9911796707
TMI Blog2022 (1) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... te its case. We therefore find force in the contention of the learned DR that the CIT(A) without any valid evidence that the machineries existed and that R D was carried out by the Assessee, merely allowed the claim of the Assessee on the basis of a finding that incomplete enquiries were made by the AO. As rightly submitted by him there was not a shred of evidence filed by the Assessee even before CIT(A) to establish with cogent evidence as to how the conclusions of the AO based on outcome of Survey proceedings and enquiries from the purchasers and their whereabouts were not correct. Without such evidence, the CIT(A) ought not to have deleted the addition made by the AO. The reference to invoices and description of machineries mentioned therein is of no avail because the invoices were found to be bogus and the machineries found not existing at the time of survey. The CIT(A) has wrongly placed the burden of proving that the Assessee did not carry out R D on the Revenue, when it was on the Assessee to prove its case. CIT(A) is not sustainable and the same is reversed and the order of the AO is restored on this issue. The reasoning for restoring the addition made by the AO disallowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Shri. Sumeer Kumar Singh, CIT(DR)(ITAT), Bengaluru ORDER PER BENCH: ITA No.1232/Bang/2005, 627 & 628/Bang/2009, 950 & 951/Bang/2009 are appeals by the Revenue against orders of CIT(A) for AY 2002-03 to 2005- 06 respectively and CO 6 to 10/Bang/2021 are cross objections by the Assessee in those appeals. ITA No.90/Bang/2008 is an appeal by the Revenue against the order of CIT(A) for AY 2002-03 whereby the CIT(A) cancelled the order of the AO imposing penalty on the Assessee u/s.271(1)( c) of the Income Tax Act, 1961 (Act). All these appeals involve common issues and hence were taken together for hearing. We deem it convenient and proper to pass a common order. 2. First we shall take up for consideration ITA No. 1232/Bang/2005 as a lead case and this appeal by the Revenue against the order dated 31.5.2005 of CIT(A), Gulbarga, relating to AY 2002-03. 3. The issues that needs to be adjudicated in this appeal are as to whether the CIT(A) was justified in deleting the addition made by the AO by disallowing deduction of Capital Expenditure u/Section 35(1)(iv) read with section 35(2) of the Income Tax Act, 1961 (Act) of a sum of ₹ 10,13,29,425/- and whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of capital expenditure incurred by the Assessee. The Assessee filed details of invoices and bills for purchase of plant & machinery and lab equipments. The name of the firm and the amount purchases from each of them was as follows: 1. M/S.Sparco Engineering Works ₹ 90,18,125 2. M/S.Hema Engineering Industries ₹ 1,13,98,125 3. M/S.Vision Metals ₹ 89,92,500 4. M/S.SCS Petro Products ₹ 84,92,500 5. M/S.Saradhi Engineering ₹ 98,44,562 6. M/s.Hi-Watt Power Systems Rs, 98,21,750 7. M/S.Sangram Castings ₹ 97,39,738 8. M/S.Sri Mythili Enterprises ₹ 1,00,40,000 9. M/S.Reliable Engineering Co. Rs, 1,35,37,500 10. M/S.Srinivas Industries ₹ 1,07,00,000 ₹ 10,15,19,425 6. To verify the genuineness of the bills/invoices furnished by the Assessee in respect of capital expenditure incurred for R& D Purposes, the AO sent letters to 7 parties to confirm the purchase bills/invoices and also to file the ledger extract of the company. In response to the above letter confirmation letters were received from the 7 persons. Similar letters were sent by the Assessee to the remaining 3 parties also and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R & D Block in this factory premises. It consisted of 2 blocks viz., R & D Block and One Kilo Block. R & D Block was a hall measuring 15ft. x 20ft. while the Kilo Block measured 10ft. x 20ft. Going by the smallness of the R & D Block, the Survey team concluded that it is impossible to install Plant & Machinery claimed to have been purchased and used by the Assessee in carrying out scientific research. 10. In the Survey at the Corporate Office at Secundrabad, AP, the Chairman and MD Shri.Venkat R.Kaluvakolanu was not available but Vice-President (Finance) one Mr.P.Veerabhadra Rao was available. He was confronted regarding purchase of Plant & Machinery for scientific research on which deduction was claimed u/s.35(2)(ia) of the Act. He admitted that the entire transactions shown under the head R & D expenditure are bogus and the parties from whom Plant & Machinery was claimed to have been purchased do not exist. He admitted to have made bogus claim for deduction as above and that the bills are all fabricated. 