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TMI Blog2020 (2) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... of the vehicle is considered to be the same as the period for which the Motor Vehicle Tax is collected in advance. In such case, the assessee will be entitled for the benefit of depreciation towards the cost of the vehicle and the pre-paid Motor Vehicle Tax paid in advance as held by the ld. CIT (A). In this circumstance, we hereby direct the ld. AO to either allow depreciation as explained by us hereinabove or the pre-paid expenditure in instalment as illustrated hereinabove whichever is more beneficial to the assessee. With respect to Registration Charges paid at the time of acquiring the new vehicle, no doubt it is attributable to the cost of the vehicle as held by the Ld. CIT (A) for which the assessee is entitled to the benefit of depreciation. Inflated expenditure on Granite processing and dressing charges u/s. 37(1) - Sustaining 50% of the addition - HELD THAT:- Revenue Authorities has not looked into the scope, volume and nature of work carried out by the proprietorship firm. Further, it is evident that the Ld. CIT (A) has accepted that certain work was carried out for processing the granites otherwise the granite slabs could not be exported. From this, it is evident t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unexplained cash receipts u/s 68 - HELD THAT:- Finding of the Ld. CIT (A) is that the same income was assessed in the hands of another assessee and therefore, it cannot be taxed one again in the hands of the assessee-company as it would amounts to double taxation. Hence, the ld. CIT (A) deleted the addition which is appropriate. Since, the Revenue has not come out with any other material or argument to negate the finding of the ld. CIT (A) we do not find it necessary to interfere with his order. Unaccounted investment - CIT-A directing the Ld. AO to verify the source for acquiring land - HELD THAT:- When the assessee had made such detailed submission before the ld. Revenue Authorities and since the payments were made by Demand Draft by M/s. Nova Granite (India) Pvt Ltd., on behalf of the assesseecompany which are all verifiable facts from the books of account of the assessee and from the bank statements, it appears that the ld. Revenue Authorities has not fulfilled their obligations and to make their task easy made additions in the hands of the assessee by surmises and conjectures which is not appreciable. In this situation, in order to avoid hardship to the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ites, the ld. CIT (A) held that it amounts to manufacturing activity / production of goods as envisaged under the Act. Accordingly, the Ld. CIT (A) granted relief to the assessee by allowing the claim of additional depreciation. We do not find any infirmity in the order of the Ld. CIT (A) as he has only relied on the Circular of the CBDT and the fact that the assessee s activity was cutting, polishing and sizing of granite is not in dispute. Therefore, the order of the ld. CIT (A) does not call for any interference. Hence, the appeal of the Revenue on this issue is devoid of merit. Addition on account of sale of scrap - AO added the same to the income of the assessee only for the reason that during the survey proceedings assessee had admitted it as not recorded in the books of accounts - HELD THAT:- When the matter cropped up before the Ld. CIT (A), the assessee explained that the amount was recorded in the books of accounts and also included in VAT return. Since the assessee did not produce the books of accounts before the ld. AO, the Ld. CIT (A) remanded the matter back to the file of the Ld. AO for verification. We do not find any infirmity in the order of the ld. CIT (A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in upholding the order of the ld. AO who had made addition of ₹ 29,21,000 towards payment made to Sri Ramakrishna Reddy as unaccounted expenditure. (v) The Ld. CIT (A) has erred in upholding the order of the ld. AO who had made addition of ₹ 1,24,940/- towards levy of interest U/s. 234A of the Act. Appeal No.617/H/2014 (AY: 2004-05): (Assessee s appeal) 4. The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:- (i) The ld. CIT (A) has erred in upholding the addition made by the ld. AO without incriminating materials found at the time of search. (ii) The ld. CIT (A) has erred in upholding the order of the Ld. AO who had disallowed the expenditure incurred towards life tax, registration charges amounting to ₹ 73,877/-. (iii) The ld. CIT (A) has erred in sustaining 50% of the addition amounting to ₹ 36,14,465/- (50% of ₹ 72,28,930/-) made by the Ld. AO towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act. (iv) The Ld. CIT (A) has erred in upholding the order of the ld. AO who had made addition of ₹ 28,10,000/- towards payment made to Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AO without incriminating materials found at the time of search. (ii) The ld. CIT (A) has erred in upholding the order of the Ld. AO who had disallowed the expenditure incurred towards life tax, registration charges amounting to ₹ 1,83,285/-. (iii) The ld. CIT (A) has erred in sustaining 50% of the addition amounting to ₹ 36,20,477/- (50% of ₹ 72,40,954/-) made by the Ld. AO towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act. (iv) The Ld. CIT (A) has erred in upholding the order of the ld. AO who had made addition of ₹ 9,000/- towards payment made to Sri Ramakrishna Reddy as unaccounted expenditure. (v) The Ld. CIT (A) has erred in upholding the order of the ld. AO who had made addition of ₹ 29,81,843/- towards levy of interest U/s. 234A of the Act. (vi) The Ld. CIT (A) has erred upholding the addition made by the Ld. AO of ₹ 39,328/- towards penalty paid to Central Excise Department. (vii) The Ld. CIT (A) has erred upholding the addition made by the Ld. AO of ₹ 1,07,898/- towards interest paid for delayed remittance of tax deducted at source. Appeal No.959/H/2014 (AY: 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Ld. AO of ₹ 9,212/- towards interest paid for delayed remittance of tax deducted at source. Appeal No.961/H/2014 (AY: 2008-09): (Revenue s appeal) 12. The Revenue has raised four grounds in its appeal however, the cruxes of the issue is that:- (i) The ld. CIT (A) has erred in holding that the activity of cutting granite into blocks is manufacturing / production thereby entitled to claim the benefit of deduction under section 10B of the Act for ₹ 11,48,84,461/-. (ii) The Ld. CIT (A) has erred in allowing additional depreciation of ₹ 66,50,908/- by holding that the assessee s activity of cutting granite into blocks amounts to manufacturing / production. Appeal No.622/H/2014 (AY: 2009-10): (Assessee s appeal) 13. The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:- (i) The ld. CIT (A) has erred in upholding the addition made by the ld. AO without incriminating materials found at the time of search. (ii) The ld. CIT (A) has erred in upholding the order of the Ld. AO who had disallowed the expenditure incurred towards life tax, registration charges amounting to ₹ 2,62,520/-. (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 years or as the case may be) is collected in advance at the time of the sale of the new vehicle. Therefore, it is revenue expenditure which is pre-paid in nature. In such circumstances, the pre-paid expenditure is to be proportionally treated as revenue expenditure over the period of the validity of Motor Vehicle Tax collected in advance. i.e., if the Motor Vehicle Tax is collected for a period of 10 years, the pre-paid amount has to be allowed as deduction for the period of 10 years in equal instalments. It is pertinent to mentioned that as held by the Ld. CIT (A), the pre-paid Motor Vehicle Tax may also be treated as expenditure which goes to add the cost of the vehicle because predominantly the life of the vehicle is considered to be the same as the period for which the Motor Vehicle Tax is collected in advance. In such case, the assessee will be entitled for the benefit of depreciation towards the cost of the vehicle and the pre-paid Motor Vehicle Tax paid in advance as held by the ld. CIT (A). In this circumstance, we hereby direct the ld. AO to either allow depreciation as explained by us hereinabove or the pre-paid expenditure in instalment as illustrated hereinabove whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es incurred by the assessee not fully explained for the following reasons:- (i) Both the proprietorship concerns M/s. Block Makers Enterprises and Sai Rock Enterprises owned by the relatives of the Directors had not maintained enough evidence such as books of account in order to establish that they are carried out the contract of granite processing. (ii) Genuineness of the existence of the proprietorship concern were doubted during the course of search proceedings and post search proceedings. (iii) Conduct of the parties during the assessment proceedings and the corroborative information creates a doubt as to the genuineness of the transaction. (iv) During the relevant assessment year benefits U/s. 10B are not available which creates a doubt that the assessee has been claiming bogus expenditure in order to avoid tax liability. (v) Filing of return of income by including such bogus receipts and paying tax thereon alone cannot establish the genuineness of the transaction. 