Income Tax Appellate Tribunal - Delhi
Kuwer Industries Ltd.,, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : 'E' NEW DELHI
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
I.T.A No. 427/Del/2005
Asstt. Year - 1995-96
Kuwer Industries Ltd. Vs. Dy. Commissioner of Income
A-71-72, Sector-58, Tax, Circle - 5 (1), New Delhi.
Noida U.P.
(Appellant) (Respondent)
AND
I.T.A No. 685/Del/2005
Asstt. Year - 1995-96
Dy. Commissioner of Income Vs. M/s. Kuwer Industries Ltd.
Tax, Cir. 5 (1), New Delhi.
A-71-72, Sector-58,
Noida UP
(Appellant) (Respondent)
Appellant by: Shri Pramod Kapur, CA
Respondent by: Shri R.S. Negi, Sr. DR
ORDER
PER RAJPAL YADAV, JM:
The assessee and revenue are in cross appeal against the order of Ld. CIT(A) dated 10.11.2004 passed for asstt. year 1995-96. First we take the appeal of assessee. The grounds of appeal taken by the assessee are 2 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 not in consonance with Rule 8 of ITAT Rules. They are argumentative and descriptive in nature. In ground No. 1, assessee has taken 6 sub grounds which are in fact the arguments. It has pleaded that Ld. CIT(A) has erred in upholding the reopening of assessment u/s 147/148 of the Income Tax Act.
2. The brief facts are that assessee company at the relevant time was in the business of manufacturing of metalized Polyester and BOPP film. It has filed its return of income on 28.11.1995, declaring a loss of ` 67,48,290/-. An asstt. order was passed u/s 143(3) on 22.12.1997 at an income of ` 3,07,933/- . During the pendency of regular assessment proceeding, a search u/s 132 of the Income Tax Act was carried out at the business premises of the assessee and residential premises of the Directors on 20.3.1996. The AO while framing the asstt. order u/s 143(3) has noticed that assessee is required to explain the unexplained credits of ` 19,90,000/-, ` 21,60,000/-, ` 27,40,000/-. He also observed that depreciation claim of assessee amounting to ` 51,24,939/- also deserves to be disallowed. However, while arriving at a conclusion, Ld. AO did not make any addition of these amounts on the ground that asstt. year 1995- 96 is covered in the block asstt. u/s 158BC and the amounts have already been added in the income for the block period. Therefore, no further addition is being considered on these grounds in asstt. year 1995-96. The block asstt. order u/s 158BC was also passed on 30.6.1997 i.e. prior to passing of the regular asstt. order u/s 143(3) 3 ITA Nos. 427, 685/Del/05 A.Y. 1995-96
3. Dissatisfied with the block asstt. order, assessee carried the matter in appeal before the ITAT, vide ITSS No. 141/D/97. Tribunal has allowed the appeal of the assessee on the ground that block asstt. order has been passed after expiry of limitation. According to the Tribunal, the valid asstt.
order could be passed only on or before 31st March, 1997 whereas it was passed on 30th June, 1997. Apart from this issue, the Tribunal has also observed that now it has been settled that undisclosed income for the purpose of block assessment has to be computed on the basis of seized material. In other words, if any item has already been disclosed by the assessee to the department prior to the search and it is forming part of regular return then assessment of such item could be examined in the regular assessment only. Thus according to the Tribunal, the scheme of Income Tax Act suggest that income which has already been disclosed by the assessee to the department can not be assessed in the block assessment and cannot be subject to higher rate of tax. Such an income can only be assessed in the regular asstt. proceeding.
4. After the order of the Tribunal, the AO had recorded reasons for reopening of asstt. and issued notice u/s 148 upon the assessee. This notice was issued on 27th March, 2002. In response to the notice, assessee has filed its reply vide letter dated 27.1.2003. Ld. AO has rejected the explanation of assessee and proceeded to pass the reassessment order.
The appeal to the Ld. CIT(A) did not bring any relief to the assessee.