11. There were also admission that the entities which purported to supply machineries to the Assessee were floated by the Assessee in the name of its employees and payments fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deduction u/s.35(2)(ia) of the Act was genuine and that the statement of P.Veerabhadra Rao, was recorded under pressure. 14. The AO finally issued a show cause notice dated 17.3.2005 pointing out that the following expenditure claimed as deduction u/s.35(2)(ia) of the Act for the AY 2001-02 to 2004-05 are bogus and the Assessee was asked to file his explanation by 24.3.2005. A.Y. 2002-03 Capital expenditure 101 329,425 As per Annexure-5 Revenue expenditure 32,446,250 As per Annexure-6 A.Y.2003-04 Capital expenditure 16,238,646 As per Annexure-7 Revenue expenditure 28,693,750 As per Annexure-8 A.Y. 2004-05 R&D expenses 65 181,550 As per Annexure-9 A.Y. 2001-02 Capital expenditure P&M equipment purchase Meganet Engineering 35,231,412 As per Annexure-10 ESSEM Equiptech 29,787,282 Asper Annexure-10 Total 308,908,315 15. Another letter dated 18.3.2005 calling for explanation was also issued. Mr.R.Venkat Kalavakolanu, Chairman & MD sent a reply dated 25.3.2005 to the AO stating that the time allowed for compliance was too short and wanted another week's time to file a reply. The AO rejected the plea for grant of time and proceeded to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to transport agencies. As seen from the profit and loss account furnished by the company in schedule-E, manufacturing, administrative and selling expenses. The company has claimed expenditure for carriage inwards of ₹ 9,68,0571-. These expenses are claimed for the entire year for goods purchased including supply of materials for production of drugs. As seen from the ledger extract of the inward expenses, it is seen that transport expenses for purchase of P&M and raw materials are not reflected in the books of accounts separately. Neither the goads are purchased nor received at the factory, hence the transport expenses are not claimed in the books of accounts. After verifying al! the details, bills / invoices, bank accounts, sworn statement of the employees and bogus confirmation letters it is found out that the entire claim of R&D expenses is false. The CMD and Shri P.Veerabhadra Rao, Vice President (Fin.) have knowingly planned in such a way to manipulate the accounts of the company and to defraud the revenue to avoid the taxes by claiming false expenditure for R&D purpose. The bills furnished when cross verified it is found out that they are non-existing firms, bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tific research at the time of survey by the employees was incorrect as they were not aware of the technical name of the equipment and could not identify the equipments found in the bills and invoice. 4. Survey warrant issued by the AO who had jurisdiction only over Gulbarga and Bidar Districts of Karnataka, to carry out survey at AP was legally not valid as he did not have territorial jurisdiction. 5. The Assessee gave details of the dates on which the various documents used agains the Assessee were given by the AO, which were as follows: Item of information / document used Date of receipt 1. Statement recorded on oath of Sri T.V.Narasa Reddy 30.3.2005 2. Statement recorded on oath of 30.3.2005 3. Statement recorded on oath of Smt. V.K.Saipriya 30.3.2005 4. Response of postal dept. in respect of service of letter on Srinivasa Ind. Through DCIT letter dt 18.3.2005, served on C&MD on 24.3.2005 (on hospital bed). 5. Response to postal department in respect of service of lettelr on Reliable Engg. 6. Response of postal Department in respect of service of letter on Mythili Enterp. 7. Response of postal department in respect of service of letter on Hi-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Cold Chamber and Clear rooms, Analytical Instruments and Lab Equipments and Glassware does not have life more than one year, after continuous operations. Hence, they have to be discarded for the lack of further utility. Equipments like Condensers, Dryers, Centrifuges, Reactors etc., are being re-modified after taking some Research and Development trials. These equipment have been designed in such a way to cater to the company's future developments in small volumes, after research and development trials. Hence, these equipment are modified for as higher capacities where controls, service fittings, fines for the equipment changing all the tubes, pipe fittings for condensers. Hence, higher batches of Research and Development small volume production can be taken. Vice President (Prod.) is incharge of day to day production activities of the Company and has very negligible knowledge of the Research and Development activities undertaken by the Company which are highly confidential. The company is in to Research and Development for the last 10 years and developed many products earlier years also the company has claimed the research expenses and those assessments are already complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipments not found at the time of survey was ever given to the Assessee. He held that the survey conducted on 24.2.2005 cannot be the basis to conclude regarding physical presence of Plant and Machinery in R & D department in FY 2001-02. 