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TMI Blog2022 (5) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... lso notice that the AO has also not effectively dealt with legal effect of the retraction of the sworn statement given by Shri Shyama Raju. However, we do not find it necessary to deal with these questions for the reasons discussed in the ensuing paragraphs. Be that as it may, we noticed that the assessing officer did not make any addition with regard to the URD purchases, which were considered to be bogus or inflation of expenses, in the respective years. In our considered view, without making addition of alleged bogus/inflated expenses, the A.O. could not have disallowed the depreciation alone in A.Y. 2014-15. Accordingly, we are of the view that the disallowance of depreciation made by the A.O. in assessment year 2014-15 is not justified in the facts and circumstances of the case. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance of depreciation made in A.Y. 2014-15. Since no addition was made in other years, there is no issue on merits requiring adjudication on merits. Disallowance u/s 14A for making addition to the net profit under clause (f) of Explanation 1 to sec. 115JB - HELD THAT:- We notice that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h seizure action was carried out in the case of M/s. Shyama Raju Company (I) Pvt. Ltd. on 20.3.2014, which is a group company of the assessee herein. During the course of search, certain documents belonging to the assessee herein were seized and hence, the A.O. initiated proceedings u/s 153C of the Income-tax Act,1961 ['the Act' for short] for assessment years 2008-09 to 2013-14. The assessment was completed for those years u/s 143(3) r.w.s. 153C of the Act. The assessment of assessment year 2014-15 was completed u/s 143(3) of the Act. 4. During the course of search, it was noticed that the assessee M/s Divyashree Infrastructure was purchasing materials from unregistered dealers (herein after referred as URD purchases ). Such kind of purchases were in the nature of sand, size stones, crushing rock fine, stone dust, gravel, wet mix, jelly, hollow blocks, solid blocks, soiling, etc. It was also noticed that the standard operating procedures prescribed for accounting receipt of materials were not followed in respect of above said purchases. Some of the employees also confirmed that the prescribed procedures have not been followed in respect of some of the URD purchases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 1. At the outset, it is submitted that the purported statement u/s 132(4) dated 21/03/2014 given by the Director of the aforesaid company, Dr.P.Shyama Raju was duly clarified and retracted vide his letter dated 27/06/2014 addressed to the Investigation Wing. During the post search appraisal proceedings it was also brought to the light of the Investigation Wing that all such Unregistered Dealers purchases(URD) involved in the construction of the likes of jelly, sand, gravel, stone dust, hollow blocks, solid blocks etc., were all genuine purchases necessarily required for the purposes of putting up the super structure evidenced duly by vouchers. Further all such payments were made by banking channels capable of being fully vouchsafed. 2. Further, it was also brought to the light of the Investigation Wing that the issue of URD purchases were specifically dealt with prior to the second search on 20/03/2014. Wherein, it was also specifically pointed out to the Investigation Wing that prior to the Second search on 20/03/2014, wherein there was an earlier search carried out on 01/03/2007 (hereinafter referred to as First Search) that for the then search Assessment year viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight and is hereby rejected. Reliance is placed on the following case-laws : B.Kishore Kumar Vs. DCIT 52 taxmann.com 449 (Madras) Ravindra Kumar verma Vs. CIT 30 taxmann.com 367 (Allahabad) Sudarshan P. Amin vs. ACIT 35 taxmann.com 370 (Gujarat ) NavdeepDingra Vs CIT 56 taxmann.com 75 [20151 ( Punjab and Haryana ) Raj Hans Towers P. Ltd Vs CIT 56 taxmann.com 67 [2015]( Delhi ) 4.13 With regard to point no. 3and 4 of the assessee that the URD purchases have been accepted by assessing officers in the regular assessments concluded u/s 143(3) and hence cannot be questioned is not logical. The search action in case of the assessee has brought to light the fact of bogus URD purchases and various statements of the employees of the assessee substantiate the finding of bogus URD purchases, hence in the light of the new evidence, the URD purchases cannot be allowed. 4.14 In point no. 5 and 6, the assessee states that the URD purchases have not been capitalized and are still part of the capital work in progress and hence the disallowance of depreciation is not acceptable. On perusal of the depreciation schedule one also finds that there is a claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld A.R also submitted that the URD purchases consisted of sand, gravel, metal, bricks etc. could be purchased from unorganized sector only and the building could not be constructed without those materials. He submitted that the AO did not examine the technical feasibility of constructing the building without the alleged URD purchases. 9. In our view, there is merit in the said contentions. We find that the assessment order is silent as to the quantum of alleged bogus/inflated expenses. As pointed out by Ld A.R, there are technical specifications regarding the quantum of consumption of various materials in the construction of a building. The moot question is, if the alleged bogus/inflated purchases are removed from the value of construction, whether the same would meet the technical specifications relating to quantum of usage of various materials required for construction of building. Admittedly, this exercise has not been carried out. There was no occasion for the assessee to carry out the said exercise, since it has maintained its stand that all URD purchases are genuine. However, the AO has not done the same. We also notice that the AO has also not effectively dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein he deposed against the genuineness of the URD purchases. Subsequently, he retracted the statement on 27.6.2014 by filing a letter, i.e. after getting the copy of sworn statement on 20.6.2014. In that letter, Shri Shyama Raju also stated that all the URD purchases are genuine purchases. The assessing officer did not accept the submissions of the assessee made in the letter, the details furnished by Shri Bhaskar N. Raju, Executive Director of the company and also the submissions made during the course of assessment proceedings. The assessing officer took the view that the depreciation relating to URD purchases are required to be disallowed and accordingly disallowed the depreciation claimed by the assessee in assessment years 2008-09 to 2013-14. The details of disallowance are tabulated as under: Assessment year Depreciation on URD purchases (Rs.) 2008-09 1,06,82,454/- 2009-10 5,31,800/- 2010-11 25,77,968/- 2011-12 53,06,605/- 2012-13 35,33,344/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication. 19. In assessment years 2008-09 to 2013-14, the assessee is also challenging the validity of search proceedings conducted u/s 132 of the Act. Since we have deleted the addition made by the A.O. on merits, those legal issues shall become academic in nature. Hence we do not find it necessary to adjudicate the legal grounds urged by the assessee in the above said years. 20. We shall now take up the appeals filed by the revenue for AY 2012-13 to 2014-15. The only issue urged in this appeal relates to the decision of Ld CIT(A) in holding that the disallowance computed u/s 14A of the Act cannot be straight away added for computing book profit under clause (f) of Explanation 1 to sec.115JB of the Act. We notice that the Ld CIT(A) has followed the decision rendered by Delhi Special Bench of Tribunal in the case of Vireet Investments Pvt Ltd (supra). However, we notice that the Ld CIT(A) has deleted the addition made to book profit u/s 115JB of the Act. The special bench has only said that the disallowance computed u/s 14A of the Act cannot be adopted straight away for the purpose of clause (f) of Explanation 1 to sec.115JB of the Act, meaning thereby, the amount to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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