4 ITA Nos. 427, 685/Del/05A.Y. 1995-96
5. Before us, Ld. Counsel for the assessee has submitted that notice u/s 148 has been served upon the assessee after expiry of four years. An assessment at the first instance was passed u/s 143(3). Therefore, the interdiction available in the proviso appended to section 147 would come in the way of AO for issuing the notice upon the assessee for reopening of the assessment. He pointed out that the embargo put by way of proviso contemplates that if four years have expired and scrutiny assessment u/s 143(3) was made by the AO, then the assessment can be reopened, if it is established that income has escaped assessment on account of failure of assessee to disclose all material facts fully and truly in connection with the income of the assessee for that asstt. year. Ld. Counsel for assessee while taking us through the reasons recorded by the AO contended that there is no allegation of the AO that income has escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. He further submitted that the Tribunal has not given any direction which can enable the AO to assessee the income with the help of explanation 2 and 3 appended with section 153 of the Income Tax Act. In his next fold of submission, he submitted that an assessment can not be reopened on the direction of any appellate authority. For buttressing his contention, he relied upon the order of the ITAT Nagpur Bench in the case of M.B.Traders vs. ACIT reported in (2011) 9 ITR (Trib) 453.
6. On the other hand, Ld. DR submitted that vide letter dated 4th December 1997 assessee has submitted to the AO during the regular 5 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 assessment proceeding that the income of this asstt. year has already been assessed in the block assessment. Therefore, no further assessment is needed. The assessee has relied upon the decision of Hon'ble Punjab & Haryana High Court in the High Court in the case of Rajaram Kulwant Rai Vs. ACIT reported in 227 ITR 187 which was operating in field at that point of time. On account of this reason, Ld. AO has not considered these issues on merit. The assessee has claimed receipt of share application money representing credits on account of stock investment, credits taken from common address and credits on account of share application money.
During the course of search, the material was collected exhibiting that all these unexplained credits were bogus and in fact these were the amounts of the assessee. In such situation, it cannot be said that assessee has disclosed all material facts fully and truly. It also cannot be the case that AO has examined these issues and, therefore, assessment has been reopened on the basis of change of opinion. No opinion was formed by the AO in the first round of assessment proceeding. He further took us through the order of the Ld. CIT(A) who has considered all these aspects elaborately. He pointed out that Ld. First Appellate Authority has made reference to section 153(3) of the Income Tax Act and taken cognizance of explanation 2 and 3 which contemplates the assessment of escaped income in such type of situation.
7. We have duly considered the rival contention and gone through the record carefully. The assessee has filed the return on 28.11.1995. It has 6 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 treated the unexplained cash credit as genuine. During the course of search, material was found indicating the facts that these were bogus cash credits. Thus, in the original assessment proceeding assessee had not disclosed true and full facts in respect of share capital or share application money and the claim of depreciation.
8. Apart from this one aspect, we find that case of the assessee duly come within the ambit of explanation 2 and explanation 3 of section 153(3). Ld. First Appellate Authority has considered this aspect lucidly and elaborately. The order of the Ld. First Appellant Authority in this respect is worth to refer which read as under :-
"1.10 Without prejudice to the observations in the earlier paragraphs, it would also be relevant to refer to the provisions of section 153(3). Just as section 150(1) provides that the time limit for issue of notice u/s 148 shall not apply to cases where assessment etc is in pursuance of a finding or direction contained in an order on appeal etc. section 153(3) excepts out such cases from the purview of the provisions of section 153(3) excepts out such cases from the purview of the provisions of section 153 (1) and 153(2) which prescribe time limit for completion of assessments etc. Explanation 2 & 3 of section 153 set out the circumstances where an assessment etc is to be deemed to be one made in consequence of or to give effect to any finding or direction contained in the appellate order etc. In this regard, it would be relevant to reproduce explanation 2 and explanation 3 to section 153(3) as under :
"Explanation 2. - Where, by an order referred to in clause (ii) of sub section (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
Explanation 3.-Where, by an order referred to in clause (ii) of sub- section (3), any income is excluded from the total income of one 7 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed tobe one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed."