4. That the AO has failed to understand the complicated nature of R & D carried out by the Assessee. The observations of the CIT(A) in this regard were as follows: "It is quite apparent that the A.O. has been completely oblivious of various relevant facts arising out of highly technical nature of research activities eg. the technical name of the asset as mentioned in the purchase bill / invoice may not always tally with its common name or regular usage name adopted by the workers. In industry , it is not uncommon to call a distillation column as evaporator / seperator or a heat exchanger as condenser. Similarly a purchase bill may describe an item as autoclave but it may still be called commonly as a reactor. In his submission dated 9.5.2005 ate CMD of i7ippellint co. has confirmed that equipments like glass set apparatus, analytical balances, Lyophilizers, cold chamber and clear rooms, analytical instruments, lab equipments and glassware do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such a sworn statement from a person having no role in R&D cannot have any material bearing on the company and cannot vitiate the claims made by the appellant in respect of capital expenditure and revenue expenditure on R&D activities. 6. On the comments of the AO regarding the size of the R & D Building, the CIT(A) held that the value of machinery and the smallness of the building has no correlation. 7. He accepted that the statements obtained at the time of survey were obtained in very inhospitable conditions and were therefore not reliable. He also held that whatever be the deficiency in the statement like the person in charge of the affairs not knowing the name of suppliers or about machinery used for R & D etc., have to be ignored because the statements were obtained by exercising pressure. He accepted the retraction of the statement in the form of affidavit of the person who made statement at the time of survey retracting the same. He also held that the AO should have re examined all the persons in the course of assessment proceedings also. 8. Regarding the results of enquiry by the AO about the non existence of the suppliers of the plant and machinery, the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings in respect of new additions made to fixed assets. To sum up, the findings of A.O. that the appellant co. had claimed fraudulently a) false capital expenditure on R&D at ₹ 10,13,29,425/- on purchase of plant and machinery b) bogus revenue expenditure on R&D for purchase of raw materials / chemicals at ₹ 3,24,46,250/- and c) depreciation at ₹ 22,92,940/- on the basis of bogus bills / invoices have been rejected on facts of the case after having due regard to the merits of the issues involved. And hence I do not consider it necessary to quash the entire assessment order even when there are certain glaring instances of denial of natural justice to the appellant company. All the five grounds of appeal are answered in favour of appellant company. The A.O. is accordingly directed_ to grant suitable relief to the appellant company and after taking due note of the disallowance sustained at ₹ 1,56,470/-." On identical reasoning the disallowance of depreciation was also deleted. 20. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. As already stated the issues that was remanded for fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve gone through each one of the documents with reference to the rival legal submissions made by the learned counsels for the parties to find out the correctness of the same. The Assessing Officer in his assessment order has made certain observations after carefully verifying the documents in the course of the proceedings, he has directed the Assessing Officer obtained details from the Auditor, who has represented the Assessee before me in the proceedings and considered the details regarding the mode of payment, cheque number, name of bank, branch and date of payment by serving a letter dated.21.1.2004 to furnish the particulars in whose name the cheque was issued in respect of the machineries alleged to have been purchased from the suppliers situated in Secunderabad. Again by another letter dated 25.2.2004, he has specifically directed the assessee to furnish the details regarding the mode of payment made to the suppliers in respect of machineries, on 4.3.2004, personal appearance was made by Sri Srinath and Sri P.V. Rao on behalf of the assessee. No details were furnished by them as directed by the Assessing Officer. Even