 4U 8938 for 14.52MT weight. The same goods were shown to have been given by M/s Palakchand Ispat Pvt. Ltd. through bill No.1 on 15-2003 i.e after about five days 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ship breaking business was in full swing in Bhavnagar and scrap was available in bulk and the appellant carried on trading business alongwith its manufacturing activity. The appellant purchased scrap from various merchants in Bhavnagar and used to unload the scrap at the rented godown site . The appellant then 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 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d old and used bearings which is a peculiar kind of raw material traded by it and it is assessed to tax. All the above three parties are assessed to sales tax also. The copies of purchase bills of all the parties are filed at pages 83 to 99 of the paper book wherein the truck numbers are mentioned, though there was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in treating the amount as unexplained cash credit. In this connection, the ld. AR relied upon an order dated 7.8.2009 in the case of Vishal exports Overseas Limited in ITA nos. 790-792 & 1684/Ahd/2005. 9. We have heard both the parties and gone through the facts of the case. Undisputedly, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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