The effect of the Supreme Court ruling in the case of Murlidhar Bhagwan Das, cited by the ld. AR was eroded by enactment of explanation 2 and 3 to section 153(3). Thus it can be seen that the explanation 2 creates a fiction. It provides that where by an order u/s 250, 254, 260, 262, 263 or to 264 in an appeal, revision etc an income is excluded from a total income of an assessee for a particular assessment period then a re-assessment of such income for the proper assessment year shall be deemed to be the one made in consequence of or to give effect to any finding or direction within the meaning of section 150 and 153(3)(ii). It has been held by the Bombay High Court in the case of Ambaji Trader Pvt. Ltd. vs ITO 105 ITR 273 (Bombay) that the fiction removes the bar of the limitation for the initiation of the reassessment proceedings as well as for the completion of the assessment or re-assessment irrespective of the question whether the appellate authority has infact given or can in law given a finding or direction that the income should be assessed in a specified assessment year other than the one under appeal. The issue also came up before AP High Court in the case of B.A.R Abdul Rehman Sahib vs ITO 100 ITR 541 while interpreting explanation 2 to section 153 (3). In this case it was held by the court that the effect of section 150 and section 153(3) read with explanation 2 is that if any income is deleted from assessment in a higher proceedings on the ground that it is not the income of that year, steps may be taken u/s 147 to assess it as the income of another year without any limitation applying to the issue of notice u/s 148. This decision was followed by M.P. High Court in the case of Sukhdayal Pahwa vs CIT 140 ITR 206. It was held by the court that the provisions of section 150 override the provisions of section 149 and 151. The SLP against the said decision was dismissed by the Hon'ble Supreme Court as reported in 160 ITR (St.) 74 (SC). Thus as per explanation 2 to section 153(3), where an income of a particular assessment year is excluded by an order in an appeal etc. its assessment in another year will be deemed to be in consequence of or in order to give effect to finding or direction in appeal etc. The intention of bringing this explanation is that the income of an assessee should not go untaxed if the same is not taxed in the hands of an assessee by virtue of an order of an appellate authority. The Revenue should not be rended helpless by not being able to tax it in another assessment year because of the limitation of time for taking action u/s 147 or for completing assessment. The intention of 8 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 the legislature cannot be that any income cannot be taxed in any assessment year. Similarly, the intention of explanation 3 is that if by an order of appellate authority a particular income is held to be non-taxable in the hands of a person, itmust be taxed in the hands of another person in whose case it is liable to be assessed as an income. The underlying principle is that the income chargeable to tax must be brought to tax in the hands of a correct person and in the correct assessment year. That is why the shackles of time limits provided in section 148, 149, 153(1) and 153(2) have been removed in such cases by inserting explanation 2 & 3 below section 153(3). Extending the same logic and keeping in view the intention of the legislature if an income is held to be not taxable under chapter XIVB it cannot be the intention of the legislature that it should not be taxable in chapter XIV also. Therefore, I am of the considered view that since as a result of the order of the ITAT the income is excluded from block assessment period under chapter XIV B, by the deeming provisions of the explanation 2 to the section 153(3) the proceedings u/s 147 could be fictionally treated as proceedings taken in consequence or to give any effect to any finding or direction contained in the order. Therefore, on this count also the provisions of section 150(1) were applicable in this case and the AO was not bound by the shackles of the proviso to section 148 or section 149."
9. With the assistance of Ld. Representative, we have gone through the record carefully. Sub section 1 of section 150 contemplates that a notice u/s 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequences of or to give effect to any finding or direction given in any appellate order. In the reasons AO has made a reference to the order of the ITAT wherein it has been observed that such type of income is to be assessed in the regular assessment and not in the block assessment. This observation is in the nature of finding comes within the meaning of section 150 (i) and there was no time limit for issuing a notice u/s 148 in order to give effect to the finding of the ITAT. If the addition could not be made under the block 9 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 assessment and the same had to be made in the regular assessment, then it would be unreasonable to say that this income could not be taxed either in the block assessment or in the regular assessment of the assessee. Ld. First Appellate Authority has considered this aspect also and has observed that observation of the ITAT may not be direction but it is a finding which can authorize the AO to initiate proceeding u/s 147 also. As far as the case law referred by the Ld. Counsel for the assessee is concerned, it is quite distinguishable on facts. The AO has not reopened the assessment on the directions of any authority, rather he applied his mind on the finding recorded in the appellate order of the Tribunal. He used it as an information for initiating the proceeding. He used it to tax the escaped income with the help of 150 (i) of the Income Tax Act. Taking into consideration the well reasoned order of Ld. First Appellate Authority covering all possible arguments of the assessee, we do not find any reason to interfere in the finding of Ld. First Appellate Authority. This ground of appeal is, therefore, rejected.