on 12.3.2004 they appeared and did not produce evidence reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass through many officers for approving the same and also for getting quotations from various parties, this has not been done by the assesee company. Further it is rightly observed by the Assessing Officer regarding the details of invoices that they are only quotations obtained by the assessee from the suppliers and nowhere they have mentioned the nature or date of payment. numbers that supplied the machineries etc except saying that the matter relating to R & D is most confidential and cannot be divulged to anybody. The Assessing Officer has further observed that only particulars of the person incharge of R & D who made a request for purchase if necessary equipment and the details of the suppliers for supplying the machineries were needed and he was not interest in the formula or any other thing. 13. The Assessing Officer after appreciation of facts & material evidence on record produced by the assessee, he came to the right conclusion and held that the purchase of R & D machineries, they were required to be transported from Secunderabad, which is in Andhra Pradesh to the Karnataka State of Bidar. The provisions under Section 28A, 28AA, and 28B for transport of machineries are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essingOfficer on the confirmation letters said to have been issued by the suppliers which is referred to by him in his order at page No.10 produced as Annexure-C before us, the same reads as under. "The above two companies who have supplied machineries to my assessee runs into crores of rupees. If a sales worth crores are made to a single company, it must be a big enough to supply the equipments to other companies also. It is surprising to note that a company who is carrying on such a big volume of business is not traceable. I have also asked the assessee company itself to file the confirmation, if any, obtained from the companies who have sold The machineries to them. This has also not been done. The assessee was told about the returning of letters of two concerns from whom they purchased machineries and asked to furnish the correct address and also proper confirmations. The letters filed by the assessee on 12.3.2004 though bears letter pads of the two concerns, it is interesting to note that even no telephone number or nature of the proprietorship who signed the letter was available. In this background returns of letters by postal authorities give rise to a reasonable finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den of proving that the Assessee did not carry out R & D on the Revenue, when it was on the Assessee to prove its case. He submitted that it was the Assessee to prove its case and it cannot pick holes in the insignificant procedural lapses, if any, on the part of the AO and seek to make a claim for deduction. It was also highlighted by him that in the later order of the Hon'ble Karnataka High Court by which this appeal was remanded to the Tribunal for consideration, this earlier order of the Hon'ble Karnataka High Court was not brought to its notice. He therefore submitted that the appeal of the revenue has to be allowed on the two issues remanded for consideration by the Tribunal. 23. We have considered the submissions and the material on record. The sequence of events in the course of assessment needs to be examined to find out whether the case made out by the AO can be sustained on the basis of probabilities. The Assessee did not file return of income voluntarily. A notice u/s.142(1) of the Act was issued by the AO on 6.3.2003 calling upon the Assessee to file return of income. The Assessee filed the return of income on 25.2.2004. The return was processed u/s.143(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis that the AO did incomplete enquiry. There was no material whatsoever produced by the Assessee to disprove the conclusions drawn by the AO and positively prove that it purchased machineries in question for R & D and that it carried out R & D activities. In such circumstances, the CIT(A) in our view fell into an error in deleting the addition made by the AO. Perusal of the order of the CIT(A) reveals that the CIT(A) has made observations that the AO could have adopted a better course than what he did, but does not go further and call upon the Assessee to produce evidence to substantiate its case. We therefore find force in the contention of the learned DR that the CIT(A) without any valid evidence that the machineries existed and that R & D was carried out by the Assessee, merely allowed the claim of the Assessee on the basis of a finding that incomplete enquiries were made by the AO. As rightly submitted by him there was not a shred of evidence filed by the Assessee even before CIT(A) to establish with cogent