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TMI Blog2020 (5) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... s also consist of bills for repairs, replacement of parts, custom duty, flooring and plaster. Keeping in view the nature of the expenditure, it cannot be treated as capital expenditure. The repairs to machinery and replacement of membrane filters or expenses which are regularly incurred in the manufacturing process and cannot be treated as capital expenditure in nature. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. Regarding the disallowance which are related to these revenue expenditure which were disallowed by the Assessing Officer without bringing anything on record is also hence liable to be deleted. Disallowance on account of Coal purchases - The payments have not been disputed and there was no record of any amounts or kick back received from VCM to the assessee. Since, VCM and the assessee were not related concern as per the provisions of Income Tax Act, no passing of the profits could also be attributable. In the absence of any evidence as to non-supply of the material (coal) and in the absence of any evidence that the purported excess money paid has been received back by the assessee, the amount of addition made on the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the computation of income. 3. During the assessment proceedings, the notices issued by the AO u/s 133(6) of the Income Tax Act, 1961 have been returned back with the remarks that no such entity exists. Based on the revisit of the notices, the Assessing Officer made addition of ₹ 87,95,000/- being 20% of the purchases of ₹ 4,39,75,000/- from one entity namely, M/s Vaibhav Coal Movers owing to non-substantiation of the purchases made. After passing of the assessment order, the Assessing Officer received information regarding the said purchases along with bank statements based on which the Assessing Officer passed an order of rectification u/s 154. Vide rectification order u/s 154, dated 19.05.2014, the AO has brought to tax the entire amount of purchases of ₹ 4,39,75,000/- made from M/s Vaibhav Coal Movers. 4. Aggrieved, the assessee field appeal before the ld. CIT (A) on the grounds that the action of the Assessing Officer is beyond the scope of powers for rectification u/s 154. 5. The ld. CIT (A) deleted the addition made u/s 154 on the grounds that the Assessing Officer has failed to accord an opportunity while enhancing the assessed income and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pehditure on account of purchases of coal through M/s. Vaibhal Coal Traders and this amount withdrawn from bank and was returned to the assessee company. The relevant details of bank account in both the companies are reproduced hereunder: Sl. No. Date Name Deposit (Amount in Rs.) Cash withdrawal from bank Vijeta Coal Traders 1. 21.07.2010 Vaibhal Coal 6,00,000 6,00,000 2. 21.07.2010 Vaibhal Coal 5,64,863 5,64,863 3. 28.07.2010 Vaibhal Coal 7,00,000 4. 28.07.2010 Vaibhal Coal 6,00,000 5. 29.07.2010 Vaibhal Coal 7,00,000 6. 29.07.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.08.2010 Vaibhal coal 14,29,628 8. 28.08.2010 Vaibhal Coal 14,50,000 9. 28.08.2010 Mughal Sarai 75,000 10. 28.08.2010 Mughal Sarai 7,79,620 11. 28.08.2010 Mughal Sarai 7,00,000 12. 28.08.2010 Mughal Sarai 74,900 13. 30.08.2010 Mughal Sarai 7,00,000 14. 30.08.2010 Mughal Sarai 7,00,000 15. 01.12.2010 Vaibhal Coal 13,89,408 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts is not determinative of the question whether the assessee has earned any profit or suffered any loss, but what is necessary to be considered is the true nature of the transactions. Perusal of above and other judicial decision so that the assessee has been avoiding to reveal true nature of its transactions and transactions were definitely in the nature of suspicious transactions. The material available on records, human conduct preponderance of probability clearly prove that the assessee company has claimed excessive/bogus expenses on account of purchase of coal and by making payment through bank account received the same from the concerned parties in cash. The purchases of coal as noted above has been proved bogus therefore the purchases of ₹ 4,39,75,256/- in the case of remaining parties was rightly added in tire assessment order as unverifiable /bogus purchases. The mistake being apparent from record within the meaning of section 154 therefore the same is hereby rectified and added back to the total income of the assessee company. Since the assessee has filed incorrect particulars of its income, penalty proceedings under section 271(1)(c) have been initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer shall make any refund which may be due to such assessee or the deductor 72[or the collector].] (6) Where any such amendment has the effect of enhancing the assessment73 or reducing a refund 74[already made or otherwise increasing the liability of the assessee or the deductor 75[or the collector], the Assessing Officer shall serve on the assessee or the deductor 75[or the collector], as the case may be] a notice of demand in the prescribed form specifying the sum payable76, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 18677 no amendment under this section shall be made after the expiry of four years 78[from the end of the financial year in which the order79 sought to be amended was passed.] [(8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee [or by the deductor] [or by the collector] on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter proceeding for rectification. 14. Apparent from record signifies, a mistake which is obvious, patent and discernable from the record available which is a subject matter of rectification. Any debatable point cannot be considered as a mistake apparent from record. The word apparent mistake denotes an obvious, plain, evident, noticeable or visible error. An apparent mistake is glaring, obvious, self-evident and should be free from debate. 15. From the above facts and provisions of the Act, we find that the Assessing Officer has taken into consideration the material and the outcome of the enquiries received subsequent to conclusion of the assessment proceedings. Hence, it cannot be held that the action of the Assessing Officer of rectifying the mistake do not emanate from the record of the Assessing Officer available at the time of assessment. Ergo, it cannot be held to be a mistake apparent from the record rectifiable u/s 154. There are other provisions enshrined in the Act to bring the amounts to the tax fold which are based on the replies received for the queries raised during the assessment proceedings but such action cannot be resorted to under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,14,720/- was made on ad-hoc basis which was infact replacement of parts of the existing machinery and allowable as repairs to machinery. On perusal of assessment order, we also find that the Assessing Officer has given no reason for disallowance of ₹ 2,14,720/-. The bills have been short listed only an amount of ₹ 5,18,000/-. The short listed bills also consist of bills for repairs, replacement of parts, custom duty, flooring and plaster. Keeping in view the nature of the expenditure, it cannot be treated as capital expenditure. The repairs to machinery and replacement of membrane filters or expenses which are regularly incurred in the manufacturing process and cannot be treated as capital expenditure in nature. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. 20. Regarding the disallowance of ₹ 2,14,720/- which are related to these revenue expenditure which were disallowed by the Assessing Officer without brining anything on record is also hence liable to be deleted. Disallowance on account of Coal purchases: 21. Brief facts of the case are that the Assessing Officer observed that the assessee company was using ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Movers (VCM) of ₹ 7,600/- per metric ton (PMT) whereas the VCM in turn procuring the coal from Aditi Enterprises and Other affiliated dealers @ ₹ 4,000 PMT. The supply of the coal per se has not been in dispute. The assessee has entered into an agreement with VCM for supply of coal at ₹ 7,650 PMT. The agreement is inclusive of al l indirect expenses, labour cost, loading unloading cost, transportation from mining area to the factory premises. The sales tax and the octrai payments are to be borne by VCM as per the agreement. Thus, the amount of ₹ 7,600/- paid by the assessee to VCM includes the bare cost of the coal and the other allied expenses such as transportation and labour. The payments have not been disputed and there was no record of any amounts or kick back received from VCM to the assessee. Since, VCM and the assessee were not related concern as per the provisions of Income Tax Act, no passing of the profits could also be attributable. 26. In nutshell , in the absence of any evidence as to non-supply of the material (coal) and in the absence of any evidence that the purported excess money paid has been received back by the assessee, the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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