10. Ground No. 2 taken by the assessee read as under :-
2) "That the learned CIT(A) has erred both on facts and in law in holding that the Assessing Officer has validly made the following additions :-
a) ` 19,90,000/- on account of purported unexplained cash credit on account of stock invests.
b) ` 21,60,000/- on account of purported unexplained cash credits.
c) ` 27,40,000/- on account of share application money and purportedly held to be the unexplained cash credits."10 ITA Nos. 427, 685/Del/05
A.Y. 1995-96
11. The brief facts of the case are that during the course of search operation, some share certificate / application forms of private placement and few cancelled stock invests were found and seized. The AO noticed that assessee company had come out with a public issue on 20th March, 1995. During the course of search as well as post search inquiry, it revealed to the department that large number of stock invests applications were submitted at the behest of assessee by giving address of Shri J.B. Aggarwal, Director of the assessee company. Different persons had made application in the public issue of the assessee company by giving address of the company or its connected persons. A sum of ` 19.90 lac was noticed by the AO representing stock invests. Similarly, AO had obtained stock invests form from account No. 120 to 218 from State Bank of Saurashtra, Patparganj, New Delhi in respect of application in the public issue of the company. The AO has noticed such details on pages No. 9-12 of the block asstt. order. From the perusal of the stock-invest application, it reveled to the AO that in the stock - invest pay and issue register, the name of the investor applicant was Shri R.K. Aggarwal, Director of the assessee company. The AO further observed that in a large number of applications for issue of stock-invest the name of the applicant was filled in the hand writing of Shri Tarun Aggarwal son of Shri J.B. Aggarwal, director of the company. The AO took the help of handwriting expert and took into consideration the ledger folio account. On the strength of these evidence, he observed that all the stock invest were purchased in cash. Un-allotted stock invests were paid to the employees 11 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 of the company after the validity of the expiry date. The value of such entries is ` 21.80 lacs. The AO made the addition of this amount with the help of section 68. Similar is the position with regard to share application representing a sum of ` 27.40 lacs.
12. On appeal, Ld. First Appellate Authority has confirmed the addition after elaborate discussion on the issues the concluding paragraph on page 24 of the Ld. CIT(A)'s order read as under :-
"The ratio in the above mentioned reasons is clearly applicable in this case. In the present case, the so called share applicants applied from the residential premises or the business premises of the assessee co. They came from far off places from all over the country to Delhi to apply for the shares of the assessee co. They came to the same bank and purchased drafts having consecutive numbers. Their share application forms were filled by the directors/employees of the assessee co. These persons were not found at the addresses given in the share application forms. The blank share transfer deeds signed by them alongwith acknowledgement slips were found at the premises of the assessee. Similarly, in some cases even the share certificates were found at the premises of the assessee. Therefore, considering the surrounding circumstances and applying the test of human probability as enunciated by the Hon'ble Supreme Court in the above mentioned case, the AO had rightly concluded that these entire transactions were not genuine and he had rightly invoked the provisions of section 68 of the I.T. Act, 1961. Therefore, the additions of ` 19.90 lacs, 21.60 lacs and 27.40 lacs aggregating to ` 68.90 lacs u/s 68 made by the AO are upheld."
13. With the assistance of Ld. Representative, we have gone through the record carefully. Ld. Counsel for the assessee was unable to advance any arguments contrary to the finding of facts recorded by the Ld. CIT(A). He was unable to discharge the onus contemplated by section 68 of the Income Tax Act. The assessee could not give the identity of the persons who made application for stock-invest share application etc. After going 12 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 through the well reasoned order of the Ld. CIT(A), we do not find any ground to interfere in it. This ground of appeal is rejected.
14. The next grievance of the assessee relates to charging of interest u/s 234A and 234B of the Income Tax Act. It is consequential in nature hence this ground of appeal is rejected.
15. In the next ground of appeal, assessee has pleaded that Ld. Commissioner has failed to appreciate that request made by the authorized representative the assessee to the AO to treat the return filed u/s 139 as return filed in response to notice u/s 148 as well as has not been validly rejected.
16. From perusal of the Ld. First Appellate Authorities' order, it revealed that Ld. CIT(A) has duly considered this issue and arrived at a conclusion that in response to the notice dated 27.3.2002 u/s 148 assessee had not made any request for treating the original return as filed in response to the notice u/s 148 till 27.1.2003. According to the Ld. CIT(A), the record indicate that return in response to the notice u/s 148 was filed on 27.1.2003. Therefore, AO has rightly taken the date of filing of return as 27.1.2003 while levying the interest u/s 234A. Ld. Counsel for the assessee could not rebut this finding of fact recorded by the Ld. CIT(A). Accordingly, this ground of appeal is also rejected.