evidence as to how the conclusions of the AO based on outcome of Survey proceedings and enquiries from the purchasers and their whereabouts were not correct. With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been addition to the fixed assets to the extent of ₹ 16,20,85,711/- during the relevant previous year by the Assessee. The AO made enquiries found that the claim of having purchased fixed assets was fictitious and hence he disallowed claim of the Assessee for depreciation of a sum of ₹ 3,10,16,050/-. In AY 2002-03, the Assessee claimed to have purchased assets during the relevant previous year and such purchase to the extent of ₹ 96,08,994/- was found to be bogus and therefore the AO disallowed 25% depreciation resulting in a disallowance of ₹ 24,02,248/- as depreciation in AY 2002-03. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2003-04 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of ₹ 18,01,687 being 25% of ₹ 72,06,746/- was disallowed by the AO. The CIT(A) allowed the claim of the Assessee for deduction and hence the appeal by the revenue before the Tribunal, raising the following grounds of appeal: 1. The Order of CIT(A) is opposed to Law and the facts of the case as brought out by the AO on various issues dealt by him in the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on for the reasons explained therein. In fact, the reasons given for not carrying on the Research Work are only self-serving. The CIT(A) ought to have appreciated the fact of admission by the assessee that no Research Work was done by the Company coupled with the facts established by the AO that the purchase invoices are bogus, which goes against the assessee. 7. The CIT(A) has erred in coming to a finding that the AO after collecting information has not given opportunity to the assessee without appreciating the fact that an opportunity was provided by the AO which was not made use of fully by the assessee and only two of the trusted employees-cum-vice presidents, who were faithful to the master were produced for re-verification and not other parities. 8. The CIT(A) has erred in allowing relief after giving a finding that investigation of the matter is at the half-investigated level. Before giving such a finding the CIT (A) using his inherent powers could have caused enquires/ investigations through the A.O.obtaining a remand report. 9. The CIT(A) has failed to appreciate the fact that summons u/s131 could not have been issued by the AO to the parties from whom P&M and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 no. 3,80,000 9 Pumps for process, vacuum, services 5,00,000 10 Lab Reaction Set, Ups All Glass for Q.C. and 7,50,000 11 Process Control Instruments etc. 7,83,640 Total 16,238,640 30. The enquires done by the AO and the result of such enquiry on the whereabouts of the aforesaid vendors was as follows: S. No. Name and full addresses of party as per the bills furnished Details of outcome after making the enquiries 1. M/s. Swati Engineering, Plot No.75/3, Phase VI, Industrial Development Area, Jeedimetla, Hyderabad-500 055 Tel No. 23099449 Detail enquiries were made to locate such firm and its address but it could not be found. Enquiries with nearby residents to trace out the party also did not yield any fruitful result. The inmates of the said address could not identify any such party or any firm with such name. However, the phone number given by the assessee was found to be of a small time STD booth owner who over phone informed that some people about 3-4 years back have sought their phone number for which he consented but he informed that he is now not in touch with those people. When the enquiry team visited his office, he was not available as he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase Amount is Rs. 1 Supreme Corporation No.253, Mahaveer Dham Society Part-II Nava Poshad Glass Liner assembly 11-04-02 4,932,000 2 Same as above S.S. Reactor of 500 & 1000 litres 17-05-02 5,283,000 3 Same as above Stainless Steel Reaction Unit 21-07-02 3,870,000 4 Same as above Same 12-09-02 3,375,000 5 Same as above Same 09-10-02 3,924,000 6 Same as above Ultra Centrifuge 11-12-02 4,080,000 7 Same as above Stainless Steel Reaction Unit 28-01-03 5,068,800 8 Same as above Lab Instruments 15-03-03 6,853,125 9 Royal Engineering Corporation 4 Hari Bhavan, Sivaram Lalwani Road, Behind Jain Mandir, Mulund, Quality Control Instruments and Quality Assurance Instruments 16-06-02 5,304,000 10 Same as above S.S. Membrance Filters and Crystelisers 22-08-02 3,456,000 11 Same as above S.S. Heat Distillation Unit etc. Exchange, 13-10-02 5,035,200 12 Same as above Lyophilizer and laminar flow cabinets 21-12-02 5,670,900 13 Same as above Fluid Heaters ans MS 07-01-03 2,448,000 14 Panama Enterprises, G- 3, Dev Hira Complex, Near Telephone Exchange Road, Brine Chiller and