21. Having observed so, the Ld. CIT (A) further opined that activities such as cutting, squaring and dressing of granites were certainly carried out, may be, by outside parties without which the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on this issue. Accordingly, this ground raised by the assessee is decided in its favour. 24. Ground No.(iv): Addition of ₹ 29,21,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure. 25. During the course of search proceedings, a noting containing the details of payment made to Sri K.V. Ramakrishna Reddy was found and seized which indicated the total payment of ₹ 146.88 lakhs. With respect to the relevant assessment year it was observed the payment made to Sri K.V. Ramakrishna Reddy was ₹ 29,21,000/- out of which ₹ 12 lakhs was paid by cash, ₹ 13 lakhs by way of cheque and ₹ 4.21 lakhs in the form of various expenditure. The Ld. AO opined that the above said paid to Sri K.V. Ramakrishna Reddy is the unaccounted money of the assessee. He further observed that the cheque payment made could not be reconciled with the books of account. Therefore, he rejected the explanation offered by the assessee and treated the same as unaccounted expenditure in the hands of the assessee company. On appeal, the ld. CIT (A) directed the ld. AO to verify the explanation offered by the assessee and thereafter decide the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income. Since these facts are not verified by the Ld. AO as well as not addressed by the ld. CIT (A), we remit back the matter to the file of the Ld. AO for fresh consideration. Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act. Assessee s appeal for the AY 2004-05: ITA No.617/Hyd/2014 29. Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search. 30. Since the assessee has withdrawn this ground, the ground does not survive for adjudication. 31. Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to ₹ 73,877/-. 32. This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also. 33. Ground No.(iii): Sustaining 50% of the addition amounting to ₹ 36,14,465/- (50% of ₹ 72,28,930/-) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts of M/s. Sam (Srilankan company). It was also observed that the assessee-company was the majority share holder of M/s. Sam. On query, Mr. N. Tirupati Rao stated that this amount was accounted in the books of M/s. Sam. Since Mr. N. Tirupati Rao did not produce the books of account of M/s. Sam the Ld. AO added the same in the hands of the assessee company as unexplained cash credit U/s. 68 of the Act. On appeal, the ld. CIT (A) after examining the issue in detail and obtained the remand report from the ld. AO deleted the addition by observing as follows: 9.3 .As could be seen from the record, the total amount of ₹ 7,67,12,492/- was shown to have been received by the group concerns between the period from 9/8/2013 to 13/3/2006, out of which certain amounts were also shown to have been paid to third parties or incurred as expense. The AO ignored such outflow on the premise that they are not identified with nature of account and are not related to the assessee company. I this context, it may be relevant to observe that at the same length and breadth, the receipts are not fully relatable to the assessee and this aspect was not disproved by the AO with the help of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A) deleted the addition which is appropriate. Since, the Revenue has not come out with any other material or argument to negate the finding of the ld. CIT (A) we do not find it necessary to interfere with his order. Therefore, the appeal of the Revenue is devoid of merits. Appeal No.618/H/2014 (AY: 2005-06): (Assessee s appeal) 42. Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search. 43. Since the assessee has withdrawn this ground, the ground does not survive for adjudication. 44. Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to ₹ 2,79,950/-. 45. This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also. 46. Ground No.(iii): Sustaining 50% of the addition amounting to ₹ 35,87,076/- (50% of ₹ 71,74,152) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act. 47. This ground is identical to the ground no.