17. Now, we take the appeal of revenue. The solitary grievance of the revenue is that Ld. CIT(A) has erred in granting the depreciation amounting to ` 67,92,680/- by holding that the company started commercial production w.e.f. 23.3.1995. In support of this ground of 13 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 appeal, it is pleaded by the revenue that Ld. First Appellate Authority has admitted additional evidence and has ignored the statement of Shri Sanjay Srivastava, who is a Works Manager of the Company . This statement was given by him u/s 132(4) on oath on 20.3.1996. In the statement he has deposed that operation of the plant was started sometime in April, 1995. The revenue has further pleaded that assessee at the relevant time was having power load of 350 KV whereas the plant and machinery imported by it could be run only on 500 KVA or above power load. Thus, there was no occasion for the assessee to demonstrate that machinery was put to use prior to 31st March, 1995. On the other hand, Ld. Counsel for the assessee relied upon the order of Ld. CIT(A) and submitted that Ld. First Appellate Authority has called for remand report from the AO which was given by the AO on 5th April, 2004.
18. We have duly considered the rival contention and gone through the record carefully.The assessee has claimed a depreciation of ` 67,92,780/-. It was claimed on the metalising plant on the ground that commercial production had started on 28.3.1995. Ld. AO has disallowed the depreciation at ` 51,24,939/-. According to the Ld. CIT(A), the actual disallowance should be ` 67,92,780/-. The disallowance has been made by the AO mainly on the ground that during the course of search operation at the factory premises of the assessee company, statement of Shri Sanjay Srivastava, Works Manager was recorded u/s 132 (4) of the Act. He made reference to the question and the reply given by Shri Sanjay Srivastava. According to the AO, the new plant and machinery could be run by a power load of more than 500 KVA. The assessee was not having this much of power load before 31st March and, therefore, it cannot be concluded that assessee was able to put the machinery on use before 31st March. The Ld. First Appellate Authority has made an elaborate discussion about the evidence produced by the assessee as well as the reasons assigned 14 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 by the AO. We deem it appropriate to make reference of the order of Ld. CIT (A) which read as under :-
3.6 "Coming to the merits of the addition, the main plank of AO's argument for disallowing the depreciation is the statement of Shri Sanjay Srivastava, Works Manager, recorded during the course of search operations. However, the issue regarding allowability of depreciation has to be decided not only on the basis of the statement of Shri Srivastava but on the totality of circumstances and the evidence placed on record during the course of assessment proceedings. The statement has to be weighed against the various evidences filed by the assessee to prove that the machinery was put to use before 31.3.95.
The vital document in this regard was filed by the assessee before the AO vide his letter dated 17.3.03. This is a letter from Addl. Director, Industries, Government of UP, Noida, Gautam Budh Nagar addressed to the Commercial Tax Authorities, Noida with regard to the exemption from commercial tax to the newly set up industrial units in the state of UP. In this certificate it has been clearly mentioned that the date of start of production by the assessee co. is 27.03.1995. Although this certificate was filed before the AO but he had chosen not to say anything on the certificate in the assessment order. He has completely ignored this vital piece of evidence placed before him by the assessee. The Industries Department of the U.P. Government is an independent authority and it would not have issued such certificate without satisfying itself about the actual state of affairs. Therefore, this certificate cannot be simply brushed aside to determine the issue as to whether the production really started before 31.03.1995 or not. On the other hand, the statement of Shri Sanjay Srivastava during the course of search is not supported 15 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 by any evidence on record. From the perusal of the assessment record it is also noticed that alongwith its reply dated 27.1. 2003 filed before the AO the assessee enclosed various evidences in support of its contention regarding use of machinery before 31.3.1995. This also contains a certificate dated 29.08.1995 issued by the Superintendent Central Excise-VIII, Division-II, Noida wherein it was mentioned that the metalizing plant imported by the assessee co. vide bill of entry dated 30.11.1944 was installed at the assessee's factory at Noida and the factory came into production on 28.3.1995. The goods produced by the assessee are excisable goods and come within the purview of the Central Excise Department. Therefore, the certificate issued by the Central Excise authorities to the effect that the production had started on 28.03.1955 also cannot be taken lightly, as it is a certificate issued by a government authority and a non-interested party.