Ultra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total bills furnished 162,138,755 33. The bills had defects like figures being in round sum etc. The Assessee failed to produce parties for examination by the AO. The AO made enquires on his own and the outcome of such enquiry has been tabulated as follows by the AO in the order of Assessment: DETAILS OF OUTCOME OF THE ENQUIRY IN RESPECT OF PURCHASES OF PLANT AND MACHINERY FOR ₹ 16,20,85,711/-. S. No. Name and address of seller Amount in Rs. Outcome of the enquiry conducted 1 M/s Deep Engineering Works, No.19, Nataraj Chambers, Bardan Street, Dane Pith, Rajkot 36,761,640 The enquiries revealed that no such firm is functioning in the said address. The name board were showing some other firms in the names of M/s Deep Traders,2) M/s Dream Enterprises and 3) M/s Master Sales Net Work. Enquiries revealed that the shop is owned by one Shri Jayesh Bhai who is doing mainlythe business of sale of biscuits and other bakery products. So, it is clear that no firm dealing in sale of plant and machinery is existing at such an address and never existed. 2 M/s Dream Enterprises, Sri Ram Park, Lane No.2, Kuvadva Road, Near Aashram, Rajkot 36,546,680. This address w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to fixed assets during the previous year should not be disallowed. Since there was no response, the depreciation claim to the extent of ₹ 3,10,16,050/- was disallowed by the AO. 35. In AY 2002-03, the Assessee claimed to have purchased assets during the relevant previous year and such purchase to the extent of ₹ 96,08,994/- was found to be bogus and therefore the AO disallowed 25% depreciation resulting in a disallowance of ₹ 24,02,248/- as depreciation in AY 2002-03. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2003-04 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of ₹ 18,01,687 being 25% of ₹ 72,06,746/- was disallowed by the AO. 36. The aforesaid four additions were deleted by the CIT(A) for identical reasons given by the CIT(A) in the appellate order for AY 2002-03 and by following the said order, which we have elaborately discussed while deciding the appeal of the Assessee for AY 2002-03. 37. The arguments advanced are identical to the one's advanced in the appeal for AY 2002-03. We have considered the same and are of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have been addition to the fixed assets to the extent of ₹ 14,90,64,625/- during the relevant previous year by the Assessee. The AO made enquiries found that the claim of having purchased fixed assets was fictitious and hence he disallowed claim of the Assessee for depreciation of a sum of ₹ 2,20,06,294/-. In AY 2002-03 & 2003-04, the Assessee claimed to have purchased assets during the relevant previous year and such purchase partly were found to be bogus and therefore the AO disallowed 25% depreciation resulting disallowanceof depreciation in AY 2002-03 & 2003-04. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2002-03 & 2003- 04 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of ₹ 13,51,265 and 3,27,58,414 for AY 2002-03 & 2003-045 had to be disallowed by the AO. The CIT(A) allowed the claim of the Assessee for deduction as he held that the purchases were genuine and hence the appeal by the revenue before the Tribunal, raising the following grounds of appeal: 1. The Order of CIT(A) is opposed to Law and the facts of the case as brought out by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The CIT(A) has erred in holding that the AO has given a conclusion that the entire activity of the Assessee is bogus and made additions without appreciating the correctness of the submission made by the assessee before the CIT(A) that the Research Work was not going on for the reasons explained therein. Infact, the reasons given for not carrying on the Research Work are only self-serving. The CIT(A) ought to have appreciated the fact of admission by the assessee that no Research Work was done by the Company coupled with the facts established by the AO that the purchase invoices are bogus, which goes against the assessee. 7.The CIT(A) has erred in coming to a finding that the AO after collecting information has not given opportunity to the assessee without appreciating the fact that an opportunity was provided by the AO which was not made use of fully by the assessee and only two of the trusted employees-cum-vice presidents, who were faithful to the master were produced for re-verification and not other parities. 8.The CIT(A) has erred in allowing relief after giving a finding that investigation of the matter is at the half-investigated level. Before coming to such a findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve mentioned plot number. The assistants working in the 0/o GIDC, Vapi have confirmed that no such supplier/concern ever functioned in the given address. The ITI also tried to obtain details from the phone number printed in the bill and it was found that the phone belongs to some residential house. Therefore it is clearly established once again that no such supplier/concern is existing and it has never existed and the claim of the assessee is bogus. 