(iii) ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings pursuant to search it was noticed by the ld. AO from the seized material (page 121 of Annexure-A/MGPL/OFF/2) that the assessee had paid ₹ 93,58,000/- for the proposed acquisition of land. Out of the amount of ₹ 93,58,000/- an amount of ₹ 20 lakh was shown as paid by M/s. Nova Granite (India) Pvt Ltd., (Group Company of the assessee) on behalf of the assessee-company. Since the incremental value of the land for ₹ 20 lakh was not disclosed in the balance sheet of the assessee company for the AY 2004-05 to 2006-07 the Ld. AO opined that the amount of ₹ 20 lakh is the unaccounted investment of the assessee. Accordingly, the Ld. AO made addition of ₹ 20 lakh in the hands of the assessee as unaccounted investment. When the matter came up before the Ld. CIT (A), after examining the issue he held that these are matters of details of facts, which required to be examined in detail and arrive at correct conclusions. There is no place for surmises in the place of truth or facts. Since both the companies are Group Concerns and assessed by same A.O., examination of information in detail, may not be an issue. The AO may enquire this an allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.00 5.00 5.00 10.00 ₹ 5,00,000 DD taken from Nova and debited to Midwest. Anwar Pasha 6.60 2.50 5.00 7.50 ₹ 3,50,000 DD taken from Nova and debited to Midwest Munithqeem 4.70 2.50 5.000 7.50 ₹ 2,50,000 DD taken from Nova and debited to Midwest Ubedulla 2.00 2.00 5.00 7.00 ₹ 1,00,000 DD taken from Nova and debited to Midwest Sardar Pasha 2.12 3.00 3.00 6.00 ₹ 50,000 DD taken from Nova and debited to Midwest Aslam 2.12 2.00 1.00 3.00 ₹ 2,00,000 DD taken from Nova and debited to Midwest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings pursuant to search it was observed by the Ld. AO that the sales amount as per ledger form in seized material was shown at ₹ 35,15,80,854/- whereas assessee has declared in his P L Account submitted before the Revenue as ₹ 34,93,05,557/-. Since the assessee was not able to explain the difference amount of ₹ 22,75,275/- the Ld. AO treated the same as unaccounted sales and brought to tax. Before the ld. CIT (A), the assessee reconciled the deference to the extent of ₹ 22,00,012/-. Therefore, the ld. CIT (A) granted relief to that extent and sustained the balanced amount of ₹ 75,285/-. Since the assessee could not reconcile the difference amount of ₹ 75,285/- before the Ld. Revenue Authorities and before us, at this stage, we do not have any other option but to sustain the addition of ₹ 75,285/-. Accordingly, we do not find it necessary to interfere with the order of the Ld. CIT (A) on this issue. Appeal No.958/H/2014 (AY: 2005-06): (Revenue s appeal) 59. Deletion of the addition made by the ld. AO of ₹ 2,81,87,800/- towards unexplained cash receipts. 60. Since the facts and issue are identical to that of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of Rs. ₹ 29,81,843/- towards levy of interest U/s. 234A of the Act. 70. At the outset, the Ld. AR submitted that the assessee had filed its return of income within the due date i.e., on 27/11/2006. It was further submitted that for the relevant AY the due date of filing the return of income was extended up to 30/11/2006 as per order U/s. 119 of the Act. It was therefore pleaded that since there was no default in furnishing the return of income by the assessee, interest levied by the Ld. AO U/s. 234A of the Act for ₹ 29,81,843/- is not justifiable. The ld. DR could not successfully controvert to the submission of the ld. AR. After hearing both sides, we find it appropriate to remit the matter to the file of the Ld. AO for fresh consideration as the issue is neither verified by the Ld. AO nor addressed by the Ld. CIT (A). Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act. 71. Ground No.(vi): The Ld. CIT (A) has erred in upholding the addition made by the Ld. AO of ₹ 39,328/- towards penalty paid to Central Excise Department. 72. At the outset, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the addition made by the ld. AO of ₹ 2,21,88,016/- towards unexplained cash receipts. 78. Since the facts and issue are identical to that of the Revenue s appeal for the AY 2004-05 2005-06, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits. 79. Ground no.:(ii) Disallowance of additional depreciation of ₹ 12,89,185/-. 80. During the course of assessment proceedings pursuant to search, it was observed by the Ld. AO that the assessee had claimed additional depreciation U/s. 32(1)(iia) of the Act on plant and machinery, mining equipment etc. the Ld. AO opined that the activity of the assessee cannot be treated as manufacturing or production of article or thing as envisaged U/s. 32(1)(iia) of the Act and therefore disallowed the claim of additional depreciation of ₹ 12,89,185/-. On appeal, the ld. CIT (A) held that the activity of making the blocks, along with shaping and cutting of granites amounts to manufacturing / production by relying on his own order of the other assessment years while granting the benefit of deduction U/s. 10B of the Act. 81. At the outset, on perusing the orders of the Ld. CIT (A), we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AY 2003-04 and 2004-05 hereinabove except for the fact that the quantum of payment made to M/s. Block Makers Enterprises is ₹ 31,94,762/- and to M/s. Om Sai Enterprises is ₹ 5,37,672/- aggregating to ₹ 37,32,434/-. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also. 89. Ground No.(iv): Addition of ₹ 24,59,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure. 90. This ground is identical to the ground no.(iv) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year. Further from the order of the ld. AO it is not clear as to what extent to the aggregate amount of ₹ 24,59,000/- was towards payment made through cheque to Mr. K.V. Ramakrishna Reddy or towards expenditure incurred on behalf of Sri K.V. Ramakrishna Reddy, purchase of granites etc. However, it was clarified by the assessee that the payment was duly accounted in the books of accounts of the assessee company and we failed to understand as to what prevented the Revenue to verify the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act. 99. Ground No.(iv): The Ld. CIT (A) has erred upholding the addition made by the Ld. AO of ₹ 49,360/- towards prior period expenses. 100. The Ld. AO disallowed an amount of ₹ 49,360/- by holding that it relates to prior period. The Ld CIT (A) after examining the issue observed that the Ld. AO had brought out entire information on record. Therefore, the Ld CIT (A) remitted the matter back to the file of the Ld. AO for de novo consideration. On this issue we are of the view that when the Ld. AO makes an ad-hoc addition without proper explanation, then the addition is not sustainable. Therefore, we hereby direct the Ld. AO to deletion the addition made for ₹ 49,360/-. 101. Ground No.(v): The Ld. CIT (A) has erred in upholding the addition made by the Ld. AO of ₹ 9,212/- towards interest paid for delayed remittance of tax deducted at source. 102. On this issue the Ld. AR submitted that the assessee has requested that the matter may be remitted back to the file of the Ld. AO for re-computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for quarrying is not the requirement for 100% EOU and the transaction of such licence alone may not constitute reconstruction or reconstitution of the company as defined in clause (ii) of sub-section (2) of section 10B of the Act. 106. We do not find any infirmity on the order of the ld. CIT (A) on this issue. The CBDT Circular No. 729 dated 1/11/1995 has made it clear that dressing of the granite, cutting them into smaller pieces, polishing the granite amounts to manufacturing or production as envisaged under the Act. Further, as observed by the Ld. CIT (A), transfer of the licence from another entity alone may will not constitute reconstruction or reconstitution of the company. Therefore, we do not find it necessary to interference with the order the ld. CIT (A) on this issue. Hence, the appeal of the Revenue on this issue is devoid of merits. 107. Ground No. (ii): Disallowance of additional depreciation of ₹ 12,89,185/-. 108. Since the issue is already adjudicated on the identical facts in the Revenue s appeal for the AY 2006-07 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue. Appeal No.622/H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee did not produce the books of accounts before the ld. AO, the Ld. CIT (A) remanded the matter back to the file of the Ld. AO for verification. We do not find any infirmity in the order of the ld. CIT (A) on this issue and accordingly we hereby direct the Ld. AO to examine the issue afresh providing proper opportunity to the assessee of being heard. Appeal No.962/H/2014 (AY: 2009-10): (Revenue s appeal) 118. Ground No.(i) Deduction under section 10B of the Act for ₹ 14,22,28,086/-. 119. Since the issue is already adjudicated on the identical facts in the Revenue s appeal for the AY 2008-09 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue. 120. Ground No. (ii): Disallowance of additional depreciation of ₹ 66,53,865/-. 121. Since the issue is already adjudicated on the identical facts in the Revenue s appeal for the AY 2006-07 and 2008-09 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue. 122. In the result, all the assessee s appeals are partly allowed for statistical purposes and the Revenue s appeals are dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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