3.7 Further, it has been stated by the AO that since the required power capacity to run the machinery was 500KVA whereas the power connection was for a capacity of 350KVA, the production could not have taken place. In this regard, it may be mentioned that the assessee's contention that it had drawn in excess of sanctioned load which attracted penalty in the shape of additional charges for the period of March, 1995 to December, 1995 stands proved by the copies of the bills of UPSEB placed on record by the assessee vide its letter dated 13.3.2003. In the bills from September to December, 1995, it has been clearly mentioned that the additional charges for excess demand exceeding the contracted demand @ ` 185 per KVA on 106 KVA. However, for the period 27.3.1995 to August 1995 there is a consolidated bill issued by the UPSEB which has not spelt out the actual maximum demand and 16 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 excess demand in KVA but has charged additional charges of ` 2,38,897.86 @25% on estimated basis on account of excess drawal of power by the assessee from the period 27.03.1995 to August, 1995. These bills indicate that the assessee had drawn excess power load than the sanctioned power load from 27.3.1995 onwards. Therefore, the AO's contention that with sanctioned power load of 350KVA the machinery could not be put to use is not correct. In fact, from the documents filed by the assessee before the AO vide its letter dated 13.3.2003 it is noticed that the additional power load of 150KVA was sanctioned to the assessee co. vide UPSEB letter dated 20.04.1996. If the AO's contention that without sanctioned power load of 500KVA the machinery could not be put to use then it can be said that the machinery was not used till 20.04.1996. In other words, it means that even in the AY 1996-97 the plant and machinery was not put to use. This conclusion will be absolutely unreasonable in view of the fact that in the AY 1996-97 the production and sale shown by the assessee have been accepted by the AO.
3.8 As regards the AO's observation that the issue analysis report for the company's public issue prepared by M/s. R.R. Investment & Research and Information Centre indicated that the commercial production was scheduled from April, 1995, this was only an anticipation and a forecast and not an actual reality. Similarly, the mention in the prospectus that the co. had not received the pollution clearance certificate is not of any consequence as the assessee has placed on record before the AO a copy of the pollution clearance certificate dated 14.02.1995 issued by the UP Pollution Control Board. A copy of the same was placed by the AR on page 227 of the paper book. Therefore, no adverse inference can be drawn in respect 17 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 of the same also. From the perusal of the tax audit report filed in the paper book it is noticed that on page 19 the auditors have given the quantitative details in respect of the purchases, sales, raw material consumed and production. The total production of metalized plastic film has been shown as 1049.80 kg out of which 431 kg is shown to have been sold and the balance quantity of 618.80 kg valued at ` 1,23,760/- has been shown as closing stock. This closing stock of finished goods appears in schedule 5 of the audited accounts at page 14 of the paper book. The AO has not challenged the correctness of the closing stock of finished goods and the same has been accepted by him as correct without giving any adverse comments about the same. In the block assessment order the AO has doubted the sales made to M/s Zari Udyog in the month of March 1995. But as regards sales to M/s Ajit Polyester Metalic Ltd. , the AO did not bring any evidence on record to prove that the sales made to this party were not genuine. He has simply stated that the confirmation from this party was not filed. The assessee had filed a copy of the sale bill in respect of sales to this party. The payment against this sale was received by cheque. There is nothing on record to prove that the sales made to this party were not genuine. The AO has further mentioned in the impugned order that the assessee had only filed circumstantial evidence for claim of depreciation. This observation of the AO is not correct in view of the evidence like letter of the Addl. Director of Industries, UP government and the certificate of the Central Excise authorities regard production in the factory before 31.3.95 which has been discussed in the earlier paras.
3.9 In view of the discussions in the foregoing paragraphs and the evidence on record the AO's observations that the machinery 18 ITA Nos. 427, 685/Del/05 A.Y. 1995-96 was not put to use before 31.3.1995 in my view is not correct.
The independent evidence of several government departments indicating the use of machinery before 31.3.1995 justifies the assessee's stand that the plant and machinery was put to use before 31.3.1995. Therefore, the AO was not justified in disallowing the depreciation on the plant and machinery. Accordingly, the disallowance made by the AO is deleted.
19. Ld. CIT(A) has not entertained any evidence in violation to Rule 46A. He has duly granted opportunity to the AO for controverting the evidence taken on record. Therefore, after going through his finding extracted supra, we do not see any reason to interfere in it. Accordingly, the appeal of the revenue is devoid of any merit it is dismissed.
In the result, both the appeals are dismissed.
Order pronounced in the open court on 31st January 2012.
Sd/- sd/-
[B.C. MEENA] [RAJPAL YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st January, 2012
Veena
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order,
Deputy Registrar, ITAT