2 M/s Prosol Scientific Instruments, No.1455, Phase IV, GIDC Industrial Area, Vatva Ahmedabad 28,037,200 The ITI could not find any such supplier. As no such supplier was found, efforts were made to locate by obtaining help from Office of Deputy Superintendent, GIDC, Vatva. On going through the address given in the bill, he informed that no such concern is functioning in the entire industrial area. After going through the area and site map of the entire industrial area, no such address such as plot number 1455 in Phase IV was found. As per the records available in the office of GIDC, Vatva Ahmedabad, the Phase-IV of the industrial area starts with plot number 4000. Therefore it is proved that the assessee has furnished a bogus bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed that no such supplier/concern existed and the claim is false. 6 M/s Puissance DE DPK, No.167/10, Bashyam Nagar, Cuddalore-607 001 443,000 The ITI could not found any such supplier in the said address. He could locate the address. It was found that the office of Deputy Inspector General of Registration, Cuddalore Zone, Cuddalore was functioning in that place. The assistants working in that office have revealed that that office is functioning in the said address sinch a long time and no concern with such name has functioned there. The IT1 took the help of post office having jurisdiction over the area and came to know that the post office has not come across any such concern. It was therefore again proved that there is no such supplier and claim of the assessee is bogus. 43. The AO confronted the Assessee with the results of the enquiry and asked to show cause why the claim of depreciation on the addition to fixed assets during the previous year should not be disallowed. Since there was no response, the depreciation claim to the extent of ₹ 2,20,06,294/- was disallowed by the AO. 44. In AY 2002-03 & 2003-04, the Assessee claimed to have purchased assets during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of capital expenditure) laid out or expended on scientific research related to the business, which was disallowed by the AO. The AO also disallowed depreciation claimed assets which were claimed to have been addition to the fixed assets to the extent of ₹ 17,49,64,543/- during the relevant previous year by the Assessee. The AO made enquiries found that the claim of having purchased fixed assets was fictitious and hence he disallowed claim of the Assessee for depreciation of a sum of ₹ 2,14,68,445/-. In AY 2002-03 & 2003-04 & 2004-05, the Assessee claimed to have purchased assets during the relevant previous year and such purchase partly were found to be bogus and therefore the AO disallowed 25% depreciation resulting disallowanceof depreciation in AY 2002-03 & 2003-04 & 2004-05. The opening written down value (wdv) of the assets on which depreciation was claimed by the Assessee in AY 2002-03 & 2003-04 & 2004-05 on the same item of machinery had to be reduced and as a consequence the depreciation of a sum of ₹ 10,13,449, ₹ 2,45,68,811 and ₹ 3,17,86,843 for AY 2002-03 & 2003-04 & 2004-05 respectively had to be disallowed by the AO. The CIT(A) all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully utilized by the assessee and only two of the trusted employees, supposed to be vice presidents, Who were faithful to the master were produced for reverification and not other parties. 8) CIT(A) has failed to appreciate the fact, that the summons u/s 131 issued to parties for supply of plant and machinery and other equipments was not correct, this was done as a last resort as the independent enquiry and verification done at the given address did not exist. 9) It is very important to note here that the honourable high court of Karnataka, has upheld the decision of the A.O., for the Asst. year 2001-02, on similar issues decided the appeal in favour of Revenue. 10) The appellant craves to leave, add, alter, amend or delete any of the Grounds on or before hearing of Appeal. 50. In AY 2002-03, the revenue expenditure claimed by the Assessee u/s.35(1)(i) was allowed by the ITAT in it's order dated 30.11.2009 prior to the order of the Hon'ble Karnataka High Court dated 1.10.2010 remanding the issue of deduction u/s.35(2)(ia) of the Act to the tribunal pursuant to which we have rendered decision in the earlier part of this order. In the said order the Tribunal held that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s during the financial year under consideration and therefore the onus of proving its transactions also lies on the assessee. Therefore in the show cause letter a proposal was issued to disallow the claim of depreciation. As no information has been furnished, I proceed to disallow the claim of depreciation of these 4 items total amounting to ₹ 11,21,389/- and add to the income available. This amount of addition prima facie appears to be satisfying to the conditions requiring initiation of penalty proceedings u/s 271(1)(c). As regards the claim of depreciation of ₹ 2,03,47,056/-is concerned, it has been elaborately discussed that the claims of new additions for plant and machinery have been immensely proved bogus in all preceding assessment years. Further the survey proceedings u/s 133A which is very much relevant for the financial year under consideration has also clearly proved that the assessee has not purchased any major plant and machinery. The assessee is having 2 factories at Bidar and in Village Cheriyal. If any plant and machinery is really purchased, the same can be installed either in factory situated at Bidar or in village Cheriyal. The factory incharge at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery had to be reduced and as a consequence the depreciation of a sum of ₹ 10,13,449/-, ₹ 2,45,68,811 and ₹ 3,17,86,843/- for AY 2002-03, 2003-04 and 2004-05 was disallowed by the AO. 53. The aforesaid additions were deleted by the CIT(A) for identical reasons given by the CIT(A) in the appellate order for AY 2002-03 and by following the said order, which we have elaborately discussed while deciding the appeal of the Assessee for AY 2002-03. 54. The arguments advanced are identical to the one's advanced in the appeal for AY 2002-03. We have considered the same and are of the view that the conclusions arrived at in AY 2002-03 on identical issue will apply to the present AY 2005-06 also. For the reasons stated therein, we allow the grounds of the revenue with regard disallowance of depreciation claimed on assets which were claimed to have been addition to the fixed assets during the relevant previous year by the Assessee of a sum of ₹ 2,14,68,445/- and upheld and restore the order of the AO. The addition of depreciation on account of opening wdv being revised owning to findings in AY 2002-03 & 2003-04 & 2004-05 that purchase of fixed assets to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld CIT(A. In the instant case, the view taken by the ld CIT(A) deserves to be reversed keeping in view the judgment of Hon'ble Karnataka High Court in the case of D. Komalakshi(supra), wherein, the Hon'ble High Court held as under: 'After hearing, we have carefully perused the material on record. Both the appellants have filed the return after the search and seizure in terms of the material on record. The returns were considered by the Assessing Officer and thereafter, adverse orders were passed by him. When the same were challenged before the Appellate Commissioner, the Appellate Commissioner by a detailed order, has chosen to hold that the appeals filed by the assessees are not maintainable in terms of section 249(4) of the Act. When the same was challenged before the Tribunal, the Tribunal has accepted the order passed by the Commissioner. Thus, we have to see as to whether the order of the Commissioner, confirmed in the appeal before the Tribunal is sustainable or not in terms of the material placed before us or in terms of the submission made by learned counsel for the assessees. Section 249 of the Act provides for "Form of appeal and limitation' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Commissioner or in the order of the Tribunal. The orders are therefore, accepted by us in the case on hand, particularly, in the light of the admitted facts in terms of the return and in terms of the submission as we see from the material on record. Under the circumstances, we hold that both the appeals are liable to be rejected by answering the questions of law against the assessees."' 58. In our considered view, the decision of the Hon'ble High Court, referred to above, is squarely applicable to the facts of the present case. In the said case, the ld CIT(A) had admitted the appeals despite the fact admitted taxes on income returned was not paid and therefore the said appeal was not maintainable in the light of section 249(4) of the Act. We therefore quash the order of the CIT(A) and allow the appeal of the Revenue and restore the order of the AO. The other grounds of appeal does not require any adjudication in view of the decision regarding maintainability of appeal before CIT(A). 59. In the result, appeal by the Revenue is allowed. ITA No. 990/Bang/2008: 60. This is an appeal by the Revenue against the order dated 11.3.2008 of CIT(A), Hubli, del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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